Deluxe Reports Financial Q4 2017 Revenue Increase of 3.1%
ST. PAUL, Minn. - January 26, 2018 - Deluxe Corp., a leader in providing small businesses and financial institutions with products and services to drive customer revenue, announced its financial results for the fourth quarter ended Dec. 31, 2017. Key financial highlights include:
Revenue was at the low end of the range of the Company’s prior outlook driven primarily by lower revenue within marketing solutions and other services (MOS). GAAP diluted EPS was $1.75 and included a federal tax benefit from the Tax Cut and Jobs Act of $0.42 per share, as well as aggregate charges of $0.07 per share for restructuring, integration and transaction costs. Excluding these charges, adjusted diluted EPS was within the range of the prior outlook.
“The fourth quarter marked the end of a very good year for us,” said Lee Schram, CEO of Deluxe. “Annual revenue increased for the eighth consecutive year and grew over 6 percent compared to the prior year, with both EPS and cash flow from operations also increasing. Our strategy continues to deliver profitable growth and looking ahead to 2018 and beyond, we have identified areas within MOS where we plan to pivot for faster organic growth and moderately more aggressive acquisition growth.”
Fourth Quarter 2017 Highlights
- Revenue increased 3.1% year-over-year, driven by Financial Services growth of 11.0% which includes the results of FMCG Direct and Data Support Systems, which were acquired in the fourth quarter of 2016 and RDM Corporation, which was acquired in April 2017, and Small Business Services growth of 1.3% which includes the results of several small tuck-in acquisitions.
- Revenue from marketing solutions and other services increased 14.8% year-over-year and grew to 40.0% of total revenue in the quarter.
- Gross margin was 61.4% of revenue, compared to 63.2% in the fourth quarter of 2016. The impact of acquisitions and increased delivery and material costs this year were only partially offset by previous price increases and continued improvements in manufacturing productivity.
- Selling, general and administrative (SG&A) expense decreased 3.3% from last year primarily due to continued cost reduction initiatives compared to the prior year which were partially offset by additional SG&A expense from acquisitions. SG&A as a percent of revenue was well leveraged at 40.6% in the quarter compared to 43.2% last year.
- Operating income increased 6.1% year-over-year. Adjusted operating income, which excludes restructuring, integration and transaction costs, increased 3.9% year-over-year primarily from price increases and continued cost reduction initiatives, partially offset by the continuing decline in check and forms usage.
- Diluted EPS increased $0.64 per share year-over-year and included $0.42 per share from the benefit of federal tax reform and aggregate charges of $0.07 per share for restructuring, integration and transaction costs. Adjusted diluted EPS, which excludes these items as well as a loss from debt extinguishment in 2016, increased 3.7% year-over-year driven primarily by favorable operating performance.
Small Business Services
- Revenue of $322.4 million was in-line with our expectations and increased 1.3% year-over-year due primarily to increased marketing solutions and other services revenue, partially offset by the decline in check and forms usage. From a channel perspective, revenue increased in the online, major accounts, and Canada, and included benefits from previous price increases.
- Operating income of $62.2 million increased $4.2 million from last year. Adjusted operating income, which excludes restructuring, integration and transaction costs, increased $5.1 million or 1.3 points year-over-year. This increase was due to price increases, continued cost reductions and favorable product mix, partially offset by the secular decline in check and forms usage.
- Revenue of $139.3 million was in-line with our expectations and increased 11.0% year-over-year primarily due to growth in marketing solutions and other services, which includes incremental revenue from the acquisitions of FMCG Direct and Data Support Systems in the fourth quarter of 2016 and RDM Corporation in April 2017. Revenue also benefitted from the impact of previous price increases. These increases in revenue were partially offset by the secular decline in check usage.
- Operating income of $25.1 million increased $2.8 million compared to last year. Adjusted operating income was the same as last year as continued benefits of cost reductions and previous price increases were offset by the secular decline in check usage and the loss of revenue and operating income from Deluxe Rewards highlighted in previous quarters. Recent acquisitions, even though they were slightly accretive to operating income including acquisition amortization, drove a 3.7-point decrease in operating margin.
- Revenue of $33.2 million was in line with our expectations and declined 8.8% year-over-year due primarily to the secular decline in check usage.
- Operating income of $11.2 million decreased $1.3 million or 0.6 points compared to last year primarily due to lower order volume, partly offset by cost reductions.
- Cash provided by operating activities for 2017 was $338.4 million, an increase of $19.1 million compared to 2016.
- The Company repurchased $14.9 million of common stock in open market transactions during the quarter, bringing stock repurchases for the year to $65.0 million.
- At the end of the fourth quarter, the company had $709.3 million of total debt outstanding comprised of approximately $413 million outstanding on the revolving credit facility and $294 million in a term loan.
- On January 23, 2018, the Board of Directors of Deluxe Corporation declared a regular quarterly dividend of $0.30 per share on all outstanding shares of the Company. The dividend will be payable on March 5, 2018 to all shareholders of record at the close of business on February 20, 2018.
- Plan to pivot for faster organic and moderately aggressive acquisitive growth including goal of approximately 60% MOS to total Company revenue mix by the end of 2020, as well as additional investments of $10 million in data-driven marketing, treasury management solutions and optimizing Web-services.
The preceding press release was provided by a company unaffiliated with Printing Impressions. The views expressed within do not directly reflect the thoughts or opinions of Printing Impressions.