Deluxe Reports Q1 2021 Results; Reports 9.3% Revenue Decline But Reaffirms 2021 Outlook
“We had a solid start to 2021, consistent with our expectations. We achieved significant year-over-year improvement in adjusted EBITDA and sequential improvement in the total revenue decline rate,” said Barry McCarthy, President and CEO of Deluxe. “Our Payments segment again delivered healthy growth, demonstrating its resiliency in the face of the continued pandemic and severe weather impacts, and despite a tough comparable with the impact of several large-scale wins in the same period a year ago. We also saw acceleration in data-driven marketing, a component of Cloud Solutions.”
McCarthy continued, “Upon the closing of our recently announced acquisition of First American Payment Systems, we expect to achieve even greater transformative acceleration by doubling the size of our Payments segment. We plan to leverage First American’s scaled payments platform and impressive distribution channels, allowing us to provide merchant services to our millions of small business customers and thousands of financial institution clients, while also offering new services, such as payroll, receivables and digital disbursements, to First American’s significant customer base. Upon closing, Deluxe will be firmly established as a payments and Trusted Business Technology™ company.”
“Our business continues to recover well, particularly in our higher growth focus areas. Our ‘One Deluxe’ go-to-market strategy is delivering impressive results, as evidenced by the signing of the two largest deals in company history in the last six months, and nine of the 13 largest wins of the last decade in the last seven quarters. Healthy customer demand in payments and data is driving the positive momentum we are seeing, and we expect it to continue in 2021,” concluded McCarthy.
First Quarter 2021 Financial and Segment Highlights
- Revenue was $45.1 million lower than the previous year. 2021 results reflect a full quarter of the impact of the COVID-19 pandemic, while prior year results were not affected until late in the first quarter. The impact is reflected primarily in the Promotional Solutions, Cloud Solutions and Checks segments.
- The Payments segment delivered revenue growth of 3.2 percent over the previous year, lapping the impact of two large wins in the same period a year ago.
- Net income of $24.3 million was impacted by COVID-19 but benefitted from various cost saving and efficiency programs across the company.
- Adjusted EBITDA margin remained strong at 20.5 percent, as management continues to refine the company’s cost structure.
- Cash flow from operations for the first quarter of 2021 was $39.6 million and capital expenditures were $21.7 million. Free cash flow, defined as cash provided by operating activities less capital expenditures, was $17.9 million, an increase of $5.7 million as compared to 2020, largely attributable to working capital improvements.
- $840.0 million remained outstanding on the revolving credit facility as of March 31, 2021, the same amount that was outstanding at the beginning of the year. Net debt of $714.6 million was the lowest since June 30, 2018 and liquidity was $427.7 million as of March 31, 2021.
Outlook for Stand-Alone Deluxe
Based on our first quarter results, the outlook remains unchanged and the company continues to expect the following for the full year 2021:
- Revenue growth in the range of 0% to 2% primarily due to the combination of sales transformation and related wins, as well as a steady macro-economic recovery from COVID-19
- Adjusted EBITDA margin in a range between 20% to 21%
- To exit the year with a growth rate in mid-single digits, without benefit of acquisitions, a significant transformation milestone
- Tax rate to continue to be approximately 25%
- Capital expenditures to be approximately $90 million
In second quarter 2021, we expect to deliver continued improvement in revenue performance, with solid margins. This includes the impact of headwinds from temporary COVID-related salary and benefit reductions implemented in April 2020. These actions benefited the full second quarter of 2020 and were substantially restored in third quarter 2020.
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 the staff of Printing Impressions.