Deluxe Reports Third Quarter 2020 Results and Declares Regular Dividend
Barry McCarthy
Deluxe, a Trusted Business Technology company, reported operating results for its third quarter ended September 30, 2020.
“Deluxe delivered better than expected results for the third quarter while accelerating our historic transformation, despite COVID-19 challenges. Reported revenue, net income and adjusted EBITDA margins all improved sequentially from last quarter, while further reducing debt,” said Barry McCarthy, President & CEO of Deluxe. “Our sales-driven ‘One Deluxe’ approach and financial health helped us win two important new deals in-quarter, closing a total of six of our top 25 prospects year-to-date.”
McCarthy continued, “The durability and strength of our business and strategy are clear in our performance. We also accelerated our transformation, announcing plans to lower future operating expense on several fronts, including relocation of existing sites in Minneapolis and Atlanta and consolidating others. We now have even more confidence in our future.”
Third Quarter 2020 Financial and Segment Highlights
- Revenue was $54.1 million lower than last year. COVID-19 continued to negatively impact our results, primarily across the Promotional Solutions, Cloud Solutions and Checks segments.
- The Payments segment delivered strong revenue growth of 15.6% over the same period last year, benefiting from Treasury Management revenue growth of 20.9% in the third quarter driven primarily by December 2019 sales wins.
- Net income of $29.4 million was impacted by COVID-19, compared to a net loss of $318.5 million in the third quarter 2019. 2019 results included pre-tax, non-cash asset impairment charges of $391.0 million. The impairment charges related to goodwill, as well as amortizable intangible assets.
- Adjusted EBITDA margin improved sequentially by 290 basis points to 23.3% despite a $16.8 million decline in adjusted EBITDA compared to the prior year. Management continues to aggressively execute cost-savings and efficiency programs.
- Cash flow from operations for the nine months ending September 30, 2020 was $166.8 million and capital expenditures were $42.7 million. Free cash flow, defined as cash provided by operating activities less capital expenditures, was $124.1 million, a decrease of $34.2 million as compared to 2019. In addition to COVID-19, free cash flow was impacted by previously disclosed expenditures to support the Company’s business transformation and the ongoing secular decline in checks. These impacts were partially offset by lower income taxes and a legal settlement in the prior year.
- At the end of the third quarter, the Company had $1.04 billion of total debt outstanding under its revolving credit facility, compared to $883.5 million at the beginning of 2020. Liquidity was $413.0 million, with cash and cash equivalents totaling $310.4 million at the end of the quarter.
- Net debt of $729.6 million was the lowest since June 30, 2018. Net debt is a non-GAAP financial measure as defined in the reconciliation tables attached.
Outlook
Due to the significant ongoing uncertainties in the macro-economic environment, the Company previously withdrew its 2020 outlook and is not providing detailed fourth quarter 2020 or full year 2021 financial guidance at this time.
The Company does expect fourth quarter 2020 year-over-year revenue performance on a percentage basis to be softer than third quarter 2020 due to expected COVID-related delays in customer implementations of new wins and data campaigns. This will be most evident in Payments, where the Company expects a temporary slowing of double-digit growth to low/mid-single digit growth. The Company is confident in Payments’ growth prospects and expects overall margins to remain in the long-term target range.
Capital Allocation and Dividend
The Board of Directors approved a regular quarterly dividend of $0.30 per share. The dividend will be payable on December 7, 2020 to shareholders of record as of market closing on November 23, 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.
