Deluxe Reports First Quarter 2018 Financial Results

Deluxe Corporation (NYSE: DLX), a leader in providing small businesses and financial institutions with products and services to drive customer revenue, announced its financial results for the first quarter ended March 31, 2018.

Revenue exceeded the high end of the range of the Company’s prior outlook driven primarily by strong performance in the Financial Services segment. GAAP diluted EPS was $1.31 and included aggregate charges of $0.08 per share primarily for restructuring, integration and transaction costs, and an asset impairment charge. Excluding these items, adjusted diluted EPS exceeded the high end of the range of the prior outlook driven primarily by the strong results in Financial Services.

“We delivered a very strong first quarter to start off the year,” said Lee Schram, CEO of Deluxe. “Diluted EPS ended at the high-end of our outlook and both revenue and adjusted diluted EPS exceeded our outlook. We grew marketing solutions and other services revenue over 12 percent from last year and it now accounts for over 39 percent of total revenue. Looking ahead, we continue to believe our transformation will deliver a ninth consecutive year of revenue growth.”

First Quarter 2018 Highlights
• Revenue increased 0.8% year-over-year, driven by Small Business Services growth of 2.7% which includes the results of several small tuck-in acquisitions. Financial Services revenue was flat compared to the prior year.
• Revenue from marketing solutions and other services (MOS) increased 12.2% year-over-year and grew to 39.3% of total revenue in the quarter.
• Gross margin was 61.6% of revenue, compared to 63.2% in the first quarter of 2017. The impact of product and service mix and increased delivery and material costs this year, as well as acquisitions, was only partially offset by previous price increases and continued improvements in manufacturing productivity.
• Selling, general and administrative (SG&A) expense decreased 2.7% from last year primarily due to continued cost reduction initiatives compared to the prior year, re-calendarization of paid time-off and lower legal costs which were partially offset by additional SG&A expense from acquisitions. SG&A as a percent of revenue was well leveraged at 43.0% in the quarter compared to 44.5% last year. Included in SG&A were gains from sales of businesses within Small Business Services of $7.2 million, compared to gains recognized in the first quarter of 2017 of $6.8 million.
• Operating income increased 3.2% year-over-year. Adjusted operating income, which excludes restructuring, integration and transaction costs, as well as asset impairment charges, in both periods, increased 0.9% 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 $0.15 per share year-over-year and included aggregate net charges of $0.08 per share for restructuring, integration and transaction costs, as well as an asset impairment charge and costs related to the retirement of term loans under our previous credit facility, partially offset by a small favorable adjustment related to federal tax reform. Adjusted diluted EPS, which excludes these items, increased 11.2% year-over-year. Our lower income tax rate in 2018, primarily due to the Tax Cuts and Jobs Act of 2017, contributed $0.10 to the increase in EPS. Additionally, EPS benefitted from favorable operating performance and lower shares outstanding.
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