Deluxe reports first quarter 2019 financial results
St. paul, minn.--(business wire)--deluxe corporation (nyse: dlx), a trusted, technology-enabled solutions provider, announced its financial results for the first quarter ended march 31, 2019. revenue was within the company’s previously disclosed outlook range of $490 to $505 million. adjusted diluted eps, calculated consistently with our prior year methodology, was $1.14, compared to the outlook range of $1.05 to $1.15. 1st quarter 2019 1st quarter 2018 first quarter 2019 highlights financial services (fs) revenue increased 9.8% compared to the prior year driven by the results of the remitco acquisition in august 2018. fs revenue was negatively impacted by the continuing decline in checks, as well as a decline in treasury management revenue, excluding the impact of the acquisition. small business services (sbs) revenue declined 1.0% compared to the prior year driven by the continuing decline in checks and forms and the impact of one less business day this year. sbs revenue benefited from the results of three tuck-in acquisitions in 2018 and price increases. direct checks revenue decreased 9.7% year-over-year driven by the continuing decline in check usage. marketing services and other solutions (mos) accounted for 43.0% of total revenue, checks accounted for 40.3% of total revenue and forms and accessories accounted for 16.7% of total revenue. net income decreased $22.1 million year-over-year. adjusted ebitda decreased $7.9 million year-over-year due primarily to the continuing decline in checks and forms, partly offset by our continued focus on cost reductions, as well as sbs price increases. diluted eps decreased $0.38 per share year-over-year. adjusted diluted eps decreased 3.8% year-over-year driven by the decline in adjusted ebitda and higher interest expense, partly offset by lower shares outstanding this year. cash provided by operating activities for 2019 was $45.4 million, a decrease of $35.4 million compared to 2018 driven by the payment of certain legal-related expenses, the timing of accounts payable payments, and the continuing decline in checks and forms, partly offset by benefits from our cost savings initiatives and lower income tax payments. the company repurchased common stock in open market transactions during the first quarter for total consideration of $50.0 million. at the end of the first quarter, the company had $946.0 million of total debt outstanding under its revolving credit facility. “i am pleased with our first quarter performance which was in-line with our expectations,” said barry mccarthy, president and ceo of deluxe. “we have made substantial progress in evaluating our operations to ensure deluxe is well positioned for the future. what is clear is that deluxe has an impressive base of existing customers, extensive catalog of products and services and a strong financial structure, all of which we expect will drive our revenue growth. today we are announcing our strategic framework to transform deluxe into a trusted, technology-enabled solutions provider. we believe that the combination of our compelling core competencies and assets, with our new go-to-market strategy will deliver significant shareholder value over the long-term.” mccarthy continued, “we are excited about transforming the company from a check and forms printer into a “new deluxe” and are focused on driving improved operating performance and financial results. later in the year, we will begin realigning our business into four primary areas: payments, cloud, promotional products and checks, which will provide us with opportunities in the enterprise, small business and financial services spaces. as we move forward, we intend to maintain our recurring revenue streams, scalable business model, attractive cost structure and data rich-businesses. with our new go-to-market strategy and integrated operations, we will run a more streamlined and efficient sales process, resulting in more cross-sell opportunities across the organization.” current outlook(4/25/2019) current outlook(4/25/2019) prior outlook(1/24/2019) earnings call information a live conference call will be held today at 11:00 a.m. et (10:00 a.m. ct) to review the financial results. listeners can access the call by dialing (615) 247-0252 (access code 2469334). a presentation also will be available via a webcast on the investor relations website. alternatively, an audio replay of the call will be available on the investor relations website or by calling (404) 537-3406 (access code 2469334). upcoming management presentations may 21st & 22nd – needham emerging technology conference – new york june 5th & 6th – r.w. baird 2019 global consumer, technology & services conference – new york about deluxe corporation deluxe is a trusted, technology-enabled solutions provider for enterprises, small businesses and financial institutions offering a range of solutions to help customers manage and grow their businesses. approximately 4.8 million small business customers access deluxe's wide range of products and services, including incorporation services, logo design, website development and hosting, email marketing, social media, search engine optimization, and payroll services along with customized checks and forms. for our approximately 4,600 financial institution customers, deluxe offers industry-leading programs in data analytics, customer acquisition and treasury management solutions, fraud prevention and profitability solutions, as well as checks. deluxe is also a leading provider of checks and accessories sold directly to consumers. for more information, visit us at www.deluxe.com, www.facebook.com/deluxecorp or www.twitter.com/deluxecorp. forward-looking statements statements made in this release concerning deluxe, “the company’s” or management’s intentions, expectations, outlook or predictions about future results or events are “forward-looking statements” within the meaning of the private securities litigation reform act of 1995. such statements reflect management’s current intentions or beliefs and are subject to risks and uncertainties that could cause actual results or events to vary from stated expectations, which variations could be material and adverse. factors that could produce such a variation include, but are not limited to, the following: the impact that a deterioration or prolonged softness in the economy may have on demand for the company’s products and services; the inherent unreliability of earnings, revenue and cash flow predictions due to numerous factors, many of which are beyond the company’s control; declining demand for the company’s checks and check-related products and services and business forms; risks that the company’s strategies intended to drive sustained revenue and earnings growth, despite the continuing decline in checks and forms are delayed or unsuccessful; intense competition in the check printing business; continued consolidation of financial institutions and/or additional bank failures, thereby reducing the number of potential customers and referral sources and increasing downward pressure on the company’s revenue and gross profit; the risk that pending and future acquisitions will not be consummated within the expected time periods or at all; risks that the company’s recent acquisitions do not produce the anticipated results or synergies; risks that the company’s cost reduction initiatives will be delayed or unsuccessful; performance shortfalls by one or more of the company’s major suppliers, licensors or service providers; unanticipated delays, costs and expenses in the development and marketing of products and services, including web services, financial technology and treasury management solutions; the failure of such products and services to deliver the expected revenues and other financial targets; risks related to security breaches, computer malware or other cyber-attacks; risks of interruptions to our website operations or information technology systems; risks of unfavorable outcomes and the costs to defend litigation and other disputes; and the impact of governmental laws and regulations. our forward-looking statements speak only as of the time made, and we assume no obligation to publicly update any such statements. additional information concerning these and other factors that could cause actual results and events to differ materially from the company’s current expectations are contained in the company’s form 10-k for the year ended december 31, 2018. diluted eps reconciliation we believe that adjusted diluted eps provides useful comparable information for investors by excluding the impact of items that we believe are not indicative of ongoing operations. it is reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantly. the presentation below is not intended as an alternative to results reported in accordance with generally accepted accounting principles (gaap) in the united states of america. instead, we believe that this information is a useful financial measure to be considered in addition to gaap performance measures. during the first quarter of 2019, we modified our presentation of adjusted diluted eps. management determined that excluding additional items, such as acquisition amortization, share-based compensation expense, certain legal-related expenses and gain on sales of businesses and customer lists, when calculating this non-gaap measure would be helpful in analyzing our results. revised amounts for 2018 are presented below. reported diluted eps reconciles to adjusted diluted eps as follows: 1st quarter2019 2nd quarter2019 total year2019 1st quarter2018 2nd quarter2018 3rd quarter2018 4th quarter2018 total year2018 reported diluted eps reconciles to adjusted diluted eps, calculated under our prior year methodology, as follows: deluxe corporation consolidated condensed statements of income (dollars and shares in millions, except per share amounts) (unaudited) deluxe corporation consolidated condensed balance sheets (in millions) (unaudited) march 31, 2019(1) deluxe corporation consolidated condensed statements of cash flows (in millions) (unaudited) deluxe corporation segment information (in millions) (unaudited) quarter endedmarch 31, the segment information reported here was calculated utilizing the methodology outlined in the notes to consolidated financial statements included in our annual report on form 10-k for the year ended december 31, 2018. the table below is provided to assist in understanding the comparability of the company’s results of operations for the quarters ended march 31, 2019 and 2018. we disclose adjusted operating income because we believe it is useful to evaluate our operating performance excluding certain items which may vary for reasons unrelated to overall operating performance. during the first quarter of 2019, management determined that excluding additional items when calculating adjusted operating income would be helpful in analyzing our results. as such, adjusted operating income by segment reported in the prior year has been revised. the excluded items include asset impairment charges, acquisition amortization, restructuring and integration costs, ceo transition costs, share-based compensation expense, acquisition transaction costs, certain legal-related expense and gain or loss on sales of businesses and customer lists. it is reasonable to expect that one or more of these excluded items will occur in future periods, but the amounts recognized can vary significantly from period to period and may not directly relate to the company’s ongoing operations. the presentation below is not intended as an alternative to results reported in accordance with gaap. instead, we believe that this information is a useful financial measure to be considered in addition to gaap performance measures. deluxe corporation adjusted segment operating income (in millions) (unaudited)
