For Q3 2021, Deluxe Reports Strong Growth in Payments Amid Decline of Legacy Check Business
Highlights
- Third quarter revenue increased 21.1%; up 2.3% excluding contribution from First American
- Solid growth in Payments, Cloud, and Promotional Solutions
- First American continues to exceed expectations with cross-selling initiatives well underway
- Declared regular quarterly dividend
Deluxe (NYSE: DLX), a Trusted Payments and Business Technology company, today reported operating results for its third quarter ended September 30, 2021.
“The scale of our Payments business now rivals our legacy Check business, confirming Deluxe is a Payments company. Our One Deluxe go-to-market strategy is working across all our businesses, providing full company organic growth during the third quarter. We are well-positioned to deliver on the fourth quarter and drive momentum into 2022,” said Barry McCarthy, President and CEO of Deluxe. “We are particularly encouraged by the performance of recently acquired First American, as well as our payroll and digital payments businesses. Cloud Solutions also performed well, improving 9% year-over-year, Promotional Solutions experienced growth and Checks’ rate of decline was better than long-term industry trends."
“We are pleased with our third quarter results which were in-line with expectations, and, as anticipated, were impacted by lingering Covid impacts, inflation and other macroeconomic factors,” said Scott Bomar, Senior Vice President and Chief Financial Officer of Deluxe. “As a reminder, last year's third quarter was positively impacted by Covid-related cost savings initiatives, and other one-time items. We have continued to effectively manage costs during the period while continuing to deliver sales growth. We expect to see improvements in free cash flow in the fourth quarter and beyond, which will allow us to invest in growth, as well as continue to de-lever our balance sheet."
Third Quarter 2021 Financial and Segment Highlights
(in millions, except per share amounts)
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- Revenue for the third quarter was $92.6 million higher than the previous year. Not including the First American acquisition, which closed on June 1, 2021, revenue increased $10.1 million, or 2.3% year-over-year.
- The Payments segment delivered revenue growth of 114.6% over the previous year to $160.3 million, $82.5 million of which was from First American.
- Net income of $12.5 million includes $11.9 million in acquisition amortization from the First American acquisition, as well as increased interest expense associated with the transaction.
- Adjusted EBITDA margin was 19.3%, down 400 basis points from the prior year due to planned technology investments, inflationary pressures, product mix, and one-time items.
- Cash flow from operations for the third quarter was $65.4 million and capital expenditures were $34.5 million. Free cash flow, defined as cash provided by operating activities less capital expenditures, was $30.9 million, an increase of $11.6 million from the second quarter of 2021, and a decrease of $10.7 million compared to the third quarter of 2020, largely attributable to capital investments this year.
- Total debt outstanding decreased from $1,833.4 million as of June 30, 2021 to $1,776.2 million as of September 30, 2021. Net debt was $1,655.1 million and liquidity was $433.6 million as of September 30, 2021.
2021 Outlook
The company continues to expect the following for full year 2021:
- Revenue growth of 10 to 12%
- Excluding First American, revenue growth of 0 to 2%
- Adjusted EBITDA margin between 20 and 21%
- Capital expenditures of $95 to $105 million
- Adjusted tax rate of approximately 25%
The guidance outlined above includes First American and assumes a continued economic recovery and is subject to, among other things, the macroeconomic unknowns associated with the COVID-19 pandemic, including the Delta variant, as well as anticipated continued supply chain constraints, labor supply issues, and inflation.
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.
