DELUXE CORP Q1 FY2025 earnings call

• Solid start to 2025 with organic growth in revenue, adjusted EBITDA, EPS, and margin. - Sustained expansion of earnings faster than revenue for ninth consecutive quarter shows operating leverage from North Star. - Significant year-over-year expansion of operating cash flow, driving net debt reduction. - Macro factors: Focus on controlling what's controllable despite volatility; monitor consumer sentiment, discretionary spending. - Tariffs: Small exposure in lower margin branded apparel/accessories, intend to pass along costs, but uncertain impact on demand. - One Deluxe go-to-market approach led to new customer wins across segments. - First quarter highlights: Total revenue $536.5M, up 1.4% comparable adjusted; comparable adjusted EBITDA $100.2M, up 3.4%; adjusted EPS $0.75, up 4%. - Segment shifts: Payments and Data mix increased to 46% from 43% year-over-year. - Data segment grew 29% with 17 new customer logos; Merchant Services partnered with TowneBank; Print segment mitigated check revenue decline.

For the first quarter, total revenue was $536.5 million, growing 1.4% on a comparable adjusted basis. The Payments and Data segments expanded year-over-year by a blended rate just above 8.5%. The Merchant Services business had revenue of $97.8 million, up 1.3% year-over-year, with adjusted EBITDA of $21.4 million flat. B2B payments segment revenues were $70.2 million, up 1.2%, with adjusted EBITDA $13.3 million flat. Data Solutions segment revenues were $77.2 million, up 29.3%, with adjusted EBITDA $19.7 million up 32.2%. Print segment revenue was $291.3 million, down 4%, with adjusted EBITDA margin 31.2% up 120 basis points. Revenue contribution: Print was 54%, Payments and Data combined 46%.

• Maintained 2025 guidance. - Merchant Services revenue growth now expected lower single-digit full year vs prior mid-single-digit. - B2B payments expected flat to low single-digit revenue growth through first half, low to mid-single-digit full year. - Data Solutions expected high single-digit to low double-digit full year growth. - Print segment expected low to mid-single-digit revenue decline, adjusted EBITDA margins low 30s. - Net debt to end 2025 at ~3.3x leverage, aiming for 3x or better by end of 2026. - Free cash flow improved to $24.3M for quarter, up $18.1M from prior year.

• Macroeconomic uncertainty impacting outlook. - Tariff exposure in small promotional product areas, potential impact on demand. - Uncertainty around how tariffs could affect demand in lower margin branded apparel and accessories. - Potential impact of government check phase-out announcement on customers, but minimal direct exposure for Deluxe.

Q: Kartik Mehta asked about the Merchant business, including new leader Brian Mahony and strategic changes.

A: Barry McCarthy said they're pleased to have Brian, focusing on improving partnership relationships, like the TowneBank deal, moving up market, and expanding channels.

Q: Charlie Strauzer asked about Q2 modeling and Data success.

A: Barry McCarthy said Data had great quarter, campaign-oriented with rolling three-to-four-quarter average; Print to see promo softness in Q2, check continuing lower single-digit decline; B2B and merchant continuing lower single-digit growth.

Q: Jonnathan Navarrete asked about government check phase-out impact and tariffs.

A: Barry McCarthy said no direct exposure to federal government checks, minimal impact; on tariffs, little evidence of stocking in their business.

Q: Marc Riddick asked about partnerships, ratings, and CapEx.

A: Chip Zint talked about ratings upgrade, strong free cash flow, CapEx guided $90M-$100M, linear path for leverage reduction.