Deluxe(DLX) - 2025 Q1 - Quarterly Report

Financial Performance - Consolidated revenue for Q1 2025 increased by $2 million to$ 536 million, despite a $6 million decrease from business exits, driven by pricing actions and growth in data-driven marketing [79]. - Net income for Q1 2025 increased by$ 3 million to $14 million, reflecting pricing and cost management actions, and reduced restructuring expenses [79]. - Net income for Q1 2025 was$ 14,048,000, reflecting a 29.7% increase compared to $10,830,000 in Q1 2024, while diluted EPS rose to$ 0.31, up 29.2% year-over-year [99]. - Free cash flow for Q1 2025 increased significantly to $24,313,000 from$ 6,148,000 in Q1 2024, indicating improved cash generation capabilities [101]. - Net cash provided by operating activities increased by $24 million to$ 50,281,000 in Q1 2025 from $26,590,000 in Q1 2024 [123]. Cost Management - Adjusted EBITDA margin for Q1 2025 was 18.7%, virtually unchanged from 18.8% in Q1 2024, with a 0.5 point decrease attributed to business exits [78]. - SG&A expenses decreased by 3.8% to$ 225 million, with SG&A as a percentage of total revenue dropping from 43.8% to 42.0% [93]. - Total cost of revenue increased by 1.6% to $255 million, with costs as a percentage of total revenue rising from 47.0% to 47.6% [90]. - Restructuring and integration expenses decreased by 44.5% to$ 7.7 million, reflecting ongoing initiatives to enhance operational efficiency [95]. - SG&A expenses decreased by 3.8% in Q1 2025 compared to Q1 2024, contributing to overall cost management efforts [109]. Debt and Cash Management - Cash and cash equivalents as of March 31, 2025, were $30 million, with an additional$ 368 million available under the revolving credit facility [84]. - Total debt as of March 31, 2025, was $1,492,545,000, down from$ 1,503,151,000 at the end of 2024, resulting in net debt of $1,462,229,000 [102]. - As of March 31, 2025, total debt obligations were$ 1.51 billion, a slight decrease from $1.52 billion as of December 31, 2024 [128]. - The company anticipates capital expenditures between$ 90 million and $100 million for the full year, compared to$ 94 million in 2024 [84]. - The company expects to maintain regular quarterly dividend payments, subject to board approval [127]. Segment Performance - Merchant Services segment revenue for Q1 2025 was $97,769,000, a 1.3% increase from$ 96,477,000 in Q1 2024, driven by higher volumes from government clients [113]. - Total revenue for the B2B Payments segment in Q1 2025 was $70,155,000, a 1.1% increase from$ 69,418,000 in Q1 2024 [115]. - Data Solutions segment revenue increased by 29.3% to $77,227,000 in Q1 2025, up from$ 59,712,000 in Q1 2024 [117]. - Adjusted EBITDA for the Data Solutions segment rose by 32.4% to $19,693,000 in Q1 2025, compared to$ 14,869,000 in Q1 2024 [117]. - Print segment revenue decreased by 4.0% to $291,304,000 in Q1 2025, down from$ 303,334,000 in Q1 2024 [119]. Tax and Interest - The effective income tax rate for Q1 2025 decreased to 27.1%, down from 33.8% in Q1 2024, primarily due to lower tax impacts from foreign operations [98]. - Interest expense for Q1 2025 increased to $31,266,000, a 1.5% rise from Q1 2024, driven by higher interest rates despite a 3.0% decrease in average debt outstanding [97]. Future Outlook - The North Star program aims for a$ 100 million run-rate improvement in free cash flow and an $80 million run-rate improvement in adjusted EBITDA by 2026 [110]. - The company is focused on growth investments, debt reduction, and returning capital to shareholders through dividends, subject to board approval [84]. Foreign Currency Exposure - The company is exposed to fluctuations in foreign currency exchange rates, primarily Canadian dollars [136]. - Foreign operations constitute a relatively small portion of the overall business, minimizing the impact of exchange rate changes on earnings and cash flows [136]. - The company has not engaged in hedging activities to mitigate foreign currency exchange rate risks [136].