Deluxe(DLX) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Performance Highlights Deluxe reported a 3.1% decrease in Q2 2025 revenue to $521.3 million, but demonstrated improved profitability through effective cost management Overview of Q2 2025 Results Deluxe reported a 3.1% decrease in Q2 2025 revenue to $521.3 million, but demonstrated improved profitability through effective cost management, with net income rising 9.3% to $22.4 million and comparable adjusted EBITDA increasing 4.6% to $106.5 million - Management highlighted strong expansion in core earnings and operating cash flow, driven by double-digit revenue growth in Data Solutions and an improving Merchant Services trajectory, despite headwinds in legacy promotional solutions[3] Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue (in millions) | $521.3M | $537.8M | (3.1%) | | Comparable Adjusted Revenue (in millions) | $521.3M | $534.9M | (2.5%) | | Net Income (in millions) | $22.4M | $20.5M | 9.3% | | Comparable Adjusted EBITDA (in millions) | $106.5M | $101.8M | 4.6% | | Diluted EPS | $0.50 | $0.46 | 8.7% | | Comparable Adjusted Diluted EPS | $0.88 | $0.85 | 3.5% | - First-half operating cash flow was $101.4 million, and free cash flow increased by $34.5 million to $52.1 million compared to the prior year[4] Full-Year 2025 Outlook The company affirmed its full-year 2025 guidance for revenue, adjusted EBITDA, and adjusted diluted EPS, while raising its free cash flow outlook to a range of $130 million to $150 million Updated Full-Year 2025 Guidance | Metric | Guidance Range | Status | | :--- | :--- | :--- | | Revenue | $2.090 to $2.155 billion | Affirmed | | Adjusted EBITDA | $415 to $435 million | Affirmed | | Adjusted diluted EPS | $3.25 to $3.55 | Affirmed | | Free cash flow | $130 to $150 million | Raised | - The guidance is subject to prevailing macroeconomic conditions, global instability, labor supply challenges, and inflation[6] Capital Allocation and Dividend The Board of Directors approved a regular quarterly dividend of $0.30 per share, payable on September 2, 2025, to shareholders of record as of August 18, 2025 - A regular quarterly dividend of $0.30 per share has been approved[7] Financial Statements Consolidated Condensed Statements of Income For the second quarter of 2025, revenue decreased to $521.3 million from $537.8 million in Q2 2024, but operating income increased to $60.8 million and net income attributable to Deluxe rose to $22.4 million due to lower SG&A and restructuring expenses Q2 2025 vs Q2 2024 Income Statement Highlights (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $521.3 | $537.8 | | Gross profit | $279.3 | $288.8 | | Operating income | $60.8 | $59.3 | | Net income attributable to Deluxe | $22.4 | $20.5 | | Diluted earnings per share | $0.50 | $0.46 | Consolidated Condensed Balance Sheets As of June 30, 2025, total assets stood at $2,535.0 million, down from $2,831.0 million at the end of 2024, primarily due to a decrease in 'Other current assets', while net debt saw a slight reduction to $1,444.6 million Balance Sheet Highlights (in millions) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $26.0 | $34.4 | | Total assets | $2,535.0 | $2,831.0 | | Long-term debt | $1,433.4 | $1,466.0 | | Shareholders' equity | $638.7 | $620.9 | | Net debt | $1,444.6 | $1,468.7 | Consolidated Condensed Statements of Cash Flows For the first six months of 2025, net cash from operating activities increased significantly to $101.4 million from $66.2 million in the prior year period, driving a substantial increase in free cash flow to $52.1 million Six Months Ended June 30 Cash Flow Highlights (in millions) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $101.4 | $66.2 | | Purchases of capital assets | ($49.3) | ($48.6) | | Net change in debt | ($34.3) | ($37.4) | | Free cash flow | $52.1 | $17.6 | Segment Performance Segment Revenue and Adjusted EBITDA In Q2 2025, revenue growth was led by the Data Solutions segment, which grew 18.1% year-over-year, while all segments saw an improvement in Adjusted EBITDA margin Q2 2025 Segment Revenue (in millions) | Segment | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Merchant Services | $101.4 | $98.5 | +2.9% | | B2B Payments | $71.0 | $70.2 | +1.1% | | Data Solutions | $67.8 | $57.4 | +18.1% | | Print | $281.1 | $308.8 | -9.0% | Q2 2025 Segment Adjusted EBITDA & Margin (in millions) | Segment | Adj. EBITDA | Margin | Q2 2024 Margin | | :--- | :--- | :--- | :--- | | Merchant Services | $21.7 | 21.4% | 19.5% | | B2B Payments | $15.6 | 22.0% | 19.9% | | Data Solutions | $20.4 | 30.1% | 27.5% | | Print | $90.4 | 32.2% | 30.4% | Reconciliation of GAAP to Non-GAAP Measures EBITDA and Adjusted EBITDA This section reconciles GAAP Net Income to non-GAAP Adjusted EBITDA, showing that Q2 2025 Net Income of $22.4 million was reconciled to Adjusted EBITDA of $106.5 million by adding back various non-operating items - Management uses Adjusted EBITDA to assess operating results, perform analytical comparisons, and identify strategies to improve performance, believing it is a useful metric for evaluating operating performance[23] Q2 2025 Reconciliation of Net Income to Adjusted EBITDA (in millions) | Line Item | Amount | | :--- | :--- | | Net income | $22.4 | | Interest expense | $30.9 | | Income tax provision | $9.3 | | Depreciation and amortization | $33.5 | | EBITDA | $96.1 | | Restructuring and integration | $4.2 | | Share-based compensation | $6.2 | | Adjusted EBITDA | $106.5 | Adjusted and Comparable Adjusted Diluted EPS This section reconciles GAAP Net Income to non-GAAP Adjusted Net Income to calculate Adjusted Diluted EPS, showing that Q2 2025 Net Income of $22.4 million was adjusted to $39.6 million, resulting in an Adjusted Diluted EPS of $0.88 - Management believes Adjusted Diluted EPS provides a useful view of underlying business performance by excluding non-cash items or items not indicative of current period operations[25] Q2 2025 Reconciliation to Adjusted Diluted EPS | Line Item | Amount (in millions) | | :--- | :--- | | Net income attributable to Deluxe | $22.4 | | Adjustments, net of tax | $17.2 | | Adjusted net income | $39.6 | | Weighted-average dilutive shares | 45.2 | | Adjusted Diluted EPS | $0.88 | Comparable Adjusted Revenue and EBITDA This section adjusts GAAP Revenue and non-GAAP Adjusted EBITDA to exclude the impact of business exits, providing a comparable year-over-year view where Q2 2024 revenue of $537.8 million is adjusted to $534.9 million and Adjusted EBITDA of $103.4 million to $101.8 million - Management uses comparable measures to evaluate results on a year-over-year basis by excluding the effects of business exits[27] Q2 2024 Comparable Adjustments (in millions) | Metric | Reported | Business Exits | Comparable Adjusted | | :--- | :--- | :--- | :--- | | Revenue | $537.8 | ($2.9) | $534.9 | | Adjusted EBITDA | $103.4 | ($1.6) | $101.8 | Net Debt Net debt is calculated as total debt minus cash and cash equivalents, showing a decrease to $1,444.6 million as of June 30, 2025, from $1,468.7 million at the end of 2024 Net Debt Calculation (in millions) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total debt | $1,470.6 | $1,503.1 | | Cash and cash equivalents | ($26.0) | ($34.4) | | Net debt | $1,444.6 | $1,468.7 | Free Cash Flow Free cash flow is calculated as net cash from operating activities less purchases of capital assets, showing a significant increase to $52.1 million for the six months ended June 30, 2025, from $17.6 million in the prior year period - Management considers free cash flow an important indicator of cash available for servicing debt, paying dividends, and funding strategic investments after necessary capital expenditures[33] Free Cash Flow Calculation (in millions) | Period | Net cash from operating activities | Purchases of capital assets | Free cash flow | | :--- | :--- | :--- | :--- | | Six Months 2025 | $101.4 | ($49.3) | $52.1 | | Six Months 2024 | $66.2 | ($48.6) | $17.6 |