Deluxe(DLX) - 2023 Q4 - Annual Report

Business Overview Deluxe Corporation transformed into a modern payments and data company, focusing on growth through strategic divestitures, leveraging print assets, and continuous operational improvements Company Overview Deluxe transformed into a modern payments and data company, divesting non-core businesses to focus on growth segments - Deluxe Corporation has transformed from a legacy check printer into a modern payments and data company, serving small businesses, financial institutions, and consumer brands[9][12] - The company completed its exit from the web hosting space in June 2023 and is exiting its payroll and human resources services business in 2024 to focus resources on payments and data[10][153] 2023 Consolidated Revenue by Business Segment | Category | Percentage of 2023 consolidated revenue | | :-------------------------- | :-------------------------------------- | | Payments | 31.5 % | | Data Solutions | 10.9 % | | Promotional Solutions | 24.7 % | | Checks | 32.9 % | | Total | 100.0 % | Our Strategy The strategy leverages print business assets to drive payments and data growth, with the 'North Star' program targeting significant EBITDA and free cash flow improvements by 2026 - The enterprise strategy is to utilize cash flows, customer relationships, and brand equity from print businesses to drive profitable organic growth in payments and data businesses[12][65] - The 'North Star' program is an integrated, multi-year plan focused on cost reduction and growth initiatives to drive shareholder value[13][151][186] - North Star targets a $100 million run-rate improvement in free cash flow and an $80 million run-rate improvement in adjusted EBITDA by 2026[13][187] Sales and Marketing The 'One Deluxe' go-to-market model uses dedicated sales teams and multi-channel approaches to deepen customer relationships and cross-sell products - The 'One Deluxe' go-to-market model deploys dedicated sales teams across business segments to leverage expertise and meet customer needs, fostering deeper relationships and cross-selling opportunities[14][15] - A multi-channel sales and marketing approach includes direct sales to financial institutions and major brands, scalable partnerships, and leveraging millions of inbound customer contacts[16] Our Businesses Deluxe's business segments include Payments, Data Solutions, and Print, each with distinct offerings and competitive landscapes, focused on modernization and growth Payments Merchant Services This segment offers credit/debit card and electronic benefit transaction processing to SMBs, focusing on technology modernization and integrated software partnerships - Merchant services provide credit card, debit card, and electronic benefit transaction processing, primarily to small and medium-sized businesses, processing approximately $40 billion in annual transaction volume[17] - Competitive advantages include industry expertise, owned technology infrastructure (gateways, onboarding, risk management, clearing/settlement), and strong relationships[19] - Future focus is on gaining market share by offering more omnichannel and embedded services and growing integrated software partnerships[20] Payments Treasury Management Solutions This segment provides automated receivables technology, shifting focus to AR/AP automation software solutions for businesses and financial institutions - Solutions reconcile and manage invoices with various payment types, integrating with customer accounting software, with over 70% of top 200 financial institutions using their item processing capabilities[21] - Competitive advantages are expertise, strong relationships, and innovative solutions, with a significant untapped market[22] - Future focus includes expanding integrated receivables and exception management tools, gaining efficiencies in item processing, and growing revenue from AR/AP automation investments[23] Data Solutions Data-Driven Marketing This segment delivers data-driven marketing campaigns, leveraging extensive data to acquire customers and expand into new industry verticals - Leverages data and analytics for targeted marketing campaigns, with nearly 100 contributing data sources integrated into a unified data library[24][25] - Competitive advantages include extensive data and top-level talent, with significant growth opportunity in scientific, data-driven marketing[25][26] - Increasing efforts to expand beyond the banking industry into new verticals such as telco, utilities, e-commerce, retail, and smart home[26] Promotional Solutions and Checks This segment provides checks, forms, and promotional products, focusing on print efficiencies and higher-margin offerings despite declining check usage - Checks remain a payment necessity for millions, especially for mid-sized businesses, with over 90,000 packages shipped daily[27] - Competitive advantages include people, product accuracy, security features, quality and service, long-standing financial institution relationships, and digital print-on-demand technology[29] - Future strategy involves investing in print efficiencies and process improvements to maintain margins, and prioritizing higher-margin promotional products that complement checks[30] Our Operations Operations focus on improving customer experience, productivity, and cost reduction through lean principles, automation, and investment in digital-first, cloud-based platforms - Operations focus on improving customer experience, productivity, and cost reduction by embedding lean operating principles and emphasizing continuous improvement and innovation[31] - Investments in print infrastructure, such as 'Print On Demand' equipment, allow for more choices with less waste, labor, and inventory, supporting margin management and redirecting savings to payments and data businesses[32] - Expanding technology investment in growth businesses by creating a digital-first, cloud-based, data-driven platform with scalable components to accelerate product commercialization and optimize margins[33] Environmental, Social and Governance Practices Deluxe implements a stakeholder-focused ESG program, integrating sustainability into operations with focuses on DEIB, energy efficiency, and responsible sourcing - Implemented a stakeholder-focused ESG program addressing responsible process improvement, DEIB, community awareness, and cybersecurity/privacy[34] - Sustainability efforts include energy-saving measures in facilities, waste stream reduction and recycling, sourcing over 90% of check and forms paper from FSC-certified mills, and using recycled materials for vinyl checkbook covers[35][38] Our Materials, Supplies and Service Providers Deluxe relies on various materials and third-party services, actively seeking multiple supply sources, but faces risks if vendors fail to perform - Principal materials include paper, plastics, ink, corrugated packaging, and printing plate material, purchased from various sources[36] - Relies on third-party providers for delivery services, information technology services (telecommunications, network server, transaction processing), and a portion of data for proprietary databases[36] - While steps are taken to secure multiple sources, there's no assurance that alternative supplies could be obtained at current prices if a vendor fails to perform[37] Our Human Capital Deluxe employs 5,170 individuals, fostering an inclusive culture with DEIB initiatives, employee ownership through RSUs, and comprehensive benefits - As of December 31, 2023, Deluxe had 5,170 employees (4,870 in the U.S., 300 in Canada), with no employees represented by labor unions[38] - All employees are granted restricted stock unit awards, making them employee-owners, fostering a culture of inclusion, diversity, equity, development, opportunity, and empowerment[39][40] - Workforce demographics (as of Dec 31, 2023): 57% female, 43% male; U.S. team members: 50% white, 18% Black/African American, 12% Hispanic/Latino, 11% Asian American, 9% other[42] - Offers competitive benefits including medical, dental, life, disability insurance, mental/physical/financial/social wellbeing programs, paid parental leave, and unlimited flexible time off for salaried employees since 2023[43][47] Community Engagement Deluxe promotes community engagement through partnerships, a paid volunteer time off program, and matching donations via the Deluxe Foundation - Employees are encouraged to engage in community service through a paid volunteer time off (VTO) program, offering 3 paid VTO days per year[48] - Partnerships include Junior Achievement USA and the American Red Cross; in 2023, employees packed 120,000 meals and donated $221,000 to non-profits, contributing approximately 22,000 VTO hours[48][51] Seasonality Seasonal trends impact revenue, with Promotional Solutions stronger in Q4/Q1 and Data Solutions typically lower in Q4 - Promotional Solutions holiday card revenue is typically stronger in Q4, and tax forms are stronger in Q1 and Q4[49] - Data Solutions typically experiences less revenue in Q4 due to customer marketing campaign cycles[49] Government Regulation Deluxe is subject to complex and evolving regulations across various business activities, posing compliance challenges that could increase costs - Subject to numerous international, federal, state, and local laws and regulations affecting business activities in areas like labor, advertising, taxation, data privacy and security, consumer protection, and merchant processing[50][113] - The complexity of complying with existing and new laws is significant, and new regulations could limit or harm the business, but the impact on capital expenditures and earnings in 2024 is not expected to be materially different from 2023[50][51][114] Available Information Annual, quarterly, and current reports are freely available on the investor relations and SEC websites - Annual, quarterly, and current reports are available free of charge on the investor relations website (www.investors.deluxe.com) and the SEC website (www.sec.gov)[52](index=52&type=chunk) Our Code of Ethics and Corporate Governance Guidelines Deluxe maintains a Code of Ethics and Corporate Governance Guidelines, accessible on its investor relations website, applicable to employees and the board - A Code of Ethics applies to employees and the board of directors, available on the investor relations website[55] - Corporate Governance Guidelines and charters of the Audit and Finance, Compensation and Talent, and Corporate Governance Committees are also available on the website[55] Information About Our Executive Officers This section lists Deluxe Corporation's executive officers, their positions, ages, and professional backgrounds Executive Officers as of February 8, 2024 | Name | Age | Present Position | Executive Officer Since | | :------------------------ | :-- | :--------------------------------------------------- | :---------------------- | | Barry McCarthy | 60 | President and Chief Executive Officer | 2018 | | William "Chip" Zint | 39 | Senior Vice President, Chief Financial Officer | 2022 | | Debra Bradford | 65 | Senior Vice President, Division President, Merchant Services | 2023 | | Garry Capers, Jr. | 47 | Senior Vice President, Chief Operations Officer | 2019 | | Jeffrey Cotter | 56 | Senior Vice President, Chief Administrative Officer and General Counsel | 2018 | | Tracey Engelhardt | 59 | Senior Vice President, Division President, Print | 2012 | | Jean Herrick | 55 | Senior Vice President, Chief Human Resources Officer | 2022 | | Yogaraj "Yogs" Jayaprakasam | 46 | Senior Vice President, Chief Technology and Digital Officer | 2022 | Risk Factors Deluxe faces strategic, operational, legal, and financial risks, including growth strategy failure, cybersecurity threats, evolving regulations, and interest rate exposure Strategic Risks Strategic risks include growth strategy failure, intense competition, technological adaptation challenges, declining check usage, and difficulties with acquisitions or divestitures - Failure to successfully implement the long-term growth strategy, which relies on leveraging print business cash flows for payments and data growth, could adversely impact business and financial results[65][66] - Intense competition in payments, data solutions, and promotional products markets, coupled with the inability to adapt to rapid technological changes, could lead to loss of clients and limit growth[72][76] - The declining use of checks (32.9% of 2023 consolidated revenue) and business forms, driven by digital payments and technological improvements, could adversely affect business if not offset by profitable revenue growth[78][79] - Risks associated with acquisitions include difficulties in combining businesses, integrating operations, retaining customers, and managing unanticipated costs, while divestitures may incur losses or operational disruptions[84][85][87][88] Operational Risks Operational risks encompass cybersecurity breaches, IT system interruptions, reliance on third parties, talent retention issues, material price increases, and supply chain disruptions - Security breaches, computer malware, or other cyberattacks involving confidential information could substantially damage reputation, lead to litigation, and harm business operations, despite significant cybersecurity systems[89][94] - Interruptions to website operations, IT systems, or the failure of third-party service providers could damage reputation, lead to customer loss, and incur significant costs[97][101] - Inability to attract, motivate, and retain key personnel in a rapidly changing technological environment, coupled with intense competition for employees, could adversely impact business and results of operations[102][103] - Increases in prices and declines in availability of materials (e.g., paper, plastics, ink), third-party services (delivery, data), and card network fees, exacerbated by inflationary pressures, could adversely affect operating results[104][106] Legal and Compliance Risks Legal and compliance risks stem from evolving regulations, potential non-compliance, costly litigation, and challenges in protecting intellectual property rights - Evolving international, federal, state, and local laws and regulations, particularly in data privacy, consumer protection, and payment processing, could impose significant limitations, require business changes, and increase compliance costs[113][114][116] - Third-party claims and litigation, including class action lawsuits, employment practices, contractual breaches, and intellectual property infringement, could result in costly and time-consuming legal proceedings and adverse financial outcomes[119] - Inability to protect intellectual property rights (trademarks, copyrights, trade secrets, patents) against infringement or misappropriation could harm business and competitive ability[120] Financial Risks Financial risks include adverse economic conditions, potential goodwill impairment, and interest rate exposure from variable-rate debt - Economic conditions, including inflation, business and consumer confidence, and credit availability, significantly affect demand for products and services, particularly for small businesses and the financial services industry[121][123][124] - Goodwill, representing 46.4% of total assets as of December 31, 2023, is subject to annual impairment testing, and a write-down could materially affect results of operations[127][128][215] - Variable-rate indebtedness exposes the company to interest rate risk; as of December 31, 2023, $357.5 million of outstanding debt was variable, though interest rate swaps fix 78% of total debt at 7.0%[129][159][207] Unresolved Staff Comments No unresolved staff comments to report - No unresolved staff comments[130] Cybersecurity Deluxe prioritizes cybersecurity with a risk-based program, led by a CISO, and board oversight, reporting no material incidents to date - Cybersecurity is critical for Deluxe, which processes hundreds of millions of records annually, and a successful cyberattack could lead to data disclosure, operational interruptions, reputation damage, and legal actions[131] - A risk-based information/cybersecurity program, led by the CISO, employs a defense-in-depth strategy, including employee training, 24/7 monitoring, and system audits against independent security control frameworks[132] - The Enterprise Risk Management Committee, with executive leadership, assesses and monitors cybersecurity risks, providing quarterly updates to the board of directors[133] - As of the report date, no cybersecurity incidents have materially affected or are reasonably likely to materially affect the business strategy, results of operations, or financial condition[135] Properties As of December 31, 2023, Deluxe occupied 40 facilities totaling 2 million square feet, reducing its footprint by 13 in 2023 - As of December 31, 2023, Deluxe occupied 37 facilities in the U.S. and 3 in Canada, totaling approximately 2 million square feet, with 20% owned and 80% leased[136] - The company reduced the number of facilities by 13 during 2023, driven by real estate footprint assessment and business exits[136] Legal Proceedings Deluxe records provisions for probable and estimable legal claims, with no currently identified litigation expected to materially affect financial position - Provisions for identified claims or lawsuits are recorded when probable and estimable, with quarterly reviews[137] - Recorded liabilities for legal matters were not material to financial position, results of operations, or liquidity, and no currently identified claims are expected to materially affect these upon resolution[137] Mine Safety Disclosures This item is not applicable to Deluxe Corporation - Not applicable[138] Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Deluxe common stock trades on the NYSE (DLX), with 4,897 shareholders and $287.5 million remaining on a share repurchase authorization - Common stock is traded on the New York Stock Exchange under the symbol DLX[3] - As of December 31, 2023, there were 4,897 shareholders of record[139] - A $500.0 million share repurchase authorization from October 2018 had $287.5 million remaining as of December 31, 2023, with no shares repurchased in Q4 2023[140][207] Item 6. [Reserved] This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews Deluxe's financial performance, covering consolidated results, non-GAAP reconciliations, segment performance, cash flows, capital resources, and critical accounting estimates Executive Overview Deluxe completed infrastructure modernization, focusing on Payments and Data growth, with 2023 operating cash flow up but net income down, and 2024 revenue projected at $2.14-$2.18 billion - Completed a 3-year corporate infrastructure modernization program in Q1 2023, including an ERP system implementation, and shifted focus to growth investments in Payments and Data Solutions[151] - The 'North Star' program aims to expand EBITDA growth, increase cash flow, pay down debt, and improve the leverage ratio[151] - Divested North American web hosting and logo design businesses in June 2023 (approx. $66 million annual revenue in 2022) and is exiting payroll and human resources services (approx. $27 million annual revenue in 2023)[153] 2023 Financial Highlights vs. 2022 | Metric | 2023 (in thousands) | 2022 (in thousands) | Change | | :-------------------------------- | :------------------ | :------------------ | :----- | | Net cash provided by operating activities | $198,367 | $191,531 | +$6,836 | | Free cash flow | $97,620 | $86,933 | +$10,687 | | Total debt (Dec 31) | $1,592,851 | $1,644,276 | -$51,425 | | Net debt (Dec 31) | $1,520,889 | $1,603,841 | -$82,952 | | Liquidity (Dec 31) | $312,476 | $335,612 | -$23,136 | | Net income | $26,227 | $65,530 | -60.0% | | Diluted EPS | $0.59 | $1.50 | -60.7% | | Adjusted diluted EPS | $3.32 | $4.08 | -18.6% | | Adjusted EBITDA | $417,135 | $418,130 | -0.2% | | Adjusted EBITDA margin | 19.0% | 18.7% | +0.3 pt | - 78% of debt had a fixed interest rate of 7.0% as of December 31, 2023, partially insulating from future interest rate increases[159] 2024 Financial Outlook | Metric | 2024 Outlook | 2023 Actual | | :---------------- | :-------------------- | :---------- | | Revenue | $2.14 billion - $2.18 billion | $2.19 billion | | Adjusted EBITDA | $400 million - $420 million | $417 million | | Capital Expenditures | ~$100 million | $100.7 million | | Recurring Revenue Impact from Business Exits | -$56 million | -$26 million | | Adjusted EBITDA Impact from Business Exits | -$26 million | N/A | Consolidated Results of Operations Consolidated revenue decreased 2.0% in 2023 due to business exits and secular declines, while net income and diluted EPS significantly declined Consolidated Revenue (in thousands) | Year | Total Revenue | Change YoY | | :--- | :------------ | :--------- | | 2023 | $2,192,260 | (2.0%) | | 2022 | $2,238,010 | N/A | - Revenue decrease driven by business exits (approx. $52 million) and secular decline in checks/business forms, partially offset by price increases and growth in data-driven marketing/merchant services[164] Consolidated Cost of Revenue (in thousands) | Year | Total Cost of Revenue | % of Total Revenue | Change YoY | | :--- | :-------------------- | :----------------- | :--------- | | 2023 | $1,029,577 | 47.0% | (0.2%) | | 2022 | $1,032,116 | 46.1% | N/A | - Cost of revenue as a percentage of total revenue increased due to inflationary impacts, business investments, and restructuring/integration expenses, outweighing pricing actions[168] Consolidated SG&A Expense (in thousands) | Year | SG&A Expense | % of Total Revenue | Change YoY | | :--- | :----------- | :----------------- | :--------- | | 2023 | $956,068 | 43.6% | (3.7%) | | 2022 | $993,250 | 44.4% | N/A | - SG&A decrease driven by cost reduction actions (workforce, marketing, real estate) and $15 million from business exits, partially offset by technology infrastructure investments[169] Key Financial Metrics (in thousands, except EPS) | Metric | 2023 | 2022 | Change YoY | | :-------------------------------- | :--------- | :--------- | :--------- | | Restructuring and integration expense | $78,245 | $62,529 | +$15,716 | | Gain on sale of businesses and long-lived assets | $32,421 | $19,331 | +$13,090 | | Interest expense | $125,643 | $94,454 | +33.0% | | Weighted-average interest rate | 7.06% | 5.19% | +1.87 pt | | Income tax provision | $13,572 | $18,848 | (28.0%) | | Effective tax rate | 34.1% | 22.3% | +11.8 pt | | Net income | $26,227 | $65,530 | (60.0%) | | Diluted EPS | $0.59 | $1.50 | (60.7%) | | Adjusted diluted EPS | $3.32 | $4.08 | (18.6%) | | Adjusted EBITDA | $417,135 | $418,130 | (0.2%) | | Adjusted EBITDA margin | 19.0% | 18.7% | +0.3 pt | Reconciliation of Non-GAAP Financial Measures This section reconciles non-GAAP financial measures like free cash flow, net debt, and adjusted EBITDA to their GAAP equivalents for performance analysis - Non-GAAP measures (free cash flow, net debt, liquidity, adjusted diluted EPS, adjusted EBITDA) provide useful information for analyzing operating performance and future prospects, but are not substitutes for GAAP measures[148][178][179][180][181][182] Free Cash Flow Reconciliation (in thousands) | Metric | 2023 | 2022 | | :-------------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $198,367 | $191,531 | | Purchases of capital assets | (100,747) | (104,598) | | Free cash flow | $97,620 | $86,933 | Net Debt Reconciliation (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :------------------------ | :----------- | :----------- | | Total debt | $1,592,851 | $1,644,276 | | Cash and cash equivalents | (71,962) | (40,435) | | Net debt | $1,520,889 | $1,603,841 | Liquidity (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------------------ | :----------- | :----------- | | Cash and cash equivalents | $71,962 | $40,435 | | Amount available for borrowing under revolving credit facility | 240,514 | 295,177 | | Liquidity | $312,476 | $335,612 | Adjusted Diluted EPS Reconciliation (in thousands, except per share amounts) | Metric | 2023 | 2022 | | :------------------------------------------ | :--------- | :--------- | | GAAP diluted earnings per share | $0.59 | $1.50 | | Adjustments, net of tax | 2.73 | 2.58 | | Adjusted diluted EPS | $3.32 | $4.08 | Adjusted EBITDA Reconciliation (in thousands) | Metric | 2023 | 2022 | | :------------------------------------------ | :--------- | :--------- | | Net income | $26,227 | $65,530 | | Depreciation and amortization expense | 169,703 | 172,552 | | Interest expense | 125,643 | 94,454 | | Income tax provision | 13,572 | 18,848 | | Restructuring and integration expense | 90,475 | 63,136 | | Share-based compensation expense | 20,525 | 23,676 | | Gain on sale of businesses and long-lived assets | (32,421) | (19,331) | | Adjusted EBITDA | $417,135 | $418,130 | | Adjusted EBITDA margin | 19.0% | 18.7% | Restructuring and Integration Expense Restructuring and integration expense increased to $90.5 million in 2023, driven by the 'North Star' program targeting significant free cash flow and EBITDA improvements by 2026 Restructuring and Integration Expense (in thousands) | Year | Total Expense | | :--- | :------------ | | 2023 | $90,475 | | 2022 | $63,136 | | 2021 | $58,947 | - The 'North Star' program aims to drive shareholder value by expanding EBITDA growth, increasing cash flow, paying down debt, and improving the leverage ratio[186] - The program targets a $100 million run-rate improvement in free cash flow and an $80 million run-rate improvement in adjusted EBITDA by 2026[187] - Expected to incur an additional $70 million to $90 million in restructuring and integration expense over the next two years[187] - Employee reductions are expected to realize annual cost savings of approximately $8 million in cost of sales and $25 million in SG&A expense in 2024 compared to 2023[188] Segment Results Deluxe operates four reportable business segments, with varying revenue and EBITDA performance in 2023, and future expectations outlined for each Payments Segment The Payments segment revenue grew 1.8% in 2023, driven by merchant services, with adjusted EBITDA up 5.7%, and mid-single digit growth expected in 2024 Payments Segment Performance (in thousands) | Metric | 2023 | 2022 | Change YoY | | :---------------- | :--------- | :--------- | :--------- | | Total revenue | $690,704 | $678,580 | 1.8% | | Adjusted EBITDA | $152,798 | $144,605 | 5.7% | | Adjusted EBITDA margin | 22.1% | 21.3% | +0.8 pt | - Merchant services revenue increased by 4.8% in 2023, driven by strong merchant fees and volume[191] - Expected mid-single digit percentage revenue growth and low to mid-20% adjusted EBITDA margin for 2024[191][192] Data Solutions Segment Data Solutions revenue decreased 10.7% in 2023 due to business exits, partially offset by data-driven marketing growth, with a similar trend expected in 2024 Data Solutions Segment Performance (in thousands) | Metric | 2023 | 2022 | Change YoY | | :---------------- | :--------- | :--------- | :--------- | | Total revenue | $238,817 | $267,525 | (10.7%) | | Adjusted EBITDA | $55,700 | $68,214 | (18.3%) | | Adjusted EBITDA margin | 23.3% | 25.5% | (2.2) pt | - Revenue decreased by approximately $38 million due to business exits in 2023[193] - Data-driven marketing revenue increased by $15 million in 2023 due to increased demand[193] - Expected revenue decline of approximately $27 million in 2024 from business exits, with mid-single digit growth in the remaining business and adjusted EBITDA margin in the low 20% range[193][194] Promotional Solutions Segment Promotional Solutions revenue decreased 3.8% in 2023 due to secular declines and business exits, while adjusted EBITDA increased 1.5% from price and cost actions Promotional Solutions Segment Performance (in thousands) | Metric | 2023 | 2022 | Change YoY | | :---------------- | :--------- | :--------- | :--------- | | Total revenue | $541,650 | $562,917 | (3.8%) | | Adjusted EBITDA | $80,751 | $79,549 | 1.5% | | Adjusted EBITDA margin | 14.9% | 14.1% | +0.8 pt | - Revenue decline driven by secular decline in business forms/accessories and $13 million from business exits, partially offset by price increases and new clients[196] - Adjusted EBITDA increased due to price increases, cost reduction actions, and a focus on higher-margin products[197] - Expected low to mid-single digit percentage revenue decline and mid-teens adjusted EBITDA margin for 2024[196][197] Checks Segment Checks segment revenue decreased 1.1% in 2023 due to secular volume declines, with adjusted EBITDA remaining flat from price increases and cost savings Checks Segment Performance (in thousands) | Metric | 2023 | 2022 | Change YoY | | :---------------- | :--------- | :--------- | :--------- | | Total revenue | $721,089 | $728,988 | (1.1%) | | Adjusted EBITDA | $320,333 | $320,498 | (0.1%) | | Adjusted EBITDA margin | 44.4% | 44.0% | +0.4 pt | - Revenue decrease driven by continuing secular decline in overall check volumes, partially offset by price increases[198] - Adjusted EBITDA remained flat as price increases and cost saving actions offset volume decline and inflationary pressures[199] - Expected low to mid-single digit percentage revenue decline in 2024, consistent with long-term expectations, and adjusted EBITDA margin in the mid-40% range[198][199] Cash Flows and Liquidity Operating cash flow increased to $198.4 million in 2023, with $312.5 million in total liquidity, deemed sufficient for the next 12 months Cash Flow Summary (in thousands) | Metric | 2023 | 2022 | Change YoY | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net cash provided by operating activities | $198,367 | $191,531 | +$6,836 | | Net cash used by investing activities | ($43,305) | ($80,325) | +$37,020 | | Net cash used by financing activities | ($37,679) | ($48,601) | +$10,922 | | Net change in cash, cash equivalents, restricted cash and restricted cash equivalents | $120,618 | $51,924 | +$68,694 | - Operating cash flow increased due to positive working capital changes, pricing/cost savings, and a $9.5 million decrease in cloud computing implementation costs, partially offset by a $28.4 million increase in interest payments and higher tax/bonus payments[156][201] - Investing activities benefited from a $28.4 million increase in proceeds from sales of businesses and long-lived assets[202] - As of December 31, 2023, cash and cash equivalents were $72.0 million, with $240.5 million available under the revolving credit facility, providing sufficient liquidity for operations and debt service for the next 12 months[163][200][205] Capital Resources Total debt principal was $1.60 billion as of December 31, 2023, with 78% fixed-rate, and the company remains compliant with all debt covenants Capital Structure (in thousands) | Metric | Dec 31, 2023 Amount | Dec 31, 2023 Interest Rate | Dec 31, 2022 Amount | Dec 31, 2022 Interest Rate | | :-------------------- | :------------------ | :------------------------- | :------------------ | :------------------------- | | Fixed interest rate debt | $1,246,659 | 7.0% | $975,000 | 6.6% | | Floating interest rate debt | $357,528 | 7.9% | $684,375 | 6.6% | | Total debt principal | $1,604,187 | 7.2% | $1,659,375 | 6.6% | | Shareholders' equity | $604,616 | N/A | $604,224 | N/A | | Total capital | $2,208,803 | N/A | $2,263,599 | N/A | - As of December 31, 2023, $240.5 million was available for borrowing under the revolving credit facility[209] - The company was in compliance with all debt covenants as of December 31, 2023, and anticipates remaining in compliance throughout 2024[163][208] Critical Accounting Estimates Critical accounting estimates involve significant judgment in revenue recognition, goodwill impairment, and business combinations, with potential material financial impacts - Critical accounting estimates include revenue recognition (transfer of control, variable consideration), goodwill impairment (annual testing, fair value estimation), and business combinations (fair value allocation, useful life estimation)[210][211][215][222] - Goodwill totaled $1.43 billion (46.4% of total assets) as of December 31, 2023, and is tested for impairment annually using qualitative or quantitative analyses (discounted cash flow model)[215][217][218] - The payroll and human resources services reporting unit, with $7.7 million goodwill as of Dec 31, 2023, is expected to be fully impaired in 2024 as the company phases out these businesses[221] New Accounting Pronouncements Deluxe adopted ASU 2022-02 and reference rate reform guidance in 2023 with no material impact, and is evaluating ASU 2023-07 and 2023-09 - Adopted ASU No. 2022-02 (Troubled Debt Restructurings) and reference rate reform guidance (ASU No. 2020-04 and 2021-01) in 2023, with no material impact[313][314] - Currently evaluating ASU No. 2023-07 (Improvements to Reportable Segment Disclosures) and ASU No. 2023-09 (Improvements to Income Tax Disclosures), effective for fiscal years beginning after December 15, 2023, and 2024, respectively[315][316] Quantitative and Qualitative Disclosures About Market Risk Deluxe faces interest rate risk from $357.5 million in variable-rate debt, mitigated by swaps, with minimal foreign currency risk - Exposed to interest rate risk from variable-rate debt; $357.5 million outstanding as of December 31, 2023[129][207][233] - Interest rate swaps, designated as cash flow hedges, effectively convert $771.7 million of variable-rate debt to a fixed rate[232][344] - A one percentage point change in the weighted-average interest rate would result in an approximate $4 million change in interest expense for 2024[173][233] - Foreign currency exchange rate risk is minimal as foreign operations represent a relatively small portion of the business[235] Financial Statements and Supplementary Data This section presents Deluxe's audited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes on accounting policies Report of Independent Registered Public Accounting Firm PwC issued an unqualified opinion on Deluxe's 2023 financial statements and internal controls, identifying revenue recognition as a critical audit matter - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[241] - Revenue recognition was identified as a critical audit matter due to the high degree of auditor effort required for procedures related to the company's diverse product and service offerings[247][249][250] Consolidated Balance Sheets Total assets slightly increased to $3.08 billion in 2023, with stable shareholders' equity, reflecting changes in cash, receivables, and debt Consolidated Balance Sheet Summary (in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------------------ | :----------- | :----------- | | ASSETS | | | | Cash and cash equivalents | $71,962 | $40,435 | | Trade accounts receivable, net | $191,005 | $206,617 | | Inventories and supplies, net | $42,088 | $52,267 | | Funds held for customers | $383,134 | $302,291 | | Total current assets | $760,988 | $704,037 | | Property, plant and equipment, net | $116,539 | $124,894 | | Intangibles, net | $391,744 | $458,979 | | Goodwill | $1,430,590 | $1,431,385 | | Total assets | $3,080,622 | $3,076,520 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Accounts payable | $154,863 | $157,055 | | Funds held for customers | $386,622 | $305,138 | | Accrued liabilities | $191,427 | $218,404 | | Current portion of long-term debt | $86,153 | $71,748 | | Total current liabilities | $819,065 | $752,345 | | Long-term debt | $1,506,698 | $1,572,528 | | Deferred income taxes | $22,649 | $45,510 | | Total liabilities | $2,476,006 | $2,479,368 | | Total shareholders' equity | $604,616 | $604,224 | | Total liabilities and shareholders' equity | $3,080,622 | $3,076,520 | Consolidated Statements of Income Total revenue decreased to $2.19 billion in 2023, with net income significantly dropping to $26.1 million and diluted EPS to $0.59 Consolidated Statements of Income Summary (in thousands, except per share amounts) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Product revenue | $1,257,600 | $1,286,197 | $1,244,529 | | Service revenue | $934,660 | $951,813 | $777,668 | | Total revenue | $2,192,260 | $2,238,010 | $2,022,197 | | Total cost of revenue | ($1,029,577) | ($1,032,116) | ($884,270) | | Gross profit | $1,162,683 | $1,205,894 | $1,137,927 | | Selling, general and administrative expense | ($956,068) | ($993,250) | ($941,023) | | Restructuring and integration expense | ($78,245) | ($62,529) | ($54,750) | | Gain on sale of businesses and long-lived assets | $32,421 | $19,331 | — | | Operating income | $160,791 | $169,446 | $142,154 | | Interest expense | ($125,643) | ($94,454) | ($55,554) | | Income before income taxes | $39,799 | $84,378 | $93,803 | | Income tax provision | ($13,572) | ($18,848) | ($31,031) | | Net income | $26,227 | $65,530 | $62,772 | | Net income attributable to Deluxe | $26,120 | $65,395 | $62,633 | | Basic earnings per share | $0.60 | $1.52 | $1.48 | | Diluted earnings per share | $0.59 | $1.50 | $1.45 | Consolidated Statements of Comprehensive Income Net income decreased to $26.2 million in 2023, while other comprehensive income shifted to a $7.2 million gain, resulting in $33.4 million comprehensive income Consolidated Statements of Comprehensive Income Summary (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net income | $26,227 | $65,530 | $62,772 | | Other comprehensive income (loss), net of tax | $7,236 | ($5,772) | $9,941 | | Comprehensive income | $33,463 | $59,758 | $72,713 | | Comprehensive income attributable to Deluxe | $33,356 | $59,623 | $72,574 | - Other comprehensive income (loss) shifted from a loss of $5.8 million in 2022 to an income of $7.2 million in 2023, driven by postretirement benefit plan actuarial gains and foreign currency translation adjustments[256] Consolidated Statements of Shareholders' Equity Total shareholders' equity slightly increased to $604.6 million in 2023, influenced by net income, share-based compensation, and cash dividends Consolidated Statements of Shareholders' Equity Summary (in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Common shares par value | $43,743 | $43,204 | $42,679 | | Additional paid-in capital | $99,141 | $79,234 | $57,368 | | Retained earnings | $491,238 | $518,635 | $505,763 | | Accumulated other comprehensive loss | ($30,028) | ($37,264) | ($31,492) | | Non-controlling interest | $522 | $415 | $280 | | Total shareholders' equity | $604,616 | $604,224 | $574,598 | - Total shareholders' equity increased slightly from $604.2 million in 2022 to $604.6 million in 2023[257] - Cash dividends paid to shareholders were $53.5 million in 2023, compared to $52.5 million in 2022[257] Consolidated Statements of Cash Flows Operating cash flow increased to $198.4 million in 2023, with investing and financing cash outflows decreasing, leading to a $68.7 million net cash increase Consolidated Statements of Cash Flows Summary (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net cash provided by operating activities | $198,367 | $191,531 | $210,821 | | Net cash used by investing activities | ($43,305) | ($80,325) | ($1,066,601) | | Net cash (used) provided by financing activities | ($37,679) | ($48,601) | $912,961 | | Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents | $3,235 | ($10,681) | ($1,099) | | Net change in cash, cash equivalents, restricted cash and restricted cash equivalents | $120,618 | $51,924 | $56,082 | | Cash, cash equivalents, restricted cash and restricted cash equivalents, end of year | $458,033 | $337,415 | $285,491 | - Net cash provided by operating activities increased by $6.8 million in 2023, driven by positive working capital changes and reduced cloud computing implementation costs[201][258] - Net cash used by investing activities decreased by $37.0 million, primarily due to a $28.4 million increase in proceeds from sales of businesses and long-lived assets[202][258] Notes to Consolidated Financial Statements This section provides detailed notes to Deluxe's consolidated financial statements, covering significant accounting policies, new pronouncements, and supplemental financial information Note 1: Significant Accounting Policies This note details Deluxe's significant accounting policies, covering operations, estimates, asset valuation, revenue recognition, and various expense treatments - Goodwill is tested for impairment annually as of July 31, or more frequently if events indicate possible impairment, using qualitative or quantitative analyses[215][282] - Revenue is recognized when control of goods is transferred (typically upon shipment) or as services are provided, net of rebates, discounts, and prepaid product discounts[211][299][301] - Employee share-based compensation includes non-qualified stock options, restricted stock units, performance share unit awards, and an employee stock purchase plan, with expense recognized over vesting periods[309] Note 2: New Accounting Pronouncements Deluxe adopted ASU 2022-02 and reference rate reform guidance in 2023 with no material impact, and is evaluating ASU 2023-07 and 2023-09 - Adopted ASU No. 2022-02 (Troubled Debt Restructurings) and reference rate reform guidance (ASU No. 2020-04 and 2021-01) in 2023, with no material impact on consolidated financial statements[313][314] - Currently evaluating ASU No. 2023-07 (Improvements to Reportable Segment Disclosures) and ASU No. 2023-09 (Improvements to Income Tax Disclosures), effective for fiscal years beginning after December 15, 2023, and 2024, respectively[315][316] Note 3: Supplemental Balance Sheet and Cash Flow Information This note provides supplemental balance sheet and cash flow details, including changes in receivables, inventories, intangibles, goodwill, and cash payments Trade Accounts Receivable, Net (in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Trade accounts receivable – gross | $197,546 | $210,799 | | Allowance for credit losses | ($6,541) | ($4,182) | | Trade accounts receivable – net | $191,005 | $206,617 | Inventories and Supplies, Net (in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Finished and semi-finished goods | $34,194 | $40,715 | | Raw materials and supplies | $17,339 | $17,952 | | Reserve for excess and obsolete items | ($9,445) | ($6,400) | | Inventories and supplies, net | $42,088 | $52,267 | Intangibles, Net (in thousands) | Item | Dec 31, 2023 Net Carrying Amount | Dec 31, 2022 Net Carrying Amount | | :-------------------------- | :-------------------------- | :-------------------------- | | Internal-use software | $142,461 | $133,792 | | Customer lists/relationships | $127,741 | $184,896 | | Technology-based intangibles | $43,382 | $52,135 | | Partner relationships | $60,880 | $65,588 | | Trade names | $15,575 | $17,675 | | Software to be sold | $1,705 | $4,893 | | Total Intangibles, net | $391,744 | $458,979 | Goodwill by Segment (in thousands) | Segment | Dec 31, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Payments | $895,853 | $896,681 | | Data Solutions | $40,816 | $40,816 | | Promotional Solutions | $59,109 | $59,076 | | Checks | $434,812 | $434,812 | | Total Goodwill | $1,430,590 | $1,431,385 | Supplemental Cash Flow Information (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Interest paid | $115,556 | $87,108 | $46,621 | | Income taxes paid | $47,945 | $38,629 | $18,761 | | Accrued purchases of capital assets | $11,924 | $1,340 | $6,477 | | Non-cash consideration for customer list purchases | — | $5,096 | $15,528 | | Vesting of restricted stock unit awards | $8,538 | $13,602 | $16,646 | Note 4: Earnings Per Share This note details basic and diluted earnings per share calculations, showing a significant decrease in 2023 due to lower net income Earnings Per Share (in thousands, except per share amounts) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net income attributable to Deluxe | $26,120 | $65,395 | $62,633 | | Basic earnings per share | $0.60 | $1.52 | $1.48 | | Diluted earnings per share | $0.59 | $1.50 | $1.45 | | Antidilutive options excluded from calculation | 1,380 | 1,732 | 2,179 | Note 5: Other Comprehensive Income (Loss) This note details other comprehensive income components, showing a shift to a $7.2 million gain in 2023, driven by actuarial gains and currency adjustments Reclassification Adjustments from Accumulated Other Comprehensive Loss to Net Income (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Amortization of postretirement benefit plan items, net of tax | ($785) | $206 | ($331) | | Realized loss on debt securities, net of tax | ($1,092) | ($6) | — | | Realized gain (loss) on cash flow hedges, net of tax | $2,355 | $15 | ($1,023) | | Foreign currency translation adjustment | ($863) | ($5,550) | — | | Total reclassifications, net of tax | ($385) | ($5,335) | ($1,354) | Accumulated Other Comprehensive Loss Components (in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------------------ | :----------- | :----------- | | Postretirement benefit plans | ($19,824) | ($26,872) | | Net unrealized loss on debt securities | — | ($909) | | Net unrealized loss on cash flow hedges | ($286) | $2,593 | | Foreign currency translation adjustment | ($9,918) | ($12,076) | | Balance, end of year | ($30,028) | ($37,264) | Note 6: Acquisition and Divestitures This note details the 2021 First American acquisition and 2023 divestitures of web hosting, payroll, and facilities, aligning with the payments and data focus - Acquired First American Payment Systems, L.P. in June 2021 for $958.5 million cash, net of cash acquired, funded by a revolving credit facility and additional debt[333] First American Operating Results (in thousands) | Item | 2023 | 2022 | 2021 | | :-------------------------- | :--------- | :--------- | :--------- | | Revenue | $364,232 | $347,709 | $194,976 | | Net income attributable to Deluxe | $14,266 | $5,794 | $1,806 | - Sold North American web hosting and logo design businesses in June 2023 for $31.2 million net cash proceeds, recognizing a $17.5 million pretax gain[339] - Executed agreements in 2023 to exit U.S. and Canadian payroll and human resources services, receiving $15.7 million initial cash and recognizing $10.7 million income[340] - Sold two facilities in Q4 2023 for $8.1 million net cash proceeds, recognizing a $3.8 million pretax gain[341] Note 7: Derivative Financial Instruments Deluxe uses interest rate swaps as cash flow hedges to mitigate variable-rate debt risk, with $771.7 million notional amount effectively fixed - Uses interest rate swaps as cash flow hedges to mitigate variability in interest payments on variable-rate debt[344] Derivative Instruments (in thousands) | Swap | Notional Amount | Interest Rate | Maturity | Dec 31, 2023 Fair Value Asset / (Liability) | | :------------------------------------------ | :-------------- | :------------ | :--------- | :---------------------------------------- | | June 2023 amortizing interest rate swap | $271,659 | 4.249% | June 2026 | ($2,158) | | March 2023 interest rate swap | $200,000 | 4.003% | March 2026 | $287 | | September 2022 interest rate swap | $300,000 | 3.990% | September 2025 | $1,519 | - Changes in fair values are recorded in accumulated other comprehensive loss and reclassified to interest expense; hedges were fully effective and their impact on net income was not material[344] Note 8: Fair Value Measurements This note details fair value measurements for goodwill impairment, business combinations, and recurring financial instruments, reporting no goodwill impairment - Goodwill impairment analyses for 2021, 2022, and 2023 (as of July 31) involved qualitative assessments, concluding no impairment charges were recorded[346][348][349] - Fair value of acquired customer and partner relationship intangibles is estimated using the multi-period excess earnings method, while trade names and technology use the relief from royalty method[352][353] Fair Value Measurements (in thousands) as of December 31, 2023 | Item | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------------------------ | :------------- | :--------- | :-------- | :-------- | :-------- | | Available-for-sale debt securities | $22,000 | $22,000 | $22,000 | — | — | | Derivative assets | $1,806 | $1,806 | — | $1,806 | — | | Derivative liability | ($2,158) | ($2,158) | — | ($2,158) | — | | Loans and notes receivable from distributors | $13,430 | $13,249 | — | — | $13,249 | | Long-term debt | $1,592,851 | $1,554,028 | — | $1,554,028 | — | Note 9: Restructuring and Integration Expense Restructuring and integration expense increased to $90.5 million in 2023, driven by the 'North Star' program targeting significant free cash flow and EBITDA improvements by 2026 Restructuring and Integration Expense (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Total cost of revenue | $12,230 | $607 | $4,197 | | Operating expenses | $78,245 | $62,529 | $54,750 | | Total Restructuring and integration expense | $90,475 | $63,136 | $58,947 | Components of Restructuring and Integration Expense (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | External consulting and other costs | $52,290 | $32,067 | $26,676 | | Employee severance benefits | $18,103 | $12,829 | $9,076 | | Internal labor | $8,723 | $7,989 | $7,948 | | Other | $11,359 | $10,251 | $15,247 | | Total Restructuring and integration expense | $90,475 | $63,136 | $58,947 | - The 'North Star' program, focused on structural cost reductions and revenue growth, incurred approximately $45 million in 2023, with an additional $70 million to $90 million expected over the next two years[361] - Employee reductions are expected to result in annual cost savings of approximately $8 million in cost of sales and $25 million in SG&A expense in 2024[188] Note 10: Income Tax Provision Income tax provision decreased to $13.6 million in 2023, despite an increased effective tax rate of 34.1% driven by foreign earnings repatriation Income Before Income Taxes (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | U.S. | ($7,636) | $51,640 | $62,361 | | Foreign | $47,435 | $32,738 | $31,442 | | Total Income before income taxes | $39,799 | $84,378 | $93,803 | Income Tax Provision and Effective Tax Rate | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Income tax provision (in thousands) | $13,572 | $18,848 | $31,031 | | Effective tax rate | 34.1% | 22.3% | 33.1% | - Effective tax rate increase in 2023 driven by repatriation of foreign earnings (+6.2 pts), return-to-provision adjustments (+2.0 pts), and share-based compensation tax impact (+6.7 pts), partially offset by business exits benefit (-30.2 pts)[174][364] - Repatriated $32.9 million in foreign earnings in 2023, incurring $2.2 million in associated tax expense[365] - Unrecognized tax benefits totaled $2.4 million as of December 31, 2023, with a reasonably possible decrease of up to $1.3 million within 12 months due to lapse of statutes of limitations[366] Note 11: Share-Based Compensation Plans Deluxe's share-based compensation expense was $20.5 million in 2023, with $22.2 million remaining for unvested awards over 1.9 years Share-Based Compensation Expense (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Restricted stock units | $14,092 | $16,632 | $20,407 | | Performance share unit awards | $4,127 | $3,840 | $4,338 | | Stock options | $1,845 | $2,665 | $4,187 | | Employee stock purchase plan | $461 | $539 | $545 | | Total share-based compensation expense | $20,525 | $23,676 | $29,477 | | Income tax benefit | ($7,408) | ($6,853) | ($7,714) | - As of December 31, 2023, $22.2 million in total compensation expense for unvested awards remains to be recognized over a weighted-average period of 1.9 years[373] - Restricted stock units are granted to all North American employees and certain management employees, with some bonus awards settled in cash if employees leave[377] - Performance share unit awards have a 3-year vesting period, with shares issued based on achievement of revenue and total shareholder return targets[380] Note 12: Postretirement Benefits Postretirement benefit plan funded status improved to a $94.9 million asset in 2023, driven by actuarial gains, with a $12.0 million 401(k) expense Postretirement Benefit Plan Funded Status (in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------------------ | :----------- | :----------- | | Benefit obligation | $35,975 | $39,709 | | Fair value of plan assets | $130,914 | $119,052 | | Funded status | $94,939 | $79,343 | Postretirement Benefit Income (in thousands) | Item | 2023 | 2022 | 2021 | | :------------------------------------------ | :--------- | :--------- | :--------- | | Interest cost | $1,985 | $1,121 | $968 | | Expected return on plan assets | ($7,320) | ($7,462) | ($7,498) | | Amortization of prior service credit | ($1,421) | ($1,421) | ($1,421) | | Amortization of net actuarial losses | $2,273 | $900 | $1,629 | | Net periodic benefit income | ($4,483) | ($6,862) | ($6,322) | - The 401(k) plan matching contribution was reinstated on January 1, 2022, with an expense of $12.0 million for 202