Deluxe(US:DLX)2022-11-05 09:39Financial Data and Key Metrics Changes - Company-wide revenue increased more than 4% year-over-year to $555 million, with quarterly revenue up nearly 7% excluding business exits [11][21] - Total adjusted EBITDA dollars increased nearly 2% year-over-year, with adjusted EBITDA margin at 18.8% [12][22] - Third quarter adjusted EPS was $0.99, down from $1.10 in the previous year, primarily due to interest expense [23] Business Segment Data and Key Metrics Changes - Payments segment revenue grew nearly 6% year-over-year, with Merchant Services revenue increasing 4.5% [13][24] - Cloud Solutions revenue increased almost 5% year-over-year, driven by double-digit growth in the data-driven marketing business [15][26] - Promotional Solutions revenue improved more than 9% year-over-year, with adjusted EBITDA margin improving sequentially [17][28] - Checks business revenue grew 6% year-over-year, maintaining strong margin rates despite expected secular declines [18][29] Market Data and Key Metrics Changes - The company noted ongoing demand for products and services, with a healthy balance of volume and pricing driving revenue growth [11][19] - The Payments segment is expected to become the largest revenue business by early 2023 [14] Company Strategy and Development Direction - The company is focused on transforming into a payments and data company, emphasizing the success of its One Deluxe model [10][19] - Strategic investments in technology and diversification of business lines are aimed at mitigating risks associated with interest rate sensitivity [16][40] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic uncertainties, noting no significant decline in aggregate demand [44][45] - The company is committed to maintaining a balanced approach to capital allocation, focusing on growth investments, dividends, and debt reduction [31][56] Other Important Information - The company ended the quarter with a net debt level of $1.63 billion, improving its net debt to adjusted EBITDA ratio to 3.8 times [30] - A regular quarterly dividend of $0.30 per share was approved, payable on December 5, 2022 [31] Q&A Session Summary Question: Breakdown of volume versus price in various segments - Management indicated that approximately 60% of revenue growth was due to volume increases, with 40% attributed to pricing actions [36][37] Question: Drivers behind DDM business growth - Management highlighted investments in diversifying income sources and expanding into new market verticals as key drivers for DDM growth [39][40] Question: Macro outlook and potential economic pressures - Management noted no significant economic slowdown impacting aggregate demand, despite some month-to-month variations in customer buying patterns [44][45] Question: Corporate expense management - Management acknowledged the need to reduce corporate costs and indicated a focus on achieving operating leverage as revenue grows [51][54] Question: Inflation impact on costs - Management stated that they have caught up with inflation through pricing adjustments and feel confident in managing future inflationary pressures [58][59] Question: Treasury management win factors - Management attributed the win with the Bank of Missouri to exceptional customer service, product feature enhancements, and alignment of company values [61][64]