UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission file number: 1-7945

DELUXE CORPORATION

(Exact name of registrant as specified in its charter)


MN			41-0216800
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
801 S. Marquette Ave.	Minneapolis	MN	55402-2807
(Address of principal executive offices)			(Zip Code)

(651) 483-7111

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	DLX	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

The number of shares outstanding of registrant’s common stock as of July ~~27, 2022~~26, 2023 was ~~43,085,310.~~43,616,556.


PART I – FINANCIAL INFORMATION


Item 1. FINANCIAL STATEMENTS


DELUXE CORPORATION CONSOLIDATED BALANCE SHEETS (unaudited)


(in thousands, except share par value)	(in thousands, except share par value)	June 30, 2022		December 31, 2021		(in thousands, except share par value)	June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents		$	43,262	$	41,231
Cash and cash equivalents, including securities carried at fair value of $5,000 as of December 31, 2022						Cash and cash equivalents, including securities carried at fair value of $5,000 as of December 31, 2022	$	39,052	$	40,435
Trade accounts receivable, net of allowance for credit losses	Trade accounts receivable, net of allowance for credit losses	186,591		197,947		Trade accounts receivable, net of allowance for credit losses	212,267		206,617
Inventories and supplies	Inventories and supplies	37,505		34,928		Inventories and supplies	54,899		52,267
Funds held for customers, including securities carried at fair value of $8,501 and $13,307, respectively		152,203		254,795
Funds held for customers, including securities carried at fair value of $8,402 and $8,126, respectively						Funds held for customers, including securities carried at fair value of $8,402 and $8,126, respectively	155,794		302,291
Prepaid expenses	Prepaid expenses	41,060		37,643		Prepaid expenses	32,820		36,642
Revenue in excess of billings	Revenue in excess of billings	36,495		30,393		Revenue in excess of billings	37,236		38,761
Other current assets	Other current assets	29,086		23,536		Other current assets	16,580		27,024
Total current assets	Total current assets	526,202		620,473		Total current assets	548,648		704,037
Deferred income taxes	Deferred income taxes	2,047		2,180		Deferred income taxes	1,341		1,956
Long-term investments	Long-term investments	47,220		47,201		Long-term investments	66,465		47,783
Property, plant and equipment, net of accumulated depreciation of $368,760 and $338,617, respectively		127,786		125,966
Property, plant and equipment, net of accumulated depreciation of $353,847 and $379,988, respectively						Property, plant and equipment, net of accumulated depreciation of $353,847 and $379,988, respectively	126,967		124,894
Operating lease assets	Operating lease assets	52,836		58,236		Operating lease assets	52,500		47,132
Intangibles, net of accumulated amortization of $754,601 and $698,764, respectively		480,494		510,724
Intangibles, net of accumulated amortization of $831,755 and $823,589, respectively						Intangibles, net of accumulated amortization of $831,755 and $823,589, respectively	430,103		458,979
Goodwill	Goodwill	1,431,457		1,430,141		Goodwill	1,430,588		1,431,385
Other non-current assets	Other non-current assets	272,347		279,463		Other non-current assets	266,403		260,354
Total assets	Total assets	$	2,940,389	$	3,074,384	Total assets	$	2,923,015	$	3,076,520
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	147,957	$	153,072	Accounts payable	$	174,662	$	157,055
Funds held for customers	Funds held for customers	152,100		256,257		Funds held for customers	155,182		305,138
Accrued liabilities	Accrued liabilities	195,775		216,832		Accrued liabilities	155,195		218,404
Current portion of long-term debt	Current portion of long-term debt	57,257		57,197		Current portion of long-term debt	86,059		71,748
Total current liabilities	Total current liabilities	553,089		683,358		Total current liabilities	571,098		752,345
Long-term debt	Long-term debt	1,618,357		1,625,752		Long-term debt	1,581,151		1,572,528
Operating lease liabilities	Operating lease liabilities	53,825		56,444		Operating lease liabilities	54,470		48,925
Deferred income taxes	Deferred income taxes	63,198		75,121		Deferred income taxes	37,597		45,510
Other non-current liabilities	Other non-current liabilities	55,129		59,111		Other non-current liabilities	65,070		52,988
Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)	0		0		Commitments and contingencies (Note 13)
Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
Common shares $1 par value (authorized: 500,000 shares; outstanding: June 30, 2022 – 43,080; December 31, 2021 – 42,679)		43,080		42,679
Common shares $1 par value (authorized: 500,000 shares; outstanding: June 30, 2023 – 43,613; December 31, 2022 – 43,204)						Common shares $1 par value (authorized: 500,000 shares; outstanding: June 30, 2023 – 43,613; December 31, 2022 – 43,204)	43,613		43,204
Additional paid-in capital	Additional paid-in capital	67,417		57,368		Additional paid-in capital	89,380		79,234
Retained earnings	Retained earnings	510,897		505,763		Retained earnings	511,058		518,635
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(24,954)		(31,492)		Accumulated other comprehensive loss	(30,891)		(37,264)
Non-controlling interest	Non-controlling interest	351		280		Non-controlling interest	469		415
Total shareholders’ equity	Total shareholders’ equity	596,791		574,598		Total shareholders’ equity	613,629		604,224
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	2,940,389	$	3,074,384	Total liabilities and shareholders’ equity	$	2,923,015	$	3,076,520

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2022		2021		2022		2021		(in thousands, except per share amounts)	2023		2022		2023		2022
Product revenue	Product revenue	$	322,109	$	306,223	$	639,412	$	605,277	Product revenue	$	323,805	$	322,109	$	634,031	$	639,412
Service revenue	Service revenue	240,844		171,993		479,556		314,204		Service revenue	247,881		240,844		483,020		479,556
Total revenue	Total revenue	562,953		478,216		1,118,968		919,481		Total revenue	571,686		562,953		1,117,051		1,118,968
Cost of products	Cost of products	(117,519)		(112,561)		(231,879)		(219,887)		Cost of products	(125,453)		(117,519)		(243,888)		(231,879)
Cost of services	Cost of services	(146,593)		(94,014)		(281,427)		(165,198)		Cost of services	(144,494)		(146,593)		(276,721)		(281,427)
Total cost of revenue	Total cost of revenue	(264,112)		(206,575)		(513,306)		(385,085)		Total cost of revenue	(269,947)		(264,112)		(520,609)		(513,306)
Gross profit	Gross profit	298,841		271,641		605,662		534,396		Gross profit	301,739		298,841		596,442		605,662
Selling, general and administrative expense	Selling, general and administrative expense	(249,626)		(233,908)		(509,325)		(446,344)		Selling, general and administrative expense	(245,359)		(249,626)		(492,989)		(509,325)
Restructuring and integration expense	Restructuring and integration expense	(15,182)		(11,364)		(31,426)		(25,677)		Restructuring and integration expense	(24,191)		(15,182)		(37,132)		(31,426)
Gain on sale of businesses and facility	Gain on sale of businesses and facility	17,527		—		17,527		—		Gain on sale of businesses and facility	21,942		17,527		21,942		17,527
Operating income	Operating income	51,560		26,369		82,438		62,375		Operating income	54,131		51,560		88,263		82,438
Interest expense	Interest expense	(21,349)		(9,530)		(41,672)		(14,054)		Interest expense	(31,932)		(21,349)		(61,948)		(41,672)
Other income		2,414		2,129		4,417		4,162
Other income, net										Other income, net	824		2,414		3,247		4,417
Income before income taxes	Income before income taxes	32,625		18,968		45,183		52,483		Income before income taxes	23,023		32,625		29,562		45,183
Income tax provision	Income tax provision	(10,528)		(6,839)		(13,407)		(16,030)		Income tax provision	(6,622)		(10,528)		(10,381)		(13,407)
Net income	Net income	22,097		12,129		31,776		36,453		Net income	16,401		22,097		19,181		31,776
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	(35)		(29)		(71)		(62)		Net income attributable to non-controlling interest	(26)		(35)		(54)		(71)
Net income attributable to Deluxe	Net income attributable to Deluxe	$	22,062	$	12,100	$	31,705	$	36,391	Net income attributable to Deluxe	$	16,375	$	22,062	$	19,127	$	31,705
Total comprehensive income	Total comprehensive income	$	26,168	$	14,124	$	38,314	$	40,057	Total comprehensive income	$	25,517	$	26,168	$	25,554	$	38,314
Comprehensive income attributable to Deluxe	Comprehensive income attributable to Deluxe	26,133		14,095		38,243		39,995		Comprehensive income attributable to Deluxe	25,491		26,133		25,500		38,243
Basic earnings per share	Basic earnings per share	0.51		0.29		0.74		0.86		Basic earnings per share	0.38		0.51		0.44		0.74
Diluted earnings per share	Diluted earnings per share	0.50		0.28		0.72		0.85		Diluted earnings per share	0.37		0.50		0.44		0.72

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)


(in thousands)	(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total		(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, March 31, 2022		42,923	$	42,923	$	62,676	$	502,125	$	(29,025)	$	316	$	579,015
Balance, March 31, 2023															Balance, March 31, 2023	43,421	$	43,421	$	83,800	$	507,992	$	(40,007)	$	443	$	595,649
Net income	Net income	—	—		—		22,062		—		35		22,097		Net income	—	—		—		16,375		—		26		16,401
Cash dividends ($0.30 per share)	Cash dividends ($0.30 per share)	—	—		—		(13,290)		—		—		(13,290)		Cash dividends ($0.30 per share)	—	—		—		(13,309)		—		—		(13,309)
Common shares issued	Common shares issued	201	201		606		—		—		—		807		Common shares issued	215	215		523		—		—		—		738
Common shares retired	Common shares retired	(44)	(44)		(1,170)		—		—		—		(1,214)		Common shares retired	(23)	(23)		(326)		—		—		—		(349)
Employee share-based compensation	Employee share-based compensation	—	—		5,305		—		—		—		5,305		Employee share-based compensation	—	—		5,383		—		—		—		5,383
Other comprehensive income	Other comprehensive income	—	—		—		—		4,071		—		4,071		Other comprehensive income	—	—		—		—		9,116		—		9,116
Balance, June 30, 2022		43,080	$	43,080	$	67,417	$	510,897	$	(24,954)	$	351	$	596,791
Balance, June 30, 2023															Balance, June 30, 2023	43,613	$	43,613	$	89,380	$	511,058	$	(30,891)	$	469	$	613,629


(in thousands)	(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total		(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, December 31, 2021		42,679	$	42,679	$	57,368	$	505,763	$	(31,492)	$	280	$	574,598
Balance, March 31, 2022															Balance, March 31, 2022	42,923	$	42,923	$	62,676	$	502,125	$	(29,025)	$	316	$	579,015
Net income	Net income	—	—		—		31,705		—		71		31,776		Net income	—	—		—		22,062		—		35		22,097
Cash dividends ($0.60 per share)		—	—		—		(26,571)		—		—		(26,571)
Cash dividends ($0.30 per share)															Cash dividends ($0.30 per share)	—	—		—		(13,290)		—		—		(13,290)
Common shares issued	Common shares issued	580	580		1,757		—		—		—		2,337		Common shares issued	201	201		606		—		—		—		807
Common shares retired	Common shares retired	(179)	(179)		(5,195)		—		—		—		(5,374)		Common shares retired	(44)	(44)		(1,170)		—		—		—		(1,214)
Employee share-based compensation	Employee share-based compensation	—	—		13,487		—		—		—		13,487		Employee share-based compensation	—	—		5,305		—		—		—		5,305
Other comprehensive income	Other comprehensive income	—	—		—		—		6,538		—		6,538		Other comprehensive income	—	—		—		—		4,071		—		4,071
Balance, June 30, 2022	Balance, June 30, 2022	43,080	$	43,080	$	67,417	$	510,897	$	(24,954)	$	351	$	596,791	Balance, June 30, 2022	43,080	$	43,080	$	67,417	$	510,897	$	(24,954)	$	351	$	596,791

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued) (unaudited)


(in thousands)	(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total		(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, March 31, 2021		42,104	$	42,104	$	22,306	$	506,613	$	(39,824)	$	174	$	531,373
Balance, December 31, 2022															Balance, December 31, 2022	43,204	$	43,204	$	79,234	$	518,635	$	(37,264)	$	415	$	604,224
Net income	Net income	—	—		—		12,100		—		29		12,129		Net income	—	—		—		19,127		—		54		19,181
Cash dividends ($0.30 per share)		—	—		—		(12,960)		—		—		(12,960)
Cash dividends ($0.60 per share)															Cash dividends ($0.60 per share)	—	—		—		(26,704)		—		—		(26,704)
Common shares issued	Common shares issued	475	475		13,704		—		—		—		14,179		Common shares issued	539	539		1,140		—		—		—		1,679
Common shares retired	Common shares retired	(42)	(42)		(1,768)		—		—		—		(1,810)		Common shares retired	(130)	(130)		(2,253)		—		—		—		(2,383)
Employee share-based compensation	Employee share-based compensation	—	—		7,365		—		—		—		7,365		Employee share-based compensation	—	—		11,259		—		—		—		11,259
Other comprehensive income	Other comprehensive income	—	—		—		—		1,995		—		1,995		Other comprehensive income	—	—		—		—		6,373		—		6,373
Balance, June 30, 2021		42,537	$	42,537	$	41,607	$	505,753	$	(37,829)	$	203	$	552,271
Balance, June 30, 2023															Balance, June 30, 2023	43,613	$	43,613	$	89,380	$	511,058	$	(30,891)	$	469	$	613,629


(in thousands)	(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total		(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, December 31, 2020		41,973	$	41,973	$	17,558	$	495,153	$	(41,433)	$	141	$	513,392
Balance, December 31, 2021															Balance, December 31, 2021	42,679	$	42,679	$	57,368	$	505,763	$	(31,492)	$	280	$	574,598
Net income	Net income	—	—		—		36,391		—		62		36,453		Net income	—	—		—		31,705		—		71		31,776
Cash dividends ($0.60 per share)	Cash dividends ($0.60 per share)	—	—		—		(25,791)		—		—		(25,791)		Cash dividends ($0.60 per share)	—	—		—		(26,571)		—		—		(26,571)
Common shares issued	Common shares issued	669	669		14,551		—		—		—		15,220		Common shares issued	580	580		1,757		—		—		—		2,337
Common shares retired	Common shares retired	(105)	(105)		(4,066)		—		—		—		(4,171)		Common shares retired	(179)	(179)		(5,195)		—		—		—		(5,374)
Employee share-based compensation	Employee share-based compensation	—	—		13,564		—		—		—		13,564		Employee share-based compensation	—	—		13,487		—		—		—		13,487
Other comprehensive income	Other comprehensive income	—	—		—		—		3,604		—		3,604		Other comprehensive income	—	—		—		—		6,538		—		6,538
Balance, June 30, 2021		42,537	$	42,537	$	41,607	$	505,753	$	(37,829)	$	203	$	552,271
Balance, June 30, 2022															Balance, June 30, 2022	43,080	$	43,080	$	67,417	$	510,897	$	(24,954)	$	351	$	596,791

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	31,776	$	36,453	Net income	$	19,181	$	31,776
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	Depreciation	12,146		9,201		Depreciation	11,052		12,146
Amortization of intangibles	Amortization of intangibles	74,498		51,823		Amortization of intangibles	75,076		74,498
Operating lease expense	Operating lease expense	9,756		8,400		Operating lease expense	10,522		9,756
Amortization of prepaid product discounts	Amortization of prepaid product discounts	17,171		15,137		Amortization of prepaid product discounts	17,173		17,171
Deferred income taxes	Deferred income taxes	(14,482)		10,977		Deferred income taxes	(9,489)		(14,482)
Employee share-based compensation expense	Employee share-based compensation expense	13,038		14,367		Employee share-based compensation expense	11,350		13,038
Gain on sale of businesses and facility	Gain on sale of businesses and facility	(17,527)		—		Gain on sale of businesses and facility	(21,942)		(17,527)
Other non-cash items, net	Other non-cash items, net	15,546		5,015		Other non-cash items, net	21,606		15,546
Changes in assets and liabilities, net of effect of acquisition:
Changes in assets and liabilities:						Changes in assets and liabilities:
Trade accounts receivable	Trade accounts receivable	8,976		18,260		Trade accounts receivable	(9,889)		8,976
Inventories and supplies	Inventories and supplies	(5,713)		6,781		Inventories and supplies	(4,609)		(5,713)
Other current assets	Other current assets	(8,229)		(23,295)		Other current assets	11,876		(8,229)
Payments for cloud computing arrangement implementation costs	Payments for cloud computing arrangement implementation costs	(11,340)		(16,252)		Payments for cloud computing arrangement implementation costs	(5,846)		(11,340)
Other non-current assets	Other non-current assets	(8,157)		(5,381)		Other non-current assets	(7,216)		(8,157)
Accounts payable	Accounts payable	(4,345)		2,706		Accounts payable	21,134		(4,345)
Prepaid product discount payments	Prepaid product discount payments	(12,285)		(19,077)		Prepaid product discount payments	(12,742)		(12,285)
Other accrued and non-current liabilities	Other accrued and non-current liabilities	(28,642)		(31,304)		Other accrued and non-current liabilities	(79,900)		(28,642)
Net cash provided by operating activities	Net cash provided by operating activities	72,187		83,811		Net cash provided by operating activities	47,337		72,187
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of capital assets	Purchases of capital assets	(45,246)		(46,615)		Purchases of capital assets	(55,904)		(45,246)
Payment for acquisition, net of cash, cash equivalents, restricted cash and restricted cash equivalents acquired		—		(956,717)
Proceeds from sale of businesses and facility		23,875		—
Proceeds from sale of businesses and facilities						Proceeds from sale of businesses and facilities	27,880		23,875
Other	Other	895		(1,358)		Other	(9,878)		895
Net cash used by investing activities	Net cash used by investing activities	(20,476)		(1,004,690)		Net cash used by investing activities	(37,902)		(20,476)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuing long-term debt and swingline loans	Proceeds from issuing long-term debt and swingline loans	314,000		1,852,850		Proceeds from issuing long-term debt and swingline loans	437,500		314,000
Payments on long-term debt and swingline loans	Payments on long-term debt and swingline loans	(323,376)		(845,000)		Payments on long-term debt and swingline loans	(416,376)		(323,376)
Payments for debt issuance costs		—		(17,911)

Net change in customer funds obligations	Net change in customer funds obligations	(100,067)		5,559		Net change in customer funds obligations	(149,336)		(100,067)
Proceeds from issuing shares		1,604		14,852
Employee taxes paid for shares withheld	Employee taxes paid for shares withheld	(5,374)		(4,171)		Employee taxes paid for shares withheld	(2,383)		(5,374)
Cash dividends paid to shareholders	Cash dividends paid to shareholders	(26,591)		(25,852)		Cash dividends paid to shareholders	(26,852)		(26,591)
Other	Other	(4,474)		(4,170)		Other	(3,273)		(2,870)
Net cash (used) provided by financing activities		(144,278)		976,157
Net cash used by financing activities						Net cash used by financing activities	(160,720)		(144,278)
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents	Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents	(3,336)		3,387		Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents	3,063		(3,336)
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	(95,903)		58,665		Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	(148,222)		(95,903)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year	Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year	285,491		229,409		Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year	337,415		285,491
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period (Note 3)	Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period (Note 3)	$	189,588	$	288,074	Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period (Note 3)	$	189,193	$	189,588

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 1: CONSOLIDATED FINANCIAL STATEMENTS

The consolidated balance sheet as of June 30, ~~2022,~~2023, the consolidated statements of comprehensive income for the quarters and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the consolidated statements of shareholders’ equity for the quarters and six monthsended June 30, ~~2022~~2023 and ~~2021~~2022 and the consolidated statements of cash flows for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 are unaudited. The consolidated balance sheet as of December 31, ~~2021~~2022 was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles (GAAP). In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial statements are included. Adjustments consist only of normal recurring items, except for any items discussed in the notes below. Interim results are not necessarily indicative of results for a full ~~year.~~year or future results. The consolidated financial statements and notes are presented in accordance with instructions for Form 10-Q and do not contain certain information included in our annual consolidated financial statements and notes. The consolidated financial statements and notes appearing in this report should be read in conjunction with the consolidated audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~2021~~"2022 Form ~~10-K)~~10-K").

The preparation of our consolidated financial statements requires us to make certain estimates and assumptions affecting the amounts reported in the consolidated financial statements and related notes. We base our estimates on historical experience and on various other factors and assumptions that we believe are reasonable, ~~under the circumstances,~~ the results of which form the basis for making judgments about the carrying values of our assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. Actual results may differ significantly from our estimates and assumptions.

Comparability – The consolidated statement of cash flows for the six months ended June 30, ~~2021~~2022 has been modified to conform to the current year presentation. We ~~presented payments for cloud computing arrangement implementation costs separately~~included proceeds from issuing shares within ~~cash flows from operating~~other financing activities. Previously, this amount was ~~included in other non-current assets. Also, we included purchases of and proceeds from customer funds marketable securities within other investing activities. Previously, these amounts were presented~~shown separately.


NOTE 2: NEW ACCOUNTING ~~PRONOUNCEMENT~~PRONOUNCEMENTS

In March 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-02, Troubled Debt Restructurings and Vintage Disclosures. ~~The~~This standard modifies the accounting for troubled debt restructurings by creditors and modifies certain disclosure requirements. The guidance will be applied prospectively, with the exception of the recognition and measurement of troubled debt restructurings, for which we may elect to apply a modified retrospective transition method. TheWe adopted this standard ~~is effective for us~~ on January 1, 2023 and elected to apply it prospectively to modifications occurring on or after January 1, 2023. Adoption of this standard did not impact our financial position as of June 30, 2023 or our results of operations for the six months ended June 30, 2023.

In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No 2021-01, Reference Rate Reform (Topic 848): Scope, which clarified the scope and application of the original guidance. Effective March 20, 2023, we domodified our existing credit facility and our September 2022 interest rate swap agreement (Note 7) to utilize the Secured Overnight Financing Rate (SOFR) as the reference rate in the agreements. In accounting for these modifications, we adopted the reference rate reform guidance on a prospective basis as allowed under the provisions of ASU No. 2022-06, Deferral of the Sunset Date of Topic 848. Adoption of these standards did not ~~expect its adoption to~~ have a ~~significant~~material impact on our consolidated financial ~~position or results of operations.~~statements.


NOTE 3: SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION

Trade accounts receivable – Net trade accounts receivable was comprised of the following:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022
Trade accounts receivable – gross	Trade accounts receivable – gross	$	190,844	$	202,077	Trade accounts receivable – gross	$	217,705	$	210,799
Allowance for credit losses	Allowance for credit losses	(4,253)		(4,130)		Allowance for credit losses	(5,438)		(4,182)
Trade accounts receivable – net(1)	Trade accounts receivable – net(1)	$	186,591	$	197,947	Trade accounts receivable – net(1)	$	212,267	$	206,617

(1) Includes unbilled receivables of ~~$52,647~~$54,882 as of June 30, ~~2022~~2023 and ~~$47,420~~$43,902 as of December 31, ~~2021.~~2022.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Changes in the allowance for credit losses for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 were as follows:


		Six Months Ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Balance, beginning of year	Balance, beginning of year	$	4,130	$	6,428	Balance, beginning of year	$	4,182	$	4,130
Bad debt expense (benefit)		1,449		(1,696)
Bad debt expense						Bad debt expense	3,027		1,449
Write-offs and other	Write-offs and other	(1,326)		(1,704)		Write-offs and other	(1,771)		(1,326)
Balance, end of period	Balance, end of period	$	4,253	$	3,028	Balance, end of period	$	5,438	$	4,253

Inventories and supplies – Inventories and supplies were comprised of the following:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022
Raw materials	Raw materials	$	6,736	$	5,316	Raw materials	$	12,028	$	11,563
Semi-finished goods	Semi-finished goods	7,004		6,708		Semi-finished goods	6,098		7,777
Finished goods	Finished goods	22,677		21,995		Finished goods	37,836		32,938
Supplies	Supplies	6,525		6,041		Supplies	7,062		6,389
Reserves for excess and obsolete items		(5,437)		(5,132)
Inventories and supplies, net of reserves		$	37,505	$	34,928
Reserve for excess and obsolete items						Reserve for excess and obsolete items	(8,125)		(6,400)
Inventories and supplies, net of reserve						Inventories and supplies, net of reserve	$	54,899	$	52,267

Changes in the ~~reserves~~reserve for excess and obsolete items were as follows for the six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


		Six Months Ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Balance, beginning of year	Balance, beginning of year	$	5,132	$	11,748	Balance, beginning of year	$	6,400	$	5,132
Amounts charged to expense	Amounts charged to expense	1,516		2,151		Amounts charged to expense	2,151		1,516
Write-offs and other	Write-offs and other	(1,211)		(8,443)		Write-offs and other	(426)		(1,211)
Balance, end of period	Balance, end of period	$	5,437	$	5,456	Balance, end of period	$	8,125	$	5,437

Available-for-sale debt securities – Available-for-sale debt securities ~~included within funds held for customers~~ were comprised of the following:


		June 30, 2022									June 30, 2023
(in thousands)	(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value		(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value

Funds held for customers:(1)	Funds held for customers:(1)									Funds held for customers:(1)
Canadian and provincial government securities	Canadian and provincial government securities	$	9,606	$	—	$	(1,105)	$	8,501	Canadian and provincial government securities	$	9,499	$	—	$	(1,097)	$	8,402
Available-for-sale debt securities	Available-for-sale debt securities	$	9,606	$	—	$	(1,105)	$	8,501	Available-for-sale debt securities	$	9,499	$	—	$	(1,097)	$	8,402

(1) Funds held for customers, as reported on the consolidated balance sheet as of June 30, ~~2022,~~2023, also included cash of ~~$143,702.~~$147,392.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


		December 31, 2021									December 31, 2022
(in thousands)	(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value		(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash equivalents:										Cash equivalents:
Domestic money market fund										Domestic money market fund	$	5,000	$	—	$	—	$	5,000
Funds held for customers:(1)	Funds held for customers:(1)									Funds held for customers:(1)

Canadian and provincial government securities	Canadian and provincial government securities	$	9,724	$	—	$	(374)	$	9,350	Canadian and provincial government securities	9,190		—		(1,064)		8,126
Canadian guaranteed investment certificate		3,957		—		—		3,957
Available-for-sale debt securities	Available-for-sale debt securities	$	13,681	$	—	$	(374)	$	13,307	Available-for-sale debt securities	$	14,190	$	—	$	(1,064)	$	13,126

(1) Funds held for customers, as reported on the consolidated balance sheet as of December 31, ~~2021,~~2022, also included cash of ~~$241,488.~~$294,165.

Expected maturities of available-for-sale debt securities as of June 30, ~~2022~~2023 were as follows:


(in thousands)	Fair value
Due in one year or less	$	~~3,260~~3,394
Due in two to five years	~~2,516~~1,723
Due in six to ten years	~~2,725~~3,285
Available-for-sale debt securities	$	~~8,501~~8,402

Further information regarding the fair value of available-for-sale debt securities can be found in Note 8.

Revenue in excess of billings – Revenue in excess of billings was comprised of the following:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022
Conditional right to receive consideration	Conditional right to receive consideration	$	22,418	$	22,780	Conditional right to receive consideration	$	24,608	$	26,520
Unconditional right to receive consideration(1)	Unconditional right to receive consideration(1)	14,077		7,613		Unconditional right to receive consideration(1)	12,628		12,241
Revenue in excess of billings	Revenue in excess of billings	$	36,495	$	30,393	Revenue in excess of billings	$	37,236	$	38,761

(1) Represents revenues that are earned but not currently billable under the related contract terms.

Intangibles – Intangibles were comprised of the following:


		June 30, 2022						December 31, 2021							June 30, 2023						December 31, 2022
(in thousands)	(in thousands)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount		(in thousands)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Internal-use software														Internal-use software	$	526,697	$	(379,518)	$	147,179	$	529,306	$	(395,514)	$	133,792
Customer lists/relationships	Customer lists/relationships	$	495,266	$	(282,533)	$	212,733	$	493,495	$	(255,178)	$	238,317	Customer lists/relationships	487,127		(335,245)		151,882		497,882		(312,986)		184,896
Internal-use software		485,726		(368,129)		117,597		456,133		(342,656)		113,477
Technology-based intangibles	Technology-based intangibles	98,813		(42,615)		56,198		98,813		(38,553)		60,260		Technology-based intangibles	97,633		(49,560)		48,073		99,613		(47,478)		52,135
Partner relationships	Partner relationships	74,205		(5,750)		68,455		73,095		(2,990)		70,105		Partner relationships	74,134		(10,790)		63,344		74,682		(9,094)		65,588
Trade names	Trade names	44,185		(25,460)		18,725		51,052		(31,277)		19,775		Trade names	39,367		(22,742)		16,625		44,185		(26,510)		17,675
Software to be sold	Software to be sold	36,900		(30,114)		6,786		36,900		(28,110)		8,790		Software to be sold	36,900		(33,900)		3,000		36,900		(32,007)		4,893
Intangibles	Intangibles	$	1,235,095	$	(754,601)	$	480,494	$	1,209,488	$	(698,764)	$	510,724	Intangibles	$	1,261,858	$	(831,755)	$	430,103	$	1,282,568	$	(823,589)	$	458,979


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Amortization of intangibles was $36,859 for the quarter ended June 30, 2023, $38,339 for the quarter ended June 30, 2022, ~~$28,559~~$75,076 for the ~~quarter~~six months ended June 30, ~~2021,~~2023 and $74,498 for the six months ended June 30, ~~2022 and $51,823 for the six months ended June 30, 2021.~~2022. Based on the intangibles in service as of June 30, ~~2022,~~2023, estimated future amortization expense is as follows:


(in thousands)	(in thousands)	Estimated amortization expense		(in thousands)	Estimated amortization expense
Remainder of 2022		$	71,410
2023		117,095
Remainder of 2023				Remainder of 2023	$	65,253
2024	2024	77,822		2024	95,983
2025	2025	48,273		2025	67,446
2026	2026	42,398		2026	42,837
2027				2027	33,036

In the normal course of business, we acquire and develop internal-use software. We ~~purchased the~~also, at times, purchase customer list and partner relationship assets. The following intangibles were capitalized during the six months ended June 30, ~~2022:~~
(in thousands) Amount Weighted-average amortization period
(in years)
Internal-use software $ 31,800 3
Customer lists/relationships 12,480 6
Partner relationships 1,110 3
Acquired intangibles $ 45,390 4
2023:


(in thousands)	Amount		Weighted-average amortization period (in years)
Internal-use software	$	48,829	3

Partner relationships	478		1
Acquired intangibles	$	49,307	3

Goodwill – Changes in goodwill by reportable segment and in total were as follows for the six months ended June 30, ~~2022:~~2023:


(in thousands)	(in thousands)	Payments		Cloud Solutions		Promotional Solutions		Checks		Total		(in thousands)	Payments		Data Solutions		Promotional Solutions		Checks		Total
Balance, December 31, 2021:
Balance, December 31, 2022:												Balance, December 31, 2022:
Goodwill, gross	Goodwill, gross	$	895,338	$	432,984	$	252,874	$	434,812	$	2,016,008	Goodwill, gross	$	896,681	$	432,984	$	252,775	$	434,812	$	2,017,252
Accumulated impairment charges	Accumulated impairment charges	—		(392,168)		(193,699)		—		(585,867)		Accumulated impairment charges	—		(392,168)		(193,699)		—		(585,867)
Goodwill, net of accumulated impairment charges	Goodwill, net of accumulated impairment charges	895,338		40,816		59,175		434,812		1,430,141		Goodwill, net of accumulated impairment charges	896,681		40,816		59,076		434,812		1,431,385

Measurement-period adjustment (Note 6)		1,343		—		—		—		1,343
Currency translation adjustment		—		—		(27)		—		(27)
Balance, June 30, 2022		$	896,681	$	40,816	$	59,148	$	434,812	$	1,431,457
Currency translation adjustment and other												Currency translation adjustment and other	(828)		—		31		—		(797)
Balance, June 30, 2023												Balance, June 30, 2023	$	895,853	$	40,816	$	59,107	$	434,812	$	1,430,588

Balance, June 30, 2022:
Balance, June 30, 2023:												Balance, June 30, 2023:
Goodwill, gross	Goodwill, gross	$	896,681	$	432,984	$	252,847	$	434,812	$	2,017,324	Goodwill, gross	$	895,853	$	432,984	$	252,806	$	434,812	$	2,016,455
Accumulated impairment charges	Accumulated impairment charges	—		(392,168)		(193,699)		—		(585,867)		Accumulated impairment charges	—		(392,168)		(193,699)		—		(585,867)
Goodwill, net of accumulated impairment charges	Goodwill, net of accumulated impairment charges	$	896,681	$	40,816	$	59,148	$	434,812	$	1,431,457	Goodwill, net of accumulated impairment charges	$	895,853	$	40,816	$	59,107	$	434,812	$	1,430,588


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Other non-current assets – Other non-current assets were comprised of the following:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022
Postretirement benefit plan asset	Postretirement benefit plan asset	$	90,639	$	87,019	Postretirement benefit plan asset	$	82,834	$	79,343
Cloud computing arrangement implementation costs	Cloud computing arrangement implementation costs	69,008		63,806		Cloud computing arrangement implementation costs	67,270		71,547
Prepaid product discounts	Prepaid product discounts	48,683		56,527		Prepaid product discounts	46,321		44,824
Deferred contract acquisition costs(1)	Deferred contract acquisition costs(1)	21,018		17,975		Deferred contract acquisition costs(1)	24,906		21,300
Loans and notes receivable from distributors, net of allowance for credit losses(2)	Loans and notes receivable from distributors, net of allowance for credit losses(2)	14,602		20,201		Loans and notes receivable from distributors, net of allowance for credit losses(2)	12,782		13,259
Other	Other	28,397		33,935		Other	32,290		30,081
Other non-current assets	Other non-current assets	$	272,347	$	279,463	Other non-current assets	$	266,403	$	260,354

(1) Amortization of deferred contract acquisition costs was $5,315 for the six months ended June 30, 2023 and $3,767 for the six months ended June 30, ~~2022 and $2,276 for the six months ended June 30, 2021.~~2022.

(2) Amount includes the non-current portion of loans and notes receivable. The current portion of these receivables is included in other current assets on the consolidated balance sheets and was ~~$1,059~~$970 as of June 30, ~~2022~~2023 and ~~$1,317~~$961 as of December 31, ~~2021.~~2022.

Changes in the allowance for credit losses related to loans and notes receivable from distributors were as follows for the six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


		Six Months Ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Balance, beginning of year	Balance, beginning of year	$	2,830	$	3,995	Balance, beginning of year	$	1,024	$	2,830
Bad debt expense (benefit)		264		(658)
Exchange for customer lists		(402)		—
Bad debt (benefit) expense						Bad debt (benefit) expense	(73)		264
Other						Other	—		(402)
Balance, end of period	Balance, end of period	$	2,692	$	3,337	Balance, end of period	$	951	$	2,692

Past due receivables and those on non-accrual status were not ~~significant~~material as of June 30, ~~2022~~2023 or December 31, ~~2021.~~2022.

We categorize loans and notes receivable into risk categories based on information about the ability of borrowers to service their debt, including current financial information, historical payment experience, current economic trends and other factors. The highest quality receivables are assigned a 1-2 internal grade. Those that have a potential weakness requiring management's attention are assigned a 3-4 internal grade.

The following table presents loans and notes receivable from distributors, including the current portion, by credit quality indicator and by year of origination, as of June 30, ~~2022.~~2023. There were no write-offs or recoveries recorded during the six months ended June 30, ~~2022.~~2023.

Loans and notes receivable from distributors amortized cost basis by origination year
(in thousands) 2020 2019 2018 2017 Prior Total
Risk rating:
1-2 internal grade $ 1,203 $ 457 $ 4,394 $ 8,649 $ 1,051 $ 15,754
3-4 internal grade — 2,599 — — — 2,599
Loans and notes receivable $ 1,203 $ 3,056 $ 4,394 $ 8,649 $ 1,051 $ 18,353


	Loans and notes receivable from distributors amortized cost basis by origination year
(in thousands)	2020		2019		2018		Prior		Total
Risk rating:
1-2 internal grade	$	1,076	$	400	$	3,886	$	9,341	$	14,703
3-4 internal grade	—		—		—		—		—
Loans and notes receivable	$	1,076	$	400	$	3,886	$	9,341	$	14,703


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Changes in prepaid product discounts during the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 were as follows:


		Six Months Ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Balance, beginning of year	Balance, beginning of year	$	56,527	$	50,602	Balance, beginning of year	$	44,824	$	56,527
Additions(1)	Additions(1)	9,413		18,689		Additions(1)	18,584		9,413
Amortization	Amortization	(17,171)		(15,137)		Amortization	(17,173)		(17,171)
Other	Other	(86)		(45)		Other	86		(86)
Balance, end of period	Balance, end of period	$	48,683	$	54,109	Balance, end of period	$	46,321	$	48,683

(1) Prepaid product discounts are generally accrued upon contract execution. ~~Cash payments~~Payments for prepaid product discounts were $12,742 for the six months ended June 30, 2023 and $12,285 for the six months ended June 30, ~~2022 and $19,077 for the six months ended June 30, 2021.~~2022.

Accrued liabilities – Accrued liabilities were comprised of the following:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022
Employee bonuses, including sales incentives						Employee bonuses, including sales incentives	$	30,573	$	57,398
Deferred revenue(1)	Deferred revenue(1)	$	39,960	$	52,645	Deferred revenue(1)	29,204		47,012
Wages and payroll liabilities, including vacation		31,621		24,951
Employee cash bonuses, including sales incentives		26,102		45,006
Operating lease liabilities	Operating lease liabilities	13,278		14,852		Operating lease liabilities	13,764		12,780
Customer rebates	Customer rebates	10,638		9,036		Customer rebates	12,104		12,153
Prepaid product discounts due within one year		8,895		11,866
Prepaid product discounts						Prepaid product discounts	10,022		4,179
Wages and payroll liabilities, including vacation						Wages and payroll liabilities, including vacation	9,460		20,264
Other	Other	65,281		58,476		Other	50,068		64,618
Accrued liabilities	Accrued liabilities	$	195,775	$	216,832	Accrued liabilities	$	155,195	$	218,404

(1) ~~$20,238~~Revenue recognized for amounts included in deferred revenue at the beginning of the ~~December 31, 2021 amount~~period was ~~recognized as revenue during~~$29,637 for the six months ended June 30, 2023 and $20,238 for the six months ended June 30, 2022.

Supplemental cash flow information – The reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents to the consolidated balance sheets was as follows:


(in thousands)	(in thousands)	June 30, 2022		June 30, 2021		(in thousands)	June 30, 2023		June 30, 2022
Cash and cash equivalents	Cash and cash equivalents	$	43,262	$	163,338	Cash and cash equivalents	$	39,052	$	43,262
Restricted cash and restricted cash equivalents included in funds held for customers	Restricted cash and restricted cash equivalents included in funds held for customers	143,702		121,992		Restricted cash and restricted cash equivalents included in funds held for customers	147,392		143,702
Non-current restricted cash included in other non-current assets	Non-current restricted cash included in other non-current assets	2,624		2,744		Non-current restricted cash included in other non-current assets	2,749		2,624
Total cash, cash equivalents, restricted cash and restricted cash equivalents	Total cash, cash equivalents, restricted cash and restricted cash equivalents	$	189,588	$	288,074	Total cash, cash equivalents, restricted cash and restricted cash equivalents	$	189,193	$	189,588


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 4: EARNINGS PER SHARE

The following table reflects the calculation of basic and diluted earnings per share. During each period, certain stock options, as noted below, were excluded from the calculation of diluted earnings per share because their effect would have been antidilutive.


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2022		2021		2022		2021		(in thousands, except per share amounts)	2023		2022		2023		2022
Earnings per share – basic:	Earnings per share – basic:									Earnings per share – basic:
Net income	Net income	$	22,097	$	12,129	$	31,776	$	36,453	Net income	$	16,401	$	22,097	$	19,181	$	31,776
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	(35)		(29)		(71)		(62)		Net income attributable to non-controlling interest	(26)		(35)		(54)		(71)
Net income attributable to Deluxe	Net income attributable to Deluxe	22,062		12,100		31,705		36,391		Net income attributable to Deluxe	16,375		22,062		19,127		31,705
Income allocated to participating securities	Income allocated to participating securities	(16)		(10)		(23)		(27)		Income allocated to participating securities	(12)		(16)		(19)		(23)
Income attributable to Deluxe available to common shareholders	Income attributable to Deluxe available to common shareholders	$	22,046	$	12,090	$	31,682	$	36,364	Income attributable to Deluxe available to common shareholders	$	16,363	$	22,046	$	19,108	$	31,682
Weighted-average shares outstanding	Weighted-average shares outstanding	43,016		42,275		42,907		42,169		Weighted-average shares outstanding	43,524		43,016		43,421		42,907
Earnings per share – basic	Earnings per share – basic	$	0.51	$	0.29	$	0.74	$	0.86	Earnings per share – basic	$	0.38	$	0.51	$	0.44	$	0.74

Earnings per share – diluted:	Earnings per share – diluted:									Earnings per share – diluted:
Net income	Net income	$	22,097	$	12,129	$	31,776	$	36,453	Net income	$	16,401	$	22,097	$	19,181	$	31,776
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	(35)		(29)		(71)		(62)		Net income attributable to non-controlling interest	(26)		(35)		(54)		(71)
Net income attributable to Deluxe	Net income attributable to Deluxe	22,062		12,100		31,705		36,391		Net income attributable to Deluxe	16,375		22,062		19,127		31,705
Income allocated to participating securities	Income allocated to participating securities	(16)		(10)		(23)		(9)		Income allocated to participating securities	—		(16)		(10)		(23)
Re-measurement of share-based awards classified as liabilities	Re-measurement of share-based awards classified as liabilities	(307)		—		(345)		—		Re-measurement of share-based awards classified as liabilities	—		(307)		(19)		(345)
Income attributable to Deluxe available to common shareholders	Income attributable to Deluxe available to common shareholders	$	21,739	$	12,090	$	31,337	$	36,382	Income attributable to Deluxe available to common shareholders	$	16,375	$	21,739	$	19,098	$	31,337
Weighted-average shares outstanding	Weighted-average shares outstanding	43,016		42,275		42,907		42,169		Weighted-average shares outstanding	43,524		43,016		43,421		42,907
Dilutive impact of potential common shares	Dilutive impact of potential common shares	269		444		349		451		Dilutive impact of potential common shares	216		269		279		349
Weighted-average shares and potential common shares outstanding	Weighted-average shares and potential common shares outstanding	43,285		42,719		43,256		42,620		Weighted-average shares and potential common shares outstanding	43,740		43,285		43,700		43,256
Earnings per share – diluted	Earnings per share – diluted	$	0.50	$	0.28	$	0.72	$	0.85	Earnings per share – diluted	$	0.37	$	0.50	$	0.44	$	0.72
Antidilutive options excluded from calculation	Antidilutive options excluded from calculation	1,891		1,530		1,891		1,530		Antidilutive options excluded from calculation	1,553		1,891		1,553		1,891


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 5: OTHER COMPREHENSIVE INCOME

Reclassification adjustments – Information regarding amounts reclassified from accumulated other comprehensive loss to net income was as follows:


Accumulated other comprehensive loss components	Accumulated other comprehensive loss components	Amounts reclassified from accumulated other comprehensive loss								Affected line item in consolidated statements of comprehensive income	Accumulated other comprehensive loss components	Amounts reclassified from accumulated other comprehensive loss								Affected line item in consolidated statements of comprehensive income
		Quarter Ended June 30,				Six Months Ended June 30,						Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021			(in thousands)	2023		2022		2023		2022
Amortization of postretirement benefit plan items:	Amortization of postretirement benefit plan items:										Amortization of postretirement benefit plan items:
Prior service credit	Prior service credit	$	355	$	355	$	711	$	711	Other income	Prior service credit	$	355	$	355	$	711	$	711	Other income
Net actuarial loss	Net actuarial loss	(225)		(407)		(450)		(814)		Other income	Net actuarial loss	(568)		(225)		(1,137)		(450)		Other income
Total amortization	Total amortization	130		(52)		261		(103)		Other income	Total amortization	(213)		130		(426)		261		Other income
Tax expense		(79)		(31)		(157)		(63)		Income tax provision
Tax benefit (expense)											Tax benefit (expense)	16		(79)		32		(157)		Income tax provision
Amortization of postretirement benefit plan items, net of tax	Amortization of postretirement benefit plan items, net of tax	51		(83)		104		(166)		Net income	Amortization of postretirement benefit plan items, net of tax	(197)		51		(394)		104		Net income
Realized loss on debt securities	Realized loss on debt securities	(8)		—		(8)		—		Revenue	Realized loss on debt securities	—		(8)		—		(8)		Revenue
Tax benefit	Tax benefit	2		—		2		—		Income tax provision	Tax benefit	—		2		—		2		Income tax provision
Realized loss on debt securities, net of tax	Realized loss on debt securities, net of tax	(6)		—		(6)		—		Net income	Realized loss on debt securities, net of tax	—		(6)		—		(6)		Net income
Realized loss on interest rate swap		(144)		(330)		(464)		(664)		Interest expense
Tax benefit		38		87		123		174		Income tax provision
Realized loss on interest rate swap, net of tax		(106)		(243)		(341)		(490)		Net income
Foreign currency translation adjustment(1)		(5,550)		—		(5,550)		—		Gain on sale of businesses and facility
Realized gain (loss) on cash flow hedges											Realized gain (loss) on cash flow hedges	634		(144)		1,204		(464)		Interest expense
Tax (expense) benefit											Tax (expense) benefit	(169)		38		(321)		123		Income tax provision
Realized gain (loss) on cash flow hedges, net of tax											Realized gain (loss) on cash flow hedges, net of tax	465		(106)		883		(341)		Net income
Currency translation adjustment(1)											Currency translation adjustment(1)	(863)		(5,550)		(863)		(5,550)		Gain on sale of businesses and facility
Total reclassifications, net of tax	Total reclassifications, net of tax	$	(5,611)	$	(326)	$	(5,793)	$	(656)		Total reclassifications, net of tax	$	(595)	$	(5,611)	$	(374)	$	(5,793)

(1)Relates to the sale of our North American web hosting business during the quarter ended June 30, 2023 and the sale of our Australian web hosting business during the quarter ended June 30, 2022. Further information can be found in Note 6.

Accumulated other comprehensive loss – Changes in the components of accumulated other comprehensive loss during the six months ended June 30, ~~2022~~2023 were as follows:


(in thousands)	(in thousands)	Postretirement benefit plans		Net unrealized loss on debt securities(1)		Net unrealized loss on cash flow hedge(2)		Currency translation adjustment		Accumulated other comprehensive loss		(in thousands)	Postretirement benefit plans		Net unrealized loss on debt securities(1)		Net unrealized gain on cash flow hedges(2)		Currency translation adjustment		Accumulated other comprehensive loss
Balance, December 31, 2021		$	(15,431)	$	(344)	$	(2,261)	$	(13,456)	$	(31,492)
Balance, December 31, 2022												Balance, December 31, 2022	$	(26,872)	$	(909)	$	2,593	$	(12,076)	$	(37,264)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	—		(562)		3,075		(1,768)		745		Other comprehensive (loss) income before reclassifications	—		(8)		4,858		1,149		5,999
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	(104)		6		341		5,550		5,793		Amounts reclassified from accumulated other comprehensive loss	394		—		(883)		863		374
Net current-period other comprehensive (loss) income		(104)		(556)		3,416		3,782		6,538
Balance, June 30, 2022		$	(15,535)	$	(900)	$	1,155	$	(9,674)	$	(24,954)
Net current-period other comprehensive income (loss)												Net current-period other comprehensive income (loss)	394		(8)		3,975		2,012		6,373
Balance, June 30, 2023												Balance, June 30, 2023	$	(26,478)	$	(917)	$	6,568	$	(10,064)	$	(30,891)

(1) Other comprehensive loss before reclassifications is net of an income tax benefit of ~~$195.~~$3.

(2) Other comprehensive income before reclassifications is net of income tax expense of ~~$1,111.~~$1,768.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 6: ~~ACQUISITION AND~~ DIVESTITURES

~~Acquisition~~ 2023 divestiture– OnIn June ~~1, 2021,~~2023, we ~~acquired all~~completed the sale of our North American web hosting and logo design businesses for net cash proceeds of $31,230. We received $27,880 of these proceeds during the ~~equity~~quarter ended June 30, 2023, with the remainder to be paid by the end of ~~First American Payment Systems, L.P. (First American). Further information regarding this acquisition can be found under the caption "Note 6: Acquisitions"~~2023. These businesses generated annual revenue of approximately $66,000 during 2022, primarily in ~~the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.~~our Data Solutions segment. During the quarter ended June 30, ~~2022,~~2023, we ~~finalized the purchase price allocation for~~recognized a pretax gain of $21,942 on this ~~acquisition~~sale. The assets and ~~we recorded measurement-period adjustments that increased deferred income tax~~ liabilities ~~by $1,343, with the offset~~sold were not material to ~~goodwill.~~our consolidated balance sheet.

~~The final allocation of the First American purchase price to the assets acquired and liabilities was as follows:~~


~~(in thousands)~~	~~Purchase price allocation~~
~~Trade accounts receivable~~	$	~~27,296~~
~~Other current assets~~	~~8,533~~
~~Property, plant and equipment~~	~~9,873~~
~~Operating lease assets~~	~~24,396~~
~~Intangible assets:~~
~~Customer relationships~~	~~127,000~~
~~Partner relationships~~	~~72,000~~
~~Technology-based intangibles~~	~~65,000~~
~~Trade names~~	~~21,000~~
~~Internal-use software~~	~~6,111~~
~~Total intangible assets~~	~~291,111~~
~~Goodwill~~	~~728,516~~
~~Other-non-current assets~~	~~350~~
~~Accounts payable~~	~~(18,475)~~
~~Funds held for customers~~	~~(9,428)~~
~~Accrued liabilities~~	~~(23,460)~~
~~Operating lease liabilities, non-current~~	~~(21,316)~~
~~Deferred income taxes~~	~~(54,506)~~
~~Other non-current liabilities~~	~~(4,376)~~
~~Payments for acquisition, net of cash, cash equivalents, restricted cash and restricted cash equivalents acquired of $15,841~~	$	~~958,514~~

Further information regarding the acquired First American intangibles can be found under the caption "Note 3: Supplemental Balance Sheet and Cash Flow Information" and "Note 8: Fair Value Measurements," both of which are included in the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

First American acquisition transaction costs are included in selling, general and administrative (SG&A) expense in the consolidated statements of comprehensive income and were $15,843 for the quarter ended June 30, 2021 and $18,608 for the six months ended June 30, 2021. Operating results for First American were as follows:

Quarter Ended
June 30, Six Months Ended
June 30,
(in thousands) 2022 2021 2022 2021
Revenue $ 90,266 $ 27,343 $ 173,550 $ 27,343
Net loss attributable to Deluxe (238) (66) (748) (66)

~~The above results include restructuring and integration costs of $2,787 for the quarter ended June 30,~~ 2022 ~~and $5,000 for the six months ended June 30, 2022.~~


~~DELUXE CORPORATION~~ ~~CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(dollars in thousands, except per share amounts)~~

~~Pro forma financial information~~ – During the first quarter of 2022, we identified errors in the previously reported pro forma results of operations related to the First American acquisition. These errors related to the amount of historical First American revenue and net income (loss) included for the pre-acquisition periods, as well as errors in the adjustments related to the amortization of acquired intangibles, interest expense on the acquisition financing and transaction costs.

For the quarter and six months ended June 30, 2021 and the nine months ended September 30, 2021, these corrections decreased pro forma revenue by $27,595 from the amounts previously reported. For the years ended December 31, 2021 and 2020, these corrections decreased pro forma revenue by $26,335 and $3,027, respectively, from the amounts previously reported. The corrections to adjusted pro forma net income (loss) attributable to Deluxe from the amounts previously reported were as follows:


~~(in thousands)~~	~~Increase (decrease) in pro forma net income attributable to Deluxe~~
~~Quarter ended June 30, 2021~~	$	~~7,636~~
~~Six Months ended June 30, 2021~~	~~5,911~~
~~Quarter ended September 30, 2021~~	~~2,231~~
~~Nine Months ended September 30, 2021~~	~~8,142~~
~~Year Ended December 31, 2021~~	~~10,138~~
~~Year Ended December 31, 2020~~	~~(9,082)~~

~~The following unaudited pro forma financial information summarizes our consolidated results of operations as though the First American acquisition occurred on January 1, 2020:~~

As Revised
(in thousands) Quarter Ended
March 31, 2021 Quarter Ended
June 30, 2021 Six Months Ended
June 30, 2021
Quarter Ended
Sept. 30, 2021(1)
Nine Months Ended
Sept. 30, 2021 Year Ended December 31, 2021 Year Ended December 31, 2020
Revenue $ 518,104 $ 535,493 $ 1,053,597 $ 532,141 $ 1,585,738 $ 2,156,313 $ 2,079,103
Net income (loss) attributable to Deluxe 19,044 24,579 43,623 14,695 58,318 74,843 (54,489)

~~(1)~~ ~~Only net income attributable to Deluxe was revised for the quarter ended September 30, 2021.~~

The unaudited pro forma financial information was prepared in accordance with our accounting policies, which can be found under the caption "Note 1: Significant Accounting Policies" in the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K. The pro forma information includes adjustments to reflect the additional amortization that would have been recorded assuming the fair value adjustments to intangible assets had been applied from January 1, 2020. The pro forma information also includes adjustments to reflect the additional interest expense on the debt we issued to fund the acquisition, and the acquisition transaction costs we incurred during 2021 are reflected in the 2020 pro forma results.

This pro forma financial information is for informational purposes only. It does not reflect the integration of the businesses or any synergies that may result from the acquisition. As such, it is not indicative of the results of operations that would have been achieved had the acquisition been consummated on January 1, 2020. In addition, the pro forma amounts are not indicative of future operating results.

~~Divestitures~~ –divestitures – In May 2022, we completed the sale of our Australian web hosting business for net cash proceeds of ~~$17,620, net of costs of the sale.~~$17,620. This business generated annual revenue in our ~~Cloud~~Data Solutions segment of $23,766 ~~for~~during 2021. During the quarter ended June 30, 2022, we recognized a pretax gain of $15,166 on this sale. The assets and liabilities sold were not ~~significant~~material to our consolidated balance sheet.


~~DELUXE CORPORATION~~ ~~CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(dollars in thousands, except per share amounts)~~

In April 2022, we sold ~~substantially all of~~ the assets of our Promotional Solutions strategic sourcing business and in August 2022, we sold ~~substantially all~~the assets of our Promotional Solutions retail packaging ~~business.These~~business. These businesses generated annual revenue of approximately ~~$30,000~~$29,000 during 2021. ~~The impact of~~Neither the ~~sale of~~gain on these sales nor the ~~strategic sourcing business was not significant to our consolidated financial statements for the quarter ended June 30, 2022,~~assets and ~~we do not expect that the impact of the retail packaging sales transaction will be significant~~liabilities sold were material to our consolidated financial statements.

We believe that ~~the sale of~~ these ~~businesses will~~divestitures allow us to focus our resources on the key growth areas of payments and data, while allowing us to optimize our operations.

Facility sale– – In May 2022, we sold our former facility located in Lancaster, California for net cash proceeds of $6,929, ~~net of costs of the sale,~~ and we recognized a pretax gain on the sale of $2,361 during the quarter ended June 30, 2022. The sale was a result of our continued real estate rationalization process.


NOTE 7: DERIVATIVE FINANCIAL INSTRUMENTS

As part of our interest rate risk management strategy, we have entered into an interest rate ~~swap in July 2019,~~swaps, which we designated as a cash flow ~~hedge,~~hedges, to mitigate variability in interest payments on a portion of our variable-rate debt (Note 12). ~~The~~In March 2023, we modified our September 2022 interest rate swap ~~which terminates~~agreement to utilize SOFR as the reference rate in ~~March~~the agreement. Information regarding our accounting for this modification can be found in Note 2. In June 2023, ~~effectively converts $200,000~~we entered into a 3-year interest rate swap agreement with a variable notional amount that resets quarterly. Our derivative instruments were comprised of ~~variable rate debt to a fixed rate of 1.798%.~~ the following:


							June 30, 2023		December 31, 2022
(in thousands)	Notional amount		Interest rate		Maturity	Balance sheet location	Fair value asset / (liability)		Fair value asset / (liability)
June 2023 amortizing interest rate swap:
	$	298,729	4.249	%	June 2026	Other non-current assets	$	1,358	$	—
March 2023 interest rate swap:
	200,000		4.003	%	March 2026	Other non-current assets	2,850		—
September 2022 interest rate swap:
	300,000		3.990	%	September 2025	Other non-current assets	4,807		2,409
July 2019 interest rate swap:
	200,000		1.798	%	March 2023	Other current assets	—		1,184

Changes in the fair ~~value~~values of the interest rate ~~swap~~swaps are recorded in accumulated other comprehensive loss on the consolidated balance sheets and are subsequently reclassified to interest expense as interest payments are made on the variable-rate debt. The fair ~~value~~values of the interest rate swap was $1,622 as of June 30, 2022 and was included in other current assets on the consolidated balance sheet. The fair value of the swap was $3,028 as of December 31, 2021 and was included in other non-current liabilities on the consolidated balance sheet. The fair value of this derivative isderivatives are calculated based on the ~~prevailing LIBOR~~applicable reference rate curve on the date of measurement. The cash flow ~~hedge was~~hedges were fully effective as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, and ~~its~~their impact on


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

consolidated net income and ~~our~~the consolidated statements of cash flows was not ~~significant.~~material. We also expect that the amount that will be reclassified to interest expense during the ~~remaining term of the swap~~next 12 months will not be ~~significant.~~material.


NOTE 8: FAIR VALUE MEASUREMENTS

Funds held for customers and cash and cash equivalents included available-for-sale debt securities (Note 3). These securities included a mutual fund investment that invests in Canadian and provincial government securities and as of December 31, ~~2021, also~~2022, included ~~an investment in~~ a ~~Canadian guaranteed investment certificate (GIC) with an original maturity of 2 years. The GIC investment matured during the quarter ended June 30, 2022.~~domestic money market fund. The mutual fund investment is not traded in an active market and its fair value is determined by obtaining quoted prices in active markets for the underlying securities held by the fund. The cost of the ~~GIC~~money market fund held as of December 31, 2022, which was traded in an active market, approximated its fair value ~~based on estimates using current market rates offered for deposits with similar remaining maturities.~~because of the short-term nature of the investment. Unrealized gains and losses, net of tax, are included in accumulated other comprehensive loss on the consolidated balance sheets. The cost of securities sold is determined using the average cost method. Realized gains and losses are included in revenue on the consolidated statements of comprehensive income and were not ~~significant during~~material for the quarters ~~and~~or six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

Information regarding the fair values of our financial instruments was as follows:


						Fair value measurements using
		June 30, 2023				Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(in thousands)	Balance sheet location	Carrying value		Fair value
Measured at fair value through comprehensive income:
Available-for-sale debt securities	Funds held for customers	$	8,402	$	8,402	$	—	$	8,402	$	—
Derivative assets (Note 7)	Other non-current assets	9,015		9,015		—		9,015		—
Amortized cost:
Cash	Cash and cash equivalents	39,052		39,052		39,052		—		—
Cash	Funds held for customers	147,392		147,392		147,392		—		—
Cash	Other non-current assets	2,749		2,749		2,749		—		—
Loans and notes receivable from distributors	Other current assets and other non-current assets	13,752		12,754		—		—		12,754
Long-term debt	Current portion of long-term debt and long-term debt	1,667,210		1,575,872		—		1,575,872		—

1716


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

~~Information regarding the fair values of our financial instruments was as follows:~~

Fair value measurements using
June 30, 2022 Quoted prices in active markets for identical assets
(Level 1) Significant other observable inputs
(Level 2) Significant unobservable inputs
(Level 3)
(in thousands) Balance sheet location Carrying value Fair value
Measured at fair value through comprehensive income:
Available-for-sale debt securities Funds held for customers $ 8,501 $ 8,501 $ — $ 8,501 $ —
Derivative asset (Note 7) Other current assets 1,622 1,622 — 1,622 —
Amortized cost:
Cash Cash and cash equivalents 43,262 43,262 43,262 — —
Cash Funds held for customers 143,702 143,702 143,702 — —
Cash Other non-current assets 2,624 2,624 2,624 — —
Loans and notes receivable from distributors Other current and non-current assets 15,661 14,262 — — 14,262
Long-term debt Current portion of long-term debt and long-term debt 1,675,614 1,600,250 — 1,600,250 —


~~DELUXE CORPORATION~~ ~~CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(dollars in thousands, except per share amounts)~~


							Fair value measurements using																		Fair value measurements using
			December 31, 2021				Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)							December 31, 2022					Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(in thousands)	(in thousands)	Balance sheet location	Carrying value		Fair value						(in thousands)			Balance sheet location				Carrying value			Fair value
Measured at fair value through comprehensive income:	Measured at fair value through comprehensive income:													Measured at fair value through comprehensive income:

Available-for-sale debt securities	Available-for-sale debt securities	Funds held for customers	$	13,307	$	13,307		$	—		$	13,307			$	—	Available-for-sale debt securities		Cash and cash equivalents			$	5,000	$		5,000	$	5,000	$	—	$	—
Derivative liability (Note 7)		Other non-current liabilities	(3,028)		(3,028)		—			(3,028)			—
Available-for-sale debt securities														Available-for-sale debt securities			Funds held for customers			8,126			8,126		—		8,126		—
Derivative assets (Note 7)														Derivative assets (Note 7)			Other current assets and other non-current assets			3,593			3,593		—		3,593		—
Amortized cost:	Amortized cost:													Amortized cost:
Cash	Cash	Cash and cash equivalents	41,231		41,231		41,231			—			—	Cash			Cash and cash equivalents			35,435			35,435		35,435		—		—
Cash	Cash	Funds held for customers	241,488		241,488		241,488			—			—	Cash			Funds held for customers			294,165			294,165		294,165		—		—
Cash	Cash	Other non-current assets	2,772		2,772		2,772			—			—	Cash			Other non-current assets			2,815			2,815		2,815		—		—
Loans and notes receivable from distributors	Loans and notes receivable from distributors	Other current and non-current assets	21,518		22,344		—			—			22,344	Loans and notes receivable from distributors			Other current assets and other non-current assets			14,220			13,315		—		—		13,315
Long-term debt	Long-term debt	Current portion of long-term debt and long-term debt	1,682,949		1,728,515		—			1,728,515			—	Long-term debt			Current portion of long-term debt and long-term debt			1,644,276			1,574,417		—		1,574,417		—


NOTE 9: RESTRUCTURING AND INTEGRATION EXPENSE

Restructuring and integration expense consists of costs related to the consolidation and migration of certain applications and processes, including our financial ~~and sales~~ management systems. It also includes costs related to the integration of acquired businesses into our systems and processes. These costs consist primarily of information technology consulting, project management services and internal labor, as well as other costs associated with our initiatives, such as training, travel, relocation and costs associated with facility closures. In addition, we recorded employee severance costs related to these initiatives, as well as our ongoing cost reduction initiatives across functional areas. We are currently pursuing several initiatives designed to support our growth strategy and to increase our efficiency. Restructuring and integration expense is not allocated to our reportable business segments.

Restructuring and integration expense is reflected on the consolidated statements of comprehensive income as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Total cost of revenue	Total cost of revenue	$	26	$	615	$	85	$	1,514	Total cost of revenue	$	3,286	$	26	$	4,439	$	85
Operating expenses	Operating expenses	15,182		11,364		31,426		25,677		Operating expenses	24,191		15,182		37,132		31,426
Restructuring and integration expense	Restructuring and integration expense	$	15,208	$	11,979	$	31,511	$	27,191	Restructuring and integration expense	$	27,477	$	15,208	$	41,571	$	31,511

1917


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Restructuring and integration expense for each period was comprised of the following:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
External consulting fees	External consulting fees	$	9,141	$	5,540	$	17,000	$	12,923	External consulting fees	$	12,930	$	9,141	$	20,621	$	17,000
Employee severance benefits										Employee severance benefits	6,161		3,281		6,347		4,406
Internal labor	Internal labor	2,604		2,480		4,300		4,520		Internal labor	1,750		2,604		3,872		4,300
Employee severance benefits		3,281		1,018		4,406		1,875
Other	Other	182		2,941		5,805		7,873		Other	6,636		182		10,731		5,805
Restructuring and integration expense	Restructuring and integration expense	$	15,208	$	11,979	$	31,511	$	27,191	Restructuring and integration expense	$	27,477	$	15,208	$	41,571	$	31,511

Our restructuring and integration accruals are included in accrued liabilities on the consolidated balance sheets and represent expected cash payments required to satisfy the remaining severance obligations to those employees already terminated and those expected to be terminated under our various initiatives. The majority of the employee reductions and the related severance payments are expected to be completed by the end of ~~2022.~~2023.

Changes in our restructuring and integration accruals were as follows:


(in thousands)	Employee severance benefits
Balance, December 31, ~~2021~~2022	$	~~5,672~~8,528
Charges	~~5,102~~6,720
Reversals	~~(696)~~(373)
Payments	~~(5,667)~~(7,406)
Balance, June 30, ~~2022~~2023	$	~~4,411~~7,469

The charges and reversals presented in the rollforward of our restructuring and integration accruals do not include items charged directly to expense as incurred, as those items are not reflected in accrued liabilities on the consolidated balance sheets.


NOTE 10: INCOME TAX PROVISION

The effective income tax rate ~~on pretax income reconciles~~for the six months ended June 30, 2023 was 35.1%, compared to the effective tax rate of 22.3% for the year ended December 31, 2022. The reconciliation of our effective tax rate for 2022 to the U.S. federal statutory tax rate ~~as follows:~~can be found under the caption "Note 10: Income Tax Provision" in the Notes to Consolidated Financial Statements appearing in the 2022 Form 10-K.

Six Months Ended June 30, 2022 Year Ended December 31, 2021
Income tax at federal statutory rate 21.0 % 21.0 %
Change in valuation allowance 14.9 % 0.1 %
Tax impact of share-based compensation 5.3 % 0.9 %
State income tax expense, net of federal income tax benefit 2.6 % 2.4 %
Non-deductible executive compensation 2.4 % 1.7 %
Foreign tax rate differences 1.7 % 1.7 %
Tax on repatriation of foreign earnings 1.4 % 4.9 %
Non-deductible acquisition costs 0.1 % 1.5 %
Sale of business (Note 6) (18.3 %) —
Research and development tax credit (1.1 %) (0.9 %)
Other (0.3 %) (0.2 %)
Effective tax rate 29.7 % 33.1 %


~~DELUXE CORPORATION~~ ~~CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(dollars in thousands, except per share amounts)~~

The increase in our effective tax rate for the six months ended June 30, 2023 was primarily driven by the impact of business exit activities, which increased our effective tax rate by 5.3 points. In ~~May~~June 2023, we recognized a capital loss for tax purposes related to the sale of our North American web hosting and logo design businesses, and we recorded a full valuation allowance against the deferred tax asset, as we do not expect to realize the related tax benefit. During the year ended December 31, 2022, we ~~completed~~recognized a capital loss for tax purposes related to the sale of our Australian web hosting business, and we ~~recognized a capital loss on the transaction for tax purposes. We~~ recorded a valuation allowance for the portion of the capital loss carryover we dodid not ~~currently~~ expect to realize. In addition, the tax impact of share-based compensation drove a 4.9 point increase in our effective tax rate and return to provision adjustments drove a 2.7 point increase in our effective tax rate, as compared to 2022.


NOTE 11: POSTRETIREMENT BENEFITS

We have historically provided certain health care benefits for eligible retired U.S. employees. In addition to our retiree health care plan, we also have a U.S. supplemental executive retirement plan. Further information regarding our postretirement benefit plans can be found under the caption “Note ~~13:~~12: Postretirement Benefits” in the Notes to Consolidated Financial Statements appearing in the ~~2021~~2022 Form 10-K.

~~Postretirement benefit income is included in other income on the consolidated statements of comprehensive income and consisted of the following components:~~

Quarter Ended
June 30, Six Months Ended
June 30,
(in thousands) 2022 2021 2022 2021
Interest cost $ 280 $ 242 $ 561 $ 484
Expected return on plan assets (1,866) (1,875) (3,731) (3,748)
Amortization of prior service credit (355) (355) (711) (711)
Amortization of net actuarial losses 225 407 450 814
Net periodic benefit income $ (1,716) $ (1,581) $ (3,431) $ (3,161)


~~NOTE 12: DEBT~~

~~Debt outstanding was comprised of the following:~~

(in thousands) June 30,
2022 December 31, 2021
Senior, secured term loan facility $ 1,016,250 $ 1,072,125
Senior, unsecured notes 500,000 500,000
Amounts drawn on senior, secured revolving credit facility 176,500 130,000
Total principal amount 1,692,750 1,702,125
Less: unamortized discount and debt issuance costs (17,136) (19,176)
Total debt, net of discount and debt issuance costs 1,675,614 1,682,949
Less: current portion of long-term debt, net of debt issuance costs (57,257) (57,197)
Long-term debt $ 1,618,357 $ 1,625,752

2118


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Postretirement benefit income is included in other income on the consolidated statements of comprehensive income and consisted of the following components:


	Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Interest cost	$	496	$	280	$	993	$	561
Expected return on plan assets	(1,830)		(1,866)		(3,660)		(3,731)
Amortization of prior service credit	(355)		(355)		(711)		(711)
Amortization of net actuarial losses	568		225		1,137		450
Net periodic benefit income	$	(1,121)	$	(1,716)	$	(2,241)	$	(3,431)


NOTE 12: DEBT

Debt outstanding was comprised of the following:


(in thousands)	June 30, 2023		December 31, 2022
Senior, secured term loan facility	$	958,500	$	987,375
Senior, unsecured notes	475,000		475,000
Amounts drawn on senior, secured revolving credit facility	247,000		197,000
Total principal amount	1,680,500		1,659,375
Less: unamortized discount and debt issuance costs	(13,290)		(15,099)
Total debt, net of discount and debt issuance costs	1,667,210		1,644,276
Less: current portion of long-term debt, net of debt issuance costs	(86,059)		(71,748)
Long-term debt	$	1,581,151	$	1,572,528

Maturities of long-term debt were as follows as of June 30, ~~2022:~~

2023:


(in thousands)	(in thousands)	Debt obligations		(in thousands)	Debt obligations
Remainder of 2022		$	28,875
2023		72,188
Remainder of 2023				Remainder of 2023	$	43,312
2024	2024	86,625		2024	86,625
2025	2025	101,062		2025	101,063
2026	2026	904,000		2026	974,500
2027				2027	—
Thereafter	Thereafter	500,000		Thereafter	475,000
Total principal amount	Total principal amount	$	1,692,750	Total principal amount	$	1,680,500

Credit facility – In June 2021, we executed a senior, secured credit facility consisting of a revolving credit facility with commitments of $500,000 and a $1,155,000 term loan facility. The revolving credit facility includes a $40,000 swingline sub-facility and a $25,000 letter of credit sub-facility. Proceeds from the credit facility were used to terminate our previous credit facility agreement and to fund the acquisition of First American ~~(Note 6)~~Payment Systems, L.P (First American). Loans under the revolving credit facility may be borrowed, repaid and re-borrowed until June 1, 2026, at which time all amounts borrowed must be repaid. The term loan facility will be repaid in equal quarterly installments of ~~$14,438 through June 30, 2023,~~ $21,656 from September 30, 2023 through June 30, 2025 and $28,875 from September 30, 2025 through March 31, 2026. The remaining balance is due on June 1, 2026. The term loan facility also includes mandatory prepayment requirements related to asset sales, new debt (other than permitted debt) and excess cash flow, subject to certain limitations. No premium or penalty is payable in connection with any mandatory or voluntary prepayment of the term loan facility.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Interest is payable ~~under~~on the credit facility at a fluctuating rate of interest determined by reference to the eurodollar rate plus an applicable margin ranging from 1.5% to 2.5%, depending on our consolidated total leverage ratio, as defined in the credit agreement. Through March 20, 2023, the eurodollar rate was derived from LIBOR. Effective March 20, 2023, we modified the credit facility to utilize SOFR as the reference rate in the agreement. Information regarding our accounting for this modification can be found in Note 2. A commitment fee is payable on the unused portion of the revolving credit facility at a rate ranging from 0.25% to 0.35%, depending on our consolidated total leverage ratio. Amounts outstanding under the credit facility had a weighted-average interest rate of ~~5.13%~~6.72% as of June 30, ~~2022~~2023 and ~~2.67%~~6.07% as of December 31, ~~2021,~~2022, including the impact of an interest rate ~~swap~~swaps that effectively ~~converts $200,000~~convert a portion of our variable-rate debt to ~~fixed rate~~fixed-rate debt. Further information regarding the interest rate ~~swap~~swaps can be found in Note 7.

Borrowings under the credit facility are collateralized by substantially all of the present and future tangible and intangible personal property held by us and our subsidiaries that have guaranteed our obligations under the credit facility, subject to certain exceptions. The credit agreement contains customary covenants regarding limits on levels of indebtedness, liens, mergers, certain asset dispositions, changes in business, advances, investments, loans and restricted payments. The covenants are subject to a number of limitations and exceptions set forth in the credit agreement. The credit agreement also includes requirements regarding our consolidated total leverage ratio and our consolidated secured leverage ratio, as defined in the credit agreement. These ratios may not equal or exceed the following amounts during the periods indicated:

Fiscal Quarter Ending

Consolidated total leverage ratio

Consolidated secured leverage ratio

~~June 30, 2022 through March 31, 2023~~

~~4.75 to 1:00~~

~~3.75 to 1:00~~

June 30, 2023 through March 31, 2024

4.50 to 1:00

3.50 to 1:00

June 30, 2024 and each fiscal quarter thereafter

4.25 to 1:00

3.50 to 1:00

In addition, we ~~are required to~~must maintain a minimum interest coverage ratio of at least 3.00 to 1.00 throughout the remaining term of the credit facility. Failure to meet any of the above requirements would result in an event of default that would allow lenders to declare amounts outstanding immediately due and payable and would allow the lenders to enforce their interests against collateral pledged if we are unable to settle the amounts outstanding. We were in compliance with all debt covenants as of June 30, ~~2022.~~2023.

The credit agreement contains customary representations and warranties and, as a condition to borrowing, requires that all such representations and warranties be true and correct in all material respects on the date of each borrowing, including representations as to no material adverse change in our business, assets, operations or financial condition. If our consolidated total leverage ratio exceeds 2.75 to 1.00, the aggregate annual amount of permitted dividends and share repurchases in connection with incentive-based equity and compensation is limited to $60,000.


~~DELUXE CORPORATION~~ ~~CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(dollars in thousands, except per share amounts)~~

~~Daily average amounts outstanding under our current and previous credit agreements were as follows:~~

(in thousands) Six Months Ended June 30, 2022 Year Ended
December 31, 2021
Daily average amount outstanding $ 1,189,469 $ 1,109,819
Weighted-average interest rate
2.99 % 2.43 %

As of June 30, ~~2022,~~2023, amounts available for borrowing under our revolving credit facility were as follows:


(in thousands)	Available borrowings
Revolving credit facility commitment	$	500,000
Amounts drawn on revolving credit facility	~~(176,500)~~(247,000)
Outstanding letters of credit(1)	~~(7,823)~~(8,368)
Net available for borrowing as of June 30, ~~2022~~2023	$	~~315,677~~244,632

(1) We use standby letters of credit primarily to collateralize certain obligations related to our self-insured workers' compensation claims, as well as claims for environmental matters, as required by certain states.These letters of credit reduce the amount available for borrowing under our revolving credit facility.

Senior unsecured notes – In June 2021, we issued $500,000 of 8.0% senior, unsecured notes that mature in June 2029. The notes were issued via a private placement under Rule 144A of the Securities Act of 1933. Proceeds from the offering, net of discount and offering costs, were $490,741, resulting in an effective interest rate of 8.3%. The net proceeds from the notes were used to fund the acquisition of First American in June ~~2021 (Note 6).~~2021. Interest payments are due each June and December. During 2022, we settled $25,000 of these notes via open market purchases.

The indenture governing the notes contains covenants that limit our ability and the ability of our restricted subsidiaries to, among other things, incur additional indebtedness and liens, issue redeemable stock and preferred stock, pay dividends and distributions, make loans and investments and consolidate or merge or sell all or substantially all of our assets.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 13: OTHER COMMITMENTS AND CONTINGENCIES

Indemnifications – In the normal course of business, we periodically enter into agreements that incorporate general indemnification language. These indemnification provisions generally encompass third-party claims arising from our products and services, including, without limitation, service failures, breach of security, intellectual property rights, governmental regulations and/or employment-related matters. Performance under these indemnities would generally be triggered by our breach of the terms of the contract. In disposing of assets or businesses, we often provide representations, warranties and/or indemnities to cover various risks including, for example, unknown damage to the assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal matters related to periods prior to disposition. We do not have the ability to estimate the potential liability from such indemnities because they relate to unknown conditions. However, we do not believe that any liability under these indemnities would have a material adverse effect on our financial position, annual results of operations or annual cash flows. We have recorded liabilities for known indemnifications related to environmental matters. These liabilities were not ~~significant~~material as of June 30, ~~2022~~2023 or December 31, ~~2021.~~2022.

First American indemnification – Pursuant to the First American acquisition agreement, we are entitled to limited indemnification for certain expenses and losses, if any, that may be incurred after the consummation of the transaction that arise out of certain matters, including a Federal Trade Commission (FTC) investigation initiated in December 2019 seeking information to determine whether certain subsidiaries of First American may have engaged in conduct prohibited by the Federal Trade Commission Act, the Fair Credit Reporting Act or the Duties of Furnishers of Information. As fully set forth in the merger agreement, our rights to indemnification for any such expenses and losses ~~are~~were limited to the amount of an indemnity holdback, which iswas our sole recourse for any such losses.

The First American subsidiaries entered into a Stipulated Order for Permanent Injunction, Monetary Judgment, and Other Relief (the “Order”) with the FTC, which was approved by the FTC on July 29, 2022. The parties subsequently entered into an amended Order. Pursuant to the Order, among other things, the First American defendants ~~are~~were required to pay $4,900 to the FTC within 7 days of the entry of the Order. The First American defendants also agreed to certain injunctive relief. The ~~above description is qualified in its entirety to the terms of the Order, which was filed as Exhibit 10.1 to the Current Report on Form 8-K that we filed on July 29, 2022. The~~ payment of the above-referenced amount ~~together with~~was made in March 2023, and we were reimbursed for post-closing expenses that we ~~and First American~~ incurred in connection with this ~~matter, will be withdrawn from the holdback referenced above. As such, the payment of such amount will~~matter. These payments did not have a material impact on our consolidated financial statements.


~~DELUXE CORPORATION~~ ~~CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(dollars in thousands, except per share amounts)~~

Self-insurance – We are self-insured for certain costs, primarily workers' compensation claims and medical and dental benefits for active employees and those employees on long-term disability. The liabilities associated with these items represent our best estimate of the ultimate obligations for reported claims plus those incurred, but not reported, and totaled ~~$8,623~~$8,643 as of June 30, ~~2022~~2023 and ~~$7,401~~$9,661 as of December 31, ~~2021.~~2022. These accruals are included in accrued liabilities and other non-current liabilities on the consolidated balance sheets. Our workers' compensation liability is recorded at present value. The difference between the discounted and undiscounted liability was not ~~significant~~material as of June 30, ~~2022~~2023 or December 31, ~~2021.~~2022.

Our self-insurance liabilities are estimated, in part, by considering historical claims experience, demographic factors and other actuarial assumptions. The estimated accruals for these liabilities could be significantly affected if future events and claims differ from these assumptions and historical trends.

Litigation – Recorded liabilities for legal matters, as well as related charges recorded in each period, were not material to our financial position, results of operations or liquidity during the periods presented, and we do not believe that any of the currently identified claims or litigation will materially affect our financial position, results of operations or liquidity, upon resolution. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, it may cause a material adverse impact on our financial position, results of operations or liquidity in the period in which the ruling occurs or in future periods.


NOTE 14: SHAREHOLDERS' EQUITY

In October 2018, our board of directors authorized the repurchase of up to $500,000 of our common stock. This authorization has no expiration date. No shares were repurchased under this authorization during the six months ended June 30, ~~2022~~2023 or June 30, ~~2021,~~2022, and $287,452 remained available for repurchase as of June 30, 2022. During the quarter ended June 30, 2021, we issued 294 thousand shares to employees of First American in conjunction with the acquisition (Note 6), resulting in cash proceeds of $13,000 during the quarter.2023.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 15: BUSINESS SEGMENT INFORMATION

We operate 4 reportable business segments, generally organized by product type, as follows:

•Payments – This segment includes our merchant in-store, online and mobile payment solutions; treasury management solutions, including remittance and lockbox processing, remote deposit capture, receivables management, payment processing and paperless treasury management; payroll and disbursement services, including Deluxe Payment Exchange; and fraud and security services.

•~~Cloud~~Data Solutions – This segment includes data-driven marketing ~~solutions;~~solutions and hosted solutions, including digital engagement, ~~logo design,~~ financial institution profitability reporting and business incorporation ~~services; and~~services. Through June 2023, this segment also included web hosting and logo design services. We completed the sale of these businesses in June 2023. Further information regarding the divestiture can be found in Note 6.

•Promotional Solutions – This segment includes business forms, accessories, advertising specialties and promotional ~~apparel and retail packaging.~~apparel.

•Checks – This segment includes printed business and personal checks.

The accounting policies of the segments are the same as those described in the Notes to Consolidated Financial Statements included in the ~~2021~~2022 Form 10-K. We allocate corporate costs for our shared services functions to our business segments when the costs are directly attributable to a segment. This includes certain sales and marketing, human resources, supply chain, real estate, finance, information technology and legal costs. Costs that are not directly attributable to a business segment are reported as Corporate operations and consist primarily of marketing, accounting, information technology, facilities, executive management and legal, tax and treasury costs that support the corporate function. Corporate operations also includes other income. All of our segments operate primarily in the U.S., with some operations in Canada. ~~In addition, Cloud~~Until the businesses were sold, Data Solutions ~~has~~also had operations in portions of Europe ~~as well as~~and partners in Central and South America through June 2023 and had operations in Australia ~~until~~through May ~~2022 when this business was sold (Note 6).~~2022.

Our chief operating decision maker (i.e., our Chief Executive Officer) reviews earnings before interest, taxes, depreciation and amortization (EBITDA) on an adjusted basis for each segment when deciding how to allocate resources and to assess segment operating performance. Adjusted EBITDA for each segment excludes depreciation and amortization expense, interest expense, income tax expense and certain other amounts, which may include, from time to time: asset impairment charges; restructuring ~~integration~~ and ~~other~~integration costs; share-based compensation expense; acquisition transaction costs; certain legal-related


~~DELUXE CORPORATION~~ ~~CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(dollars in thousands, except per share amounts)~~

expense; and gains or losses on sales of businesses and long-lived assets. Our Chief Executive Officer does not review segment asset information when making investment or operating decisions regarding our reportable business segments.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Segment information for the quarters and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 was as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Payments:	Payments:									Payments:
Revenue	Revenue	$	171,154	$	103,339	$	337,362	$	182,777	Revenue	$	174,372	$	171,154	$	346,355	$	337,362
Adjusted EBITDA	Adjusted EBITDA	34,986		21,199		71,421		39,528		Adjusted EBITDA	36,318		34,986		72,873		71,421
Cloud Solutions:
Data Solutions:										Data Solutions:
Revenue	Revenue	68,587		68,067		138,084		130,287		Revenue	72,090		68,587		130,683		138,084
Adjusted EBITDA	Adjusted EBITDA	17,509		18,803		34,836		36,011		Adjusted EBITDA	17,741		17,509		33,058		34,836
Promotional Solutions:	Promotional Solutions:									Promotional Solutions:
Revenue	Revenue	139,276		134,987		272,519		259,494		Revenue	138,800		139,276		274,942		272,519
Adjusted EBITDA	Adjusted EBITDA	14,596		21,416		31,540		39,131		Adjusted EBITDA	21,239		14,596		40,049		31,540
Checks:	Checks:									Checks:
Revenue	Revenue	183,936		171,823		371,003		346,923		Revenue	186,424		183,936		365,071		371,003
Adjusted EBITDA	Adjusted EBITDA	82,564		80,191		165,360		163,725		Adjusted EBITDA	83,585		82,564		160,064		165,360
Total segment:	Total segment:									Total segment:
Revenue	Revenue	$	562,953	$	478,216	$	1,118,968	$	919,481	Revenue	$	571,686	$	562,953	$	1,117,051	$	1,118,968
Adjusted EBITDA	Adjusted EBITDA	149,655		141,609		303,157		278,395		Adjusted EBITDA	158,883		149,655		306,044		303,157

The following table presents a reconciliation of total segment adjusted EBITDA to consolidated income before income taxes:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Total segment adjusted EBITDA	Total segment adjusted EBITDA	$	149,655	$	141,609	$	303,157	$	278,395	Total segment adjusted EBITDA	$	158,883	$	149,655	$	306,044	$	303,157
Corporate operations	Corporate operations	(47,918)		(44,147)		(101,801)		(90,428)		Corporate operations	(50,511)		(47,918)		(97,236)		(101,801)
Depreciation and amortization expense	Depreciation and amortization expense	(45,047)		(33,244)		(86,644)		(61,024)		Depreciation and amortization expense	(42,607)		(45,047)		(86,128)		(86,644)
Interest expense	Interest expense	(21,349)		(9,530)		(41,672)		(14,054)		Interest expense	(31,932)		(21,349)		(61,948)		(41,672)
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	35		29		71		62		Net income attributable to non-controlling interest	26		35		54		71
Restructuring, integration and other costs		(15,208)		(11,979)		(31,511)		(27,191)
Restructuring and integration costs										Restructuring and integration costs	(27,477)		(15,208)		(41,571)		(31,511)
Share-based compensation expense	Share-based compensation expense	(4,896)		(7,625)		(13,038)		(14,367)		Share-based compensation expense	(5,484)		(4,896)		(11,350)		(13,038)
Acquisition transaction costs	Acquisition transaction costs	(12)		(15,843)		(61)		(18,608)		Acquisition transaction costs	—		(12)		—		(61)
Certain legal-related expense		(162)		(302)		(845)		(302)
Certain legal-related benefit (expense)										Certain legal-related benefit (expense)	183		(162)		(245)		(845)
Gain on sale of businesses and facility	Gain on sale of businesses and facility	17,527		—		17,527		—		Gain on sale of businesses and facility	21,942		17,527		21,942		17,527
Income before income taxes	Income before income taxes	$	32,625	$	18,968	$	45,183	$	52,483	Income before income taxes	$	23,023	$	32,625	$	29,562	$	45,183

2523


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

The following tables present revenue disaggregated by our product and service offerings:


		Quarter Ended June 30, 2022											Quarter Ended June 30, 2023
(in thousands)	(in thousands)	Payments		Cloud Solutions		Promotional Solutions		Checks		Consolidated		(in thousands)	Payments		Data Solutions		Promotional Solutions		Checks		Consolidated
Checks	Checks	$	—	$	—	$	—	$	183,936	$	183,936	Checks	$	—	$	—	$	—	$	186,424	$	186,424
Merchant services and other payment solutions	Merchant services and other payment solutions	111,619		—		—		—		111,619		Merchant services and other payment solutions	113,206		—		—		—		113,206
Marketing and promotional solutions												Marketing and promotional solutions	—		—		72,037		—		72,037
Forms and other products	Forms and other products	—		—		69,404		—		69,404		Forms and other products	—		—		66,763		—		66,763
Marketing and promotional solutions		—		—		69,872		—		69,872
Treasury management solutions	Treasury management solutions	59,535		—		—		—		59,535		Treasury management solutions	61,166		—		—		—		61,166
Data-driven marketing solutions	Data-driven marketing solutions	—		45,470		—		—		45,470		Data-driven marketing solutions	—		54,503		—		—		54,503
Web and hosted solutions	Web and hosted solutions	—		23,117		—		—		23,117		Web and hosted solutions	—		17,587		—		—		17,587
Total revenue	Total revenue	$	171,154	$	68,587	$	139,276	$	183,936	$	562,953	Total revenue	$	174,372	$	72,090	$	138,800	$	186,424	$	571,686


		Quarter Ended June 30, 2021											Quarter Ended June 30, 2022
(in thousands)	(in thousands)	Payments		Cloud Solutions		Promotional Solutions		Checks		Consolidated		(in thousands)	Payments		Data Solutions		Promotional Solutions		Checks		Consolidated
Checks	Checks	$	—	$	—	$	—	$	171,823	$	171,823	Checks	$	—	$	—	$	—	$	183,936	$	183,936
Merchant services and other payment solutions	Merchant services and other payment solutions	47,115		—		—		—		47,115		Merchant services and other payment solutions	111,619		—		—		—		111,619
Marketing and promotional solutions												Marketing and promotional solutions	—		—		69,872		—		69,872
Forms and other products	Forms and other products	—		—		78,194		—		78,194		Forms and other products	—		—		69,404		—		69,404
Marketing and promotional solutions		—		—		56,793		—		56,793
Treasury management solutions	Treasury management solutions	56,224		—		—		—		56,224		Treasury management solutions	59,535		—		—		—		59,535
Data-driven marketing solutions	Data-driven marketing solutions	—		39,518		—		—		39,518		Data-driven marketing solutions	—		45,470		—		—		45,470
Web and hosted solutions	Web and hosted solutions	—		28,549		—		—		28,549		Web and hosted solutions	—		23,117		—		—		23,117
Total revenue	Total revenue	$	103,339	$	68,067	$	134,987	$	171,823	$	478,216	Total revenue	$	171,154	$	68,587	$	139,276	$	183,936	$	562,953


		Six Months Ended June 30, 2022											Six Months Ended June 30, 2023
(in thousands)	(in thousands)	Payments		Cloud Solutions		Promotional Solutions		Checks		Consolidated		(in thousands)	Payments		Data Solutions		Promotional Solutions		Checks		Consolidated
Checks	Checks	$	—	$	—	$	—	$	371,003	$	371,003	Checks	$	—	$	—	$	—	$	365,071	$	365,071
Merchant services and other payment solutions	Merchant services and other payment solutions	219,889		—		—		—		219,889		Merchant services and other payment solutions	224,715		—		—		—		224,715
Marketing and promotional solutions												Marketing and promotional solutions	—		—		142,689		—		142,689
Forms and other products	Forms and other products	—		—		139,720		—		139,720		Forms and other products	—		—		132,253		—		132,253
Marketing and promotional solutions		—		—		132,799		—		132,799
Treasury management solutions	Treasury management solutions	117,473		—		—		—		117,473		Treasury management solutions	121,640		—		—		—		121,640
Data-driven marketing solutions	Data-driven marketing solutions	—		87,313		—		—		87,313		Data-driven marketing solutions	—		93,785		—		—		93,785
Web and hosted solutions	Web and hosted solutions	—		50,771		—		—		50,771		Web and hosted solutions	—		36,898		—		—		36,898
Total revenue	Total revenue	$	337,362	$	138,084	$	272,519	$	371,003	$	1,118,968	Total revenue	$	346,355	$	130,683	$	274,942	$	365,071	$	1,117,051

2624


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


		Six Months Ended June 30, 2021											Six Months Ended June 30, 2022
(in thousands)	(in thousands)	Payments		Cloud Solutions		Promotional Solutions		Checks		Consolidated		(in thousands)	Payments		Data Solutions		Promotional Solutions		Checks		Consolidated
Checks	Checks	$	—	$	—	$	—	$	346,923	$	346,923	Checks	$	—	$	—	$	—	$	371,003	$	371,003
Merchant services and other payment solutions	Merchant services and other payment solutions	67,417		—		—		—		67,417		Merchant services and other payment solutions	219,889		—		—		—		219,889
Marketing and promotional solutions												Marketing and promotional solutions	—		—		132,799		—		132,799
Forms and other products	Forms and other products	—		—		149,975		—		149,975		Forms and other products	—		—		139,720		—		139,720
Marketing and promotional solutions		—		—		109,519		—		109,519
Treasury management solutions	Treasury management solutions	115,360		—		—		—		115,360		Treasury management solutions	117,473		—		—		—		117,473
Data-driven marketing solutions	Data-driven marketing solutions	—		73,164		—		—		73,164		Data-driven marketing solutions	—		87,313		—		—		87,313
Web and hosted solutions	Web and hosted solutions	—		57,123		—		—		57,123		Web and hosted solutions	—		50,771		—		—		50,771
Total revenue	Total revenue	$	182,777	$	130,287	$	259,494	$	346,923	$	919,481	Total revenue	$	337,362	$	138,084	$	272,519	$	371,003	$	1,118,968

The following tables present revenue disaggregated by geography, based on where items are shipped from or where services are performed:


	Quarter Ended June 30, 2023
(in thousands)	Payments		Data Solutions		Promotional Solutions		Checks		Consolidated
United States	$	162,422	$	69,211	$	132,175	$	179,692	$	543,500
Foreign, primarily Canada	11,950		2,879		6,625		6,732		28,186
Total revenue	$	174,372	$	72,090	$	138,800	$	186,424	$	571,686


	Quarter Ended June 30, 2022
(in thousands)	Payments		Data Solutions		Promotional Solutions		Checks		Consolidated
United States	$	159,939	$	63,758	$	132,886	$	176,692	$	533,275
Foreign, primarily Canada and Australia	11,215		4,829		6,390		7,244		29,678
Total revenue	$	171,154	$	68,587	$	139,276	$	183,936	$	562,953


	Six Months Ended June 30, 2023
(in thousands)	Payments		Data Solutions		Promotional Solutions		Checks		Consolidated
United States	$	321,886	$	124,956	$	262,671	$	351,539	$	1,061,052
Foreign, primarily Canada	24,469		5,727		12,271		13,532		55,999
Total revenue	$	346,355	$	130,683	$	274,942	$	365,071	$	1,117,051


	Six Months Ended June 30, 2022
(in thousands)	Payments		Data Solutions		Promotional Solutions		Checks		Consolidated
United States	$	316,207	$	124,382	$	260,128	$	355,780	$	1,056,497
Foreign, primarily Canada and Australia	21,155		13,702		12,391		15,223		62,471
Total revenue	$	337,362	$	138,084	$	272,519	$	371,003	$	1,118,968

Quarter Ended June 30, 2022
(in thousands) Payments Cloud Solutions Promotional Solutions Checks Consolidated
United States $ 159,939 $ 63,758 $ 132,886 $ 176,692 $ 533,275
Foreign, primarily Canada and Australia 11,215 4,829 6,390 7,244 29,678
Total revenue $ 171,154 $ 68,587 $ 139,276 $ 183,936 $ 562,953

Quarter Ended June 30, 2021
(in thousands) Payments Cloud Solutions Promotional Solutions Checks Consolidated
United States $ 93,796 $ 59,265 $ 129,321 $ 165,799 $ 448,181
Foreign, primarily Canada and Australia 9,543 8,802 5,666 6,024 30,035
Total revenue $ 103,339 $ 68,067 $ 134,987 $ 171,823 $ 478,216

Six Months Ended June 30, 2022
(in thousands) Payments Cloud Solutions Promotional Solutions Checks Consolidated
United States $ 316,207 $ 124,382 $ 260,128 $ 355,780 $ 1,056,497
Foreign, primarily Canada and Australia 21,155 13,702 12,391 15,223 62,471
Total revenue $ 337,362 $ 138,084 $ 272,519 $ 371,003 $ 1,118,968

Six Months Ended June 30, 2021
(in thousands) Payments Cloud Solutions Promotional Solutions Checks Consolidated
United States $ 162,280 $ 112,777 $ 248,469 $ 334,813 $ 858,339
Foreign, primarily Canada and Australia 20,497 17,510 11,025 12,110 61,142
Total revenue $ 182,777 $ 130,287 $ 259,494 $ 346,923 $ 919,481

2725


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) includes the following sections:

•Executive Overview that discusses what we do, our operating results at a high level and our financial outlook for the upcoming year;

•Consolidated Results of Operations; Restructuring ~~Integration~~ and ~~Other~~Integration Costs; and Segment Results that includes a more detailed discussion of our revenue and expenses;

•Cash Flows and Liquidity, Capital Resources and Other Financial Position Information that discusses key aspects of our cash flows, financial commitments, capital structure and financial position; and

•Critical Accounting Estimates that discusses the estimates that involve a significant level of uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Please note that this MD&A discussion contains forward-looking statements that involve risks and ~~uncertainties.~~uncertainties, including, but not limited to, our 2023 outlook, market impacts and expectations regarding our strategy and performance. Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~"2021~~"2022 Form 10-K") outlines known material risks and important information to consider when evaluating our forward-looking statements and is incorporated into this Item 2 of this report on Form 10-Q as if fully stated herein. The Private Securities Litigation Reform Act of 1995 (the "Reform Act") provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information. When we use the words or phrases “should result,” “believe,” “intend,” “plan,” “are expected to,” “targeted,” “will continue,” “will approximate,” “is anticipated,” “estimate,” “project,” “outlook,” "forecast" or similar expressions in this Quarterly Report on Form 10-Q, in future filings with the Securities and Exchange Commission, in our press releases, investor presentations and in oral statements made by our representatives, they indicate forward-looking statements within the meaning of the Reform Act.

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). In addition, we discuss free cash flow, net debt, liquidity, adjusted diluted earnings per share ("EPS"), consolidated adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") and consolidated adjusted EBITDA margin, all of which are non-GAAP financial measures. We believe that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide useful information to assist investors in analyzing our current period operating performance and in assessing our future operating performance. For this reason, our internal management reporting also includes these financial measures, which should be considered in addition to, and not as superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and therefore, may not result in useful comparisons. The reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Consolidated Results of Operations.


EXECUTIVE OVERVIEW

We help businesses deepen customer relationships through trusted, technology-enabled solutions that help businesses pay and get paid, accelerate growth and operate more efficiently. Our solutions include merchant services, marketing services and data analytics, treasury management solutions, ~~website development and hosting,~~ promotional products, and fraud and payroll solutions, as well as customized checks and business forms. We support millions of small businesses, thousands of financial institutions and hundreds of the world’s largest consumer brands, while processing approximately ~~$3.0~~$3 trillion in annual payment volume. Our reach, scale and distribution channels position us to be a trusted business partner for our customers.

~~Acquisition~~Recent market conditions – ~~On June 1, 2021, we acquired all~~Our interest expense has increased as a result of the ~~equity~~rising interest rate environment. As of ~~First American Payment Systems, L.P. (First American) in~~June 30, 2023, we held interest rate swaps that effectively convert $798.7 million of our variable-rate debt to a ~~cash transaction for $958.5 million, net~~fixed rate. As a result, 76% of cash, cash equivalents, restricted cash and restricted cash equivalents acquired, subject to customary adjustments under the terms of the acquisition agreement. First American is a large-scale payments technology company that provides partners and merchants with comprehensive in-store, online and mobile payment solutions. The results of First American are included in our Payments segment and contributed incremental revenue of $144.2 million and incremental adjusted EBITDA of $30.2 million for the first half of 2022. The acquisition was funded with cash on hand and proceeds from new debt. Further information regarding the acquisition can be found under the caption "Note 6: Acquisitions" in the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K and under the caption "Note 6: Acquisition and Divestitures" in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report. Information regarding our debt ~~can be found under the caption "Note 12: Debt" in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1~~was fixed rate as of ~~this report.~~June 30, 2023, which partially insulates us from future interest rate increases.

~~Impacts of COVID-19, inflation and supply disruptions~~ ~~– The impact of the global coronavirus ("COVID-19") pandemic on our business and historical results of operations can be found in the~~ ~~Executive Overview~~ ~~section appearing in Part II, Item 7 of the 2021 Form 10-K. The impacts of the pandemic~~We continue to ~~contribute to~~monitor inflationary pressures on our labor, delivery and material costs. ~~Late in~~In response to the ~~fourth quarter of 2021,~~inflationary environment, we ~~began implementing~~implemented targeted price increases in all of our ~~segments in response to the current inflationary environment.~~segments. Despite the price changes, we continue to experience ~~strong~~healthy revenue volumes, demonstrating the strength of our business and ~~the~~ continued ~~strong~~ demand for our products. During 2022, we ~~also~~ experienced some supply disruptions impacting certain higher margin printed products in our Promotional Solutions segment. We continue to closely monitor our supply chain to promptly address any further delays or ~~disruptions, though we expect some improvement~~disruptions. We have also experienced labor supply issues in ~~the second half~~certain portions of ~~2022.~~

our business. It remains difficult to estimate the severity and duration of the ~~various impacts of the COVID-19 pandemic, as well as the~~ current inflationary environment ~~and~~or supply chain and labor issues on our business, financial position or results of operations. ~~The magnitude~~

We continue to see no material impact from the disruptions to some regional financial institutions earlier in the year. We do not bank with any of the ~~impact will be determined by the duration~~directly affected financials institutions, and ~~span~~they collectively represent an immaterial portion of ~~the pandemic, subsequent COVID-19 variants~~our

revenue. Additionally, we have very little customer concentration risk and ~~their severity, and operational disruptions, including those resulting from government actions, as~~we believe our diversified customer base positions us well ~~as global supply chain conditions and the overall impact on the economy.~~going forward.

Cash flows and liquidity – Cash provided by operating activities ~~remained stable~~decreased $24.9 million for the first half of ~~2022, decreasing $11.6 million~~2023, as compared to the first half of ~~2021 despite~~2022, driven by a ~~$28.8~~$22.3 million increase in interest payments as a result of ~~debt issued to complete the First American acquisition and~~rising interest rates, as well as a ~~$22.8~~$9.4 million increase in employee ~~cash~~ bonus payments related to our ~~2021~~2022 operating performance. During 2021, a portion of our cash bonuses were paid in the form of restricted stock units and the bonus payments in 2021 were unusually low because of the impact of the COVID-19 pandemic on our 2020 performance. Operating cash flow was also negatively impacted by ~~inflationary pressures, supply chain constraints~~a $6.3 million increase in ~~our Promotional Solutions segment, and the continuing secular decline~~income tax payments. These decreases in ~~checks, business forms and some business accessories. We~~operating cash flow were ~~able to substantially~~partially offset ~~these impacts through the contribution of First American's operations, price increases~~by positive changes in ~~response to the current inflationary environment, acquisition transaction costs in 2021 related to the First American acquisition that did not recur in 2022, and continued cost saving actions.~~working capital. Free cash flow decreased ~~$10.3~~$35.5 million for the first half of ~~2022,~~2023, as compared to the first half of ~~2021, although we expect free cash flow to increase for the full year, as compared to 2021.~~2022. Total debt was ~~$1.68~~$1.67 billion and net debt was $1.63 billion as of June 30, ~~2022.~~2023. We held cash and cash equivalents of ~~$43.3~~$39.1 million as of June 30, ~~2022,~~2023, and liquidity was ~~$358.9~~$283.7 million. Our capital allocation priorities are to reduce our debt and net leverage, deliver high return internal investments and pay our dividend. We continue to responsibly invest inthe free cash flow generated by our print businesses into Payments and Data Solutions, businesses that we believe can generate more robust growth ~~pay our dividend, reduce~~over time. A reconciliation of free cash flow, net debt and ~~return value~~liquidity to ~~our shareholders.~~the comparable GAAP financial measures can be found in Consolidated Results of Operations.

~~2022~~2023 earnings vs. ~~2021~~2022 – ~~Numerous~~Multiple factors drove the decrease in net income for the first half of ~~2022,~~2023, as compared to the first half of ~~2021,~~2022, including:

•a ~~$27.6~~$20.3 million increase in interest expense resulting from ~~debt issued to complete the First American acquisition;~~

•~~a $16.4 million increase in acquisition amortization, driven primarily by the First American acquisition;~~increasing interest rates on our variable-rate debt;

•increased transformational investments, primarily costs related to our technology ~~infrastructure;~~infrastructure and increased restructuring and integration costs as we continue to take actions to maximize our cost structure;

•inflationary pressures on hourly wages, materials and delivery;

•~~product mix within the Promotional Solutions segment, as supply chain disruptions impacted certain of our higher margin printed products during the first half of 2022; and~~

•the continuing secular decline in checks, business forms and some Promotional Solutions business ~~accessories.~~accessories; and

•higher effective income tax expense in 2023.

Partially offsetting these decreases in net income were the following factors:

•~~acquisition transaction costs of $18.6 million in the first half of 2021 related to the First American acquisition;~~

•~~pretax gains of $17.5 million on the sale of businesses and a facility during the second quarter of 2022;~~

•price increases in response to the current inflationary environment;

•the benefit of actions taken to reduce costs, ~~as we continually evaluate our cost structure,~~ including workforce adjustments and real estate ~~rationalization and marketing optimization;~~rationalization;

•a $4.7 million decrease in acquisition amortization, as certain of our assets are amortized using accelerated methods; and

•~~revenue growth from new business~~a $4.4 million increase in ~~all~~gains recognized on the sale of ~~our segments~~businesses and ~~strong ongoing demand for our products, reflecting the continued success of our One Deluxe strategy.~~facility.

Diluted EPS of $0.44 for the first half of 2023, as compared to $0.72 for the first half of 2022, ~~as compared to $0.85 for the first half of 2021,~~ reflects the decrease in net income as described in the preceding paragraphs, as well as higher average shares outstanding in ~~2022.~~2023. Adjusted diluted

EPS for the first half of ~~2022~~2023 was ~~$2.05~~$1.73 compared to ~~$2.51~~$2.05 for the first half of ~~2021,~~2022, and excludes the impact of non-cash items or items that we believe are not indicative of our current period operating performance. The decrease in adjusted diluted EPS was driven ~~primarily~~ by the increase in interest expense resulting from the effect of increasing interest rates on our variable-rate debt, ~~issued to complete the First American acquisition,~~ increased transformational investments, inflationary pressures on our cost structure ~~Promotional Solutions supply chain disruptions~~ and the continuing secular decline in checks, business forms and some business accessories. These decreases in adjusted diluted EPS were partially offset by the contribution from First American, as adjusted EPS excludes the associated acquisition amortization of $24.6 million for the first half of 2022 compared to $4.0 million for the first half of 2021. In addition, adjusted EPS benefited from price increases in response to the current inflationary environment and the benefit from various cost saving actions across functional ~~areas, and revenue growth driven by new business in all of our segments and strong ongoing demand for our products.~~areas. A reconciliation of diluted EPS to adjusted diluted EPS can be found in Consolidated Results of Operations.

"One Deluxe" Strategy

A detailed discussion of our strategy can be found in Part I, Item 1 of the ~~2021~~2022 Form 10-K. During the first quarter of 2023, we completed our 3-year corporate infrastructure modernization program with the implementation of the final phase of our enterprise resource planning (ERP) system. This effort required significant investment and management attention over the past 3 years. We ~~have~~expect that the new platform will now drive additional cost improvements and scale. We also made significant progress in ~~the integration of~~ our ~~various technology platforms, developed an enterprise-class sales organization, assembled a talented management team,~~ongoing lockbox improvement efforts within our Payments segment, continuing to consolidate sites and ~~built an organization focused on developing new and improved products. As a result,~~shift work to optimize our operations. Having substantially completed our infrastructure modernization initiatives, we have ~~realized the benefit of significant new client wins~~shifted our focus to growth investments, primarily in ~~all of our segments. We also completed the acquisition of First American in June 2021,~~Payments and Data Solutions, so that we ~~believe that First American's end-to-end payments technology platform is providing significant leverage that will~~can continue to ~~accelerate organic revenue growth. Since~~drive scale, with the ~~acquisition~~goal of growing profits faster than revenue. For the first half of 2023, both operating margin and adjusted EBITDA margin increased as compared to the ~~implementation of~~prior year, as our ~~One Deluxe model, First American revenue growth has been exceeding~~operations continued to benefit from our ~~expectations.~~disciplined pricing actions and overall cost management.

Divestitures – In June 2023, we completed the sale of our North American web hosting and logo design businesses. These businesses generated annual revenue of approximately $66 million during 2022, primarily in our Data Solutions segment. Further information regarding this divestiture can be found under the caption "Note 6: Divestitures" in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part 1, Item 1 of this report.

In May 2022, we completed the sale of our Australian web hosting business, ~~for cash proceeds of $17.6 million, net of costs of the sale. This business generated annual revenue in our Cloud Solutions segment of $23.8 million during 2021,~~ and we ~~recognized a pretax gain of $15.2 million on this sale during the second quarter of 2022. The assets and liabilities~~also sold ~~were not significant to our consolidated balance sheet.~~

~~In April 2022, we sold substantially all of the assets of~~ our Promotional Solutions strategic sourcing ~~business~~ and ~~in August 2022, we sold substantially all of our Promotional Solutions~~ retail packaging ~~business.~~businesses during 2022. These businesses generated annual revenue of approximately ~~$30.0~~$24 million in our Data Solutions segment and approximately $29 million in our Promotional Solutions segment during 2021. The impact of the sale of the strategic sourcing business was not significant to our consolidated financial statements for the second quarter of 2022, and we do not expect that the impact of the retail packaging sales transaction will be significant to our consolidated financial statements.

We believe that the sale of these businesses ~~will allow~~allows us to focus our resources on the key growth areas of payments and data, while allowing us to optimize our operations.

Outlook for ~~2022~~2023

We expect that revenue ~~to increase 8% to 10%~~ for ~~2022, including a full year of revenue from First American~~2023 will be between $2.18 billion and ~~the impact of business exits,~~$2.22 billion, as compared to 2022 revenue of ~~$2.022 billion for 2021. Business exits are expected~~$2.24 billion. The 2022 amount included revenue of approximately $52 million that will not recur in 2023 due to ~~reduce full year 2022 revenue growth by approximately 2.0 percentage points.~~our divestitures. We expect that adjusted EBITDA ~~margin~~ for the full year will be ~~approximately 18.5% to 19.0%,~~between $400 million and $415 million, as compared to ~~20.2%~~$418 million for ~~2021, with the fourth quarter~~2022. The 2022 amount included adjusted EBITDA of ~~2022 being higher than the third quarter~~approximately $14 million that will not recur in 2023 due to our normal seasonality pattern. Our adjusted EBITDA margin outlook reflects inflation and supply chain disruptions within the higher margin print products in our Promotional Solutions segment, partially offset by price increases.divestitures. These estimates are subject to, among other things, prevailing macroeconomic conditions, ~~anticipated continued supply chain constraints,~~ labor supply issues, inflation and the impact of ~~recent~~ divestitures.

As of June 30, ~~2022,~~2023, we held cash and cash equivalents of ~~$43.3~~$39.1 million and ~~$315.7~~$244.6 million was available for borrowing under our revolving credit facility. We anticipate that capital expenditures will be approximately ~~$105.0~~$100 million for the full year, as compared to ~~$109.1~~$104.6 million for ~~2021,~~2022, as we continue with important innovation investments and building scale across our product categories. We also expect that we will continue to pay our regular quarterly dividend. However, dividends are approved by our board of directors each quarter and thus, are subject to change. We anticipate that net cash generated by operations, along with cash and cash equivalents on hand and availability under our credit facility, will be sufficient to support our operations, including our contractual obligations and debt service requirements, for the next 12 ~~months.~~months, as well as our long-term capital requirements. We were in compliance with our debt covenants as of June 30, ~~2022,~~2023, and we anticipate that we will remain in compliance with our debt covenants throughout the next 12 months.


CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Revenue


		Quarter Ended June 30,					Six Months Ended June 30,						Quarter Ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		Change	2022		2021		Change	(in thousands)	2023		2022		Change	2023		2022		Change
Total revenue	Total revenue	$	562,953	$	478,216	17.7%	$	1,118,968	$	919,481	21.7%	Total revenue	$	571,686	$	562,953	1.6%	$	1,117,051	$	1,118,968	(0.2%)

The ~~increases~~increase in total revenue for the second quarter ~~and first half~~ of ~~2022,~~2023, as compared to ~~the same periods in 2021, were driven, in part, by the acquisition and strong performance of First American, which contributed incremental revenue of $61.0 million for~~ the second quarter of 2022, ~~and $144.2 million for the first half of 2022. In addition, revenue grew from new business~~was driven, in ~~all of our segments and strong ongoing demand for our products, reflecting the success of our One Deluxe strategy. Price~~part, by price increases in response to the current inflationary environment, ~~also contributed to the revenue increase,~~ primarily in our Promotional Solutions and Checks ~~segments.~~segments, as well as growth from new business, primarily a $9 million increase in data-driven marketing, as we saw increased demand for our marketing services in support of banks attracting low-cost deposits. Additionally, revenue for the second quarter of 2023 benefited from some timing impacts related to the implementation of our ERP system in the first quarter of 2023. Partially offsetting these revenue increases were the divestitures discussed in Executive Overview, which resulted in a decrease in revenue ~~was~~of approximately $6 million for the second quarter of 2023, and the continuing secular decline in order volume for checks, business forms and some Promotional Solutions business ~~accessories,~~accessories.

The slight decrease in total revenue for the first half of 2023, as ~~well as~~compared to the first half of 2022, was driven by the divestitures discussed in Executive Overview, which resulted in a decrease in revenue of ~~$7.4~~approximately $19 million ~~for the second quarter and first half of 2022.~~

~~Service revenue represented 42.9% of total revenue~~ for the first half of ~~2022~~2023, as well as the continuing secular decline in order volume for checks, business forms and ~~34.2% for~~some Promotional Solutions business accessories. These decreases in revenue were almost entirely offset by price increases in response to the ~~first half of 2021.~~ current inflationary environment, primarily in our Promotional Solutions and Checks segments, as well as growth from new business and favorable volumes, primarily in Promotional Solutions and Payments.

We do not manage our business based on product versus service revenue. Instead, we analyze our revenue based on the product and service offerings shown under the caption "Note 15: Business Segment Information" in the Condensed Notes to

Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report. Our revenue mix by business segment was as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Payments	Payments	30.4	%	21.6	%	30.1	%	19.9	%	Payments	30.5	%	30.4	%	31.0	%	30.1	%
Cloud Solutions		12.2	%	14.3	%	12.3	%	14.2	%
Data Solutions										Data Solutions	12.6	%	12.2	%	11.7	%	12.3	%
Promotional Solutions	Promotional Solutions	24.7	%	28.2	%	24.4	%	28.2	%	Promotional Solutions	24.3	%	24.7	%	24.6	%	24.4	%
Checks	Checks	32.7	%	35.9	%	33.2	%	37.7	%	Checks	32.6	%	32.7	%	32.7	%	33.2	%
Total revenue	Total revenue	100.0	%	100.0	%	100.0	%	100.0	%	Total revenue	100.0	%	100.0	%	100.0	%	100.0	%

Consolidated Cost of Revenue


		Quarter Ended June 30,							Six Months Ended June 30,								Quarter Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			Change	2022			2021			Change	(in thousands)	2023			2022			Change	2023			2022			Change
Total cost of revenue	Total cost of revenue	$	264,112		$	206,575		27.9%	$	513,306		$	385,085		33.3%	Total cost of revenue	$	269,947		$	264,112		2.2%	$	520,609		$	513,306		1.4%
Total cost of revenue as a percentage of total revenue	Total cost of revenue as a percentage of total revenue	46.9		%	43.2		%	3.7 pts.	45.9		%	41.9		%	4.0 pts.	Total cost of revenue as a percentage of total revenue	47.2		%	46.9		%	0.3 pts.	46.6		%	45.9		%	0.7 pts.

Cost of revenue consists primarily of raw materials used to manufacture our products, shipping and handling costs, third-party costs for outsourced products and services, payroll and related expenses, information technology costs, depreciation and amortization of assets used in the production process and in support of digital service offerings, and related overhead.

The increases in total cost of revenue for the second quarter and first half of ~~2022,~~2023, as compared to the same periods in ~~2021,~~2022, were driven ~~in part,~~ by the incremental costs resulting from the First American acquisition of $38.0 million for the second quarter of 2022 and $88.7 million for the first half of 2022, including acquisition amortization. In addition, revenue grew in all of our segments, and we experienced some inflationary pressures on hourly wages, materials and ~~delivery.~~delivery, as well as the revenue growth from new business noted above, continued investments in the business and some cost pressures in our Payments lockbox business as we continued to consolidate these operations. Partially offsetting these increases in total cost of revenue was reduced revenue volume from the continuing secular decline in checks, business forms and some Promotional Solutions business ~~accessories, and Promotional Solutions was impacted by supply chain disruptions for certain higher margin print products.~~accessories. Total cost of revenue as a percentage of total revenue ~~increased~~ for the second quarter and first half of ~~2022,~~2023 increased as compared to the same periods in ~~2021, driven by~~2022, as the ~~impact of~~inflationary impacts and investments in the First American acquisition, including acquisition amortization, the impact of the Promotional Solutions supply chain disruptions for certain higher margin printed products, and inflationary pressures on our cost structure,business were partially offset by ~~price increases in response to the current inflationary environment.~~our pricing actions.

Consolidated Selling, General & Administrative (SG&A) Expense


		Quarter Ended June 30,							Six Months Ended June 30,								Quarter Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			Change	2022			2021			Change	(in thousands)	2023			2022			Change	2023			2022			Change
SG&A expense	SG&A expense	$	249,626		$	233,908		6.7%	$	509,325		$	446,344		14.1%	SG&A expense	$	245,359		$	249,626		(1.7%)	$	492,989		$	509,325		(3.2%)
SG&A expense as a percentage of total revenue	SG&A expense as a percentage of total revenue	44.3		%	48.9		%	(4.6) pts.	45.5		%	48.5		%	(3.0) pts.	SG&A expense as a percentage of total revenue	42.9		%	44.3		%	(1.4) pts.	44.1		%	45.5		%	(1.4) pts.

The ~~increases~~decreases in SG&A expense for the second quarter and first half of ~~2022,~~2023, as compared to the same periods in ~~2021,~~2022, were driven, in part, by various cost reduction actions, including workforce adjustments and real estate rationalization, as well as a decrease related to the ~~incremental operating costs~~ divestitures discussed under Executive Overview of ~~First American of $13.0~~approximately $2 million for the second quarter of ~~2022~~2023 and ~~$30.6~~$5 million for the first half of ~~2022. The First American acquisition also drove an increase in~~2023. Additionally, acquisition amortization ~~of $5.3~~decreased $2 million for the second quarter of ~~2022~~2023 and ~~$15.6~~$5 million for the first half of ~~2022,~~2023, as ~~compared to the same periods~~certain of our intangible assets are amortized using accelerated methods. These decreases in ~~2021. Additionally,~~SG&A expense were partially offset by increased costs related to our continued transformational investments, ~~increased,~~ primarily ~~driven by investments in~~related to our technology infrastructure, including sales and financial management tools, and commission expense increased, primarily as a result of new clients in our Checks segment. Partially offsetting these increases in SG&A expense were acquisition transaction costs of $15.8 million for the second quarter of 2021 and $18.6 million for the first half of 2021 that did not recur in 2022. Also reducing SG&A expense were various cost reduction actions, including workforce adjustments, real estate rationalization and marketing optimization.infrastructure.

Restructuring and Integration Expense


		Quarter Ended June 30,						Six Months Ended June 30,							Quarter Ended June 30,						Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		Change		2022		2021		Change		(in thousands)	2023		2022		Change		2023		2022		Change
Restructuring and integration expense	Restructuring and integration expense	$	15,182	$	11,364	$	3,818	$	31,426	$	25,677	$	5,749	Restructuring and integration expense	$	24,191	$	15,182	$	9,009	$	37,132	$	31,426	$	5,706

We continue to pursue several initiatives designed to focus our business behind our growth strategy, to increase our efficiency and to integrate acquired businesses. The amount of restructuring and integration expense is expected to vary from

period to period as we execute these initiatives. Further information regarding these costs can be found in Restructuring ~~Integration~~ and ~~Other~~Integration Costs in this MD&A discussion.

~~Gain on Sale of Businesses and Facility~~

Quarter Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 Change 2022 2021 Change
Gain on sale of businesses and facility $ 17,527 $ — $ 17,527 $ 17,527 $ — $ 17,527

~~As discussed in~~ ~~Executive Overview~~, in May 2022, we completed the sale of our Australian web hosting business for cash proceeds of $17.6 million, net of costs of the sale. During the quarter ended June 30, 2022, we recognized a pretax gain of $15.2 million on this sale. Also during the second quarter of 2022, we sold a former facility for net cash proceeds of $6.9 million, realizing a pretax gain of $2.3 million.

Interest Expense


		Quarter Ended June 30,							Six Months Ended June 30,								Quarter Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			Change	2022			2021			Change	(in thousands)	2023			2022			Change	2023			2022			Change
Interest expense	Interest expense	$	21,349		$	9,530		124.0%	$	41,672		$	14,054		196.5%	Interest expense	$	31,932		$	21,349		49.6%	$	61,948		$	41,672		48.7%
Weighted-average debt outstanding	Weighted-average debt outstanding	1,682,573			1,174,615			43.2%	1,689,469			1,008,315			67.6%	Weighted-average debt outstanding	1,706,152			1,682,573			1.4%	1,704,186			1,689,469			0.9%
Weighted-average interest rate	Weighted-average interest rate	4.7		%	3.1		%	1.6 pts.	4.5		%	2.6		%	1.9 pts.	Weighted-average interest rate	7.2		%	4.7		%	2.5 pts.	6.9		%	4.5		%	2.4 pts.

The increases in interest expense for the second quarter and first half of ~~2022,~~2023, as compared to the same periods in ~~2021,~~2022, were ~~driven~~ primarily bydue to the increase in our weighted-average interest rate ~~for 2022, due in part to the $500.0 million notes issued in June 2021 with an interest rate of 8.0%. The increase in the amount of debt outstanding,~~ driven by the ~~issuance of debt to fund the First American acquisition in June 2021, also negatively impacted~~rising interest expense. Further information regarding our debt can be found under the caption "Note 12: Debt" in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report.rate environment. Based on the daily average amount of variable-rate debt outstanding during the first half

of ~~2022,~~2023, a one percentage point change in the weighted-average interest rate would have resulted in a ~~$4.9~~$3.5 million change in interest expense.

Gain on Sale of Businesses and Facility


	Quarter Ended June 30,						Six Months Ended June 30,
(in thousands)	2023		2022		Change		2023		2022		Change
Gain on sale of businesses and facility	$	21,942	$	17,527	$	4,415	$	21,942	$	17,527	$	4,415

As discussed in Executive Overview, in June 2023, we completed the sale of our North American web hosting and logo design businesses, and in May 2022, we completed the sale of our Australian web hosting business. We also sold a former facility during the second quarter of 2022. Further information regarding these sales can be found under the caption "Note 6: Divestitures" in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part 1, Item 1 of this report.

Income Tax Provision


		Quarter Ended June 30,							Six Months Ended June 30,								Quarter Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			Change	2022			2021			Change	(in thousands)	2023			2022			Change	2023			2022			Change
Income tax provision	Income tax provision	$	10,528		$	6,839		53.9%	$	13,407		$	16,030		(16.4%)	Income tax provision	$	6,622		$	10,528		(37.1%)	$	10,381		$	13,407		(22.6%)
Effective income tax rate	Effective income tax rate	32.3		%	36.1		%	(3.8) pts.	29.7		%	30.5		%	(0.8) pts.	Effective income tax rate	28.8		%	32.3		%	(3.5) pts.	35.1		%	29.7		%	5.4 pts.

The decrease in our effective income tax rate for the second quarter of ~~2022,~~2023, as compared to the second quarter of ~~2021,~~2022, was driven primarily by nondeductible acquisition transaction costs in 2021, which increased our 2021 effective tax rate by 10.3 points. This decrease in our effective income tax rate was partially offset by an increase in the tax impact of share-based compensation and the impact of ~~the repatriation of current year earnings from our Canadian subsidiaries~~business exit activity in ~~2022.~~each period.

The ~~decrease~~increase in our effective income tax rate for the first half of ~~2022,~~2023, as compared to the first half of ~~2021,~~2022, was driven primarily by an increase of 4.3 points related to the repatriation of foreign earnings and the change in our foreign effective tax rate, as well as a 2.8 point increase related to the tax impact of ~~the sale of~~share-based compensation. Partially offsetting these increases in our ~~Australian web hosting business. For~~effective tax ~~purposes, we recognized~~rate was a ~~capital loss on the transaction, and we recorded a valuation allowance for the portion of the capital loss carryover we do not currently expect to realize. These impacts reduced~~1.9 point decrease in our state effective tax rate. Information regarding other factors that impacted our effective income tax ~~expense $1.6 million~~rate for the first half of 2022, reducing our effective income tax rate by 3.4 points. In addition, nondeductible acquisition transaction costs in 2021 increased our 2021 tax rate by 3.7 points. These decreases in our effective income tax rate were partially offset by a 4.1 point increase2023 can be found under the caption "Note 10: Income Tax Provision" in the ~~tax impact~~Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part 1, Item 1 of ~~share-based compensation and a 1.4 point increase from the repatriation of current year earnings from our Canadian subsidiaries.~~this report.

Net Income / Diluted Earnings Per Share


		Quarter Ended June 30,					Six Months Ended June 30,						Quarter Ended June 30,					Six Months Ended June 30,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2022		2021		Change	2022		2021		Change	(in thousands, except per share amounts)	2023		2022		Change	2023		2022		Change
Net income	Net income	$	22,097	$	12,129	82.2%	$	31,776	$	36,453	(12.8%)	Net income	$	16,401	$	22,097	(25.8%)	$	19,181	$	31,776	(39.6%)
Diluted earnings per share	Diluted earnings per share	0.50		0.28		78.6%	0.72		0.85		(15.3%)	Diluted earnings per share	0.37		0.50		(26.0%)	0.44		0.72		(38.9%)
Adjusted diluted EPS(1)	Adjusted diluted EPS(1)	0.99		1.25		(20.8%)	2.05		2.51		(18.3%)	Adjusted diluted EPS(1)	0.93		0.99		(6.1%)	1.73		2.05		(15.6%)

(1) Information regarding the calculation of adjusted diluted EPS can be found in the following section entitled Reconciliation of Non-GAAP Financial Measures.

Numerous factors drove the increases in net income and diluted EPS for the second quarter of 2022, as compared to the second quarter of 2021, including a pretax gain of $17.5 million on the sale of businesses and a facility during the second quarter of 2022 and acquisition transaction costs of $15.8 million in the second quarter of 2021. In addition, net income benefited from price increases in response to the current inflationary environment, actions taken to reduce costs and new business in all of our segments. Partially offsetting these increases in net income and diluted EPS was an $11.8 million increase in interest expense resulting from debt issued to complete the First American acquisition, inflationary pressures, increased transformational investments, a $5.7 million increase in acquisition amortization driven by the First American acquisition, supply chain disruptions for certain of our higher margin print products within Promotional Solutions, and the continuing secular decline in certain of our products.

The decrease in adjusted EPS for the second quarter of 2022, as compared to the second quarter of 2021, was driven primarily by the increase in interest expense resulting from the debt issued to complete the First American acquisition, inflationary pressures on our cost structure, increased transformational investments, supply chain disruptions in Promotional Solutions, and the continuing secular decline in certain of our products. These decreases in adjusted EPS were partially offset by the contribution from First American, as adjusted EPS excludes the associated acquisition amortization of $12.0 million for the second quarter of 2022 compared to $4.0 million for the second quarter of 2021. In addition, adjusted EPS benefited from price increases in response to the current inflationary environment, cost saving actions and new business in all of our segments.

The decreases in net income, diluted EPS and adjusted diluted EPS for the first half of ~~2022,~~2023, as compared to the first half of ~~2021,~~2022, were driven by the factors outlined in Executive Overview - ~~2022~~2023 earnings vs. ~~2021.~~2022.

The same factors drove the

3330

decreases for the second quarter of 2023, as compared to the second quarter of 2022, with the exception of the effective income tax rate, which was lower for the second quarter of 2023, as presented in our income tax provision discussion above.

Adjusted EBITDA


		Quarter Ended June 30,							Six Months Ended June 30,								Quarter Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			Change	2022			2021			Change	(in thousands)	2023			2022			Change	2023			2022			Change
Adjusted EBITDA(1)	Adjusted EBITDA(1)	$	101,737		$	97,462		4.4%	$	201,356		$	187,967		7.1%	Adjusted EBITDA(1)	$	108,372		$	101,737		6.5%	$	208,808		$	201,356		3.7%
Adjusted EBITDA as a percentage of total revenue (adjusted EBITDA margin)(1)	Adjusted EBITDA as a percentage of total revenue (adjusted EBITDA margin)(1)	18.1		%	20.4		%	(2.3) pts.	18.0		%	20.4		%	(2.4) pts.	Adjusted EBITDA as a percentage of total revenue (adjusted EBITDA margin)(1)	19.0		%	18.1		%	0.9%	18.7		%	18.0		%	0.7 pts.

(1) Information regarding the calculation of adjusted EBITDA and adjusted EBITDA margin can be found in the following section entitled Reconciliation of Non-GAAP Financial Measures.

The increases in adjusted EBITDA for the second quarter and first half of ~~2022,~~2023, as compared to the same periods in ~~2021,~~2022, were primarily driven by the incremental contribution from the First American acquisition of $12.1 million for the second quarter of 2022 and $30.2 million for the first half of 2022. In addition, adjusted EBITDA benefited from price increases in response to the current inflationary environment and the benefit of actions taken to reduce costs as we continually evaluate our cost ~~structure and revenue growth in all of our segments.~~structure. Partially offsetting these increases in adjusted EBITDA were ~~inflationary pressures on hourly wages, materials and delivery;~~ increased costs related to our continued transformational investments, primarily ~~investments in~~costs related to our technology infrastructure, ~~including sales~~as well as inflationary pressures on hourly wages, materials and ~~financial management tools; the impact of Promotional Solutions supply chain disruptions; and~~delivery. Also reducing adjusted EBITDA was the continuing secular decline in checks, business forms and some business accessories.

Adjusted EBITDA margin ~~decreased~~increased for the second quarter and first half of ~~2022,~~2023, as compared to the same periods in ~~2021,~~2022, driven by ~~inflationary pressures, planned technology investments and lower sales volume related to supply chain disruptions within~~price increases, the ~~higher margin print products in our Promotional Solutions segment. These decreases in adjusted EBITDA margin were partially offset by price increases,~~benefit of cost saving actions and operating leverage, ~~from strong revenue growth. We expect that adjusted EBITDA margin will improve in the second half of the year, as compared to the first half of 2022, driven~~partially offset by ~~the timing of certain employee benefit costs~~inflationary pressures and ~~investments, as well as seasonality for some of~~ our ~~products and services.~~continued transformational investments.

Reconciliation of Non-GAAP Financial Measures

Free cash flow – We define free cash flow as net cash provided by operating activities less purchases of capital assets. We believe that free cash flow is an important indicator of cash available for debt service and for shareholders, after making capital investments to maintain or expand our asset base. A limitation of using the free cash flow measure is that not all of our free cash flow is available for discretionary spending, as we may have mandatory debt payments and other cash requirements that must be deducted from our cash available for future use. We believe that the measure of free cash flow provides an additional metric to compare cash generated by operations on a consistent basis and to provide insight into the cash flow available to fund items such as dividends, mandatory and discretionary debt reduction, acquisitions or other strategic investments, and share repurchases.

Net cash provided by operating activities reconciles to free cash flow as follows:


		Six Months Ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Net cash provided by operating activities	Net cash provided by operating activities	$	72,187	$	83,811	Net cash provided by operating activities	$	47,337	$	72,187
Purchases of capital assets	Purchases of capital assets	(45,246)		(46,615)		Purchases of capital assets	(55,904)		(45,246)
Free cash flow	Free cash flow	$	26,941	$	37,196	Free cash flow	$	(8,567)	$	26,941

Net debt – Management believes that net debt is an important measure to monitor leverage and to evaluate the balance sheet. In calculating net debt, cash and cash equivalents are subtracted from total debt because they could be used to reduce our debt obligations. A limitation associated with using net debt is that it subtracts cash and cash equivalents, and therefore, may imply that management intends to use cash and cash equivalents to reduce outstanding debt. In addition, net debt suggests that our debt obligations are less than the most comparable GAAP measure indicates.

Total debt reconciles to net debt as follows:


(in thousands)	(in thousands)	June 30, 2022		December 31, 2021		(in thousands)	June 30, 2023		December 31, 2022
Total debt	Total debt	$	1,675,614	$	1,682,949	Total debt	$	1,667,210	$	1,644,276
Cash and cash equivalents	Cash and cash equivalents	(43,262)		(41,231)		Cash and cash equivalents	(39,052)		(40,435)
Net debt	Net debt	$	1,632,352	$	1,641,718	Net debt	$	1,628,158	$	1,603,841

3431

Liquidity – We define liquidity as cash and cash equivalents plus the amount available for borrowing under our revolving credit facility. We consider liquidity to be an important metric for demonstrating the amount of cash that is available or that could be available on short notice. This financial measure is not a substitute for GAAP liquidity measures. Instead, we believe that this measurement enhances investors' understanding of the funds that are currently available. ~~Liquidity was as follows:~~

(in thousands) June 30,
2022 December 31, 2021
Cash and cash equivalents $ 43,262 $ 41,231
Amount available for borrowing under revolving credit facility 315,677 362,619
Liquidity $ 358,939 $ 403,850
Liquidity was as follows:


(in thousands)	June 30, 2023		December 31, 2022
Cash and cash equivalents	$	39,052	$	40,435
Amount available for borrowing under revolving credit facility	244,632		295,177
Liquidity	$	283,684	$	335,612

Adjusted diluted EPS – By excluding the impact of non-cash items or items that we believe are not indicative of current period operating performance, we believe that adjusted diluted EPS provides useful comparable information to assist in analyzing our current period operating performance and in assessing our future operating performance. As such, adjusted diluted EPS is one of the key financial performance metrics we use to assess the operating results and performance of the business and to identify strategies to improve performance. It is reasonable to expect that one or more of the excluded items will occur in future periods, but the amounts recognized may vary significantly.

Diluted EPS reconciles to adjusted diluted EPS as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2022		2021		2022		2021		(in thousands, except per share amounts)	2023		2022		2023		2022
Net income	Net income	$	22,097	$	12,129	$	31,776	$	36,453	Net income	$	16,401	$	22,097	$	19,181	$	31,776
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	(35)		(29)		(71)		(62)		Net income attributable to non-controlling interest	(26)		(35)		(54)		(71)
Net income attributable to Deluxe	Net income attributable to Deluxe	22,062		12,100		31,705		36,391		Net income attributable to Deluxe	16,375		22,062		19,127		31,705
Acquisition amortization	Acquisition amortization	23,024		17,335		46,961		30,528		Acquisition amortization	21,018		23,024		42,297		46,961
Restructuring, integration and other costs		15,208		11,979		31,511		27,191
Restructuring and integration costs										Restructuring and integration costs	27,477		15,208		41,571		31,511
Share-based compensation expense	Share-based compensation expense	4,896		7,625		13,038		14,367		Share-based compensation expense	5,484		4,896		11,350		13,038
Acquisition transaction costs	Acquisition transaction costs	12		15,843		61		18,608		Acquisition transaction costs	—		12		—		61
Certain legal-related expense		162		302		845		302
Certain legal-related (benefit) expense										Certain legal-related (benefit) expense	(183)		162		245		845
Gain on sale of businesses and facility	Gain on sale of businesses and facility	(17,527)		—		(17,527)		—		Gain on sale of businesses and facility	(21,942)		(17,527)		(21,942)		(17,527)

Adjustments, pretax	Adjustments, pretax	25,775		53,084		74,889		90,996		Adjustments, pretax	31,854		25,775		73,521		74,889
Income tax provision impact of pretax adjustments(1)	Income tax provision impact of pretax adjustments(1)	(5,120)		(11,716)		(16,092)		(20,170)		Income tax provision impact of pretax adjustments(1)	(7,407)		(4,507)		(16,895)		(17,642)
Income tax impact of sale of business (2)		613		—		(1,550)		—
Adjustments, net of tax	Adjustments, net of tax	21,268		41,368		57,247		70,826		Adjustments, net of tax	24,447		21,268		56,626		57,247
Adjusted net income attributable to Deluxe	Adjusted net income attributable to Deluxe	43,330		53,468		88,952		107,217		Adjusted net income attributable to Deluxe	40,822		43,330		75,753		88,952
Income allocated to participating securities	Income allocated to participating securities	(32)		(39)		(65)		(81)		Income allocated to participating securities	—		(32)		—		(65)
Re-measurement of share-based awards classified as liabilities	Re-measurement of share-based awards classified as liabilities	(316)		—		(356)		—		Re-measurement of share-based awards classified as liabilities	—		(316)		(20)		(356)
Adjusted income attributable to Deluxe available to common shareholders	Adjusted income attributable to Deluxe available to common shareholders	$	42,982	$	53,429	$	88,531	$	107,136	Adjusted income attributable to Deluxe available to common shareholders	$	40,822	$	42,982	$	75,733	$	88,531

Weighted average shares and potential common shares outstanding	Weighted average shares and potential common shares outstanding	43,285		42,719		43,256		42,620		Weighted average shares and potential common shares outstanding	43,740		43,285		43,700		43,256
Adjustment~~(3)~~(2)	Adjustment~~(3)~~(2)	—		—		—		(16)		Adjustment~~(3)~~(2)	—		—		16		—
Adjusted weighted average shares and potential common shares outstanding	Adjusted weighted average shares and potential common shares outstanding	43,285		42,719		43,256		42,604		Adjusted weighted average shares and potential common shares outstanding	43,740		43,285		43,716		43,256

GAAP diluted EPS	GAAP diluted EPS	$	0.50	$	0.28	$	0.72	$	0.85	GAAP diluted EPS	$	0.37	$	0.50	$	0.44	$	0.72
Adjustments, net of tax	Adjustments, net of tax	0.49		0.97		1.33		1.66		Adjustments, net of tax	0.56		0.49		1.29		1.33
Adjusted diluted EPS	Adjusted diluted EPS	$	0.99	$	1.25	$	2.05	$	2.51	Adjusted diluted EPS	$	0.93	$	0.99	$	1.73	$	2.05

(1) The tax effect of the pretax adjustments considers the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). Generally, this results in a tax impact that approximates the U.S. effective tax rate for each adjustment. However, the tax impact of certain adjustments, such as share-based compensation expense, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable effective tax rate(s) in those jurisdictions.

~~(2)~~ Represents the recognition of a capital loss carryover arising from the sale of our Australian web hosting business, partially offset by a related valuation allowance for the portion of the carryover we do not currently expect to realize.

~~(3)~~(2) The total of weighted-average shares and potential common shares outstanding used in the calculation of adjusted diluted EPS for the first half of ~~2021~~2023 differs from the GAAP calculation due to differences in the amount of dilutive securities in each calculation.

Adjusted EBITDA and adjusted EBITDA margin – We believe that adjusted EBITDA and adjusted EBITDA margin are useful in evaluating our operating performance, as they eliminate the effect of interest expense, income taxes, the accounting effects of capital investments (i.e., depreciation and amortization) and certain items, as presented below, that may vary for reasons unrelated to current period operating performance. In addition, management utilizes these measures to assess the operating results and performance of the business, to perform analytical comparisons and to identify strategies to improve

performance. We also believe that an increasing adjusted EBITDA and adjusted EBITDA margin depict an increase in the value of the company. We do not consider adjusted EBITDA to be a measure of cash flow, as it does not consider certain cash requirements such as interest, income taxes, debt service payments or capital investments.

We have not reconciled our adjusted EBITDA ~~margin~~ outlook for ~~2022~~2023 to the directly comparable GAAP financial measure because we do not provide outlook guidance for net income or the reconciling items between net income and adjusted EBITDA. Because of the substantial uncertainty and variability surrounding certain of the forward-looking reconciling items, including asset impairment ~~charges;~~charges, restructuring and integration ~~and other costs;~~costs, gains and losses on sales of businesses, ~~and facilities;~~ and certain legal-related expenses, a reconciliation of the non-GAAP financial measure outlook guidance to the corresponding GAAP measure is not available without unreasonable effort. The probable significance of certain of these reconciling items is high and, based on historical experience, could be material.

Net income reconciles to adjusted EBITDA and adjusted EBITDA margin as follows:


		Quarter Ended June 30,						Six Months Ended June 30,							Quarter Ended June 30,						Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			2022			2021			(in thousands)	2023			2022			2023			2022
Net income	Net income	$	22,097		$	12,129		$	31,776		$	36,453		Net income	$	16,401		$	22,097		$	19,181		$	31,776
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	(35)			(29)			(71)			(62)			Net income attributable to non-controlling interest	(26)			(35)			(54)			(71)
Depreciation and amortization expense	Depreciation and amortization expense	45,047			33,244			86,644			61,024			Depreciation and amortization expense	42,607			45,047			86,128			86,644
Interest expense	Interest expense	21,349			9,530			41,672			14,054			Interest expense	31,932			21,349			61,948			41,672
Income tax provision	Income tax provision	10,528			6,839			13,407			16,030			Income tax provision	6,622			10,528			10,381			13,407
Restructuring, integration and other costs		15,208			11,979			31,511			27,191
Restructuring and integration costs														Restructuring and integration costs	27,477			15,208			41,571			31,511
Share-based compensation expense	Share-based compensation expense	4,896			7,625			13,038			14,367			Share-based compensation expense	5,484			4,896			11,350			13,038
Acquisition transaction costs	Acquisition transaction costs	12			15,843			61			18,608			Acquisition transaction costs	—			12			—			61
Certain legal-related expense		162			302			845			302
Certain legal-related (benefit) expense														Certain legal-related (benefit) expense	(183)			162			245			845
Gain on sale of businesses and facility	Gain on sale of businesses and facility	(17,527)			—			(17,527)			—			Gain on sale of businesses and facility	(21,942)			(17,527)			(21,942)			(17,527)
Adjusted EBITDA	Adjusted EBITDA	$	101,737		$	97,462		$	201,356		$	187,967		Adjusted EBITDA	$	108,372		$	101,737		$	208,808		$	201,356
Adjusted EBITDA margin	Adjusted EBITDA margin	18.1		%	20.4		%	18.0		%	20.4		%	Adjusted EBITDA margin	19.0		%	18.1		%	18.7		%	18.0		%


RESTRUCTURING ~~INTEGRATION~~ AND ~~OTHER~~INTEGRATION COSTS

Restructuring and integration expense consists of costs related to the consolidation and migration of certain applications and processes, including our financial ~~and sales~~ management systems. It also includes costs related to the integration of acquired businesses into our systems and processes. These costs consist primarily of information technology consulting, project management services and internal labor, as well as other costs associated with our initiatives, such as training, travel, relocation and costs associated with facility closures. In addition, we recorded employee severance costs related to these initiatives, as well as our ongoing cost reduction initiatives across functional areas. Further information regarding restructuring and integration expense can be found under the caption "Note 9: Restructuring and Integration Expense" in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report.

The majority of the employee reductions included in our restructuring and integration accruals as of June 30, ~~2022,~~2023, as well as the related severance payments, are expected to be completed by the end of ~~2022.~~2023. As a result of our employee reductions, we expect to realize cost savings of approximately ~~$20.0~~$7 million in cost of sales and $20 million in SG&A expense in ~~2022,~~2023, in comparison to our ~~2021~~2022 results of operations. In addition, we anticipate cost savings from facility closures of approximately ~~$4.0~~$3 million in ~~2022,~~2023, in comparison to our ~~2021~~2022 results of operations. Note that these savings ~~will~~may be ~~partially~~ offset by increased labor and other costs, including costs associated with new employees as we restructure certain activities and strive for the optimal mix of employee skill sets that will continue to support our growth strategy.


SEGMENT RESULTS

We operate 4 reportable business segments: Payments, ~~Cloud~~Data Solutions, Promotional Solutions and Checks. These segments are generally organized by product type and reflect the way we manage the company. The financial information presented below for our reportable business segments is consistent with that presented under the caption "Note 15: Business Segment Information"

in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report, where information regarding revenue from our various product and service offerings can also be found.

Payments

Results for our Payments segment were as follows:


		Quarter Ended June 30,							Six Months Ended June 30,								Quarter Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			Change	2022			2021			Change	(in thousands)	2023			2022			Change	2023			2022			Change
Total revenue	Total revenue	$	171,154		$	103,339		65.6%	$	337,362		$	182,777		84.6%	Total revenue	$	174,372		$	171,154		1.9%	$	346,355		$	337,362		2.7%
Adjusted EBITDA	Adjusted EBITDA	34,986			21,199			65.0%	71,421			39,528			80.7%	Adjusted EBITDA	36,318			34,986			3.8%	72,873			71,421			2.0%
Adjusted EBITDA margin	Adjusted EBITDA margin	20.4		%	20.5		%	(0.1) pts.	21.2		%	21.6		%	(0.4) pts.	Adjusted EBITDA margin	20.8		%	20.4		%	0.4 pts.	21.0		%	21.2		%	(0.2) pts.

The ~~increases~~increase in total revenue for the second quarter ~~and first half~~ of ~~2022,~~2023, as compared to ~~the same periods in 2021, were driven by the acquisition and strong performance of First American, which contributed incremental revenue of $61.0 million for~~ the second quarter of 2022, ~~and $144.2 million~~was driven by a 2.7% increase in treasury management revenue, primarily driven by our receivables offerings, partially offset by some softness in lockbox processing volumes. Additionally, merchant services revenue increased 1.3%, reflecting some softer consumer discretionary spending levels early in the quarter.

The increase in total revenue for the first half of ~~2022. In addition, volume~~2023, as compared to the first half of 2022, was due to an increase in merchant services revenue of 4.0%, driven by strong merchant activations, and a 3.5% increase in treasury management revenue, primarily our ~~core payments businesses increased, primarily digital payments~~receivables offerings and lockbox processing services. Revenue also benefited from price increases in response to the current inflationary environment. ~~Longer term,~~For the full year, we expect ~~high single~~mid-single digit percentage revenue growth for this segment.

The increases in adjusted EBITDA for the second quarter and first half of ~~2022,~~2023, as compared to the same periods in ~~2021,~~2022, were driven by the incremental contribution of the First American acquisition of $12.1 million for the second quarter of 2022 and $30.2 million for the first half of 2022. In addition, adjusted EBITDA benefited from price increases and the revenue growth in ~~our core payments businesses.~~merchant services and treasury management, as well as price increases in response to the current inflationary environment. These increases in adjusted EBITDA were partially offset by continued ~~sales and~~ information technology investments and inflationary pressures on labor costs. Adjusted EBITDA for the second quarter of 2023 benefited from operational improvements across our lockbox sites, while adjusted EBITDA for the first half of 2023 included cost ~~structure, primarily labor costs in~~pressures as we consolidated our lockbox processing ~~business. Adjusted EBITDA margin decreased in both periods, as compared to 2021, as the investments in the business and the inflationary pressures exceeded the benefit of the revenue increases.~~operations. For the full year, we expect adjusted EBITDA margin to be in the low to mid 20% range.

~~Cloud~~Data Solutions

Results for our ~~Cloud~~Data Solutions segment were as follows:


		Quarter Ended June 30,							Six Months Ended June 30,								Quarter Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			Change	2022			2021			Change	(in thousands)	2023			2022			Change	2023			2022			Change
Total revenue	Total revenue	$	68,587		$	68,067		0.8%	$	138,084		$	130,287		6.0%	Total revenue	$	72,090		$	68,587		5.1%	$	130,683		$	138,084		(5.4%)
Adjusted EBITDA	Adjusted EBITDA	17,509			18,803			(6.9%)	34,836			36,011			(3.3%)	Adjusted EBITDA	17,741			17,509			1.3%	33,058			34,836			(5.1%)
Adjusted EBITDA margin	Adjusted EBITDA margin	25.5		%	27.6		%	(2.1) pts.	25.2		%	27.6		%	(2.4) pts.	Adjusted EBITDA margin	24.6		%	25.5		%	(0.9) pts.	25.3		%	25.2		%	0.1 pts.

The ~~increases~~increase in total revenue for the second quarter ~~and first half~~ of ~~2022,~~2023, as compared to the ~~same periods in 2021, were~~second quarter of 2022, was driven by ~~growth~~a $9 million increase in data-driven marketing, as we saw increased demand for our marketing services in support of ~~$6.0~~banks attracting low-cost deposits. Partially offsetting this increase in revenue, was a reduction in North American web hosting revenue, as well as the sale of our Australian web hosting business in the second quarter of 2022, which resulted in a reduction in revenue of approximately $2 million for the second quarter of 2023.

The decrease in total revenue for the first half of 2023, as compared to the first half of 2022, ~~and $14.1~~was driven by the sale of our Australian web hosting business in the second quarter of 2022, which resulted in a reduction in revenue of approximately $8 million for the first half of ~~2022, resulting from relationship expansion with key clients, sales wins~~2023, and ~~increased marketing spend by~~revenue for our ~~customers. We continue~~North American web hosting business declined due to ~~add new~~continuing customer churn. Partially offsetting these decreases in revenue was an increase in data-driven marketing ~~clients, which~~revenue of $6 million for the first half of 2023, as we saw increased demand for our marketing services in support of banks attracting low-cost deposits, partially offset by the first quarter 2023 impact of certain of our customers's marketing campaigns being pulled into the fourth quarter of 2022. For the full year, we expect that revenue will ~~benefit revenue going forward. As~~decline approximately $38 million as a result of the sale of our web hosting and logo design businesses, as discussed ~~under~~in Executive Overview, ~~we sold our Australian web hosting~~and that the remainder of the business ~~in May 2022. This sale resulted in a $4.0 million reduction in revenue for the second quarter and first half of 2022. We expect~~will deliver low single digit percentage revenue ~~growth for the full year, reflecting a decline of $16.0 million from the sale of the Australian web hosting business.~~growth.

Adjusted EBITDA increased for the second quarter of 2023, as compared to the second quarter of 2022, due to the growth in data-driven marketing revenue and the benefit of cost reduction actions, partially offset by the reduction in North American web hosting volume. Adjusted EBITDA margin decreased for the second quarter of 2023, as compared to the second quarter of 2022, ~~and~~reflecting the shift toward data-driven marketing revenue, which has a somewhat lower EBITDA margin.

Adjusted EBITDA decreased for the first half of 2023, as compared to the first half of 2022, ~~as compared to the same periods in 2021,~~ driven by the the decrease in North American web hosting revenue, as well as the sale of the Australian web hosting business, ~~and investments~~which reduced adjusted EBITDA by approximately $1 million for the first half of 2023. These decreases in ~~our data-driven marketing platform,~~adjusted EBITDA were partially offset by the growth in data-driven marketing ~~revenue.~~and the benefit of cost reduction actions. Adjusted EBITDA margin ~~decreased in both periods,~~increased slightly for the first half of 2023, as compared to ~~2021, driven by~~ the ~~mix~~first half of 2022, as the shift toward data-driven marketing ~~clients in each period and~~revenue was offset by expense management. For the ~~investments in the business. We~~full year, we expect that adjusted EBITDA ~~margin for~~will decline approximately $13 million as a result of the ~~full year~~sale of our web hosting and logo design businesses, as discussed in Executive Overview, and we expect that adjusted EBITDA margin will be in the low to ~~mid-20%~~mid 20% range.

Promotional Solutions

Results for our Promotional Solutions segment were as follows:


		Quarter Ended June 30,							Six Months Ended June 30,								Quarter Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			Change	2022			2021			Change	(in thousands)	2023			2022			Change	2023			2022			Change
Total revenue	Total revenue	$	139,276		$	134,987		3.2%	$	272,519		$	259,494		5.0%	Total revenue	$	138,800		$	139,276		(0.3%)	$	274,942		$	272,519		0.9%
Adjusted EBITDA	Adjusted EBITDA	14,596			21,416			(31.8%)	31,540			39,131			(19.4%)	Adjusted EBITDA	21,239			14,596			45.5%	40,049			31,540			27.0%
Adjusted EBITDA margin	Adjusted EBITDA margin	10.5		%	15.9		%	(5.4) pts.	11.6		%	15.1		%	(3.5) pts.	Adjusted EBITDA margin	15.3		%	10.5		%	4.8 pts.	14.6		%	11.6		%	3.0 pts.

The ~~increases~~slight decrease in total revenue for the second quarter of 2023, as compared to the second quarter of 2022, was driven primarily by the continuing secular decline in business forms and some accessories. Additionally, as discussed in Executive Overview, we sold our strategic sourcing business during the second quarter of 2022 and our retail packaging business during the third quarter of 2022. These divestitures resulted in a revenue decline of approximately $4 million for the second quarter of 2023. Partially offsetting these decreases in revenue was the impact of new clients, relationship expansion with existing clients, and price increases in response to the current inflationary environment.

The increase in total revenue for the first half of 2023, as compared to the first half of 2022, ~~as compared to the same periods in 2021, were~~was driven primarily by the impact of new clients, relationship expansion with existing clients, and price increases in response to the current inflationary ~~environment, and strong ongoing demand for our promotional and apparel products.~~environment. Partially offsetting these revenue increases ~~were lower sales of certain printed products due to supply chain disruptions, as well as~~was the continuing secular decline in business forms and some accessories. ~~The sale of~~Additionally, as discussed in Executive Overview, we sold our strategic sourcing business during the second quarter of 2022 and our retail packaging business during the third quarter of 2022. These divestitures resulted in a revenue decline of ~~$3.4~~approximately $11 million for the ~~second quarter and~~ first half of ~~2022, and~~2023. For the full year, we expect that revenue ~~for the full year~~ will decline approximately ~~$18.0~~$13 million as a result of business exits, ~~including~~and that the ~~third quarter sale~~remainder of ~~our retail packaging business.~~the business will deliver low single digit percentage revenue growth.

Adjusted EBITDA for the second quarter and first half of ~~2022 decreased~~2023 increased compared to the same periods in ~~2021,~~2022, driven by price increases, the revenue growth noted above and cost reduction actions. Partially offsetting these increases in adjusted EBITDA were inflationary pressures on materials and delivery and supply chain disruptions for certain printed products as a result of paper and other supply disruptions. These decreases in adjusted EBITDA were partially offset by price increases in response to the current inflationary environment and the revenue growth noted above.delivery. Adjusted EBITDA margin ~~decreased in~~for both periods asincreased compared to ~~2021,~~2022, as price increases and the benefit of our cost reduction actions more than offset the impact of ~~inflation and supply chain disruptions for certain higher margin printed products exceeded~~inflationary pressures. For the ~~impact of~~full year, we expect the ~~price increases and revenue growth. We anticipate improvement in~~ adjusted EBITDA ~~margins for~~margin percentage to be in the ~~remainder of 2022, consistent with our long-term expectations.~~mid-teens.

Checks

Results for our Checks segment were as follows:


		Quarter Ended June 30,							Six Months Ended June 30,								Quarter Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022			2021			Change	2022			2021			Change	(in thousands)	2023			2022			Change	2023			2022			Change
Total revenue	Total revenue	$	183,936		$	171,823		7.0%	$	371,003		$	346,923		6.9%	Total revenue	$	186,424		$	183,936		1.4%	$	365,071		$	371,003		(1.6%)
Adjusted EBITDA	Adjusted EBITDA	82,564			80,191			3.0%	165,360			163,725			1.0%	Adjusted EBITDA	83,585			82,564			1.2%	160,064			165,360			(3.2%)
Adjusted EBITDA margin	Adjusted EBITDA margin	44.9		%	46.7		%	(1.8) pts.	44.6		%	47.2		%	(2.6) pts.	Adjusted EBITDA margin	44.8		%	44.9		%	(0.1) pts.	43.8		%	44.6		%	(0.8) pts.

The ~~increases~~increase in total revenue for the second quarter ~~and first half~~ of ~~2022,~~2023, as compared to the ~~same periods in 2021, were~~second quarter of 2022, was driven primarily by ~~the impact of new client wins,~~ price increases in response to the current inflationary environment and ~~strength~~the benefit from some timing impacts related to the implementation of our ERP system in ~~business checks. These~~the first quarter of 2023. Partially offsetting these increases in revenue ~~were partially offset~~was the continuing secular decline in overall check volumes.

The decrease in total revenue for the first half of 2023, as compared to the first half of 2022, was driven primarily by the continuing secular decline in ~~checks. We do not expect this level of growth throughout~~overall check volumes, partially offset by price increases in response to the ~~remainder of 2022, as 2021 revenue benefited from onboarding new clients late in the third quarter of 2021.~~current inflationary environment. For the ~~remainder of the~~full year, we ~~anticipate~~are expecting a low to mid-single digit percentage ~~decline in~~ revenue ~~in the low single digits.~~decline.

The ~~increases~~increase in adjusted EBITDA for the second quarter of 2023, as compared to the second quarter of 2022, was driven by price increases, the revenue growth discussed above and the benefit of cost saving actions. These increases in adjusted EBITDA were partially offset by the secular decline in overall check volumes and inflationary pressures on delivery and materials.

The decrease in adjusted EBITDA for the first half of 2023, as compared to the first half of 2022, was driven by the secular decline in overall check volumes and inflationary pressures on delivery and materials. These decreases in adjusted EBITDA were partially offset by price increases and the benefit of cost saving actions. Adjusted EBITDA margin for the first half of 2023 decreased,as compared to first half of 2022, as ~~compared to the same periods in 2021, were driven by the price increases and~~inflationary cost ~~saving actions, partially~~pressures more than offset by inflationary pressures on delivery and materials and the secular decline in checks. Adjusted EBITDA margin decreased in both periods, as compared to 2021, as inflationary pressures and the addition of lower margin new clients exceeded the benefit of the pricing and cost ~~savings~~saving actions. For the full year, we expect adjusted EBITDA margin to remain in the mid 40% range.


CASH FLOWS AND LIQUIDITY

As of June 30, ~~2022,~~2023, we held cash and cash equivalents of ~~$43.3~~$39.1 million ~~as well as~~and restricted cash and restricted cash equivalents included in funds held for customers and other non-current assets of ~~$146.3~~$150.1 million. The following table shows our cash flow activity for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 and should be read in conjunction with the consolidated statements of cash flows appearing in Part I, Item 1 of this report.

Six Months Ended June 30,
(in thousands) 2022 2021 Change
Net cash provided by operating activities $ 72,187 $ 83,811 $ (11,624)
Net cash used by investing activities (20,476) (1,004,690) 984,214
Net cash (used) provided by financing activities (144,278) 976,157 (1,120,435)
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents (3,336) 3,387 (6,723)
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents $ (95,903) $ 58,665 $ (154,568)
Free cash flow(1)
$ 26,941 $ 37,196 $ (10,255)


	Six Months Ended June 30,
(in thousands)	2023		2022		Change
Net cash provided by operating activities	$	47,337	$	72,187	$	(24,850)
Net cash used by investing activities	(37,902)		(20,476)		(17,426)
Net cash used by financing activities	(160,720)		(144,278)		(16,442)
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents	3,063		(3,336)		6,399
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	$	(148,222)	$	(95,903)	$	(52,319)
Free cash flow(1)	$	(8,567)	$	26,941	$	(35,508)

(1) See ~~the~~ Reconciliation of Non-GAAP Financial Measures within the Consolidated Results of Operations section, which defines and illustrates how we calculate free cash flow.

Net cash provided by operating activities decreased ~~$11.6~~$24.9 million for the first half of ~~2022,~~2023, as compared to the first half of ~~2021,~~2022, driven by a ~~$28.8~~$22.3 million increase in interest payments as a result of ~~debt issued to complete the First American acquisition and~~rising interest rates, as well as a ~~$22.8~~$9.4 million increase in employee ~~cash~~ bonus payments related to our ~~2021~~2022 operating performance. During 2021, a portion of our cash bonuses were paid in the form of restricted stock units and the bonus payments in 2021 were unusually low because of the impact of the COVID-19 pandemic on our 2020 performance. Operating cash flow was also negatively impacted by ~~inflationary pressures, supply chain disruptions~~a $6.3 million increase in ~~our Promotional Solutions segment, and the continuing secular decline~~income tax payments. These decreases in ~~checks, business forms and some business accessories. We~~operating cash flow were ~~able to substantially~~partially offset ~~these impacts through the contribution of First American's operations, price increases~~by positive changes in response to the current inflationary environment, acquisition transaction costs incurred in 2021 related to the First American acquisition that did not recur in 2022, and continued cost saving actions.working capital.

Included in net cash provided by operating activities were the following operating cash outflows:


		Six Months Ended June 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		Change		(in thousands)	2023		2022		Change
Interest payments	Interest payments	$	37,713	$	8,963	$	28,750	Interest payments	$	60,013	$	37,713	$	22,300
Performance-based compensation payments(1)	Performance-based compensation payments(1)	34,943		12,180		22,763		Performance-based compensation payments(1)	44,320		34,943		9,377
Income tax payments	Income tax payments	22,580		15,270		7,310		Income tax payments	28,892		22,580		6,312
Prepaid product discount payments(2)	Prepaid product discount payments(2)	12,285		19,077		(6,792)		Prepaid product discount payments(2)	12,742		12,285		457
Severance payments								Severance payments	7,406		5,667		1,739
Payments for cloud computing arrangement implementation costs	Payments for cloud computing arrangement implementation costs	11,340		16,252		(4,912)		Payments for cloud computing arrangement implementation costs	5,846		11,340		(5,494)
Severance payments		5,667		6,193		(526)

(1) Amounts reflect compensation based on total company and segment performance.

(2) See Other Financial Position information for further information regarding these payments.

Net cash used by investing activities for the first half of ~~2022~~2023 was ~~$984.2~~$17.4 million ~~lower~~higher than the first half of ~~2021,~~2022, driven by ~~the acquisition~~a $10.7 million increase in capital expenditures in 2023 as we continued innovation investments and building scale across our product categories. We also made payments of ~~First American~~$10.0 million in ~~2021~~2023 related to a joint venture focused on launching and ~~proceeds of $23.9 million from sales of businesses and~~marketing a ~~facility during 2022.~~business payment distribution technology platform.

Net cash used by financing activities for the first half of ~~2022~~2023 was ~~$1,120.4~~$16.4 million higher than the first half of ~~2021,~~2022, driven by ~~the net proceeds from debt issued in 2021 to fund the First American acquisition, as well as~~ the net change in customer funds obligations in each ~~period, primarily related to the portion of First American's business under which property tax payments are collected~~period. Partially offsetting this increase in ~~December and are paid on behalf of customers~~cash used by financing activities was an increase in ~~the following quarter. In addition,~~ proceeds from ~~issuing shares were $13.2 million lower in 2022,~~debt, as ~~certain employees~~we drew on our revolving line of ~~First American purchased our stock~~credit during ~~2021 in conjunction with~~ the ~~acquisition.~~first half of 2023.

Significant cash transactions, excluding those related to operating activities, for each period were as follows:

Six Months Ended June 30,
(in thousands) 2022 2021 Change
Net change in debt $ (9,376) $ 1,007,850 $ (1,017,226)
Net change in customer funds obligations (100,067) 5,559 (105,626)
Purchases of capital assets (45,246) (46,615) 1,369
Cash dividends paid to shareholders (26,591) (25,852) (739)
Payments for debt issuance costs — (17,911) 17,911
Proceeds from sale of businesses and facility 23,875 — 23,875
Proceeds from issuing shares 1,604 14,852 (13,248)

As of June 30, 2022, our foreign subsidiaries held cash and cash equivalents of $40.5 million. During 2022, we began repatriating Canadian current year earnings, as we believe the accumulated and remaining cash of our Canadian subsidiaries is sufficient to meet their working capital needs. We intend to use the repatriated earnings to reduce outstanding debt. The historical unremitted Canadian earnings as of December 31, 2021, as well as the accumulated and future unremitted earnings of our European subsidiaries, will continue to be reinvested indefinitely in the operations of those subsidiaries. Deferred income taxes have not been recognized on these earnings as of June 30, 2022. If we were to repatriate our foreign cash and cash equivalents into the U.S. at one time, we estimate that we would incur a foreign withholding tax liability of approximately $2.0 million, notwithstanding any tax planning strategies that might be available.


	Six Months Ended June 30,
(in thousands)	2023		2022		Change
Proceeds from sale of businesses and facility	$	27,880	$	23,875	$	4,005
Net change in debt	21,124		(9,376)		30,500
Net change in customer funds obligations	(149,336)		(100,067)		(49,269)
Purchases of capital assets	(55,904)		(45,246)		(10,658)
Cash dividends paid to shareholders	(26,852)		(26,591)		(261)

In assessing our cash needs, we must consider our debt service requirements, lease obligations, other contractual commitments and contingent liabilities. Information regarding the maturities of our long-term debt and our contingent liabilities can be found under the captions “Note 12: Debt” and "Note 13: Other Commitments and Contingencies," both of which appear in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report. Information regarding our lease obligations can be found under the caption "Note ~~15:~~14: Leases" in the Notes to Consolidated Financial Statements appearing in the ~~2021~~2022 Form 10-K, and information regarding our contractual obligations can be found in the MD&A section of the ~~2021~~2022 Form 10-K, under the section entitled Cash Flows and Liquidity. ~~There were no significant changes in our lease or contractual obligations during~~During the first half of ~~2022.~~2023, we entered into additional contractual obligations related primarily to information technology and consulting services. These contracts increase our contractual obligations approximately $130 million, with $65 million due through 2024 and the remainder due through 2028.

As of June 30, ~~2022, $315.7~~2023, $244.6 million was available for borrowing under our revolving credit facility. We anticipate that net cash generated by operations, along with cash and cash equivalents on hand and availability under our credit facility, will be sufficient to support our operations, including our contractual obligations and debt service requirements, for the next 12 ~~months.~~months, as well as our long-term capital requirements. We anticipate that we will continue to pay our regular quarterly dividend. However, dividends are approved by our board of directors each quarter and thus, are subject to change.


CAPITAL RESOURCES

The principal amount of our debt obligations was ~~$1.69~~$1.68 billion as of June 30, ~~2022~~2023 and ~~$1.70~~$1.66 billion as of December 31, ~~2021.~~2022. Further information concerning our outstanding debt, including our debt service obligations, can be found under the caption “Note 12: Debt” in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report.

Our capital structure for each period was as follows:


		June 30, 2022				December 31, 2021							June 30, 2023				December 31, 2022
(in thousands)	(in thousands)	Amount		Weighted- average interest rate		Amount		Weighted- average interest rate		Change		(in thousands)	Amount		Weighted- average interest rate		Amount		Weighted- average interest rate		Change
Fixed interest rate(1)	Fixed interest rate(1)	$	700,000	6.9	%	$	700,000	6.9	%	$	—	Fixed interest rate(1)	$	1,273,729	7.0	%	$	975,000	6.6	%	$	298,729
Floating interest rate	Floating interest rate	992,750		3.9	%	1,002,125		2.4	%	(9,375)		Floating interest rate	406,771		7.5	%	684,375		6.6	%	(277,604)
Debt principal	Debt principal	1,692,750		5.1	%	1,702,125		4.2	%	(9,375)		Debt principal	1,680,500		7.1	%	1,659,375		6.6	%	21,125
Shareholders’ equity	Shareholders’ equity	596,791				574,598				22,193		Shareholders’ equity	613,629				604,224				9,405
Total capital	Total capital	$	2,289,541			$	2,276,723			$	12,818	Total capital	$	2,294,129			$	2,263,599			$	30,530

(1) The fixed interest rate amount includes the amount of our variable-rate debt that is subject to an interest rate swap ~~agreement.~~agreements. The related interest rate includes the fixed rate under the ~~swap of 1.798%~~swaps plus the credit facility spread due on all amounts outstanding under our credit facility.

In October 2018, our board of directors authorized the repurchase of up to $500.0 million of our common stock. This authorization has no expiration date. We have not repurchased any shares under this authorization since the first quarter of ~~2020, when we suspended share repurchases in order to maintain liquidity during the COVID-19 pandemic.~~2020. As of June 30, ~~2022,~~2023, $287.5 million remained available for repurchase under this authorization. Information regarding

changes in shareholders' equity can be found in the consolidated statements of shareholders' equity appearing in Part I, Item 1 of this report.

As of June 30, ~~2022,~~2023, total commitments under our revolving credit facility were $500.0 million. Our quarterly commitment fee ranges from 0.25% to 0.35%, based on our total leverage ratio, as defined in the credit agreement. Further information regarding the terms and maturities of our debt, as well as our debt covenants, can be found under the caption "Note 12: Debt" in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report. Under the terms of our credit facility, if our consolidated total leverage ratio exceeds 2.75 to 1.00, the aggregate annual amount of permitted dividends and share repurchases is limited to $60.0 million. We were in compliance with our debt covenants as of June 30, ~~2022,~~2023, and we anticipate that we will remain in compliance with our debt covenants throughout the next 12 months.

As of June 30, ~~2022,~~2023, amounts available for borrowing under our revolving credit facility were as follows:


(in thousands)	Available borrowings
Revolving credit facility commitment	$	500,000
Amounts drawn on revolving credit facility	~~(176,500)~~(247,000)
Outstanding letters of credit(1)	~~(7,823)~~(8,368)
Net available for borrowing as of June 30, ~~2022~~2023	$	~~315,677~~244,632

(1) We use standby letters of credit to collateralize certain obligations related primarily to our self-insured workers’ compensation claims, as well as claims for environmental matters, as required by certain states. These letters of credit reduce the amount available for borrowing under our revolving credit facility.


OTHER FINANCIAL POSITION INFORMATION

Information concerning items comprising selected captions on our consolidated balance sheets can be found under the caption "Note 3: Supplemental Balance Sheet and Cash Flow Information" appearing in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report.

Funds held for customers – Funds held for customers of ~~$152.2~~$155.8 million as of June 30, ~~2022~~2023 decreased ~~$102.6~~$146.5 million from December 31, ~~2021,~~2022, and the related current liability for funds held for customers of ~~$152.1~~$155.2 million as of June 30, ~~2022~~2023 decreased ~~$104.2~~$150.0 million from December 31, ~~2021.~~2022. These decreases were driven by the seasonal nature of a portion of ~~First American's~~our merchant services business under which property tax payments are collected in December and are paid on behalf of customers the following year.

Prepaid product discounts – Other non-current assets include prepaid product discounts that are recorded upon contract execution and are generally amortized on the straight-line basis as reductions of revenue over the related contract term. Changes in prepaid product discounts during the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 can be found under the caption "Note 3: Supplemental Balance Sheet and Cash Flow Information" in the Condensed Notes to Unaudited Consolidated Financial

Statements appearing in Part I, Item 1 of this report. Cash payments for prepaid product discounts were $12.7 million for the first half of 2023 and $12.3 million for the first half of ~~2022 and $19.1 million for the first half of 2021.~~2022.

The number of checks written has been declining, which has contributed to increased competitive pressure when attempting to retain or acquire clients. Both the number of financial institution clients requesting prepaid product discount payments and the amount of the payments has fluctuated from year to year. Although we anticipate that we will selectively continue to make these payments, we cannot quantify future amounts with certainty. The amount paid depends on numerous factors, such as the number and timing of contract executions and renewals, competitors’ actions, overall product discount levels and the structure of up-front product discount payments versus providing higher discount levels throughout the term of the contract.

Liabilities for prepaid product discounts are recorded upon contract execution. These obligations are monitored for each contract and are adjusted as payments are made. Prepaid product discount payments due within the next year are included in accrued liabilities on the consolidated balance sheets. These accruals were ~~$8.9~~$10.0 million as of June 30, ~~2022~~2023 and ~~$11.9~~$4.2 million as of December 31, ~~2021.~~2022.


CRITICAL ACCOUNTING ESTIMATES

A description of our critical accounting estimates was provided in the MD&A section of the ~~2021~~2022 Form 10-K. There were no changes in the determination of these estimates during the first half of ~~2022.~~2023.

New accounting ~~pronouncement~~pronouncements – Information regarding ~~the~~ new accounting ~~pronouncement that we have not yet~~pronouncements adopted during 2023 can be found under the caption “Note 2: New Accounting ~~Pronouncement”~~Pronouncements” in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk – We are exposed to changes in interest rates primarily as a result of the borrowing activities used to support our capital structure, maintain liquidity and fund business operations and investments. We do not enter into financial instruments for speculative or trading purposes. The nature and amount of debt outstanding can be expected to vary as a result of future business requirements, market conditions and other factors.

Interest is payable on amounts outstanding under our credit facility at a fluctuating rate of interest determined by reference to the ~~eurodollar rate~~Secured Overnight Financing Rate (SOFR) plus an applicable margin ranging from 1.5% to 2.5%, depending on our total leverage ratio, as defined in the credit agreement. We also had ~~$500.0~~$475.0 million of 8.0% senior, unsecured notes outstanding as of June 30, ~~2022.~~2023. Including the related discount and debt issuance costs, the effective interest rate on these notes is 8.3%.

As of June 30, ~~2022,~~2023, our total debt outstanding was as follows:


(in thousands)	(in thousands)	Carrying amount(1)		Fair value(2)		Interest rate(3)		(in thousands)	Carrying amount(1)		Fair value(2)		Interest rate(3)
Senior, secured term loan facility	Senior, secured term loan facility	$	1,007,448	$	1,016,250	3.9	%	Senior, secured term loan facility	$	952,238	$	958,500	6.7	%
Senior, unsecured notes	Senior, unsecured notes	491,666		407,500		8.0	%	Senior, unsecured notes	467,972		370,372		8.0	%
Amounts drawn on revolving credit facility	Amounts drawn on revolving credit facility	176,500		176,500		3.9	%	Amounts drawn on revolving credit facility	247,000		247,000		6.7	%
Total debt	Total debt	$	1,675,614	$	1,600,250	5.1	%	Total debt	$	1,667,210	$	1,575,872	7.1	%

(1) The carrying amount has been reduced by unamortized discount and debt issuance costs of ~~$17.1~~$13.3 million.

(2) For the amounts outstanding under our credit facility agreement, fair value approximates carrying value because the interest rate is variable and reflects current market rates. The fair value of the senior, unsecured notes is based on quoted prices in active markets for the identical liability when traded as an asset.

(3) The interest rate presented for total debt includes the impact of the interest rate ~~swap~~swaps discussed below.

As part of our interest rate risk management strategy, we entered into an interest rate ~~swap in July 2019,~~swaps, which we designated as a cash flow ~~hedge,~~hedges, to mitigate variability in interest payments on a portion of our variable-rate debt. ~~The~~As of June 30, 2023, the interest rate ~~swap, which terminates in March 2023,~~swaps effectively ~~converts $200.0~~converted $798.7 million of variable-rate debt to a fixed rate. Further information regarding the interest rate swaps can be found under the caption "Note 7: Derivative Financial Instruments" in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of ~~1.798%.~~this report. Changes in the fair value of the interest rate ~~swap~~swaps are recorded in accumulated other comprehensive loss on the consolidated balance sheets and are subsequently reclassified to interest expense as interest payments are made on the variable-rate debt.

The fair value of the ~~interest rate swap~~swaps was ~~$1.6~~included in other non-current assets on the consolidated balance sheet and was $9.0 million as of June 30, 2023. The fair value of the swaps in effect at December 31, 2022 ~~and~~ was included in other current assets and other non-current assets on the consolidated balance ~~sheet. The fair value of the swap was $3.0 million as of December 31, 2021~~sheet and was ~~included in other non-current liabilities on the consolidated balance sheet.~~$3.6 million.

Based on the daily average amount of variable-rate debt outstanding during the first half of ~~2022,~~2023, a one percentage point change in the weighted-average interest rate would have resulted in a ~~$4.9~~$3.5 million change in interest expense.

Our credit agreement matures on June 1, 2026, at which time any amounts outstanding under the revolving credit facility must be repaid. The term loan facility requires periodic principal payments through June 1, 2026, and the senior, unsecured notes mature in June 2029. Information regarding the maturities of our long-term debt can be found under the caption "Note 12: Debt" in the Condensed Notes to Unaudited Consolidated Financial Statements appearing in Part I, Item 1 of this report.

Foreign currency exchange rate risk – We are exposed to changes in foreign currency exchange rates. Investments in, and loans and advances to, foreign subsidiaries and branches, as well as the operations of these businesses, are denominated in foreign currencies, primarily Canadian dollars. The effect of exchange rate changes is ~~not~~ expected to have a ~~significant~~minimal impact on

our earnings and cash flows, as our foreign operations represent a relatively small portion of our business. We have not entered into hedges against changes in foreign currency exchange rates.


ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures – As of the end of the period covered by this report, June 30, ~~2022~~2023 (the ~~Evaluation Date)~~"Evaluation Date"), we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the ~~Exchange Act)~~"Exchange Act")). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in applicable rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

(b) Internal Control Over Financial Reporting – There were no material changes in our internal control over financial reporting identified in connection with our evaluation during the quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

We record accruals with respect to identified claims or lawsuits when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Claims and lawsuits are reviewed quarterly and provisions are taken or adjusted to reflect the status of a particular matter. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable outcomes. As of June 30, ~~2022,~~2023, recorded liabilities were not material to our financial position, results of operations or liquidity, and we do not believe that any of the currently identified claims or litigation will materially affect our financial position, results of operations or liquidity upon resolution. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, it may cause a material adverse impact on our financial position, results of operations or liquidity in the period in which the ruling occurs or in future periods.


ITEM 1A. RISK FACTORS

Our risk factors are outlined in Part I, Item 1A of the ~~2021~~2022 Form 10-K. There have been no significant changes in these risk factors since we filed the ~~2021~~2022 Form 10-K.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, ~~AND~~ USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

~~The following table shows purchases of our common stock that were completed during the second quarter of 2022:~~

Period
Total number of shares purchased(1)
Average price paid per share(1)
Total number of shares purchased as part of publicly announced plans or programs
Approximate dollar value of shares that may yet be purchased under the plans or programs(2)
April 1, 2022 –
April 30, 2022
30,406 $ 30.29 — $ 287,452,394
May 1, 2022 –
May 31, 2022 1,727 21.20 — 287,452,394
June 1, 2022 –
June 30, 2022 11,456 22.32 — 287,452,394
Total 43,589 27.84 — 287,452,394

~~(1)~~ Under the terms of our 2022 Stock Incentive Plan, as well as our previous long-term incentive plans, participants may surrender shares that would otherwise be issued under equity-based awards to cover the withholding taxes due as a result of the exercising or vesting of such awards. During the second quarter of 2022, we withheld 43,589 shares in conjunction with the vesting and exercise of equity-based awards.

~~(2)~~In October 2018, our board of directors authorized the repurchase of up to $500.0 million of our common stock. This authorization has no expiration date. No shares were repurchased under this authorization during the second quarter of ~~2022~~2023 and $287.5 million remained available for repurchase as of June 30, ~~2022.~~2023.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5. OTHER INFORMATION

~~None.~~During the three months ended June 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).


ITEM 6. EXHIBITS


Exhibit Number						Description
2.1						Second Amendment to Stock and Asset Purchase Agreement, dated May 31, 2023, by and between us and HostPapa, Inc.
2.2						Third Amendment to Stock and Asset Purchase Agreement, dated June 15, 2023, by and between us and HostPapa, Inc.
2.3						Fourth Amendment to Stock and Asset Purchase Agreement, dated June 26, 2023, by and between us and HostPapa, Inc.
10.1						Amendment No. 1 to the Deluxe Corporation 2022 Stock Incentive Plan (incorporated by reference to Annex B of the definitive proxy statement filed with the Commission on March ~~14, 2022~~)13, 2023)*
31.1						CEO Certification of Periodic Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						CFO Certification of Periodic Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						CEO and CFO Certification of Periodic Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished)


~~Exhibit Number~~						~~Description~~
101.INS						XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document


Exhibit Number						Description
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover page interactive data file (formatted as Inline XBRL and contained in Exhibit 101)

————

* Denotes compensatory plan or management contract

4643


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			DELUXE CORPORATION (Registrant)

Date: August ~~5, 2022~~4, 2023			/s/ Barry C. McCarthy
			Barry C. McCarthy President and Chief Executive Officer (Principal Executive Officer)

Date: August ~~5, 2022~~4, 2023			/s/ ~~Scott~~William C. ~~Bomar~~Zint
			~~Scott~~William C. ~~Bomar~~Zint Senior Vice President, Chief Financial Officer (Principal Financial Officer)

Date: August ~~5, 2022~~4, 2023			/s/ Chad P. Kurth
			Chad P. Kurth Vice President, Chief Accounting Officer (Principal Accounting Officer)

4744


			As Revised
(in thousands)	Quarter Ended March 31, 2021		Quarter Ended June 30, 2021		Six Months Ended June 30, 2021		Quarter Ended Sept. 30, 2021(1)		Nine Months Ended Sept. 30, 2021		Year Ended December 31, 2021		Year Ended December 31, 2020
Revenue	$	518,104	$	535,493	$	1,053,597	$	532,141	$	1,585,738	$	2,156,313	$	2,079,103
Net income (loss) attributable to Deluxe	19,044		24,579		43,623		14,695		58,318		74,843		(54,489)


	Six Months Ended June 30, 2022		Year Ended December 31, 2021
Income tax at federal statutory rate	21.0	%	21.0	%
Change in valuation allowance	14.9	%	0.1	%
Tax impact of share-based compensation	5.3	%	0.9	%
State income tax expense, net of federal income tax benefit	2.6	%	2.4	%
Non-deductible executive compensation	2.4	%	1.7	%
Foreign tax rate differences	1.7	%	1.7	%
Tax on repatriation of foreign earnings	1.4	%	4.9	%
Non-deductible acquisition costs	0.1	%	1.5	%
Sale of business (Note 6)	(18.3	%)	—
Research and development tax credit	(1.1	%)	(0.9	%)
Other	(0.3	%)	(0.2	%)
Effective tax rate	29.7	%	33.1	%


(in thousands)	Six Months Ended June 30, 2022			Year Ended December 31, 2021
Daily average amount outstanding	$	1,189,469		$	1,109,819
Weighted-average interest rate	2.99		%	2.43		%


Period	Total number of shares purchased(1)	Average price paid per share(1)		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs(2)
April 1, 2022 – April 30, 2022	30,406	$	30.29	—	$	287,452,394
May 1, 2022 – May 31, 2022	1,727	21.20		—	287,452,394
June 1, 2022 – June 30, 2022	11,456	22.32		—	287,452,394
Total	43,589	27.84		—	287,452,394