DLX - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome everyone to the Fourth Quarter 2018 Deluxe Corporation Earnings Conference Call. At this point, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference maybe recorded. I would now like to turn the conference over to our host for today, Ed Merritt, Treasurer and Vice President of Investor Relations.

You may begin.

Ed Merritt

welcome Deluxe and XXXX fourth Sonia call. earnings you, everyone Corporation's to quarter Thank Deluxe's Vice Treasurer Relations. Merritt, Ed I'm and President Investor of

Joining I Keith is Chief in call of today's Officer. me our Barry, end questions. on and Keith I remarks, intentions future remind President and regarding At Barry the the Executive Litigation take financial and our forward-looking management's Bush, today performance in McCarthy, that company's estimates, the and made prepared Chief and will Financial as comments you Officer; regarding Private today's like would Reform to XXXX. expectations defined Act nature are projections Securities of

those risks such, uncertainties to cause which projected. comments could from results subject As these to and actual materially are differ

or that SEC company's actual information from cause the in are Investor about Relations XX-K This GAAP measures non-GAAP call. Additional to on reviewed reconciled today's part information a issued posted furnished are results the release that filed our factors with as was release the during Form the of information the in our more will are be comparable year also financial morning. projections December release to deluxe.com/investor. at press Any references X-K website the morning, XXXX. call which that presentation various the the during by in Form on this is company financial this press detail measures statistical differ this as press addressed Portions and we in this of contained XX, financial for in ended well to as could

Barry Now I'll turn call the to over

Barry McCarthy

President with my call a and first Ed you, Deluxe. be everyone. as It's of today at to CEO good you earnings Thank privilege and morning,

continue here. in retirement, important during Before we the at years it. to time as some chose many coming a check shareholders. share he general some very where over best background I'm solutions printer create why of I'll In also provider us, accelerate honored him vital my value become month. his our like I'll and exciting contributions a some outline I'd my from urgent few Deluxe Lee initial transition a his to transformation nearly support the we a thank to a XX and Deluxer of with I get minutes, provide wish Along all the join acknowledge first for I to and priorities this weeks for from ongoing to observations few for sense I'm his of Schram headed and here. started, deserves this of technology-enabled and

to Keith get go from me report I details of that shortly. we've strong highlights pleased year revenue have provide I'll growth. Before XXXX. I'm some to another more into let delivered that,

to results. full for is and adjusted technology-enabled quarter additional grew share a XXXX Keith driven call record earnings XXXX. let we positive XX% and to clear double-digit small printer delivering that fact, growing revenue increased X% the marked business Total of which at continue fourth rate. the for operating a financial services of With and ended per forms and our In and to I details by grow revenue our to a solutions check and quarter note were year. revenue more think top the data-driven health declined address with delivered the solution. I'll few fundamental the data-driven and solutions the data-driven Had partially line XXXX marketing Checks company offset expected, Checks Direct X% within challenges is strong. have underperformance very the it's on which increases fourth by in banner minutes. important in perform services business forms a in transform XX% year strategy that to which continue financial Deluxe cash quarter a increased me a and would our It's on opportunities by marketing that, X%. from provider turn year-over-year to been in In These flow. detail we marketing well as

Keith Bush

We grown of earlier a in $XXX over mentioned the FX data-driven delivered which million, marketing revenue revenue expected, quarter. year. represents health, company Barry. the flat. quarter which Thanks, as Barry about company's about To excludes fourth grown items had non-comparable last increase organic underscore as revenue acquisitions, other the and fundamental would've Organic X% Barry's was point

$XX in $X.XXX other to better As all-time ninth Barry of was declined in in slightly revenue the revenue and an Checks million X.X% a X.X% about $X.XXX X% this previous set the we compared expectations. noted, check Services or year. back total XXXX, grew revenue flat Financial about Services record than the and reported for total year. Financial at also our billion year. of we billion, of for the quarter revenue XX% units less X% and declining represented over fourth small $XXX high established exceeds year Direct from grew consecutive organically. segments, last about million X.X% organically and revenue. was basis or grew full year last XX% quarter full Shifting over the expected services than XX% prior but solutions ending on business over $XXX and and our of revenue about services the was million revenue to Marketing grew year

for good accelerating progress As on mentioned, transformation on value increasing making this our we're strategy and we're our focused shareholders. and Barry intently

and XX% the a continue or organically. MOS grew ending and $XXX quarter, of about MOS central nearly solutions XX% organically. are at increase of year other transformation and Marketing Our million representing XX% year-over-year or increase XX% revenue the X% for to about or an our to to $XXX grow. million, services total total MOS represented revenue last increased and of X% year, over for

organically. organically. and was marketing our annual by line our Services and XX% at business at X% the prior slight revenue the with ended year than year-over-year and year following with XX% the in about $XXX the year year delivered X%. about growing line from growing at our expectations. declining million Data-driven with decline about category; ended Web prior MOS of marketing million we XX% year growing expectations the $XXX management a slightly ended in $XXX million Treasury ended the Specifically, small better the was X% from and $XXX expectations, year X% solutions at year-over-year million organic

X% However, fourth over quarter the in revenue grew about XX% and organically the year. for

year $XX Check representing of total with $XXX Finally, declining about and X% fraud, in ended million revenue line expectations quarter other from prior services XX% year operational at the or the organically. XX% at about the security our ended revenue. million,

and margin XX% mix, of XX% revenue. by margin XXXX. $XX quarter Gross points million and was of service from total The for about the Forms and accessory from ended at revenue declined to basis representing impact product XXX XX.X% and last $XX.X XX.X% shipping by represented were year costs partially and expense million material and last revenue improvements acquisitions SG&A compared offset price previous increased productivity. to from only year. in increased and of increases manufacturing

additional to small on and more year, legal process, a in cost offset asset from initiatives the by in business were higher sales expenses SG&A reduction favorable acquisitions, CEO costs the segment. Continued gains commission prior than related transition average and settlement the

XX% initiatives. check and was increased I XX.X%, and discuss reductions. from by operating of shortly, costs usage shipping decline for quarter. and higher driven margin and higher margin by continued compression. by The from XX.X%, Excluding continued in Revenue offset basis shipping from in increases primarily was average of Services of XXX decline will was down Financial price marketing adjusted Small basis basis XXXX. margin contributed rates quarter of non-GAAP previous product points which by material down partially Business acquisitions, was and allowances benefits the cost price revenue only The service margin commission to the experienced in XXXX, acquisitions, increases reduction to partially Services XXX pricing rate XXXX. adjusted margin continued reduction previous initiatives XX.X% underperformance adjustments, cost a operating driven XXX partially of operating offset adjusted XX.X% only a data-driven cost the offset and check also points points and mix declines, the

in acquisition with amortization service the drove mix and addition, [indiscernible] expense. product In changes higher along

a of per adjusted Direct non-GAAP As reminder, XXXX and initiatives. share. in basis includes points management from legal had $X.XX in benefit same was a fourth the aggregate margin XX cost adjustments share XXXX Checks for Diluted earnings per from increased period. by settlement we XX.X% $X.XX operating driven of a the quarter

profit During lower to Adjusted federal that the high-end per CEO quarter, ended revenue. of impact we and by lower the transaction costs marketing was recognized $X.XX diluted by driven share charges $X.XX related benefit and and for restructuring reform. per the was our data-driven costs, and offset integration, of outlook spending share tax of partially $X.XX near of flow-through EPS a transition

by acquisitions. expense higher end and increase was operating on statement, million. sheet credit $XXX and about million. for Depreciation was repurchases our were with the and of balance the amortization year year cash at facility the $XX Cash provided about acquisition Turning to $XX due million. drawn million, $XXX expense Capital $XX and share were the the we activities to was amortization million flow expenditures primarily

Moving onto our XXXX outlook.

more our planning to that of This provide gains during go-forward full and benefits will sales. M&A but forward-looking driving a acquisitions the transparent on Now outlook further the from we business. you more are view will excludes returns of activity with from half from our impact any asset on moment, current architecture businesses. a adjusting focus XXXX we enhanced in on discuss Barry pause first to the

This revenue sales to rate, we innovation the strategic and company. the solutions is slow to scaling we important will capabilities profit direction on a as to temporarily our and our focus transition provider. of allow us this to growth it While continue technology-enabled believe product

versus have outlook last quarter some expect a be full year a solid. to result of first we as but We non-comparable challenging to year expect the items

first to share. in adjusted to $X.XX and million million of quarter diluted to per revenue $X.XX from we For range EPS to the the range $XXX $XXX expect be

on The first included gains $X.X results of million from asset XXXX quarter sales.

guidance not include asset the Our benefit for on quarter gains sales. from any first does

very XXXX. a had QX strong management treasury Additionally,

orders balance of the XXXX of the of we second we over rollout Although in with record slower half the a XXXX, year. the had ramp to the expect start

we amortization on Direct expenses, highest declines adjusted and tax diluted pressure Checks, the putting EPS. addition, the revenue In volume higher all in expect medical acquisition of year, and rate

revenue $X.XX we some we to full digits diluted adjusted on full low which consolidated expect includes our year EPS. to of grow GAAP single To directional improvement delivered assets year and $X.XX in we you to see gains In expect year XXXX EPS from full perspective give Turning XXXX outlook. sales.

we sales. this growth. investments incremental account are This we assuming adjustment, see slight on After we outlook accelerate our benefit diluted any adjusted evaluating taking year-over-year improvement are from not expect into a EPS. XXXX in to before asset gains For is to

year. current We are the looking for investments to self-fund these opportunities in

differences timing be may might which there outlook. impact However, this

earlier, mentioned close acquisitions. I make but pause As will as future appear even provide planned to upside for growth slightly long-term better slow will our we the acquisition an growth on

provide will including into full our year and plans earnings visibility cash greater flow call. our projections April We on

make management throughout We continue intro product modest innovation, and XXXX to structural deliver and in to cost expect significant sales improvements. we'll on to investments focus and beyond

provide capital additional of structure, will approach and April. to we expect to this of acquisitions our all on to color growth We through balanced Shifting transformation. in investing our drive organically maintain

channels services. with acquisition be it and As The and complements customers other XXXX. credit funded acquisition and customers. in in our new We of expect source I on small services. to this other to [ph] will a December, developing earlier, businesses helps accretive through slightly also the new compliance, included MyCorporation, a new This longer draw of was will we facility which great we opportunities source our of our acquisitions outlook. be no acquisition Deluxe into mentioned believe closed be cross-sell In strategy provides on business incorporation,

of allocation In a expect capital paying we dividend. to quarterly terms continue other priorities,

Directors last $XXX recall, of repurchase a new you If million share Board program. authorized year our

facility. we common amount During XXXX we full the stock repurchase the as $XX repurchased fourth as flexibility we $XXX continue million. facility, excess the XXXX we to with generate of expect and on transformation. $XXX financial January quarter, additional credit giving beginning us outstanding this our stock We are facility The for our our against by ended million proceeds corporate drawn to quarter. to reduce share extent $XXX bringing our the purposes, XX plan we cash, more XXXX be execute we to In common on early expanded and capacity To repurchases as year million. credit million credit general to used that total

Now, I'll call to Barry. the turn back

Barry McCarthy

Thank you, Keith.

As of at I beginning very the opportunities for Deluxe. the ahead I'm mentioned optimistic the call, about compelling

company to talking for position a in that learning to customers, our at full recognize I looked I've hundreds to achieve a spent work the our do believe of and I've is teammates and been Overall, potential. current have strategy. many to and few our I of only I've the on our weeks, at a leaders the solid Although acquisitions time we but path, listening business, sites, meeting our

future I'm optimistic than Deluxe joined just weeks our about now more Importantly, ago. I even when a was few I

Before I because Deluxe, I share about I how positions you under-appreciated. our came month, in significantly company the leading the why plans coming for with is background enthusiastically talk the company I the saw well believe joined, me Deluxe to I to future. want my for what and I into

We have assets. an impressive collection of

technology favorably business Deluxe Services base with another Services our our segment X,XXX growing a has adds top companies On tier clients counts compares partners. global alone, million double-digits. example, Business already Small of X.X institution and For of financial with Financial XX% loyal customer

like PE I transformation underway. our that sheet low yet has not than of is a believe company, already picture, leverage. multiple While traditional current the the looks the technology strong with balance recognizing a the consequence printer company a Completing market's more our

I learn and segments know turned business deliver innovation exit. fortune to management successful career importantly, VeriSign how selling each up and record only greater each business the potential. enterprise a the because confident also change everything a a on product every a urgency. including ability but data need Fargo also First before. at worked it's not doing role I'm our later at management, sure bottom-line my pay I've and career, focused spent PayPal. and had positioned began cash enterprises. to Deluxe remain stock. tackled is mentors company business I And turnarounds Earlier unlock I'm acquisition Wells my my large I've worked in product and is company in started several I lead do. and flow financially value in Silicon global To we're by in invest challenging I'm we'll to have growth and and ran brand from and repurchase domestic won't field Data that that small These career; delivered uniquely at generate and business who and and but at the I the dividend sales with in understand The at payments happen we great planning I for decisions, accelerate shareholder we businesses. challenges and face in performance I've point, the XX micropayments years to similar company business, legendary with running ATM at sales winning the I headquarters competent changes in can so financial almost P&G to major cycle. Our at today. overnight, over Valley and leading in increased leaders to the I around and the for both, I have of difficult condition. significantly to consistent institutions, enables roles. solid

While a have been job do be few the I've done, do an urgency to for sense on and only of I weeks what clarity needs so. have intent on I to

me you immediate my walk focus Let through areas.

serve our will us company full sales clients we enterprise This accelerate the will and capability profitable of First, to organic expand revenue the potential and unlock allow to growth. holistically. selling

to we solutions targeted will strategy, sell. expand we ensure innovation organization and markets our and to effectively to product sales in new the and management capabilities competing growth the give Second, are better

consider needed objective all and to our we costs options. examine unnecessary the structure self-fund untouchable eliminating Third, Nothing we and growth investments. will enhance both, will is of rigorously expense margin with structural

need greater our we our to to culture focus clients structure we're and of speed on execution, put and accelerate this. Finally, on taking and action reinvigorate immediate

Deluxe where XX partnerships for about learn on calling help Top more the we Day. for our early and hundreds leaders February clients [indiscernible] course build Financial to clients Our host our we our in our And to needs. Exchange us chart expect are of emerging what we New will

XXXX As us first strategy, better and scaling key pause will allow last acquisitions acquisitions efforts. on year we've from and additional sales our integrate of mentioned to earlier, half work to the during we the product

our this and deliver to and more new a scalable stronger slow future indicated, take positioned will growth better more scale. acquisitions to our forward revenue going Keith have but will As profit be temporarily and and we of organic solutions company integrate easily will advantage

help we strategic are shareholder more forward return; release, alliances. our specifics consulting one product about and management us strategy. to task In opportunities you providing when plans the time. we together of plans maximize quarter include first have look and In to our engage stress [ph] firms sales, share identify earnings our at next this direction, plan foremost to current addition, and will strategic an that additional I'll April, management to update for world's I

a there questions, in advance. touch to I are on would taking key Before like few points

despite in meet organic due model specifically Macro impacted revenue like the business gaining mortgage and growth negatively marketing the but revenue, had First, rates our factors our to other wins is we customer underperformance data-driven good primarily within interest expectations, arena did record not business. pay-for-performance traction. this we've higher

signs the be to I is positive done. more there marketing there much are While data-driven work know space, some in

business deposits, clients from progress new Treasury us. small to and web spots in logo about institutions web [ph] existing largest XXXX [indiscernible]. services business acquisition growing Business Small to signing anticipate hosting, initiative; multi-year will to the new and to cross-sell design, strong and segment which enable web design, help new we're revenue, grow the MyCorporation, to at We're XXXX, pleased email provide in services, our we demand believe for of more. solutions For sweet we and businesses. marketing, banking financial us them grew management products customer Capturing payroll recent such as all In services XXXX. mover formation services us integrating XX% clients develop made corporation enables relationships

but Finally, questions company thank up call I'd our our before my of my the hope have and for we optimism for urgency, now of been is proud great to I sense strong brighter. Deluxer. the good and to people. be I you've people work jersey and open it's myself for work bias as to dedication. traction their Deluxe A Deluxe teammates heard never opportunity take is and done to all call clearly future the There like this I'm only wear future. company hard has a as

and Ed I Keith, Now the will for questions. open call

Operator

[Operator you. first Charlie question Our Instructions] from Strauzer comes Thank CJS of Securities.

line Your open. is

Charlie Strauzer

I just questions quick had all a for you morning. couple this of

look you're for you giving guidance But the breaking revenue into in assumptions at only you since out, is couple any that at growth if -- you're the the organic this year, of full been Just that assumption look weeks appreciate it's initial I'd a in there. that year?

Barry McCarthy

in taken which is that is important in out what things two that thing difference we've is our most So specifically I a are architecture we going -- forecast; think forward. planning

or any assuming view the we and are new business acquisition; of can. sale, we you are not not we the trying So planning on give transparent any gains assuming so to most as we're

in to thinking specifically about -- how we're modest forecasting is you've I I asking first-pass and about that very, growth, but organic full think year. seen increase what think we're numbers if you're the organic our were growth very

Charlie Strauzer

you I'm -- is should kind look be for you're the to and against using for this at about year said side, when the year, guidance base? we of we sorry, on $X.XX using it $X.XX guidance, the as full that about adjusted of base or it the for QX then EPS, past more versus QX talked talking a the And EPS

Keith Bush

include on is reported about thinking $X.XX The you're being did that it our basis benefit. Yes, sale $X.XX and of right.

so gain guidance, So we benefit have included any on in you be from not would sale working our lower XXXX number. that

Charlie Strauzer

say? growth modest is what number you're off trying assuming So some the lower to

Keith Bush

Correct.

Charlie Strauzer

turn employ of a disappointing this you little you to there strategy here; obviously back bit And Are can more the little get that the on bit terms broadly think just around of kind again? fixes was past data-driven then, just marketing thinking vary year. a that

Barry McCarthy

know to for a and it's From nice really what opportunity grow. an today I business continue to us

some we performance have plans have the and place We for will that terrific improve expect assets in teams the year. help I know

area invest So teams to growth. over it's I the those to time, accelerate weeks intend with to coming an work our

Operator

from Clement Jamie Buckingham. And our of next question comes

Jamie Clement

different initially Barry, obviously will if group the more you comments but organization, your look customers of have there than kind forward? customers if sales financial business of themes we thoughts institution going forth look you becoming about you can terms across kind processes, common small of radically, two force any customers, that thematically picture from here you improving that at radically customer-centric your of or the across are radically, big in progress

Barry McCarthy

I I'm here can weeks give really… only only you a few this, into

Jamie Clement

Totally acknowledged, totally acknowledged.

Barry McCarthy

you I'm company I my company, that have we what leveraged I more holistically. as I philosophically at we And can companies, look of our a and about. thoughts not really assets thinking give have see fantastic many

class by to it, that integrated especially I customers, institutions. including customers can together So we enterprise stand putting an catalog financial present

We design, ability think the only time going going but believe to we they mobile that's really need needing opportunity of formation our do And of of a that positioned, businesses to the MyCorporation we a for especially sell more not scenario pleased well. opportunity of small cross-sell business in this case I but with our can commerce and about time one the opportunity solutions that us well of and present clients. enterprise in our if business have many is forward solutions can opportunity formation, our services or website, agree are the we to distribute ecommerce, moment opportunity than multiple at design business we're in to as reasons believe to FI customer, other puts incorporate that to different business a with merchants you is book [ph] website, small small logo clients etcetera. that host at acquisition And these an we're existing are present that the and very business to we existing beginning to an it because provide. for at all

Jamie Clement

for number So sentiment the the the small on small little last couple the macro, business a but thoughts just your months, has you data deteriorated bit over curious of it's one with feelings macro Are what are shutdown. here or seeing the the business your you couple government all on of administration shutdown months? the backdrop what hearing -- over you are last got involved,

Barry McCarthy

Jamie, the you that let to how same about tell it I I our read all read business. things me but relative you think

spots generally are us business turn a so start are the And have their that customers. find foundational small we've generally places to those if very environment, business really off Even don't sweet they services lobe And sturdy footprint. on because there got is nice we we to a a businesses provide businesses [ph] where to small operations. website, that ongoing the are don't new trying their for

happening So immediate in starting macro durability of we us protection the what's our us term, regardless environment. gives solution the of think like data that -- and off our I

Jamie Clement

looking think next I decline -- enough to release like all guide. you the by business turnaround the other Does year data-driven as from transition feel in quarter. aspects have and XXXX more or I'm is there for mentioned in in X% wait to minus an the to do But you your comprehensive first of of turn positive? guidance a the XXXX organic marketing to positive juice all you're on presentation, for we'll Just earnings about for revenue you the of for obviously, X% noticing a goes

Keith Bush

quarter data-driven is important I giving at in this for through. management do XXXX make year. wobble we an the first XXXX was up important that you're are strong that [ph] incredible to attention marketing year acknowledge just really we they it that quarter think and wrapped looking a of quarter also to treasury move it's when with last and that But it's recognize

on effect we're [ph] So focused we of our we're in well most need and growth. XXXX But the the first the data-driven feeling certainly up as of tips to ramp that. pipeline to marketing that rebuilding quarter be

Operator

be that one we more Company. Thank coming & Chris from of will for you. time have McGinnis question, Sidoti and And

Chris McGinnis

on and you So been of small guess helping don't kind I it's you'd confident direct anything that that terms start checks, you Thanks. know that three maybe I the drive I I about so and in more -- or of you could SI lines of just other more the we early, already one feel But excites it's mind? know just there at when guess in transformation; if call. look business business stressed

Barry McCarthy

Let me think sort to exciting our our it I about customer company is down of tell you really comes what prospects, our most footprint. and and incredible

X.X embedded portfolio of million relationships that expanded or businesses, have have financial financial beyond enviable institutions, businesses. an we just So with small banks already X,XXX with and think be enterprise in And we small we can institutions. so traditional many business relationship

we margins, got at way we comments succeed. help to early the to place we can organic a and And the the to can service start help growth that our we've in a make company with made which way and offer, product the strong the have from sell a it that and earlier -- will already need an customers us an to I already extend find deliver a that entire I and like the consume, them we become companies and we of got. relationship huge company much suite enterprise already and we've can if things we within of do easier stronger can that have. So operate observation integrated that a opportunity the with with we and is want way footprint to even really just to what also more take us We us we can just have relationship that lead which like customers that --

think why on product one any thing we've highlight more sales The program first wouldn't place I capability So to to as and new here. is scale our another day biggest we customers holistically. the it's over do reach which and got we to I have distribution because multiple our our got initiative better

Chris McGinnis

forward? end just And share you. Thank last purpose question; through get we the maybe buying going because you're should year account for of one quarter, then just that

Barry McCarthy

that Yes, wait the we're XX-K provide going to until to to need information.

Chris McGinnis

in you much. very And QX. good luck Thank

Operator

Barry Thank like the would call to you. now turn And back to I any further over for remarks. McCarthy

Barry McCarthy

you questions you like today. small give your I'd all thank Well, to summary. participation for a and

I'll First, I forge the and stronger plan to innovative delivery and products and new the additional belt, support an earnings the the their into to see to structure services, the I'd position detailed weeks and reduce which achieve spend of revenue our in needs. the how transforming we effectiveness provide second, reviewing direction time profitable and organization, with a culture long-term. of much XX can our strategic improving be of will for clients so days call partnerships development organic organization better my have process of I And cost, coming more company on insights growth our driving our under by enhancing our sales April our to in my

back turn Ed call some final comments. So I'll the for to now

Ed Merritt

Barry. Thanks,

quarter that management New us, we Susquehanna On at Investor XX call. Advisory Telsey Thanks New Tech we'll and conferences in XX the Before be like in will the and York XXXX March Conference. Summit, today's the and quarter. the on for XX be be Group Deluxe first joining XX the at Deluxe we'll that you remind fourth concludes conclude March York in and earnings call, I'd to participating following at

Operator

great have and today's gentlemen, in and program, participating for Ladies you thank may all concludes a today's This disconnect. day. you Everyone, conference.

Deluxe (DLX) 24 Jan 192018 Q4 Earnings call transcript