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Deluxe Profit in Q1 Tops Esimates

Friday, April 26, 2013

Press release from the issuing company

ST. PAUL, Minn. - Deluxe Corporation announced its financial results for the first quarter ended March 31, 2013. Key financial highlights include:

      Q1 2013     Q1 2012     Vs. Q1 2012
Revenue     $387.6 million     $378.0 million     2.5%
Net income     $45.9 million     $44.1 million     4.1%
Diluted EPS – GAAP     $0.89     $0.86     3.5%
Adjusted Diluted EPS – Non-GAAP     $0.91     $0.88     3.4%

A reconciliation between earnings per share on a GAAP basis and adjusted earnings per share on a non-GAAP basis is provided after the Forward-Looking Statements discussion.

Revenue of $387.6 million and adjusted diluted EPS exceeded the high end of the range in the prior outlook due to strong operating performance, particularly in the Financial Services segment.

“We delivered an outstanding first quarter to start the year, despite a ramp in brand awareness spend and two less business days than last year and we exceeded both our revenue and adjusted EPS outlooks,” said Lee Schram, CEO of Deluxe. “All our segments performed well and checks and forms performed better than our expectations and importantly, marketing solutions and other services revenue grew 22% over last year. Our strong first quarter positions us well to grow revenue in 2013 for a fourth consecutive year.”

First Quarter 2013 Highlights:

  • Revenue for the quarter was $387.6 million compared to $378.0 million during the first quarter of 2012. Revenue increased 2.5% compared to 2012, despite two fewer business days in 2013, driven by 8.1% growth in Small Business Services. Marketing solutions and other services revenue increased 22.2% compared to 2012 and represented 19.2% of consolidated revenue, up from 16.1% in the first quarter of 2012.
  • Gross margin was 65.6% of revenue, compared to 66.3% in the first quarter of 2012. Unfavorable product mix and increased delivery rates and material costs in 2013, were partly offset by favorable impacts from price increases and the Company’s continued cost reduction initiatives.
  • Selling, general and administrative (SG&A) expense increased $3.3 million in the quarter compared to 2012. Increased SG&A expense associated with commissions on increased revenue, as well as higher brand awareness spending and the OrangeSoda acquisition in the second quarter of 2012, was partially offset by benefits from continued execution against expense reduction initiatives.
  • Operating income in 2013 was $77.7 million compared to $78.0 million in the first quarter of 2012. Restructuring-related costs were $1.4 million in 2013 versus $1.9 million in 2012. These costs were primarily attributable to the Company’s on-going cost reduction initiatives. Operating income was 20.0% of revenue compared to 20.6% in the prior year driven primarily by product mix, increased delivery rates and material costs, and the OrangeSoda acquisition in the second quarter of 2012, partly offset by higher revenue per order and continued cost reductions.
  • Reported diluted EPS increased $0.03 from the prior year due primarily to lower interest expense driven by the Company’s debt refinancing completed in the fourth quarter of 2012.

Segment Highlights

Small Business Services

  • Revenue was $248.3 million versus $229.6 million in 2012. Revenue was 8.1% higher in the quarter driven by growth in marketing solutions and other services revenue, accessories and other product revenue and in checks, driven by our on-line, Safeguard® distributor, and dealer channels. Revenue also benefited from price increases and the OrangeSoda acquisition.
  • Operating income in 2013 was flat at $38.6 million, compared to $38.8 million in 2012.

Financial Services

  • Revenue was $87.2 million compared to $90.6 million in 2012. The impact of check usage declines and two fewer business days offset the benefits of price increases and growth in non-check revenue.
  • Operating income in 2013 increased to $22.9 million from $21.9 million in 2012.

Direct Checks

  • Revenue was $52.1 million compared to $57.8 million in 2012, primarily driven by lower order volume resulting from the continued decline in check usage and two fewer business days, partially off-set by higher revenue per order.
  • Operating income in 2013 decreased to $16.2 million from $17.3 million in 2012.

Other Highlights

Cash provided by operating activities for the first quarter of 2013 was $51.5 million, flat compared to $52.0 million in 2012. Higher payments for performance-based compensation related to our 2012 performance were offset by lower contributions to fund future medical benefits, as well as lower contract acquisition and income tax payments.

Full Release


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