Revenue increases 6.5% over last year – at high end of outlook

Diluted EPS $0.91; Adjusted EPS of $1.04 increases 6.1% – at high end of outlook

Strengthens Full Year Outlook for Revenue, Adjusted EPS and Operating Cash Flow

ST. PAUL, Minn. - Deluxe Corporation, a leader in providing small businesses and financial institutions with products and services to drive customer revenue, announced its financial results for the first quarter ended March 31, 2015. Key financial highlights include:

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

Both revenue and adjusted diluted EPS were at the high end of the range in the prior outlook driven by strong operating results in all segments despite weaker than expected foreign exchange rates and an unfavorable effective tax rate. Diluted EPS on a GAAP basis also includes a $0.12 per share charge related to the previously announced early redemption of the Company’s $200 million 2019 Senior Notes in March 2015.

“We delivered another strong quarter with both revenue and adjusted EPS at the top end of our outlook,” said Lee Schram, CEO of Deluxe. “With this strong start to the year, we continue to expect to deliver our sixth consecutive year of profitable revenue growth and our seventh consecutive year of cash flow from operations growth. 2015 is a special year for Deluxe as it represents our company’s 100th anniversary. Over the last 100 years, we have established Deluxe as a trusted partner to financial institutions and small businesses, offering products and services to help them grow and thrive. Looking ahead, we will continue our hard work to transform Deluxe to be more of a growth services provider for our clients.”

First Quarter 2015 Highlights:

• Revenue increased 6.5% year-over-year due to the Financial Services segment which grew 20.5% and included the results of Wausau Financial Systems which was acquired in October 2014. Additionally, the Small Business Services segment grew 3.9%.
• Revenue from marketing solutions and other services increased 31.5% year-over-year and accounted for 27.8% of consolidated revenue in the quarter.
• Gross margin was 64.8% of revenue, up from 64.4% in the first quarter of 2014. The increase was primarily driven by a favorable products and services revenue mix and improvements in manufacturing productivity, partially offset by higher delivery and material costs.
• Selling, general and administrative (SG&A) expense increased 9.8% from last year primarily due to additional SG&A expense from acquisitions partially offset by continued cost reduction initiatives in all three segments. SG&A as a percent of revenue was 45.0% in the quarter compared to 43.7% last year.
• Operating income increased 5.6% year-over-year and includes restructuring and transaction-related costs in both periods. Adjusted operating income, which excludes these items, increased 1.7% year-over-year from higher revenue and continued cost reductions.
• Diluted EPS decreased 2.2% year-over-year. Excluding restructuring and transaction-related costs in both periods, as well as a $0.12 per share loss on debt extinguishment in 2015, adjusted diluted EPS increased 6.1% year-over-year driven by stronger operating performance, lower interest expense and fewer average shares outstanding, partly offset by a higher effective income tax rate.

Segment Highlights
Small Business Services

• Revenue was $277.0 million and increased 3.9% year-over-year due to growth in marketing solutions and other services, as well as growth in the Safeguard® distributor, major account and dealer channels. Previous price increases also benefitted the quarter while unfavorable foreign exchange rates negatively impacted revenue growth by approximately 0.8 percentage points year-over-year.
• Operating income increased 14.1% from last year to $49.5 million. Adjusted operating income, which excludes restructuring and transaction-related costs in both periods, increased 7.8% year-over-year due primarily to higher revenue, a favorable product mix and cost reductions.

Financial Services

• Revenue was $111.5 million and increased 20.5% year-over-year due to growth in marketing solutions and other services, which includes the results of Wausau Financial Systems and growth in Destination Rewards, as well as the impact of previous price increases. The secular decline in check usage and the impact on pricing from a large financial institution contract renewal early in the second quarter of 2014 partially offset these benefits.
• Operating income decreased 6.4% from last year to $20.4 million. Adjusted operating income, which excludes restructuring and transaction-related costs in both periods, decreased 8.0% year-over-year, reflecting the secular decline in check usage, the large customer contract renewal in the second quarter of 2014 and the impact of acquisitions, partially offset by previous price increases and the continued benefits of cost reductions.

Direct Checks

• Revenue of $45.1 million declined 6.0% year-over-year due primarily to the secular decline in check usage and the elimination of marketing expenditures that no longer met the Company’s return criteria.
• Operating income decreased 1.3% year-over-year to $15.4 million. Adjusted operating income, which excludes restructuring costs in 2014, decreased 2.5% due to lower revenue, partially offset by cost reductions.

Other Highlights

• Cash provided by operating activities for the first quarter of 2015 was $77.7 million, an increase of $4.4 million compared to 2014, driven primarily by improved earnings and lower medical payments, partially offset by higher performance-based compensation payments.
• On March 16, the Company redeemed all of its $200 million 7.00% Senior Notes Due 2019. The early debt extinguishment generated a loss of approximately $0.12 per diluted share related to a contractual call premium and associated redemption fees. The early debt extinguishment was financed through the existing credit facility and the issuance of a new $75 million short-term bank loan.