• Delivered strong consolidated revenue growth of 17.7% in the second quarter
• Revenue increased 6.6% excluding the First American acquisition and business exits
• All four segments delivered year-over-year sales-driven revenue growth, led by Payments and Data-Driven Marketing
• Net income of $22.1 million, up 82.6% from the prior year primarily driven by a gain on the sale of our Australian web hosting business
• Adjusted EBITDA rate of 18.1% down from 20.4% in the prior year
• Declared regular quarterly dividend
• Updated full year 2022 guidance to reflect strong revenue performance and lower Adjusted EBITDA rate expectations

MINNEAPOLIS--Deluxe, a Trusted Payments and Business Technology™ company, today reported operating results for its second quarter ended June 30, 2022.

“Our strong sales momentum continues. We delivered our fifth consecutive quarter of sales-driven revenue growth led by our Payments and Data businesses,” said Barry McCarthy, President and CEO of Deluxe. “All four of our segments once again achieved year-over-year revenue growth, demonstrating the durable demand for our products and services even in an uncertain market.”

“While we were very pleased with our sales performance, our second quarter Adjusted EBITDA rate was impacted by inflation and supply chain disruptions primarily in our Promotional Solutions segment,” said Scott Bomar, Senior Vice President and Chief Financial Officer of Deluxe. “We are updating our full year guidance to reflect our strong revenue performance and rate pressure.”

Revenue for the second quarter was $84.8 million higher than the previous year. Excluding incremental revenue from the First American acquisition, which closed on June 1, 2021, and business exits during the quarter, revenue increased $31.2 million, or 6.6% year-over-year.

The Payments segment delivered revenue growth of 65.7% over the previous year to $171.2 million. Excluding incremental revenue from the First American acquisition, Payments grew 6.7%.

Net income of $22.1 million included gains of $17.5 million from the sale of the Australian web hosting business and a call center facility, and also included an $8.0 million increase in First American acquisition amortization and an increase in interest expense of $11.9 million resulting from the acquisition transaction. Prior year net income included $15.9 million of acquisition transaction costs.

Adjusted EBITDA margin was 18.1%, down 230 basis points from the prior year and was impacted by inflation, supply chain disruptions primarily affecting the higher margin portion of our Promotional Solutions business, and planned IT investments.

Cash flow from operations for the first half of the year was $72.2 million and capital expenditures were $45.3 million. Free cash flow was $26.9 million, a decrease of $10.3 million compared to the first half of 2021, and included increased interest payments of $28.8 million.

Outlook

Given our strong revenue growth, as well as inflation and supply chain disruption impacts on our margin rate, the Company now expects the following for full year 2022:

• Increasing full year revenue growth outlook to 10% to 12% excluding the impact of business exits; or 8% to 10% as reported
• Modifying full year adjusted EBITDA rate to 18.5% to 19.0% with the fourth quarter rate being higher than the third quarter due to our normal seasonality pattern
• Capital expenditures of approximately $105 million

The guidance outlined above is subject to, among other things, prevailing macroeconomic conditions, anticipated continued supply chain constraints, labor supply issues, inflation, and the impact of recent divestitures.

Capital Allocation and Dividend

The Board of Directors recently approved a regular quarterly dividend of $0.30 per share. The dividend will be payable on September 6, 2022 to shareholders of record as of market closing on August 22, 2022.

Earnings Call Information

Deluxe management will host a conference call today at 8:30 a.m. ET (7:30 a.m. CT) to review the financial results. Listeners can access the call by dialing 1-888-210-4748 (access code 7092711). The webcast and presentation will also be available on the investor relations website at www.investors.deluxe.com. Alternatively, an audio replay of the call will be available after 11:30 a.m. ET through midnight on August 11, 2022 by dialing 1-800-770-2030 (access code 7092711).