Deluxe Reports Second Quarter 2017 Financial Results

Deluxe Corporation (NYSE: DLX), a leader in providing small businesses and financial institutions with products and services to drive customer revenue, announced its financial results for the second quarter ended June 30, 2017.

Revenue exceeded the Company’s prior outlook driven by strong performance by all three segments. GAAP diluted EPS was $0.01 below the range of the prior outlook and included aggregate charges of $0.07 per share for an asset impairment charge, restructuring and transaction-related costs. The asset impairment charge related to a small business distributor that was sold during the quarter. Excluding these charges, adjusted diluted EPS exceeded the range of the prior outlook due primarily to a favorable product mix in Small Business Services.

“We are pleased with our results in the second quarter, growing both revenue and earnings,” said Lee Schram, CEO of Deluxe. “While there appear to be mixed economic signals at a macro level, our strategy continues to deliver strong results, growing marketing solutions and other services revenue 26 percent over last year and now comprising over 38 percent of our total revenue. We believe we are well positioned as we enter the back half of the year to continue to deliver year-over-year growth in revenue, earnings and operating cash flow.”

Second Quarter 2017 Highlights
• Revenue increased 7.7% year-over-year, driven by Small Business Services which grew 5.1% and includes the results of several small tuck-in acquisitions and from growth in Financial Services of 18.9% driven by the results of FMCG Direct and Data Support Systems, which were acquired in the fourth quarter of 2016 and RDM Corporation, which was acquired in April 2017.
• Revenue from marketing solutions and other services increased 26.3% year-over-year and grew to 38.2% of total revenue in the quarter.
• Gross margin was 63.1% of revenue, compared to 64.5% in the second quarter of 2016. The impact of acquisitions, increased delivery and material costs this year, and a favorable adjustment from an environmental reserve in 2016, were only partially offset by previous price increases and continued improvements in manufacturing productivity.
• Selling, general and administrative (SG&A) expense increased 4.8% from last year primarily due to additional SG&A expense from acquisitions which was partially offset by continued cost reduction initiatives in all segments. SG&A as a percent of revenue was 42.9% in the quarter compared to 44.1% last year.
• Operating income increased 2.6% year-over-year. Adjusted operating income, which excludes restructuring and transaction-related costs in both periods and an asset impairment charge in 2017, increased 6.7% year-over-year primarily from price increases and continued cost reduction initiatives, partially offset by the continuing decline in check and forms usage.
• Diluted EPS increased 3.4% year-over-year. Excluding restructuring and transaction-related costs in both periods and the asset impairment charge in 2017, adjusted diluted EPS increased 7.5% year-over-year driven by favorable operating performance.

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