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 third quarter ended September 30, 2017.
Revenue exceeded the Company’s prior outlook driven by strong performance by all three segments. GAAP diluted EPS was $0.59 which was below the range of the prior outlook and included aggregate charges of $0.73 per share for asset impairment charges, restructuring and transaction-related costs. Excluding these charges, adjusted diluted EPS exceeded the high-end of the range of the prior outlook.
“In the third quarter, we once again delivered strong growth in both revenue and adjusted diluted EPS,” said Lee Schram, CEO of Deluxe. “Marketing solutions and other services revenue grew over 30 percent from the prior year and accounted for over 40 percent of revenue in the third quarter. Despite our expectations for a continued sluggish economy and the impact of multiple weather-related challenges affecting our customers across the country, we expect to deliver another consecutive year of growth in revenue, adjusted diluted EPS and cash flow from operations.”
Third Quarter 2017 Highlights
• Revenue increased 8.5% year-over-year, driven by Small Business Services which grew 2.5% and includes the results of several small tuck-in acquisitions and from growth in Financial Services of 28.0% 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 30.2% year-over-year and grew to 40.2% of total revenue in the quarter.
• Gross margin was 61.2% of revenue, compared to 63.8% in the third quarter of 2016. The impact of acquisitions and increased delivery and material costs this year were only partially offset by previous price increases and continued improvements in manufacturing productivity.
• Selling, general and administrative (SG&A) expense increased 2.4% 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 well leveraged at 40.8% in the quarter compared to 43.2% last year.
• Operating income decreased 41.6% year-over-year. Adjusted operating income, which excludes restructuring and transaction-related costs in both periods and asset impairment charges in 2017, increased 7.9% year-over-year primarily from price increases and continued cost reduction initiatives, partially offset by the continuing decline in check and forms usage. During the quarter, the Company recognized aggregate charges of $0.73 per share for asset impairment, restructuring and transaction related charges. Of the aggregate $0.73 per share charge, $0.46 per share was a non-cash goodwill impairment charge resulting from the declining core checks and forms business in the Safeguard reporting unit, $0.20 per share was a non-cash impairment charge for the discontinued NEBS trade name, $0.05 per share was a non-cash impairment charge for an internally-developed order management software solution and $0.02 per share resulted from restructuring and transaction-related costs.
• Diluted EPS decreased 50.4% year-over-year. Excluding restructuring and transaction-related costs in both periods and asset-impairment charges in 2017, adjusted diluted EPS increased 8.2% year-over-year driven by favorable operating performance. FMCG Direct had a shift into the third quarter of revenue originally expected to occur in the fourth quarter which drove approximately $0.03 per share of additional EPS improvement and favorable mix and delayed spending contributed an additional $0.03 per share improvement while medical expenses were approximately $0.02 per share higher than expected in the third quarter.
more detail at: http://phx.corporate-ir.net/phoenix.zhtml?c=61257&p=irol-newsArticle_Print&ID=2311638