Deluxe Corp. Earnings Call: Margins Up, Growth Mixed

Deluxe Corp. ((DLX)) has held its Q4 earnings call. Read on for the main highlights of the call.

Deluxe Corp. Earnings Call Highlights Profitability Gains Amid Modest Growth

Deluxe Corp.’s latest earnings call struck a cautiously upbeat tone, emphasizing strong gains in profitability, cash generation, and balance-sheet strength despite only modest revenue growth and continued pressure from its legacy print business. Management highlighted expanding margins, robust free cash flow, and a rapid shift in the company’s mix toward higher-growth payments and data solutions, with the data segment in particular delivering standout performance. While executives acknowledged ongoing headwinds in print and tougher comparisons ahead for the data unit, the overarching sentiment was one of disciplined execution and a more resilient, higher-quality earnings profile.

Adjusted EBITDA Growth and Margin Expansion

Deluxe posted full-year comparable adjusted EBITDA of $431.5 million, a 6.2% increase, showcasing the company’s improved earnings power. Adjusted EBITDA margin expanded 90 basis points to 20.2%, reflecting better cost control, stronger pricing discipline, and a more favorable mix toward higher-margin businesses. This margin expansion, achieved even with only modest top-line growth, underscored the company’s focus on operational rigor and profitability rather than pure revenue growth.

EPS and Operating Income Improvement

Earnings quality improved meaningfully, with full-year comparable adjusted EPS rising 12.6% to $3.67 from $3.26, far outpacing revenue growth. Operating income climbed 23% year over year, while GAAP net income increased to $85.3 million, or $1.87 per share, up from $52.9 million, or $1.18 per share. These gains show that Deluxe is converting operational efficiencies and mix improvements directly into bottom-line growth, a key positive for equity holders focused on earnings momentum.

Strong Free Cash Flow and Deleveraging

Cash generation was a major bright spot. Free cash flow surged to $175.3 million from $100 million the prior year, giving management more flexibility to reduce leverage and invest selectively in growth. Net debt was cut by roughly $76 million to $1.39 billion, bringing net debt to adjusted EBITDA down to 3.2x from 3.6x. While leverage remains above the company’s long-term target, the trajectory is clearly improving, signaling reduced balance-sheet risk over time.

Strategic Mix Shift Toward Payments and Data

The earnings call underscored an accelerating strategic shift away from legacy print and toward payments and data. These higher-growth segments now account for 47% of total revenue, up roughly 400 basis points from 43% a year ago. Combined, payments and data grew about 12% in the fourth quarter and roughly 10% for the full year, providing a structural lift to the company’s growth profile. This mix shift is central to Deluxe’s transformation story and is helping offset ongoing declines in print.

Data Segment Outperformance

Deluxe’s data segment was the standout performer. Revenue climbed 31.3% year over year to $307.3 million, while adjusted EBITDA jumped 42.8% to $86.4 million. The segment delivered a robust 28.1% full-year margin, with fourth-quarter revenue up 30.6% compared with the prior year. Management framed data as a key growth engine, contributing not only strong top-line expansion but also high-margin earnings that materially enhance the company’s overall profitability profile.

Merchant Services Momentum

Merchant Services maintained solid momentum, delivering revenue of $398.6 million for the year, up 3.8%, and accelerating to 6.3% growth in the fourth quarter with revenue of $101.5 million. Adjusted EBITDA for Merchant Services rose 9.4% to $85.9 million, with margins improving by roughly 120 basis points to 21.6%. These results suggest Deluxe is gaining traction with merchants and successfully managing pricing, mix, and scale to drive profitable growth in this segment.

Operational Efficiency and SG&A Reduction

Cost discipline was a repeated theme throughout the call. SG&A expenses were reduced by approximately $40 million in 2025, an improvement of more than 4% year over year. This leaner cost base provided meaningful operating leverage and contributed to margin expansion across the business. Management highlighted these efficiency gains as structural rather than one-off, pointing to a more sustainable profitability profile going forward.

Print Margin Resilience Despite Revenue Declines

While the print business continues to face secular headwinds, Deluxe demonstrated that it can still extract attractive profitability from this legacy segment. Print adjusted EBITDA reached $366.9 million with margins of 32.3%, expanding about 100 basis points year over year. Management attributed this resilience to disciplined mix and pricing actions, focusing on more profitable customers and products even as total print volumes decline.

Overall Revenue Growth Remains Modest

Despite the many positives on margins and cash flow, overall revenue growth remains subdued. Total full-year revenue came in at $2,133 million, up just 0.5% on a reported basis and 1.1% on a comparable adjusted basis versus 2024. The modest top-line expansion reflects both secular pressures in print and slower-than-hoped growth in certain payments areas, tempering the otherwise strong narrative of profit improvement.

Print Revenue Decline and Non-Core Weakness

The print segment’s structural decline remains a drag on the consolidated revenue picture. Print revenue fell 5.7% year over year to $1,140 million, with particular weakness in other promotional product solutions, which sank 15.3%. Management emphasized that these declines are concentrated in lower-margin, non-core offerings, but the pressure underscores the urgency of scaling payments and data to offset ongoing erosion in legacy categories.

B2B Payments Segment in Transition

B2B payments posted full-year revenue of $290.5 million, growing only 0.9% versus the prior year, though fourth-quarter growth improved to 4.5%. The segment remains in transition as Deluxe shifts toward more recurring, digital offerings. While the current growth profile is modest, management framed B2B as a strategic area poised for better performance as newer, stickier solutions ramp and the revenue mix becomes more subscription-like over time.

Data Segment Seasonality and Tough Comparisons Ahead

Management also offered a measured view on the data segment’s outlook. Fourth-quarter data revenue of $73 million stepped down from the third quarter due to normal seasonality, and executives cautioned that “monster comps” in the second half of 2026 will make it difficult to sustain the exceptional 2025 growth rates. Investors were reminded to expect more normalized mid- to high-single-digit growth, rather than repeating this year’s outsized gains.

Leverage Still Above Long-Term Target

Although the company made clear progress on deleveraging, leverage remains slightly above the long-term goal. Net debt stands at $1.39 billion, with net debt to adjusted EBITDA at 3.2x versus the long-term target of 3.0x or less. Management reiterated its expectation to fall below 3.0x in the first half of 2026, supported by continued free cash flow generation and restrained capital allocation.

Exposure to Macroeconomic and Sector Volatility

Executives acknowledged that Deluxe’s top line remains sensitive to macroeconomic trends and sector-specific volatility, particularly in merchant and broader business spending. The company’s guidance assumes a stable macro backdrop, and management pointed to peer-group volatility as a reminder that a deterioration in consumer or business confidence could weigh on payments volumes and overall revenue. This macro sensitivity is an ongoing risk factor for investors to monitor.

Print Secular Decline Pressures Revenue Mix

Despite the company’s margin management and strategic repositioning, the secular decline of print—especially in legacy products and forms—continues to pressure the revenue mix. Deluxe’s transformation depends on accelerating growth in payments and data to offset this structural headwind. The call made clear that print will likely remain a shrinking part of the portfolio, even as it continues to generate strong cash and profit in the near term.

Forward-Looking Guidance and Outlook

Looking ahead to 2026, management guided revenue to a range of $2,110 million to $2,175 million, implying roughly flat to low-single-digit comparable adjusted growth. Adjusted EBITDA is expected between $445 million and $470 million, and adjusted EPS is projected at $3.90 to $4.30, representing about 6% to 17% comparable adjusted growth. Free cash flow is projected at around $200 million, up roughly 14% from 2025. By segment, the company anticipates mid-single-digit revenue growth in Merchant Services with margins targeting the mid-20s, low-single-digit growth in B2B with low- to mid-20s margins, mid- to high-single-digit growth in Data with low- to mid-20s margins, and a low- to mid-single-digit revenue decline in Print with margins in the low 30s. Underpinning these forecasts are assumptions of stable interest expense, tax rate, and capital spending, and a path to reducing leverage below 3.0x in the first half of 2026.

In sum, Deluxe’s earnings call presented a company steadily reshaping itself: profitability and cash flow are improving, leverage is coming down, and higher-growth payments and data businesses are taking center stage, even as the legacy print franchise continues to shrink. For investors, the key takeaway is a more durable and higher-quality earnings base, supported by disciplined cost control and a clear strategic direction, albeit tempered by modest top-line growth and ongoing macro and secular risks.