Deluxe Corp. ((DLX)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Deluxe Corp. painted a picture of robust performance, highlighting significant achievements in EBITDA growth, data segment performance, and debt reduction. Despite some challenges in the B2B payments and print segments, the overall sentiment was positive, with strong financial metrics overshadowing the areas of concern.
Strong Third Quarter Results
Deluxe Corp. reported organic growth across all key financial metrics, including revenue, adjusted EBITDA, EPS, margin rate, and year-to-date cash flows. Notably, adjusted EBITDA grew significantly faster than revenue, with margins expanding across each operating segment, underscoring the company’s operational efficiency and strategic execution.
Data Segment Performance
The data segment was a standout performer, with revenue growing by 46% year-over-year. This marks the fourth consecutive quarter of double-digit growth, highlighting the company’s strong position in the data market and its ability to capitalize on growing demand for data-driven solutions.
Debt Reduction and Leverage Ratio Improvement
A key highlight from the quarter was the reduction in net debt by more than $20 million, allowing Deluxe to achieve its targeted year-end leverage ratio of 3.3x ahead of schedule. This improvement in financial health is a testament to the company’s disciplined approach to debt management.
Improved Free Cash Flow
Year-to-date free cash flow expanded by over 49%, translating to a $31 million increase compared to the prior year period. This significant improvement in cash flow positions Deluxe well for future investments and growth opportunities.
EPS Growth
Adjusted EPS saw a remarkable increase of nearly 30% year-over-year, reaching $1.09 per share. This growth reflects the company’s strong operational performance and its ability to deliver value to shareholders.
B2B Payments Revenue Decline
Despite the overall strong performance, the B2B payments segment experienced a revenue decline of 2.7% year-over-year. However, there was a sequential improvement, indicating potential stabilization in this segment.
Print Segment Challenges
The print segment faced challenges, with overall revenue declining by 5.9% compared to the prior year. Significant declines were noted in branded promotional products, highlighting ongoing challenges in this traditional segment.
Forward-Looking Guidance
During the earnings call, Deluxe provided optimistic guidance, projecting a 2.5% comparable adjusted revenue growth and a significant 14% increase in adjusted EBITDA, reaching nearly $119 million for the quarter. The margin rate expanded by more than 200 basis points, and adjusted EPS grew by nearly 30% year-over-year. The company also highlighted continued debt reduction and a substantial increase in free cash flow, achieving its leverage ratio target ahead of schedule and raising its full-year adjusted EPS outlook.
In conclusion, Deluxe Corp.’s earnings call reflected a strong quarter with impressive achievements in key financial metrics, despite some challenges in specific segments. The company’s positive outlook and strategic focus on growth and debt reduction position it well for future success, making it an attractive consideration for investors.