Deluxe (DLX) Q4 2019 earnings summary

Executive summary

• FY19 revenue reached a record $2.009B, the tenth consecutive year of growth; operating cash flow was $286.7M.

• Reported net loss was $199.9M and diluted loss per share was $4.65, primarily reflecting $391.0M of pretax asset impairment charges.

• Transformation shifted the operating model toward four product-based areas and prioritized profitable organic growth, cross-selling and operational efficiency.

Financial highlights

• FY19 revenue was $2,008.7M, up 0.5% YoY; orders rose 0.6% to 47,815 and revenue per order was $42.01.

• Gross profit was $1,195.8M; cost of revenue was 40.5% of revenue vs. 39.6% in 2018, while SG&A was 44.4% vs. 42.7%.

• Adjusted diluted EPS was $6.82 vs. $6.88; adjusted EBITDA was $480.9M vs. $509.3M.

• Q4 revenue was $522.1M, net income $44.8M and diluted EPS $1.06; Q4 2018 results were $524.7M, $57.2M and $1.25, respectively.

• Returned $170M to shareholders through dividends and repurchases in 2019.

Outlook and guidance

• FY20 revenue guidance: $2.000B–$2.040B; adjusted EBITDA: $410M–$435M; adjusted diluted EPS: $5.50–$5.95.

• Lower expected adjusted EBITDA and EPS reflect web hosting and data-driven marketing mix, secular check declines, check contract renewals and incremental growth investment.

• Planned FY20 investment of ~$70M in technology platforms and transformation initiatives; a large portion expected to be funded by structural cost savings.

• FY20 capital spending expected to be ~$70M; operating cash flow and revolving-credit availability expected to fund operations, dividends, interest, repurchases and possible acquisitions.

• Expected FY20 tax rate was ~25%; share repurchases were expected to be lower than in recent years.