Deluxe (DLX) Sidoti Small-Cap Virtual Conference summary

Company transformation and strategic focus

• Underwent significant transformation since 2019, shifting from a print-focused business to a diversified payments and data company.

• Exited numerous non-core businesses, retaining only strategic acquisition First American to expand merchant acquiring.

• Modernized infrastructure by moving to the cloud and unified go-to-market approach as One Deluxe.

• Leveraged legacy print business to invest in payments and data segments, targeting growth in Merchant Services, B2B Payments, and Data.

• Maintains strong relationships with 180 of the top 200 financial institutions and millions of small businesses.

Financial performance and guidance

• Generates $2.1 billion in revenue and over $400 million in EBITDA, with $100 million in free cash flow and a dividend yield near 8%.

• 2024 guidance projects 1% revenue growth, faster EBITDA growth, and free cash flow of $120–$140 million.

• Aims for $470 million EBITDA and $160–$180 million free cash flow by 2026, with conversion ratio targeted above 30%.

• Plans to reduce leverage ratio below 3x by end of 2026, supported by North Star program and disciplined capital allocation.

• Dividend maintained at $0.30 per share per quarter, with $55 million annual cash outflow.

North Star program and operational initiatives

• North Star program launched in late 2023 to drive $130 million gross EBITDA improvement by 2026.

• Two-thirds of program focused on cost initiatives, including real estate consolidation, procurement, and tech simplification.

• Revenue initiatives include pricing analytics, sales effectiveness, and marketing investment optimization.

• Free cash flow expansion expected through improved profitability, debt paydown, and lower restructuring costs.

• Capital structure refinanced with no near-term maturities, providing flexibility and liquidity.