Business Overview Deluxe Corporation, originally established as the American Multigraph Company in 1915, has a rich history spanning over a century. The company initially manufactured duplicating machines before expanding into check printing and business forms. In the 1920s, it changed its name to Deluxe Check Printers, reflecting its growing focus on check printing and related products for businesses and financial institutions.
Over the following decades, Deluxe solidified its position as a leading provider of printed checks and business forms, serving customers across various industries. However, the 1990s and 2000s brought challenges as the use of paper checks declined due to the growth of electronic payments. In response, Deluxe diversified its offerings, moving into areas such as payment processing and data-driven marketing, leveraging its existing customer relationships and expertise to expand into new markets.
Despite industry changes, Deluxe has maintained a strong market position through strategic acquisitions, such as the purchase of First American Payment Systems in 2021. The company has also invested in modernizing its technology and infrastructure to better serve its customers in the digital age.
Today, Deluxe operates through four key business segments: Merchant Services, B2B Payments, Data Solutions, and Print. Merchant Services provides electronic payment processing solutions, including credit/debit card authorization and settlement. B2B Payments offers treasury management services such as remittance processing, accounts receivable/payable automation, and fraud/security tools. The Data Solutions segment leverages Deluxe's extensive consumer and business database to provide targeted marketing and analytics services. Finally, the Print segment produces checks, business forms, promotional products, and other printed materials.
Over the past three years, Deluxe has strategically exited several non-core businesses, including web hosting, logo design, and payroll/HR services, to focus on its key growth platforms. These divestitures have allowed the company to streamline operations and redirect resources towards more promising opportunities in payments and data-driven marketing.
Financial Performance In fiscal year 2024, Deluxe reported total revenue of $2.12 billion, a 3.2% decline year-over-year. This top-line performance was impacted by the continued secular decline in check usage and the company's exit from the payroll/HR services business. However, Deluxe was able to offset some of these headwinds through pricing actions and growth in its data-driven marketing and merchant services offerings.
Despite the revenue decline, Deluxe delivered impressive profitability metrics in 2024. Adjusted EBITDA totaled $412 million, representing a margin of 19.4%. On a comparable basis, excluding the impact of business exits, adjusted EBITDA grew 3.9% year-over-year. The company also generated $100 million in free cash flow, up from $97.7 million in the prior year, as it continued to optimize its cost structure and working capital.
For the full year 2024, Deluxe reported net income of $53 million. Annual operating cash flow was $194 million, and annual free cash flow reached $100 million. In the fourth quarter of 2024, the company reported revenue of $521 million and net income of $13 million.
Liquidity Deluxe's balance sheet remains solid, with net debt of $1.47 billion as of December 31, 2024, down $52.2 million from the prior year-end. The company's net debt to adjusted EBITDA ratio was 3.6x, in line with its long-term target of approximately 3x. During the fourth quarter of 2024, Deluxe also successfully refinanced its 2026 debt maturities, pushing out the maturity dates to 2029 and providing ample liquidity to support its strategic growth initiatives.
As of December 31, 2024, Deluxe had cash and cash equivalents of $34 million. The company's debt-to-equity ratio stood at 1.55, with total debt of $1.50 billion and shareholders' equity of $621 million. Deluxe maintained a strong liquidity position with $374 million available under its $400 million revolving credit facility. The company's current ratio and quick ratio were both 0.98 at the end of 2024.
Segmental Performance Deluxe's Merchant Services segment reported a 5.4% increase in revenue to $384 million in 2024, driven by new customer wins and pricing actions. Adjusted EBITDA for this business grew 5.6% to $79 million, with margins holding steady at 20.4%. The growth was attributed to customer wins across market channels, including partnerships with banks, government clients, and the company's expanding reach with integrated software vendors.
The B2B Payments segment experienced a 3.8% revenue decline to $288 million in 2024, as the business continues its transition towards a more recurring, software-as-a-service model. Adjusted EBITDA for this unit decreased 8% to $57 million, with margins contracting slightly to 19.8%. The decline was primarily due to reduced lockbox processing volumes and the absence of one-time hardware and license sales.
Deluxe's Data Solutions segment was a standout performer in 2024, with revenue increasing 10.5% to $234 million. Adjusted EBITDA for this business grew 30.6% to $60 million, as the company capitalized on strong demand for its data-driven marketing services. The growth was driven by customer acquisition marketing activities across core financial institution partners and an expanding portfolio of other clients.
The Print segment, which includes checks, business forms, and promotional products, saw revenue decline 4.5% to $1.21 billion in 2024, reflecting the ongoing secular shift away from printed materials. Adjusted EBITDA for the Print segment decreased 6.1% to $377 million. However, Deluxe was able to maintain Print's adjusted EBITDA margin at a healthy 31.3% through disciplined cost management and pricing actions.
Geographic Performance Deluxe Corporation primarily operates in North America, with some activities previously conducted in Europe, Central/South America, and Australia. However, the revenue and long-lived assets associated with foreign operations were not material to the company's overall financial results.
Outlook and Key Initiatives For fiscal year 2025, Deluxe provided guidance for revenue in the range of $2.09 billion to $2.16 billion, representing -1% to 2% growth on a comparable basis. Adjusted EBITDA is expected to be between $415 million and $435 million, translating to 2-7% comparable growth. The company also forecasts adjusted EPS of $3.25 to $3.55 and free cash flow of $120 million to $140 million, reflecting 20% to 40% growth.
Deluxe expects its Merchant and B2B Payments segments to ramp sequentially towards mid-single-digit growth in 2025. The Data segment is anticipated to maintain mid to high single-digit growth, while the Print segment is expected to continue experiencing low to mid-single-digit secular declines. The company aims to maintain margin profiles, with Print in the low 30s, B2B in the high teens to low 20s, and Merchant and Data in the low 20s.
To drive this performance, Deluxe is focused on several key strategic initiatives:
1. Expanding its Merchant Services business by developing an integrated software channel, onboarding new financial institution partners, and growing its presence in underserved market verticals.
2. Transitioning its B2B Payments segment towards a more recurring, software-based revenue model, with a particular emphasis on accounts receivable automation solutions.
3. Leveraging its cloud-based data platform to expand its Data Solutions offering into new industry verticals beyond financial services.
4. Maintaining disciplined cost management and operational efficiency across the organization to support margin expansion and free cash flow generation.
5. Prudently allocating capital, with a focus on responsible growth investments, debt reduction, and shareholder returns through its regular dividend.
Risks and Challenges Despite Deluxe's transformation, the company continues to face several risks and challenges. The secular decline in check usage, while mitigated by the company's diversification, remains a long-term headwind. Deluxe also operates in highly competitive markets, particularly in the payments and data solutions spaces, where it must continuously innovate to stay ahead of nimble fintech competitors.
Additionally, Deluxe is subject to evolving regulatory environments, both in the financial services industry and with respect to data privacy and security. Any failure to comply with these regulations could result in significant fines, penalties, or reputational damage.
The company's reliance on third-party vendors and service providers also introduces operational risks, as disruptions in the supply chain or IT infrastructure could impact Deluxe's ability to serve its customers effectively.
Conclusion Deluxe Corporation has transformed itself into a diversified payments and data solutions provider, leveraging its historic brand equity and cash flows to fund strategic growth initiatives. Despite ongoing industry disruption and macroeconomic uncertainty, the company has demonstrated its ability to adapt and deliver consistent financial performance.
With a focused strategy, disciplined execution, and a strong balance sheet, Deluxe appears well-positioned to continue navigating the evolving technological landscape and capitalizing on opportunities in the payments, treasury management, and data-driven marketing sectors. As the company executes on its North Star program and invests in innovative product offerings, investors may find Deluxe's risk-reward profile attractive in the years ahead.