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| Statement |
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| Operational improvements across our lockbox sites continue to show progress, driving much of the rate improvements seen versus prior year |
| Check demand has remained durable relative to our low to mid single-digit decline expectations, and we continue to see positive impacts from our responsible price actions |
| We will execute against additional North Star work streams over the next 18 to 24 months and expect the initiative will also lead to an improved free cash flow trajectory starting in 2025, inclusive of the impact of cash restructuring and integration charges |
| We have made reasonable and responsible investments to improve and maintain our operating efficiency for the long-term that also has given us a better product, a clearly superior product, which helps deliver us additional market share, helping us ensure that great cash flow for the foreseeable future |
| And really proud of that, and we have got a great team that’s working on it |
| So, that gives us a ton of confidence in our ability to continue transforming the company and deliver the great cash flow that investors expect of us |
| Year-to-date through the third quarter, our total revenue has grown 1%, while EBITDA has expanded by 4%, demonstrating our continued ability to drive efficiency in our cost base while delivering profitable growth |
| And actually, in the last couple of years, we have had a period where we had four consecutive quarters of revenue growth while holding on to really attractive margins in the mid-40s |
| Further, in the third quarter, we delivered our third straight quarter of operating leverage, with profit growing faster than revenue |
| 2023 will also be our third consecutive year of organic revenue growth |
| And so we really fundamentally believe that, and we don’t dispute the check consumption and usage is in decline, but we are able to win market share and we are also able to price effectively |
| Overall, we are pleased with our execution through the third quarter of the year |
| On a more positive note, revenue growth improved during the third quarter for the other half of our payments business, Merchant Services, increasing sequentially to just over 2% |
| Every time there is bank consolidation, we tend to be the big winner and that we continue to improve the effectiveness of our program of selling checks through all of our bank and other non-bank channel partners |
| As a reminder, our Merchant Services business also has a strong presence across several less discretionary areas, which continue to perform well |
| Year-to-date, through the third quarter, Merchant Services revenue growth was roughly 3.5%, and we remain confident that the merchant business will deliver mid-single-digit revenue growth for the full year |
| We achieved an important milestone during the quarter in Merchant Services that will help further accelerate our growth in the fourth quarter and beyond via win with Fulton Financial Corporation |
| Checks actually increased profitability in the third quarter and we are winning market share |
| We won the business because of our superior customer support, robust and reliable platform and our omni-channel capabilities |
| Fulton represents a significant milestone for our business, demonstrating successful expansion into the middle market for our Merchant Services offerings |
| As Barry mentioned, you will see the first significant benefits from North Star within our Q4 adjusted EBITDA performance |
| We are really confident about this, and that we have already put points on the board that are going to deliver for shareholders starting in the fourth quarter, we think is a really strong indication about the opportunity right in front of us that we are executing against |
| To summarize, we are pleased with our third quarter and year-to-date results and encouraged by our ongoing execution |
| We are particularly pleased with the continued exceptional performance within this segment as revenue increased over 24% |
| These results accompanied more than a 45% growth of EBITDA during the quarter and were driven by a continuation of robust campaign execution across many of our FI partners |
| We have continued to see strong demand for our data-driven marketing services in support of banks seeking low-cost deposits, as we noted in the last quarter, in addition to expansion of their business banking account offerings |
| We are very excited about this and we think it’s a great initiative, and we are very pleased that we have already executed that $10 million worth of in-year – I think here in the fourth quarter, which annualized gives us a $40 million run rate already going into next year, again, partially offset by what will be secular declines |
| And so we are very confident |
| On a year-to-date basis, we have continued to see sequential growth for this important metric, with the third quarter representing continued improvement from our first quarter’s seasonally negative result |
| As we have noted throughout this year, Deluxe is at an inflection point where our payments and data businesses together are able to outpace the secular decline within our print businesses |
| Statement |
|---|
| This outlook is likely to position us slightly below the midpoint of our revenue guidance range based on some of these recent trends |
| Overall, Payments segment revenue was flat in the third quarter, below our expectations of mid-single-digit revenue growth |
| Promotional Solutions third quarter revenue was $124.3 million, down 8.7% versus last year on a reported basis |
| In addition, this line of business was lapping a challenging prior year comp during the third quarter |
| Data’s adjusted EBITDA margins in the quarter decreased 10 basis points year-over-year, landing at 23.9% |
| While we are maintaining our revenue guidance range for the year, as we’ve mentioned a few times today, we have seen some volume softness in parts of the business in the third quarter that we expect will continue through the balance of the year |
| Promo’s comparable adjusted revenue decreased 7.5%, as demand softened a bit across some of our extended distribution networks |
| In the Promotional Solutions portion of our print business third quarter revenue declined 7.5% |
| This will bring us back below our long-term 3x levered target over the coming periods |
| On a reported basis, Data Solutions revenue decreased 4% from the third quarter of 2022 to $64 million |
| The result was primarily impacted by some continued softness within the lockbox portion of our B2B payments business |
| For the balance of the current year, we expect Q4 DDM results to experience negative growth, reflecting both our year-to-date outsized revenue growth as well as a challenging prior-year comp from some significant campaign shifts into Q4 last year |
| As Barry noted, rates for the B2B Payments portion of the segment, including our receivables and payables solutions, were impacted by lockbox declines of 8.9%, resulting from ongoing volume softness and challenging prior year comparisons |
| We did see some demand softness during the quarter, and we executed a previously planned site closure, impacting some of our production |
| You will recall, we signaled volume softness in this area during last quarter’s call |
| Third quarter adjusted diluted EPS came in at $0.79, down from $0.99 in last year’s third quarter |
| As a result, for 2023, we now expect to see full year low single-digit comparable adjusted revenue declines consistent with secular trends within our broader combined print portfolio, with adjusted EBITDA margins holding in the mid-teens |
| On a blended basis, these businesses decline at low single-digit rates and in many cases, have recurring or reoccurring characteristics |
| In the third quarter of 2022, we temporarily processed a large amount of one-time volume due to an extended outage experienced by a competitor in the remittance space |
| We reported a third quarter GAAP net loss of $8 million, or $0.18 per diluted share, down from net income of $14.7 million, or $0.34 per share in the third quarter of 2022 |
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