Deluxe Corp. (DLX) Tops Q4 EPS by 7c, Revenues Beat; Offers 1Q19 EPS/Revenue Guidance Below Consensus

Deluxe Corp. (NYSE: DLX) reported Q4 EPS of $1.54, $0.07 better than the analyst estimate of $1.47. Revenue for the quarter came in at $524.7 million versus the consensus estimate of $522.6 million.

• Revenue increased 6.0% year-over-year. Financial Services revenue increased 15.0% compared to the prior year and includes the results of the REMITCO acquisition which closed in August 2018. Small Business Services revenue grew 3.6% and includes the results of several small tuck-in acquisitions.
• Revenue from marketing solutions and other services (MOS) increased 20.1% year-over-year and grew to 45.4% of total revenue in the quarter.
• Gross margin was 59.0% of revenue, compared to 61.4% in the fourth quarter of 2017. The impact to margin from product and service mix, acquisitions and increased delivery and material costs this year was only partially offset by previous price increases and continued improvements in manufacturing productivity.
• Selling, general and administrative (SG&A) expense as a percent of revenue was 41.2% in the quarter compared to 40.6% last year. SG&A expense dollars increased $15.2 million compared to last year as continued cost reduction initiatives and gains from asset sales of $2.8 million within Small Business Services were more than offset by additional SG&A expense from acquisitions, a favorable legal settlement in the prior year, costs related to the CEO transition process this year and higher average commissions in Small Business Services.
• Operating income decreased $11.5 million year-over-year. Adjusted operating income decreased $6.2 million year-over-year primarily from the continuing decline in check and forms usage, partially offset by previous price increases and continued cost reduction initiatives.
• Diluted EPS decreased $0.36 per share year-over-year and included aggregate non-GAAP charges of $0.15 per share. Adjusted diluted EPS increased 10.0% year-over-year. A lower income tax rate in 2018, primarily due to the Tax Cuts and Jobs Act of 2017, and lower shares outstanding contributed to the increase in adjusted EPS and were partially offset by the continuing secular decline in check and forms usage.

“I am honored to join Deluxe at this critical moment in the Company’s history,” said Barry McCarthy, President and CEO of Deluxe. “Our strong fourth quarter performance and record full year revenue reflect the solid foundation from which we will accelerate our ongoing transformation to a technology-enabled solutions provider. Looking ahead, I will continue my deep dive into the business as we refine our strategic plan while remaining focused on driving long-term revenue growth and enhancing shareholder value.”

GUIDANCE:

Deluxe Corp. sees Q1 2019 EPS of $1.05-$1.15, versus the consensus of $1.29. Deluxe Corp. sees Q1 2019 revenue of $490-505 million, versus the consensus of $515.4 million.

For earnings history and earnings-related data on Deluxe Corp. (DLX) click here.

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