Deluxe Q1 Net Income Up 3 Percent
Deluxe Corporation, a leader in providing small businesses and financial institutions with products and services to drive customer revenue, announced its financial results for the first quarter ended March 31, 2014.
Both revenue and adjusted diluted EPS exceeded the high end of the range in the prior outlook. The strong earnings performance was driven primarily by higher than expected revenue in the Direct Checks segment and a slightly lower effective tax rate.
"We delivered an outstanding first quarter, hitting on all cylinders in spite of the impact from severe winter weather and a continued sluggish economy," said Lee Schram, CEO of Deluxe. "We have established a solid baseline first quarter to propel us towards profitable revenue growth again in 2014 for a fifth consecutive year. Marketing solutions and other services grew 21 percent and represented 22 percent of total revenue towards our 25 percent of revenue objective for the full year. We improved our earnings and operating cash flow outlook for the year, we were more aggressive on share repurchases, and we remained disciplined in maintaining financial flexibility in our capital structure by amending and extending our credit facility to 2019."
First quarter 2014 highlights are as follows:
- Revenue increased 5.0 percent year-over-year, with the strongest performance in the Small Business Services segment which grew 8.7 percent, followed by Financial Services which grew 2.2 percent.
- Revenue from marketing solutions and other services increased 20.5 percent year-over-year and accounted for 22 percent of total revenue in the quarter.
- Gross margin was 64.4 percent of revenue, down from 65.6 percent in the first quarter of 2013. The decline was primarily driven by a higher services revenue mix and higher delivery and material costs.
- Selling, general and administrative (SG&A) expense increased 1.5 percent from last year primarily due to additional SG&A expense from acquisitions and spending on other revenue-generating initiatives. SG&A as a percent of revenue was 43.7 percent in the quarter compared to 45.2 percent of revenue last year.
- Operating income increased 4.0 percent year-over-year and includes restructuring-related costs in both periods. Adjusted operating income, which excludes these items, increased 6.7 percent year-over-year from higher revenue per order and continued cost reductions.
- Diluted EPS increased 4.5 percent year-over-year driven primarily by stronger operating performance and lower shares outstanding partially offset by a higher effective tax rate.
Small Business Services