Deluxe Reports 7 Percent Revenue Growth in Q3 2012
St. Paul, Minnesota-based Deluxe Corporation announced its financial results for the third quarter ended Sept. 30, 2012.
Revenue and diluted EPS exceeded the high end of the range in the prior outlook due primarily to better than expected check and forms performance in Small Business Services and Financial Services and lower discretionary spend.
"We just delivered our third outstanding quarter this year," said Lee Schram, CEO of Deluxe. "We exceeded both our revenue and EPS outlook in the third quarter, with better than expected performance in checks and 23 percent growth in marketing solutions and other services. We are now well positioned to grow revenue 6 to 7 percent for the full year, which would represent the third consecutive year of revenue growth with a fourth year of revenue growth planned for 2013."
Third Quarter 2012 Highlights:
• Revenue for the quarter was $378.3 million compared to $355.1 million during the third quarter of 2011. Revenue increased 6.5 percent compared to 2011, driven by 14.0 percent growth in Small Business Services, which included the impact of the OrangeSoda acquisition. Marketing solutions and other services revenue increased 22.9 percent compared to 2011 and represented 19.2 percent of consolidated revenue, up from 16.7 percent in the third quarter of 2011.
• Gross margin was 65.2 percent of revenue compared to 65.5 percent in 2011. Increased delivery rates, material costs and performance based compensation expense in 2012 were partially off-set by favorable impacts from price increases and the Company's continued cost reduction initiatives.
• Selling, general and administrative (SG&A) expense increased $8.6 million in the quarter compared to 2011, but as a percent of revenue, was down slightly to 45.3 percent. Increased SG&A expense associated with commissions on increased revenue, as well as higher performance based compensation expense and the OrangeSoda acquisition last quarter was partially offset by benefits from continued execution against cost reduction initiatives.
• Operating income in 2012 was $72.7 million compared to $65.6 million in the third quarter of 2011. Restructuring and transaction-related costs were $2.9 million in 2012 versus $5.1 million in 2011. These costs were primarily attributable to the Company's on-going cost reduction initiatives. Operating income was 19.2 percent of revenue compared to 18.5 percent in the prior year driven primarily by higher revenue per order, continued cost reductions and lower restructuring charges, partially off-set by higher performance based compensation expense, increased delivery rates and material costs, and the OrangeSoda acquisition last quarter.
• Reported diluted EPS increased $0.10 from the prior year driven by improved operating performance and lower restructuring charges in 2012.
Small Business Services
• Revenue was $244.5 million versus $214.4 million in 2011. Revenue was 14.0 percent higher in the quarter driven by growth in marketing solutions and other services revenue and in the Safeguard distributor, dealer and major account channels. Revenue also benefited from price increases and $8.6 million from the OrangeSoda acquisition.
• Operating income in 2012 increased to $39.6 million from $34.6 million in 2011.
• Revenue was $82.8 million compared to $85.2 million in 2011. The impact of check usage declines exceeded the benefits of price increases, revenue from a new financial institution client, and growth in non-check revenue. Secular declines for consumer checks were slightly less than 5 percent in the quarter.
• Operating income in 2012 increased to $17.7 million from $14.1 million in 2011.
• Revenue was $51.0 million compared to $55.5 million in 2011, primarily driven by lower order volume resulting from the continued decline in check usage.
• Operating income in 2012 decreased to $15.4 million from $16.9 million in 2011.
• Cash provided by operating activities for the first nine months of 2012 totaled $177.1 million, an increase of $5.9 million compared to 2011. Improved operating performance and the discontinuation of payments to our defined contribution pension plan were partially offset by higher income tax payments, a planned contribution in the first quarter to our VEBA trust for future medical costs, and higher contract acquisition payments.
• The board of directors of Deluxe Corporation declared a regular quarterly dividend of $0.25 per share to all outstanding shares of the company. The dividend will be payable on Dec. 3, 2012 to shareholders of record at the close of business on Nov. 19, 2012. The company had 50,902,714 shares outstanding as of Oct. 23, 2012.
For more information, visit www.deluxe.com.