Deluxe Reports Fourth Quarter 2013 Financial Results
Deluxe Corporation, Shoreview, Minn., recently announced its financial results for the fourth quarter ended Dec. 31, 2013.
Revenue of $417.8 million was above the mid-point of the range in the prior outlook and adjusted diluted EPS exceeded the high end of the range in the prior outlook. The strong earnings performance was driven primarily by better operating margins in Small Business Services and Financial Services and a lower effective tax rate. GAAP Diluted EPS also includes in 2013, an after tax non-cash asset impairment charge of $0.06 per share related to the write-down of a customer relationship intangible asset in the Small Business Services segment and higher restructuring charges.
"We delivered an outstanding fourth quarter, our fourth consecutive year of revenue growth, and our fifth consecutive year of cash flow from operations growth," said Lee Schram, CEO of Deluxe. "Our transformation continues to deliver strong results. Marketing solutions and other services grew to 22 percent of total revenue for the year and we expect it to grow to 25 percent of revenue in 2014 along with expected continued growth in total revenue and earnings per share."
Fourth Quarter 2013 Highlights:
- Revenue increased 7.8 percent year-over-year, with the strongest performance in the Small Business Services segment, which grew 11.8 percent followed by Financial Services which grew 5.5 percent.
- Revenue from marketing solutions and other services increased 19.8 percent year-over-year and accounted for 25 percent of total revenue in the quarter.
- Gross margin was 63.6 percent of revenue, down from 64.5 percent in the fourth quarter of 2012. The primary drivers of the decline were a shift in product and services mix and higher delivery and material costs.
- Selling, general and administrative (SG&A) expense increased 5.1 percent from last year primarily driven by additional SG&A expense from acquisitions and spending on other revenue-generating initiatives, partially offset by lower medical expenses.
- Operating income increased 0.3 percent year-over-year and includes restructuring and transaction-related costs and a non-cash asset impairment charge due to a write-down of a Small Business Services customer relationship intangible asset. Adjusted operating income, which excludes these items in both periods, increased 8.4 percent year-over-year from higher revenue per order, continued cost reductions and lower medical expenses.
- Diluted EPS increased 8.4 percent year-over-year driven primarily by stronger operating performance and lower interest expense, partially offset by a higher effective tax rate compared to 2012. The 2012 tax rate benefited from favorable discrete items. Results for 2012 also included a charge of $0.07per diluted share related to the early retirement of debt.