Q4 2021 Deluxe Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the deluxe fourth quarter and full year 2021 earnings conference call.
At this time all participants are in listen only mode and today's call is being recorded.
We will begin with opening remarks introductions at this time I'd like to turn the conference over to your host Vice President of Investor Relations Tom Morabito. Please.
Please go ahead.
Thank you operator, and welcome to the deluxe fourth quarter and full year 2021 earnings call.
Joining me on today's call is Barry Mccarthy, our President and Chief Executive Officer, and Scott Bommer, Our Chief Financial Officer.
At the end of today's prepared remarks, we will take questions.
Before we begin and as seen on this slide I'd like to remind everyone that comments made today regarding management's intentions projections financial estimates or expectations about the company's future strategy or performance are forward looking in nature as defined in the private Securities Litigation Reform Act of 1995.
These comments are subject to risks and uncertainties, including without limitation risks related to COVID-19 . The rest at the company's recent acquisition of first American payment systems or any other acquisitions does not produce the anticipated results or synergies and the rest of that any future acquisitions or divestitures will not be consummated.
Any of these risks and uncertainties could cause our actual results to differ materially from our projections.
Additional information about factors that may cause our actual results to differ from projections is contained in our Form 10-K for the year ended December 31, 2021 and in other company SEC filings.
On the call today, we will discuss non-GAAP financial measures, including adjusted EBITDA and free cash flow.
In our press release or presentation, and our filings with the SEC you will find additional disclosures regarding the non-GAAP measures, including reconciliations of these measures to the most comparable measures under U S. GAAP.
Now I'll turn it over to Barry.
Thanks, Tom and good morning, everyone.
Deluxe delivered strong and historic 2021 results.
We reported full year sales driven growth the first time in nearly a decade.
Along with adjusted EBITDA margins of over 20%.
We promised this outcome in 2020.
Firm did again last February and our 2021 guidance.
Our fourth quarter was especially strong as we delivered sales driven growth in all four segments.
In short our transformation into a sales driven trusted payments and business technology company is real.
And our one deluxe sales model works.
During the quarter payments performance was driven by the positive results from first American and growth on our digital payments and receivables businesses.
Importantly.
For the first time in our 106 year history, we expect payments to equal checks as our largest business by revenue as we exit 2022.
First American up 13% year over year revenue growth in the quarter once again exceeding our expectations.
First American is clearly benefiting from the deluxe Halo, our strong reputation solid balance sheet and deep customer relationships.
The deluxe Halo is real.
And by Plugging first American into our one deluxe sales model, we're accelerating their growth.
Cloud growth was driven by data driven marketing promotional solutions banner spread from the implementation of key wins from earlier in the year and checks performance was driven primarily by new competitive wins and business checks.
Before I go into the highlights for the quarter and year I want to acknowledge my fellow deluxe offers for their continued hard work and commitment to our customers and what was once again, a challenging year due to COVID-19 and more.
Our significant progress on our transformation would not be happening without their dedication and unwavering commitment.
Now to the consolidated highlights for the quarter.
Revenue was $571 million up 25, 5% year over year.
Not including the positive impact of first American sales driven revenue was up six 8%.
This was the second strongest quarterly performance since 2012.
Adjusted EBITDA margin was 25%, which was in line with our expectations.
For full year 2021 revenue was $2 billion up 12, 9% year over year.
Not including the impact of first American revenue was up 2%.
Adjusted EBITDA margin was 22% down slightly from last year's 24%.
In 2021, we also maintained our commitment to ongoing financial discipline and to maintaining a healthy balance sheet, which Scott will touch on in a moment.
Moving on to some segment revenue highlights.
For the fourth quarter, our payment segment grew 114% year over year, driven by the performance of first America.
Excluding first American revenue increased more than 5% with growth in our other major businesses, particularly receivables payroll and HR.
Our payables as a service offerings, which include our deluxe payment exchange and medical payment exchange continue to experience strong growth.
Next caller.
Loud solutions had another solid quarter growing nearly 6% year over year.
Importantly, excluding business exits from 2020 clouds growth would have been nearly 11% for the quarter.
Cloud performance benefited from sales wins and positive impacts of our recovery recovering economy, and our data driven marketing business or DDR.
Now onto our promotional solutions segment.
Promotional solutions had a strong quarter, improving nearly 9% year over year positively impacted by the PNC deal, we announced earlier in 2021.
AMC is a great example of the one deluxe strategy as we're now providing multiple products to the nation's eighth largest bank. After initially only providing one.
Finally, our very profitable cash generating check business also had a strong quarter growing just over 6% year over year, which is significantly better than long term industry trends.
The performance was largely driven by new wins solid growth from business tracks and the successful onboarding of new clients.
Next I'd like to take a moment to reflect on what was a momentous 2020 one as we continue our transformation that began in late 2019.
As I mentioned, our one deluxe model works.
We reported full year sales driven growth for the first time in nearly 10 years.
We're very proud of this achievement.
This was my promise when I became CEO to grow our deluxe portfolio of products and to sell more to both existing and new customers.
As further evidence of the success of one deluxe and <unk>.
'twenty, one we achieved a third consecutive year of record sales performance.
In 2021, we saw four of the top 10 deals of the last 10 years.
Has it beginning the one deluxe approach late in 2019, we closed 12 of the top 20 deals of the last 10 years and close the single largest deal in the company's history.
Now, let me touch on some of the key wins during the quarter.
And payments during the fourth quarter, we signed one of the largest healthcare payers in the United States to our medical payment exchange solution or M. P X.
This company is the fourth payer in 2021, the committed to issuing payments through MPLX and our solutions solve for their major strategic goal of moving to electronic payments.
M P X digitizes, the disbursement of healthcare payments and plenty explanation of benefits saving time and expense for the customer.
Another key win was with Valeo, a fast growing payments company with an investments and partnerships with some of the major players in the Tech World.
Melia focuses on giving small business as a way to digitally manage their BTB payments and receivables that will be using the deluxe payment exchange or D. P X percent beat of beat shacks digitally to participating lock boxes.
And our cloud business a key win was with a large real estate financing customer.
Here, we were able to solidify its direct marketing business through an optimization approach designed to analyze recent data driven marketing campaign responses.
Cloud also want a contract with Pentagon Federal credit Union.
This exciting strategic partnership will help test and facilitate member retention strategies with the nation's third largest credit union was $25 billion in assets and over $2 3 million members.
And our tax business, we recently announced two significant value creating developments.
First we're installing new HP printers to augment our check and promotional solutions segments with digital and print on demand technology.
These new capabilities will help manage fixed costs enable us to quickly build new products and implement new customer requirements faster.
Getting new revenue opportunities.
With this technology, we have already expanded premium check and overall print design options.
Second this long term investment has enabled us to win one of the largest non bank distributors of personal checks the Bradford exchange.
Brad Foreign exchange provides innovative high quality art, and a variety of collectible and consumer products, including checks with millions of repeat customers.
We won Bradford away from their long term supplier, our chief check competitor.
We are now well positioned to win even more.
Another significant highlight of 2021 and consistent with our strategy to make meaningful platform acquisitions, we made the largest acquisition in our history first American.
First American gave us an immediate leadership position and a strong secular growth markets complementary to our existing businesses.
First American also brought US a platform on which we can further grow and Gail <unk> gained scale advantage.
Driving future leverage and positioning us for revenue and profit growth going forward.
As I mentioned earlier, the deluxe Halo Israel.
Our strong trusted reputation excellent balance sheet and deep customer relationships provide a strong foundation from which first American can grow.
We simply plug first American into our one deluxe model and it works.
And it's working really well.
First American was historically, a low mid single digit revenue growth business.
So it's just a part of one deluxe first American has been growing double digits, which is better than our expectations.
Additionally, first American has already successfully selling deluxe products like HR payroll payables receivables and web hosting into their base magnifying our success.
As further evidence of the one deluxe Halo and one deluxe success first American closed three times as many financial institutions in the back half of the year as they would normally.
Cross selling to our approximately 4000 financial institutions and 4 million small business customers is not limited just to first American.
We achieved significant telesales success with increases in average order value and items per order across the company. In addition to the enterprise level wins I've mentioned earlier.
One deluxe works and our transformation is real.
In summary.
Deluxe delivered strong fourth quarter and full year results furthering our transformation into a payments company just as we promised.
To recap during the year, we delivered the following.
First we reported sales driven full year revenue growth for the first time in nearly a decade more than replacing secular check declines with profitable new and sustainable revenue.
Second we completed the largest acquisition in our history in the second quarter first American, giving us a strong market position.
First American is performing well above expectations proving the one deluxe model works and the deluxe Halo Israel.
Third.
All four segments demonstrated sales driven growth in the fourth quarter.
Fourth we expect that as we exit 2022 payments will equal the truck business in terms of revenue.
And our long history, and a critical milestone in our transformation.
And finally, even with Covid inflationary supply chain and labor pressures.
We're driving transformation.
We said, what we would do and we did what we said.
We're looking forward to continue our revenue momentum into 2022, as we add new sell through partners and payments and cloud continue to innovate and grow our pipeline and actively manage the portfolio.
Now I will turn it over to Scott, who will provide more details on our financial performance.
Thank you Barry and good morning, everyone.
It's going through the consolidated highlights for the quarter and year for moving on to the segments.
For the fourth quarter, we posted total revenue of $576 million up 25, 5% year over year.
Not including first American revenue came in at $485 5 million up six 8% year over year.
We reported fourth quarter GAAP net income of $13 8 million or <unk> 32 per share in the quarter.
Compared to the prior year fourth quarter GAAP net income was impacted by $13 $7 million and acquisition amortization as well as increased interest expense both related to the first American acquisition.
We also incurred increased tax expense related to the repatriation of $85 $3 million of cash from our Canadian operations.
Adjusted EBITDA came in at $117 $1 million, while adjusted EBITDA margin was 25%.
Up from 29% in last year's fourth quarter.
Yeah.
Fourth quarter adjusted EBITDA was impacted by planned technology investments and inflationary pressures offset by pricing actions and operating leverage from strong revenue growth.
Fourth quarter adjusted EPS came in at $1 26 down from $1 38 in last year's fourth quarter.
This included an <unk> 11 per share impact from the previously mentioned cash repatriation.
For the full year, we posted total revenue of $2.02 billion of.
Up 12, 9% year over year.
Not including first American revenue came in at $1 $83 billion up.
Up 2% year over year at the high end of our guided range.
We reported full year GAAP net income of $62 $8 million or $1 45 per share for the year.
On a GAAP basis. The first American acquisition was diluted due to $29 5 million and acquisition amortization as well as $18 $9 million in transaction costs.
The incremental interest expense, resulting from the acquisition was offset by the operations of first American.
Full year, adjusted EBITDA was $407 $8 million and adjusted EBITDA margin was 20.
2% down slightly from last year's 24% due primarily to business mix.
Full year adjusted EPS came in at $4 88.
From $5 eight in 2020.
As mentioned in the quarterly results EPS was impacted by incremental tax associated with the repatriation of cash from our Canadian operations as well as the higher share count.
First America was slightly accretive to full year adjusted EPS.
Now turning to our segment details.
Payments grew fourth quarter revenue of 114, 5% year over year to $167 $3 million largely driven by the acquisition of first American and sales driven growth for stand alone deluxe.
Excluding first American payments revenue increased five 4% year over year.
In addition to first American strong performance that Barry mentioned, we experienced growth in our core payments businesses.
Including first American adjusted EBITDA increased 93, 8% in the quarter and adjusted EBITDA margin was 26% down 220 basis points due to inflationary pressure in our lockbox business, partially offset by price increases as.
As well as increased investments in sales and marketing.
First America was slightly accretive to payments adjusted EBITDA margin for the quarter.
With the addition of first American our payments segment has more than doubled in size.
As Barry mentioned this is an important milestone in our transformation to becoming a payments company and once again, we expect payments to equal checks is our largest business by revenue as we exit 2022.
For the year payments grew 69, 1% year over year to $510 $4 million driven by the acquisition of Firstmerit and sales driven growth for stand alone deluxe.
Excluding first American payments revenue increased five 4% year over year.
For the year and including first American adjusted EBITDA increased 55, 1% and adjusted EBITDA margin was 27% down 190 basis points.
Longer term, we expect the payments segment to deliver a high single digit revenue growth rate and for 2022, we expect adjusted EBITDA margins to be in the low 20% range.
Cloud solutions had another solid quarter segment revenue increased five 6%.
Year over year to $62 $5 million in the quarter.
As Barry mentioned earlier as businesses exited during 2020 are excluded cloud grew 11% in the quarter.
While its growth continues to be driven by our data driven marketing solutions, which is seeing a solid rebound with the recovering economy and increased marketing spend.
We continue to add new DBM clients, which will benefit us going forward.
As we've said in previous quarters, our strategy and our data businesses to diversify beyond our core banking and mortgage verticals. We had mentioned pilot campaigns within these new markets and these initial opportunities have been successful. These.
These pilots have outperformed our customer's existing campaigns, leading to new ongoing programs and use cases to approach other major players within these target markets.
Q4 wins included new customers and programs and telco and notably within the one of the country's largest e-commerce marketers.
In Q4 clouds, adjusted EBITA margin declined 300 basis points versus prior year to 24, 2% due to product mix planned investments to drive future growth in the business and the impact from business exits.
For the year cloud segment revenue increased three 8% year over year to $262 $3 million.
Once again that business is exited during 2020 are excluded file grew 13% for the year.
For 2021 clouds, adjusted EBITDA margin improved 240 basis points versus prior year to 26, 8%.
For 2022, we continue to expect to see mid single digit revenue growth on a reported basis. We also expect cloud margins to remain healthy in the low to mid 20% range.
Promotional solutions fourth quarter 2021 revenue was $156 7 million up eight 8% year over year.
Adjusted EBITDA margin for the fourth quarter was 18, 3% up 430 basis points due to sales driven operating leverage merchandising optimization and seasonal factors.
For the year promotional solutions revenue was $546 5 million up three 2% year over year.
Adjusted EBITDA margin for the year was 15, 6% up 300 basis points.
We are anticipating 2020 to topline growth in the low single digit range and slightly improved adjusted EBITDA margins due to value realization initiatives and merchandising optimization.
<unk> fourth quarter revenue increased six 2% from last year to $184 $1 million as new competitive wins pricing actions and strengthen our business checks outpaced the anticipating secular declines in the business.
The significant Bradford when enabled by our investment in HP digital assets had a modest impact in the fourth quarter revenue, but were partially offset the expected secular declines in 2022.
I should also note that while we are very pleased with these results. We do not expect to see this level of outperformance in 2022.
Fourth quarter adjusted EBITDA dollars remained flat year over year, and adjusted EBITDA margin levels were 45, 2% down 290 basis points.
This was largely driven by expenses related to the onboarding of new customers inflation and planned investments, including our new print on demand technology from HP.
Which should help protect our margins moving forward.
<unk> full year 2021 revenue was $703 million flat with last year and adjusted EBITA margin levels were 46, 1% down 230 basis points.
Based on high renewal rates and new businesses. One in 2020 in 2021, we anticipate checks to decline in the low single digits for 2022.
Better than anticipated industry secular declines.
Turning now to our balance sheet and cash flow.
We ended the year with a net debt level of $1 $64 billion up from $716 $9 million last year due to the first American transaction.
Importantly in the fourth quarter, we retired over $94 million of debt and nearly $153 million since the first American transaction further demonstrating our financial discipline and commitment to delever.
Our net debt to adjusted EBITDA ratio was four zero times at the end of the year down from four three times in the third quarter.
Our long term strategic target remains approximately 3.0 times.
Free cash flow defined as cash provided by operating activities less capital expenditures was $33 $5 million in the fourth quarter up $2 $7 million from the fourth quarter of 2020.
We do expect overall free cash flow to increase in 2022 as the investments in our major tech platform modernization will decrease meaningfully starting in the second half of the year.
For the year free cash flow was $101 $7 million down from $155 million in 2020 due to planned investments as well as transaction fees associated with the first American transaction.
Okay.
Our board approved a regular quarterly dividend of <unk> 30 per share on all outstanding shares the dividend will be payable on March seven 2022 to all shareholders of record on February 22022.
We did not repurchase common stock in the fourth quarter as a reminder, our capital allocation priorities are to responsibly invest in growth pay our dividend reduce debt and return value to our shareholders.
We will evaluate future repurchases on an opportunistic basis subject to the attainment of our deleveraging goals.
Turning now to guidance.
Today, we are providing our expectations for 2022 as a reminder of the guidance includes a partial prior year of first American assumes a continued economic recovery and is subject to among other things the macroeconomic 10 minutes associated with the COVID-19 pandemic, including the omicron variant as well as the anticipated continued supply chain can.
Strengths labor supply issues and inflation.
Yes.
We've added several more components to our guidance, which should help you with your modeling.
For full year 2022, we are expecting the following keeping in mind that all figures are approximate.
Revenue growth of 8% to 10%, including a full year of first American as a reminder, the transaction closed on June one 2021.
Adjusted EBITDA margin of approximately 20% for the full year.
We expect 2022 to return to pre Covid seasonal patterns. The Q1 margin rate will be the lowest of the year with margins improving as the year progresses.
Interest expense of $85 million in.
And adjusted tax rate of 26%.
Depreciation and amortization of $180 million approximately half of which is acquisition amortization.
Average outstanding share count of $43 5 million shares and capital expenditures of $105 million.
To summarize I'm very pleased with the fourth quarter and full year 2021 results.
We are executing on our one deluxe strategy I believe the company is experiencing solid momentum we would expect to continue into 2022.
Operator, we're now ready to take questions.
Thank you and at this time I'll, just remind everyone. If you would like to ask a question. Please press Star then one on your telephone keypad.
Our first question is from Lance Vitanza with Cowen Your line is open.
Hi, guys. Thanks for taking the questions and congratulations on an.
Important year, a great quarter.
And if I can I'd like to start maybe with just one big picture question.
Barry you have done a lot to really transform this business over the past couple of years. My question is where do you see the business going from here do you have deluxe, where you want it to be or will there be more improvement. So I guess, what I'm wondering is.
Will are you now moving into a reap.
Reap what you sow type type of dynamic or do you have a lot more are there more transformational is there a more transformational work that needs to be done in Europe .
Well first of all ask Gregg to talk to you again, and we're very proud of how the business performed through 2021, and I and fundamentally agree with you that it was a very very important year in our transformation.
You'll recall that we have invested over the last couple of years to improve our core operating systems or infrastructure or more and we will be completing all of that work on the first half of this year. So that is already largely behind us, but it will be really behind us at the middle of the year passes.
We very much like the position the company is in today, which is we.
Have a payments business that at year end will be the largest business in the company's portfolio and that puts us in a strong position for secular growth going forward that payments business we have.
Have long held the belief that it will continue to grow and deliver high single digit growth for the long term with healthy margins, we really liked that profile substantially we've made investments to ensure the success of our tech business cash flow for the long term, but you saw us make announcements in the very recent past.
Really like where we're positioned today.
And we think we're in a great spot to grow the company from.
From here.
Our next question is from Charles Strausser with CJS Securities. Your line is open.
Hi, good morning, everybody.
Can you talk a little bit more about your assumptions behind the organic growth for 2022 for both the core <unk> business and.
Maybe a little bit more granularity on the segment.
Scott you gave some good detail there, but maybe some more about the assumptions behind those are those numbers.
Sure Charlie so.
Good morning, so the revenue of 8% to 10% obviously that includes a.
A partial year for firstmerit can be including in the base for the first time.
Make that a part we would say on the legacy business that would be zero to 2%.
Zero to 2% growth similar to what we had communicated for this year as you move into the back half of the year and its first American just becomes part of who deluxe is.
<unk> will begin to think about that as a portfolio and we.
We will.
Youre not not need to segregate that.
Independently.
Within the segments that we've talked about each individual segment and what our long term expectations are for the overall payments business.
We're thinking 2022 and beyond as being a long term high single digit grower with the inclusion of first American cloud in the mid single digits promo in the low single digits in check we talk about the secular declines in that industry that we continue to resume in 2022 had an incredible Q.
For in the Czech business, where we actually grew revenue.
Period over period, we don't well, we're thrilled with our performance. We don't expect that to continue next year and we're going to look at 2022 to deliver a low single digit decline in checks.
Great. Thank you and then if youre looking at.
Bit of growth, obviously on the topline, but EBIT margins are relatively flat with 21 can you talk more about kind of the factors impacting the margins and so that may be something to offset those things.
Sure so.
20% EBITDA margin for 2022, consistent with what we would say is this year and certainly there are.
Some areas of pressure with inflation and supply chain dynamics that we're still working our way through but.
But we do feel like we've got a good solid plan on how to deflect those pressures in the business and deliver EBITDA rate outperformance in line with.
With what we saw this year no. One nuance is that we are expecting Q1 to be the lowest quarter of the year theres. Some seasonal patterns that have historically existed in the business that we expect to resume you didn't see those in 2020 one data some of the one timers associated with Covid.
But we do expect Q1 to be the lowest performer of the year increasingly steadily throughout the year and deliver 20% overall.
Across the across the.
The cadence there.
Great and then lastly, if you can expand a little further on your thoughts for free cash flow I know you said, you're expecting it to grow in 2022, but you know maybe a little bit more granularity.
Certainly so Barry talked a lot about the transformation that was initiated several years ago regarding the internal infrastructure of the organization internally we call. These initiatives six flag there were six specific infrastructure components that were replace completely five of those projects are now complete the Fi.
Anil, which but final of those which is also the biggest and most impactful is the replacement of the ERP system to integrate all these previously unintegrated businesses that will conclude in the first half of 2022 and that has been a significant consumer of cash in the organization and so with the completion of that activity there is meaning.
The amount of incremental free cash flow as compared to 2021 that we'll expect to see next year.
Uh huh.
Excellent. Thank you very much.
Yes.
Our next question is from Lance Vitanza with Cowen Your line is open.
Hey, guys. Thanks, Ben.
To start on first American and the payments business actually it sounds like it was accretive if I heard you right. It was accretive to EBITDA margin slightly accretive to EBITDA margin in the quarter. Good yet the guidance I think you said for 2022 is going to be for another year of low 20% EBITDA.
Margin and so it just it seems like Youre not really if I heard you right. It sounds like youre, not really expecting to capture any operating leverage there and I'm. Just wondering if that's a temporary phenomenon I know obviously, we've got a lot of things going on in the world right now or should we be thinking that that's that's just the nature of the business in that.
Sort of that margin profile should continue out for the next several years.
Youre correct in that we have not modeled a significant amount of operating leverage and firstmerit and for 2022.
There are a number of investments that need to be made in the business and we're excited about continuing to grow that and thrilled with the performance that that team has delivered over.
Over the course of 2021, we do however expect it in the long term even in the intermediate term there should be operating leverage as we've talked a lot about the strategy of that acquisition first American has is a scale business with a solid platform upon which additional volume should come through at higher flow through rates. So we do expect operating leverage into this.
Future, but we need to make some investments that continue to grow the baseline business as we further integrate that and with with the balance of deluxe.
So so not to quibble with the semantics, but it sounds like the flat margin in 'twenty. Two is really somewhat misleading because there's things going on puts and takes beneath the surface. There is.
There is some higher flow through but it's being offset by some temporary investments that you feel like you need to make is that a fair way to characterize it.
Yes, I think Thats fair.
Okay.
It looks like the the.
The year on year growth it looks like it decelerated and I'm wondering if there was anything in particular happening there and we're still quite nice, but I also noticed that it was down quarter on quarter. So I was hoping you could talk a little bit about the seasonality that you would typically expect to see in the business. Thanks.
Now there is seasonality of the business, but I think primarily the.
Decelerating growth as a function of the comp year and the recovery from Covid that we saw in the early part of the year and now we're starting to see.
To trend up against stronger comp quarters in.
In the business and as we've continued to articulate we view this as a mid single digit grower going forward as we've reverted to that level in Q4, but this business is performing.
Aligned with our expectations really happy with the traction we've made with <unk>.
With new customers and the prospective opportunities to enter into new industry verticals. So we're very happy with the performance. We've seen there I think it is important to note that the growth rate that youre seeing there. The mid single digit growth rate is also impacted by the exit. So if you exclude the exits it would have been 11% growth in the <unk>.
Order.
Right, Okay, great and so on the promo side, where there you did quite nicely much better than we were expecting and I'm wondering actually if maybe the reverse what's happening. There was there. Some reason that that was maybe an easier comp maybe anything that got pushed out of <unk> or was there anything pulled forward into FY 'twenty one.
Clearly I am guessing, we shouldnt be expecting 9% year on year growth going forward.
So we saw some strong growth in that business certainly we do not expect that to continue at those levels going forward.
We did see some improved performance in some sub sections within promos, specifically promo in apparel, which is a business that was hit hard by Covid, but we saw some nice strength in that in that.
Of the business in Q4 also.
Part of that business that there is sort of our forms business that often tracks with checks and we see some saw some strong performance there as well. So we still think the business is healthy again performed well in 2020 to 22, but we're modeling that out as more of a low single digit grower next year.
Okay and my last question, if I can squeeze one more in is really on the balance sheet and you did a nice job there.
Leverage net debt, both a little bit lower than we had modeled.
Okay.
Im a little frustrated that debit now apparently you don't feel as the time to be repurchasing the stock I mean, the stock is clearly not reflecting the value proposition here and it sounds like you're pretty much made up your mind that until you get that leverage down to your target share repurchases or.
But off the table and maybe I'm, making too maybe stronger than you guys are.
We're making it but could you comment on that a little bit. It is there any chance that maybe the company does move in first half of this year and take advantage of the prices that we're seeing.
This is something we review with our board every single quarter, we're always evaluating.
Our capital allocation priorities and I would never say never but at the moment, we're steadfast in our commitment to delever. According to the commitments. We've made at the time of the first one first American acquisition, but we will revisit that on a constant basis for evaluating our capital plans we are evaluating our.
<unk>.
Our debt deleveraging plans as well as our share buyback plans constantly so never say never but for the moment, we're focused on reducing our leverage.
Understood. Thanks for the color guys I appreciate it.
Our next question is from Chris Mcginnis with Sidoti <unk> Co. Your line is open.
Yes. Good morning, Thanks for taking my questions and nice quarter I.
I guess, if we could start just on the.
First American can you just talk about the growth rate that you're seeing there and then how long you can keep that growth rate going now that it's under your <unk>.
Demand.
Hey, Chris good.
Good to hear you.
We're obviously very proud and pleased with first American performance and like we said earlier, we think it's just really clear clear evidence that our <unk> sales model works on the deluxe Elo is real.
I think that that's going to be a great business over the long term.
We don't know that thats going to stay at this elevated the rate of growth in.
And definitely we are.
Tell you we feel very good now about.
What we said when we acquired the asset that we believe we could have it as a.
Solid middle.
Yes digit grower and perhaps more and we're seeing perhaps more right now and what we saw in the full year in our fourth quarter results.
And what I would just tell you we feel very confident very confident that our original business case on plan is solid and is going to deliver.
Great. Thanks for that and then I guess, just the second part of that around.
<unk> I know you mentioned this last quarter Barry is that Youre getting inbound calls is that customer outreach still continuing to happen coming to you now that you have that asset in place.
Absolutely and I think Chris maybe the best way to think about sort of this notion of the deluxe halo on the strength of our relationship and the strength of the brand we have in the marketplace, particularly with financial institutions.
Is that we closed three times three times the number of financial institutions in the back half that would that would be a normal close rates for first American it is like the best way I can explain to you that it's real and that the fact that the relationships. We have can be leveraged for growth is this.
It's clear, it's black and white three times the number of <unk>.
<unk> institutions signed with first American in the back half than they would in a typical back half.
I don't have a better way to dimensionalize, except to tell you that.
It's really powerful and really clear.
No I appreciate that and I guess just.
Thinking about that where the Brad for exchange announcement earlier. This week can you just talk about I guess, one the opportunity there just on the check side and then also is there.
For that one deluxe strategy to play out.
To include more.
Products that deluxe offers.
We continue.
There's a bunch of questions. There. So let me take them one at a time, let me talk about the Bradford HP and what we're doing in our tech business. We have long said that we were going to focus on maintaining that profitability for the fire.
Foreseeable future and by making investments on the digital technology like you saw us announced with HP helps us do that it's greatly simplifies the production process eliminates inventory in our warehouses.
And it gives us many more products to sell.
Part of having more products to sell me and there are other customers that we can go sell to a brand for an exchange is a great example, Bradford explained their core business is that they put artwork on a variety of different products.
Great is custom product for a consumer.
And that a significant chunk of business today that was being managed and delivered by our competitor and we won that away.
On a variety of points, especially the fact that we now have this tech capability in technology that allows us to have nearly infinite variety of designs and that's important not only to Bradford exchange because that's a key differentiator for them on the market, but it has already allowed us to add additional check designs to our mix.
Which allows us to have new revenue sources and it does position us really well to go after a different segment of the market that we haven't been able to go after in the past.
We think there is opportunity for us to win additional business there and continue.
The ability for us to grow share of the market in checks.
So the second question really was around one deluxe and the ability to cross sell beyond just the success, we highlighted on first American.
But throughout this quarter and throughout the year, we continue to improve our cross sell rate in our telesales centers. As an example, our pipeline of products that we have in queue to be sold to our existing customers has continued to expand and I think it was our third at a record.
Consecutive year of record a cross sell performance. So we don't see any reason that that's going to slow down the <unk>.
One deluxe model that we started building it clearly works.
And if it's a machine.
That is working really well for us.
Great No I appreciate that color.
Just to move on to checks and the growth in the quarter and I understand the outlook for 'twenty, two but can you just dive a little bit more into the growth in the quarter itself, maybe how much is from existing and then from new client wins.
Yes so.
Look we still think about the industry in the base business as being in that mid single single digit secular decline. So you get a sense for how much of the volume that we delivered was based on new wins.
And so the business. The team has just done a terrific job in winning a high very very high percentage of renewals of our existing customers and then fairing quite well when new business is up for grabs. So team just continues to do a do a terrific job there.
And so we don't have as many renewals coming up in the near term. So we think we've got a pretty solid.
Baseline of revenue training into into 2022.
But again the team continues to take share and do a good job with that business.
Thanks for that.
Also on MTX it sounds like it's starting to really gain some traction can you just talk about the opportunity that you see and maybe the revenue growth rate I know, it's still small, but it sounds like it's moving in a pretty positive direction.
So we're really proud of what's happening with MPLX and <unk> and <unk>.
Year on year.
Growing you know in the.
50, plus percent range, so very material revenue growth rate.
And we think there is a ton of upside potential. If you just look at it and you say that if you'd convert just a small percentage of <unk> checks.
It's a it's incredibly it's right in front of it right in front of us to go to make that 100 million dollar a year business not tomorrow morning.
A couple of year horizon and at that growth rate. We believe we can get there a few years.
And so it's a it's a real business, it's a real market opportunity and as we noted we signed the fourth major Payor in Q4, which is a big deal.
Because it it hasnt gone live yet, but because they are fine there'll be revenue and profit that come to us.
Beginning in 'twenty, two and then accelerating as we go forward.
And it appears that we have no further questions at this time I'll turn the call back to Mr. Morabito for any closing remarks.
Thanks, Chris before we conclude I'd like to mention that management will be participating in the Sidoti spring small cap conference on March 23.
Thank you again for joining US today, please stay healthy and safe and we look forward to speaking with you in may as we share our first quarter 2022 results.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
Okay.
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