Q1 2024 Deluxe Corp Earnings Call

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Deluxe Quarterly Earnings Conference. All participants are currently in a listen-only mode, and today's call is being recorded. At this time, I would like to turn the conference over to your host, Vice President of Strategy and Federal Relations, Brian Anderson. Please go ahead.

Ladies and gentlemen, thank you for standing by and welcome to the Deluxe quarterly earnings Conference call.

Participants are currently in a listen only mode and today's call is being recorded.

At this time I would like to turn the conference I'll break your host Vice President of strategy Investor Relations, Brian Anderson. Please go ahead.

Brian Anderson: Thank you, operator, and welcome to the Deluxe First Quarter 2024 earnings call. Joining me on today's call are Barry McCarthy, our President and Chief Executive Officer, and Chip Zint, our Chief Financial Officer.

Brian Anderson: Thank you operator, and welcome to the Deluxe first quarter 2024 earnings call.

Brian Anderson: Joining me on today's call are Barry Mccarthy, our President and Chief Executive Officer, and chipset, our Chief Financial Officer.

Brian Anderson: At the end of today's prepared remarks, we will take questions.

Brian Anderson: 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, and expectations of the company's future strategy or performance are forward-looking in nature as defined in the Private Securities Litigation Reform Act of 1995. Additional information about factors that may cause our actual results to differ from projections is set forth in the press release we issued this afternoon, in our Form 10-K for the year ended December 31, 2023, and in other company SEC filings.

Brian Anderson: Before we begin and as seen on the current slide I'd like to remind everyone that comments made today regarding management's intentions projections financial estimates and expectations of the company's future strategy or performance are forward looking in nature as defined in the private Securities Litigation Reform Act of 1995.

Brian Anderson: Additional information about factors that may cause our actual results to differ from projections is set forth in the press release, we furnished this afternoon and in our Form 10-K for the year ended December 31, 2023, and in other company SEC filings.

Brian Anderson: On the call today, we will discuss non-GAAP financial measures, including comparable adjusted revenue, adjusted and comparable adjusted EBITDA and EBITDA margin, adjusted and comparable adjusted EPS, and free cash flow. In our press release, today's presentation, and our filings with the SEC, you'll find additional disclosures regarding these non-GAAP measures, including reconciliation of these measures to the most comparable measures under U.S. GAAP. Within the materials, we're also providing reconciliations of GAP EPS to comparable adjusted EPS, which may assist with your model.

Brian Anderson: On the call today, we will discuss non-GAAP financial measures, including comparable adjusted revenue adjusted and comparable adjusted EBITDA and EBITDA margin adjusted and comparable adjusted EPS and free cash flow.

Brian Anderson: In our press release todays presentation, and our filings with the SEC Youll find additional disclosures regarding the non-GAAP measures, including reconciliation of these measures to the most comparable measures under U S. GAAP.

Brian Anderson: Within the materials. We are also providing reconciliations of GAAP EPS to comparable adjusted EPS, which will assist with your modeling.

Brian Anderson: Finally, as an important additional note, this evening's presentation reflects results aligned to our updated segment reporting structure. As outlined in our filings concurrent with our December Investor Day presentation and today's 8K filing, which provides unaudited recap business segment revenue and adjusted EBITDA information for both 2022 and 2023, including quarterly details for 2023. Updated operating segment figures are reported excluding any results from exited businesses for the respective period, with results from such activities reported separately within the filed materials and detailed further within our segment information and reconciliation of gap to non-gap measures slides in the appendix of today's presentation material. Chip will add some detail regarding these updates during his comments this evening. And with that, I'll turn it over to Barry.

Brian Anderson: Finally, as an important additional know this evening's presentation reflects result aligned to our updated segment reporting structure.

Brian Anderson: As outlined in our filings concurrent with our December Investor Day presentation, and todays 8-K filing which provides unaudited recast the segment revenue and adjusted EBITDA information for both 2022 and 2023, including quarterly details for 2023.

Brian Anderson: Updated operating segment figures are reported excluding any results from exited businesses for the respective periods with.

Brian Anderson: With results from such activities reported separately within the filed materials and detailed further within our segment information and reconciliation of GAAP to non-GAAP measures slide in the appendix of today's presentation materials.

Brian Anderson: Chip will add some detail regarding these updates during his comments this evening.

Brian Anderson: And with that I'll turn it over to Barry.

Barry C. McCarthy: Thanks, Brian, and good evening, everyone. Two things before I get started. First, today I'll be discussing comparable adjusted results for the quarter, which we believe best reflect our ongoing business performance. Later, Chip will discuss a reported consolidated and comparable adjusted figure to give even more perspective. Second, as Brian just mentioned, this is the first time we're reporting in our new segment.

Barry C. McCarthy: Thanks, Brian and good evening everyone.

Brian Anderson: She was saying this before I get started.

Barry C. McCarthy: First today I'll be discussing comparable adjusted results for the quarter, which we believe best reflect our ongoing business performance.

Brian Anderson: Later she.

Barry C. McCarthy: I'll discuss our reported consolidated and comparable adjusted figures to give even more perspective.

Barry C. McCarthy: Second as Brian just mentioned this is the first time, we're reporting in our new segments.

Barry C. McCarthy: We'll also be happy to have follow-up conversations and answer questions that you may have about these updates. We think this new segmentation provides better insight into the company and our future. Our strategy is clear.

Brian Anderson: I'll also be happy to have follow up conversations and answer questions that you may have on these updates.

Brian Anderson: We think this new segmentation provides better insight into the company and our future.

Brian Anderson: Our strategy is clear.

Barry C. McCarthy: I will invest the relationships, trust, and brand built in our print business to grow the payments and data business. Very simply, payments and data are our growth drivers, and print is our cash generator helping drive payments and data success. On this chart, you can see Prince with 57% of revenue, with payments and data combined delivering 43% for the quarter, with Q1 combined payments and data revenue of $226 million, growing 8.1% with margins of 22%. This is an attractive portfolio of businesses that we think is often overlooked.

Brian Anderson: Investor relationships Trust and brand built at our print business.

Brian Anderson: To grow the payments and data businesses.

Brian Anderson: Very simply payments from data or our growth drivers and print as a cash generator, helping drive payments and data success.

Brian Anderson: On this chart you can see print was 57% of revenue with payments from data combine delivering 43% for the quarter.

Brian Anderson: With Q1, combined payments and data revenue of $226 million.

Brian Anderson: Eight 1% with margins of 22%.

Brian Anderson: This is an attractive portfolio of businesses that we think is often overlooked.

Barry C. McCarthy: Our new operating segments should help highlight these businesses. Over the longer term, we expect the combined payments and data businesses to reach revenue parity with print, and we expect to provide updates annually. Overall, I'm very pleased to report our strong start to 2024.

Brian Anderson: Our new operating segments should help highlight these businesses.

Brian Anderson: Over the longer term, we expect the combined payments and data businesses to reach revenue parity with print.

Brian Anderson: And expect to provide updates annually.

Brian Anderson: Overall I'm very pleased to report our strong start to 2024.

Barry C. McCarthy: In the first quarter, we delivered growth across every key metric, revenue, adjusted EBITDA, EPS, and margin. Our adjusted EBITDA expanded at a significantly faster rate than revenue, demonstrating the operating leverage we have now purposely built into the company. We were also particularly pleased with the significant year-over-year improvement in cash flow.

Brian Anderson: In the first quarter, we delivered growth across every key metric revenue adjusted EBITDA EPS and margin.

Brian Anderson: Our adjusted EBITDA expanded at a significantly faster rate than revenue demonstrating the operating leverage we have now purposely built into the company.

Brian Anderson: We were also particularly pleased with the significant year over year improvement in cash flow.

Barry C. McCarthy: As a result of this strong performance, we're raising our 2024 cash flow guidance and affirming all other full-year operating benefits. As you recall, accelerating cash flow and profit growth are the key tenets of our overall strategy and North Star program, both of which we outlined during our December Investor Day. We believe that Q1 performance demonstrates our progress. As a reminder, our North Star goal is to unlock $80 million of incremental comparable adjusted EBITDA and $100 million of incremental free cash flow by 2026.

Brian Anderson: As a result of the strong performance, we're raising our 2020 for cash flow guidance.

Brian Anderson: Firming all other full year operating metrics.

Brian Anderson: You will recall accelerated cash flow of profit growth are the key tenants of our overall strategy at North Star program.

Brian Anderson: Both of which we outlined during our December Investor day.

Brian Anderson: We believe the Q1 performance demonstrates our progress.

Brian Anderson: As a reminder, our norstar goal is to unlock $80 million of incremental comparable adjusted EBITDA and a $100 million of incremental free cash flow by 2026.

Barry C. McCarthy: As of the end of Q1, we're making progress on all 12 Northstar workstreams shown here. Initiatives comprising roughly two-thirds of our targeted $130 million of overall EBITDA improvements are now moving to the execution stage. Recall that the $130 million is aligned to our net $80 million incremental earnings target after factoring for expected secular declines through 2026. Benefit realization will phase in during the remainder of this year and throughout 2025.

Brian Anderson: As of the end of Q1, we're making progress on all 12 Northstar work streams as shown here.

Brian Anderson: Initiatives, comprising roughly two thirds of our targeted $130 million of overall EBITDA improvements are now moving to the execution stage.

Brian Anderson: Recall that the $130 million is aligned to our net $80 million incremental earnings target after factoring for expected secular declines through 2026.

Brian Anderson: Benefit realization will phase in during the remainder of this year and throughout 2025.

Barry C. McCarthy: We expect to see in-year benefits accelerate and remain well-positioned to achieve our goal. Now, before reviewing our first quarter highlights, I'd like to provide a few comments on the macroeconomy and key business drivers. First, as we discuss on each of these calls, Deluxe actively monitors trends surrounding overall domestic consumer sentiment, including discretionary spending. We review economic information for many providers, including the Federal Reserve, card associations, and more, looking at this information alongside our own available data. While it appears consumers still feel inflation pressure, some of the unfavorable spending dynamics between less and more discretionary categories present a year ago appear to have stabilized a bit.

Brian Anderson: We expect to see in year benefits accelerate and remain well positioned to achieve our goals.

Speaker Change: Now before reviewing our first quarter highlights I'd like to provide a few comments on the macro economy and key business drivers.

Speaker Change: First as we discussed on each of these calls.

Speaker Change: <unk> actively monitors trends surrounding overall domestic consumer sentiment, including discretionary spending.

Speaker Change: We review economic information for many providers, including the Federal reserve card associations and more.

Speaker Change: Looking at this information alongside our all of the available data.

Speaker Change: While it appears consumers still feel inflation pressure some of the unfavorable spending dynamics between less and more discretionary categories present, a year ago appear to have stabilized a bit.

Barry C. McCarthy: You see this reflected in our merchant services performance. Second, our business continues to benefit from our overall one deluxe go-to-market approach, as our growth during the first quarter included new customer wins across each of our reporting segments. Third, trust continues to be a key driver for the company and, as we have noted, is one of our core values. We were honored to be recognized for the third consecutive year as one of America's most trustworthy companies by Newsweek.

Speaker Change: Youll see this reflected in our merchant services performance.

Speaker Change: Second our business continues to benefit from our overall one deluxe go to market approach as our growth during the first quarter included new customer wins across each of our reporting segments.

Speaker Change: Third <unk>.

Speaker Change: <unk> continues to be a key driver for the company and as we have noted is one of our core values.

Speaker Change: We were honored to be recognized for the third consecutive year.

Speaker Change: As one of America's most trustworthy companies by Newsweek.

Barry C. McCarthy: This ongoing recognition is testament to the quality both of our products and services and the commitment of all deluxers to delivering every day for customers. Now to provide some additional details about our first quarter performance, for the quarter, that of business exits. Revenue is $529 million, up 1.2%, or just over $6 million year over year. The combined growth in our payments and data businesses more than offsets the single-digit secular declines in print, consistent with our strategy.

Speaker Change: This ongoing recognition is testament to the quality both of our products and services and the commitment of all deluxe are delivering every day for customers.

Barry C. McCarthy: Importantly, the company is now in its fourth consecutive year of delivering organic revenue growth, demonstrating that our shift toward a payments and data company is working. Total adjusted EBITDA dollars increased 7% from the first quarter of 2023 to $97 million, continuing to reflect robust operating leverage across our portfolio, as noted in my opening comments. Adjusted EBITDA margins finished the quarter at 18.3%, reflecting an expansion of a full 100 basis points versus the prior year.

Speaker Change: Now to provide some additional details about our first quarter performance.

Speaker Change: For the quarter net of business exits revenue was $529 million.

Speaker Change: Up one, 2% or just over $6 million year over year.

Speaker Change: The combined growth in our payments and data businesses more than offset the single digit secular declines in print consistent with our strategy.

Speaker Change: Importantly, the company is now in its fourth consecutive year of delivering organic revenue growth.

Speaker Change: Demonstrating that our shift towards a payments and data company is working.

Speaker Change: Total adjusted EBITDA dollars increased 7% from the first quarter of 2000 $23 million to $97 million continuing to reflect robust operating leverage across our portfolio as noted in my opening comments.

Speaker Change: Adjusted EBITDA margins finished the quarter at 18, 3%, reflecting an expansion of our fall 100 basis points versus the prior year.

Barry C. McCarthy: We remain particularly pleased with the results, helping to demonstrate our progress around continued optimization of our operating expense base and expansion of adjusted EBITDA levels outlined within our NORSTAR execution plan. Moving on to some segment highlights, beginning with Merchant Service.

Speaker Change: We remain particularly pleased with the results.

Speaker Change: And to demonstrate our progress around continued optimization of our operating expense base and expansion of adjusted EBITDA levels outlined within our Northstar execution plans.

Speaker Change: Moving on to some segment highlights beginning with merchant services.

Barry C. McCarthy: For the quarter, merchant segment revenue grew 8.3%, while adjusted EBITDA dollars grew 16.3%, and margins expanded 150 basis points from 2023 on strong processing volume. We're pleased with the strong performance of this business as we approach the third anniversary of the acquisition on June 1st. Since the combination, revenue, profit, operating leverage, and margin have all materially accelerated, further demonstrating the power of our One Deluxe model. We will continue to leverage our strong bank partner relationships, increasing penetration with integrated software vendors or ISVs, and direct selling resources.

Speaker Change: For the quarter merchant segment revenue grew eight 3%, while adjusted EBITDA dollars grew 16, 3%.

Speaker Change: And margins expanded 150 basis points from 2023, our strong processing volumes.

Speaker Change: We're pleased with the strong performance of this business as we approach the third anniversary of the acquisition on June one.

Speaker Change: Since the combination revenue profit operating leverage and margin have all materially accelerated.

Speaker Change: Further demonstrating the power of our one deluxe model.

Speaker Change: We will continue to leverage our strong bank partner relationships, increasing penetration with integrated software vendors are Isps and direct selling resources.

Barry C. McCarthy: Additionally, we continue to responsibly invest in our differentiated service capabilities, technology, and feature enhancement. Moving now to results within the B2B payment cycle. We saw year-over-year declines of 7.7% for B2B. The overall results were largely in line with our internal expectations for the first quarter. As we have shared on previous calls, we're transitioning to a software-as-a-service, or a SaaS, model, reducing our dependency on one-time, non-recurring revenue like software licenses and check imaging devices. This move to SAS will also reduce our dependency on core transaction processing revenue over time. This means we are deliberately reducing our focus on selling one-time, non-recurring products.

Speaker Change: Additionally, we continue to invest responsibly in our differentiated service capabilities technology and feature enhancements.

Speaker Change: Moving now to results within the BTB payments segments.

Speaker Change: While we saw year over year declines of seven 7% for <unk>.

Speaker Change: The overall results were largely in line with our internal expectations for the first quarter.

Speaker Change: As we have shared on previous calls we're transitioning to a software as a service or SaaS model, reducing our dependency on one time nonrecurring revenue like software licenses and check imaging devices.

Speaker Change: This move to SaaS will also reduce our dependence on core transaction processing revenue over time.

Speaker Change: This means we are deliberately reducing focus.

Speaker Change: Selling one time nonrecurring products as.

Barry C. McCarthy: As we anticipated, and as indicated in our first quarter results, the short-term impact has been less revenue, but improved margins. During the first quarter, B2B margins expanded 120 basis points, resulting in modest EBITDA impacts despite the drop in revenue. Additionally, we remain encouraged by our growing pipeline, demonstrating strong demand for our newest product. While we shift our focus to SAS, we will continue to focus on efficiencies across lockbox, leveraging recent site consolidations and other operating. Additionally, we have continued to win new deals in the lockbox business, helping to offset secular volume pressure and fund the transition to fast products. We have several high-quality deals currently in the implementation phase, and despite some customer delays, we expect these deals to go live later this year.

Speaker Change: As we anticipated and as indicated in our first quarter results. The short term impact has been less revenue, but improved margins.

Speaker Change: During the first quarter <unk> margins expanded 120 basis points, resulting in modest EBITDA impacts despite the drop in revenue.

Speaker Change: Additionally, we remain encouraged by our growing pipeline demonstrating strong demand for our newest products.

Speaker Change: While we shift our focus to SaaS. It will continue to focus on efficiencies across lockbox, leveraging recent site consolidations and other operating improvements.

Speaker Change: We have continued to win new deals and the lock box business.

Speaker Change: Helping to offset secular volume pressure and fund the transition to SaaS products.

Speaker Change: We have several high quality deals currently in the implementation phase and despite some customer delays. We expect these deals to go live later this year.

Barry C. McCarthy: To be clear, we do expect to see revenue, profits, and margin grow simultaneously as the shift towards SAS unfolds over the next several quarters. We also expect to announce a new leader for this segment in the coming months, Moving now to data solutions, which delivered particularly strong first quarter results. The core data-driven marketing, or DDM, business had a solid quarter, driving segment revenue growth of 34.5% and adjusted EBITDA growth of 46% during the period.

Speaker Change: To be clear, we do expect to see revenue profit and margin growth simultaneously as the shift towards SaaS unfolds over the next several quarters.

Speaker Change: We also expect to announce a new leader for this segment in the coming weeks.

Speaker Change: Moving now to data solutions, which delivered particularly strong first quarter results.

Speaker Change: The core data driven marketing or <unk> business had a solid quarter driving segment revenue growth of 34, 5% and adjusted EBITDA growth of 46% during the period.

Barry C. McCarthy: These results reflect continued strong demand for customer acquisition marketing activities across our expansive base of core FI partners. Additionally, Data continues to broaden its portfolio of clients, extending to other attractive non-financial service verticals, including telecom, utility, and smart home technology providers.

Speaker Change: These results reflect continued strong demand for customer acquisition marketing activities across our expansive base of core F&I partners.

Speaker Change: Additionally, data continues to broaden its portfolio of clients.

Speaker Change: Turning to other attractive non financial service verticals, including telecom utility and smart home technology providers.

Barry C. McCarthy: As we've discussed previously, quarter-to-quarter lumpiness results from the campaign-oriented nature of the DDM business, with customers often shifting planned marketing expenditure between quarters. Accordingly, we would not expect the levels of growth reported during the first quarter to recur over the balance of the year. Moving finally to our print site, consistent with our expectations and prior guidance, the print business experienced a revenue decline of just over 3% to $303 million, while adjusted EBITDA margins held at 30%, in line with our outlook and typical first quarter seasonality.

Speaker Change: As we've discussed previously quarter to quarter Lumpiness results from the campaign oriented nature of the DDS business.

Speaker Change: With customers are often shifting planned marketing expense between quarters.

Speaker Change: Accordingly, we would not expect the levels of growth reported during the first quarter to recur over the balance of the year.

Speaker Change: Shifting finally to our print segment.

Speaker Change: Consistent with our expectations and prior guidance the print business experienced a revenue decline of just over 3% to $303 million, while adjusted EBITDA margins held at 30% in line with our outlook and typical first quarter seasonality.

Barry C. McCarthy: Within the segment, legacy check revenues remained roughly flat during the quarter at just over $178 million. Promo revenue declines were consistent with our expectations for the first quarter, which typically lags sequentially from Q4 holiday-related seasonal strengths. Overall, we continue to manage the print portfolio to maximize cash flow through operating efficiency, Pricing Actions, and Responsible Investing.

Speaker Change: Within the segment legacy check revenues remained roughly flat during the quarter at just over $178 million.

Speaker Change: Cobalt revenue declines were consistent with our expectations for the first quarter, which typically lag sequentially from Q4 holiday related to seasonal strength.

Speaker Change: Overall, we continue to manage the print portfolio to maximize cash flow through operating efficiencies pricing actions and responsible investments.

Barry C. McCarthy: To summarize, our overall first quarter results speak to our transformation and North Star progress. This ongoing performance improvement provides us with a great foundation to deliver our 2024 revenue growth and EBITDA expansion goals. While work remains, our consistent and sustained pace of progress creates even greater confidence in our bright future as a payments and data company. Finally, before passing this to Chip, I want to acknowledge and thank all my fellow Deluxe Corp employees who work hard every day to deliver those results for our customers and investors. With that, I'll turn it over to Chip.

Speaker Change: To summarize our overall first quarter results speak to our transformation and Northstar progress.

Speaker Change: This ongoing performance improvement provides us with a great foundation to deliver our 2020 for revenue growth and EBITDA expansion goals.

Speaker Change: While work remains our consistent and sustained pace of progress create even greater confidence in our bright future as a payments and data company.

Speaker Change: Finally, before passing muster chip I want to acknowledge and thank all fellow deluxe first who work hard every day to deliver these results for our customers and investors.

Speaker Change: With that I'll turn it over to chip.

William Zint: Thank you, Barry, and good evening, everyone. As Barry noted in his opening, we were very pleased with our first quarter progress, particularly our better than anticipated cash flow generation and our strong comparable adjusted EBITDA growth during the period. As Brian pointed out up front,

Chip: Thank you Barry and good evening everyone.

Chip: As Barry noted in his opening remarks.

Chip: Very pleased with our first quarter progress, particularly our better than anticipated cash flow generation and our strong comparable adjusted EBITDA growth during the period.

Chip: As Brian pointed out upfront our updated segment reporting reflects the removal of all business exited impacts to both ongoing and recast historical operating segment financials.

William Zint: Our updated segment reporting reflects the removal of all business exit impacts on both ongoing and recasted historical operating segment financials. This will allow for a clean view of our segment performance over time, net of any impacts from divested lines of business. The combined impact of the business exits can be seen separately within the historical results of today's 8K file, as well as within the enterprise-level non-GAAP reconciliations found in the appendix of today's materials and in our past filings.

Chip: This will allow for a clean view of our segment performance overtime.

Chip: Net of any impacts from divested lines of business.

Chip: The combined impact of the business exits can be seen separately within the historical results of today's 8-K filing as well as within the enterprise level non-GAAP reconciliations found within the appendix of todays materials and in our past filings.

William Zint: Importantly, 2024 operating segment results will continue to be reported, excluding any impacts from residual payroll business results that may be realized as customer migrations take place over the course of the year. This is consistent with the conversion agreements we executed during the second half of 2023 as we made the decision to exit these businesses.

Chip: Importantly, 2024 operating segment results will continue to be reported excluding any impacts from residual payroll business results that may be realized as customer migrations take place over the course of the year.

Chip: This is consistent with the conversion agreements we executed during the second half of 2023 as we made the decision to exit these businesses.

William Zint: As a result, our total enterprise 2024 results will now incorporate a comparable adjusted revenue figure in addition to comparable adjusted EBITDA and EPS to remove any payroll business impacts incurred from both the current and prior year results. Now with that out of the way, I'll begin today with a bit of additional color around our consolidated highlights for the period before moving on to the segment results, our balance sheet and cash flow progress, and our updated 2024 guidance.

Chip: As a result, our total enterprise 2024 results will now incorporate a comparable adjusted revenue figure. In addition to comparable adjusted EBITDA and EPS to remove any payroll business impacts incurred for both the current and prior year results.

Chip: Now with that out of the way I'll begin today with a bit of additional color around our consolidated highlights for the period before moving onto the segment results, our balance sheet and cash flow progress and updated 2020 for guidance.

William Zint: For the quarter, on a recorded basis, we posted total revenue of $535 million, down 1.9% driven by the impact of our prior year exits, but increasing 1.2% year over year on a comparable adjusted basis. We reported a gap net income of $10.8 million or $0.24 per share for the period, improving from $2.8 million or $0.06 per share in the first quarter of 2023.

Chip: For the quarter on a reported basis, we posted total revenue of $535 million.

Chip: Down one 9% driven by the impact of our prior year exits, but increasing one 2% year over year on a comparable adjusted basis.

Chip: We reported GAAP net income of $10 $8 million or <unk> 24 per share for the period, improving from $2 8 million or <unk> <unk> per share in the first quarter of 2023.

William Zint: This increase was driven by improved operating results, particularly lower SG&A, as well as gains relating to business exits during the period. Comparable Adjusted EBITDA was $96.9 million, up $6.3 million, or 7%, versus the first quarter of last year. Comparable Adjusted Even of Margins was 18.3%, improving 100 basis points versus the first quarter of 2023. Q1 Comparable Adjusted EPS came in at $0.72, improving from $0.69 in 2023, primarily driven by the improved operating income results previously noted. Now turning to our Operating Segment details, beginning with the Merchant Services Business.

Chip: This increase was driven by improved operating results, particularly lower SG&A expense as well as gains relating to the business exits during the period.

Chip: Comparable adjusted EBITDA was $96 9 million up.

Chip: Up $6 3 million or 7% versus the first quarter of last year.

Chip: Comparable adjusted EBITDA margins were 18, 3%, improving 100 basis points versus the first quarter of 2023.

Chip: Q1 comparable adjusted EPS came in at 72.

Chip: Improving from 69, and 2023, primarily driven by the improved operating income results previously noted.

Chip: Now turning to our operating segment details beginning with the merchant services business.

William Zint: The merchant business grew first quarter revenue by 8.3% year over year to $96.5 million, reflecting strong Q1 performance. As Barry noted, segment adjusted EBITDA finished at $21.4 million, improving $3 million or 16.3% versus the prior year, with margins expanding 150 basis points to 22.2% of revenue, mainly resulting from the strong top-line growth and our ongoing profit enhancement initiatives. In addition to the highlights Barry covered, the merchant business also benefited from robust seasonal volumes within the government vertical during the quarter and remains well-positioned to continue momentum towards our mid- to high-single-digit revenue growth and low 20% adjusted EBITDA long-term outlook.

Chip: Merchant business grew first quarter revenue by eight 3% year over year to $96 $5 million, reflecting strong Q1 performance as Barry noted.

Chip: Segment, adjusted EBITDA finished at $21 $4 million, improving 3 million or 16, 3% versus the prior year with margins expanding 150 basis points to 22, 2% of revenue maybe.

Chip: Mainly resulting from the strong top line growth and our ongoing profit enhancement initiatives.

Chip: In addition to the highlights Barry covered the merchant business also benefited from robust seasonal volumes within the government vertical during the quarter.

Chip: It remains well positioned to continue momentum towards our mid to high single digit revenue growth and low 20% adjusted EBITDA long term outlook.

William Zint: Turning to B2B payments, as a reminder, our B2B segment includes our treasury management offerings, featuring both our R360 software and lockbox remittance offerings on the AR side, in addition to our e-check and DPX AP disbursement solutions.

Chip: Turning to BTB payments as a reminder, our <unk> segment includes our Treasury management offerings, featuring both our 360 software and lockbox remittance offerings on the AUR side. In addition to our E checks and D. PX AP disbursement solutions.

William Zint: Results from RDC and other scanner hardware and our fraud and security suite of offerings are also included within this segment. For the first quarter, B2B segment revenues finished at $69.4 million, down from $75.2 million during 2023, consistent with our expectation for Q1 performance. While overall remittance volumes remained fairly stable on a sequential basis during the quarter, the balance of the business was unable to fully offset some non-recurring hardware sales from 2023 and other one-time items, resulting in an overall 7.7% decline year-over-year.

Chip: Results from RTC and other scanner hardware <unk>.

Chip: And our fraud and security suite of offerings are also included within this segment.

Chip: For the first quarter <unk>.

Chip: <unk> segment revenues finished at $69 $4 million down from $75 $2 million during 2023, consistent with our expectation for Q1 performance.

Chip: While overall remittance volumes remain fairly stable on a sequential basis during the quarter.

Chip: Balance of the business was unable to fully offset some nonrecurring hardware sales from 2023 and other one time items, resulting in an overall seven 7% decline year over year.

William Zint: Despite the revenue headwinds within the segment, adjusted EBITDA margins continue to improve consistent with the focus on operational efficiency, to which we have alluded on our prior quarterly earnings call. Margins improved by 120 basis points to 19.2% during the quarter, with adjusted EBITDA dollars declining 1.5% from 2023 to finish at $13.3 million. Despite the expected soft start to the year, we anticipate flat to low single-digit four-year revenue growth as we transition to recurring revenues, as Barry discussed. Overall EBITDA margins are expected to improve to the low to mid 20% range over time. Moving on to data solutions.

Chip: Despite the revenue headwinds within this segment.

Chip: Adjusted EBITDA margins continue to improve consistent with our focus on operational efficiencies.

Chip: We have alluded on our prior two quarterly earnings calls.

Chip: Margins improved by 120 basis points to 19, 2% during the quarter.

Chip: With adjusted EBIT dollars declining one 5% from 2023 to finish at $13 $3 million.

Chip: Despite the expected soft start to the year, we anticipate flat to low single digit full year revenue growth as we transition to recurring revenues as Barry discussed.

Chip: Overall EBITDA margins are expected to improve to the low to mid 20% range over time.

Chip: Moving onto data solutions.

William Zint: This segment rebounded very strongly on both a year-over-year and sequential basis, delivering strong results for the first quarter. Data revenues finished at $59.7 million for the quarter, reflecting a sequential increase of more than $15.5 million from its seasonally lowest fourth quarter. Achieving overall growth of 34.5% versus Q1 of 2023. As we noted a quarter ago, the data-driven marketing business saw several customers accelerate campaigns into the fourth quarter of 2022, pulling planned data spend from the prior year first quarter comparable results. As Barry referenced, the quarter-to-quarter volatility of campaign timing within this business can make sequential growth rates difficult to predict with great precision.

Chip: This segment rebounded very strongly on both a year over year and sequential basis delivering strong results for the first quarter.

Chip: Data revenues finished at $59 $7 million for the quarter, reflecting a sequential increase of more than $15 $5 million from its seasonally lowest fourth quarter.

Chip: Achieving overall growth of 34, 5% versus Q1 of 2023.

Chip: As we noted a quarter ago that data driven marketing business saw several customers accelerate campaigns into the fourth quarter of 2022.

Chip: Pulling planned data spend from the prior year first quarter comparable results.

Chip: Any reference to quarter to quarter volatility of campaign timing within this business can make sequential growth rate is difficult to predict with great precision.

William Zint: We continue to suggest averaging the two to three most recent quarters' actual results for both revenue and EBITDA dollars as a good barometer for ongoing segment-level financial performance over the balance of the year. We remain very encouraged by the recent performance of this segment and believe our mid-to high-single-digit, longer-term growth guidance remains appropriate from a full-year perspective. Data suggests the amount of margins for the quarter improved 200 basis points to 25%, again reflecting campaign timing impacts within the Q1 comparison, as referenced previously.

Chip: We continue to suggest averaging the two to three most recent quarters actual results for both revenue and EBIT dollars is a good barometer for ongoing segment level financial performance over the balance of the year.

Chip: We remain very encouraged by the recent performance of this segment and believe our mid to high single digit longer term growth guidance remains appropriate from a full year perspective.

Chip: Data is adjusted EBITDA margins for the quarter improved 200 basis points to 25% again, reflecting campaign timing impacts within the Q1 compare as referenced previously.

William Zint: Adjusted EBITDA for the quarter was $14.9 million, up 46.1% from the prior year period. We continue to have strong confidence in the long-term low to mid 20% adjusted EBITDA rate guidance for this segment. Turning now to our print businesses, our print segment first quarter revenue was $303.4 million, declining 3.4% on a year-over-year basis. This decline was in line with our secular unit decline expectations across this business, with legacy promotional solutions revenue driving nearly all the full segment decline as we continue to prioritize stronger-margin printed forms and other business essentials. Adjusted EBITDA margins declined 30 basis points year-over-year to 30%, continuing to reflect our operating expense discipline and efficiency across cost-of-goods sold inputs in particular.

Chip: Adjusted EBITDA for the quarter was $14 9 million up 46, 1% from the prior year period we.

Chip: We continue to have strong confidence in the long term low to mid 20% adjusted EBITDA rate guidance for this segment.

Chip: Turning now to our print businesses.

Chip: Print segment first quarter revenue was $303 $4 million declining three 4% on a year over year basis.

Chip: This decline was in line with our secular unit decline expectations across this business with our legacy promotional solutions revenue driving nearly all of the full segment decline as we continue to prioritize stronger margin printed forms and other business essentials.

Chip: Adjusted EBITDA margins declined 30 basis points year over year to 30%.

Chip: <unk> to reflect our operating expense discipline and efficiency across cost of goods sold inputs in particular.

Chip: Consistent with our long term outlook for the balance of 2024, we continue to expect to see low to mid single digit revenue declines across the print segment with adjusted EBITDA margins remaining in the low thirties.

William Zint: Consistent with our long-term outlook, for the balance of 2024, we continue to expect to see low- to mid-single-digit revenue declines across the print segment, with adjusted EBITDA margins remaining in the low 30s. Turning now to our balance sheet and cash flow. We ended the first quarter with a net debt level of $1.54 billion, modestly up from our 2023 year-end level, while remaining materially lower than the $1.66 billion mark at the end of Q1 of the prior year.

Chip: Turning now to our balance sheet and cash flow.

Chip: We ended the first quarter with a net debt level of $154 billion modestly up from our 2023 year end level, while remaining materially lower than the 166 billion Mark at the end of Q1 of the prior year.

William Zint: Consistent with our ongoing commitment to debt reduction as a top capital allocation priority for the enterprise, our net debt to adjusted EBITDA ratio was 3.7 times at the end of the quarter, also increasing minimally from the 3.6 times reported at year end.

Chip: With our ongoing commitment to debt reduction the top capital allocation priority for the enterprise.

Chip: Our net debt to adjusted EBITDA ratio was three seven times at the end of the quarter also increasing minimally from the three six times reported at year end.

William Zint: As we've noted, our long-term strategic target remains approximately three times leverage, and the first quarter typically reflects our seasonally lowest cash flow result, which tends to drive slight increases to our reporting leverage ratio relative to the balance of the year. Free cash flow, defined as cash provided by operating activities, less capital expenditures, finished at $6.2 million for the quarter, improving by $38 million from the negative results reported during the first quarter of 2023, driven by continued strong working capital efficiency, in addition to reduced year-over-year capex spend, lower cash incentive payments, and improved operating results.

Chip: As we've noted our long term strategic target remains approximately three times leverage.

Chip: The first quarter typically reflects our seasonally lowest cash flow result, which tends to drive slight increases to our reporting leverage ratio relative to the balance of the year.

Chip: Free cash flow defined as cash provided by operating activities less capital expenditures finished at $6 2 million for the quarter improving by $38 million from the negative results reported during the first quarter of 2023, driven by continued strong working capital efficiency. In addition to reduced year over year Capex spend.

Chip: Lower cash incentive payments and improved operating results.

William Zint: This was a continuation of the stronger-than-anticipated operating cash flow results we have reported since the second quarter of last year, noting that we guided to expected negative first quarter free cash flow results on our prior earnings call. We continue to expect the first quarter to reflect our seasonally lowest cash flow results, inclusive of payments for annual license and maintenance expenditures, employee compensation payments, and other items.

Chip: This was a continuation of the stronger than anticipated operating cash flow results. We have reported since the second quarter of last year.

Chip: Noting that we guided to an expected negative first quarter free cash flow result on our prior earnings call.

Chip: We continue to expect the first quarter to reflect our seasonally lowest cash flow results inclusive of payments for annual license and maintenance expenditures employee compensation payments and other items as a result of this first quarter performance and our updated forecast we are raising our full year free cash flow guidance range as Barry.

William Zint: As a result of this first quarter performance and our updated forecast, we are raising our full year free cash flow guidance range, as Barry alluded within his opening remark. We remain very pleased with our overall operating cash flow generation during recent quarters and our ability to continue our delevering path consistent with our clear capital allocation priorities. As an additional note regarding our overall capital structure, I wanted to take a moment to provide a bit of additional color as to the status of our present debt maturities, summarized on the current slide.

Chip: Alluded within his opening remarks.

Chip: We remain very pleased with our overall operating cash flow generation during recent quarters and our ability to continue our delevering path consistent with our clear capital allocation priorities.

Speaker Change: As an additional note regarding our overall capital structure I wanted to take a moment to provide a bit of additional color as to the status of our present debt maturities.

Chip: <unk> on the current slide.

William Zint: As we announced during the first quarter, in mid-March, we entered into an accounts receivable securitization facility with a capacity of up to $80 million. Through the first quarter, we have drawn approximately $65 million on the facility, directing these funds toward prepayments against the balance of our 2024 required quarterly term loan amortization. This ARM facility provides us with two primary benefits relative to our prior capital structure. First, the 36-month agreement terminates in the first quarter of 2027 and, as such, acts to shift out as much as $80 million of maturities to the column labeled 2027-plus on the current slide.

Chip: As we announced during the first quarter in mid March we entered into an accounts receivable securitization facility with a capacity of up to $80 million.

Chip: Through the first quarter, we had drawn approximately $65 million on the facility directing these funds towards prepayments against the balance of our 2024 required quarterly term loan amortization.

Chip: This facility provides us two primary benefits relative to our prior capital structure first the 36 month agreement terminated in the first quarter of 2027, and as such acts to shift out as much as $80 million of maturities to the column labeled 2027, plus on the current slide.

William Zint: Secondly, the base rate plus 140 basis points of interest on the new facility provides rate-advantaged borrowing against the balance of our 2026 variable rate debt. As shown here, our current revolving credit and term loan facilities carry June 2026 maturities, while our 8% bonds mature in 2029. We remain very comfortable with our present levels of available liquidity and look forward to providing additional updates on any capital structure developments going forward.

Chip: Secondly, the base rate plus 140 basis points of interest on the new facility provides rate advantage borrowing against the balance of our 2026 variable rate debt.

Chip: As shown here, our current revolving credit and term loan facilities carry June of 2026 maturities.

Chip: Our 8% bonds mature in 2029.

Chip: We remain very comfortable with our present levels of available liquidity and look forward to providing additional updates on any capital structure developments going forward.

William Zint: Before turning to guidance, consistent with past quarters, our board approved a regular quarterly dividend of $0.30 per share on all outstanding shares. The dividend will be payable on June 3rd, 2024 to all shareholders of record as of market closing on May 20th, 2024.

Chip: Before turning to guidance consistent with past quarters, Our board approved a regular quarterly dividend of <unk> 30 per share on all outstanding shares.

Chip: The dividend will be payable on June three 2024 to all shareholders of record as of market closing on may 20th 2024.

William Zint: I'm pleased to update our 2024 guidance, reaffirming our estimates from our December Investor Day and raising our free cash flow range this evening. As Barry noted previously, we continue to make strong progress in line with our original expectations across all key North Star initiatives. Forecasted realization of the implemented work stream impacts noted in various comments is fully reflected within our existing 2024 guidance.

Chip: I'm pleased to update our 2024 guidance reaffirming our estimates from our December Investor day, and raising our free cash flow range. This evening.

Chip: As Barry noted previously we continue to make strong progress in line with our original expectations across all key norstar initiatives.

Chip: <unk> forecasted realization of the implemented work stream impacts noted in various comments are fully reflected within our existing 2024 guidance ranges.

William Zint: Our updated guidance figures are as follows, keeping in mind all figures are approximate and reflect the impact of business exits over the past 12 months: revenue of $2.14 billion to $2.18 billion, reflecting flat to 2% comparable adjusted growth versus 2023; adjusted EBITDA of $400 to $420 million, reflecting between 2% and 7% comparable adjusted growth. Adjusted EPS of $3.10 to $3.40, reflecting 3 to 13% comparable adjusted growth, and free cash flow of $80-$100 million, an increase from our prior guidance range of $60-$80 million.

Chip: Our updated guidance figures are as follows keeping in mind all figures are approximate and reflect the impact of business exits over the past 12 months.

William Zint: Revenue of $2, $1 4 billion to $1 $8 billion, reflecting flat to 2% comparable adjusted growth versus 2023.

William Zint: Adjusted EBITDA of $400 million to $420 million, reflecting between 2% and 7% comparable adjusted growth.

William Zint: Adjusted EPS of $3 10 to $3 40.

William Zint: Reflecting 3% to 13% comparable adjusted growth.

William Zint: And free cash flow of $80 million to $100 million increased from our prior guidance range of $60 million to $80 million.

William Zint: Finally, in order to assist with your modeling, our guidance assumes the following. Interest expense of $120 to $125 million, an adjusted tax rate of 26%. Depreciation and amortization of $150 million, of which acquisition amortization is approximately $55 million, an average outstanding share count of 44 and a half million shares, and capital expenditures of approximately $100 million.

William Zint: Finally in order to assist with your modeling our guidance assumes the following.

William Zint: Interest expense of $120 million to $125 million.

William Zint: And adjusted tax rate of 26%.

Chip: Depreciation and amortization of $150 million of which acquisition amortization is approximately $55 million.

William Zint: And average outstanding share count of 44, 5 million shares and capital expenditures of approximately $100 million.

William Zint: This guidance is subject to, among other things, prevailing macroeconomic conditions, including interest rates, labor supply issues, inflation, and the impact of other divestitures. To summarize, we are very pleased with the first quarter 2024 performance and resulting increased cash flow forecast. We look forward to continuing the growth and operating leverage momentum throughout the balance of the year while remaining focused on executing against our broad North Star initiatives and continuing our organic revenue growth, EBITDA expansion, and due leveraging journey. Operator, we are now ready to take questions.

William Zint: This guidance is subject to among other things prevailing macroeconomic conditions, including interest rates labor supply issues inflation and the impact of other divestitures.

William Zint: To summarize we are very pleased with the first quarter of 2020 for performance and resulting increased cash flow forecast, we look forward to continuing the growth and operating leverage momentum throughout the balance of the year, while remaining focused on executing against our broad north star initiatives and continuing our organic revenue growth EBIT expansion.

William Zint: And deleveraging journey.

Speaker Change: Operator, we are now ready to take questions.

William Zint: Yes.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker, your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. Your first question comes from the line of Karthik Mehta from North Coast Research. Please go ahead. Thank you.

Speaker Change: Thank you we will now begin the question and answer session.

Kartik Mehta: I would like to ask a question. Please press star one on your telephone keypad tracer Hannan joined the queue.

Kartik Mehta: Like the reserve question simply press Star one again.

Kartik Mehta: You are called upon to ask your question and are listening via loud speakers. Your device. Please speak up your handset and ensuring that their phone is not on mute.

Operator: Asking your question again press star one to join the queue.

Kartik Mehta: Your first question comes from the line of Kartik Mehta from North Coast Research. Please go ahead.

Kartik Mehta: Thank you. Barry, on the merchant services side of the business, you saw pretty good growth. And I'm wondering, as you look at your business and try to compare it with the industry or the kind of the credit card association numbers out there, what type of growth would you anticipate relative to the growth that the associations would see?

Kartik Mehta: Good evening.

Kartik Mehta: On the merchant services side of the business you saw pretty good growth and I'm wondering as you look at your business and try to compared with the industry or kind of.

Kartik Mehta: The credit card Association numbers out there what type of growth would you anticipate relative to the growth that the association's would see.

Barry C. McCarthy: So, Karthik, thanks for being here. I would tell you that we're pretty, we're very pleased with the growth that we're seeing in our merchant business. As you know, the business that we have there is very focused on good secular growth categories, and we think that we're actually outperforming the market in those categories. If you look at the Carter Association numbers, they also include volume growth in very, very high growth categories that often also include higher risk.

Barry: So kartik.

Barry: Thanks for being here I would tell you that.

Barry C. McCarthy: We're pretty we're very pleased with the growth that we're seeing in our merchant business.

Barry C. McCarthy: As you know the business that we have there is very focused in a good secular growth categories.

Barry C. McCarthy: We think there we're actually outperforming the market in those categories.

Barry C. McCarthy: You look at the card Association numbers. They also include volume growth in very very high growth categories that often also include higher risk our portfolio is a very clean healthy portfolio that produces quality results over time, and we're very pleased by that performance.

Barry C. McCarthy: Our portfolio is a very clean, healthy portfolio that produces quality results over time, and we're very pleased with that performance. And you know, when we acquired the business, it was a low to mid single-digit grower, and we've expanded that, and we have a great guide for the year that we think really talks about and shows the power of bringing that business inside of deluxe and our one deluxe go-to-market model where we can bring more products and services to more customers and leverage the trust that customers have in us now expanded across a bigger portfolio.

Barry C. McCarthy: And you know from when we acquired the business. It was a low to mid single digit grower and we've expanded that and we have a great guide for the year. So we think really talks about and shows the power of bringing that business inside of deluxe and our one deluxe go to market model, where we can bring more products and services to more customers.

Barry C. McCarthy: And leverage the trust that customers have in us and now expanded across a bigger portfolio of businesses.

William Zint: Tip, as you look at the drivers for free cash flow and the improvement that you hope that you're going to see in 2024 and the raised guidance, if you look at those factors, are there other factors that you look at where you can see maybe an opportunity to improve and the free cash flow guidance be maybe on the higher end or improve even more?

Barry C. McCarthy: As you look at the drivers for free cash flow and the improvement.

William Zint: But youre going to see.

William Zint: 2024, and the raised guidance. If you look at those factors are there factors. Other factors that you look at where you can see maybe an opportunity to improve and.

William Zint: The free cash flow guidance, maybe on the higher end or improve even more.

William Zint: Yeah, I appreciate the question. So I'll tell you that strong Q1 really was once again a narrative of really good working capital efficiency. You may recall, in the fourth quarter, we surprised to the positive based on extremely strong working capital. That left me hesitant to change my existing guidance range coming into the year. And once again, here in the first quarter, the team managed the working capital very well, and we really pulled forward cash to deliver a solid number, nearly 40 million better than a year ago. Given it is working capital, I have to be mindful that some of it could be timing and a pull forward of future quarters.

TIP: I appreciate the question. So I will tell you. The strong Q1 really was once again a narrative a really good working capital efficiency you may recall in the fourth quarter are we surprised to the positive based on extremely strong working capital that left me hesitant to change my existing guidance range coming into.

William Zint: For the year and once again here in the first quarter the team manage the working capital very well and we really pulled forward cash to deliver a solid number of nearly $40 million better than a year ago. Given it is working capital I have to be mindful that some of it could be timing in a pull forward of future quarters. So my view is roughly half of that sticks for.

William Zint: So my view is roughly half of that sticks for the year at this moment in time. And at this point, we need to continue to execute and see how the year goes on. And for sure, there's an opportunity to over improve with execution and other levers as the year goes on. But at this moment in time, I look at that strong start as a good sign for what's to come. We raised the 20 million range for now, and then we'll see how we do as the year goes on.

William Zint: <unk> at this moment in time and at this point, we need to continue to execute and see how the year goes on and for sure. There is an opportunity to over improve with execution and other levers as the year goes on but at this moment in time I looked at that strong start is a good sign of what's to come we raised the $20 million range for now and then we'll see how we executed.

William Zint: The other point would be, you know, I do anticipate some of that cash flow that occurred in the first quarter being a slight pull forward from the second. I do expect the first half of the year to be significantly better than it was a year ago. But I'm not really sure exactly what it means from a Q2 number specifically compared to last year. But overall, really pleased with the performance and a great opportunity to raise the guidance here at the start of the year.

William Zint: It goes on the other point would be you know I do anticipate some of that cash flow that occurred in the first quarter being a slight pull forward from the second I do expect the first half of the year to be significantly better than it was a year ago, but I'm not really sure exactly what it means from a Q2 number specifically compared to last year, but overall really pleased with the perf.

William Zint: Formats, and great opportunity to raise the guidance here at the start of the year.

William Zint: And then just one last question, Jeff. Last quarter you gave a very good overview of maybe how the quarters were going to play out from an EPS standpoint, and I'm wondering if you could provide just maybe some cadence or your expectations as we go through the year.

Speaker Change: And then just one last question, Jeff last quarter, you gave a very good.

William Zint: Great overview of maybe how the quarters, we're going to play out from an EPS standpoint, I'm wondering if you could provide us maybe cadence or your expectations as we go through the year.

William Zint: Yeah, maybe I'll start at the top. I know you asked DPS.

Jeff: Yes, maybe I'll start at the top I know you asked EPS, let me just start at the top I think the one thing. So first of all really pleased with the data business.

William Zint: 35% growth rate that they post just incredible obviously, we're not expecting that to continue here in the second quarter in my prepared remarks, I, specifically pointed to you guys to look at the average of the previous two to three quarters specifically three in this case because revenue was roughly 65 in the third.

William Zint: Let me just start at the top. I think the one thing, so first of all, really pleased with the data business and the 35% growth rate that they post, just incredible. Obviously, we're not expecting that to continue here in the second quarter. In my prepared remarks, I specifically pointed you guys to look at the average of the previous two to three quarters, specifically three in this case, because revenue was roughly 65 in the third quarter of last year, 45 in the fourth, and then 60 here in the first.

William Zint: And so if you average that out, I think that's a good indicator for where data revenue will be in the second quarter. Now, data is lapping some tough comps, especially in the second and the third quarter. So if you think about the sequence of the top line, I think really getting data right is the key piece on the board to land on the right revenue starting point. Flowing that down through towards profitability, I don't really think I have great guidance for you other than, you know, we would expect that as the year goes on, the benefit from North Star, as Barry mentioned, should grow over time, at least until we get to the fourth quarter, when we' So I would expect margins to be pretty solid over the next few quarters, growing overall dollars, and that should flow to reasonable EPS numbers here in the next couple of quarters.

William Zint: Quarter of last year of 45 in the fourth and then 60 here in the first and so if you average that out I think that's a good indicator for where data revenue will be in the second quarter now data. It is lapping some tough comps, especially in the second and the third quarter. So if you think about the sequence of the topline I think really getting data right is the key.

William Zint: Piece on the board to land on the right revenue starting point.

William Zint: Flowing that down through towards profitability I don't really think I have great guidance for you other than we.

William Zint: We would expect that as the year goes on the benefit from Northstar as Barry mentioned should grow over time at least until we get to the fourth quarter. When we lap the big in your benefit from a year ago. So I would expect margins to be pretty solid over the next few quarters.

William Zint: Growing overall dollars and it should flow to reasonable EPS numbers here in the next couple of quarters.

Kartik Mehta: Perfect. Thank you very much. I appreciate it.

Speaker Change: Perfect. Thank you very much I appreciate it.

Operator: Your next questions come from the line of Jonathan Novoretik from TD Cohen.

Kartik Mehta: Your next question comes from the line of Jonathan <unk> from TD Cowen Inc.

Jonathan Novoretik: Please go ahead.

Jonathan Novoretik: Hey guys, Jonathan speaking for Lance. Nice job on the quarter. And nice job on free cash flow as well. I know you said it was largely driven by working capital. So can you maybe walk us through the puts and takes, like what items in working capital drove the positive free cash?

Jonathan Novoretik: Hey, guys stopping on finance.

Jonathan Novoretik: On the quarter and nice to have a free cash flow as well I know you.

Jonathan Novoretik: This was largely driven by.

Jonathan Novoretik: By working capital. So can you maybe walk us through the puts and takes like what items in working capital drove the positive free cash flow.

William Zint: Yeah, sure, Jonathan, it was mostly from an AR perspective. I'm so very pleased with where our DSO landed on the AR side. By my calculation, the DSO was at 28 days at the end of the quarter, a substantial improvement from where it was a year ago. Now you have to keep in mind that a year ago, we had just gone live on our ERP upgrade. So that did impact our overall AR balance a bit, and it was definitely one of the reasons why, you know, AR could be so solid.

Speaker Change: Yes, sure Jonathan It was mostly from an AUR perspective, so very pleased with where our DSO landed on AAR side by my calculation. The DSO was at 28 days at the end of the quarter was a substantial improvement from where it was a year ago now you got to keep in mind a year ago, We had just gone live on our.

William Zint: But the 28 days DSO compares to 31 at the end of the year. So it does show, regardless of the timing of the year over year perspective from ERP, we did make progress. The other thing I'll just point out is that we continue to do well managing our inventory. This is a journey we've been talking about probably since the second quarter of last year. But we've been steadily walking our inventory balances down as, again, we go live on ERP.

William Zint: ERP upgrade so that did impact our overall AR balance a bit and so was definitely one of the reasons why.

William Zint: It could be so solid, but the 28 days DSO compares to 31 at the end of the year. So it does show regardless of the timing of the year over year perspective from ERP, We did make progress. The other thing I'll. Just point you to is we continue to do well managing our inventory and this is a journey we've been talking about probably since the second quarter of last year.

William Zint: <unk>, but we've been steadily walking our inventory balances down as again, we go live on ERP spend.

William Zint: It's been many, many years, but we're through the supply chain disruptions and some of the challenges that we faced back in the 2021 timeframe. And so as you look at what we've done since about Q2 of last year to where we are now, inventory was a good driver of working capital improvement as well. So really, at the highest level, you're going to see it in AR and inventory when you get a chance to digest our Q later this week.

William Zint: It's been many many years, but we're through the supply chain disruptions and some of that challenges that we face back into 2021 time frame and so as you look at what we've done since about Q2 of last year to where we are now inventory was a good driver of working capital improvement as well so really at the highest level youre going to see it in AR and inventory and when you get a chance to digest.

Jonathan Novoretik: Great. Thanks.

Jonathan Novoretik: First our Q later this week.

William Zint: My second question is on EBITDA. What levers do you guys have available to improve EBITDA margins in 2024? And is there any segment that stands out with the most opportunity?

Speaker Change: Great. Thanks.

Jonathan Novoretik: And the second one is on EBIT, though what levers do you guys have available to improve EBITDA margins in 2024, and we're hearing any segment that stands out with the most opportunity.

Jonathan Novoretik: So the question is, what levers do we have to improve EBITDA?

Speaker Change: So the question what levers do we have to improve EBITDA.

Jonathan Novoretik: Yes, that's right. I'm guessing it's largely driven by cost improvements, but I'm just curious.

Speaker Change: Yes, that's right I'm guessing it was largely driven by cost improvements, but just curious Scott yeah.

William Zint: So if you think back to our investor day, this is the page I always think of, it's the page I said, if there's one page I want you guys to remember from the day, it's this one. I've clearly remembered it, but I did a walk of kind of our starting point for the program of Northstar to where we would be at the very end of 2026, but if you think about narrowing that focus into So we start at 391 as our comparable adjusted beginning balance for the year. Of course, right off the bat, you have to take off the secular declines, which, you know, I like big round numbers.

Jonathan Novoretik: So if you think back to our Investor day.

William Zint: It's the page I would think of as the page I said, if theres one page I want you guys to remember from the day. It's this one I've clearly remembered it but I did a walk of kind of our starting point for the program of North star to where we'd be at the very end of 2026, but if you think about narrowing that focus into just this year. It's really the same walk so we start at $3 91 as our comparable.

William Zint: So let's call that 25, you know, really from that point to, you know, the mid, the mid range of our guidance, the lever is going to be what we're achieving in Northstar. As a reminder, we've got all the work streams that go across org discipline, pricing actions, procurement savings, you name it. We've laid it all out on the slide deck.

William Zint: Adjusted beginning balance of the year.

William Zint: Of course right off of a you have to take off the secular declines, which I like big round numbers. So let's call that 25 really from that point to the mid the mid range of our guidance that the lever is going to be what we're achieving in Northstar and as a reminder, we've got all of the work streams that go across or disciplined.

William Zint: Pricing actions procurement savings you name it we've laid it all out on the slide deck all of those levers are there and so if you combine the cost levers we're doing as part of North star along with the revenue initiatives and just growth across the payments and data business, which as a reminder, our scale businesses that as we grow the top line across the three <unk> merger.

William Zint: All of those levers are there. And so if you combine the cost levers we're doing as part of Northstar along with the revenue initiatives and just growth across the payments and data business, which, as a reminder, are scaled businesses that as we grow the top line across the three, B2B, merchant, and data, it should bring improved margins with it. And again, really as part of Northstar going after the corporate cost center as well to try to remove costs from the share of services.

William Zint: And data it should bring improved margins with it and again really as part of North star going after the corporate cost center as well to try to remove cost from the shared services. So I think the answer is it's all of the obvious levers you would expect and it's all of the things we've gone through as part of the North Star journey and the simple walk is exactly like I laid out.

William Zint: So I think the answer is it's all of the obvious levers you would expect. And it's all of the things we've gone through as part of the Northstar journey. And the simple walk is exactly like I laid out.

Jonathan Novoretik: Got it. Thank you. And my last question is actually on North Star itself. Can you just share a little bit of details about where we are today? How much was spent on North Star during the first quarter? And yeah, that's it. Thank you. Yeah, sure. So you'll see in our earnings release.

Speaker Change: Got it. Thank you and my last question is actually on North Star itself.

Jonathan Novoretik: Can you just sharing a little bit of.

Jonathan Novoretik: Details of where we are today, how much was spent and northstar during the first quarter and yeah. That's it. Thank you.

William Zint: Yeah, sure. So you'll see in our earnings release that we had roughly $15 million in restructuring costs in the first quarter. The majority of it was North Star, although not perfect. There was still a million or two non-North Star related activities, but net-net, it was mostly that. As you may recall, we were at roughly $45 million through the program at the end of the year. So I call it right around $60 in North Star restructuring spend at this point. You'll recall that the overall program has an estimated cost of somewhere between $115 and $135.

Speaker Change: Yes, sure so youll see in our earnings release that we had roughly $15 million of restructuring costs in the first quarter. The majority of that was norstar a perfect. There were still a $1 million or seven 1 million or two <unk>.

William Zint: <unk> North star related activities, but net net it was mostly that so you may recall, we were at roughly $45 million through the program at the end of the year. So I call. It right around 60, and Northstar restructuring spend at this point you will recall that the overall program has an estimated cost of somewhere between 115 to 100.

William Zint: <unk> 35.

William Zint: So we sit here today at $60. That leaves us with 55 to 75 left to go. We do expect a little bit to drift into the first half of next year, mostly Q1, but a little bit could drift in. So everything's on track from a spend perspective. The other thing I signaled in Q1, as you guys will recall, we spent $90 million on restructuring in 2023. We said it would come down here in 2024.

William Zint: So we sit here today at 16.

William Zint: That leaves US 55% to 75 left to go we do expect a little could drift into the first half of next year, mostly Q1, but a little bit could drift and so everything is on track from a spend perspective.

William Zint: The other thing I signaled in Q1 is I know you guys will recall, we spent $90 million in restructuring in 2023, we said it would come down here in 2024, I provided a range of 60 to 80 I'm still in that range.

William Zint: I provided a range of 60 to 80. I'm still in that range. So take everything I just said, sitting at 60 today through the first quarter, 55 to 75 left to go on the program with some of it shifting into next year and overall staying in that range. I think you can figure out kind of how to sequence the restructuring dollars the rest of the year.

William Zint: So kind of take everything I, just said sitting at 60 today through the first quarter, 55% to 75 left to go the program with some of it shifting into next year and overall staying in that range. I think you can figure out kind of held us sequence the restructuring dollars the rest of the year.

William Zint: Okay.

William Zint: Okay.

Operator: Your next question comes from the line of Charles Strauzer from CJS Tourism. Please go ahead.

Tried Exposure: Your next question comes from the line of tried exposure from CJS. Please go ahead.

Charles S. Strauzer: Hi, Good evening, just makes me okay.

Charles S. Strauzer: Are you hearing me okay? Hey, Charlie.

Charles S. Strauzer: Thanks, Charlie.

Charles S. Strauzer: Great just when looking at the.

Barry C. McCarthy: Great. When looking at Project North Star, a lot about that today, you know, one of the things that's always kind of a hallmark of Deluxe. They take costs out of the business over the years, but the revenue side has always been the more elusive or more difficult one. Where are you on the revenue front there? Provide a little more color. Some of the opportunities. So Charlie, I really appreciate the question. And I think it's one of the things that really is a hallmark of where deluxe is located.

Charles S. Strauzer: Project North Star.

Charlie: You talked a lot about that today.

Barry C. McCarthy: One of the things that's always kind of a hallmark.

Barry C. McCarthy: <unk> has the ability to take costs out of the business over the years.

Barry C. McCarthy: On the revenue side, it's always been the more elusive or.

Charlie: The more difficult one to do.

Barry C. McCarthy: Capitalize on those opportunities where are you on the revenue front there.

Charlie: Can you maybe provide a little more color as to some of the opportunities that are in front of you on the revenue side.

Barry C. McCarthy: So Charlie, I really appreciate the question. And I think it's one of the things that really is a hallmark of where deluxe is today. So at the beginning of my prepared remarks, I talked about the progress we're making in our payments and data business, which is about 43% of the company's revenue today. And you saw in the first quarter, on a combined basis, those businesses in that portfolio of businesses grew over 8% with healthy margins at 22%.

Speaker Change: So Charlie really appreciate the question and I think it's one of the things that really is a hallmark of where deluxe is today.

Barry C. McCarthy: So at the beginning of my prepared remarks I talked about.

Barry C. McCarthy: The progress, we're making in our payments and data business, which is about 43% of the company's revenue today than you saw in the first quarter on a combined basis.

Barry C. McCarthy: Those business as a portfolio of businesses grew over 8%.

Barry C. McCarthy: With healthy margins at 22%.

Barry C. McCarthy: So we fundamentally think the company is in a very different place today, where we have 43% of the company's revenue growing in the high single-digit range with very attractive margins. And we're doing it at the same time that we're controlling or limiting the downside exposure on the secular declining businesses like checks, where we're continuing to win market share, putting in operational improvements, etc., to produce and protect that cash. So we think the company today is a very different company than the company of just a few years ago that was not growing organically.

Barry C. McCarthy: So we fundamentally think the company is in a very different place today, where we have 43% of the company's revenue growing in the high single digit range with very attractive margins and we're doing it at the same time that we're controlling our limiting the downside exposure on the secular declining business link checks, where we are.

Barry C. McCarthy: Continuing to win market share, putting in operational improvements et cetera to produce and protect that cash flow.

Barry C. McCarthy: So we said the company today is a very different company than the company of.

Barry C. McCarthy: Just a few years ago, there was not growing organically and if you just see in the aggregate. We're now in the fourth consecutive year.

Barry C. McCarthy: And if you just look at the aggregates, we're now in the fourth consecutive year of organic revenue growth. I mean, Charlie, just once again, the fourth consecutive year of organic revenue growth. And while that number may be modest, it is proving that we can consistently grow the company, and we're doing that through the success of the payments and data business as an aggregate.

Barry C. McCarthy: I mean, Charlie just once again, the fourth consecutive year of organic revenue growth.

Barry C. McCarthy: And while that number may be modest it is proving that we can consistently grow the company and we're doing that by the success of the payments and data businesses in aggregate.

Operator: Again, if you would like to ask a question, simply press star 1 on your telephone keypad. Again, press star 1 to join the queue. Your next question comes from the line of Marc Riddick from CDOT. Marc, please go ahead.

Barry C. McCarthy: Again again, if you would like to ask the question since your breast star one on your telephone keypad again.

Marc Frye Riddick: Start with the China Q you're.

Operator: Your next question comes from the line of Marc Riddick from Sidoti.

Marc Frye Riddick: Please go ahead.

Marc Frye Riddick: Hi, good evening everyone.

Marc Frye Riddick: Hey, Mark.

Marc Frye Riddick: [inaudible] So I was sort of curious if we could spend a little time on a couple of the other North Star threats that we haven't had a chance to touch on, one of which is around real estate. And I was wondering if you could maybe give us an update there, if there are, are there any things that we should be thinking about on that front?

Marc Frye Riddick: So I was sort of curious if we could spend a little time on a couple of the other north star threat.

Marc Frye Riddick: Threats that we haven't had a chance to touch on.

Marc Frye Riddick: One of which is around real estate and I was wondering if you could maybe give us an update there. If theres are there any things that we should be thinking about them on on that front.

Barry C. McCarthy: Marc, you may recall we have made a lot of progress on real estate, consolidating our operating footprint, especially around our print production, our lockbox operation, etc. We continue to make more progress even in the first quarter, consolidating some of our office locations and the space we have in that and our footprint. I think you'll continue to see us make incremental improvements there, but over the last few years, we've already made a very significant step forward in consolidating our real estate footprint. And while there's a bit more to go, I feel like we've made significant progress.

Speaker Change: Mark you May recall, we have made a lot of progress on real estate consolidating our operating footprint, especially around our print production, our lockbox operation et cetera, and we continue to make more progress even in the first quarter consolidating some of our office locations and the space, we have in that and our foot.

Barry C. McCarthy: Print I think you'll continue to see us to make incremental improvement there.

Barry C. McCarthy: But over the last few years, we've already made a very significant step forward on consolidating our real estate footprint.

Barry C. McCarthy: And while there is a bit more to go I feel like we have made us we've made significant progress there.

Marc Frye Riddick: And then I was wondering if you could also sort of, I wanted to step back to one of the comments around cash flow improvement year over year. And, Chip, I think you brought up the commentary around the timing of the ERP system last year, if I remember correctly. And correct me if I'm wrong, because I'm not off the top of my head, I'm trying to remember if this was right.

Speaker Change: Great and then I was wondering if you could.

Marc Frye Riddick: Also I wanted to step back to one of the comments around with cash flow improvement year over year.

Marc Frye Riddick: Chip I think you brought up the commentary around the timing of the ERP system last year, if I remember correctly and correct me if I'm wrong. So I'm not off the top of my head I'm trying to remember this was right. There was like a little bit of a blip. When you guys went live that maybe sort of maybe set you back a week or so or something like that so relatively speaking there is sort of a.

Marc Frye Riddick: There was like a little bit of a blip when you guys went live that maybe, you know, sort of maybe set you back a week or so or something like that. So, relatively speaking, there's sort of a, you know, there's, you guys were sort of up against it a little bit last year with that part of it. Was there a little bit of an impact there that you obviously weren't seeing this year that was somewhat helpful to him?

Marc Frye Riddick: You guys are sort of up against it a little bit last year with that part of it was there a little bit of impact there that youre. Obviously, you weren't seeing this year that was somewhat helpful. There.

William Zint: Yeah, a little bit. I mean, if you think about our print businesses, they would have had a little bit of pressure in Q1 a year ago with not being able to get everything out the door with perfect timing and then made up for it in the second quarter. In the blend of everything, when you think about secular unit declines, everything going on, it's not a huge part of the print story. But, you know, if you're looking at it in absolute terms, there was a bit of pressure we would have seen in the first quarter last year that gave us favorability in the second quarter.

Marc Frye Riddick: Yes, a little bit I mean, if you think about our print businesses. They would've had a little bit of pressure in Q1, a year ago with not being able to get everything out the door with perfect timing and then made up for it in the second quarter and the blend of everything when you think about secular unit declines everything going on it's not a huge part of the print story.

William Zint: But if you're looking at in absolute terms, there was a bit of pressure we would have seen in the first quarter of last year that gave us favorably in the second quarter. So as you look ahead to Q2 comps there will be a little bit of pressure with brands, but we think it really doesn't change the narrative of what's going on there with the business just continuing to execute in this low to mid single digit decline.

William Zint: So as you look ahead to Q2 comps, there will be a little bit of pressure with print, but we think it really doesn't change the narrative of what's going on there with the business just continuing to execute in this low to mid single-digit decline level.

William Zint: Levels.

Marc Frye Riddick: Right, I gotcha. And then finally, for me, I was sort of curious as to maybe if you could give a little bit of a pricing dynamic update of what you're seeing out there as far as are there any particular areas where, you know, pricing pressures or any any pushback has been seen that should be called out or, or what are we seeing there as far as your expectations as to pricing and escalations there?

Speaker Change: Alright, Gotcha and then finally for me I was sort of curious as to maybe if you could give a little bit of a.

Marc Frye Riddick: Our pricing dynamic update of what Youre seeing out there as far as are there any particular areas where you know.

Marc Frye Riddick: Sure.

Marc Frye Riddick: No pricing pressures or any pushback has been been seen that that should be called out or or or what are we seeing there as far as your expectations as to the pricing and escalations there.

Barry C. McCarthy: So we continue to be successful at moving the price for our products up in the marketplace, really across the portfolio. And we think we're able to do that because of the quality of the product and the service that we provide.

Marc Frye Riddick: So.

Marc Frye Riddick: We continue to be successful.

Barry C. McCarthy: Moving the price for our products and up in the marketplace really across the portfolio.

Barry C. McCarthy: And we think we're able to do that because of the quality of the product and the service that we provide.

Barry C. McCarthy: We have of course, no customer wants to see a price increase we think there'll be been very responsible and I think our customers would agree we've been responsible in the way we have been advancing our prices in the marketplace.

William Zint: Of course, no customer wants to see a price increase. But I think that we've been very responsible, and I think our customers would agree that we've been responsible in the way we have been advancing our prices in the marketplace. And we have been able to make those price increases stand. And we continue to take prices, we had, we put some additional price changes, increases in the first quarter that we will benefit from later in the year.

William Zint: Yeah.

William Zint: Have been able to make those price increases sand and we continue to take price, we had and we put some additional price changes increases in in the first quarter that will be benefit later in the year because as you know some of the increase was get announcement. It takes a bit of time for them to be implemented and actually hit the P&L.

William Zint: Because, as you know, some of the increases get announced, but it takes a bit of time for them to be implemented and actually hit the P&L. But we continue to take prices across the portfolio. And it does not appear to have a significant impact on volume. Yeah, Mark, I would just add that yesterday we talked about pricing as one of the North Star initiatives and how it was just advancing itself from inflationary input cost relative to output price and really moving to more of an analytical view of price stratification across the customer base or product base, really changing the need for how we do it.

Mark: But we continue to take price across the portfolio.

Mark: It does not appear to have a significant impact on volume.

William Zint: And so that is part of the initiative and is one of the drivers behind why we, I would say, if you boil it all the way up, and you got to remember you've got parts of the business with some declining aspects of it, you got to normalize it all. But at the highest level, I'd say our growth in the first quarter was probably right down the middle 50-50 price volume, a healthy mix of both.

Speaker Change: Yes, Mark I would just add that you may recall at Investor Day, we talked about pricing is one of the north star initiatives and how it wishes advancing itself from inflationary input cost relative to output price and really moving to more of our analytical view of price stratification across the customer base of our product base really moving the needle on.

William Zint: How we do it and so that is part of the initiatives. He is one of the drivers behind why we.

William Zint: Continue to do it and feel good about the responsible price we're taking I would say if you boil it all the way up and you've got to remember you got parts of the business with some decline aspects of that you've got to normalize at all but at the highest level I would say our growth in the first quarter was probably right down the middle 50, 50 price volume healthy mix of both.

Marc Frye Riddick: Well, it's certainly an encouraging start to the year. Thank you very much.

Speaker Change: Great well, it's certainly an encouraging start to the year. Thank you very much.

Marc Frye Riddick: Yes.

Brian Anderson: That concludes our Q&A session. I will now turn the conference back over to Brian Anderson for closing remarks.

Marc Frye Riddick: That concludes our Q&A session I will now turn the conference back over to Brian Anderson for closing remarks.

Brian Anderson: Thank you Mark.

Brian Anderson: Before we conclude, I'd like to share that management will be participating in person at both the Needham Technology, Media, and Consumer Conference on May 14th and 15th and the T.D. Cowan Technology, Media, and Telecom Conference on May 29th and 30th, both in New York during the quarter.

Brian Anderson: Before we conclude I would like to share that management will be participating in person at both the Needham technology media and consumer conference on May 14th and 15th and the TD Cowen Technology Media and Telecom conference on May 29th and 30th opened New York during the quarter.

Operator: Thank you again for joining us today, and we look forward to speaking with you all again in August as we share our second quarter results. Ladies and gentlemen, that concludes today's call. Thank you for joining us. You may now disconnect.

Brian Anderson: Thank you again for joining us today, and we look forward to speaking with you all again in August as we share our second quarter results.

Operator: Ladies and gentlemen that simplicity call. Thank you for all the time you may now disconnect.

Operator: [music].

Operator: Yeah.

Operator: [music].

Operator: Okay.

Operator: [music].

Operator: Sure.

Operator: [music].