Q3 2024 Deluxe Corp Earnings Call
Please stand, bye.
Ladies and Gentlemen, thank you for standing by.
and welcome to Deluxe Quarterly Burning's Conference Call.
All participants are currently in a listen-only mode.
and today's call is being recorded.
Speaker Change: At this time, I like to turn the conference over to your host, Vice President of Strategy and Invest Relations. Brian Anderson, please go ahead.
Brian Anderson: Thank you, operator, and welcome to the Deluxe 3rd Quarter 24 earnings call. Joining me on today's call are Barry McCarthy, our president and chief executive officer, and chip-sint, our chief financial officer. At the end of today's prepared remarks, we will take questions.
Brian Anderson: Before we begin and as seen on the current slide, I'd like to remind everyone that comments me today regarding management's intentions
Brian Anderson: and the Projections, Financial Estimates and Expectations of the company's future performance or strategy are forward looking in nature as defined in the private securities litigation reform act of 1995.
Speaker Change: Additional information about factors that may cause actual results to differ from projections, is that fourth in the release we furnished this afternoon in our form 10K for the year ended December 31, 2023, and in other company SEC filings.
Speaker Change: On the call today we will discuss non-gap financial measures, including comparable adjusted revenue, adjusted and comparable adjusted EBITDA and EBITDA margin, adjusted and comparable adjusted EPS and free cash flow.
Speaker Change: In our release, today's presentation and our filings with the SEC, you will find additional disclosures regarding the non-gap measures, including reconciliations of these measures the most comparable measures under US gap.
Speaker Change: Within the materials, we are also providing reconciliation of GAPDPS to comparable adjusted EPS, which may assist with your modeling. And with that, I'll turn it over to Barry.
Barry McCarthy: Thanks Brian and good evening everyone.
Barry McCarthy: I'm pleased to report our strong third quarter results, including sustained growth across our core comparable adjusted earnings metrics, continued expansion of free cash flows, and a reduced level of net debt for the enterprise.
Speaker Change: During the quarter we drove nearly 7% year over year growth in comparable adjust to EBDA, a company a margin expansion of 140 basis points.
Speaker Change: Our free cash flow also grew not in a half percent for the period.
Speaker Change: As we outlined at our investor day last December, the North Star program was designed systematically to accelerate these key profitability metrics. And our third quarter results further demonstrate our ability to consistently expand earnings faster than revenue.
Speaker Change: During the quarter, we also continue to deliver healthy top line results across our payments operating units.
Speaker Change: We saw sustained mid-single-digit growth of more than 6% within merchant services.
Speaker Change: The B2B payments segment also returned to modest year over year growth profile during the period consistent with our guidance last quarter.
Speaker Change: The data segment also drove strong sequential improvement.
Speaker Change: The business succeeded $60 million of revenue during the quarter for the first time this year, first as a strong prior year, comparable.
Speaker Change: On a year to date basis through three quarters, the merchant and data segment has seen growth of just over 7% and 6% respectively. I'll cover additional segment revenue highlights that have been more detail in a few moments.
Speaker Change: A company that's on going top line progress that continued expansion of our earnings and cash flow results are tough to let the strong execution across the enterprise on our core capital allocation priorities.
Speaker Change: We reduced our net debt balance sequentially by $45 million for the second quarter, further demonstrating our commitment to debt reduction as a top priority for the company.
Speaker Change: Bill Day from the Strong 3 or 3rd quarter and year-to-date results. Tonight we're confirming our existing full-year guidance within a narrow or range.
Speaker Change: Chip will share more details during his comments.
Speaker Change: Now, prior to providing more insight into the quarter, I'd like to highlight progress on our Norse dog or execution.
Speaker Change: Play-in.
Speaker Change: As a reminder, our North Star program was designed across 12 work streams to identify 130 million dollars of improvements to our baseline 2023 comparable address at Eva Dau Results, over a multi year horizon.
Speaker Change: and a net basis.
Speaker Change: and the first, after fact, to bring for impact from secular decline trends across the print portfolio. These improvements are expected to unlock the targeted $80 million of incremental adjusted EBITDA and $100 million of the annualized incremental free cash flow both by 2026.
Speaker Change: During the third quarter, we reached a notable North Star milestone.
Speaker Change: I'm pleased to share the enterprise as now fully scoped and is in the execution or completion stage of projects comprising more than $100 million of the $130 million targeted and utilized EBITDA improvements.
Speaker Change: We're proud of our progress as we mark the first anniversary of the multi-year initiative.
Speaker Change: This success further increases our confidence in achieving our goals.
Speaker Change: Reportedly, full benefit realization will be reflected over the coming quarters throughout 2025 as our faiths to execution progresses.
Speaker Change: As I noted last quarter, one of the clearest ways to see our North Star progress is the the continued improvement of our Austrian A expense, particularly with end corporate.
Speaker Change: During the third quarter, overall corporate expenses improved by more than a dozen to percent from the prior year period. Additionally, cash restructuring and integration expenses were laid to North Star, and have chronic favorably versus our full year estimates.
Speaker Change: This contributed to our approved year-to-date free cash flow results through the third quarter.
Speaker Change: Now to provide some additional details about our third quarter performance.
Speaker Change: As a reminder and consistent with prior calls, my comments will reflect comparable adjusted results for the quarter and year-to-date periods, which we believe best represents our ongoing business performance.
Speaker Change: Chippel review both are reported, consolidated, and comparable adjusts results to provide additional context.
Speaker Change: for the third quarter, that of accident businesses.
Speaker Change: Revenue with 527 million dollars, which reflects the decline of just under 1% year over year. Total adjusted EBITDA reached 104 and a half million dollars, increasing roughly 7% from the third quarter of 2023.
Speaker Change: This strong Eva dog growth rate matched that of the first quarter this year and reflected our third consecutive quarter demonstrating robust operating leverage at the enterprise level, as I noted in my opening comments.
Speaker Change: Adjusted EBITDA margins finished the quarter at just under 20%, reflecting the continuation of our year-to-date sequential expansion trend and growing by 140 basis points versus the prior year.
Speaker Change: On a year-to-date basis, comparable adjusted EBITDA margins have expanded by a full 100 basis points.
Speaker Change: While Free Cashflow has approved by more than $30 million from the year to date, 2023 figures.
Speaker Change: We remain particularly pleased with these adjusted EBITDA and cash flow results. Further enabling our progress toward our focused capital allocation priorities under North Star.
Speaker Change: Moving now to our third quarter segment, revenue highlights beginning with merchant services.
Speaker Change: for the quarter segment revenue grew just over 6%. While this reflected moderation from our nearly 8% second quarter trajectory, as we've signaled on our last call, we remain very pleased with the overall year-to-date trajectory of the merchant business.
Speaker Change: Photo-processing volumes remain solid and we continue to benefit from new wins.
Speaker Change: As always, we continue to monitor material, macroeconomic trends surrounding consumer discretionary spending and sentiment.
Speaker Change: We leveraged recent insights from the card brands, the Fed, and other economic forecast providers, as well as our internal proprietary data sources.
Speaker Change: While some overall economic uncertainty remains, some trends appear to have largely stabilized during the third quarter.
Speaker Change: Impact and recent weather events, my pressure growth a bit, but we believe that our diversified portfolio will enable us to continue to deliver healthy growth even as we laughed the major win that went live last November.
Speaker Change: Chifting to Results with the Libby to be Payment Cycle.
Speaker Change: As we anticipated during the third quarter, the B2B segment recovered from the year over year to client rates experience across the first half of 2024. We reported revenue growth of about 1% for the period. This improvement was in line with the commentary we provided during our last call.
Speaker Change: Consistence with our expectations, we anticipate the B2B revenue growth projector will improve sequentially in the fourth quarter.
Speaker Change: We remain confident that our longer term growth outlook for these lines of business, given our strong existing pipeline of SaaS opportunities, and near term onboarding of new incremental remittance volumes.
Speaker Change: Moving now to data solutions, which continues to deliver strong revenue results. Expanding sequentially, by more than 6% versus the second quarter, to just over $61 million.
Speaker Change: As we signal during our last call, the core data driven marketing or DDM business once again lacked a challenging prior year compare during the third quarter driven by client campaign timing resulting in a 4.5% revenue decline for this specific period.
Speaker Change: as we've noted previously.
Speaker Change: We believe that the best of you of data's growth trajectory remains for a multi-quarter lens.
Speaker Change: On a year to date basis through three quarters, rather than a growth for data remains strong at more than 6%. Reflective of continued demand for customer acquisition marketing activities across both our core FI clients and expanding growth verticals.
Speaker Change: Shifting finally to our Prince segment. This is this return to its expected Losingled Digital Revenue Decline Profile during the quarter.
Speaker Change: Court of Quarter Revenors finished just over $297 million to climbing roughly 2% versus the prior year.
Speaker Change: Importantly, Legacy Check revenues have experienced overall declines just under 2% on a year-to-date basis.
Speaker Change: This rate is aligned to our guidance and better than long term fed estimates.
Speaker Change: to summarize our overall third quarter results. Particularly our continued expansion of earnings, freak cash flow, and our management of operating costs, demonstrate our ongoing transformation and North Star progress.
Speaker Change: The Enterprise remains diligently focused on execution of our DeLeveraging Path, demonstrated within our Q3 net deproduction and continuing to deliver robust operating leverage.
Speaker Change: Finally, before passing this to chip, I want to take a moment to once again thank my fellow Deluxeers.
Speaker Change: Your consistent commitment to exceeding the needs of our customers and driving continuous improvement is recognized and appreciated every day. You are the Deluxe Difference.
Speaker Change: with that I'll turn it over to Chip.
Chip Sint: and Good evening everyone.
Chip Sint: and Barry noted in his opening, we were pleased with our continued progress during the third quarter. Particularly our strong margin expansion, free cash flow generation, and year-over-year growth of comparable adjusted EBITDA and EPS during the period.
Speaker Change: As in past quarters, I'll begin today providing a bit of additional context around our consolidated highlights for the period. Before moving on to the segment results, our balance sheet and cash flow progress and our 2024 guidance.
Chip Sint: For the quarter on a reported basis, we posted total revenue of 528.4 million dollars, down 1.7% Inclusive of the impact of our prior year exits, while declining 0.7% year over year on a comparable adjusted basis.
Chip Sint: As of the end of the second quarter of this year, we have fully laughed the divestiture of our web hosting businesses.
Chip Sint: As such, our Exitid Business impacts are lowered, and remaining quarters will reflect only the ongoing conversion of the payroll business.
Chip Sint: We reported gap net income of $8.9 million or 20 cents per share for the period, and proving from the loss of $8 million or negative 18 cents per share in the third quarter of 2023.
Chip Sint: This improvement was driven by both lower restructuring and integration related spend and improved SGNA expense, as well as a gain related to our payroll exit.
Chip Sint: Comparable with Jesse D. Bada was $104.5 million, up to $6.9% versus the third quarter of last year.
Speaker Change: Comfortable Objectivity, but of margins were 19.8% improving 140 basis points versus the third quarter of 2023 as Barry noted.
Speaker Change: Q3 Comparable Adjusted EPS came in at 84 cents, improving from 75 cents in 2023, primarily driven by the net income drivers previously noted, net of increases to the tax provision for the period.
Speaker Change: Now turning to our operating segment details beginning with the Merchant Services Business.
Speaker Change: The Merchant segment grew third quarter revenue by 6.3% year over year to $93.5 million. Bringing year to date growth to 7.4% through the first nine months of the year, as Barry noted in his opening comments.
Speaker Change: Bagmint adjusted EBITDA finish at $17.8 million, improving $2.3% versus the prior year, while margins finish at 19%.
Speaker Change: Down slightly from the 19.8% prior year rate.
Speaker Change: Droom in primarily by year to year channel mixed dynamics, while maintaining the margin dollar growth trend we've seen consistently throughout the year to date period.
Speaker Change: As we noted during our prior quarter comments, we would anticipate some continued moderation of merchant revenue growth from the year-to-date levels during the fourth quarter period, as we began to lapped the prior year of mid-market FI implementation activity that began in November of last year.
Speaker Change: are outlook for both the full year 2024 and longer term horizon remains consistent with the mid to high single digit growth rates included in our prior guidance and investor-day communications.
Speaker Change: Third quarter year-to-date, adjusted even a margin for the merchant segment of 20.2% also remain consistent with our outlook for this segment.
Speaker Change: Moving to B2B payments for the third quarter B2B segment revenues finished at $75.1 million. Sequentially improving $4.9 million from the prior quarter and growing 0.7% versus 2023.
Speaker Change: While multiple factors contributed to the overall improved trajectory during the third quarter, primary drivers included those and anticipated on our prior quarterly call.
Speaker Change: We've previously mentioned material new customer wins in the lockbox remittance business and we saw initial implementation activity and volume additions from the onboarding of these deals.
Speaker Change: Additionally, we saw a moderation of prior-year comps of legacy on-premise hardware, software license and other one-time revenue across the balance of Treasury Management Business. As we continue to execute our migration towards our more recurring revenue business model.
Speaker Change: Adjusted EBITDA within B2B finished at $15.3 million declining 5% while maintaining a rate of 20.4% which reflected a sequential improvement of 50 basis points from the second quarter margin level.
Speaker Change: is overall adjusted to the result, including impacts from initial onboarding activity for the Lockbox ShareGain implemented during the period. And overall, we're seeing what's mixed shifts from prior year, non-recurring business as noted previously.
Speaker Change: Based on these year-to-date results, including the third quarter trajectory improvement, we continue to anticipate a four-year low single digit revenue decline rate for the segment.
Speaker Change: including our updated revenue guidance as we noted last quarter.
Speaker Change: We remain confident that a just even a margin should also stabilize around the low to mid 20% range
Speaker Change: Moving on to data solutions, this segment continued its strong performance, inclusive of another challenging prior year revenue column during the third quarter.
Speaker Change: Data Remedy finished at $61.1 million for the quarter reflecting a year-old decline of 4.5% versus the same period of 2023, laughing very strong prior year-to-positive seeking campaign activity among qualified partners.
Speaker Change: which we discussed during both the second and third quarters of 2023.
Speaker Change: Tagnant revenues improves sequentially from the second quarter by 6.4%.
Speaker Change: Overall third quarter rep have new results performed favorably against the average of the three to four trailing quarter barometer we had previously noted for comparison.
Speaker Change: adjusted even as finished at $17.5 million reflecting a very strong 14.4% growth versus Q3 of the prior year.
Speaker Change: while it just even a margins expanded 470 basis points to 28.6% on continued management of core operating expense and the segment and the favorable overall mix of DBM campaign activity during the period.
Speaker Change: We anticipate the data segment returning to a year we are growth profiles during the fourth quarter. Consistent with our full year mid to high single digit growth guidance for 2024, and in line with our anticipated longer-term trajectory expectations for this segment shared during Investigation.
Speaker Change: We also maintain strong confidence in the long-leterm load to mid 20% to just leave it a rate out, work for this segment.
Speaker Change: Turning now to our print businesses.
Speaker Change: Print segments, third quarter revenue, was $297.3 million to climbing 2.3% on a year of a year basis.
Speaker Change: Legacy Check revenues continue to perform in line with our expectations declining 1.8% during the quarter.
Speaker Change: The balance of the promotional solutions offerings declined just over 3% reflecting both the short-circled discretionary spending dynamics discussed last quarter, as well as our continued focus on higher margin printed offerings, which leverage our broad print and manufacturing platforms.
Speaker Change: Overall, it just gave it a margins for the print segment improved 32.8% expanding 60 basis points versus the prior year quarter, and to continue to practically manage the print portfolio to drive supply chain efficiency and capacity utilization.
Speaker Change: while leveraging our print-on-demand investment to deliver the highest quality products while maximizing ongoing cash flow generation.
Speaker Change: and just to the even up for print, finished at $97.4 million, which reflected a very modest 0.7% decline from the prior year.
Speaker Change: Consistent with our long-term outlook shared in best-raight, we continue to expect to see the low to mid-singled-visit revenue declines across the print segment with the just-we've been a margins remaining in the low 30s within our full year 2024 outlook.
Speaker Change: Turning to our balance sheet and cash for results for the third quarter.
Speaker Change: We ended the period with a net debt level of $1.49 billion, improving $30.7 million from our 2023 year and level of $1.52 billion.
Speaker Change: While sequentially improved by $44.7 million from the $1.53 billion mark at the end of Q2, on our strong third-party cash flow results as Barry noted.
Speaker Change: are net debt to adjusted even a ratio finished at 3.6 times at the end of the quarter, improving from 3.7 in times on a sequential basis while earning flat versus the ratio reported at year end.
Speaker Change: Free Cashflow to find is cash provided by Operant Activities, Less Capital Extenatures.
Speaker Change: finished at $46.7 million for the third quarter, improving to $64.3 million for the nine months year to date period, and reflecting a $30.2 million improvement from the results reported through the nine months of 2023.
Speaker Change: Dr. Jim and Brian proved your data in income results, inclusive of lower restructuring spend, continuing working capital efficiency and lower capital expenditures versus the prior year.
Speaker Change: We continue to be pleased with our year-to-date operating cash flow generation, and our ability to sustain our third quarter-d leveraging trajectory consistent with our clear capital allocation priorities.
Speaker Change: Moving to our overall capital structure, as we shared last quarter, we continue to actively monitor the broader interest rate environment, or remain consistently engaged with our current lending group and other advisors surrounding exploration of available optionality regarding our long-term debt capital stack.
Speaker Change: As shown here, our interest profile remains roughly 75% 6-rate, and our existing revolving credit internal loan facilities carry June of 2026 and 30s, while our 8% bonds mature in 2029.
Speaker Change: We also remain comfortable with our available liquidity levels, we'll provide additional updates on any capital structure or other financing development going forward as applicable.
Speaker Change: Before turning to guidance, consistent with prior quarters are board approved or where the lower quarter lead dividend of 30 cents per share on all outstanding shares. The dividend will be payable on December 2nd, 2024 to all shareholders of record as a market closing on November 19th, 2024.
Speaker Change: As Barry detail previously, we continue to make strong progress against our key nor star initiatives.
Speaker Change: for casted realization of the implemented workstream impacts noted in Barry's comments, reflected fully within our 2024 guidance artwork.
Speaker Change: Tonight we are narrowing our estimates for full year guidance metrics from within the existing ranges.
Speaker Change: Four-year guidance ranges are shown on the current slide, keeping in mind all figures are approximate, and reflect the impact of business aggregates over the prior 12 months.
Speaker Change: Revenue of $2.12 billion to $2.14 billion. Reflecting a decline of 1% to flat, comparable adjusted growth first 2023.
Speaker Change: Adjusted EBITDA, a 415 million dollars, reflecting between 4% and 6% comparable adjusting quirks.
Speaker Change: A Jeopardy P S of $3.20 to $3.35
Speaker Change: reflecting six to eleven percent top of all adjusting growth.
Speaker Change: and free cash flow of $90 to $100 million.
Speaker Change: These forecasts reflect continuation of the robust operating leverage we have delivered across comparable to results through the first three quarters.
Speaker Change: Finally, to further assist with your modeling, our guidance assumes the following.
Speaker Change: Interest Expents of $120 million and adjusted tax rate of 26%.
Speaker Change: The appreciation and memorization of $165 million of which acquisition aminization is approximately $75 million and average offending share count of 45 million shares and capital expenditures of approximately $100 million.
Speaker Change: This guidance remains subject to among other things, prevailing macroeconomic conditions as noted previously, including interest rates, labor supply issues, inflation, and the impact of divestitures.
Speaker Change: and summary, we will be pleased with our continued focus on North Star Execution during the third quarter and our overall year-to-date results.
Speaker Change: Before we open the mic for questions, I'd like to leave you all at the clear statement that we're simply executing well against our objectives.
Speaker Change: through the first nine months of the year, we've continued to grow EBITDA, expand margins, improve free cash flow, and pay down debt the way we intended and told you we would.
Speaker Change: We remain confident that our execution and focus will continue to be reflected in our fourth quarter performance and look forward to sharing our progress on our fourth quarter call.
Speaker Change: Operator, we are now ready to take questions.
Speaker Change: Thank you. If you would like to signal with questions, please press star 1 on your touch tone telephone. If you're joining today, you say speaker phone, please make sure your new function is turned off to allow your signal to reach our equipment. Again, that is star 1 if you would like to signal with questions, star 1.
Speaker Change: and our first question comes from Lance Faitansa with TD Count.
Lance Faitansa: Thanks guys, can you hear me?
Lance Faitansa: Jerry Funt, hey Lance
Lance Faitansa: Great, great, great, great. So first off, nice job on the Ibiza and Casflow.
Lance Faitansa: and I appreciate the improving tone and merchant services and data solutions. All the same. I was a little disappointed to see total revenue down on a like for like basis. I know what was just down a smidge, but it wasn't up.
Speaker Change: So my question, I'm kind of a two-partner here, Barry, as we think about 2025, and obviously I'm not expecting guidance here, but how confident are you that you can see?
Speaker Change: Consolidated revenue growth for the full year. Obviously, I appreciate you've got some businesses that are growing nicely. You've also got some businesses that are facing some secular headwinds. So I just wanted to get your temperature there. And then maybe for a chip.
Speaker Change: You mentioned the investor day a couple of times if you could perhaps go back and remind us when we lay out the long-term growth expectations for each of your four sectors and then factoring in the size of those businesses as we exit 2024.
Speaker Change: What should we expect for consolidated growth in 2025 if it turns out to be a normal year. And I just don't have a math in my fingertips. There's a 2% is it 4% is it more or less. Any color there would be would be very helpful. Thank you.
Speaker Change: So, let's start with the first question. First of all, we're very pleased with the progress against our North Star initiative.
Speaker Change: and you'll recall that North Star is more than just cost. It's also improving product development, launching more product and helping to grow our revenue.
Speaker Change: and so you're starting to see the first fruits of that. I think I would point you to look at what's happening in the B2B business.
Speaker Change: We said it would be a tough start to the year and we have got that business now to just slightly positive growth and we've guided for the rest of this year that we think there'll be sequential growth and Q4 from Q3.
Speaker Change: and we think that's a trajectory without providing guidance for 2025 for how that business ultimately gets to its goal that we have shared is a missing little digital better growth rate.
Speaker Change: and I'm very proud of that as well. We think that that this continues to be on very solid footing as well as what we see on data-driven marketing. Now, in this particular quarter,
Speaker Change: Data had a really super tough, top versus last year, which I think made the grow over for this year, particularly difficult to make you three, but as we said in our prepared remarks, we expect that to recover in two four, and that we think that is a very healthy, mid-singular, better growth business.
Speaker Change: and over a multi-quarter horizon.
Speaker Change: So put all of those things together. We think the business is with great growth prospects, the data-driven marketing, merchant services, B2B, are on their path to delivering what we said would be their long term growth horizons.
Speaker Change: While at the same time we're holding on to our print business with really fat margins that helps fuel the growth across the enterprise.
Speaker Change: Yep, Lance, and that was well said by Barry, I'll take the second part of your question.
Speaker Change: If you think about what we laid out in Vester Day and I'll simplify a few things. We showed you guys ranges, cager ranges across the horizon, but directionally speaking.
Speaker Change: B2B business, we're expecting it to grow in the mid-singles digit range.
Speaker Change: over the next few year horizon.
Speaker Change: The merchant business we're stepping to grow in the upper single digit range.
Speaker Change: as well as data growing in the upper single digit range. And then on top of that, you have the print business declining in the load to mid single digit range.
Speaker Change: Those are the near-term next few year trajectory. When you put it all in the vacuum, we have not guided 2025, right? We guided cagers over the horizon. But if you put it all, based off weirgon in this year, where we think we'll be, I think it'll put us to the lower end of our growth value algorithm, right? The value algorithm is to grow 2 to 4%.
Speaker Change: Over the long term with profit expanding faster than revenue. I would think initially you should expect face off the scale and what's going on that we would be somewhere in the lower end of that and the kind of the one to two percent. But again, we haven't guided fully 2025. That's just a long-degenerning journey. How I think it'll play together. And I think Barry said it well, I think.
Speaker Change: with the third quarter with the Katofcomp that data had.
Speaker Change: and B2B starting to turn the quarter. I think we were close to putting those points on the board to be able to show that low-singled digit growth, again, if the comp wouldn't have been there for data. So I think we feel good about how the businesses are shaping up and the ability to exit the year with the right trajectory and set us up for that 20, 25 year, which will guide on the next call.
Speaker Change: at Super helpful guys, thanks in great execution, take care.
Speaker Change: and the next question will come from Charlie Strauss with CJS.
Charlie Strauss: I good evening
Speaker Change: Harlie.
Speaker Change: A, even though margin was pretty strong actually in the quarter, it was quite kind of a rubbed of being in line nearly 20% there in the quarter. Can you shed a little bit more light on the drivers behind that? I know you said mix.
Speaker Change: and you know, expensive reductions but maybe a little bit more color on that as well. And then moreover, the margins were very strong. Maybe in your commentary for my questions, you know, should some more color on that, too.
Speaker Change: You know, just at the very high level, Charlie, you know we've been very focused on improving the operating efficiency of the company.
Speaker Change: and you can see the overall margin profiling improved because you can the best place to see this of course on what we're doing our efficiency is in the corporate line where you see we have had very significant reduction year on your quarter and quarter in our efficiency in our corporate line spending.
Speaker Change: but it's also just broad execution across each of the businesses that had healthy periods.
Speaker Change: I think that the data business and ship can add more here had, you know, honestly, had a pretty darn good corner. It was a...
Speaker Change: It was a over $60 million quarter, which is a good milestone for that business.
Speaker Change: and Agreeus Equentially, it just was up against a gigantic comp of Q3 last year and I think they're doing a great job there, selling additional features and functions as well as discreet execution overall. What everyone add on that. Yeah, I think.
Speaker Change: Starting with the enterprise Charlie, I mean, part of this is the North Star Vision and what we need to do for a period of time to drive the operating leverage, expand the margins and grow the EBITDA faster than revenue. And so, keep in with.
Speaker Change: No way is in the numbers and tough comps and a slightly down top line. We would expect that as we execute the program, we roll out, we realize the savings into the PNL, whether it's due to corporate cost center or across the PNL, we're seeing really good progress inside of North Star, whether you're talking about the procurement, track of work.
Speaker Change: The tech and app, all of the things we're doing to run the business more efficiently or below the business of the R-reven initiatives It's all leading towards what you're noticing, right? The margin expansion
Speaker Change: and the accelerated growth of E.B. but I wanted to red myself. So I think we feel really good about that. And as Barry said, you know, relative to data, you know, this business continues to really perform well in terms of the campaign mix of the old we're taking, how we're driving efficiency inside the business, realizing some more star value inside that segment.
Speaker Change: and obviously setting us up to maybe be on the higher end of what we thought our long-term margin rates would be there. So I think we continue to maintain that kind of low 20s to mid 20s range for the data business.
Speaker Change: but obviously it continues to perform like it is. That's a period for autism for us over the long term and we feel really good about how that team is executing.
Speaker Change: That's very helpful. Thank you and Chip just give me some suggestions. So, cheers a little bit to the balance sheet.
Speaker Change: and the commentary about the yos of death and some of your termed turtidies with reach, you know, going lower and heading in the right direction. You know, you thought more to tackle that soon rather than later.
Speaker Change: Yeah, I mean we're still working through those strategies and thoughts with our bank group. I think we all know it's the bank side of the equation, will mature in June of next year and obviously we don't want to let those those maturitys go current.
Speaker Change: So as we look at it, we have a window of opportunity that we're nearing or walking into here very soon where we would want to get that done.
Speaker Change: Whether this quarter or next, and so I think for us it's...
Speaker Change: You know, looking at the market, seeing what's going on with interest rates, hearing how credits spreads, have progressed, broadly speaking, and trying to find the right timing. So, nothing to announce yet, nothing to really talk about, but it's definitely something will make sure to address in short order before we get anywhere near the debt going our next next year.
Speaker Change: Thank you very much.
Speaker Change: And our next question will come from Will Brunnamon with North Coast Research.
Will Brunnamon: Hey guys, how's it going?
Will Brunnamon: I was gonna add
Speaker Change: Hey, I was going to ask are you guys seeing any changes in the competitive environment or any pricing pressure in the merchant business and then if you're able to, could you possibly provide us any color on how transaction growth has looked within the business as well?
Speaker Change: So I'm going to answer those sort of separately. So on the first one, on price, price, or competitive pressure, but of course there's always competitive pressure in the marketplace, but one of the really great things about where we compete.
Speaker Change: and where our foothold is strong, gets some areas like state and local government, not for profit. Auto repair among a number of others, including integrated software vendors, etc. And banked channel leads.
Speaker Change: These are areas that are very sturdy and durable and less subject to the ongoing pressure of and on constant flipping that is present in other parts of our business.
Speaker Change: and we think that has allowed us to really focus more on our service level, which is how we win it. In the space of course, it has to be priced competitively, but at some time you were to come and see our facility and for a worthy it's the encounter full of awards.
Will Brunnamon: the show that we are the best in class in the Merchant category around service.
Will Brunnamon: and that's helping us win business. You'll recall last November. We announced an implemented a very significant win for us on a mid-sized regional bank.
Will Brunnamon: and moving their entire portfolio to our platform. And while we were competitively priced, it wasn't about price. It was about service and value and we were able to win. So that's helping us win additional business across our footprint.
Will Brunnamon: and as far as processing volume, we don't specifically release processing volume trends.
Will Brunnamon: So we said in our prepare remarks that we think of processing volume the solid. Of course, we shared plenty earlier in the year about what we thought was happening with the consumer. We think that as largely at this point, stabilize with the mix.
Will Brunnamon: Moved towards less discretionary capital categorized now stabilizing. So we're optimistic about the fourth quarter and looking forward to the 2025.
Speaker Change: Okay, thank you and then just one more. So we were curious, if there was an increase in bank M&A with the new administration and office, what kind of impact would that have on the check business?
Speaker Change: So I love this.
Speaker Change: and I will tell you that bank consolidation is almost always a very important positive for Deluxe.
Speaker Change: in the scenario when we don't act.
Speaker Change: both sides of a merge bank.
Speaker Change: We have a very high success rate of winning both sides when the banks come together.
Speaker Change: The most notable one that we were very public about a couple years ago was the formation of true West
Speaker Change: WebBV&T and some trust came together.
Speaker Change: and it ended up being one of the largest single sale in the company's history.
Speaker Change: and has been called in those environments.
Speaker Change: We can show that our product is better.
Speaker Change: We can show that our service is better, we can show that we help a bank sell more to their existing customer, our balance sheet is better and as a result, we win and we win a very, very disproportionate share when that happens of course from our perfect.
Speaker Change: but a very disproportionate share there. And that is not only in bank and solidations but even in the contracts are up for renewal and that's in part how we are able to keep our check business to climb to a rate much less.
Speaker Change: and then what's happening in the industry overall has been...
Speaker Change: Much our proof is up.
Speaker Change: Information is shared by the Fed regularly. So the fact that we have a better product, we have a better balance sheet, we have deliverance service for customers better, help us win really in any environment, whether it's a bank consolidation environment or under renewal space.
Speaker Change: and I think we'll just this trip, I'll chime in, I think Barry nailed that aspect of it, but just to quam in any follow-up concerns or the next question may come from.
Speaker Change: Additionally, when banks...
Speaker Change: Merge and solidate, you know, they're important partners to us. They're important self-reveal, to us, but ultimately the volumes and consumers, the end businesses, they're still there. So if we have less thanks to partner with Will Still Partner, deliver service, Will Still Drive, whether it's checks.
Speaker Change: Lockbox Equipment, all the aspects of our portfolio to the end markets, regardless of the number of banks. So there's no negative there from consolidation. Barry's right. It's more about the opportunity it creates for us to maybe gain more wallish share or gain a new customer that we didn't have before.
Speaker Change: Alright, thank you guys so much. I appreciate it.
Speaker Change: Evan, the next question will come from Mark Ridic with Sidoti.
Mark Ridic: That's better when I'm not muted. Hey there, good evening guys.
Mark Ridic: I wanted to touch a little bit on.
Mark Ridic: I wanted to touch a little bit on, I guess, tackles head on both the revenue and margin I brought it to where I was, I sort of curious that's too.
Speaker Change: and what you're seeing as far as, was there any, I think, up in dispersionary spend or a revenue mix that might have been helpful. I know that certainly the expense management productivity was key, but it's wanting it from a kind of behavior standpoint if you're seeing much change relative to where we were earlier in the other.
Speaker Change: I think in the Chuck business it's just steady as we go. And I think we are seeing some of the fruits of the investments. Mark that you know we made it to in our printing capabilities so that we have made both of the expense.
Speaker Change: and producing Czechs variables instead of having significant mentors and example and other fixed expenses.
Speaker Change: and the variable cost we can manage really effectively. And then as we win business, that helps give us volume. And so I think it's a strong execution of all around along with the smart investments we made in how we manage and produce and print product.
Speaker Change: and it's been about a year now since North Star Wars was introduced initially on the call and then more broadly in the investor event. I was wondering that sort of, you know, we're a year in and probably slide seven is probably my favorite slide in the deck as far as all the pieces involved. I was wondering if there are any areas that you sort of look at among those opportunities and sort of
Speaker Change: and the other, you know, sort of see maybe a different level of optimism upside things that nature where you are now versus maybe six months ago or so, seeing this, but there's so many different pieces that are part of the plan.
Speaker Change: I guess the first thing I have started with there, Mark, is we're really proud of our progress.
Speaker Change: We said that we were going to go and increase cash flow for the company of the time I got 2826 by an incremental $100 million dollars of EBITDA. And we said we would get there by following as you saw on pay 7 a series of initiatives.
Speaker Change: and we are on track or ahead of track on those initiatives and we are booking the savings. Now of course you understand how this works.
Speaker Change: Just because you've completed the work and you've implemented it, it takes you sometimes a year plus to actually get the full value from that because you've got to earn that value over multiple quarters.
Speaker Change: But we're very pleased with the progress and we set up an unprepared remarks that we've hit a big milestone.
Speaker Change: of getting $100 million of that $13 million goal in process.
Speaker Change: and the implementation phase are beyond.
Speaker Change: I don't know if you want anything on that? Yeah, I mean just to clarify in process we think of that as identified, executed but not yet realized. So depending on the nature of the program.
Speaker Change: Certain things realize value quicker, like Orange designed it the last half of the last year, other things take time whether it's pricing, fully laughing a year.
Speaker Change: or getting to the decommission of a technology application and then realizing the savings. So it all sequences. So we're going to build all that into our guidance for next year and how we get from where we're going to end this year to where we'll be in 2026.
Speaker Change: But I think we're actually doing very well. I think we've been pleased with the way things have played out, the way we've stayed on target.
Speaker Change: State Together's a team. I think the last piece I'll leave you with, I think.
Speaker Change: I mentioned a little bit in the scripts that I'll kind of hit at home for you guys here.
Speaker Change: I think one important thing we delivered when we launched North Star as well as when we talked about it at investor day as we mentioned we thought we would spend roughly 115 to 135 million dollars of restructuring dollars to enable the program and that it would be a roughly IRR of north of 50%.
Speaker Change: I think the great news is as I said, we're on path, we're executing well, we still see the full value that we promised there but we're being very disciplined stewards of the restructuring spending and as Barry said in his script we're actually spending less.
Speaker Change: and we anticipated so now we've spent about $80 million to date to the program. We see about another just north of the 30. So as you do the math, that would say we drift it down to the lower end of that range, which makes the returns on the program even better. So I think we're very pleased.
Speaker Change: with the way it's playing out, the returns we're going to deliver, and then ultimately how that's going to lead to improving free castles this year, which I'll be seeing as we've...
Speaker Change: Cighten Free Cash, so up to the high end, which is well above where we started the year at. We've raised guidance along the year and then we also give us maybe some ability to have lower restructuring spent as the front finish this week next year and again.
Speaker Change: and have a guide of you out, but again, look for a material step forward on free casual next year. So I think overall Mark, just very pleased and very proud of the way the team has partnered and stacked hands on the delivery here.
Speaker Change: Thanks a lot. Thank you very much.
Speaker Change: And once again, if you would like to signal with questions, please press star 1, again, star 1 and we'll pause for a moment.
Speaker Change: and the
Speaker Change: At this time, there are no further questions and now turn the conference back over to Brian Anderson for any closing or additional marks.
Brian Anderson: Thanks, Justin.
Brian Anderson: Before we conclude, I'd like to share that management will be attending the 2024 Stevens Annual Investment Conference in Nashville on November 20th.
Speaker Change: and the BFA Securities Leverage Finance Conference on December 2nd and third respectively during the quarter. For which any applicable webcast information will be posted to our NESTA Relations website.
Speaker Change: Thank you again for joining us this evening. We look forward to speaking with you all again in early 2025 as we share our fourth quarter and full year 2024 results.
Speaker Change: Thank you and that does conclude today's conference. What do you think you for your participation? Have a next one day.
Speaker Change: The New York Times