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Press Release: Deluxe Reports Fourth Quarter and -3-

· 02/04/2021 16:05
Quarter Ended Year Ended December 31, December 31, 2020 2019 2020 2019 ------ ------ ------- ---------- Net income (loss) $24.7 $44.8 $8.9 ($199.9) Non-controlling interest -- -- (0.1) -- ----- ----- ------ ------- Net income (loss) attributable to Deluxe 24.7 44.8 8.8 (199.9) Asset impairment charges -- -- 98.0 391.0 Acquisition amortization 13.8 16.5 55.9 70.7 Restructuring, integration and other costs 21.6 25.8 80.7 79.5 CEO transition costs -- 0.9 -- 9.4 Share-based compensation expense 6.5 5.1 21.8 19.2 Acquisition transaction costs -- -- -- 0.2 Certain legal-related (benefit) expense -- -- (2.2) 6.4 Loss (gain) on sales of businesses and customer lists 1.8 (0.1) 1.8 0.1 ----- ----- ------ ------- Adjustments, pre-tax 43.7 48.2 256.0 576.5 Income tax provision impact of pre-tax adjustments(1) (10.2) (10.6) (49.9) (81.9) ----- ----- ------ ------- Adjustments, net of tax 33.5 37.6 206.1 494.6 ----- ----- ------ ------- Adjusted net income 58.2 82.4 214.9 294.7 Income allocated to participating securities -- (0.1) (0.1) (0.4) Re-measurement of share-based awards classified as liabilities -- -- (0.8) 0.1 ----- ----- ------ ------- Adjusted income attributable to Deluxe available to common shareholders $58.2 $82.3 $214.0 $294.4 ===== ===== ====== ======= Weighted-average dilutive shares 42.2 42.3 42.1 43.0 Adjustment(2) -- -- -- 0.2 ----- ----- ------ ------- Adjusted weighted-average dilutive shares 42.2 42.3 42.1 43.2 ===== ===== ====== =======Quarter Ended Year Ended December 31, December 31, 2020 2019 2020 2019 ------ -------- ------- ---------- Net income (loss) $24.7 $44.8 $8.9 ($199.9) Non-controlling interest -- -- (0.1) -- Interest expense 4.9 7.4 23.1 34.7 Income tax provision 7.7 15.8 21.7 14.3 Depreciation and amortization expense 27.7 30.6 110.8 126.0 ------ ------- ------ ------- EBITDA 65.0 98.6 164.4 (24.9) Asset impairment charges -- -- 98.0 391.0 Restructuring, integration and other costs 21.6 25.8 80.7 79.5 CEO transition costs -- 0.9 -- 9.4 Share-based compensation expense 6.5 5.1 21.8 19.2 Acquisition transaction costs -- -- -- 0.2 Certain legal-related (benefit) expense -- -- (2.2) 6.4 Loss (gain) on sales of businesses and customer lists 1.8 (0.1) 1.8 0.1 ------ ------- ------ ------- Adjusted EBITDA $94.9 $130.3 $364.5 $480.9 ====== ======= ====== =======SEGMENT INFORMATION (In millions) (Unaudited) Quarter Ended Year Ended December 31, December 31, 2020 2019 2020 2019 ----------- ----------- ------------- ------------- Revenue: Payments $78.0 $75.7 $301.9 $269.6 Cloud Solutions 59.2 81.2 252.8 318.4 Promotional Solutions 144.0 172.7 529.6 640.9 Checks 173.3 192.5 706.5 779.8 ------ ------ -------- -------- Total $454.5 $522.1 $1,790.8 $2,008.7 ====== ====== ======== ======== Adjusted EBITDA: Payments $17.8 $22.3 $68.1 $74.4 Cloud Solutions 16.1 20.8 61.6 77.2 Promotional Solutions 20.1 32.5 66.6 101.3 Checks 83.3 101.8 341.7 402.7 Corporate (42.4) (47.1) (173.5) (174.7) ------ ------ -------- -------- Total $94.9 $130.3 $364.5 $480.9 ====== ====== ======== ======== Adjusted EBITDA Margin: Payments 22.8 % 29.5 % 22.6 % 27.6 % Cloud Solutions 27.2 % 25.6 % 24.4 % 24.2 % Promotional Solutions 14.0 % 18.8 % 12.6 % 15.8 % Checks 48.1 % 52.9 % 48.4 % 51.6 % Total 20.9 % 25.0 % 20.4 % 23.9 %

Effective January 1, 2020, the company reorganized its operations into four reportable business segments based on its product and service offerings. In addition, management began utilizing Adjusted EBITDA to determine the allocation of company resources and to assess segment operating performance. Adjusted EBITDA is the measure of segment performance presented in the company's 2020 Form 10-Qs in accordance with Accounting Standards Codification 280. Corporate consists of those costs that are not directly attributable to a business segment, primarily marketing, accounting, information technology, facilities, executive management, legal, tax and treasury costs that support the corporate function. Corporate also includes other income. Prior period information has been revised to reflect these changes. A reconciliation of net income (loss) to total Adjusted EBITDA can be found later in this release.

DELUXE CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(in millions)

(Unaudited)

Note that the company has not reconciled adjusted EBITDA for full year 2021 to the directly comparable GAAP financial measure because the company does not provide outlook guidance for net income or the reconciling items between net income and adjusted EBITDA. Because of the substantial uncertainty and variability surrounding certain of these forward-looking reconciling items, including asset impairment charges, restructuring, integration and other costs, and certain legal-related expenses, a reconciliation of the non-GAAP financial measure outlook guidance to the corresponding GAAP measure is not available without unreasonable effort. The probable significance of certain of these reconciling items is high and, based on historical experience, could be material.

EBITDA AND ADJUSTED EBITDA

Management discloses EBITDA and Adjusted EBITDA because it believes they are useful in evaluating the company's operating performance, as the calculations eliminate the effect of interest expense, income taxes, the accounting effects of capital investments (i.e., depreciation and amortization) and in the case of Adjusted EBITDA, certain items, as presented below, that may not be indicative of current period operating performance. In addition, management utilizes Adjusted EBITDA to assess the operating results and performance of the business, to perform analytical comparisons and to identify strategies to improve performance. Management also believes that an increasing EBITDA and Adjusted EBITDA depict an increase in the value of the company. Management does not consider EBITDA and Adjusted EBITDA to be measures of cash flow, as they do not consider certain cash requirements, such as interest, income taxes, debt service payments or capital investments. Management does not consider EBITDA or Adjusted EBITDA to be substitutes for operating income or net income. Instead, management believes that EBITDA and Adjusted EBITDA are useful performance measures that should be considered in addition to GAAP performance measures.

DELUXE CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (continued)

(in millions)

(Unaudited)

ADJUSTED DILUTED EPS

By excluding the impact of non-cash items or items that may not be indicative of ongoing operations, management believes that Adjusted Diluted EPS provides useful comparable information to assist in analyzing the company's current and future operating performance. As such, Adjusted Diluted EPS is one of the key financial performance metrics used to assess the operating results and performance of the business and to identify strategies to improve performance. It is reasonable to expect that one or more of the excluded items will occur in future periods, but the amounts recognized may vary significantly. Management does not consider Adjusted Diluted EPS to be a substitute for GAAP performance measures, but believes that it is a useful performance measure that should be considered in addition to GAAP performance measures.

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February 04, 2021 16:05 ET (21:05 GMT)