Deluxe Q2 2026 Earnings Report

Deluxe EPS Results

• Actual EPS: $0.87
• Consensus EPS: $0.81
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $0.88

Deluxe Revenue Results

• Actual Revenue: $499.30 million
• Expected Revenue: $486.30 million
• Beat/Miss: Beat by +$13.00 million
• YoY Revenue Growth: -4.20%

Deluxe Announcement Details

• Quarter: Q2 2026
• Date: 8/5/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 5:00PM ET

Deluxe (NYSE:DLX), founded in 1915 and headquartered in Shoreview, Minnesota, is a provider of integrated business and financial technology solutions. Originally established as a check printing company, Deluxe has evolved its offerings to support small businesses, financial institutions and entrepreneurs with a comprehensive suite of services spanning print, digital and software platforms.

The company’s core business activities include printing checks, forms and promotional materials, as well as delivering digital marketing and customer engagement solutions. Deluxe also offers cloud-based software for invoice management, payment processing and fraud prevention, enabling clients to streamline operations and enhance security. Its business services portfolio extends to fulfillment, document management and regulatory compliance support.

Serving primarily North American markets, Deluxe partners with community banks and credit unions to provide branded debit cards, loyalty programs and merchant services for small- and medium-sized enterprises. The company’s digital platforms help businesses build online presence, execute targeted marketing campaigns and manage customer relationships through analytics-driven insights.

Over more than a century of operations, Deluxe has grown through both product innovation and strategic acquisitions, maintaining a focus on delivering seamless, end-to-end solutions. Its leadership team, comprised of seasoned executives with deep experience in printing, payments and SaaS, oversees ongoing investments in technology to support clients’ evolving needs.

Deluxe Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 execution remained strong, with comparable adjusted revenue up 2.6%, adjusted EBITDA up 5.3%, adjusted EPS increasing to $0.87, and adjusted EBITDA margin expanding to 21.8%. Year-to-date free cash flow rose nearly 65% to $85.9 million, supporting $75.2 million of net debt reduction.
• Positive Sentiment: Deluxe closed its Celero acquisition, expanding the merchant-services platform to more than 210,000 merchants and over $70 billion in annual payment volume. Management expects cost synergies and longer-term revenue opportunities, while raising full-year 2026 revenue guidance to $2.095 billion-$2.12 billion and adjusted EBITDA guidance to $455 million-$475 million.
• Positive Sentiment: The payments and data businesses continued to drive the transformation, growing 11% year to date and reaching 52% of revenue. Data Solutions revenue increased 21.4% in Q2, marking more than 15% growth for seven consecutive quarters, while merchant-services revenue grew 6.1%.
• Negative Sentiment: Print remains a declining business, with comparable adjusted revenue down 4.3% in Q2; legacy check revenue fell 1.7% and other print revenue declined 10.1%. Management expects low- to mid-single-digit print revenue declines for the full year, while warning that difficult comparisons could moderate Data Solutions growth in the second half.
• Neutral Sentiment: Despite higher revenue and EBITDA guidance from Celero, Deluxe left adjusted EPS guidance at $3.60-$4.00 and free cash flow guidance at approximately $200 million because incremental interest expense, integration costs, and tax effects are expected to offset much of the acquisition’s near-term contribution. The company expects Celero to be EPS-accretive in the first full year after closing and plans to return to approximately 3.0 times net leverage within two years.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Deluxe second quarter 2026 earnings conference call. All participants are currently in a listen-only mode. 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 Investor Relations, Brian Anderson. Please go ahead.

[Brian Anderson, VP of Strategy and Investor Relations at Deluxe]

Thank you, operator. Welcome to the Deluxe second quarter 2026 earnings call. Joining me on today's call are Barry McCarthy, our President and Chief Executive Officer, and Chip Zint, our Chief Financial Officer. At the end of today's prepared remarks, we will take questions.

[Brian Anderson, VP of Strategy and Investor Relations at Deluxe]

Before we begin, 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 about 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 actual results to differ from projections is set forth in the press release we furnished today, in our Form 10-K for the year ended December 31st, 2025, and in other company SEC filings.

[Brian Anderson, VP of Strategy and Investor Relations at Deluxe]

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, free cash flow. In our press release, today's presentation, our filings with the SEC, you'll find additional disclosures regarding non-GAAP measures, including reconciliation of these measures to the most comparable measures under U.S. GAAP.

[Brian Anderson, VP of Strategy and Investor Relations at Deluxe]

Within the materials, we are also providing reconciliations of GAAP EPS to adjusted EPS, which may assist with your modeling. As a reminder, all comparable adjusted metrics reflect the removal of impacts from business exits, including prior year adjustments to reflect removal of the Safeguard business effective with the closing of that divestiture as of March 1st, 2026.

[Brian Anderson, VP of Strategy and Investor Relations at Deluxe]

Financial metrics discussed through the second quarter also exclude any historical financial results relating to the Celero acquisition, which closed on July 31st, 2026, and for which additional pro forma reporting, in line with SEC requirements, will be provided over the balance of the post-closing 2026 periods. With that, I'll hand it over to Barry.

[Barry McCarthy, President and CEO at Deluxe]

Thanks, Brian, and good evening, everyone. I'm pleased to report our strong performance through mid-year. Deluxe continues to deliver its financial goals while accelerating our strategic transformation into a payments and data company. During the second quarter, we once again delivered comparable adjusted growth across all key metrics: revenue, adjusted EBITDA, adjusted EPS, and free cash flow.

[Barry McCarthy, President and CEO at Deluxe]

We were particularly pleased to see free cash flow increase 65% through Q2. We're now in our fourth consecutive year driving consistent operating leverage and growth across all core earnings metrics. This performance enabled further reduction of our pre-acquisition debt levels and improvement of our leverage ratio through the first half. We delivered this strong financial performance while accelerating our revenue mix shift towards payments and data.

[Barry McCarthy, President and CEO at Deluxe]

You'll recall in Q1 of this year, we reached a key milestone with just over 50% of our revenue being generated from non-print sources for the first time in our 111-year history. In the first half of the year, our payments and data businesses together grew 11% and represented 52% of revenue, marking an acceleration of our progress.

[Barry McCarthy, President and CEO at Deluxe]

The addition of Celero, a leading merchant services provider, which closed last week, decisively shifts our revenue mix even further. More on Celero in a minute. At our December 2023 Investor Day, we outlined our plan to execute this financial and strategic transformation over three years. We delivered while achieving important cash flow and balance sheet commitments early. We're a team that executes consistently. We say what we'll do, and we do what we say. Let me summarize the quarter and highlight our ongoing consistent execution.

[Barry McCarthy, President and CEO at Deluxe]

One, our second quarter comparable adjusted revenue grew just over 2.5%, led by continuing revenue expansion across each of the payments and data segments. Two, comparable adjusted EBITDA grew at 2x the rate of revenue, demonstrating the continuing operating leverage and cost efficiency focus embedded across our business model.

[Barry McCarthy, President and CEO at Deluxe]

This strong earnings growth also accompanied rate expansion, as adjusted EBITDA margins reached nearly 22% for the quarter. Three, our free cash flow continued to expand, growing year to date by nearly 65% versus prior year. This strong cash generation enabled more than $75 million of net debt reduction from our year-end 2025 levels, improving our pre-acquisition leverage ratio to 2.9x at the end of the second quarter. Four, our payments and data businesses together expanded revenue more than 9.5% in Q2.

[Barry McCarthy, President and CEO at Deluxe]

Together, these businesses accounted for 52% of total year-to-date revenue, continuing the expansion from less than 1/3 of overall revenues in 2021. Now, a few additional details from each BU. Our combined payments and data segments expanded year-to-date revenues by 11% through Q2, led by another standout growth quarter for the data segment.

[Barry McCarthy, President and CEO at Deluxe]

Data segment revenues expanded just over 21% versus the prior year second quarter. This performance continued to reflect strong campaign demand for data-driven marketing solutions that deliver measurable outcomes, particularly from financial institutions and adjacent market verticals. We've now grown data segment revenues by more than 15% for seven consecutive quarters, demonstrating the strength of our AI-supported DDM model. This strong data performance has continued to support overall enterprise revenue growth, even as we approach significantly stronger growth comps over the back half of this year.

[Barry McCarthy, President and CEO at Deluxe]

During the second quarter, our payments businesses together saw continued revenue growth rates as well, in line with our overall guidance outlook across both the merchant services and B2B payment segments. Within the Deluxe Merchant Services or DMS segment, our onboarding of new partner wins, an overall resilient macro spending environment, and stable volumes across our diversified verticals contributed to second quarter revenue growth of just over 6%.

[Barry McCarthy, President and CEO at Deluxe]

Moving to the B2B business, we saw sustaining top-line growth across this segment as well, with revenues expanding by 3.5% versus Q2 of 2025. B2B continued to drive strong margin improvement during the period, expanding adjusted EBITDA rate by more than 250 basis points versus the prior year quarter. Finally, across print, we also saw continued comparable adjusted EBITDA margin expansion with year-over-year margins improving 110 basis points. Print strong margin performance was helped by the combination of three factors.

[Barry McCarthy, President and CEO at Deluxe]

Our exit from the declining and lower margin, safeguard distribution channels earlier this year, containing the legacy check revenue decline to less than 2%, and our prioritization of overall stronger margin insourced printed offerings. On to a bit more about Celero. We closed on the transaction last Friday. Celero is a highly attractive asset in the merchant payment space.

[Barry McCarthy, President and CEO at Deluxe]

They enjoy solid growth and margin rates, broad channel distribution, and important technology, including a terrific partner portal enabling customers to onboard and operate their portfolios more efficiently. Strategically, Celero complements our existing merchant services offering and extends and improves our market position. Here are a few key factors.

[Barry McCarthy, President and CEO at Deluxe]

First, Celero immediately enhances the scale of our combined merchant services offerings. Together, we'll now process over $70 billion in annual volume across more than 210,000 merchants.

[Barry McCarthy, President and CEO at Deluxe]

This acquisition moves Deluxe to a top 10 non-bank merchant acquirer based on Nilson data. Second, our increased scale enables significant near-term cost synergy and revenue synergy over time. We anticipate further improvement to our already robust sales capacity and pipeline as our complementary go-to-market resources are brought together. Third, together with Celero, we become an even more attractive merchant services partner for prospects beyond our added scale.

[Barry McCarthy, President and CEO at Deluxe]

This addition will complement Deluxe's core offerings and go-to-market assets, our trusted brand, award-winning customer service, and expansive reach across more than 4,000 bank partners and millions of SMB customers. Adding Celero's strong sales relationships, platform technology, and streamlined onboarding capabilities will position the expanded Deluxe Merchant Services offering as an even more formidable competitor in the marketplace. Finally, Celero has built a very strong and talented team. We're pleased now to welcome them to Deluxe.

[Barry McCarthy, President and CEO at Deluxe]

We look forward to sharing more details regarding the combination and our integration progress over coming quarters. As we noted within our recent press release, we're also planning to host a live Investor Day presentation in New York in December of this year. We'll provide more details regarding that event over coming months.

[Barry McCarthy, President and CEO at Deluxe]

Now I want to talk briefly about putting this all together to update our 2026 outlook. We are updating our overall guidance ranges to reflect the closing of the Celero transaction last week. Our updated ranges include both increased overall revenue and adjusted EBITDA ranges to include Celero over the balance of the year, complementing our strong year-to-date performance through the first half. Chip will share specifics in a moment. Before concluding, I want to reinforce our strategic progress on our core priorities through the first half.

[Barry McCarthy, President and CEO at Deluxe]

As a reminder, our core business strategy is focused on three ongoing strategic planks. Number one, shifting revenue mix towards payments and data to accelerate profitable secular growth. Two, driving operating efficiencies, margin expansion, and overall operating leverage across the combined enterprise. Three, expanding adjusted EBITDA and free cash flow to improve the balance sheet and rapidly improve our net leverage ratio toward a long-term 3x or better target.

[Barry McCarthy, President and CEO at Deluxe]

We clearly delivered on all three strategic planks through the first half, remaining focused on driving execution across our existing businesses and now increased payment scale via the addition of Celero, which provides opportunities to directly accelerate our progress. We are pleased to have Celero join Deluxe and are confident in our bright and clear future as a payments and data company.

[Barry McCarthy, President and CEO at Deluxe]

Before passing this to Chip, I'd like to take a moment to acknowledge and thank all my fellow Deluxers for their dedication to our customers' success and our company's continuing transformation. With a majority of revenue now coming from our growing payments and data segments and the addition of Celero accelerating this mix towards 60% of total revenue later in 2027, my fellow Deluxers are on the cusp of achieving what few other 100-plus-year-old companies have ever achieved, successfully transforming ourselves for the next generation. Thank you. Our best days are yet to come. With that, I'll turn it over to Chip.

[Chip Zint, CFO at Deluxe]

Thank you, Barry. Good evening, everyone. As Barry mentioned, we were pleased with our second quarter progress, particularly our strong year-to-date free cash flow expansion, continued year-over-year comparable adjusted revenue, EBITDA and EPS growth, and margin expansion over the quarter and year-to-date periods. I'll begin, as always, by reviewing some of the consolidated highlights for the period before moving on to operating segment results, strong cash flows, and other balance sheet and recent capital structure updates, as well as our improved overall full year 2026 outlook, inclusive of forecasted Celero additions.

[Chip Zint, CFO at Deluxe]

For the second quarter, we reported total revenue of $499.3 million, decreasing 4.2% against prior year reported results while growing 2.6% on a comparable adjusted basis. We reported GAAP net income of $19.2 million, or $0.41 per share, down from $22.4 million, or $0.50 per share, in the second quarter of 2025.

[Chip Zint, CFO at Deluxe]

This reduction was driven by the inclusion of $5.6 million of one-time transaction-related expenses within second quarter operating results and a slightly higher tax provision, net of overall lower restructuring and SG&A expenses and lower interest expense during the period. Adjusted EBITDA was $108.8 million, increasing 5.3% on a comparable adjusted basis versus the second quarter of last year. Adjusted EBITDA margins were 21.8%, improving 60 basis points on a comparable adjusted basis.

[Chip Zint, CFO at Deluxe]

Q2 adjusted diluted EPS came in at $0.87, improving from $0.82 on a comparable adjusted basis, driven primarily by our improved adjusted operating results and lower year-over-year interest expense. Turning now to our operating segment details, beginning with the Deluxe Merchant Services business. The merchant business grew second quarter revenue by 6.1% year-over-year to $107.6 million, continuing its mid-single-digit growth trajectory consistent with our full-year guidance expectations for the standalone DMS segment.

[Chip Zint, CFO at Deluxe]

This growth rate reflected overall stable base processing volume levels as well as the onboarding of new business wins discussed during prior quarters, net of attrition consistent with our forecasted expectations. Segment adjusted EBITDA finished at $25.1 million, expanding by 15.7%, driven by revenue growth and overall channel mix dynamics, in addition to the impacts from the December 2025 purchase of residual commission rights from a large ISO partner.

[Chip Zint, CFO at Deluxe]

Margins finished the quarter at 23.3%, expanding by 190 basis points versus prior year Q2 levels. On a year-to-date basis, merchant margins have expanded by 280 basis points, in line with our guidance for the full-year margin growth. We continue to expect the base DMS business to achieve full-year mid-single-digit revenue growth consistent with our prior outlook, along with a mid-20% adjusted EBITDA margin profile.

[Chip Zint, CFO at Deluxe]

As the Celero business is integrated to the merchant segment results for the post-closing periods, this will provide significant upside to the overall balance of year merchant revenue outlook, as well as anticipated improvement of margins for the segment. We will provide further detail along these lines as integration efforts move forward over coming months.

[Chip Zint, CFO at Deluxe]

Turning to B2B payments. For the second quarter, B2B segment revenues finished at $73.5 million, increasing 3.5% versus Q2 of 2025. Our installed lockbox volumes remains in line with our expectation as newer digital treasury management offerings continue to build momentum. We remain pleased with this blended level of B2B revenue growth, continuing our improved trajectory extending from the positive fourth quarter 2025 exit rate. Adjusted EBITDA for B2B came in at $18.3 million, reflecting an overall 24.9% margin.

[Chip Zint, CFO at Deluxe]

This represented continued strong expansion of adjusted EBITDA, growing by 17.3% from the prior year results, with overall realized margin rate in line with the top end of our full-year guidance expectation for the segment. EBITDA growth for the period was driven by continued operating efficiencies realized across both our physical lockbox footprint and overall optimization of the expense structure across the B2B business model.

[Chip Zint, CFO at Deluxe]

Within our B2B segment outlook, we continue to anticipate a full-year low single-digit revenue growth rate as the business laps sequentially improving revenues, particularly across the prior year back half periods. Overall EBITDA margins are expected to remain within our full-year low to mid-20% range. Moving on to Data Solutions. The segment continued to drive very robust incremental year-over-year revenue growth, supporting ongoing strong customer marketing campaign demand levels.

[Chip Zint, CFO at Deluxe]

Revenues finished at $82.3 million, driving overall growth of 21.4% versus Q2 of 2025. Second quarter adjusted EBITDA finished at $18.1 million, with the margin rate finishing at 22% for the period, consistent with our longer term low to mid-20s expectation for the segment. Recall that prior year margins included material non-recurring vendor rebates.

[Chip Zint, CFO at Deluxe]

Our full-year 2026 guidance ranges continue to reflect expected high single-digit overall data segment revenue growth. This outlook continues to reflect moderation of recent quarter growth trends over the back half of the year, as we lap increasingly more difficult prior year results for the data segment. Turning finally to our Print businesses. Print segment second quarter revenue finished at $235.9 million, a decline of 4.3% year-over-year on a comparable adjusted basis.

[Chip Zint, CFO at Deluxe]

Legacy check revenues declined 1.7% on a comparable adjusted basis, while the balance of the segment declined by 10.1% to drive the overall blended results. We continue to see blended comparable adjusted decline rates moderate, due in part to the shifting of overall Print revenues more towards legacy check, reflective of the divestiture of Safeguard-related promo revenues in particular.

[Chip Zint, CFO at Deluxe]

Overall adjusted EBITDA for Print finished the period at $86 million. The 1.4% rate of comparable adjusted EBITDA decline across Print continued to align favorably to the blended rate of revenue declines, as margin rates expanded to the mid 30s during the quarter on the improving overall mix, including favorable margin rate impacts from the Safeguard divestiture earlier in the year.

[Chip Zint, CFO at Deluxe]

Consistent with our prior quarter outlook, we continue to expect to see low to mid single digit comparable adjusted revenue declines across the Print segment, with full year adjusted EBITDA margins remaining in the low to mid 30s. Moving now to our balance sheet and cash flow. We ended the June 30th period with a net debt level of $1.32 billion, down $75.2 million from $1.39 billion at year-end 2025.

[Chip Zint, CFO at Deluxe]

Consistent with our ongoing commitment to debt reduction as a top capital allocation priority, as Barry noted. Our Q2 net debt to adjusted EBITDA ratio prior to impacts related to the Celero acquisition reflected 2.9x at the end of the period, improving versus our 3x ratio a year ago. Free cash flow, defined as cash provided by operating activities less capital expenditures, finished at $85.9 million for the year to date period.

[Chip Zint, CFO at Deluxe]

This was an improvement of $33.8 million from the results reported through the first half of 2025. This continuing expansion of cash flows was reflective of our improved year to date operating results, including lower restructuring spend, SG&A expense, and cash taxes, along with largely stable working capital efficiency and CapEx investment, net of increased year-over-year cash incentive payments over the year to date period.

[Chip Zint, CFO at Deluxe]

Continuation of our robust operating cash generation remains a top focus area as we reset our deleveraging expectations against the updated capital structure, reflective of the closing of the Celero acquisition. As we shared during the transaction announcement in June, we expect to return to 3x net leverage over a two year horizon.

[Chip Zint, CFO at Deluxe]

Concurrent with the transaction closing effective July 31st, we also completed an amendment and extension of our now $1.2 billion credit facility, consisting of an $800 million term loan A and $400 million revolving credit facility, extending these balances respectively to a 2031 maturity, as noted in our filings of late last week.

[Chip Zint, CFO at Deluxe]

In addition, we entered into $600 million worth of floating to fixed interest rate swaps, helping insulate the incremental variable rate debt from ongoing volatility and interest rates. As a result of these swaps, we estimate to have approximately 75% of the debt stack aligned to fixed rates of interest. This structure enables improved confidence to our planned cash flow generation and debt reduction trajectory.

[Chip Zint, CFO at Deluxe]

These updates to our long-term capital structure position us well from both a liquidity and go forward balance sheet position, will allow us to further assess our existing 2029 bond maturities opportunistically as warranted over coming periods. Consistent with past quarters, our board approved a regular quarterly dividend of $0.30 per share on all outstanding shares.

[Chip Zint, CFO at Deluxe]

The dividend will be payable on September 1st, 2026, to all shareholders of record as of market closing on August 18th, 2026. As Barry noted in his opening comments, we are raising our expected full-year revenue and adjusted EBITDA guidance outlook this evening to incorporate expected August to December 2026 results for the Celero acquisition. We are also affirming or narrowing our prior base business estimates to reflect our year-to-date first-half results and our updated outlook across the operating segments. Our updated full-year ranges are as follows.

[Chip Zint, CFO at Deluxe]

Revenue of $2.095 billion-$2.12 billion, including flat to positive 1% comparable adjusted growth versus 2025 for Baseline Deluxe. Adjusted EBITDA of $455 million-$475 million, which reflects between 5% and 8% comparable adjusted growth. Adjusted EPS of $3.60-$4, reflecting between 7% and 19% comparable adjusted growth. Free cash flow of approximately $200 million, reflecting 14% growth versus our 2025 results.

[Chip Zint, CFO at Deluxe]

To reiterate, the increased revenue and adjusted EBITDA ranges reflect our combined balance of year outlook, while adjusted EPS and cash flow estimates reflect both interest expense from the updated cap structure and other transaction-related expenses expected over the initial integration periods. As a reminder, we expect the acquisition to be accretive to adjusted EPS over the first full year horizon. Finally, to assist with your balance of year modeling, our guidance has been updated to assume the following.

[Chip Zint, CFO at Deluxe]

Interest expense of approximately $130 million, an adjusted tax rate of 25%, depreciation and amortization of approximately $155 million-$160 million, of which acquisition amortization is approximately $55 million-$60 million, an average outstanding share count of approximately 46.5 million shares, and capital expenditures of approximately $100 million-$110 million. This guidance remains subject to, among other things, prevailing macroeconomic conditions, including interest rates, labor supply issues, inflation, and the impact of any incremental portfolio additions or exits.

[Chip Zint, CFO at Deluxe]

To summarize, we remain very pleased with our Q2 and year-to-date momentum, particularly our demonstrated continuing operating leverage, strong ongoing free cash flow generation, and comparable adjusted expansion of our core earnings metrics through the first half of 2026. As we now welcome Celero, this strong execution focus and our capital allocation discipline provide a solid foundation for further acceleration of our combined growth and enhanced scale across payments and data.

[Chip Zint, CFO at Deluxe]

This combination will unlock synergy opportunities to further extend our earnings expansion, cash flow generation, and balance sheet improvement priorities in support of our long-term value creation algorithm. We are excited to bring these assets together and look forward to sharing more details regarding integration progress and the combined outlook on our upcoming calls and planned Investor Day later this year. Operator, we are now ready to take questions.

[Operator]

Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open.

[Operator]

Please state your name and company before posing your question. Please limit yourself to one question and one follow-up. You may reenter the queue with additional questions. Again, please press star one to ask a question. We will go to our first question.

[Kartik Mehta, Analyst at Northcoast Research]

Hey. Good afternoon, Barry and Chip. By the way, this is Kartik Mehta at Northcoast Research. Barry, if you look at the merchant business, good to see 6% growth in the quarter. As you integrate Celero within there, what do you think is the largest revenue synergy opportunity for you?

[Barry McCarthy, President and CEO at Deluxe]

Well, first of all, Kartik, thanks for the question. We're really excited about Celero because it not only gives us cost synergies, which we've talked about extensively when we announced the transaction. It also, over time, is going to give us revenue synergies. Immediately, as we said in our prepared remarks, our scale of a business expands tremendously, which then gives us opportunities to compete for business that we weren't otherwise able to compete for, either Celero or Deluxe independently.

[Barry McCarthy, President and CEO at Deluxe]

Helps us move up to be considered for larger partnerships as well as larger customers, given that we will have more scale. That's number one. Number two, the Celero team has done a particularly good job, we think, in the ISV space, which we'll be able to leverage across our business, which together we've got a great ISV business, but together we think we can accelerate that business opportunity.

[Barry McCarthy, President and CEO at Deluxe]

As well as in specific market verticals. We think the combination of the increased scale, the technology, by the way, which I didn't mention, they have some really great technology that we're going to bring to bear, which allows partners to board merchants more quickly, manage them more effectively, as well as great pipeline and go to market synergies. We are very optimistic that over time we will see some revenue synergies as well.

[Kartik Mehta, Analyst at Northcoast Research]

Okay. Chip, just understanding the new guidance. Just surprised a little bit that you didn't increase the adjusted EPS or free cash flow, especially with Celero contributing five months. Maybe you can just talk about your thought process for the guidance.

[Chip Zint, CFO at Deluxe]

Sure. I'm going to take that as an overall question about guidance in general. Just to reiterate what we did do. On both revenue and adjusted EBITDA, we bolted on revenue for Celero for the five-month stub period, as well as narrowing our existing ranges for the Baseline Deluxe.

[Chip Zint, CFO at Deluxe]

When you think about EPS and free cash flow, the reason I left it alone is really some of the math of what we laid out for you. If you think about the five-month stub period of earnings that are coming into the guide, we're also adding in the incremental five-month interest cost from the new refinanced debt, along with other moving pieces that come to light during the integration. There's going to be some integration-related costs that will impact cash flows. There's going to be some moving pieces around taxes.

[Chip Zint, CFO at Deluxe]

Really, if you really step back and you see the math, you'll see that the incremental EBITDA, net of taxes, adjusted for the interest cost that I bolted in there, it kind of becomes a wash, right? Given the time left in the year, the transaction having just closed last week, we think it was prudent to leave a bit of a wider range now to give us room to land the transaction, get the integration underway, and really start to see how things unfold. To be clear, at the midpoint of our guidance for EPS, you're talking about growth in EPS of 13%, which is more than double the rate of growth of EBITDA, and obviously all of those are faster than revenue.

[Chip Zint, CFO at Deluxe]

I think we feel really good about the profile of business we're putting into the guide here, what it means for shareholders, and the progress we've made. Really think of it as confidence around the existing numbers we had, the ability to manage some moving pieces as the year unfolds, as we start the integration, digest the interest costs, continue to digest uncertainty in the interest rate environment, and just being able to be very prudent about how we set this initial guidance, and then coming back later in the year and firming things up with a little bit of time.

[Chip Zint, CFO at Deluxe]

Just as a reminder, Kartik, the Celero transaction will be accretive to EPS the first full year following close. Think of that as net neutral to this year, but accretive full year post-closing, going into next year.

[Kartik Mehta, Analyst at Northcoast Research]

Perfect. That was what I was just going to ask you, thank you for clarifying. I appreciate it. Thank you.

[Barry McCarthy, President and CEO at Deluxe]

You're welcome.

[Operator]

Thank you. We will go to our next question.

[Charlie Strauzer, Analyst at CJS Securities]

Hi, it's Charlie Strauzer with CJS. How are you?

[Barry McCarthy, President and CEO at Deluxe]

Hey, Charlie.

[Charlie Strauzer, Analyst at CJS Securities]

Hey, just a couple of quick questions. First on Celero Commerce, if you look at the integration plan, if you will, what are the priorities there for the combined companies?

[Barry McCarthy, President and CEO at Deluxe]

Appreciate the question, Charlie. What we really like about the Celero Commerce asset is we think that the integration is very straight ahead. We call it right down the middle of the fairway. One of the pieces of technology that comes with the transaction is actually going to help us with that integration, which is this partner platform. We'll simply be adding the Deluxe services into that partner platform.

[Barry McCarthy, President and CEO at Deluxe]

The new boarding of merchants will go onto Deluxe, and over time, we have the opportunity in the background to port the other parts of the portfolio towards our existing platform. There's cost synergies on the absolute operating side of the equation, payment processing, et cetera. That's an opportunity. We also have opportunity on the other cost side, on fees and other things where we have two companies paying for the same fee, we get that to one.

[Barry McCarthy, President and CEO at Deluxe]

Of course, on the overall organization, we have the opportunity to streamline the organizations by pushing them together. I will tell you though, Charlie, we're going to be very practical and thoughtful about that integration on the people side to make sure that we are putting the best talent in each of the chairs that we have across the organization.

[Barry McCarthy, President and CEO at Deluxe]

One of the prime assets that we got from this transaction was a very talented Celero team. We've got a very talented Deluxe team. We're going to put those together, and we expect that will help the company not just deliver cost synergies, but as I mentioned earlier, help accelerate on revenue synergies as well, and make sure we put the right folks in the right spots, and leverage the incredible talent pool we have between the two organizations.

[Charlie Strauzer, Analyst at CJS Securities]

Great. Thank you for that. Looking at data, it continues to outperform growth estimates despite tough year-over-year comps. Can you talk a little bit more about what types of programs are having success there?

[Barry McCarthy, President and CEO at Deluxe]

I'll start and then Chip can jump in and give you any more color commentary. We continue to see really strong success from our existing customers expanding their relationships with us, or shifting where they're spending their marketing dollars towards the solutions that we provide. The reason for that, Charlie, is that they're measurable. The outcomes are measurable.

[Barry McCarthy, President and CEO at Deluxe]

We can provide and the customer can understand if they put a dollar in, what they're getting specifically in return for that marketing investment. I think you know, Charlie, that we have built what we believe is the largest data lake of consumer and small business marketing data in the industry, or among the largest for sure. Then we've supplemented that with what we believe are best-in-class AI tools that get smarter with every campaign we run on behalf of our customers.

[Barry McCarthy, President and CEO at Deluxe]

Not only do we have the most robust data set, we get smarter with every campaign we run. Then just as a reminder, we think the largest bank that's doing this on their own is doing a couple of hundred campaigns a year. On behalf of our customers, we're doing thousands of campaigns. We've got better data. Our models get better over time because they have GenAI part of the modeling tool. We end up with expanding our moat, and that means that we get more business from our existing customers, while at the same time expanding to new market verticals.

[Chip Zint, CFO at Deluxe]

Yeah, I just want to repeat something Barry said in the prepared remarks. This business has grown more than 15% for seven straight quarters. Specifically when you look ahead to what the Q3 comp's going to be this quarter and the Q4 comp next quarter, those are growth rates of 46% and 31% respectively.

[Chip Zint, CFO at Deluxe]

Listen, we are not any less bullish on this business than we've ever been. It's just knowing the strategy of the business, how they're executing the strategy to expand into new verticals, get new logos, and get greater share of wallet from existing customers. At some point, we have to be very prudent and assume that customers can't keep spending, existing customers can't keep spending at the same rate that they have been. We think these tough comps are just a part where we have to normalize a little bit.

[Chip Zint, CFO at Deluxe]

We're no less bullish on this business than we've ever been. It has grown at a CAGR faster than we ever anticipated at our investor day a few years ago. This is definitely a business that we're very proud of, and we see a lot of great things ahead as it just continues to grow. We just want to continue to caution that back half of the year because of what's ahead of us. Really proud of how that team is executing, and it's going to be a great full year for that team.

[Charlie Strauzer, Analyst at CJS Securities]

Helpful. Thank you.

[Operator]

Thank you. Once again, if you would like to ask a question, please signal by pressing star one. We will go to our next question. Please go ahead.

[Analyst]

Hey, good afternoon. Hey, good afternoon.

[Barry McCarthy, President and CEO at Deluxe]

Marc.

[Chip Zint, CFO at Deluxe]

Hey, Marc.

[Barry McCarthy, President and CEO at Deluxe]

Marc.

[Analyst]

We've covered quite a bit already, but I wanted to talk a little bit about the margins that you saw across the segments and the multiple improvements in most of the segments. Sort of curious, one of the things that sort of jumped out was the pickup on print. Maybe you could talk a little bit about how much of that was revenue mix shift and the divestiture and how we should think about, I think you mentioned mid-30s or so, but it just seemed to be sort of a notable tick up there on the print side. Maybe talk a little bit about how much of that is sustainable for the remainder of the year and going forward.

[Barry McCarthy, President and CEO at Deluxe]

Sure, Marc. Let me just kind of give the overview and then Chip can go as deep as you want. First of all, I think the most important thing to know is how well the Check business is performing overall. It is declining at a slower rate than we have anticipated in the past, and we've been able to expand the margins in that business because of the smart investments we've made in the operating platform there over time. You know that we invested to improve the product by having print on demand, which also lowers the operating cost and variabilizes it with volume, and we are getting rewarded for that today in our operation.

[Barry McCarthy, President and CEO at Deluxe]

The driver, and you were on the topic there, Marc, which is we announced last quarter a very strategic exit and divestiture of part of the promo business, which was the Safeguard channel of distribution. Basically, a group of resellers, they were independent sales groups that sold our products. They were lower margin, and they were declining revenue.

[Barry McCarthy, President and CEO at Deluxe]

When we have less drag, because that part of the business is smaller, it improves both our top-line performance and improves our margin opportunity. Not having that in our mix has significantly helped us expand margin, and we think that continues to benefit the portfolio over time. It's those two things. First of all, the Check business is performing really well, and we were successful in divesting a piece of the promo business that was not strategic for us and not helpful on our margins.

[Chip Zint, CFO at Deluxe]

Just to reiterate.

[Analyst]

I'm sorry. Go ahead.

[Chip Zint, CFO at Deluxe]

Go ahead, Marc. Nope, you can finish.

[Analyst]

No, go ahead.

[Chip Zint, CFO at Deluxe]

That's no problem. I was just going to reiterate, we've been very consistent in the stated strategy in this space for a while. We're going to continue to slow the melt of Check, continue to maintain margins, make smart investments. Barry made all those points. I think it's very clear the progress we're making there. This is a trend in Check that is not one, two, three.

[Chip Zint, CFO at Deluxe]

This is multiple years' worth of progress that we're really laying out. We've also been very clear that when it comes to the lower margin aspects, the promo and apparel side that's declining way outside our long-term guide and at low margins, we weren't going to just go chase revenue for the sake of dollars. We weren't going to take bad deals. We weren't going to take low margin.

[Chip Zint, CFO at Deluxe]

We've been very focused on that higher margin in-source printed offerings and improving the margin profile. I don't have the exact basis points impact to the print specific segment at my fingertips, but I can tell you roughly for the overall enterprise, getting out of the Safeguard business

[Chip Zint, CFO at Deluxe]

Helped our mix by about 80 basis points to rate for the full Deluxe enterprise. That was a really meaningful move to get very focused along with the stated strategy, help inflect the mix towards the more higher margin pieces. Obviously, we're really focused on finishing that transition and really setting up that business for smooth execution and just continuing to run the strategy the way we have been.

[Analyst]

Excellent. That's very helpful. My other question is sort of kind of generic, I suppose, but as we approach through the year and your commentary about having the December investor event, I was sort of thinking back to the prior one is maybe you could just spend a little bit of time and without stealing future thunder, but maybe you could spend a little bit of time as to maybe the thought process of having an event later in the year and maybe sort of what maybe some of the big picture things that you see getting across for investors who either have been with you through the way or may be new to the story there.

[Barry McCarthy, President and CEO at Deluxe]

Appreciate the question. I think, first of all, we told investors we had a three-year plan, and we have delivered on the expectations for that three-year plan. In our prepared comments, we noted that we delivered those early. Most of those things that we've promised to deliver through the 2026 year, we've actually already delivered most of them already in the first quarter, even some last year.

[Barry McCarthy, President and CEO at Deluxe]

It's important that we think that we share with investors the progress we've made against the goals we stated three years ago. Second, it's important to reiterate our strategy because the strategy is unchanged with the Celero acquisition, and those three strategic planks, again, are shifting the revenue mix towards payments and data to accelerate our organic growth. Second, driving operating leverage and efficiency across the enterprise.

[Barry McCarthy, President and CEO at Deluxe]

Third, increasing adjusted EBITDA and cash flow so we can lower our overall debt and leverage ratio. Those are unchanged, we're going to want to affirm those for investors, talk about how we've made progress on all three of those so far, talk about how we will continue to improve the company on those same strategy. We want to introduce and spend more time describing the Celero acquisition and how that is going to improve not only our merchant business, but the company's performance overall.

[Barry McCarthy, President and CEO at Deluxe]

We think that's plenty to cover, it's an important time to update investors on the progress from three years ago, affirm our strategy, and talk about the strategic value that's being created by Celero, and give all of the investors that are following our story a thorough update about what the progress that we've made, which we're very proud of.

[Analyst]

Much appreciated. Thank you very much.

[Operator]

Thank you. This concludes today's question and answer session. I would now like to turn the call back to Brian Anderson for closing remarks.

[Brian Anderson, VP of Strategy and Investor Relations at Deluxe]

Thanks, Rachel. Before we conclude, I'd like to share that management will be participating at the Northcoast Research Small Cap Conference on September 9th, and at the Barrington Research Virtual Investment Conference on September 22nd during the quarter. Thank you again for joining us today, and we look forward to speaking with you all again in late October as we share our third quarter results.

[Operator]

This does conclude today's call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Brian Anderson, VP of Strategy and Investor Relations
• Barry McCarthy, President and CEO
• Chip Zint, CFO

Analysts

• Kartik Mehta, Analyst at Northcoast Research
• Charlie Strauzer, Analyst at CJS Securities
• Analyst