Deluxe Corporation (
Q4 2010 Earnings Call Transcript
January 27, 2011 11:00 am ET
Jeff Johnson – VP, IR and Treasurer
Lee Schram – CEO
Terry Peterson – CFO
Charles Strauzer – CJS Securities
John Kraft – D.A. Davidson
Jamie Clement – Sidoti
Previous Statements by DLX
» Deluxe Corporation CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Deluxe Corporation Q2 2010 Earnings Call Transcript
» Deluxe Corporation Q1 2010 Earnings Call Transcript
» Deluxe Corp. Q4 2009 Earnings Call Transcript
Good day, ladies and gentlemen. And welcome to the Fourth Quarter 2010 Deluxe Corporation Earnings Conference Call. My name is Angela, and I will be your coordinator for today. At this time, all participates are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator instructions)
As a reminder, this conference is being recorded for replay purposes. And now, I would now like to turn the conference over to your host for today’s call, Jeff Johnson, Treasurer, Vice President and Investor Relations. Please proceed.
Thank you Angela. Welcome to Deluxe Corporation's 2010 Fourth Quarter Earnings Call. I'm Jeff Johnson, Deluxe's Vice President, Investor Relations and Treasurer. Joining me on the call today are Lee Schram, Deluxe's Chief Executive Officer; and Terry Peterson, Deluxe's Chief Financial Officer. Lee, Terry, and I will take questions from analysts after the prepared comments. At that time, the operator will instruct you how to ask a question.
In accordance with Regulation FD, this call is open to all interested parties. A replay of the call will be available via telephone and Deluxe's website. I will provide instructions for accessing the replay at the conclusion of our teleconference.
Before I begin, let me make this brief cautionary statement. Comments made today regarding financial estimates and projections and any other statements addressing management's intentions and expectations regarding the company's future performance are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.
As such, these comments are subject to risks and uncertainties, which could cause actual results to differ materially from those projected. Additional information about various factors that could cause actual results to differ from those projected are contained in the news release that we issued this morning, and in the company's Form 10-K for the year ended December 31
In addition, the financial and statistical information that will be reviewed during this call is addressed in greater detail in today's press release, which is posted in the News and Investor Relations section of our website, www.deluxe.com, and was furnished to the SEC on the Form 8-K filed this morning. In particular, any non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release.
Now, I'll turn the call over to Lee.
Thank you, Jeff, and good morning, everyone. Deluxe delivered another very strong quarter. We reported revenue towards the high-end of our expected range while adjusted earnings per share was well above the high-end of our range.
All three segments delivered strong revenue. Checks and Forms both performed well against our expectations, and new business services revenue grew 17% over the prior year.
We also continue with strong execution against our cost reduction program and spending controls and reported a favorable effective tax rate, all of which drove better than expected adjusted earnings per share.
Adjusted diluted earnings per share from continuing operations grew 11% over the prior year’s quarter and we generated $213 million in operating cash flow for the year. In the quarter, we continued our test-and-learn brand awareness and direct-response advertizing, as well as organic technology initiatives to help better position our new business services offerings and generate future revenue growth.
At the same time, we continued our process improvements and cost reduction all driving strong operating cash flow as we continue our transformation. In few minutes, I’ll discuss more details around our recent progress, and next steps but first, Terry will cover our financial performance.
Thank you, Lee. Earlier today, we reported diluted earnings per share for the fourth quarter of $0.68, which included restructuring and related costs of $0.10. Excluding these costs, adjusted EPS from continuing operations of $0.78 was six times favorable to the upper end of our previous outlook and 11% higher than the $0.70 we reported in the fourth quarter of 2009.
Favorable product mix and lower costs drove better than expected EPS performance. Results for the quarter also included a $0.03 per share benefit from a lower effective tax rate. The restructuring costs are primarily driven by infrastructure consolidations, fulfillment operational efficiencies, continued custom direct integrations, and sales and marketing capability improvements.
Revenue for the quarter came in at $351.5 million, which is towards the upper end of the range of our previous outlook. All three of our business segments performed well. Revenue was up 3% from 2009 and grew on a sequential quarterly basis excluding the third quarter contract settlement revenue.
Small business services revenue up $204.2 million was nearly flat versus 2009. While we continue to operate in a weak economic environment, we did deliver growth in new business services, a Safeguard distributor channel in Canada which mostly offset ongoing declines in our core printed products.
Financial services revenue up $88 million was down 7% versus the fourth quarter of last year. The impact of lower check orders was only partially offset by higher non-check services revenue.
Direct checks revenue totaled $59.3 million, up 51% on a year-over-year basis due to the custom direct acquisition. Excluding the impact of the acquisitions, direct checks revenue was down only 4% due to continued strong reorder performance.