Deluxe Corporation (
Q1 2011 Earnings Call
April 28, 2011 11:00 am ET
Jeff Johnson – Treasurer and VP, IR
Lee Schram – CEO
Terry Peterson – CFO
Charles Strauzer – CJS Securities
John Kraft – D.A. Davidson
Davis Hebert – Wells Fargo
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» Deluxe Corporation Q1 2010 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the First Quarter 2011 Deluxe Corporation Earnings Conference Call. My name is Mary, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions)
As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Mr. Jeff Johnson, Treasurer, Vice President of Investor Relations. Please proceed.
Thank you, Mary. Welcome to Deluxe Corporation's 2011 First Quarter Earnings Call. I'm Jeff Johnson, Deluxe's Vice President of 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 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,
. In particular, any non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release.
Now, I will turn the call over to Lee.
Thank you, Jeff and good morning everyone. In the continued sluggish economic environment, we delivered another strong quarter and are off to a solid start to the year. We reported revenue at the top of our expected range, while adjusted earnings per share was above the high end of our range. Both Small Business Services and Direct Checks grew over the prior year. Checks and forms both performed well against our expectations and business services revenues grew 19% over the prior year.
We had strong execution against our cost reduction program. Improved product mix drove better-than-expected EPS. Adjusted diluted EPS from continuing operations grew 3% over our strong prior year. We generated strong operating cash flow and we were not drawn on our credit facility as we ended the quarter.
We issued $200 million in new eight-year senior notes and repurchased almost 70% of our 2012 notes and $10 million of our 2014 notes. In early April, we completed the acquisition of Bankers Dashboard to expand our financial services analytics and profitability services capability.
We continued to invest in improved brand awareness to help better position our new business services offerings and drive future revenue growth. We also expanded our process improvement and cost reduction initiatives, while driving strong operating cash flow as we continue to transform Deluxe. In a few minutes, I will 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 first quarter of $0.63, which included losses of $0.10 per share on long-term debt repurchases in the quarter and restructuring-related costs of $0.02. Excluding these costs, adjusted EPS from continuing operations of $0.75 was $0.02 favorable to the upper end of our previous outlook and 3% higher than the $0.73 reported in the first quarter of 2010.
Favorable product mix drove better-than-expected EPS performance. The restructuring-related costs were primarily driven by infrastructure consolidations. Revenue for the quarter came in at $350 million, which was right at the upper end of the range of our previous outlook. Revenue was up 4% from 2010 and was roughly flat on a sequential quarterly basis.
Small Business Services revenue of $200 million also grew 4% versus last year. While we continue to operate in a weak economic environment, we did deliver growth in business services, the Safeguard distributor channel and Canada, and our core printing business benefited from a routine price increase.
Financial Services revenue of $88 million was down 13% versus the first quarter of last year, but was flat on a sequential quarterly basis with the fourth quarter of 2010. The impact of price increases and higher non-check services revenue as more than offset by the amortization of a 2009 contract settlement in the prior-year quarter and lower check orders. Excluding the impact of the contract settlement amortization, revenue in Financial Services declined less than 6% from the last year.