Deluxe Corporation ( DLX) Q4 2010 Earnings Call Transcript January 27, 2011 11:00 am ET Executives Jeff Johnson – VP, IR and Treasurer Lee Schram – CEO Terry Peterson – CFO Analysts Charles Strauzer – CJS Securities John Kraft – D.A. Davidson Jamie Clement – Sidoti Presentation Operator
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 st 2009.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. Lee Schram 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.
Terry PetersonThank 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. Read the rest of this transcript for free on seekingalpha.com