DELUXE CORPORATION 2020 Analyst
- Investor Day
February 25, 2020
© 2020 Deluxe Enterprise
Ed Merritt, Vice President, Corporate Finance & Treasurer
MY EXPERIENCE
6
Years
2
Forward Looking Statements
Comments made today regarding financial estimates, projections, and management's intentions and expectations regarding the Company's future performance, are forward-looking in nature as defined in the Private Securities Litigation Reform Act of 1995. 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 projections are contained in the press release that we issued today as well as in the Company's Form 10-K for the year ended December 31, 2019.
The financial and statistical information that will be reviewed during this event is posted on our investor relations website at deluxe.com and was also furnished to the SEC on Form 8-K filed by the Company this morning.
3
Non-GAAP Financial Measures &
Business Re-segmentation
References to non-GAAP financial measures are reconciled to the comparable GAAP financial measures as part of this presentation when necessary.
We announced as part of our One Deluxe strategy that we would realign the Company into four new segments in 2020. These new segments are Payments, Cloud Solutions, Promotional Solutions and Checks. This realignment was effective January 1, 2020, and today, we will present our strategy and financial projections in this new segment structure.
It is important to note that the historical financials presented today in the new segment structure are unaudited. Once we finalize our re-segmentation process, we will provide fiscal years 2018 and 2019 in this new format and intend to provide the information to the SEC on Form 8K. We anticipate we will be filing this report following the release of our 2020 first quarter financial statements. As this process has not been finalized, it is possible that the re-allocation of goodwill between the new business units could result in an impairment unrelated to any changes in our business conditions.
4
Additional Information
Information regarding the Company's new segment structure can be found in the Company's Current Report on Form 8-K furnished to the SEC on February 25, 2020. The reconciliation of Adjusted EBITDA for 2019 to net income can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
Note that the Company has not reconciled adjusted EBITDA
margin outlook guidance for the first quarter of 2020, full year 2020 and 2023 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 items is high and, based on historical experience, could be material.
5
Meeting Logistics
6
Please silence your cellphones
7
2020 ANALYST & INVESTOR DAY
One DeluxeNeed B
Barry McCarthy
President & CEO
9
Barry McCarthy, President & Chief Executive Officer
MY EXPERIENCE
15
months
10
Leveraging Our Incredible Assets as One Deluxe
THE OLD DELUXE | THE NEW DELUXE |
» Company of companies | » Company of products |
» Growth exclusively from | » Focus on sales-driven |
acquisitions | growth |
» Acquired 50 companies | » Supplement with |
over 7 years, none of | strategic acquisitions |
which were integrated | |
11
Today's Speakers
Chris Thomas | Michael Reed | Garry Capers | Tom Riccio |
CHIEF REVENUE OFFICER | GENERAL MANAGER, | GENERAL MANAGER, | GENERAL MANAGER, |
PAYMENTS | CLOUD SOLUTIONS | PROMOTIONAL SOLUTIONS |
Tracey Engelhardt | Pete Godich | Michael Mathews | Keith Bush |
GENERAL MANAGER, | SVP, CHIEF OF OPERATIONS | SVP, CHIEF INFORMATION OFFICER | CHIEF FINANCIAL OFFICER |
CHECKS | 12 | ||
Agenda
One Deluxe: Barry McCarthy
Customer: Chris Thomas
Payments: Michael Reed
Cloud Solutions: Garry Capers
Promotional Solutions: Tom Riccio
Checks: Tracey Engelhardt
Operations: Pete Godich
IT: Michael Mathews Financial Overview: Keith Bush
13
Customers Build Their Businesses on
Deluxe Platforms and Technology
Purpose-Built to Help Our Customers Succeed
14
Deluxe is a Fintech Company with Unparalleled Scale
EXISTING RELATIONSHIPS WITH NEARLY:
4,000 | ~4.5M | ~4M | ||
Financial Institutions | SMBs | Consumers |
$2.8T | 400K | 150K |
Annual payments volume | New SMBs added each year | Packages shipped each day |
15
Business Lifecycle
START YOUR
BUSINESS
Checks Forms
BRAND YOUR
BUSINESS
Website &
Hosting
GROW YOUR
BUSINESS
OPTIMIZE YOUR
BUSINESS
Payroll Digital
Solutions Payments
Licenses
and IDs
TM
Trademark
Print Marketing
Retail
Packaging
Data-Driven
Marketing
Merchant
Services
Incorporation
Services
Filings
Logo
Design
Promotional
Products
Digital Marketing
Remote Deposit Capture
Payments
Cloud
One Deluxe helps companies across the business lifecycle
Promo
Checks
16
Four Business Segments
The New Deluxe: A Company of Products
Payments | Cloud Solutions | Promotional Solutions | Checks | ||||||
Growth Area | Growth Area | Potential Growth Area | Value Area | ||||||
Treasury Management Solutions | Hosted Solutions | » | Business Forms | » | Printed Checks | ||||
» | Lockbox | » | Digital Engagement | » | Accessories | » | Other | ||
» | Remote Deposit Capture | » | Logo Design | ||||||
» | Advertising Specialties | ||||||||
» | Integrated Receivables | » | FI Profitability Reporting | ||||||
» | Payment Acceptance | » | Account Switching Tools | » | Promotional Apparel | ||||
Payroll | » | Incorporation Services | » | Retail Packaging | |||||
Web Hosting | |||||||||
Disbursements | » | Deluxe Strategic Sourcing | |||||||
» | Digital Engagement | ||||||||
» | Disbursements & eChecks | » | Other | ||||||
» | Logo Design | ||||||||
» | Fraud/Security | ||||||||
Data-driven Marketing | |||||||||
Other |
Growth | 10-15 | 5-10 | Flat | 4-5 | % | decline |
% | % | |||||
Estimated Market | ||||||
Estimated | 15x-20x | 20x-40x | 5x-15x | 5x | ||
Multiple | ||||||
EV/EBITDA | ||||||
Sales-Driven Growth | 17 |
Now a Company of Products
- Temporarily suspended acquisitions to upgrade infrastructure and integrate previous acquisitions
- Acquisitions will be part of longer- term playbook, but no longer the ONLY source of growth
- Robust asset review to maximize shareholder value
Expanding through sales-driven growth and large customer base
18
Path to Sales-
Driven Growth
- Expect to return to consistent sales-driven revenue growth in 2020
- Expect total revenue of at least $2.3 billion, net of expected declines in checks, in 2023
- Expect to maintain adjusted EBITDA margins in the low- to mid-twenties in 2023
19
The New Deluxe is Already Winning
Won 3 out of the 10 | Partnered with Vodafone | |||||
largest deals of the | ||||||
India and Ingram Micro | ||||||
decade signed in Q4'19 | ||||||
Won major BPO | Entered Canadian check | |||||
outsourcing contracts in | market with CIBC | |||||
treasury management | contract | |||||
Made every North | Successfully launched |
American employee of | Workday and Microsoft |
Deluxe a shareholder | Teams |
20
A Compelling Investment Opportunity
Fundamentally changing how Deluxe goes to market and operates - "One Deluxe" strategy
Leverage existing customer base, core competencies and assets to accelerate sales- driven revenue growth
Plan to compete in four primary areas;
Payments; Cloud Solutions; Promotional Solutions; and Checks
Re-invest cash flow from Promotional Solutions and Checks into Payments and Cloud Solutions growth areas
Continue our commitment to returning capital to shareholders
21
Strong Return On Invested Capital (ROIC)
Mid-single digit | Adjusted EBITDA |
revenue growth | margins low-mid 20s |
22
We Are Delivering Value Now
- Eliminating silos to improve structural efficiencies
- Managing and optimizing portfolio
- Capitalizing on low cost of customer acquisition
- Converting millions of our annual contacts into leads
Deluxe's businesses help each
other deliver greater value
23
Our Future Has Never Been Brighter
- New, successful go-to-market strategy and sales team
- New partnership agreements
- New major BPO contracts wins
- New entrance into Canadian bank market
- New IT systems and tools implementations
Tremendous progress in transformation journey, delivering record revenue in 2019
24
2020 ANALYST & INVESTOR DAY
World-Class
Sales andNeed B
Marketing
Chris Thomas
Chief Revenue Officer
26
Chris Thomas, Chief Revenue Officer
EXPERIENCE
219
Days
Sales and Marketing Transformation
Q32019 | Q42019 | Q12020 |
Decentralized sales and marketing organization
Sales leaders had never met each other
Disparate CRM tools (10+)
Siloed sales incentive plans (over 150)
Created CRO organization Launched Sales Excellence program Launched Deluxe Top 10 Deal list
Developed first Deluxe consolidated pipeline
Results
Won 3 of largest top 10 deals ever
First ever enterprise Sales Kick Off
Comprehensive sales incentive strategy cross-sell goals
out first enterprise Deluxe conference
deal list expanded to top 25
Results
Record quarter for Average Order Value (AOV) and products per order inbound sales
Record revenue month on revenue for Shop.Deluxe.com
Pipeline up 15% QTD Another top 10 deal signed Renewed largest check contract
29
THIS IS THE NEW DELUXE
A Culture of Selling - Everyone Sells!
ONE
Focused to Drive
Organic Growth
Everyone Sells Program
Portfolio Management
Agile Mindset
Knowledge Management
Service Excellence
Demand Generation
New Talent
Go-To-Market Priorities
NEW CAPABILITIES THAT WILL DRIVE INCREMENTAL
ORGANIC GROWTH
Demand | Enterprise Account | Strategic | Small Business | |||||||||||||||||||
Generation | Management | Alliances | Advisory Model | |||||||||||||||||||
Business Lifecycle
START YOUR
BUSINESS
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BRAND YOUR
BUSINESS
Website &
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OPTIMIZE YOUR
BUSINESS
Payroll Digital
Solution Payments
Licenses and IDs
TM
Trademark
Print Marketing
Retail
Packaging
Data-Driven
Marketing
Merchant
Services
Incorporation
Services
Filings
Logo
Design
Promotional
Products
Remote Deposit
Capture
Payments
One Deluxe helps companies across the business lifecycle
Digital Marketing
Cloud
Promo
Checks
2020 Sales Progress
New Sold Revenue
$100 | ||||||||
$80.0 | $83 | |||||||
$67 | ||||||||
$54.0 | $50 | |||||||
$33 | ||||||||
$17 | ||||||||
$6.6 | ||||||||
Q3 - 2019 | Q4 - 2019 | Q1 - 2020 | Q2 - 2020 | Q3 - 2020 | Q4 - 2020 | |||
Target | Actual New Revenue | |||||||
6 months ahead of 2020 plan for new revenue sold
Expected Sales Increase 2020
$20 | $2,040 | ||||
$1,990 | $10 | $20 | |||
$2,009 | Factored Pipeline | ||||
~ average annual | Sales Excellence | GTM Priorities | |||
decline = 5% | $80 | ||||
Revenue ($ Millions) | $1,910 | New Revenue | |||
Sold to Date | |||||
2019 | 2020 | Revenue Range | |||
Revenue | Baseline | $2,000 -to- $2,040 | |||
Revenue |
Summary
ONE
Focused to Drive
Organic Growth
Fantastic Sales Momentum
Everyone Sells! Sales Culture is in Place
Pipeline is up 15% QTD
Cross-Selling is Happening Now
Sales Strategy and Tools are in Place
Top Talent has Arrived
Growth Right Here, Right Now under One Deluxe!
2020 ANALYST & INVESTOR DAY
Payments
Michael Reed
General Manager, Payments
38
Michael Reed, General Manager, Payments
MY EXPERIENCE
93
Days
39
Before One Deluxe, the Payments Portfolio Was Siloed
Treasury | Digital Payments | Payroll | Fraud and Security | ||||||
Management | |||||||||
Integrated Receivables | eCheck | Payroll Services | Check Fraud Protection | ||||||
Remote Deposit Capture | eDeposit | Tracking and Onboarding | Identity Theft Protection | ||||||
Payment Processing | Print and Mail | Time and Attendance | New Account Screening | ||||||
Treasury Onboarding | HR Tools | ||||||||
Advisory Services | Benefits and Administration | ||||||||
Payment Acceptance |
…with a Leading Market Share
65% | 100% | 70 | 50+ |
of all Lockbox Transactions | of Federal Reserve | of the Top 100 Financial | of Fortune 500 Companies |
Payment Exceptions | Institutions |
40
As an Integrated Business, We Offer Comprehensive Payment Technology
Security and protection
Fraud Protection
Identity Protection
New Account Screening
Cash management solutions for small businesses
Merchant Services
Remote Deposit Capture
Payroll and Employee Lifecycle Tools
$8.6 billion in payroll processed2
Receiving
Payments
Deluxe
Payments
Cash | Fraud prevention |
Mgmt for | security protection |
Small | Making |
Business | |
Payments | |
Receivables as a Service (RaaS)
Aggregate all payments in an integrated hub to automate cash application through artificial intelligence
$2.8 trillion in transactions1
Faster, smarter payments
Convert conventional payment methods into digital payment choice for businesses and consumers
$12.9 billion in digital payment volume
41
1 Includes processed directly in outsourced model and indirectly through partners | 2 Includes USD and CAD
Two Key Customer Focus Areas Within Payments
Enterprise Customers | Small Business Market | |
Digital and analytics-based | Cash management solutions | |
services to meet receivables and | for small businesses, include | |
payables needs of enterprise | incoming and outgoing | |
customers and financial | payments, along with paying | |
institutions | your employees. |
42
Multiple Payment Methods Require Separate, Manual Processes to Integrate Receivables
Payments from different payment | Separate payment files manually | Individual payment files are | |||||||||||
integrated and consolidated using | |||||||||||||
sources come in separately. | entered or uploaded by internal staff. | ||||||||||||
additional BI tools. | |||||||||||||
77% ($88B) of receivables management expense tied in people performing manual processes
Receivables as a Service Intelligently Matches All Payment Options into a Single Dashboard
Receive payments of any type from any source. All payment options are available for integration.
Automate cash application using Artificial Intelligence. Match remittances to open receivables in sub-seconds.
Gain integrated insights and visibility from a single portal to help make real- time business decisions.
With automation and intelligent matching, the system learns how to apply payments
Improving Receivables Management and Cash Application With Artificial Intelligence
We Help Businesses Pay and Get Paid
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Payroll Digital
Solutions Payments
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Merchant
TM
Trademark
Filings
Print Marketing
Retail
Packaging
Data-Driven
Marketing
Processing
Incorporation
Services
Logo
Design
Promotional
Products
Digital Marketing
Remote Deposit
Capture
Enabling Digital Payment Platform Capabilities
Digital payouts for receivers without sender disruption
SENDER | RECEIVER |
AP System | Payment choice |
Debit Credit Check Cash
Deluxe PaymentExchange
AND OTHERS COMING SOON
ACH RTP PayPal P2P
No change to sender's | The switch that routes the payment | Receiver chooses the way |
accounts payable process | and remittance together | they prefer to receive payment |
Provider Payments in Health Insurance
HEALTH PLAN SENDER | Send explanation | PROVIDER |
of payment (EOP) | ||
with the funds | Payment choice |
Virtual Card | ACH | Check |
Deluxe PaymentExchange
Nearly $1B | 40K+ | $20B | 500K |
in 2019 payment volume | Providers paid in | Forecasted to facilitate in | Forecasted providers paid |
network in 2019 | 2020 payment volume | in network in 2020 | |
Property & Casualty Payments in Insurance
P&C INSURANCE COMPANIES PAY CONSUMERS BY CHECK TODAY…
…AND BOTH PARTIES FEEL THE PAIN
Check payment value 2019
$105 BILLION
P&C Insurance Sender:
- Costly disbursement method
- Low claimant (customer) satisfaction
- To switch would require AP changes
- Many one time payments
Claimant Receiver:
- No choice on payment type
- No choice on speed of access to funds
Deluxe Payment Exchange
Power of payment choice backed by security, speed and functionality
Source: CAQH Index, pymnts.com, internal research
Key Takeaways
To support sales-driven growth, we will:
- Leverage the company's assets
- Implement an agile delivery model
- Remain laser-focused on innovation that matters
We will focus on growth and innovation in the following areas:
- Receivables as a Service (RaaS)
- Cash management solutions for small business
- Digital payments
52
2020 ANALYST & INVESTOR DAY
Cloud Solutions
Garry Capers
General Manager,
Cloud Solutions
© 2020 Deluxe Enterprise Operations, | 54 |
Garry Capers, General Manager, Cloud Solutions
MY EXPERIENCE
148
Days
55
Business Lifecycle
START YOUR
BUSINESS
Checks &
Forms
Licenses
and IDs
Merchant
Processing
Incorporation
Services
BRAND YOUR
BUSINESS
Website &
Hosting
TM
Trademark
Filings
Logo
Design
GROW YOUR
BUSINESS
Retail
Packaging
Marketing
Promotional
Products
Digital
Marketing
OPTIMIZE YOUR
BUSINESS
Payroll
Solution ePayments
Data-Driven
Marketing
Remote Deposit
Capture
Web Hosting
Data & Analytics
Cloud helps businesses across the business lifecycle
SaaS Solutions
56
Cloud SaaS Solutions
DIY and DIFM models for customers of all sizes and sophistication
~$35B
Market Size*
+5-10%
Market Growth*
CUSTOMER PROFILES
SMBs
Increasing use of digital marketing; typically remain loyal to service providers
FIs
Increasing adoption of data, analytics and tools to manage business operations
OFFERINGS
- MyCorporation
- Logo / Web Design
- Digital Marketing
- Bankers Dashboard
*US provider revenue | 57 |
Cloud Web Hosting Solutions
Online commerce driving demand for online presence
~$30B
Market Size*
+5-10%
Market Growth*
CUSTOMER PROFILES
SMBs
Seeking to move to public cloud and need provider for infrastructure operations
Web developers and Internet providers
Offering greater functionality to their customers
OFFERINGS
- Shared Hosting Services
- Managed / Cloud Services
- Colocation Services
*US provider revenue | 58 |
Cloud Data-Driven Marketing Solutions
Trusted provider of full-service,omni-channel for B2B and B2C
~$19B
Market Size*
+5%
Market Growth*
CUSTOMER PROFILES
FIs
Shifting spend to digital marketing, increasing focus on B2B marketing
Enterprises
Willing to test new data sources for incremental improvement
OFFERINGS
- Datamyx
- Deluxe Marketing Solutions
- Deluxe Performance Management
- FMCG Direct
*US provider revenue | 59 |
Business Accelerator Concept
60
Business Accelerator Prototype
FEATURES
- Behavioral profile of entrepreneur drives tailored experience
- Step-by-stepguidance on where to focus to build startup
- Educational content and community
- Artificial intelligence chatbot provides instant access to deep expertise
1 | 2 |
3 | 4 |
61
Cloud Solutions Differentiators
Deluxe Powers BILLIONS of Data
Events Every Month
6M | 4M | |||
Check & | Transactions | |||
print client | processed | |||
1B | 1.5M | |||
Emails sent | Hosted websites |
CUSTOMERS ARE OUR CURRENCY
Base with more than 4.5M SMBs and 4K FIs: Attracts potential partners, source of valuable data
DATA ARE THE NEW OIL
Directly observed and measured data and insights: Includes purchase history, online activity, online and offline contact info, etc.
DELUXE OFFERINGS GENERATE DIGITAL DATA
62
Cloud Solutions Go-To-Market Strategy
SMBs
OPPORTUNITY
Embed into more ecosystems through which customers procure technology and services
- Telesales
- Online / Digital
- Technology, Service Provider Channel Partners
FIs & ENTERPRISES
- Field Sales
- Technology, Service Provider Channel Partners
63
Cloud Solutions Has Promising Opportunities For Growth
Use data/insights to | Grow | Enhance offerings, |
generate new business | interactions/transactions to | increase stickiness |
value (product, targeting, | enrich customer data and | |
efficiencies) | generate insights |
Execute with speed, | Invest in sales & channel |
efficiency, and ownership | expansion to grow |
mindset | share of wallet, improve |
retention, and expand into | |
new segments |
64
Cloud Solutions Digital Data Use Case #1
Web Hosting Data (Email Marketing)
RTE EXPERIENCE
Day 6: Customer hasn't logged in
Don't wait to get online!
Day 14: Customer didn't upload a logo
We offer personal logos
Day 60: Site traffic is low
Online marketing offer
AUTOMATED TRIGGER-BASED MARKETING
3-month performance across 3 periods
Logged into Portal | 40.2% | IMPROVEMENT | |||||
18.9% | 112% | ||||||
Accessed Websites | 20.9% | 152% | |||||
11.5% | |||||||
Published via OPB | 11.0% | 814% | |||||
1.2% | |||||||
Cancelled (avg mthly) | 1.0% | (47%) | |||||
2.0% | |||||||
RTE-Activated | Control Group | ||||||
RTE increased activity and purchases, while reducing churn!
65
Cloud Solutions Digital Data Use Case #2
Web Hosting Data (Email Marketing)
DIGITAL IDENTITIES
A 2.2M record list was sold to a B2B marketing data aggregator:
» Nearly one-thirdof email addresses and 15% of
URLs were new additions to its file
» Remaining data were used to match and validate its
records
Digital data increases the marketable universe
66
2020 Analyst
- Investor Day
February 25, 2020
© 2020 Deluxe Enterprise
2020 Analyst
- Investor Day
February 25, 2020
© 2020 Deluxe Enterprise
2020 Analyst
- Investor Day
February 25, 2020
© 2020 Deluxe Enterprise
2020 Analyst
- Investor Day
February 25, 2020
© 2020 Deluxe Enterprise
2020 ANALYST & INVESTOR DAY
Promotional Solutions
Tom Riccio
General Manager, Promotional Solutions
© 2020 Deluxe Enterprise Operations,
Tom Riccio, General Manager, Promotional Solutions
MY EXPERIENCE
148
Days
Business Lifecycle
START YOUR
BUSINESS
Checks Forms
BRAND YOUR
BUSINESS
Website &
Hosting
GROW YOUR
BUSINESS
OPTIMIZE YOUR
BUSINESS
Payroll Digital
Solutions Payments
Licenses
and IDs
TM
Trademark
Print Marketing
Retail
Packaging
Data-Driven
Marketing
Merchant
Services
Incorporation
Services
Filings
Logo
Design
Promotional
Products
Digital Marketing
Remote Deposit Capture
Payments
Cloud
Promo
Promotional Solutions help companies across the business lifecycle
Checks
Promotional Solutions Overview
- ~$50B market; single digit growth rate
- Highly competitive and fragmented market
- Key underlying trends of digital transformation, technology innovation, and consolidation
- Shift from traditional print to more digital solutions
-
Promotional products were rated as the
#1 most effective advertising channel for calling consumers to action*
Consumers:
80%
Have an immediate reaction when they receive promo from companies they have never heard of
7 in 10
Wish they received promotional products more often
72%
Believe that quality of a product = reputation of a company
- Source: PPAI 2019
Promotional Solutions
$642M in Annual Revenue
Wearables | 5.6% |
Drinkware | 6.3% |
Writing
Travel | 6.6% |
35.8% | |
Technology | 8.4% |
Quality | Broad | Competitive | Outstanding | Fast | Custom | Design | Mailing |
Products | Assortment | Pricing | Service | Turnaround | Quotes | Services | Services |
Vision
Enabling Customers To Use Technology To Easily Build Their Business Brand
Where We Have To Win
Omni-channel retailer of products & B2B Product Distribution
Merchant Mindset | Best-in-Class | GTM Enhancement | Distribution | Tech Production / |
Pricing Capabilities | Optimization | Capacity Optimization | ||
Strategic Enablers
Promotional Customer Touch Points
E-Commerce | Inside Sales | Field Sales/ |
Cross Sell | ||
Distribution | Will Call | Mobile Experience |
Positioned to Win
- Enabling customers to use technology platform to build their brand identities in an easy way
- Bundle solutions (physical & digital) / cross-sell managed services
- Drive transition to digital solutions as customer needs evolve
- Develop platform solutions for both
enterprise (verticals / direct & 1:many) & SMBs
- Optimize tech / production capacity and distribution footprint to drive growth / profitability
- Expansion of vertical, one-to-many platform
solutions (e.g., Deluxe Brand Center)
HealthcareHospitality
Real Estate | Financial |
Deluxe Differentiation
Customized Web Storefronts
Easy for customers to access, personalize and order promotional & marketing materials while keeping control of brand
Deluxe can handle any type of product regardless of where it is manufactured, procured or shipped from
Personalized Reporting
Deluxe's robust analytics and user engagement tools provide an intelligent platform to handle demand generated from our portals
Supply Chain Management
With easy-to-use configuration settings, we can control production and warehouse locations and pick pack; and can determine where orders are in the process and inventory levels at any given time
Current Customer
- ANNUAL SALES
CAGR = 25%+
- Doubled sales in 5 years
- Improved mix from 40% services / 60% product to 75% services / 25% product
2016 | 2017 | 2018 | 2019 | 2020 | |||||
Mktg Printing | Stationery | Platform | Creative SVC | ||||||
Product | Platform & Creative Services |
Key Takeaways
- Opportunity to cross sell Promotional Solutions to nearly 60% of current customers
- Web Storefronts & Reporting Insights are key differentiators
- Investments in our strategic enablers help build a growth business
- "Product-BasedSale" pivoting to "Managed Services" offering to generate recurring revenue streams
2020 ANALYST & INVESTOR DAY
Checks
Tracey Engelhardt
General Manager, Checks
© 2020 Deluxe Enterprise Operations, | 83 |
Tracey Engelhardt, General Manager, Checks
Since 2006, has managed | |
components of Check Business: | |
» Call Centers | |
25 | » Websites |
» Marketing | |
Years | » Sales |
Sizeable Opportunity for Checks
Checks are still the only universally accepted payment method besides cash
2020 REVENUE EST.
$750MM to $760MM
80.8% 80.8%
of all business payments can be checks
Source: PYMNTS/Corcentric Payables Friction 2019
CHANNEL & CUSTOMER
Financial Institutions
Wholesale and Retail
Distributors and Large Retailers
Sell directly to consumers and SMBs
Direct Channel
Sell directly to consumers
Deluxe: The Trusted Check Brand, Then and Now
3.5M
Inbound phone calls
from customers each year
Deluxe invents the checkbook and founds the modern payment system
One Deluxe renews focus on the customer and on organic revenue growth
1915 | 2020 |
Checks Market
Trends
MARKET ASSESSMENT
- 16 billion checks written per year
- Deluxe market share ~40%
- Checks: Integral part of financial operations of SMBs
- 61% of SMBs are "very" or "extremely" satisfied with checks as payment*
*Source: PYMNTS / Mastercard B2B Payments Tipping Point, Sept. 2018
Business Lifecycle
START YOUR
BUSINESS
Checks Forms
BRAND YOUR
BUSINESS
Website &
Hosting
GROW YOUR
BUSINESS
OPTIMIZE YOUR
BUSINESS
Payroll Digital
Solutions Payments
Licenses
and IDs
TM
Trademark
Print Marketing
Retail
Packaging
Data-Driven
Marketing
Merchant
Services
Incorporation
Services
Filings
Logo
Design
Promotional
Products
Digital Marketing
Remote Deposit Capture
Payments
Cloud
Promo
Checks help companies across the business lifecycle
Checks
The One Deluxe
Difference
- Trusted brand that has delivered quality product for over 100 years
- Proprietary data helps FIs better serve SMBs
- Optimized ordering process reduces costs for FIs while helping retain customers
New Eco- and User-Friendly Packaging
"I like that it is more green than the plastic covers"
"The new designed check booklet is great for keeping booklets in numerical order. They are also very handy to store in small places and find when needed. Love it!"
"I love it; it's
easy to use and
store"
Technology
Initiatives
- Partnering with Salesforce to make converting to Deluxe check printing easier for FIs
- Making APIs available to clients to ensure security and ease of ordering from a mobile device
- Working with FIs to transition ordering online
Integrated API and Superior Reporting Platform
Bank XYZ
Deluxe's 'Vaya' reporting solution (platform) is user friendly and gives a great snapshot of program performance. In comparing Deluxe's 'Vaya' against their major competitor's tool, I find 'Vaya' delivers a greater level of detail allowing financial institutions to make 'real- time' program decisions that impact customer satisfaction and program profitability.
- Check Industry Consultant
Checks Remain Relevant
Deluxe Checks typically outperforms the market
Helps customers gain efficiencies by reducing number of vendors
Checks' strong cash flow generation supports higher growth businesses and One Deluxe's capital allocation priorities
Rich pasture to cross-sell other products and services
2020 ANALYST & INVESTOR DAY
Operations
Pete Godich
SVP, Chief of Operations
© 2020 Deluxe Enterprise
Pete Godich, SVP, Chief of Operations
MY EXPERIENCE
Previous roles include: | |
» VP, Customer Care | |
» VP, Sales & Marketing Operations | |
33 | » VP, Manufacturing and Supply Chain |
» SVP, Fulfillment | |
Years | » SVP, Financial Services |
Proven Record of Achieving Greater Efficiencies
CUMULATIVE Savings
$ in millions
2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Customer First
Process | |
Improvement | |
Manufacturing | Client Data |
Operations | |
Engineering | Supply Chain |
Operations/ | |
Warehousing | |
Professional | Remittance |
Services | |
Processing | |
Customer | |
Care |
Customer First
Process | |
Improvement | |
Manufacturing | Client Data |
Operations | |
Engineering | Customers |
Supply Chain | |
Operations/ | |
Warehousing | |
Client | Remittance |
Services | |
Processing | |
Customer | |
Care |
Business Lifecycle
START YOUR
BUSINESS
Checks Forms
BRAND YOUR
BUSINESS
Website &
Hosting
GROW YOUR
BUSINESS
OPTIMIZE YOUR
BUSINESS
Payroll Digital
Solutions Payments
Licenses
and IDs
TM
Trademark
Print Marketing
Retail
Packaging
Data-Driven
Marketing
Merchant
Services
Incorporation
Services
Filings
Logo
Design
Promotional
Products
Digital Marketing
Remote Deposit Capture
Payments
Cloud
Promo
Operations support all our solutions to help companies across their business lifecycle
Checks
Key Focus Areas for Operations
- Technology Platforms:
- Payment Processing
- Contact Center
- Warehouse Operations
- Evaluation of real estate footprint
- Service excellence program
2020 ANALYST & INVESTOR DAY
Technology
Michael Mathews
SVP, Chief Information Officer
© 2020 Deluxe Enterprise Operations,
Michael Mathews, SVP, Chief Information Officer
MY EXPERIENCE
7
Years
Deluxe: Recognized as a Trusted Company
Deluxe named runner up for | Twin Cities Global CIO of | ||
The Global Transformation of | the Year in 2019 | ||
the Year Award in 2018 | |||
IT Serves our Customers, CRO and General Managers
Innovate and | Run, Protect & | |||
Transform | Enable The Business | |||
Customers
Deliver Commitments | Integrate and |
with Quality | Optimize |
Key Takeaways
- Delivering best-in-class technology to enable organic growth
- Innovating and creating new solutions and services for our customers
- Technology is at the core of everything we do and is instrumental to our future
One Deluxe is a Fintech company
Business Lifecycle
START YOUR
BUSINESS
Checks Forms
BRAND YOUR
BUSINESS
Website &
Hosting
GROW YOUR
BUSINESS
OPTIMIZE YOUR
BUSINESS
Payroll Digital
Solutions Payments
Licenses
and IDs
TM
Trademark
Print Marketing
Retail
Packaging
Data-Driven
Marketing
Merchant
Services
Incorporation
Services
Filings
Logo
Design
Promotional
Products
Digital Marketing
Remote Deposit Capture
Payments
Cloud
Promo
One Deluxe helps companies across the business lifecycle
Checks
The One Deluxe Transformation
109
Enabling an Integrated Look to Drive Greater
Productivity and Revenue
"Collaboration | "People | "Execution | "Financial | "Data | "Planning | |||||||
Culture | ||||||||||||
Engine" | Engine" | Engine" | Engine" | Engine" | Engine" | |||||||
Product | HCM | Customer | ERP | Enterprise | Planning | |||||||
Communication | ||||||||||||
Experience | ||||||||||||
Platform | Data Platform | |||||||||||
Efficiency | Platform | Platform | Platform | Platform | ||||||||
Integration | Platform | |||||||||||
Sales | ||||||||||||
Deluxe's Proprietary Technology Solutions Handling Massive Data Volume
Technology is at the core of everything we do
$2.8 Trillion in transactions flow through Deluxe's check and payment platforms
The Federal Reserve's reconciliation is done using our adjudication software
and is instrumental to our future
Lockbox platform processes 570M transactions annually, data platforms process and refresh 1B+ credit bureau records each month
eCheck platform embedded in Quickbooks and OrderPro embedded in Salesforce App exchange, both API enabled
Key Takeaways
- Delivering best-in-class technology to enable organic growth
- Innovating and creating new solutions and services for our customers
- Technology is at the core of everything we do and is instrumental to our future
2020 ANALYST & INVESTOR DAY
Financials
Keith Bush
SVP, Chief Financial Officer
© 2020 Deluxe Corporation. Proprietary and Confidential.
Keith Bush, SVP, Chief Financial Officer
MY EXPERIENCE
3
Years
115
Record Revenue in 2019
2019 HIGHLIGHTS | DEEPER DIVE |
» Revenue >$2.0B, all time record | » Cloud Computing Arrangements |
» Last 120 days 3 of top 10 wins in decade | » Margins and Capital Allocation |
- Returned $170M to shareholders; invested in transformation; and paid down debt
- Delivered adjusted diluted EPS of $6.82
- Introduced new Deluxe at Dreamforce with main stage presence
- Please Note: 2019 segmented financials are unaudited
116
Changes to New Day Investment Accounting - CCA
NEW DAY INVESTMENTS ACCOUNTING TREATMENT
Accounting Change | Pre CCA | CCA Adopted 1/1/2020 |
2019 | 2020E | |
Total Costs During Implementation | 30 | 70 |
Recognized as Expense | 30 | 20 |
Capitalized Set-Up | - | 50 |
Ongoing Operating Expense of SaaS Platforms under New CCA | ||
Subscription | 8 | |
Amortization of Set-Up | 2 | |
Total SaaS Operating Expense | 10 | |
117
Sales-Driven,Product-Focused, Efficient Enterprise Model
ADJUSTED EBITDA MARGIN 2019-2023E
118
Sales-Driven,Product-Focused,
Efficient Enterprise Model
CAPITAL ALLOCATION 2015-2020E and Beyond
Dollars in Millions
276 | Capital | ||
253 | Expenditures | ||
46 | 62 | Acquisitions | |
208 | 214 | 78 | 70 | 75-100 |
67 | 70 | |||
11 | ||||
2015-2017 | 2018 | 2019 | 2020E | Beyond 2020E |
(Average) |
119
High Revenue Businesses with Attractive Adjusted EBITDA Margins
FY 2019*
Segment
DLX Total
Payments
Cloud
Promotional
Checks
Segment
Corporate
Revenue | Adj. EBITDA | Adj. EBITDA |
($ millions) | ($ millions) | Margin % |
2,009 | 481 | 23.9 |
270 | 74 | 27.5 |
318 | 82 | 25.9 |
641 | 100 | 15.6 |
780 | 399 | 51.2 |
Cost | % of Revenue |
($ millions) | |
175 | 8.7 |
* Please Note: 2019 segmented financials are unaudited
120
Expect 2020 Total Revenue of $2.00 to $2.04 Billion
Q1 2020E
Revenue | Adj. EBITDA | |
($ millions) | ($ millions) | |
DLX Total | 490 to 505 | 85 to 95 |
Midpoint | ||
Revenue | Adj. EBITDA Margin | |
$500M | 18% | |
FY 2020E
Revenue | Adj. EBITDA | |
($ millions) | ($ millions) | |
DLX Total | 2,000 to 2,040 | 410 to 435 |
Midpoint
Revenue | Adj. EBITDA Margin | |||
$2,020M | 21% | |||
FY 2020E | Revenue | Adj. EBITDA | ||
Segment | ($ millions) | ($ millions) | ||
Payments | $316 to 322 | High-Teens | ||
to Low 20s | ||||
Cloud | $302 to 312 | Low-to-Mid 20s | ||
Promotional | $632 to 646 | Mid-Teens | ||
Checks | $750 to 760 | Mid-to-High 40s | ||
121
Expect 2023 Total Revenue of $2.3 Billion with Adjusted EBITDA Margins in Low-to-Mid 20s
Revenue Mix + Margin Expansion Will Drive Growth:
- Projected growth in revenue across Payments, Cloud, and Promotional segments (with Payments nearly doubling in size)
- Increases in both adjusted EBITDA dollars and margin
- Check continue to be smaller portion of overall revenue
REVENUE | ADJUSTED | ||||||||||
REVENUE MIX | CAGR | EBITDA MARGIN | |||||||||
13% | 16% | Upper- | Mid-to-High | ||||||||
Teens to | 20s | ||||||||||
16% | 15% | Mid-20s | |||||||||
Mid-Single | Low-to-Mid | ||||||||||
Digits | 20s | ||||||||||
32% | 32% | Low-Single | Mid-to-High | ||||||||
Digits | Teens | ||||||||||
39% | 37% | Contract | Mid-40s | ||||||||
Mid-Single | |||||||||||
Digits | |||||||||||
2019* | 2020E | 2020E - 2023E | 2023E | ||||||||
Check | Promotional | ||||||||||
Cloud | Payments | ||||||||||
* Please Note: 2019 segmented financials are unaudited | 122 |
Consolidate Corporate Cost Center and Implement Common Processes to Enable Efficiency and Drive Scale
FY 2019* | FY 2020 Guidance | FY 2023E |
% of | 8.7% | 7.5% | 8.5% | 9.5% | Mid-single | |
Revenue | MIDPOINT | digits | ||||
Efficiency to be achieved | Real Estate | Technology | Sourcing | ||||
Infrastructure | |||||||
by eliminating redundancy | |||||||
and improving processes | |||||||
in three areas: | |||||||
* Please Note: 2019 segmented financials are unaudited
123
Path to Success
- Each segment produces 100s of millions of dollars in revenue…with healthy margins
- Payments, Cloud & Promotions to produce scalable revenue and profit expansion
- Large customer base = low cost to acquire quality revenue growth
- Growth segments positioned to outpace decline of checks
- Change in capital allocation driving opportunity to ignite transformation and create scalable platforms
- Value capture will fuel reinvestment to drive growth + margin expansion
124
New Deluxe: Positioned for Success and
Already Delivering Results
STRONG FINANCIAL | POSITIONED FOR | ALREADY DELIVERING |
HEALTH | SUCCESS | RESULTS |
- Attractive quarterly dividend
- Bought back $320M of equity in past 2 years
- Self-fundingour initiatives
- Paid down debt in 2019
- Prospects in clear growth markets
- High growth businesses with financial stability and benefits of more mature, dividend-paying company
- Transformation well on its way
- Right strategy and right team to deliver
- Demonstrated momentum and trajectory consistent with our commitments
125
2020 ANALYST & INVESTOR DAY
One
Deluxe
Barry McCarthy
President and Chief Executive Officer
The New Deluxe: A Company of Products
Payments
Growth Area
Treasury Management Solutions
- Lockbox
- Remote Deposit Capture
- Integrated Receivables
- Payment Acceptance
Payroll
Disbursements
- Disbursements & eChecks
- Fraud/Security
Cloud Solutions
Growth Area
Hosted Solutions
- Digital Engagement
- Logo Design
- FI Profitability Reporting
- Account Switching Tools
- Incorporation Services
Web Hosting
- Digital Engagement
- Logo Design
Data-driven Marketing Other
Promotional Solutions | Checks | |||
Potential Growth Area | Value Area | |||
» | Business Forms | » | Printed Checks | |
» | Accessories | » | Other |
- Advertising Specialties
- Promotional Apparel
- Retail Packaging
- Deluxe Strategic Sourcing
- Other
Business Lifecycle
START YOUR
BUSINESS
Checks Forms
BRAND YOUR
BUSINESS
Website &
Hosting
GROW YOUR
BUSINESS
OPTIMIZE YOUR
BUSINESS
Payroll Digital
Solutions Payments
Licenses
and IDs
TM
Trademark
Print Marketing
Retail
Packaging
Data-Driven
Marketing
Merchant
Services
Incorporation
Services
Filings
Logo
Design
Promotional
Products
Digital Marketing
Remote Deposit Capture
Payments
Cloud
One Deluxe helps companies across the business lifecycle
Promo
Checks
Deluxe's Key Differentiators
TRUSTED BRAND AND EXISTING RELATIONSHIPS
UNPARALLELED REACH AND SCALE
INCREDIBLE CUSTOMER BASE
4,000 ~4.5M ~4M
Financial Institutions | SMBs | Consumers |
CRO Creation and Transformation
Accelerated customer education
Established go-to-market strategy
Built experienced sales team
Implemented "Everyone Sells" program to over 6,000 employees
Payments
Solutions enable customers to make payments to any payee, including employees
Simplify payor processes | Give payee control over | $2.8 Trillion in transactions |
through Deluxe's check and | ||
and reduce costs | how they are paid | |
payment platforms | ||
With automation and intelligent matching, the system learns how to apply payments
Cloud Solutions
Using AI and proprietary data to offer differentiated SaaS applications
~$35B
Market Size*
+5-10%
Market Growth*
CUSTOMER PROFILES
SMBs
Increasing use of digital marketing; typically remain loyal to service providers
FIs
Increasing adoption of data, analytics and tools to manage business operations
OFFERINGS
- MyCorporation
- Logo / Web Design
- Digital Marketing
- Bankers Dashboard
*US provider revenue
Promotional Solutions
Investments in our strategic enablers help build a growth business
Own the process from | Deliver a best-in-class | Understand our |
start to finish | pricing experience | customers |
Enhance our world | Maximize our capacity |
class supply chain | |
Checks
Retaining existing customers while transitioning to technology-based payment offerings
Checks' strong cash flow generation supports higher growth businesses and One Deluxe's capital allocation priorities
Rich pasture to cross-sellother products and services
Time is Now: Exceptional Opportunity For One Deluxe
Q&A
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© 2020 Deluxe Enterprise Operations,
2020 Analyst
- Investor Day
February 25, 2020
© 2020 Deluxe Enterprise
2020 Analyst
- Investor Day
February 25, 2020
© 2020 Deluxe Enterprise
2020 Analyst
- Investor Day
February 25, 2020
© 2020 Deluxe Enterprise
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Deluxe Corporation published this content on 25 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 February 2020 16:50:21 UTC
