Deluxe Corporation (NYSE:DLX) Q2 2023 Earnings Call Transcript

Marc Riddick: Excellent. I wondered if you talk a little bit about now that we have a little more time and a little more distance from going live with the ERP. I was wondering if you could talk about maybe some additional learnings benefits or some things that maybe that you’ve gleaned from the last time so.

Barry McCarthy: So I’ll just remind that at the — we started the ERP program because we had systems that really needed to be modernized. They were quite integrated. But that is all now behind us, and it gives us the opportunity to do more things around efficiency, gives us better insight into what’s happening in our business and it also allows us to streamline, not just our technology platforms but gives us opportunity to dig deeper into our — what our retail prices are, what our costing is, what happens in our supply chain. It really opens the door for us to consider multiple facets that we had a hard time getting deepen a visibility into. And we’re pleased that we’re going to see that visibility and starting to take action on that. We think that will continue to yield results over time. Do you want to add on that?

Chip Zint: Marc, I would just say we can’t underscore just how hard the team worked on this. We have to continue to thank the team for all the work and effort they put into it. It’s been a very busy first half of the year, getting stable and live, and we feel great about where we are. We’re not in the place anymore where it’s about keeping up with production and being able to fulfill orders. We still have a little bit of work to do to fix every single aspect of the end-to-end customer experience, whether that’s billing or how we internally report things back to the dealer reseller side. We still have a little bit of work to do, but these are small immaterial things in the grand scheme of the company but important to our customer base.

And we’ll continue to focus on that where you’re going to see us focus on is the process underneath. So whether that’s the order management systems that are on the front end of the ERP, all the way through to how we process things through the system, we can now go do process-related work, which doesn’t take a heavy technology investment just takes resources and capacity, and we think we can unlock a lot of operational improvements from working on processes. And so that’s where we’re going to turn our focus here in the second half of the year.

Marc Riddick: Excellent. And the last one for me is that, I guess, SG&A as a percentage of revenue for the quarter, at least relative to where my numbers were, was certainly better than what we were expecting. I just wanted to talk a little bit about various cost measures, cost controls, anything in that nature that you saw there and how that plays into the full year guidance?

Chip Zint: Yes. So I can’t speak exactly to what you had in your model. But just in general, we feel good about the work we’ve been doing. So year-over-year, SG&A is favorable about $4 million, which obviously, with revenue growth shows operating leverage and what we’re doing. And there’s no real specific one call out of what’s driving that. That’s just general cost improvements and focus across the enterprise to take costs out where we can and continue to deliver both the revenue and organic adjusted EBITDA growth.

Operator: We have a follow-up question from the line of Lance Vitanza.

Lance Vitanza: Just wondering — and I know you sort of — you addressed this in terms of talking about the nonrecurring EBITDA in the quarter. But I’m just wondering the cash flow guidance being unchanged. I’m wondering if there’s anything else there as we think about cash flow generation in the back half anything unusual that we might expect, whether it was on the working capital changes in the current quarter or in the first half that won’t recur in the second half or perhaps some onetime items that will negatively impact cash flow in the second half, anything there that we can be thinking about?