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

Chip Zint: Yes. Great question, Lance. Thank you. So first of all, we’re very pleased with the second quarter free cash flow result. As I said, we’re still a little behind our plan on a year-to-date basis. But having been negative in the first quarter and to deliver nearly a positive number to offset, it was a great start. And so we got there through obviously higher earnings, improvement in working capital. And there’s a few items that occur in the first quarter of the year that don’t repeat another period. And so if you think about the second half versus the first half, you’re going to see a continuation of both those things. We do expect CapEx to be lighter in the second half. Those site consolidation efforts and the things around real estate we mentioned, those projects were more front loaded for the year.

So that, plus the sale of the Web hosting business, give us some tailwinds on CapEx second half of the year. Taxes have a bit of a seasonal portion to them, so they’ll be lower in the second half of the year. We have annual incentive payments that occur in the first quarter that obviously don’t repeat in the second half of the year. And then beyond that, it’s really going to be a focus on working capital. It doesn’t take Herculean efforts of working capital in the second half to deliver our guide, but we continue to focus on all aspects of that, whether that’s now that we’re live on ERP or through all the supply chain challenges last year, continuing to work down our inventory balances and continue to be better about collections and management of our DSO.

And so if you really think about it, to deliver the midpoint of our range for the full year, that’s a very impressive second half, and it’s the second half we have confidence in, and we look forward to delivering.

Operator: At this time, there are no further questions. I will now hand the call back over to Brian Anderson for any closing remarks.

Brian Anderson: Thanks, Tamika. Before we conclude, I’d like to mention that management will be participating in CL King’s 21st Annual Best Ideas Conference on September 18 and the Sidoti Virtual Small CAP Conference on September 20. Thank you again for joining us today, and we look forward to speaking with you in November as we share our Third Quarter 2023 Results.

Operator: This concludes today’s call. Thank you for joining. You may now disconnect your lines.