Deluxe Corporation (NYSE:DLX) Q4 2022 Earnings Call Transcript

Lance Vitanza: Hey, thanks guys. Just two quick follow-ups that I forgot about. The first is on the proceeds from the web hosting sale. I know that there’s about $10 million or so in the 8-K that sort of deferred, I think, over a 6 to 12-month period from the time you close it. And I’m just wondering, are there — is that like an earn out, are there any sort of performance-related contingencies there that we should be aware of? And then my second question is just with respect to the payments business. I’m wondering if you could kind of step back and walk me through the margin outlook in 2023 and I apologize, I think you mentioned that you had some opportunities there, but if you could recap that for me, that would be great? Thank you.

Chip Zint: This is Chip, I’ll take both of those. So, on the sale of the web hosting business. So we announced a base sales price of $42 million in our 8-K the other day. $32 million of that is kind of a payment to occur at time of closing with the other $10 million 180 days later and 360 days later, I believe, neither of those 10 million are contingency-based. There is up to another $10 million, which could take the total sale price up to a max of 52. Those are contingency base subject to performance obligations. And so look at the sale price as a range of 42 to 52. The 42, it will happen, and it has the second and third payment which is just a timing factor as the business transitions over. The question about payments, you’re right, we did talk about that a bit.

So, we are forecasting EBITDA margin rates in the low to mid-20s. But I think what I said is if you look at the last few quarters, you’re starting to see that business realize operating leverage, margins are expanding. That’s a function of the volume growth. We like that business because as volume grows, it can come at an incremental margin rate because of the way the platform business work. We were — we’ve got operational efficiency in our treasury management business, specifically lockbox, that’s improving profitability there. And then, of course, as we continue to take price to keep up with inflation, that’s helping as well. So all things equal, this is a business that we believe will expand margins nicely in 2023.

Lance Vitanza: Thank you so much.

Operator: And there are no further questions at this time. Mr. Tom Morabito, I turn the call back over to you for some closing remarks.

Thomas Morabito: Thanks, Rob. Before we conclude, I’d like to mention that management will be participating in the Truist Securities Technology, Internet & Services Conference on March 7, 2023, and the Sidoti Virtual Small Cap Conference on March 22nd. Thank you again for joining us today, and we look forward to speaking with you in May as we share our first quarter 2023 results.

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