DELUXE CORP [DLX] Filings

10-Q 1 dlx-20240630.htm DELUXE CORPORATION 10-Q 06.30.2024 dlx-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission file number: 1-7945

DELUXE CORPORATION

(Exact name of registrant as specified in its charter)


MN									41-0216800
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)
801 S. Marquette Ave., Minneapolis, MN									55402-2807
(Address of principal executive offices)									(Zip Code)

(651) 483-7111

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	DLX	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

The number of shares outstanding of registrant’s common stock as of July 24, 2024 was 44,211,138.


PART I – FINANCIAL INFORMATION


Item 1. FINANCIAL STATEMENTS


DELUXE CORPORATION CONSOLIDATED BALANCE SHEETS (unaudited)


(in thousands, except share par value)	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents, including securities carried at fair value of $22,000 as of December 31, 2023	$	23,077	$	71,962
Trade accounts receivable, net of allowance for credit losses	175,170		191,005
Inventories and supplies, net of reserve	38,028		42,088
Funds held for customers	50,937		383,134
Prepaid expenses	38,332		30,116
Revenue in excess of billings	30,964		26,107
Other current assets	34,865		16,576
Total current assets	391,373		760,988
Deferred income taxes	8,129		8,694
Long-term investments	62,281		61,924
Property, plant and equipment, net of accumulated depreciation of $344,856 and $334,101, respectively	112,393		116,539
Operating lease assets	52,428		58,961
Intangibles, net of accumulated amortization of $752,687 and $775,190, respectively	357,815		391,744
Goodwill	1,430,542		1,430,590
Other non-current assets	251,345		251,182
Total assets	$	2,666,306	$	3,080,622
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	160,235	$	154,863
Funds held for customers	51,870		386,622
Accrued liabilities	149,145		191,427
Current portion of long-term debt	43,124		86,153
Total current liabilities	404,374		819,065
Long-term debt	1,514,852		1,506,698
Operating lease liabilities	52,048		58,840
Deferred income taxes	12,487		22,649
Other non-current liabilities	62,069		68,754
Commitments and contingencies (Note 13)
Shareholders' equity:
Common shares $1 par value (authorized: 500,000 shares; outstanding: June 30, 2024 – 44,210; December 31, 2023 – 43,743)	44,210		43,743
Additional paid-in capital	106,466		99,141
Retained earnings	495,113		491,238
Accumulated other comprehensive loss	(25,900)		(30,028)
Non-controlling interest	587		522
Total shareholders’ equity	620,476		604,616
Total liabilities and shareholders’ equity	$	2,666,306	$	3,080,622

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)


	Quarter Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2024		2023		2024		2023
Product revenue	$	309,225	$	323,805	$	609,536	$	634,031
Service revenue	228,591		247,881		463,234		483,020
Total revenue	537,816		571,686		1,072,770		1,117,051
Cost of products	(115,170)		(125,453)		(229,505)		(243,888)
Cost of services	(133,856)		(144,494)		(270,938)		(276,721)
Total cost of revenue	(249,026)		(269,947)		(500,443)		(520,609)
Gross profit	288,790		301,739		572,327		596,442
Selling, general and administrative expense	(233,818)		(245,359)		(467,911)		(492,989)
Restructuring and integration expense	(11,064)		(24,191)		(24,868)		(37,132)
Gain on sale of businesses and long-lived assets	15,401		21,942		23,982		21,942
Operating income	59,309		54,131		103,530		88,263
Interest expense	(30,197)		(31,932)		(61,006)		(61,948)
Other income, net	1,786		824		4,726		3,247
Income before income taxes	30,898		23,023		47,250		29,562
Income tax provision	(10,401)		(6,622)		(15,923)		(10,381)
Net income	20,497		16,401		31,327		19,181
Net income attributable to non-controlling interest	(38)		(26)		(65)		(54)
Net income attributable to Deluxe	$	20,459	$	16,375	$	31,262	$	19,127
Total comprehensive income	$	20,434	$	25,517	$	35,455	$	25,554
Comprehensive income attributable to Deluxe	20,396		25,491		35,390		25,500
Basic earnings per share	0.46		0.38		0.71		0.44
Diluted earnings per share	0.46		0.37		0.70		0.44

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)


(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, March 31, 2024	44,046	$	44,046	$	101,317	$	488,317	$	(25,837)	$	549	$	608,392
Net income	—	—		—		20,459		—		38		20,497
Cash dividends ($0.30 per share)	—	—		—		(13,663)		—		—		(13,663)
Common shares issued, net of tax withholding	164	164		146		—		—		—		310
Employee share-based compensation	—	—		5,003		—		—		—		5,003
Other comprehensive loss	—	—		—		—		(63)		—		(63)
Balance, June 30, 2024	44,210	$	44,210	$	106,466	$	495,113	$	(25,900)	$	587	$	620,476


(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, March 31, 2023	43,421	$	43,421	$	83,800	$	507,992	$	(40,007)	$	443	$	595,649
Net income	—	—		—		16,375		—		26		16,401
Cash dividends ($0.30 per share)	—	—		—		(13,309)		—		—		(13,309)
Common shares issued, net of tax withholding	192	192		197		—		—		—		389
Employee share-based compensation	—	—		5,383		—		—		—		5,383
Other comprehensive income	—	—		—		—		9,116		—		9,116
Balance, June 30, 2023	43,613	$	43,613	$	89,380	$	511,058	$	(30,891)	$	469	$	613,629

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued) (unaudited)


(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, December 31, 2023	43,743	$	43,743	$	99,141	$	491,238	$	(30,028)	$	522	$	604,616
Net income	—	—		—		31,262		—		65		31,327
Cash dividends ($0.60 per share)	—	—		—		(27,387)		—		—		(27,387)
Common shares issued, net of tax withholding	467	467		(2,846)		—		—		—		(2,379)
Employee share-based compensation	—	—		10,171		—		—		—		10,171
Other comprehensive income	—	—		—		—		4,128		—		4,128
Balance, June 30, 2024	44,210	$	44,210	$	106,466	$	495,113	$	(25,900)	$	587	$	620,476


(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, December 31, 2022	43,204	$	43,204	$	79,234	$	518,635	$	(37,264)	$	415	$	604,224
Net income	—	—		—		19,127		—		54		19,181
Cash dividends ($0.60 per share)	—	—		—		(26,704)		—		—		(26,704)
Common shares issued, net of tax withholding	409	409		(1,113)		—		—		—		(704)
Employee share-based compensation	—	—		11,259		—		—		—		11,259
Other comprehensive income	—	—		—		—		6,373		—		6,373
Balance, June 30, 2023	43,613	$	43,613	$	89,380	$	511,058	$	(30,891)	$	469	$	613,629

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


	Six Months Ended June 30,
(in thousands)	2024		2023
Cash flows from operating activities:
Net income	$	31,327	$	19,181
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	10,375		11,052
Amortization of intangibles	73,064		75,076
Amortization of prepaid product discounts	16,354		17,173
Employee share-based compensation expense	10,130		11,350
Operating lease expense	9,279		10,522
Amortization of cloud computing arrangement implementation costs	8,247		7,470
Gain on sale of businesses and long-lived assets	(23,982)		(21,942)
Deferred income taxes	(11,887)		(9,489)
Other non-cash items, net	21,871		14,136
Changes in assets and liabilities:
Trade accounts receivable	6,682		(9,889)
Inventories and supplies	2,029		(4,609)
Payments for cloud computing arrangement implementation costs	(75)		(5,846)
Other current and non-current assets	(27,018)		4,660
Accounts payable	8,059		21,134
Prepaid product discount payments	(14,497)		(12,742)
Other accrued and non-current liabilities	(53,736)		(79,900)
Net cash provided by operating activities	66,222		47,337
Cash flows from investing activities:
Purchases of capital assets	(48,626)		(55,904)
Proceeds from sale of businesses and long-lived assets	4,738		27,880
Other	(50)		(9,878)
Net cash used by investing activities	(43,938)		(37,902)
Cash flows from financing activities:
Proceeds from issuing long-term debt and swingline loans, net of debt issuance costs	466,937		437,500
Payments on long-term debt and swingline loans	(504,306)		(416,376)
Net change in customer funds obligations	(328,376)		(149,336)
Cash dividends paid to shareholders	(27,469)		(26,852)
Other	(5,395)		(5,656)
Net cash used by financing activities	(398,609)		(160,720)
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents	(3,704)		3,063
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	(380,029)		(148,222)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year	458,033		337,415
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period (Note 3)	$	78,004	$	189,193

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 1: CONSOLIDATED FINANCIAL STATEMENTS

The consolidated balance sheet as of June 30, 2024, the consolidated statements of comprehensive income for the quarters and six months ended June 30, 2024 and 2023, the consolidated statements of shareholders’ equity for the quarters and six months ended June 30, 2024 and 2023 and the consolidated statements of cash flows for the six months ended June 30, 2024 and 2023 are unaudited. The consolidated balance sheet as of December 31, 2023 was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles ("GAAP"). In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial statements are included. Adjustments consist only of normal recurring items, except for any items discussed in the notes below. Interim results are not necessarily indicative of results for a full year or future results. The consolidated financial statements and notes are presented in accordance with instructions for Form 10-Q and do not contain certain information included in our annual consolidated financial statements and notes. The consolidated financial statements and notes appearing in this report should be read in conjunction with the consolidated audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K").

The preparation of the consolidated financial statements requires us to make certain estimates and assumptions affecting the amounts reported in the consolidated financial statements and related notes. We base our estimates on historical experience and on various other factors and assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of our assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. Actual results may differ significantly from our estimates and assumptions.

During the quarter ended June 30, 2024, we recorded out-of-period correcting adjustments that increased net income attributable to Deluxe by $1,778. These adjustments were not material to any historical interim or annual period.

Comparability – The consolidated statement of cash flows for the six months ended June 30, 2023 has been modified to conform to the current year presentation. Within net cash provided by operating activities, other current and other non-current assets have been combined. In addition, amortization of cloud computing arrangement implementation costs is presented separately. Previously, this amount was included in other non-cash items, net. Within net cash used by financing activities, employee taxes paid for shares withheld is included in other. Previously, this amount was presented separately. The consolidated statements of shareholders' equity for the quarter and six months ended June 30, 2023 have also been modified to conform to the current year presentation. Common shares retired are included in common shares issued, net of tax withholding. Previously, these amounts were presented separately.


NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

ASU No. 2023-07 – In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on the related disclosures within our consolidated financial statements.

ASU No. 2023-09 – In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures, which modifies the required income tax disclosures to include specific categories in the income tax rate reconciliation and to require the disclosure of income tax payments by jurisdiction, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The standard is required to be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on the related disclosures within our consolidated financial statements.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 3: SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION

Trade accounts receivable – Net trade accounts receivable was comprised of the following:


(in thousands)	June 30, 2024		December 31, 2023
Trade accounts receivable – gross	$	184,754	$	197,546
Allowance for credit losses	(9,584)		(6,541)
Trade accounts receivable – net(1)	$	175,170	$	191,005

(1) Includes unbilled receivables of $52,249 as of June 30, 2024 and $43,673 as of December 31, 2023.

Changes in the allowance for credit losses for the six months ended June 30, 2024 and 2023 were as follows:


	Six Months Ended June 30,
(in thousands)	2024		2023
Balance, beginning of year	$	6,541	$	4,182
Bad debt expense	8,980		3,027
Write-offs and other	(5,937)		(1,771)
Balance, end of period	$	9,584	$	5,438

Inventories and supplies – Inventories and supplies were comprised of the following:


(in thousands)	June 30, 2024		December 31, 2023
Finished and semi-finished goods	$	32,138	$	34,194
Raw materials and supplies	17,125		17,339
Reserve for excess and obsolete items	(11,235)		(9,445)
Inventories and supplies, net of reserve	$	38,028	$	42,088

Available-for-sale debt securities – We did not hold any available-for-sale debt securities as of June 30, 2024. Available-for-sale debt securities held as of December 31, 2023 were comprised of the following:


	December 31, 2023
(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash equivalents:
Domestic money market fund	$	22,000	$	—	$	—	$	22,000
Available-for-sale debt securities	$	22,000	$	—	$	—	$	22,000

The domestic money market fund held highly liquid, short-term investments managed by the financial institution. Further information regarding the fair value of available-for-sale debt securities can be found in Note 8.

Revenue in excess of billings – Revenue in excess of billings was comprised of the following:


(in thousands)	June 30, 2024		December 31, 2023
Conditional right to receive consideration	$	20,693	$	20,680
Unconditional right to receive consideration(1)	10,271		5,427
Revenue in excess of billings	$	30,964	$	26,107

(1) Represents revenues that are earned but not currently billable under the related contract terms.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Intangibles – Intangibles were comprised of the following:


	June 30, 2024						December 31, 2023
(in thousands)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Internal-use software	$	577,245	$	(435,266)	$	141,979	$	554,825	$	(412,364)	$	142,461
Customer lists/relationships	346,890		(239,298)		107,592		363,298		(235,557)		127,741
Partner relationships	75,100		(16,050)		59,050		74,911		(14,031)		60,880
Technology-based intangibles	65,700		(25,752)		39,948		97,633		(54,251)		43,382
Trade names	39,367		(31,516)		7,851		39,367		(23,792)		15,575
Software to be sold	6,200		(4,805)		1,395		36,900		(35,195)		1,705
Intangibles	$	1,110,502	$	(752,687)	$	357,815	$	1,166,934	$	(775,190)	$	391,744

Amortization of intangibles was $37,366 for the quarter ended June 30, 2024, $36,859 for the quarter ended June 30, 2023, $73,064 for the six months ended June 30, 2024 and $75,076 for the six months ended June 30, 2023. During the quarter ended June 30, 2024, we modified the useful life of a trade name asset that we no longer expect to utilize beyond 2024. This change resulted in incremental amortization expense of $6,674 during the quarter, and a similar incremental amount is expected to be recognized during the quarter ended September 30, 2024.

Based on the intangibles in service as of June 30, 2024, estimated future amortization expense is as follows:


(in thousands)	Estimated amortization expense
Remainder of 2024	$	61,171
2025	88,178
2026	58,906
2027	36,071
2028	26,993

In the normal course of business, we acquire and develop internal-use software. We also, at times, purchase customer list and partner relationship assets. During the six months ended June 30, 2024, we acquired or developed $37,710 of internal-use software with a weighted-average useful life of 3 years. Other intangibles acquired during the period were not material.

Goodwill – In conjunction with the realignment of our reportable business segments effective January 1, 2024 (Note 15), the goodwill amounts by reportable segment as of December 31, 2023 have been recast to reflect our new segment structure. No goodwill impairment charges were recorded in conjunction with the segment realignment. Changes in goodwill by reportable segment and in total were as follows for the six months ended June 30, 2024:


(in thousands)	Merchant Services		B2B Payments		Data Solutions(1)		Print(1)		All Other		Total
Balance, December 31, 2023	$	727,688	$	160,431	$	40,804	$	493,924	$	7,743	$	1,430,590
Currency translation adjustment	—		—		—		(48)		—		(48)
Balance, June 30, 2024	$	727,688	$	160,431	$	40,804	$	493,876	$	7,743	$	1,430,542

(1) The Data Solutions and Print balances are net of accumulated impairment charges of $145,584 and $193,699, respectively, for each period.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Other non-current assets – Other non-current assets were comprised of the following:


(in thousands)	June 30, 2024		December 31, 2023
Postretirement benefit plan asset	$	99,163	$	94,939
Cloud computing arrangement implementation costs	48,124		59,234
Prepaid product discounts(1)	41,390		40,376
Deferred contract acquisition costs(2)	20,513		21,103
Loans and notes receivable from distributors, net of allowance for credit losses(3)	12,081		12,443
Other	30,074		23,087
Other non-current assets	$	251,345	$	251,182

(1) Amortization of prepaid product discounts was $16,354 for the six months ended June 30, 2024 and $17,173 for the six months ended June 30, 2023.

(2) Amortization of deferred contract acquisition costs was $6,298 for the six months ended June 30, 2024 and $5,315 for the six months ended June 30, 2023.

(3) Amount includes the non-current portion of loans and notes receivable. The current portion of these receivables is included in other current assets on the consolidated balance sheets and was $1,501 as of June 30, 2024 and $987 as of December 31, 2023.

Changes in the allowance for credit losses related to loans and notes receivable from distributors were as follows for the six months ended June 30, 2024 and 2023:


	Six Months Ended June 30,
(in thousands)	2024		2023
Balance, beginning of year	$	928	$	1,024
Bad debt expense (benefit)	217		(73)

Balance, end of period	$	1,145	$	951

Past due receivables and those on non-accrual status were not material as of June 30, 2024 or December 31, 2023.

We categorize loans and notes receivable into risk categories based on information about the ability of borrowers to service their debt, including current financial information, historical payment experience, current economic trends and other factors. The highest quality receivables are assigned a 1-2 internal grade. Those that have a potential weakness requiring management's attention are assigned a 3-4 internal grade.

The following table presents loans and notes receivable from distributors, including the current portion, by credit quality indicator and by year of origination, as of June 30, 2024. There were no write-offs or recoveries recorded during the six months ended June 30, 2024.


			Loans and notes receivable from distributors amortized cost basis by origination year
(in thousands)	2024		2023		2020		2019		Prior		Total
Risk rating:
1-2 internal grade	$	967	$	341	$	928	$	340	$	11,448	$	14,024
3-4 internal grade	—		—		—		—		703		703
Loans and notes receivable	$	967	$	341	$	928	$	340	$	12,151	$	14,727


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Accrued liabilities – Accrued liabilities were comprised of the following:


(in thousands)	June 30, 2024		December 31, 2023
Deferred revenue(1)	$	26,620	$	35,343
Employee bonuses, including sales incentives	23,902		49,446
Income taxes	17,965		7,558

Operating lease liabilities	13,369		13,562
Customer rebates	10,637		12,718
Wages and payroll liabilities, including vacation	8,344		8,605
Prepaid product discounts	7,457		4,477
Restructuring	3,800		9,689
Other	37,051		50,029
Accrued liabilities	$	149,145	$	191,427

(1) Revenue recognized for amounts included in deferred revenue at the beginning of the period was $24,333 for the six months ended June 30, 2024 and $29,637 for the six months ended June 30, 2023.

Supplemental cash flow information – The reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents to the consolidated balance sheets was as follows:


(in thousands)	June 30, 2024		June 30, 2023
Cash and cash equivalents	$	23,077	$	39,052
Restricted cash and restricted cash equivalents included in funds held for customers	50,937		147,392

Non-current restricted cash included in other non-current assets	3,990		2,749
Total cash, cash equivalents, restricted cash and restricted cash equivalents	$	78,004	$	189,193


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 4: EARNINGS PER SHARE

The following table reflects the calculation of basic and diluted earnings per share. During each period, certain share-based awards, as noted below, were excluded from the calculation of diluted earnings per share because their effect would have been antidilutive.


	Quarter Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2024		2023		2024		2023
Earnings per share – basic:
Net income	$	20,497	$	16,401	$	31,327	$	19,181
Net income attributable to non-controlling interest	(38)		(26)		(65)		(54)
Net income attributable to Deluxe	20,459		16,375		31,262		19,127
Income allocated to participating securities	(5)		(12)		(14)		(19)
Income attributable to Deluxe available to common shareholders	$	20,454	$	16,363	$	31,248	$	19,108
Weighted-average shares outstanding	44,162		43,524		44,039		43,421
Earnings per share – basic	$	0.46	$	0.38	$	0.71	$	0.44

Earnings per share – diluted:
Net income	$	20,497	$	16,401	$	31,327	$	19,181
Net income attributable to non-controlling interest	(38)		(26)		(65)		(54)
Net income attributable to Deluxe	20,459		16,375		31,262		19,127
Income allocated to participating securities	—		—		(11)		(10)
Re-measurement of share-based awards classified as liabilities	—		—		(37)		(19)
Income attributable to Deluxe available to common shareholders	$	20,459	$	16,375	$	31,214	$	19,098
Weighted-average shares outstanding	44,162		43,524		44,039		43,421
Dilutive impact of potential common shares	524		216		547		279
Weighted-average shares and potential common shares outstanding	44,686		43,740		44,586		43,700
Earnings per share – diluted	$	0.46	$	0.37	$	0.70	$	0.44
Antidilutive potential common shares excluded from calculation	1,295		1,553		1,295		1,553


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 5: OTHER COMPREHENSIVE INCOME (LOSS)

Reclassification adjustments – Information regarding amounts reclassified from accumulated other comprehensive loss to net income was as follows:


Accumulated other comprehensive loss components	Amounts reclassified from accumulated other comprehensive loss								Affected line item in consolidated statements of comprehensive income
	Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Amortization of postretirement benefit plan items:
Prior service credit	$	355	$	355	$	711	$	711	Other income
Net actuarial loss	(334)		(568)		(667)		(1,137)		Other income
Total amortization	21		(213)		44		(426)		Other income
Tax (expense) benefit	(44)		16		(89)		32		Income tax provision
Amortization of postretirement benefit plan items, net of tax	(23)		(197)		(45)		(394)		Net income
Realized gain on cash flow hedges	895		634		1,810		1,204		Interest expense
Tax expense	(242)		(169)		(489)		(321)		Income tax provision
Realized gain on cash flow hedges, net of tax	653		465		1,321		883		Net income
Currency translation adjustment(1)	—		(863)		—		(863)		Gain on sale of businesses and long-lived assets
Total reclassifications, net of tax	$	630	$	(595)	$	1,276	$	(374)

(1) Relates to the sale of our North American web hosting business during the quarter ended June 30, 2023 (Note 6).

Accumulated other comprehensive loss – Changes in the components of accumulated other comprehensive loss for the six months ended June 30, 2024 and 2023 were as follows:


(in thousands)	Postretirement benefit plans		Net unrealized gain on cash flow hedges(1)		Currency translation adjustment		Accumulated other comprehensive loss
Balance, December 31, 2023	$	(19,824)	$	(286)	$	(9,918)	$	(30,028)
Other comprehensive income (loss) before reclassifications	—		6,903		(1,499)		5,404
Amounts reclassified from accumulated other comprehensive loss	45		(1,321)		—		(1,276)
Net current-period other comprehensive income (loss)	45		5,582		(1,499)		4,128
Balance, June 30, 2024	$	(19,779)	$	5,296	$	(11,417)	$	(25,900)

(1) Other comprehensive income before reclassifications is net of income tax expense of $2,553.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


(in thousands)	Postretirement benefit plans		Net unrealized loss on debt securities(1)		Net unrealized gain on cash flow hedges(2)		Currency translation adjustment		Accumulated other comprehensive loss
Balance, December 31, 2022	$	(26,872)	$	(909)	$	2,593	$	(12,076)	$	(37,264)
Other comprehensive (loss) income before reclassifications	—		(8)		4,858		1,149		5,999
Amounts reclassified from accumulated other comprehensive loss	394		—		(883)		863		374
Net current-period other comprehensive income (loss)	394		(8)		3,975		2,012		6,373
Balance, June 30, 2023	$	(26,478)	$	(917)	$	6,568	$	(10,064)	$	(30,891)

(1) Other comprehensive loss before reclassifications is net of an income tax benefit of $3.

(2) Other comprehensive income before reclassifications is net of income tax expense of $1,768.


NOTE 6: DIVESTITURES

In September and December 2023, we executed agreements allowing for the conversion of our U.S. and Canadian payroll and human resources services customers to other service providers. We recognized related income of $15,401 during the quarter ended June 30, 2024 and $22,982 during the six months ended June 30, 2024, and we received related cash proceeds of $4,738 during the six months ended June 30, 2024. The income recognized is included in gain on sale of businesses and long-lived assets on the consolidated statements of comprehensive income. Recognition of the remaining income will be based on actual customer conversion and retention activity, which we expect to be completed during 2024. These businesses generated annual revenue of approximately $27,000 during 2023. Our U.S. and Canadian payroll and human resources businesses comprise a reporting unit that had a goodwill balance of $7,743 as of June 30, 2024. We evaluated this goodwill for impairment as of June 30, 2024, and, based on our quantitative analysis, we concluded that it was not impaired as of that date. In conjunction with our phased transition out of these businesses, we expect that this goodwill will be fully impaired during 2024, at the point when the remaining cash flows expected to be generated by these businesses no longer support the carrying value of the reporting unit. During the six months ended June 30, 2024, we also recognized a gain of $1,000 on the sale of a small business distributor customer list.

In June 2023, we completed the sale of our North American web hosting and logo design businesses for net cash proceeds of $31,230, and we recognized a pretax gain of $21,942 during the quarter and six months ended June 30, 2023. These businesses generated revenue of approximately $28,000 during 2023, through the sale date. Further information regarding this sale can be found under the caption "Note 6: Acquisition and Divestitures" in the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 7: DERIVATIVE FINANCIAL INSTRUMENTS

As part of our interest rate risk management strategy, we have entered into interest rate swaps, which we designated as cash flow hedges, to mitigate variability in interest payments on a portion of our variable-rate debt (Note 12). Our derivative instruments were comprised of the following:


							June 30, 2024		December 31, 2023
(in thousands)	Notional amount		Interest rate(1)		Maturity	Balance sheet location	Fair value asset / (liability)		Fair value asset / (liability)
June 2023 amortizing interest rate swap:
	$	239,174	4.249	%	June 2026	Other non-current assets and other non-current liabilities	$	1,369	$	(2,158)
March 2023 interest rate swap:
	200,000		4.003	%	March 2026	Other non-current assets	2,422		287
September 2022 interest rate swap:
	300,000		3.990	%	September 2025	Other non-current assets	3,503		1,519

(1) In addition, an applicable margin ranging from 1.5% to 2.5%, depending on our consolidated total leverage ratio, is paid on amounts outstanding under our credit facility (Note 12).

Changes in the fair values of the interest rate swaps are recorded in accumulated other comprehensive loss on the consolidated balance sheets and are subsequently reclassified to interest expense as interest payments are made on the variable-rate debt. The fair values of the derivatives are calculated based on the applicable reference rate curve on the date of measurement. The cash flow hedges were fully effective as of June 30, 2024 and December 31, 2023, and their impact on consolidated net income and the consolidated statements of cash flows was not material. We also expect that the amount that will be reclassified to interest expense during the next 12 months will not be material.


NOTE 8: FAIR VALUE MEASUREMENTS

Recurring fair value measurements – Cash and cash equivalents included available-for-sale debt securities at December 31, 2023 (Note 3), which consisted of a domestic money market fund. The cost of the fund, which was traded in an active market, approximated its fair value because of the short-term nature of the underlying investments. The fair value of derivative instruments (Note 7) is calculated based on the applicable reference rate curve on the date of measurement.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Information regarding the fair values of our financial instruments was as follows:


						Fair value measurements using
		June 30, 2024				Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(in thousands)	Balance sheet location	Carrying value		Fair value
Measured at fair value through comprehensive income:
Derivative assets (Note 7)	Other non-current assets	$	7,294	$	7,294	$	—	$	7,294	$	—
Amortized cost:
Cash	Cash and cash equivalents	23,077		23,077		23,077		—		—
Cash	Funds held for customers	50,937		50,937		50,937		—		—
Cash	Other non-current assets	3,990		3,990		3,990		—		—
Loans and notes receivable from distributors	Other current assets and other non-current assets	13,582		14,294		—		—		14,294
Long-term debt	Current portion of long-term debt and long-term debt	1,557,976		1,538,742		—		1,538,742		—


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


						Fair value measurements using
		December 31, 2023				Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
(in thousands)	Balance sheet location	Carrying value		Fair value
Measured at fair value through comprehensive income:

Available-for-sale debt securities	Cash and cash equivalents	$	22,000	$	22,000	$	22,000	$	—	$	—
Derivative assets (Note 7)	Other non-current assets	1,806		1,806		—		1,806		—
Derivative liability (Note 7)	Other non-current liabilities	(2,158)		(2,158)		—		(2,158)		—
Amortized cost:
Cash	Cash and cash equivalents	49,962		49,962		49,962		—		—
Cash	Funds held for customers	383,134		383,134		383,134		—		—
Cash	Other non-current assets	2,937		2,937		2,937		—		—
Loans and notes receivable from distributors	Other current assets and other non-current assets	13,430		13,249		—		—		13,249
Long-term debt	Current portion of long-term debt and long-term debt	1,592,851		1,554,028		—		1,554,028		—


NOTE 9: RESTRUCTURING AND INTEGRATION EXPENSE

Restructuring and integration expense consists of costs related to initiatives to drive earnings and cash flow growth and also includes costs related to the consolidation and migration of certain applications and processes. These costs consist primarily of consulting, project management services and internal labor, as well as other costs associated with our initiatives, such as costs related to facility closures and consolidations. In addition, we have recorded employee severance costs across functional areas. Restructuring and integration expense is not allocated to our reportable business segments.

We are currently pursuing several initiatives designed to support our growth strategy and to increase our efficiency, including several initiatives that we collectively refer to as our North Star program. The goal of these initiatives is to further drive shareholder value by (1) expanding our earnings before interest, taxes, depreciation and amortization ("EBITDA") growth trajectory, (2) increasing cash flow, (3) paying down debt, and (4) improving our leverage ratio. Our various initiatives include a balanced mix of structural cost reductions focused on organizational structure, processes and operational improvements, in addition to workstreams to drive revenue growth. We have already combined like-for-like capabilities, reduced management layers and consolidated core operations to run more efficiently and to create the ability to invest in high impact talent to accelerate our growth businesses of payments and data. The associated expense, which consisted primarily of consulting and severance costs, was approximately $10,000 during the quarter ended June 30, 2024 and $22,000 during the six months ended June 30, 2024. During the quarter and six months ended June 30, 2023, we incurred associated expense of approximately $15,000. To date, we have incurred expense of approximately $70,000, and we anticipate that we will incur additional North Star restructuring and integration expense of approximately $50,000 through 2025.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Restructuring and integration expense is reflected on the consolidated statements of comprehensive income as follows:


	Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Total cost of revenue	$	(35)	$	3,286	$	898	$	4,439
Operating expenses	11,064		24,191		24,868		37,132
Restructuring and integration expense	$	11,029	$	27,477	$	25,766	$	41,571

Restructuring and integration expense for each period was comprised of the following:


	Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
External consulting and other costs	$	9,150	$	12,930	$	17,119	$	20,621
Employee severance benefits	(415)		6,161		1,557		6,347
Internal labor	384		1,750		1,222		3,872
Other	1,910		6,636		5,868		10,731
Restructuring and integration expense	$	11,029	$	27,477	$	25,766	$	41,571

Our restructuring and integration accruals are included in accrued liabilities on the consolidated balance sheets and represent expected cash payments required to satisfy the remaining severance obligations to those employees already terminated and those expected to be terminated under our various initiatives. The majority of the employee reductions, as well as the related severance payments, are expected to be completed within the next year.

Changes in our restructuring and integration accruals were as follows:


(in thousands)	Employee severance benefits
Balance, December 31, 2023	$	9,689
Charges	2,056
Reversals	(499)
Payments	(7,446)
Balance, June 30, 2024	$	3,800

The charges and reversals presented in the rollforward of our restructuring and integration accruals do not include items charged directly to expense as incurred, as those items are not reflected in accrued liabilities on the consolidated balance sheets.


NOTE 10: INCOME TAX PROVISION

The effective income tax rate for the six months ended June 30, 2024 was 33.7%, compared to the effective tax rate of 34.1% for the year ended December 31, 2023. The benefit of business exit activity in 2023 was more than offset by lower tax impacts in 2024 from share-based compensation, foreign operations and return to provision adjustments. The reconciliation of our effective tax rate for 2023 to the U.S. federal statutory tax rate can be found under the caption "Note 10: Income Tax Provision" in the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.


NOTE 11: POSTRETIREMENT BENEFITS

We have historically provided certain health care benefits for eligible retired U.S. employees. In addition to our retiree health care plan, we also have a U.S. supplemental executive retirement plan. Further information regarding our postretirement


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

benefit plans can be found under the caption “Note 12: Postretirement Benefits” in the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

Postretirement benefit income is included in other income on the consolidated statements of comprehensive income and consisted of the following components:


	Quarter Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Interest cost	$	435	$	496	$	871	$	993
Expected return on plan assets	(2,099)		(1,830)		(4,197)		(3,660)
Amortization of prior service credit	(355)		(355)		(711)		(711)
Amortization of net actuarial losses	334		568		667		1,137
Net periodic benefit income	$	(1,685)	$	(1,121)	$	(3,370)	$	(2,241)


NOTE 12: DEBT

Debt outstanding was comprised of the following:


(in thousands)	June 30, 2024		December 31, 2023
Senior, secured term loan facility	$	790,563	$	877,187
Senior, unsecured notes	475,000		475,000
Amounts drawn on senior, secured revolving credit facility	223,000		252,000
Securitization obligations	78,917		—
Total principal amount	1,567,480		1,604,187
Less: unamortized discount and debt issuance costs	(9,504)		(11,336)
Total debt, net of discount and debt issuance costs	1,557,976		1,592,851
Less: current portion of long-term debt, net of debt issuance costs	(43,124)		(86,153)
Long-term debt	$	1,514,852	$	1,506,698

Maturities of long-term debt were as follows as of June 30, 2024:


(in thousands)	Debt obligations
2025	$	101,063
2026	912,500
2027	78,917
2028	—
2029	475,000
Total principal amount	$	1,567,480

Credit facility – In June 2021, we executed a senior, secured credit facility consisting of a revolving credit facility with commitments of $500,000 and a $1,155,000 term loan facility. The revolving credit facility includes a $40,000 swingline sub-facility and a $25,000 letter of credit sub-facility. Loans under the revolving credit facility may be borrowed, repaid and re-borrowed until June 1, 2026, at which time all amounts borrowed must be repaid. The term loan facility is required to be repaid in equal quarterly installments of $21,656 through June 30, 2025 and $28,875 from September 30, 2025 through March 31, 2026. The remaining balance is due on June 1, 2026. The term loan facility also includes mandatory prepayment requirements related to asset sales, new debt (other than permitted debt) and excess cash flow, subject to certain limitations. No premium or penalty is payable in connection with any mandatory or voluntary prepayment of the term loan facility.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

Interest is payable on the credit facility at a fluctuating rate of interest determined by reference to the Secured Overnight Financing Rate ("SOFR") plus an applicable margin ranging from 1.5% to 2.5%, depending on our consolidated total leverage ratio, as defined in the credit agreement, and a commitment fee is payable on the unused portion of the revolving credit facility. Amounts outstanding under the credit facility had a weighted-average interest rate of 6.70% as of June 30, 2024 and 6.83% as of December 31, 2023, including the impact of interest rate swaps that effectively convert a portion of our variable-rate debt to fixed-rate debt. Further information regarding the interest rate swaps can be found in Note 7.

Borrowings under the credit facility are collateralized by substantially all of the present and future tangible and intangible personal property held by us and our subsidiaries that have guaranteed our obligations under the credit facility, subject to certain exceptions. The credit agreement contains customary covenants regarding limits on levels of indebtedness, liens, mergers, certain asset dispositions, changes in business, advances, investments, loans and restricted payments. The covenants are subject to a number of limitations and exceptions set forth in the credit agreement.

The credit agreement also includes requirements regarding our consolidated total leverage ratio and our consolidated secured leverage ratio, as defined in the credit agreement. During each remaining quarterly period, the consolidated total leverage ratio may not equal or exceed 4.25 to 1.00 and the consolidated secured leverage ratio may not equal or exceed 3.50 to 1.00. In addition, we must maintain a minimum interest coverage ratio of at least 3.00 to 1.00 throughout the remaining term of the credit facility. Failure to meet any of the above requirements would result in an event of default that would allow lenders to declare amounts outstanding immediately due and payable and would allow the lenders to enforce their interests against collateral pledged if we are unable to settle the amounts outstanding. We were in compliance with all debt covenants as of June 30, 2024.

The credit agreement contains customary representations and warranties and, as a condition to borrowing, requires that all such representations and warranties be true and correct in all material respects on the date of each borrowing, including representations as to no material adverse change in our business, assets, operations or financial condition. If our consolidated total leverage ratio exceeds 2.75 to 1.00, the aggregate annual amount of permitted dividends and share repurchases in connection with incentive-based equity and compensation is limited to $60,000.

As of June 30, 2024, amounts available for borrowing under our revolving credit facility were as follows:


(in thousands)	Available borrowings
Revolving credit facility commitment	$	500,000
Amounts drawn on revolving credit facility	(223,000)
Outstanding letters of credit(1)	(7,673)
Net available for borrowing as of June 30, 2024	$	269,327

(1) We use standby letters of credit primarily to collateralize certain obligations related to our self-insured workers' compensation claims, as well as claims for environmental matters, as required by certain states. These letters of credit reduce the amount available for borrowing under our revolving credit facility.

Senior unsecured notes – In June 2021, we issued $500,000 of 8.0% senior, unsecured notes that mature in June 2029. The notes were issued via a private placement under Rule 144A of the Securities Act of 1933. Proceeds from the offering, net of discount and offering costs, were $490,741, resulting in an effective interest rate of 8.3%. The net proceeds from the notes were used to fund the acquisition of First American Payment Systems, L.P. in June 2021. Interest payments are due each June and December. During 2022, we settled $25,000 of these notes via open market purchases.

The indenture governing the notes contains covenants that limit our ability and the ability of our restricted subsidiaries to, among other things, incur additional indebtedness and liens, issue redeemable stock and preferred stock, pay dividends and distributions, make loans and investments and consolidate or merge or sell all or substantially all of our assets.

Securitization facility – In March 2024, Deluxe Receivables LLC, a wholly-owned subsidiary, entered into a receivables financing agreement (the “Securitization Facility”) with a group of financial institutions. The agreement terminates in March 2027, unless extended in accordance with its terms. The maximum amount available under the Securitization Facility is $80,000, subject to certain borrowing base adjustments. Under the agreement, we sold and will continue to automatically sell certain of our accounts receivable to the subsidiary as collateral for borrowings under the facility. Borrowings bear interest at SOFR plus an applicable margin, and a commitment fee is payable on the unused portion of the facility. Interest and fees are due monthly. As of June 30, 2024, $78,917 was outstanding under the facility at an interest rate of 6.91%. We utilized the proceeds from these borrowings to prepay amounts due under our secured term loan facility.

The Securitization Facility is accounted for as a collateralized financing activity, rather than the sale of assets. As such, the subsidiary is consolidated, and the receivable balances pledged as collateral are presented as accounts receivable on the


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

consolidated balance sheet, and the borrowings are presented as long-term debt. Cash receipts related to the underlying receivables are reflected as operating cash flows and borrowings and repayments under the collateralized loans are reflected as financing cash flows within the consolidated statement of cash flows.


NOTE 13: OTHER COMMITMENTS AND CONTINGENCIES

Indemnifications – In the normal course of business, we periodically enter into agreements that incorporate general indemnification language. These indemnification provisions generally encompass third-party claims arising from our products and services, including, without limitation, service failures, breach of security, intellectual property rights, governmental regulations and/or employment-related matters. Performance under these indemnities would generally be triggered by our breach of the terms of the contract. In disposing of assets or businesses, we often provide representations, warranties and/or indemnities to cover various risks including, for example, unknown damage to the assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal matters related to periods prior to disposition. We do not have the ability to estimate the potential liability from such indemnities because they relate to unknown conditions. However, we do not believe that any liability under these indemnities would have a material adverse effect on our financial position, annual results of operations or annual cash flows. We have recorded liabilities for known indemnifications related to environmental matters. These liabilities were not material as of June 30, 2024 or December 31, 2023.

Self-insurance – We are self-insured for certain costs, primarily workers' compensation claims and medical and dental benefits for active employees and those employees on long-term disability. The liabilities associated with these items represent our best estimate of the ultimate obligations for reported claims plus those incurred, but not reported, and totaled $8,851 as of June 30, 2024 and $9,024 as of December 31, 2023. These accruals are included in accrued liabilities and other non-current liabilities on the consolidated balance sheets. Our workers' compensation liability is recorded at present value. The difference between the discounted and undiscounted liability was not material as of June 30, 2024 or December 31, 2023.

Our self-insurance liabilities are estimated, in part, by considering historical claims experience, demographic factors and other actuarial assumptions. The estimated accruals for these liabilities could be significantly affected if future events and claims differ from these assumptions and historical trends.

Litigation – Recorded liabilities for legal matters, as well as related charges recorded in each period, were not material to our financial position, results of operations or liquidity during the periods presented, and we do not believe that any of the currently identified claims or litigation will materially affect our financial position, results of operations or liquidity, upon resolution. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, it may cause a material adverse impact on our financial position, results of operations or liquidity in the period in which the ruling occurs or in future periods.


NOTE 14: SHAREHOLDERS' EQUITY

In October 2018, our board of directors authorized the repurchase of up to $500,000 of our common stock. This authorization has no expiration date. No shares were repurchased under this authorization during the six months ended June 30, 2024 or June 30, 2023, and $287,452 remained available for repurchase as of June 30, 2024.


NOTE 15: BUSINESS SEGMENT INFORMATION

Effective January 1, 2024, we revised our reportable business segments to align with structural and management reporting changes that better reflect our portfolio mix and offerings. We now operate the following reportable segments, generally organized by product and service type:

•Merchant Services – provides electronic credit and debit card authorization and payment systems and processing services, primarily to small and medium-sized retail and service businesses.

•B2B Payments – provides treasury management solutions, including remittance and lockbox processing, remote deposit capture, receivables management, payment processing and paperless treasury management, as well as fraud and security services and Deluxe Payment Exchange+, an accounts payable automation solution.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

•Data Solutions – provides data-driven marketing solutions, including digital engagement, financial institution profitability reporting and account switching tools, and business incorporation services.

•Print – provides printed personal and business checks, printed business forms, business accessories and promotional products.

The accounting policies of the segments are the same as those described in the Notes to Consolidated Financial Statements included in the 2023 Form 10-K. We allocate corporate costs for our shared services functions to our business segments when the costs are directly attributable to a segment. This includes certain sales and marketing, supply chain, real estate, finance, information technology and legal costs. Costs that are not directly attributable to a business segment are reported as Corporate operations and consist primarily of marketing, accounting, information technology, human resources, facilities, executive management and legal, tax and treasury costs that support the corporate function.

All of our segments operate primarily in the U.S., with some operations in Canada. Through June 2023, we operated our former web hosting business in portions of Europe and through partners in Central and South America. Revenue and long-lived assets related to our foreign operations were not material to our consolidated financial statements during the periods covered by this report. No single customer accounted for more than 10% of consolidated revenue during the six months ended June 30, 2024 and 2023.

Our chief operating decision maker ("CODM") is our Chief Executive Officer. He reviews EBITDA on an adjusted basis for each segment when deciding how to allocate resources and to assess segment operating performance. Adjusted EBITDA for each segment excludes depreciation and amortization expense, interest expense, income tax expense and certain other amounts, which may include, from time to time: asset impairment charges; restructuring and integration expense; share-based compensation expense; acquisition transaction costs; certain legal-related expenses outside of the normal course of business; and gains or losses on sales of businesses and long-lived assets. The CODM does not review segment asset information when making investment or operating decisions regarding our reportable business segments.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)