Deluxe Corporation

Second Quarter 2018 – Earnings Conference Call

July 26, 2018
Ed Merritt
Treasurer and Vice President of
Investor Relations

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Todays Presenters

Lee Schram Keith Bush Ed Merritt

Chief Executive Officer Chief Financial Officer Treasurer and Vice President
and Senior Vice President of Investor Relations

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 Cautionary Statement

• 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 this morning as well as
in the company's Form 10-K for the year ended December 31, 2017.
• Portions of the financial and statistical information that will be reviewed
during this call are addressed in more detail in today's press release
which is posted on our investor relations website at deluxe.com/investor.
This information was also furnished to the SEC on Form 8-K filed by the
Company this morning.
• References to non-GAAP financial measures are reconciled to the
comparable GAAP financial measures in the press release or as part of
this presentation.

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Lee Schram
Chief Executive Officer

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 Second Quarter 2018 Highlights

• Delivered a solid second quarter

• Revenue grew 1% from last year
– Small Business Services revenue growth of about 5%
• Marketing solutions & other services (MOS) revenue grew about 7%
– MOS represents nearly 41% of total second quarter revenue
• Adjusted diluted EPS grew almost 9% from prior year quarter
• Strong operating cash flow of $147 million in the first half of 2018
• Drawn ~$765 million on our credit facility at the end of the quarter
• Repurchased $20 million of common shares in the quarter, year-to-
date repurchase total to $40 million, $10 million higher than last year at
this time
• Continued brand awareness campaign
• Delivered on our cost reduction commitment for the quarter
• Acquired ColoCrossing in June 2018

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Keith Bush
Chief Financial Officer
and Senior Vice President

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Q2 Results

$ in millions Better/
2018 2017
(Worse)
Revenue
Small Business Services $317.7 $302.9 $14.8
Financial Services 139.3 147.7 (8.4)
Direct Checks 31.2 34.6 (3.4)
Consolidated $488.2 $485.2 $3.0

Gross Margin 61.0% 63.0% (2.0) pts

$209.6 $208.7 ($0.9)

SG&A Expense
42.9% 43.0% 0.1%

Adjusted Operating Margin

Small Business Services 19.2% 19.2%  pts
Financial Services 14.4% 19.2% (4.8) pts
Direct Checks 33.0% 33.8% (0.8) pts
Consolidated 18.7% 20.2% (1.5) pts

$60.2 $59.6 $0.6

Net Income
12.3% 12.3%  pts

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Q2 2018 – Earnings Per Share

• Diluted earnings per share for the second quarter was $1.25

• Adjusted diluted earnings per share for the second quarter was $1.40
 grew 8.5% from the second quarter of 2017
 $0.05 better than the high-end of our prior outlook

 excludes aggregate charges of $0.15 per share for non-GAAP

adjustments

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 Balance Sheet and Cash Flow
$ in millions

Cash Provided by
Total Debt Operating Activities

$766.8 *
$709.3 $151.6
$146.9

6/30/2018 12/31/2017 6/30/2018 6/30/2017

* $765 drawn from Credit Facility

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 2018 Outlook
Small Business Financial $ in millions, except for EPS
Direct Checks
Services Services
Full Year Full Year Full Year Full Year
Expected Increase Expected Increase Expected Decline
Revenue

$2.045B to
$2.065B 4% to 5% 8% to 9% ~11%
• Growth in our online, dealer • Continued growth in MOS • Secular check order
Q3 & major accounts channels including data-driven declines
$496M to $504M • Price increases marketing and treasury
• Double-digit revenue management solutions
growth in MOS • Continued acquisitions
Diluted • Small tuck-in acquisitions
FACTORS

Full Year
$5.23 to $5.35 • Believe the economy is beginning to strengthen, we continue to be cautious
Q3 • Cost and expense full year reductions expected to be ~$55M, net of investments
$1.15 to $1.21  ~ 70% of expected reductions from sales and marketing
EPS

 ~ 25% of expected reductions from fulfillment

Adjusted Diluted
 ~ 5% of expected reductions from shared services organizations
Full Year
• Expect increased material costs and delivery rates
$5.68 to $5.80
Q3 • Continued investments in revenue growth opportunities
$1.26 to $1.32 • Effective tax rate approximately 24.5% for the full year
• Expect stronger earnings, lower tax payments and lower medical costs partially offset by
higher interest payments
Op. Cash Flow

• Prepaid Product Discounts ~$27M

Full Year • Capital Expenditures ~$55M
$360M to $370M • Depreciation & amortization ~$142M (~$88M acquisition-related amortization)

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 Capital Structure

• Our priorities for use of capital continue to be:

 Maintain balance approach of investing organically and through
acquisitions in order to drive our growth transformation – intend to be
moderately more aggressive in acquisition plans going forward
 Continue paying a quarterly dividend
 Periodically repurchase common stock
 As excess cash becomes available, plan to reduce the amount
outstanding against our credit facility

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Lee Schram
Chief Executive Officer

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Initial Outlook Compared To Current Outlook
Revenue in millions, EPS in dollars
Adjusted
Revenue
Diluted EPS
January 25, 2018 – High End of Outlook $2,105 $5.80
Treasury Management Services Acquisition ($ 21) --
FX / eCheck Customer Delays ($ 5)
Data-Driven Marketing ($ 17) (0.15)
Small Business Marketing Solutions + Web Services $ 12
Forms & Accessories ($ 9)
Additional Cost Reductions -- 0.08
Delayed Innovation Investments -- 0.03
Income Tax Rate -- 0.04
July 26, 2018 – High End of Outlook $2,065 $5.80

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 In 2018 We Expect . . .

• Continued growth in MOS revenue and a ninth consecutive year of

total revenue growth
 If achieved, 2018 will mark the first time in the history of Deluxe that our
revenue will exceed $2 billion
• 2018 is the first year of our three-year goal through 2020 to pivot for
faster organic growth and moderately more aggressive acquisitive
growth
 Targeting overall MOS to total company revenue mix to be approximately
44% this year, growing to 60% by year-end 2020
 All large financial institution core check contracts now extended through at
least 2020

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 Marketing Solutions & Other Services
$ in millions
2017 2018 Estimated
Actual Expected
Outlook 2018 by Annual
Categories Revenue Key Revenue Growth Initiatives
Revenue $ Revenue $ Segment Recurring
Growth Rates
(% of Total) (% of Total) Revenue

• Scale integrated marketing on

Small Business $262 ~$299
All SBS ~14% ~40% demand solutions, W2P, retail
Marketing (35%) (~33%)
packaging, promotional products

Web $132 $164 – $165

• Scale DLX Marketing Suite, web &
All SBS ~25% ~95% payroll services; continued tuck-in
Services (17%) (~18%)
acquisitions
Data Driven 24% to 29%
$151 $187 – $194 • Scale DMS, Datamyx, FMCG;
Marketing All FS (7% to 12% ~90%
(20%) (~21%) continued acquisitions
Solutions organic)

Treasury 42% to 46%

$109 $155 – $160 • Scale Wausau, FISC, DSS, RDM;
Management All FS (6% to 10% ~70%
(14%) (~18%) continued acquisitions
Solutions organic)

Fraud, Security, • Scale fraud & security offers for

~53% FS SBs + consumers; scale
Risk Mgmt, and $102 $91 – $93
~32% SBS ~10% Decline ~90% profitability, strategic sourcing,
Operational (14%) (~10%)
e-Checks, Deluxe Rewards,
~15% DC
Services SwitchAgent
$756 $895 – $910 18% to 20% MOS to Total Revenue Mix = ~44%
Total ~70%
(100%) (100%) (4 to 6% organic) in 2018 vs. 38% in 2017

2018 revenue outlook includes ~$80M new acquisitions + ~$45M carryover acquisitions
or ~$125M total
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 2018 Key Focus Areas for SB and FS
Segment Focus Areas Initiatives

• Drive check customer retention and acquisition of new customers and

1) Payments and
develop new retail customer acquisition channels
Marketing
• Profitably scale marketing on demand solutions in select industries
Solutions
• Scale eChecks, eDeposit and other payments and workflow solutions
Small
Business
Services
• Grow digital marketing services thru improved customer experience and
cross-sell including using integrated Deluxe Marketing Suite (DMS) and
2) Web Services
building out partnership and assessing tuck-in acquisition opportunities
• Scale payroll services and other operational annuity growth solutions

1) Data Driven • Grow data driven marketing solutions, leveraging proprietary data with
Marketing robust analytics and assess additional acquisitions
Financial
Services
• Continue to grow treasury management solutions - payment acceptance
2) Treasury
of multiple payment types, reconciliation and exception resolution
Management
• Profitably integrate and scale previous acquisitions, assess additional
Solutions
acquisitions, primarily focused in the financial services market

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 Direct Checks

• 2018 Expectations:
 Revenue decline around 11% range

 Marketing solutions and other services revenue to account for about 10%
of Direct Checks revenue

 Reduce manufacturing costs and SG&A

 Targeting operating margins in the low 30% range

 Expect to generate strong operating cash flow

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Questions and Answers

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 In Summary

1. We delivered a solid second quarter

2. Marketing solutions and other services revenue grew about 7% and

mix improved to 41% of total company revenue towards our goal of
44% this year and 60% in 2020

3. We have established a solid baseline first half to propel us towards

revenue growth again in 2018 for a ninth consecutive year

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Deluxe Up-Coming Events

Date Event City

KeyBanc Capital Markets 20th Annual

August 12-13 Vail
Technology Leadership Form

CL King & Associates 16th Annual Best

September 13 New York
Ideas Conference

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Appendix

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 Replay Of This Call

• Audio replay available through August 2

 Dial: 1-404-537-3406

 Access code: 6253348

• Presentation slides:

 Deluxe’s investor relations website at deluxe.com/investor

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Revenue Growth Reconciliation
Revenue Growth reconciliation from GAAP to Non-GAAP
2018
Summarized 2018* 2017 2016 2015 2014
Q2
Revenue Growth 4.8% 0.6% 6.3% 4.3% 5.9% 5.6%

Acquisitions (6.5%) (3.7%) (9.3%) (6.4%) (8.9%) (6.7%)

Exited Business 1.0% 1.2% 1.6% 0.1% 0.5% -

Other (incl. FX and business day adj.) 0.1% (0.2%) 0.3% 0.1% 0.5% 0.4%

Adjusted Organic Growth / Decline (0.6%) (2.1%) (1.1%) (1.9%) (2.0%) (0.7%)

Adjusted organic revenue growth/(decline) is provided to assist in understanding the comparability of the Company’s revenue growth for the years ended December 31,
2014 – 2017, the second quarter of 2018 and as expected for the year ending December 31, 2018. The Company’s management believes that adjusted organic revenue
growth is a useful financial measure to compare revenue growth excluding acquisitions, divestitures, exited business, foreign exchange effect, extra days and other non-
comparable revenue items. This presentation is not intended as an alternative to results reported in accordance with generally accepted accounting principles (GAAP) in the
United States. Instead, the Company believes that this information is a useful financial measure to be considered in addition to GAAP performance measures.

*2018 is an estimate based on the Company’s Outlook provided on July 26, 2018.

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Investor Relations
Tel: 651-787-1370
ed.merritt@deluxe.com