Deluxe Corporation. First Quarter 2017 Earnings Conference Call April 27, 2017

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1 Deluxe Corporation First Quarter 2017 Earnings Conference Call April 27, 2017

2 Ed Merritt Treasurer and Vice President of Investor Relations 2

3 Todays Presenters Lee Schram Chief Executive Officer Keith Bush Chief Financial Officer and Senior Vice President Ed Merritt Treasurer and Vice President of Investor Relations 3

4 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 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, Portions of the financial and statistical information that will be reviewed during this call is addressed in greater detail in today's press release furnished to the SEC on Form 8-K filed by the Company this morning & posted on our investor relations website at deluxe.com/investors. References to non-gaap financial measures are reconciled to the comparable GAAP financial measures in the press release or as part of our remarks. 4

5 Lee Schram Chief Executive Officer 5

6 First Quarter 2017 Highlights Delivered a very strong quarter to start 2017 Revenue grew 6% over prior year quarter Financial Services revenue grew ~11% Small Business Services revenue grew ~6% Marketing solutions & other services (MOS) revenue grew ~20% MOS over 35% of total first quarter revenue Adjusted diluted EPS grew 5% from the prior year Strong operating cash flow of $74 million for the quarter Drawn nearly $740 million on credit facility at the end of the quarter Repurchased $15 million of common shares in the Q1 Continued brand awareness campaign Delivered on our cost reduction commitment for the quarter Closed on the acquisition of RDM 6

7 Keith Bush Chief Financial Officer and Senior Vice President 7

8 Q1 Results $ in millions Better/ (Worse) Revenue Small Business Services Financial Services Direct Checks Consolidated $ $487.8 $ $459.3 $ (2.9) $ 28.5 Gross Margin 63.3% 64.2% (0.9) pts SG&A Expense $ % $ % $ (15.3) (0.5 pts) Adjusted Operating Margin Small Business Services Financial Services Direct Checks Consolidated 19.1% 14.8% 32.1% 18.9% 17.9% 21.1% 35.4% 20.4% 1.2 pts (6.3 pts) (3.3 pts) (1.5 pts) Net Income $ % $ % $ (1.0) (0.9 pts) 8

9 Q1 Results vs. Outlook and Prior Year Diluted EPS $1.25 Adjusted Diluted EPS $1.12 to $1.17 Adjusted Diluted EPS $1.19 Adjusted Diluted EPS $0.09 $0.01 GAAP Diluted EPS $1.16 GAAP Diluted EPS $1.12 to $1.17 GAAP Diluted EPS $1.18 Q Reported Q Outlook Q Reported Excludes asset impairment charge and transaction-related costs in Q and restructuring-related costs in 2017 and

10 Balance Sheet and Cash Flow $ in millions Total Debt Cash Provided by Operating Activities $740 $759 $74.3 $72.7 3/31/ /31/2016 3/31/2017 3/31/

11 2017 Outlook Op. Cash Flow EPS Revenue Full Year $1.945B to $1.975B Q2 $476M to $484M Q3 $483M to $492M Diluted Full Year $5.06 to $5.21 Q2 $1.23 to $1.28 Adjusted Diluted Full Year $5.15 to $5.30 Q2 $1.23 to $1.28 Q3 $1.20 to $1.25 Full Year $330M to $350M FACTORS Small Business Services Full Year Expected Increase 3% to 5% Growth in our online, dealer & major accounts channels Price increases Double-digit growth in MOS Continued small tuck-in acquisitions Financial Services Full Year Expected Increase 15% to 17% Continued growth in MOS including data driven marketing and treasury mgmt. solutions Small tuck-in acquisitions Recurring check order declines of 5-6% and some pricing pressure Strong Operating Cash Flow $ in millions, except for EPS Direct Checks Full Year Expected Decline ~9% Secular check order declines Continued sluggish economy Cost and expense reductions ~$45M, net of investments Increases in material costs and delivery rates Continued investments in revenue growth opportunities including brand awareness, marketing solutions and other services offers, and enhanced internet capabilities Effective tax rate ~32.5% for the full year Stronger earnings and lower interest payments partially offset by higher tax, and employee medical payments Contract acquisition payments ~$23M Capital Expenditures ~$45M Depreciation & amortization ~$123M (~$75M acquisition-related amortization) 11

12 Capital Structure Our priorities for use of capital continue to be: Invest organically Small to medium-sized acquisitions Continue paying a quarterly dividend Periodically repurchase common stock As excess cash becomes available, plan to reduce the amount drawn on credit facility 12

13 Cost and Expense Reduction Initiatives Solid start in 2017 expect to drive approximately $45M of cost reductions, net of investments 60% of savings expected to come from sales & marketing 30% of savings expected to come from fulfillment, and 10% of savings expected to come from shared services 13

14 Lee Schram Chief Executive Officer 14

15 Marketing Solutions & Other Services $ in millions Categories 2016 Actual Revenue $ (% of Total) 2017 Outlook Revenue $ (% of Total) 2017 by Segment Expected Revenue Growth Rates Directional Annual EBITDA% v Estimated Total Company EBITDA% Estimated Annual Recurring Revenue Key Revenue Growth Initiatives Small Business Marketing $243 (39%) $249 $254 (~34%) All SBS ~3% to 5% Well Below ~40% Scale integrated marketing on demand solutions, W2P, retail packaging, promotional products Web Services $115 (19%) $132 $137 (~18%) All SBS ~15% to 19% Moderately Below ~95% Scale Deluxe Mktg Suite, web & payroll services; continue tuck-in acquisitions FS Data Driven Marketing $50 (8%) $135 - $142 (~19%) All FS Triple-Digit Growth Slightly Above ~90% Scale DMS, Datamyx, FMCG; continue tuck-in acquisitions Treasury Management Solutions $92 (15%) $114 - $117 (~15%) All FS ~24% to 27% Slightly Below ~70% Scale Wausau, FISC, DSS, RDM; continue tuck-in acquisitions Fraud, Security, Risk Mgmt, & Operational Services $117 (19%) ~$105 (~14%) ~63% FS ~24% SBS ~13% DC (~10%) Decline Well Above ~90% Scale fraud & security offers for SBs + consumers; scale profitability, strategic sourcing, Deluxe Rewards, echecks, SwitchAgent Total $617 ~$735 $755 (100%) 19% to 22% Moderately Below ~70% 15

16 2017 Key Focus Areas for SB and FS Segment Focus Areas 2017 Initiatives Small Business Services 1) Payments & Business Solutions 2) Web Services Drive check customer retention and acquisition of new customers and develop new retail customer acquisition channels Profitably scale marketing on demand solutions in select industries Scale echecks, edeposit and other payments and workflow solutions Grow digital marketing services thru improved customer experience and cross-sell including using integrated Deluxe Marketing Suite (DMS) and building out partnership and assessing tuck-in acquisition opportunities Scale payroll services and other operational annuity growth solutions Continue to drive Deluxe brand awareness with clear linkage to marketing and revenue generating capabilities Financial Services 1) Retail Banking 2) Commercial Banking Drive check customer retention and acquisition of new customers, continue to simply processes and eliminate costs Grow data driven marketing solutions, leveraging proprietary data with robust analytics and assess additional tuck-in acquisitions Continue to grow treasury management solutions - payment acceptance of multiple payment types, reconciliation and exception resolution Profitably integrate and scale previous acquisitions, assess additional tuck-in acquisitions, primarily focused in the financial services market 16

17 Direct Checks 2017 Expectations: Revenue decline of approximately 9% Marketing solutions and other services revenue to account for about 10% of Direct Checks revenue Reduce manufacturing costs and SG&A Deliver operating margins in the low-to-mid 30% range Generate strong operating cash flow 17

18 Well Positioned For... What we expect to be an eighth consecutive year of revenue growth Invest in people, technology, products, services and our brand Improve profitability and operating cash flow Technology and sales channels are stronger Digital technology service offers are more mature Infrastructure is better Management talent is deeper and aligned to grow revenue Strong MOS platform 18

19 Questions and Answers 19

20 In Summary 1. We delivered a very strong first quarter 2. Marketing solutions and other services revenue grew 20% and mix improved to 35% of total company revenue towards our goal of 38% this year and 40% in We have established a solid baseline first quarter to propel us towards revenue growth again in 2017 for an eighth consecutive year 20

Q2 Deluxe Up-Coming Event Date Event City May 3 Macquarie Business Services Conference Boston May 9 SunTrust Robinson Humphrey Internet & Digital Media Conference San Francisco May 17 Needham

21 Q2 Deluxe Up-Coming Event Date Event City May 3 Macquarie Business Services Conference Boston May 9 SunTrust Robinson Humphrey Internet & Digital Media Conference San Francisco May 17 Needham Emerging Technology Conference New York May 18 June 6 Global Mizuho SMID-Cap Opportunities Conference R.W. Baird Consumer, Technology, & Services Conference Boston New York June 8 Citi Small & Mid-Cap Conference New York 21

22 Replay Of This Call Audio replay available through May 4 Dial: Access code: Presentation slides: Deluxe s investor relations website at deluxe.com/investor 22

23 Investor Relations Tel:

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