Deluxe Corporation announced its financial results for the fourth quarter ended Dec. 31, 2012.
“We are excited to deliver our third straight year of revenue growth and our highest annual revenue growth rate since 1994, excluding the NEBS acquisition,” said Lee Schram, CEO of Deluxe. “Revenue in the fourth quarter was at the top end of our outlook and adjusted EPS exceeded our outlook, driven by strong performance in both Small Business Services and Financial Services. Full year adjusted EPS grew almost 14% to $3.53. Looking forward to 2013, in spite of an anticipated continued sluggish economy, we expect to continue our strong performance with a fourth year of profitable revenue growth.”
Revenue for the quarter was $387.6 million compared to $366.4 million during the fourth quarter of 2011. Revenue increased 5.8% compared to 2011, driven by 11.2% growth in Small Business Services, which included the impact of the OrangeSoda, Inc. acquisition in the second quarter. Marketing solutions and other services revenue, which also included the impact of the OrangeSoda, Inc. acquisition, increased 26.4% compared to 2011 and represented 22.5% of consolidated revenue, up from 18.8% in the fourth quarter of 2011.
Gross margin was 64.5% of revenue, the same as in 2011. Increased delivery rates, material costs and performance based compensation expense in 2012 were offset by favorable impacts from price increases and the Company’s continued cost reduction initiatives.
Selling, general and administrative (SG&A) expense increased $10.3 million in the quarter compared to 2011. Increased SG&A expense associated with commissions on increased revenue, as well as higher performance based compensation expense, higher brand awareness spending and the OrangeSoda acquisition in the second quarter, was partially offset by benefits from continued execution against expense reduction initiatives.
Operating income in 2012 was $77.8 million compared to $74.0 million in the fourth quarter of 2011. Restructuring and transaction-related costs were $4.0 million in 2012 versus $3.1 million in 2011. These costs were primarily attributable to the Company’s on-going cost reduction initiatives. Results for 2011 also included an asset impairment charge of $1.2 million related to a vacant facility. Operating income was 20.1% of revenue compared to 20.2% in the prior year driven primarily by higher performance based compensation expense, increased delivery rates and material costs, and the OrangeSoda acquisition in the second quarter, offset by higher revenue per order and continued cost reductions.
Reported diluted EPS increased $0.05 from the prior year driven by a lower effective income tax rate due to discrete items, and improved operating performance, partially offset by a charge of approximately $0.07 per diluted share in 2012 related to early debt retirements.