# DELUXE CORP (DLX) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from DELUXE CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/27996/000002799625000051/dlx-20241231.htm
Accession: 0000027996-25-000051
Filing date: 2025-02-21
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/DLX/
All MD&A years: /company/DLX/mda/
Previous year: /company/DLX/mda/fy2023/ (FY 2023)
Next year: /company/DLX/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") includes the following sections:

•Executive Overview that discusses what we do and our operating results at a high level;

•Consolidated Results of Operations; Restructuring and Integration Expense; and Segment Results that includes a more detailed discussion of our revenue and expenses;

•Cash Flows and Liquidity and Capital Resources that discusses key aspects of our cash flows, financial commitments, capital structure, and financial position; and

•Critical Accounting Estimates that discusses the estimates that involve a significant level of judgment and uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Please be aware that this MD&A discussion contains forward-looking statements that involve risks and uncertainties. Part I, Item 1A of this report details known material risks and important information to consider when evaluating our forward-looking

24

statements. The Private Securities Litigation Reform Act of 1995 (the "Reform Act") provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information. When we use terms such as “should result,” “believe,” “intend,” “plan,” “are expected to,” “targeted,” “will continue,” “will approximate,” “is anticipated,” “estimate,” “project,” “outlook,” "forecast," or similar expressions in this Annual Report on Form 10-K, in future filings with the Securities and Exchange Commission (SEC), in our press releases, investor presentations, and in oral statements made by our representatives, these indicate forward-looking statements within the meaning of the Reform Act.

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). Additionally, we discuss non-GAAP financial measures such as free cash flow, net debt, adjusted diluted earnings per share (EPS), consolidated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), and consolidated adjusted EBITDA margin. We believe that these non-GAAP financial measures, when reviewed alongside GAAP financial measures, can provide valuable insights for investors analyzing our current period operating performance and assessing our future operating performance. Consequently, our internal management reporting also includes these financial measures, which should be considered in addition to, and not as superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly filed reports in their entirety and not to rely solely on any single financial measure. Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and therefore, may not facilitate useful comparisons. The reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the Consolidated Results of Operations section.

The following discussion and analysis provides information we believe is essential for understanding our financial condition and results of operations. This discussion focuses on our consolidated financial results for the years ended December 31, 2024 and December 31, 2023. For a discussion of our consolidated results of operations for the year ended December 31, 2023, compared to the year ended December 31, 2022, please refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 ("the 2023 Form 10-K"), which was filed with the SEC on February 22, 2024, and is incorporated by reference into this Form 10-K. Since we revised our reportable segments effective January 1, 2024, the Segment Results section includes an analysis of segment performance for the years ended December 31, 2024, 2023, and 2022. We recommend that you read the following discussion and analysis in conjunction with our consolidated financial statements and related notes, which are presented in Part II, Item 8 of this report. This will provide a comprehensive understanding of our financial performance and the factors that influenced our results during these periods.

EXECUTIVE OVERVIEW

We help businesses strengthen their customer relationships through trusted, technology-enabled solutions that facilitate payments, drive growth, and enhance operational efficiency. Our comprehensive suite of solutions includes merchant services, marketing and data analytics, treasury management solutions, and promotional products, along with customized checks and business forms. We support small and medium-sized businesses, financial institutions, and some of the world’s largest consumer brands. We also provide checks and accessories directly to consumers. Our reach, scale, and distribution channels position us to be a trusted business partner, providing the tools and support our customers need to succeed.

Our Strategy

A detailed discussion of our strategy can be found in Part I, Item 1 of this report. Having substantially completed our infrastructure modernization efforts and the divestiture of non-strategic businesses, we have now redirected our focus toward growth investments. This shift is aimed at driving scale and accelerating profit growth at a pace that surpasses revenue growth. Our operations continue to benefit from our disciplined pricing actions and comprehensive cost management practices. In 2023, we launched our North Star program with the objective of enhancing shareholder value by (1) accelerating our adjusted EBITDA growth, (2) increasing cash flow, (3) reducing debt, and (4) improving our leverage ratio. We have started to realize the benefits of our North Star initiatives, as evidenced by the improvement in both adjusted EBITDA and adjusted EBITDA margin for 2024 compared to 2023, excluding the impact of business exits. A key driver of this improvement was a 14% reduction in the costs of our corporate operations for 2024, as compared to 2023. We also reduced net debt by $52 million from the previous year-end.

Realignment – Effective January 1, 2024, we realigned our organizational structure to better reflect our portfolio mix and offerings, and we updated our reportable segments to correspond with these changes. We did not operate under the new segment structure prior to January 1, 2024. Information regarding our realigned reportable segments can be found under the caption "Note 17: Business Segment Information" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Business exits – Over the past three years, we made strategic decisions to exit certain of our businesses. In 2022, we sold our Australian web hosting business, as well as our strategic sourcing and retail packaging businesses. In 2023, we sold our North American web hosting and logo design businesses, completing our exit from the web hosting space. Additionally, in 2023, we entered into agreements to exit our payroll and human resources services business, facilitating the transition of our U.S. and Canadian customers to other service providers. These customer conversions were substantially completed during 2024.

25

We believe that these business exits allow us to concentrate our resources on our growth businesses, while optimizing our operations. Further information regarding these business exits can be found under the caption "Note 6: Divestitures" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

2024 Financial Results

Highlights of our 2024 financial results compared to 2023 include:

•Consolidated revenue – Decreased by $70 million to $2.12 billion, primarily due to the continuing secular decline in order volumes for checks, business forms, and some business accessories, as well as business exits, which drove a $45 million reduction. These declines were partially offset by pricing actions and growth in data-driven marketing and merchant services.

•Net income – Increased by $27 million to $53 million, reflecting the impact of our pricing and cost reduction actions and reduced restructuring and integration expense. These positive factors were partially offset by the loss of earnings from exited businesses, the secular revenue declines in the Print segment, and inflationary pressures on hourly wages, materials, and delivery costs.

•Adjusted EBITDA – Decreased by $5 million to $412 million, including the impact of business exits, which drove a $20 million decrease. Excluding the impact of business exits, adjusted EBITDA would have increased due to the benefits of our pricing and cost reduction actions and growth in data-driven marketing and merchant services. These impacts were partially offset by the secular declines in the Print segment, inflationary pressures on our cost structure, and a $6 million increase in bad debt expense, primarily in the Print segment.

Adjusted EBITDA margin of 19.4% for 2024 increased as compared to 19.0% for 2023. Our pricing and cost optimization actions more than offset the impact of the Print secular declines, the inflationary pressures, and the higher bad debt expense. A reconciliation of net income to adjusted EBITDA can be found in the Consolidated Results of Operations section.

•Cash provided by operating activities – Decreased by $4 million to $194 million, reflecting the secular declines in the Print segment, business exits, inflationary pressures on our cost structure, and an unfavorable year-over-year impact from certain working capital changes, primarily related to receivables, prepaids, and inventories. These impacts were partially offset by our pricing and cost management actions, reduced restructuring and integration spend, and lower payments for cloud computing arrangement implementation costs and performance-based employee cash bonuses.

•Free cash flow – Increased by $2 million to $100 million, defined as cash flows from operating activities less purchases of capital assets. We continue to reinvest the free cash flow generated by our Print business into our growth businesses. A reconciliation of free cash flow to its comparable GAAP financial measure can be found in the Consolidated Results of Operations section.

Recent Market Conditions

We continually monitor the interest rate environment and its impact on our outstanding debt. As of December 31, 2024, 61% of our debt had a fixed interest rate of 8.1%, which partially insulates us from future interest rate increases.

We also continually monitor the impact of inflationary pressures affecting our labor, delivery, and material costs. In response to the inflationary environment, we have implemented targeted price increases, primarily in our Print and Merchant Services segments. Despite these price adjustments, we continue to experience healthy revenue volumes, which underscores the strength of our business and the sustained demand for our products and services. We have occasionally experienced supply chain disruptions, particularly affecting the supply of certain printed products in our Print segment, and ongoing global unrest and potential uncertainties surrounding trade policies, treaties, and tariffs, could further disrupt the global supply chain and result in increased costs. To mitigate this risk, we continuously monitor our supply chain to avoid delays or disruptions. We have also experienced labor supply issues in certain portions of our business. The severity and duration of inflation, as well as supply chain and labor issues, remains difficult to predict and could continue to impact our business, financial position, and results of operations.

We also monitor trends in small business sentiment and consumer discretionary spending. We analyze various data sources, including information from credit card brands, the Federal Reserve, other economic forecast providers, and our proprietary data. These trends significantly influence multiple areas of our portfolio, particularly our Merchant Services and Print segments. The data suggests that downward trends in discretionary consumer spending have stabilized. Nonetheless, we have observed a softening in demand for some of our discretionary promotional products within the Print segment and our processing volumes within Merchant Services. We also monitor various factors that could influence our customers' purchasing power, including potential global trade disruptions due to tariffs and other changes to trade policy in the U.S. and other countries.

26

Additionally, geopolitical events, such as war or other hostilities, could lead to a downturn in the global economy, which may negatively impact our performance.

Liquidity

As of December 31, 2024, we held cash and cash equivalents of $34 million, along with an additional $374 million available for borrowing under our revolving credit facility. We anticipate that capital expenditures will be between $90 and $100 million in 2025, compared to $94 million in 2024, as we continue to build scale across our product categories and invest in innovation. Our capital allocation priorities remain focused on responsible growth investments, debt reduction, and returning capital to shareholders through dividends. We expect to maintain our regular quarterly dividend payments. However, dividends are subject to approval by our board of directors each quarter and, therefore, may change.

We believe that net cash generated by operations, combined with cash and cash equivalents on hand, and the availability under our credit facility, will be sufficient to support our operations over the next 12 months. This includes meeting our contractual obligations, debt service requirements, and addressing our long-term capital needs. As of December 31, 2024, we were in compliance with our debt covenants.

CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Revenue

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["Total revenue","","$","2,121,761","","","$","2,192,260","","","","","(3.2%)"]]
[[/GREPCENT_TABLE]]

The decrease in total revenue for 2024, compared to 2023, was driven by several factors, including the continuing secular decline in order volumes for checks, business forms, and certain business accessories, as well as the business exits discussed in the Executive Overview section, which led to a reduction in revenue of approximately $45 million. Additionally, revenue was impacted by a reduction in treasury management revenue resulting from reduced lockbox processing volumes and a strategic shift from relying on one-time revenue to a more recurring revenue model.

These declines in revenue were partially offset by price increases in response to the inflationary environment, primarily in our Print and Merchant Services segments. Additionally, there was strong demand for our data-driven marketing services, which contributed a $22 million increase in revenue.

We do not manage our business based on product versus service revenue. Instead, we analyze our revenue based on the product and service offerings shown under the caption "Note 17: Business Segment Information" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report. Our revenue mix by business segment was as follows:

[[GREPCENT_TABLE]]
[["","","2024","","2023"],["Merchant Services","","18.1","%","","16.6","%"],["B2B Payments","","13.6","%","","13.7","%"],["Data Solutions","","11.0","%","","9.7","%"],["Print","","56.8","%","","57.5","%"],["All other","","0.5","%","","2.5","%"],["Total revenue","","100.0","%","","100.0","%"]]
[[/GREPCENT_TABLE]]

Consolidated Cost of Revenue

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["Total cost of revenue","","$","995,311","","","$","1,029,577","","","","","(3.3%)"],["Total cost of revenue as a percentage of total revenue","","46.9","%","","47.0","%","","","","(0.1) pt."]]
[[/GREPCENT_TABLE]]

Cost of revenue primarily consists of raw materials used to manufacture our products, shipping and handling costs, third-party costs for outsourced products and services, payroll and related expenses, information technology costs, depreciation and amortization of assets used in the production process and in support of digital service offerings, and related overhead.

27

The decrease in total cost of revenue for 2024, compared to 2023, was driven by several factors. Reduced revenue volume from the continuing secular decline in checks, business forms, and some business accessories contributed to the decrease. Additionally, our various cost management actions and the decrease in treasury management revenue further reduced cost of revenue. Total cost of revenue decreased by $18 million due to the business exits discussed in the Executive Overview section, and restructuring and integration expense included in cost of revenue decreased by $10 million. These decreases in total cost of revenue were partially offset by the revenue growth in data-driven marketing, as well as inflationary pressures on hourly wages, materials, and delivery costs.

As a result, total cost of revenue as a percentage of total revenue for 2024 was virtually flat as compared to 2023. The benefits of our pricing and cost management actions and the lower restructuring and integration expense were offset by the inflationary impacts.

Consolidated Selling, General & Administrative (SG&A) Expense

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["SG&A expense","","$","909,168","","","$","956,068","","","","","(4.9%)"],["SG&A expense as a percentage of total revenue","","42.8","%","","43.6","%","","","","(0.8) pt."]]
[[/GREPCENT_TABLE]]

The decrease in SG&A expense for 2024, compared to 2023, was primarily due to various cost management actions, including workforce adjustments, marketing optimization, and real estate rationalization. Additionally, there was a reduction of approximately $11 million related to the business exits discussed in the Executive Overview section. These reductions were partially offset by a $6 million increase in bad debt expense, primarily within the Print segment.

Total SG&A expense as a percentage of total revenue for 2024 decreased compared to 2023, as the combined effects of price increases and our cost management actions more than offset the increase in bad debt expense.

Restructuring and Integration Expense

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["Restructuring and integration expense","","$","48,570","","","$","78,245","","","","","(37.9%)"]]
[[/GREPCENT_TABLE]]

We are actively pursuing several initiatives aimed at aligning our business with our growth strategy and enhancing operational efficiency. As we implement these initiatives, the amount of restructuring and integration expense is expected to fluctuate from period to period. Further information regarding these costs can be found in the Restructuring and Integration Expense section.

Gain on Sale of Businesses and Long-Lived Assets

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["Gain on sale of businesses and long-lived assets","","$","31,207","","","$","32,421","","","","","(3.7%)"]]
[[/GREPCENT_TABLE]]

As discussed in the Executive Overview section, we substantially completed our exit from the U.S. and Canadian payroll and human resources services business during 2024. This transition allowed us to recognize income related to the customer conversion agreements during 2024. Additionally, in 2023, we finalized the sale of our North American web hosting and logo design businesses, recognized income from our decision to exit the payroll and human resources services business, and sold two facilities. Additional information regarding these business exits and asset sales can be found under the caption "Note 6: Divestitures" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Asset Impairment Charges

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023"],["Asset impairment charges","","$","7,743","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

During 2024, we recorded goodwill impairment charges associated with our exit from the U.S. and Canadian payroll and human resources services business. Additional information can be found under the caption "Note 6: Divestitures" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

28

Interest Expense

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["Interest expense","","$","123,281","","","$","125,643","","","","","(1.9%)"],["Weighted-average debt outstanding","","1,584,453","","","1,676,858","","","","","(5.5%)"],["Weighted-average interest rate","","7.15","%","","7.06","%","","","","0.09 pt."]]
[[/GREPCENT_TABLE]]

The decrease in interest expense for 2024, compared to 2023, was mainly due to a decrease in the average debt outstanding. This positive effect was partially offset by the impact of higher interest rates and expense of $2 million from the retirement of debt due to the debt refinancing completed in the fourth quarter of 2024. Further information regarding the refinancing of our debt can be found under the caption "Note 13: Debt" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report. Based on the amount of variable-rate debt outstanding as of December 31, 2024, a one percentage point change in the weighted-average interest rate would result in a $6 million change in interest expense for 2025.

Income Tax Provision

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["Income tax provision","","$","23,552","","","$","13,572","","","","","73.5%"],["Effective tax rate","","30.8","%","","34.1","%","","","","(3.3) pt."]]
[[/GREPCENT_TABLE]]

The effective income tax rate for 2024 decreased compared to 2023. This change was primarily due to lower tax rate impacts in 2024 from return to provision adjustments, share-based compensation, and the repatriation of foreign earnings. Partially offsetting these decreases in our effective income tax rate was the tax rate benefit from business exit activities in 2023 that did not recur in 2024. Additional details regarding other factors that impacted our effective income tax rates can be found under the caption "Note 10: Income Tax Provision" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Net Income, Diluted EPS, and Adjusted Diluted EPS

[[GREPCENT_TABLE]]
[["(in thousands, except per share amounts)","","2024","","2023","","","","Change"],["Net income","","$","52,945","","","$","26,227","","","","","101.9%"],["Diluted EPS","","1.18","","","0.59","","","","","100.0%"],["Adjusted diluted EPS","","3.29","","","3.32","","","","","(0.9%)"]]
[[/GREPCENT_TABLE]]

Net income and diluted EPS increased for 2024 compared to 2023, reflecting the changes noted above. Adjusted diluted EPS decreased $0.03 per share in 2024, compared to 2023, driven by the impact of business exits, which drove a $0.27 per share decrease. Excluding the impact of business exits, adjusted diluted EPS would have increased due to the benefits of our pricing and cost reduction actions, as well as growth in data-driven marketing and merchant services. These positive impacts were partially offset by the secular declines in the Print segment, inflationary pressures on our cost structure, and a $6 million increase in bad debt expense, primarily in the Print segment. A reconciliation of net income to adjusted net income, which is used in the calculation of adjusted diluted EPS, can be found in the following section.

Reconciliation of Non-GAAP Financial Measures

Free cash flow – We define free cash flow as net cash provided by operating activities minus purchases of capital assets. We consider free cash flow to be an important indicator of cash available for servicing debt and for shareholders, after making necessary capital investments to maintain or expand our asset base. One limitation of using the free cash flow measure is that not all of our free cash flow is available for discretionary spending. We may have mandatory debt payments and other cash requirements that must be deducted from our available cash. Despite this limitation, we believe that the measure of free cash flow offers an additional metric to consistently compare cash generated by operations. It also provides insight into the cash flow available to fund various items such as dividends, mandatory and discretionary debt reduction, acquisitions or other strategic investments, and share repurchases.

29

Net cash provided by operating activities for the years ended December 31 reconciles to free cash flow as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023"],["Net cash provided by operating activities","","$","194,281","","","$","198,367"],["Purchases of capital assets","","(94,389)","","","(100,747)"],["Free cash flow","","$","99,892","","","$","97,620"]]
[[/GREPCENT_TABLE]]

Net debt – Net debt is calculated by subtracting cash and cash equivalents from total debt. One limitation associated with using net debt is that by subtracting cash and cash equivalents, it may imply that management intends to use these funds to reduce outstanding debt. Additionally, net debt can suggest that our debt obligations are lower than what the most comparable GAAP measure indicates. Despite these limitations, management believes that net debt is a valuable metric for assessing our financial leverage and overall balance sheet health. It provides a measure of our debt burden by considering the funds available to offset our debt obligations.

Total debt reconciles to net debt as follows as of December 31:

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023"],["Total debt","","$","1,503,151","","","$","1,592,851"],["Cash and cash equivalents","","(34,399)","","","(71,962)"],["Net debt","","$","1,468,752","","","$","1,520,889"]]
[[/GREPCENT_TABLE]]

Adjusted EBITDA and adjusted EBITDA margin – We believe that adjusted EBITDA and adjusted EBITDA margin are useful metrics for evaluating our operating performance. These measures eliminate the effect of interest expense, income taxes, the accounting effects of capital investments (i.e., depreciation and amortization), and certain other items that may vary for reasons unrelated to current period operating performance. Management uses these measures to assess the operating results and performance of the business, perform analytical comparisons, and identify strategies to improve performance. Additionally, we believe that an increasing adjusted EBITDA and adjusted EBITDA margin indicate an increase in the company's value.

It is important to note that we do not consider adjusted EBITDA to be a measure of cash flow, as it does not account for certain cash requirements such as interest, income taxes, debt service payments, or capital investments.

Net income for the years ended December 31 reconciles to adjusted EBITDA and adjusted EBITDA margin as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023"],["Net income","","$","52,945","","","$","26,227"],["Net income attributable to non-controlling interest","","(143)","","","(107)"],["Depreciation and amortization expense","","165,544","","","169,703"],["Interest expense","","123,281","","","125,643"],["Income tax provision","","23,552","","","13,572"],["Restructuring and integration expense","","50,450","","","90,475"],["Share-based compensation expense","","19,944","","","20,525"],["Certain legal-related (benefit) expense","","(34)","","","2,195"],["Asset impairment charges","","7,743","","","\u2014"],["Gain on sale of businesses and long-lived assets","","(31,207)","","","(32,421)"],["Loss on sale of investment securities","","\u2014","","","1,323"],["Adjusted EBITDA","","$","412,075","","","$","417,135"],["Adjusted EBITDA margin","","19.4","%","","19.0","%"]]
[[/GREPCENT_TABLE]]

Adjusted diluted EPS – We believe that adjusted diluted EPS is a valuable metric for providing comparable information that assists in analyzing our current period operating performance and assessing our future operating performance. By excluding the impact of non-cash items or items that we believe are not indicative of current period operating performance, adjusted diluted EPS offers a useful view of our underlying business performance. Adjusted diluted EPS is one of the key financial performance metrics we use to evaluate the operating results and performance of the business, and It helps us identify strategies to improve performance. While it is reasonable to expect that one or more of the excluded items will occur in future periods, the amounts recognized may vary significantly.

30

Diluted EPS for the years ended December 31 reconciles to adjusted diluted EPS as follows:

[[GREPCENT_TABLE]]
[["(in thousands, except per share amounts)","","2024","","2023"],["Net income","","$","52,945","","","$","26,227"],["Net income attributable to non-controlling interest","","(143)","","","(107)"],["Net income attributable to Deluxe","","52,802","","","26,120"],["Acquisition amortization","","55,489","","","74,839"],["Accelerated amortization","","16,866","","","2,500"],["Restructuring and integration expense","","50,450","","","90,475"],["Share-based compensation expense","","19,944","","","20,525"],["Certain legal-related (benefit) expense","","(34)","","","2,195"],["Asset impairment charges","","7,743","","","\u2014"],["Gain on sale of businesses and long-lived assets","","(31,207)","","","(32,421)"],["Loss on sale of investment securities","","\u2014","","","1,323"],["Loss on debt retirement","","1,934","","","\u2014"],["Adjustments, pretax","","121,185","","","159,436"],["Income tax provision impact of pretax adjustments(1)","","(26,640)","","","(39,684)"],["Adjustments, net of tax","","94,545","","","119,752"],["Adjusted net income attributable to Deluxe","","147,347","","","145,872"],["Income allocated to participating securities","","(8)","","","\u2014"],["Re-measurement of share-based awards classified as liabilities","","(47)","","","(20)"],["Adjusted income attributable to Deluxe available to common shareholders","","$","147,292","","","$","145,852"],["Adjusted weighted-average shares and potential common shares outstanding(2)","","44,738","","","43,889"],["GAAP diluted EPS","","$","1.18","","","$","0.59"],["Adjustments, net of tax","","2.11","","","2.73"],["Adjusted diluted EPS","","$","3.29","","","$","3.32"]]
[[/GREPCENT_TABLE]]

(1) The tax effect of the pretax adjustments takes into account the tax treatment and related tax rate(s) applicable to each adjustment in the relevant tax jurisdiction(s). Generally, this results in a tax impact that approximates the U.S. effective tax rate for each adjustment. However, the tax impact of certain adjustments, such as share-based compensation expense and gains on sales of businesses, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable effective tax rate(s) in those jurisdictions.

(2) The total of weighted-average shares and potential common shares outstanding used in the calculation of adjusted diluted EPS differs from the GAAP calculation due to differences in the amount of dilutive securities in each calculation.

RESTRUCTURING AND INTEGRATION EXPENSE

Restructuring and integration expense consists of costs related to initiatives aimed at driving earnings and cash flow growth, including costs related to the consolidation and migration of certain applications and processes. These costs consist primarily of consulting, project management services, internal labor, and other items such as facility closure and consolidation costs. Additionally, we have recorded employee severance costs across functional areas.

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 enhance shareholder value by (1) accelerating our adjusted EBITDA growth, (2) increasing cash flow, (3) reducing debt, and (4) improving our leverage ratio. North Star is a comprehensive, multi-year plan that balances cost reduction and growth opportunities. On the cost reduction front, we are focused on refining our organizational structure and transforming our infrastructure and operations. We have successfully completed the material elements of our organizational redesign, which included consolidating similar roles, reducing hierarchical layers, and expanding spans of control. We are also leveraging technology and process automation to digitize and streamline our operations. Additionally, we are scaling our operations by consolidating back-office functions and tapping into the global labor market. On the revenue growth side, our priorities include developing an integrated software channel in Merchant Services, expanding our Data Solutions business to cater to more industry verticals, and enhancing our marketing and sales capabilities. We have made significant progress on all of the remaining North Star initiatives and anticipate continued positive impacts on our results of operations throughout the coming year. For example, we have significantly reduced our corporate expenses, which decreased 14% in 2024, compared to 2023. Further information regarding restructuring and

31

integration expense can be found under the caption "Note 9: Restructuring and Integration Expense" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

All investments under the North Star program are required to meet our internal hurdle rate and provide a higher return compared to other uses of capital, such as debt repayment. The North Star program aims to achieve a $100 million run-rate improvement in free cash flow and an $80 million run-rate improvement in adjusted EBITDA by 2026. Through December 31, 2024, we incurred related restructuring and integration expense of approximately $95 million ($50 million in 2024 and $45 million in 2023), and we expect to incur approximately $15 million in additional North Star restructuring and integration expense in 2025. These charges will include professional services fees, employee severance, and other restructuring-related costs.

The majority of the employee reductions included in our restructuring and integration accruals as of December 31, 2024, along with the related severance payments, are anticipated to be completed by mid-2025. As a result of these employee reductions, including those related to our North Star program, we realized cost savings of approximately $10 million in cost of sales and $25 million in SG&A expense in 2024, compared to our 2023 results of operations. For those employee reductions included in our restructuring and integration accruals through December 31, 2024, we expect to realize annual cost savings of approximately $5 million in cost of sales and $7 million in SG&A expense in 2025, compared to our 2024 results of operations. Note that these savings may be offset by increased labor and other costs, including inflationary impacts and investments in the business.

SEGMENT RESULTS

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, B2B Payments, Data Solutions, and Print. The financial information presented below for our reportable business segments is consistent with that presented under the caption “Note 17: Business Segment Information” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report, where information regarding revenue for our product and service offerings can also be found. The segment information for 2023 and 2022 has been recast to reflect our current segment structure.

Merchant Services

Results for our Merchant Services segment were as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","2022","","2024 vs. 2023","","2023 vs. 2022"],["Total revenue","","$","384,038","","","$","364,233","","","$","347,709","","","5.4%","","4.8%"],["Adjusted EBITDA","","78,540","","","74,399","","","70,760","","","5.6%","","5.1%"],["Adjusted EBITDA margin","","20.5","%","","20.4","%","","20.4","%","","0.1 pt.","","\u2014"]]
[[/GREPCENT_TABLE]]

Total revenue for 2024 increased compared to 2023, driven by customer wins across market channels, including our partnerships with banks, government clients, and our expanding reach with integrated software vendors, or ISVs. Additionally, revenue benefited from pricing actions implemented in response to the inflationary environment. These gains were partially offset by pressure on processing volumes in some verticals.

The increase in adjusted EBITDA for 2024 compared to 2023 was primarily driven by the price increases and other revenue growth, along with cost management actions. The scalability of our business model and the pricing actions also contributed to the slight increase in the adjusted EBITDA margin. Looking ahead to 2025, we expect to maintain this positive trajectory by capitalizing on our strong market position and growing customer base.

Total revenue for 2023 increased compared to 2022, as processing volumes increased despite soft consumer spending. Additionally, revenue benefited from pricing actions implemented in response to inflation and a significant customer conversion that went live in the fourth quarter of 2023.

The increase in adjusted EBITDA for 2023 compared to 2022 was primarily driven by the revenue growth and cost management actions. However, adjusted EBITDA margin remained flat year-over-year as the benefits from our pricing and cost management actions were offset by a shift in revenue mix linked to the higher processing volumes.

32

B2B Payments

Results for our B2B Payments segment were as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","2022","","2024 vs. 2023","","2023 vs. 2022"],["Total revenue","","$","287,851","","","$","299,196","","","$","307,117","","","(3.8%)","","(2.6%)"],["Adjusted EBITDA","","57,088","","","62,034","","","71,242","","","(8.0%)","","(12.9%)"],["Adjusted EBITDA margin","","19.8","%","","20.7","%","","23.2","%","","(0.9) pt.","","(2.5) pt."]]
[[/GREPCENT_TABLE]]

Total revenue for 2024 decreased compared to 2023, primarily due to reduced lockbox processing volumes and the absence of one-time hardware and license sales that occurred in 2023. We are continuing our migration from a dependency on one-time revenue to a more recurring revenue model. Consequently, we have intentionally shifted our focus away from selling products such as check imaging devices and one-time software licenses. These reductions in revenue were partially offset by a modest price increase to counteract inflation and the onboarding of new clients in the latter half of 2024. The revenue trend improved over the course of 2024, with a year-over-year decrease of 7.8% in the first half of the year, but a slight increase of 0.4% in the second half.

Adjusted EBITDA for 2024 decreased compared to 2023, driven mainly by the reduction in revenue, ongoing inflationary pressures on labor costs, and expenses related to the initial onboarding of new remittance processing customers in the latter half of 2024. These decreases were partially offset by our cost management actions, including the consolidation of our lockbox processing operations, as well as the modest price increase. Adjusted EBITDA margin decreased year-over-year, as inflationary pressures and the costs associated with new customer implementations exceeded the benefits from our pricing and cost management actions.

Total revenue for 2023 decreased compared to 2022, primarily due to reduced volumes for our fraud and security service offerings. Treasury management revenue remained virtually flat year-over-year, as price increases implemented in response to inflation were offset by the impact of one-time revenue in 2022 and demand softness for lockbox services.

Adjusted EBITDA for 2023 also decreased compared to 2022. This decline was primarily driven by the reduction in revenue and inflationary pressures on labor costs. These decreases were partially offset by the benefits realized from operational improvements across our lockbox sites. Adjusted EBITDA margin for 2023 decreased compared to 2022, as the investments in the business and increased labor costs exceeded the benefit from cost management actions.

Data Solutions

Results for our Data Solutions segment were as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","2022","","2024 vs. 2023","","2023 vs. 2022"],["Total revenue","","$","234,033","","","$","211,788","","","$","196,707","","","10.5%","","7.7%"],["Adjusted EBITDA","","60,443","","","46,281","","","44,833","","","30.6%","","3.2%"],["Adjusted EBITDA margin","","25.8","%","","21.9","%","","22.8","%","","3.9 pt.","","(0.9) pt."]]
[[/GREPCENT_TABLE]]

Total revenue for 2024 increased compared to 2023, driven by strong demand for customer acquisition marketing activities across both our core base of financial institution partners and our expanding portfolio of other clients. Robust new campaign activity underscores our success in collaborating with our customer base to deploy an optimized set of marketing capabilities.

Adjusted EBITDA for 2024 also increased compared to 2023, primarily driven by the rise in data-driven marketing volume, the benefits of our cost management actions, and a favorable mix of clients throughout the year. Adjusted EBITDA margin increased for 2024 compared to 2023, due to the cost management actions and favorable changes in client mix.

Total revenue for 2023 increased compared to 2022, driven by increased demand for our marketing services aimed at helping banks attract low-cost deposits and expand their business banking account offerings. This increase was partially offset by the pull-forward of some of our clients' marketing campaigns into the fourth quarter of 2022.

Adjusted EBITDA for 2023 also increased compared to 2022, mainly due to the growth in data-driven marketing and the benefits of our cost management actions. However, adjusted EBITDA margin decreased for 2023 compared to 2022, as the benefits of our cost management actions were more than offset by an unfavorable shift in client mix.

33

Print

Results for our Print segment were as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","2022","","2024 vs. 2023","","2023 vs. 2022"],["Total revenue","","$","1,205,077","","","$","1,261,283","","","$","1,276,775","","","(4.5%)","","(1.2%)"],["Adjusted EBITDA","","376,601","","","400,942","","","399,045","","","(6.1%)","","0.5%"],["Adjusted EBITDA margin","","31.3","%","","31.8","%","","31.3","%","","(0.5) pt.","","0.5 pt."]]
[[/GREPCENT_TABLE]]

Total revenue for 2024 decreased compared to 2023, primarily due to the ongoing secular decline in order volumes for checks, business forms, and some business accessories, as well as demand softness for our promotional products. Increased competition, particularly in the lower-margin promotional, apparel, and branded accessory areas, contributed to this softness. This competitive pressure largely impacted our third-party sourced offerings, reducing the traditional fourth quarter increase in volume observed in the prior year. These revenue declines were partially offset by pricing actions implemented in response to inflation.

Adjusted EBITDA for 2024 also decreased compared to 2023, primarily due to the decline in revenue, inflationary pressures on materials and delivery costs, and increased bad debt expense. These decreases were partially offset by our cost management actions, as we continue to focus on operating expense discipline and overall efficiency within this segment. Adjusted EBITDA margin for 2024 decreased compared to 2023, as the benefits from our pricing and cost management actions were more than offset by the inflationary cost pressures and the increased bad debt expense.

Total revenue for 2023 decreased compared to 2022, driven by the continuing secular decline in order volumes for checks, business forms, and some business accessories, as well as demand softness within our distributor network. These decreases were partially offset by pricing actions implemented in response to inflation, as well as the acquisition of new small business clients and the expansion of relationships with some of our existing clients.

Adjusted EBITDA for 2023 increased slightly compared to 2022, mainly due to the benefits of our cost management actions and a more focused approach targeting products with better margins. These increases were partially offset by the revenue decline and inflationary pressures on materials and delivery costs. Adjusted EBITDA margin for 2023 also increased compared to 2022, as the inflationary cost pressures were more than offset by the benefits of the pricing and cost management actions, along with our focus on higher-margin products.

CASH FLOWS AND LIQUIDITY

As of December 31, 2024, we held cash and cash equivalents of $34 million. Additionally, we had restricted cash and restricted cash equivalents, which were included in settlement processing assets and other non-current assets on the consolidated balance sheet, totaling $275 million. The following table should be read in conjunction with the consolidated statements of cash flows located in Part II, Item 8 of this report.

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["Net cash provided by operating activities","","$","194,281","","","$","198,367","","","","","$","(4,086)"],["Net cash used by investing activities","","(69,842)","","","(43,305)","","","","","(26,537)"],["Net cash used by financing activities","","(267,255)","","","(37,679)","","","","","(229,576)"],["Effect of exchange rate change on cash, cash equivalents, restricted cash, and restricted cash equivalents","","(6,064)","","","3,235","","","","","(9,299)"],["Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents","","$","(148,880)","","","$","120,618","","","","","$","(269,498)"],["Free cash flow(1)","","$","99,892","","","$","97,620","","","","","$","2,272"]]
[[/GREPCENT_TABLE]]

(1) See Reconciliation of Non-GAAP Financial Measures within the Consolidated Results of Operations section, which defines and illustrates how we calculate free cash flow.

Cash provided by operating activities for 2024 decreased $4 million compared to 2023, reflecting the secular declines in the Print segment, business exits, inflationary pressures on our cost structure, and an unfavorable year-over-year impact from certain working capital changes, primarily related to receivables, prepaids, and inventories. These impacts were partially offset by our pricing and cost management actions, reduced restructuring and integration spend, and lower payments for cloud computing arrangement implementation costs and performance-based employee cash bonuses.

34

Included in net cash provided by operating activities were the following operating cash outflows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["Interest payments","","$","117,828","","","$","115,556","","","","","$","2,272"],["Income tax payments","","49,893","","","47,945","","","","","1,948"],["Performance-based employee cash bonuses(1)","","39,045","","","44,483","","","","","(5,438)"],["Prepaid product discount payments","","29,809","","","28,535","","","","","1,274"],["Severance payments","","10,308","","","16,942","","","","","(6,634)"],["Payments for cloud computing arrangement implementation costs","","3,145","","","9,118","","","","","(5,973)"]]
[[/GREPCENT_TABLE]]

(1) Amounts reflect compensation based on total company and segment performance.

Net cash used by investing activities for 2024 increased by $27 million compared to 2023. This increase was primarily driven by lower proceeds from business exit activities in 2024 and proceeds of $8 million received in 2023 from the sale of investment securities related to our exit from the payroll and human resources services business, as discussed in the Executive Overview section. These increases in net cash used were partially offset by payments of $10 million in 2023 related to a joint venture aimed at launching and marketing a business payment distribution technology platform, which did not recur in 2024.

Net cash used by financing activities for 2024 increased by $230 million compared to 2023. This increase was primarily driven by changes in settlement processing obligations during each period, including the impact of our exit from the payroll and human resources services business, as discussed in the Executive Overview section. Additionally higher payments on long-term debt in 2024 contributed to the increase, along with payments of $15 million in 2024 for debt issuance costs related to the refinancing of our debt in December 2024.

Significant investing and financing cash transactions for each period were as follows:

[[GREPCENT_TABLE]]
[["(in thousands)","","2024","","2023","","","","Change"],["Net change in settlement processing obligations","","$","(108,036)","","","$","79,063","","","","","$","(187,099)"],["Purchases of capital assets","","(94,389)","","","(100,747)","","","","","6,358"],["Net change in debt","","(82,270)","","","(55,188)","","","","","(27,082)"],["Cash dividends paid to shareholders","","(54,155)","","","(53,325)","","","","","(830)"],["Payments for debt issuance costs","","(15,225)","","","\u2014","","","","","(15,225)"],["Proceeds from sale of businesses and long-lived assets","","23,295","","","53,635","","","","","(30,340)"],["Proceeds from sale of settlement processing asset debt securities","","\u2014","","","8,006","","","","","(8,006)"]]
[[/GREPCENT_TABLE]]

When evaluating our cash needs, we must take into account our debt service requirements, lease obligations, other contractual commitments, and contingent liabilities. Detailed information regarding the maturities of our long-term debt, our operating and finance lease obligations, and contingent liabilities can be found in the Notes to Consolidated Financial Statements under the captions "Note 13: Debt," "Note 14: Leases," and "Note 15: Other Commitments and Contingencies," located in Part II, Item 8 of this report.

Furthermore, we have entered into contracts with third-party service providers, primarily for information technology services, including cloud computing and professional services. These agreements also cover outsourced services, data purchases, and payment acceptance services. These contracts commit us to payments totaling approximately $225 million, with approximately $70 million due in 2025, $60 million due in 2026, and the remaining amounts due through 2029. We anticipate that capital expenditures will be between $90 and $100 million in 2025, compared to $94 million in 2024, as we continue to scale our product categories and invest in innovation.

As of December 31, 2024, we held cash and cash equivalents of $34 million, with an additional $374 million available for borrowing under our revolving credit facility. We believe that net cash generated from our operations, combined with cash and cash equivalents on hand, and the availability under our credit facility, will be sufficient to support our operations over the next 12 months. This includes meeting our contractual obligations, debt service requirements, and addressing our long-term capital needs. We expect to maintain our regular quarterly dividend payments. However, dividends are subject to approval by our board of directors each quarter and, therefore, may change.

35

CAPITAL RESOURCES

As of December 31, 2024, the principal amount of our debt obligations was $1.52 billion, compared to $1.60 billion as of December 31, 2023. Detailed information regarding our outstanding debt, including our debt service obligations, can be found under the caption "Note 13: Debt” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Our capital structure for each period was as follows:

[[GREPCENT_TABLE]]
[["","","December 31, 2024","","December 31, 2023"],["(in thousands)","","Amount","","Period-end interest rate","","Amount","","Period-end interest rate","","Change"],["Fixed interest rate","","$","925,000","","","8.1","%","","$","1,246,659","","","7.0","%","","$","(321,659)"],["Floating interest rate","","596,917","","","7.2","%","","357,528","","","7.9","%","","239,389"],["Total debt principal","","1,521,917","","","7.7","%","","1,604,187","","","7.2","%","","(82,270)"],["Shareholders\u2019 equity","","620,918","","","","","604,616","","","","","16,302"],["Total capital","","$","2,142,835","","","","","$","2,208,803","","","","","$","(65,968)"]]
[[/GREPCENT_TABLE]]

During 2024, we made significant changes to our debt obligations. In March 2024, we established an accounts receivable financing facility with a capacity of $80 million. As of December 31, 2024, $79 million was outstanding under the facility at an interest rate of 6.22%. The proceeds from these borrowings were used to prepay amounts due under our former secured term loan facility.

In December 2024, we executed a $900 million amended and restated credit agreement, which includes commitments of $400 million under a revolving credit facility and $500 million under a term loan facility. Concurrently, we repaid and terminated our previous credit facility, recording interest expense of $2 million for the write-off of the related unamortized debt issuance costs. As of December 31, 2024, $518 million was outstanding under our new credit agreement, at a weighted-average interest rate of 7.23%.

Additionally, in December 2024, we issued $450 million of 8.125% senior secured notes that mature in September 2029. However, if any of our senior unsecured notes remain outstanding as of February 1, 2029, the senior secured notes will mature on February 1, 2029. The proceeds from this offering, net of discount and offering costs, were $441 million, resulting in an effective interest rate of 8.6%. The net proceeds, along with borrowings from the new credit agreement established in December 2024, were used to refinance the former senior secured term loan and revolving credit facilities.

Information regarding our debt covenants can be found under the caption "Note 13: Debt” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report. As of December 31, 2024, we were in compliance with our debt covenants.

In October 2018, our board of directors authorized the repurchase of up to $500 million of our common stock. This authorization does not have an expiration date. We have not repurchased any shares under this authorization since the first quarter of 2020. As of December 31, 2024, $287 million remained available for repurchase. Information regarding changes in shareholders' equity can be found in the consolidated statements of shareholders' equity located in Part II, Item 8 of this report.

CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimates are those that are most important to accurately portraying our financial condition and results of operations, or that place significant demands on management's judgment regarding the effects of inherently uncertain matters, and different estimates or assumptions could materially impact our financial condition or results of operations. Our MD&A discussion is based on our consolidated financial statements, which have been prepared in accordance with GAAP. Our accounting policies are detailed under the caption “Note 1: Significant Accounting Policies” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

We regularly review the accounting policies used in reporting our financial results. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the related disclosure of contingent assets and liabilities. These estimates are based on historical experience and various other factors and assumptions that we believe are reasonable under the circumstances. This forms the basis for making judgments about the carrying values of assets and liabilities.

36

In some cases, we could have reasonably used different accounting estimates and in other cases, changes in the accounting estimates are likely to occur from period to period. Therefore, actual results may differ from our estimates. Significant estimates and judgments are reviewed by management on an ongoing basis and by the Audit and Finance Committee of our board of directors at the end of each quarter, prior to the public release of our financial results.

Revenue Recognition

We recognize product revenue when control of the goods is transferred to our customers, reflecting the consideration we expect to receive in exchange for those goods. Typically, control is transferred when products are shipped. The majority of our service revenue is recognized as the services are provided. Most of our contracts involve either the shipment of tangible products or the delivery of services with a single performance obligation or multiple performance obligations where control is transferred simultaneously. Some of our financial institution contracts include prepaid product discounts, which are cash payments made to our financial institution clients. These prepaid product discounts are recorded in other non-current assets on the consolidated balance sheets and are generally amortized as reductions of revenue on the straight-line basis over the contract term. Sales tax collected during revenue-producing activities is excluded from revenue. Amounts billed to customers for shipping and handling are included in revenue, while the related costs are recorded in cost of products and accrued when the related revenue is recognized.

When another party is involved in providing goods or services to a customer, we determine whether our obligation is to provide the specified good or service ourselves or to arrange for the good or service to be provided by the other party. If we are responsible for satisfying a performance obligation based on our control over the product or service, we are considered the principal and recognize revenue for the gross amount of consideration. If the other party is primarily responsible for satisfying the performance obligation, we are considered the agent and recognize revenue in the amount of any fee or commission we are entitled to. We sell certain products and services through a network of distributors and have determined that we are the principal in these transactions, recording revenue for the gross amount of consideration. Within Merchant Services, we present revenue net of the interchange fees retained by the card issuing financial institutions and the fees charged by the payment networks.

Certain costs incurred to obtain customer contracts must be recognized as assets and amortized in line with the transfer of goods or services to the customer. We defer costs related to obtaining check supply, treasury management solutions, and merchant services contracts. These amounts, which totaled $19 million as of December 31, 2024, are included in other non-current assets on the consolidated balance sheets and are amortized on the straight-line basis as SG&A expense. The straight-line amortization approximates the timing of the transfer of goods or services to the customer, generally over periods of two to five years. Costs are expensed as incurred when the amortization period is one year or less.

Accounting for customer contracts can be complex and may involve various techniques to estimate total contract revenue. Some contracts for data-driven marketing solutions include variable consideration that depends on the success of the marketing campaign, commonly referred to as pay-for-performance. We recognize revenue for estimated variable consideration as services are rendered, based on the most likely amount to be realized. As of December 31, 2024, the amount of conditional contract assets included in revenue in excess of billings on the consolidated balance sheet was $17 million. Estimates regarding the recognition of variable consideration are based on assumptions projecting the outcome of future events. Typically, the final amount of consideration for these contracts is determined within three to four months. We regularly review and update our contract-related estimates and do not expect that revisions to our estimates will have a material impact on our results of operations, financial position, or cash flows.

Goodwill Impairment

As of December 31, 2024, our goodwill totaled $1.42 billion, representing 50.3% of our total assets. We test goodwill for impairment annually as of July 31, or more frequently if events or changes in circumstances indicate a possible impairment.

To assess goodwill for impairment, we assign it to individual reporting units. Identification of reporting units involves analyzing the components that comprise each of our operating segments, considering factors such as the manner in which we operate our business and the availability of discrete financial information. Components of an operating segment are aggregated to form a reporting unit if they have similar economic characteristics. We periodically review our reporting units to ensure they continue to reflect the manner in which we operate our business.

During our annual goodwill impairment analysis, we may first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If this qualitative assessment suggests it is not more likely than not that the fair value is less than the carrying amount, a quantitative impairment test is unnecessary. For the 2024 annual impairment analysis, we performed quantitative analyses for specific reporting units: Merchant Services, Treasury Management, and Business Essentials. These quantitative analyses indicated that the estimated fair values of the reporting units exceeded their carrying values. For the remaining reporting units with goodwill, we conducted qualitative analyses, considering factors such as economic, market, and industry conditions, cost factors, and the overall financial performance of the reporting units. We also reviewed the most recent quantitative analyses from prior periods. Based on these assessments, we found no changes in events or circumstances that suggested it was more likely than not that the fair value of any reporting unit was less

37

than its carrying amount. As such, no goodwill impairment charges were recorded as a result of our 2024 annual impairment analysis.

When a quantitative analysis is necessary, we compare the carrying value of the reporting unit, including goodwill, to its estimated fair value. The carrying value is based on the assets and liabilities associated with the reporting unit's operations, often requiring the allocation of shared and corporate items among reporting units. We use a discounted cash flow model to estimate the fair value of a reporting unit. This model involves projecting future cash flows using the reporting unit's financial forecast from the perspective of an unrelated market participant. We project revenue using historical trending and internal forecasting techniques, apply our fixed and variable cost experience rates to the projected revenue, and calculate future cash flows. A terminal value is then applied to the projected cash flow stream, and future estimated cash flows are discounted to their present value to determine the estimated fair value. The discount rate used is the market-value-weighted-average of our estimated cost of capital, derived using both known and estimated customary market metrics. To determine the estimated fair values of our reporting units, we estimate several factors, including projected revenue growth rates, EBITDA margins, terminal growth rates, discount rates, and the allocation of shared and corporate items. When completing quantitative analyses for all of our reporting units, we compare the summation of our reporting units' fair values to our consolidated fair value, as indicated by our market capitalization, to ensure the reasonableness of our calculations.

In 2023, we entered into agreements to transition our U.S. and Canadian payroll and human resources services customers to other service providers. This business, which comprised a reporting unit with a goodwill balance of $8 million as of December 31, 2023, underwent an impairment evaluation during the latter half of 2024 as we transitioned out of the business. During the third and fourth quarters of 2024, we recorded goodwill impairment charges totaling $8 million, as we determined that the remaining cash flows to be generated by the business no longer supported the carrying value of the reporting unit.

Further details about our goodwill impairment analyses can be found under the caption "Note 8: Fair Value Measurements" in the Notes to Consolidated Financial Statements located in Item II, Part 8 of this report. Evaluating asset impairment involves assumptions about future events, market conditions, and financial performance over the asset's life, requiring significant judgment. Actual results may differ from our assumptions. For instance, a sustained decline in our stock price, a downturn in economic conditions affecting our operating results, changes in business strategies or resource allocation, loss of significant customers, increased competition, or accelerated declines in order volume for checks and business forms could indicate a decline in the fair value of one or more reporting units, potentially necessitating additional impairment charges for goodwill or other assets.

New Accounting Pronouncements

Information regarding accounting pronouncements not yet adopted can be found under the caption “Note 2: New Accounting Pronouncements” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.