Deluxe Corp (DLX) 2025 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Deluxe quarterly earnings conference call. (Operator Instructions) and today's call is being recorded.

At this time, I would like to turn the conference over to your host, Vice President of Strategy and Investor Relations, Brian Anderson. Please go ahead.

Thank you, operator, and welcome to the Deluxe fourth-quarter and full-year 2025 earnings call. Joining me on today's call are Barry McCarthy, our President and Chief Executive Officer; and Chip Zint, our Chief Financial Officer. At the end of today's prepared remarks, we will take questions.

Before we begin, and as seen on the current slide, I'd like to remind everyone that comments made today regarding management's intentions, projections, financial estimates, and expectations about the company's future strategy or performance are forward-looking in nature as defined in the Private Securities Litigation Reform Act of 1995. Additional information about factors that may cause actual results to differ from projections is set forth in the press release we furnished today in our Form 10-K for the year ended December 31, 2024, and in other company SEC filings.

On the call today, we will discuss non-GAAP financial measures, including comparable adjusted revenue, adjusted and comparable adjusted EBITDA and EBITDA margin, adjusted and comparable adjusted EPS, and free cash flow. All comparable adjusted metrics reflect the removal of impacts from business exits.

In our press release, today's presentation and our filings with the SEC, you'll find additional disclosures regarding the non-GAAP measures, including reconciliations of these measures to the most comparable measures under US GAAP. Within the materials, we are also providing reconciliations of GAAP EPS to adjusted EPS, which may assist with your modeling.

And with that, I'll hand it over to Barry.

Thanks, Brian, and good evening, everyone. I'm pleased to share our strong fourth-quarter and full-year 2025 results. Across the past year, our team executed with discipline and each of our businesses performed well, driving robust growth of all profit metrics directly benefiting our balance sheet.

There are five key highlights for the year. Number one, revenue and profit growth. Comparable adjusted EBITDA expanded more than 6% at the top of our value creation framework with organic revenue growing 1%. 2025 was the third-consecutive year with EBITDA growing faster than revenue, demonstrating our ability to scale profits.

Two, EPS and operating income comparable adjusted EPS grew 13% and operating income increased by 23%.

Three, cash generation and balance sheet improvement. We generated $175 million of free cash flow, delivering our 2026 goal in 2025, a full year early. We reduced net debt by $76 million, lowering our year-end leverage ratio to 3.2 times also ahead of schedule. And we've paid our regular dividend for more than 30 consecutive years.

Four, strategic mix shift towards payments and data. Payments and Data now account for 47% of revenue, up from 43% a year ago and around 30% in early 2021. The payments and data businesses combined grew 12% during Q4 and 10% for the full year. We expect to achieve our strategic goal of payments and data achieving revenue parity with the print businesses later this year, delivering on our promise of transforming Deluxe into a payments and data company.

Five, exit rate provides optimism for 2026. Chip will introduce our guidance in a minute, but we are pleased with our Q4 exit rates with all businesses performing well, giving us confidence in 2026.

You will recall, at our Investor Day in December 2023, we promised Deluxe would be a significantly improved business by 2026. We think our results clearly tell the story of our progress. Put simply, our team executed well in 2025. Chip will provide deeper details for both Q4 and full-year financial performance in a minute. But before he does, and consistent with recent quarters, I'll discuss overall business performance in the context of our three ongoing strategic planks.

One, shifting revenue mix towards payments and data to deliver ongoing profitable enterprise-level organic growth. Two, driving operating leverage and efficiencies across the enterprise. And three, increasing EBITDA, EPS, and free cash flow to both lower net debt and improve our leverage ratio.

Starting with our first priority, shifting our revenue mix towards payments and data. We are executing well against our clear strategy to leverage our history as the leader in paper-based payments to build a leading position in the digital payments and data space. We're strategically redeploying the dependable cash flows, sterling reputation and strong customer relationships from the Print segment to build a leading payments and data company, and it's working.

As I noted, payments of data now accounts for 47% of total revenue, increased by nearly 400 basis points from 2024. We expect to achieve parity later this year, affirming our future as a payments and data company.

The Data segment in particular, continued its standout performance to finish 2025, expanding its revenue by just over 30% year over year. You'll recall, our data business helps our customers across market verticals, attract and deepen relationships with high lifetime value customers. We've built what we believe is one of the largest consumer and small business marketing data lakes in the industry.

We pair this information with our large-scale GenAI-enabled data analytics tools to deliver outstanding ROI for our customers' marketing spend. The flexibility of our data lake, AI-enhanced intelligence, and proprietary targeting tools allow us to quickly shift focus across a broad diversity of bank product offerings, while also extending our services to new logo wins across non-FI market verticals.

Beyond the continuing growth momentum in data, Deluxe Merchant Services, or DMS, also extended its revenue growth trend across all four quarters of 2025. DMS revenue growth versus prior year improved sequentially across each quarter of 2025 toward our mid-single-digit growth outlook.

We also invested to expand our DMS technology platforms and the strong service model throughout the year. The business delivered growth in line with our expectations, even at some levels of macroeconomic and broader peer group volatility persisted. As one example of our ongoing investment in DMS, we recently announced the deepening of our collaboration with the Visa Direct network, via the introduction of the Deluxe Bass Funds solution. This integration, along with other areas of ongoing investments, demonstrate our commitment to innovation across our DMS offerings.

We remain encouraged with our prospects spanning both our direct go-to-market channels and through key partnerships, including our robust network of FI partners and embedded software integrations across market verticals. We are particularly optimistic about the many attractive opportunities in the ISV space, where we've made responsible investments in APIs, reporting tools, and new features. We expect to share more news about some of these opportunities over the course of 2026. Our overall DMS sales pipeline remains strong as we enter the new year.

Moving now to the B2B payments segment. Revenue growth for B2B also accelerated as we finished 2025 as we had signaled during last quarter's call. We saw sequential revenue dollar improvement for this segment across each quarter of 2025, reaching a fourth-quarter revenue peak of more than $76 million. This reflected a year-over-year growth rate of 4.5%, consistent with our prior cadence commentary for the segment. We are well-positioned to sustain growth into 2026 and as we continue to invest in newer digital offerings, helping transition the B2B portfolio to a more recurring revenue model.

Finally, the Print business. For the full year, the strong margin check portion of the business continued to perform well, aligned with our long-term expectations, with full year revenue declining just under 2%. We were encouraged to see some improvement in the rate of decline for shorter cycle legacy promo revenue during the fourth quarter period as well.

As we've discussed throughout the year, we remain focused on optimizing the long-term margin profile across Print through prioritization of our core offerings and consciously foregoing opportunities with unattractive margins. This strategy is clearly reflected within the expanded Print EBITDA margin profile during 2025.

To summarize this first strategic priority area, the 10% full-year revenue growth rate from our combined payments and data businesses more than offset anticipated secular decline rates across the Print segment. This expansion drove total company organic revenue growth across both the fourth-quarter and full-year periods. The payments and data businesses are together on their way to account for more than 50% of company revenue in 2026, affirming our future as a payments and data company.

Moving to our second big strategic priority, driving efficiency across our business operations to improve margins and deliver predictable operating leverage. Operating cost discipline remained a core tenet of the company throughout the year, and our EBITDA margins expanded in each operating segment for both the fourth-quarter and full-year periods. We reduced overall SG&A expenses by roughly $40 million over the full year 2025 horizon. This reflected an improvement of more than 4% year over year.

Our OpEx discipline contributed to robust 23% growth of full year operating income and supported the significant improvement of our balance sheet.

Our year-over-year growth of adjusted EBITDA for the 12th consecutive quarter and margin expansion realized across all four segments simultaneously demonstrate the continuing strength of our operating model.

Finally, moving to the third strategic priority area within our capital allocation model, increasing adjusted EBITDA and EPS, driving cash flows, and lowering our net debt and leverage ratio. As I noted earlier, we finished the year driving more than 6% growth of adjusted EBITDA, reflecting the high end of our value creation algorithm target range. Our adjusted EPS expanded by nearly 13%, further reflecting our improved balance sheet and strengthening interest rate position as 2025 progressed.

We also drove improved conversion of profits into 2025 cash flows. This resulted in a year-end leverage ratio of 3.2 times, ahead of our previously signaled timing as we continue to progress towards our longer-term leverage target of 3 times or lower. We reduced our net debt by more than $76 million during the year demonstrating our commitment to continued balance sheet optimization.

To summarize, our 2025 results demonstrate clear progress on all three concurrent strategic priorities. One, shifting the mix towards payments and data; two, driving operating efficiencies; and three, increasing cash flow generation, driving reduction of debt and improving our leverage ratio.

Both our fourth-quarter and full-year results illustrate this progress achieved through disciplined capital allocation, strong execution across each operating unit, and sustained focus around the pushing of our value creation algorithm forward.

Revenue momentum and our sales pipelines remain robust across each operating segment, giving us confidence toward continued progress in 2026.

Before passing this to Chip to share additional details regarding our 2025 performance and solid 2026 outlook, I want to thank my fellow Deluxers for executing so well. I'm proud of their unwavering dedication to our customers and the communities that Deluxe has served for generations, especially as we celebrated the company's 110th anniversary. It is via these daily efforts that we set Deluxe on a promising path for the next generation as a trusted payments and data company.

Chip, now over to you.

Thank you, Barry, and good evening, everyone. As Barry noted in his opening, we were very pleased with our strong 2025 progress, including our better-than-anticipated free cash flow conversion and resulting de-levering pace. Expansion of comparable adjusted EBITDA and EPS growth rates, lowered overall operating expense, and reduced restructuring-related spending during the year clearly highlight our progress. Our strong momentum toward key Investor Day outcomes is clearly embedded within our 2026 guidance ranges, which I'm pleased to be able to share this evening.

Our 2025 results also demonstrate continued improvement in the health of our balance sheet. We're pleased with our recently upgraded credit standing across key capital markets and our strengthened quality of earnings as we execute our clear strategy.

I'll begin by reviewing some of the consolidated highlights for the year before moving on to operating segment results and our 2026 guidance ranges. For the full year, we posted total revenue of $2.133 billion, increasing 0.5% versus 2024 reported results, while expanding by 1.1% year over year on a comparable adjusted basis. We reported full-year GAAP net income of $85.3 million or $1.87 per share for the year, improving from $52.9 million or $1.18 per share in 2024. This increase was driven by overall revenue growth, improved operating margins, and lower restructuring spend during 2025.

Full-year comparable adjusted EBITDA was $431.5 million, improving $25 million or 6.2% from the prior-year results. Adjusted EBITDA margins were 20.2%, expanding by 90 basis points from the 2024 levels. Full-year comparable adjusted EPS came in at $3.67, improving 12.6% from $3.26 in 2024. This improvement was primarily driven by expanded operating profits, along with slightly lower interest expense.

Now, turning to our operating segment details, beginning with Merchant Services.

For the full year, Merchant segment revenue finished at $398.6 million, growing by 3.8% versus 2024 results. We were pleased with this full year growth trajectory, which expanded sequentially across each quarter, as Barry noted, to reach our mid-single-digit fourth-quarter exit growth rate consistent with our longer-term outlook for this business.

Segment adjusted EBITDA finished 2025 at $85.9 million, expanding by 9.4% on the improving revenue trajectory and operating cost efficiencies realized versus the prior year. Margins finished at 21.6%, expanding by 120 basis points versus full year 2024 levels.

Merchant revenue for the fourth quarter finished at $101.5 million, reflected growth of 6.3% versus Q4 of 2024, inclusive of our sequentially improving growth trend across the quarters. Merchant fourth-quarter adjusted EBITDA finished at $22.3 million or 22% of revenue, expanding by 80 basis points versus Q4 of 2024. Margin improvement was driven via the improved revenue growth rate, continuing cost discipline, and overall channel mix dynamics across the quarter.

Our guidance ranges for 2026 reflect the expectation for growth of Merchant segment revenue in the mid-single-digit range with continued expansion of margin opportunities across the portfolio, as I'll discuss in greater detail in a bit.

We remain confident in our ability to drive growth across Merchant based on our robust pipeline of new FI, ISV, and ISO partners, either currently signed or in queue for 2026 as well as additional merchant adds across our direct go-to-market channels. We have also assumed fairly stable ongoing macroeconomic conditions and related discretionary consumer spending levels across our broader guidance ranges.

Shifting to results within B2B Payments segment. B2B revenue finished the year at $290.5 million, reflecting growth of 0.9% versus the prior year. This overall growth rate aligned to our in-year expectations and reflected sequential improvement of B2B revenue dollars during each quarter of the year, driving an improved fourth-quarter revenue exit trajectory. 2025 adjusted EBITDA for B2B came in at $64.4 million, reflecting an overall 22.2% margin. This represented a strong 12.8% expansion of adjusted EBITDA from the prior-year results.

EBITDA growth was driven via continued efficiencies, realized across our operational footprint, and ongoing migration of the B2B business model toward expansion of our more recurring revenue offerings. This margin rate was aligned to our expectation, reflecting expansion from the high-teens towards low to mid-20s profile, consistent with our Investor Day multiyear outlook for the segment.

For the fourth quarter, B2B revenues were $76.3 million, expanding by 4.5% versus the prior year. Q4 adjusted EBITDA finished at $18.7 million, reflecting a strong 24.5% rate in line with the improving fourth-quarter revenue growth trajectory for the segment. Adjusted EBITDA for the quarter improved by 29% versus the fourth quarter of 2024, on stable lockbox processing operations and improving segment revenue mix within the specific fourth-quarter prior-year comparison.

Within our 2026 guidance ranges, we anticipate B2B revenues maintaining an overall low-single-digit growth profile as the segment continues to transition toward increasingly digital solutions. Our outlook also includes the continued rollout of our DPN capabilities within B2B, supported by the small acquisition we executed during the third quarter.

Our 2026 full-year outlook for the segment continues to incorporate adjusted EBITDA margins in the low- to mid-20s range, consistent with my prior comments and the rate reflected within our 2025 results.

Moving now to the strong 2025 growth results within the Data segment. Overall, as Barry noted, the data-driven marketing business saw standout growth across each quarter of the year as full-year revenue finished at $307.3 million, reflecting 31.3% growth versus 2024. This trajectory continued to demonstrate our success partnering with an expanded customer base to deploy our increasingly compelling set of marketing capabilities as we discussed throughout the year.

Data growth was also accompanied by strong margin expansion during 2025, and inclusive of certain volume-related vendor rebates executed as part of our broader North Star program, as we specifically discussed last quarter. Overall, data adjusted EBITDA finished at $86.4 million reflecting a 28.1% margin rate, expanding 42.8% versus the prior-year result.

Fourth-quarter data revenue finished at $73 million reflecting the anticipated sequential step-down from Q3 on normal course seasonality trends within the segment. Despite this, year-over-year revenue growth remained very strong, expanding 30.6% from the prior-year fourth-quarter results on continuing robust campaign demand during the period.

Q4 adjusted EBITDA finished at $17.3 million, expanding just over 40% year-over-year on the drivers noted within my full-year commentary. The Q4 margin rate finished at 23.7%, returning toward our signaled longer-term low- to mid-20s expectation range for the data segment. Our full-year 2026 guidance ranges incorporate a sustaining mid- to high-single-digit segment revenue growth rate going forward. We remain confident in the growth trajectory of our data offerings, even as we begin to lap the raised prior year comparable results seen across the 2025 periods.

Our adjusted EBITDA guidance incorporates data margins sustaining in the low- to mid-20s margin profile consistent with our prior quarter commentary and the outlook communicated within our multiyear Investor Day trajectory.

Shifting finally to our Print business. The segment finished 2025 with $1.14 billion in annual revenue, reflecting an overall decline of 5.7% versus prior year levels consistent with our overall low- to mid-single-digit secular decline trajectory expectation. As Barry mentioned, legacy check continued to perform well and consistent with our forecast, with revenue declining by 1.8% versus 2024. Accompanying the check trajectory, printed forms and other business products declined at 6.5% year-over-year rate.

On a combined basis, these two core areas blended to an overall 3% rate of year-over-year decline, in line with our longer-term trajectory expectation for the segment.

Full year revenue trajectory across other promotional product solutions reflecting some demand headwinds we discussed over the prior two quarters declined 15.3% year over year while remaining concentrated toward generally lower-margin noncore product offerings.

Overall adjusted EBITDA for Print finished the year at $366.9 million. The 2.6% rate of adjusted EBITDA declines seem within print aligned favorably to the blended rate of revenue decline for the more core print product focus areas. This drove an overall print margin rate of 32.3%, remaining consistent with our longer-term low-30s margin outlook for the segment. Despite some shorter cycle demand headwinds to the top line, we expanded the overall print margin rate by a full 100 basis points across the full-year 2025 results.

Fourth-quarter Print revenues were $284.5 million, declining 3.8% versus Q4 of 2024, as detailed further within the revenue breakdown by product category slide in our materials. On a blended basis, the trajectory across more core products reflected a 1.5% decline rate, while other promotional solutions rate improved sequentially but remained outsized to our longer-term revenue decline expectations.

Q4 adjusted EBITDA for Print remained strong, finished at $92.2 million. This reflected a 32.4% margin rate for the segment, expanding year over year by 50 basis points, while remaining consistent with our longer-term outlook rate expectations. Our overall 2026 guidance ranges continue to reflect our confidence towards a predictable year-over-year trend for secular declines across print, driving an overall revenue trajectory in the low- to mid-single-digit decline range. We remain confident in our ability to sustain margin levels across print, continuing to target an overall margin rate in the blended low-30s range over the guidance horizon.

Turning now to our balance sheet and better-than-anticipated 2025 cash flow results. We ended the year with a net debt level of $1.39 billion, down $76.2 million from $1.47 billion last year, consistent with our ongoing commitment to debt reduction as a top capital allocation priority for the enterprise, as Barry highlighted.

Our net debt to adjusted EBITDA ratio was 3.2 times at the end of the year, improving further versus our 3.6 times ratio a year ago. As we've noted, this is ahead of the pacing we previously signaled toward our longer-term strategic target of 3 times or lower leverage.

Free cash flow to fund as cash provided by operating activities less capital expenditures, was $175.3 million, up from $100 million in 2024, driven by lower in-year cash restructuring spend, improved year-over-year adjusted EBITDA results, continuing core working capital efficiency, and lower cash taxes. We remain particularly pleased with the accelerated achievement of our targeted free cash flow expansion and the ability to continue reducing our net debt consistent with our clear balance sheet optimization priorities.

During the fourth quarter, we deployed $36 million of cash for investing activities relating to the purchase of residual commission rights or one of our largest ISO partners within the Merchant Services segment. This investment is not expected to materially impact segment revenues during 2026 as related volumes have consistently been processed via Deluxe Merchant Services. We would, however, expect the fold-in of ongoing residual commissions to improve segment margins by as much as 200 to 300 basis points. This impact magnets our margin guidance for the segment toward the upper end of our low- to mid-20s rate outlook band.

Finally, supported by our strong cash flow and overall 2025 results, our overall balance sheet remains well-positioned and reflects our ongoing strong liquidity. Over the course of the year, our improving capital structure drove two S&P upgrades the most recent and late in November, and Fitch also moved our outlook to a positive watch position. All our material debt maturities remain aligned to our 2029 capital structure following our late 2024 refinancing activity. Our flexibility toward potential future portfolio optimization or other opportunistic investments continues to improve as we approach our targeted longer-term balance sheet ratios.

Before turning to the details of our 2026 outlook, consistent with the remaining plank of our capital allocation priorities, the Board approved a regular quarterly dividend of $0.30 per share on all outstanding shares. The dividend will be payable on February 23, 2026, to all shareholders of record as a market closing on February 9, 2026.

With that, I'm pleased to now share our overall guidance ranges for 2026. Our ranges for the full year are as follows: revenue of $2.11 billion to $1.175 billion, reflecting negative 1% to positive 2% comparable adjusted growth versus 2025; adjusted EBITDA of $445 million to $470 million, reflecting between 3% and 9% comparable adjusted growth; adjusted EPS of $3.90 to $4.30, reflecting between 6% to 17% comparable adjusted growth; and free cash flow of approximately $200 million, reflecting 14% growth versus our 2025 results.

And to recap my previous segment assumptions, we anticipate the Merchant segment to grow revenue in the mid-single-digit range year over year. B2B growth is expected to expand at low-single-digit levels. Data will maintain strong mid- to high-single-digit revenue growth rates as we lap increased baseline comparables across 2026 quarters. And Print will continue to reflect low- to mid-single-digit secular decline rates.

Margins for Merchant are expected to reach a mid-20s profile. While B2B will remain in the low- to mid-20s, consistent with 2025, and as Data also returns to our longer-term low- to mid-20s profile expectation, and Print margins will remain roughly flat in the low-30s range.

Lastly, we'd expect significant efficiencies across our corporate operations and spending, in line with our multiyear commitments and conclusion of North Star plan objectives.

Finally, to assist with your modeling, our guidance assumes the following: interest expense of approximately $110 million and adjusted tax rate of 26%; depreciation and amortization of approximately $135 million, of which acquisition amortization is approximately $45 million; an average outstanding share count of approximately 46.5 million shares; and capital expenditures between $90 million and $100 million. This guidance remains subject to, among other things, prevailing macroeconomic conditions as noted previously, including interest rates, labor supply issues, inflation, and the impact of divestitures.

To summarize, our solid 2025 execution and strong momentum put us on a strong trajectory heading into 2026. Our guidance for the year shows the significant progress we have made toward our Investor Day commitment of just over two years ago. 2026 is a year where the results of our hard work, deliver major advances towards all three of our critical strategic priorities.

Payments and Data revenues are expected to reach parity with the legacy print side of the business, putting us on a more sustainable, long-term growth trajectory. Our earnings expansion is expected to continue once again, outpacing revenue growth as we drive efficiencies and improvements to our cost structure. And our significant free cash flow generation will allow us to achieve our sub-3 times leverage target in the first half of the year.

Each of these expectations are consistent with our clear ongoing value creation formula, and we remain confident in our overall progress against our focused capital allocation priorities.

Operator, we are now ready to take questions.

(Operator Instructions) Kartik Mehta, Northcoast Research.

I'm hearing silence. We will go on to our next question from Charlie Strauzer with CJS Securities.

Hi, this is Will for Charlie. You made a note about the use of AI-enabled -- you made a note about the use of AI-enabled tools supporting the Data segment and developments and payments around embedded solutions such as Deluxe Fast Funds as the largest financial players increasingly discuss investment in agentic commerce and the impacts of AI across industries, how would you say Deluxe's positioned to respond to or to take advantage of some of these trends?

So Will, appreciate the question. I would tell you that we're very proud and believe that Deluxe is very well-positioned. We are a company that actually has applied AI technology in multiple places across our business. We're not experimenting with it. We have gone live, and it's delivering improved performance.

So as I mentioned in my prepared remarks, it is a part of how we're winning with our data-driven marketing business. As I said in my remarks, we built what we believe is one of the largest consumer and small business data lakes, and we pair that with great talent, but also great tools that are GenAI-based that gets smarter with every campaign that we run.

And if you compare our results and our -- the number of ad bats we have, we do thousands of campaigns a year, and any individual might do -- a large bank might do hundreds. So not only do we have more at bats, but given the nature of GenAI, we also have the opportunity for some exponential increase in our capabilities and success from a campaign performance perspective, and you can see that in our revenue performance.

We grew 30% in the full year, and that is a direct result of having great tools, great technology, great customer support, and being able to move quickly to help an institution solve its problems around growth, customer acquisition, or however we can apply that data to help them be successful.

Very helpful. Thank you. Just a follow-up, given the release of your updated outlook, how are you feeling about macroeconomic or other risks potentially impacting your growth segments in particular? And what factors could drive upside to the higher end of the outlook provided?

Sure. I'll start and give you some there, and then Chip can jump in, too. But on previous calls during the whole last year, we've been talking a bit about macroeconomic uncertainty, but we'll tell you what we've seen in the sort of the back half of the year through Q4 and even into the start of this year. We're seeing what we would consider just more traditional patterns of consumer behavior.

Now, the shift to still happen between discretionary and less discretionary categories that we saw earlier in the year but that shift seems to have stabilized. And so we believe that that gives us good confidence as we look forward to this new year. And we're optimistic that the consumer is going to stay healthy and that will help not just our merchant business, but our businesses overall, that tend to track pretty darn well with the economy overall.

Yeah. I think -- well said, Barry, I guess two points I'd make. First of all, we're just fundamentally in a different place coming out of 2025 and going into 2026 than we were a year ago. If you look at the execution and the performance across all four segments, just from a year ago. Everything is in a different place in terms of momentum and how we're performing.

I think the other thing I'd call your attention to is just the Data segment in particular. Obviously, that was a business that experienced extraordinary demand last year and obviously, at times, outperformed even our expectations.

But what we know is we're going to face some monster comps in the back half of the year. And I'll just remind you, this is a campaign-oriented business. And because of that, the nature of it is, we have better visibility to the next one to two quarters than we necessarily do the third or fourth one out.

So as we think about the momentum of the business, that puts us on a path to see some solid growth continue for Data for the first half of the year, not as strong as what you just saw, but we would expect Data to continue a nice double-digit growth rate in the first half of the year. And then obviously, once we come up against those comps in the second half, things will more normalize getting to that overall guidance range.

So I think to overall answer, we can drift up throughout the year. It's going to be getting more visibility to the pipeline, continuing the momentum across all the segments and just continuing to execute the way we have over the last four straight quarters or so.

Thank you.

Kartik Mehta, Northcoast Research.

Hey, good afternoon, Barry and Chip. Sorry about that. I was having phone issues. But Barry, you talked about the business exiting 2025, with some growth trajectory, which is great to see. As you look at 2026, kind of what's your primary objectives for the business, maybe your top two objectives you'd like to accomplish in 2026?

Sure. So let me just reiterate that we think there are three big strategic plans of what we're continuing to drive in this business. The first one is to shift the mix towards our Payments and Data business. You heard us say that we added 400 basis points of revenue to our mix there going from 43% to 47%. We think that we get to two parity as the year unfolds.

And Kartik, as following our story for a while, you know why that's so important because it puts a bigger percentage of our revenue every day on growth segments to make it easier to offset the secular declines on the print side of the business. And as we continue to grow the payments and data business, it gets easier and easier for us to accelerate our overall growth rate.

The second area is driving efficiency in everything we do coming out of the work we did on the North Star project that has now moved to business as usual. We have built a good amount of muscle in operating the business even more efficient than ever.

And the third, of course, is to generate cash flow through EBITDA, et cetera, to lower our debt, net debt, and our leverage ratio.

So those are the big three things that we're working on as a company. And each one of the businesses, their specific strategic things they're trying to achieve, everything from building the ISV channel strongly in the merchant business to accelerating the software side of the B2B business and working on the margin. And the Data business, of course, continuing the phenomenal trajectory thereon. And in the Print business is holding under those fantastic margins, renewing customers and continuing the healthy cash generation of that business.

So all those things work together to deliver what we think is going to be a very -- another very nice year in 2026, consistent with our ability to execute that hopefully, we highlighted in our prepared remarks.

And then as you look at the Merchant business, I know one of the objectives was to grow the distribution. As you look at the pipeline, I know you talked a little bit about the ISV distribution system channel. And I'm wondering, as you look at the pipeline, what does the pipeline look like for 2026 in terms of adding additional distribution?

Sure. So Kartik, I think we talked on the last call about the fact that we have really been working on putting more muscle into our ISV distribution channel. We have a new-ish leader there now that is helping us build a very nice and robust pipeline.

We've also paired that with responsible investments and improving our API suite, working on reporting tools and other features and functionality, but we think will make our program even more appealing to ISVs, and I think you should expect to hear from us more about the ISV channel and hopefully, knock on woods, some wins that we can share with you as the year unfolds. But we're very optimistic that we have the right service model as well as the right feature set and now with the right leadership driving distribution, we think we've got a real opportunity there.

Perfect. Thank you very much. I appreciate it.

(Operator Instructions) Marc Riddick, Sidoti.

Hi, good evening.

Hi, Marc.

So first of all, thanks for all the detail that's already been provided and certainly quite a bit has been accomplished. I was wondering if you could talk a little bit about maybe some of the opportunities that you see before you? And specifically, sort of thinking about some of the maybe build versus buy kind of decisions as far as investments. We had thematically was over the summer or last few years.

Maybe you could talk a little bit about the capabilities that you're that you're looking to continue to enhance and possibly maybe your appetite for a build versus buy kind of decision around those lines?

Sure. Let me just start with the point that we believe we're very fiscally responsible and good stewards of shareholder capital. And as you've seen us continue to help this business perform paying down debt, improving our leverage ratio.

We did make two small acquisitions, the one that you mentioned with the CheckMatch, which helps our B2B business and then bought the residuals from an ISO or an independent sales organization that was on the merchant business. Both of those we believe will deliver nicely for us that there are logical tuck-ins that will help deliver improved performance, particularly around profitability over time.

We also have a pretty great track record, Marc, of being able to deliver capabilities ourselves to help the business grow. So for example, we were one of the first companies in the merchant processing space to get approval and certification from Apple for a program they called Tap on Glass that allows two different phones to pay each other. You just saw us announce an integration with Visa into our product, Deluxe Fast Pay.

You've heard us talk about our investment in building the database and the AI tools that have led to and created the opportunity for this massive growth in our data-driven marketing business. And even in our check business, we've been very responsible at making responsible investments to secure the margin profile of our check business for the intermediate to long term.

So when you think about these things all the time and finding a balance between building things ourselves, which hopefully has the highest rate of return for shareholders, but when we see opportunities like we saw with the two things that we've talked about, as long as they're responsible and they meet our high hurdles, we're going to move forward with those because they are accretive to the company and help us succeed.

Yeah. And Marc, it's Chip. I'll just add a couple more comments. So first of all, you saw us guide $90 million to $100 million worth of CapEx spend. We've been spending at that level pretty consistently the last few years. And as Barry said, we feel like we're good stewards of shareholder capital. So think of that as the right balance of investments that the business needs to drive efficiencies, remain competitive, and invest in new growth opportunities to attack the market and win obviously in the competition. So embedded in our guidance is an organic continued investment in the business.

And the second point to Barry's comment we are continuing to stay very clear on our existing capital allocation priorities. So as we watch the generation of free cash flow and as that has been expanding and getting better and more improving north of 40% last year, in fact, we're able to look at that in the direct impact it has to our leverage ratio and the trajectory we're on, and we're able to balance various levers, which gives us a chance to be opportunistic as Barry said, again, if it's the right opportunity with the right returns.

So I think the way he described our fiscal responsibility is exactly how I would think about it, and it's how we've said we would prioritize capital allocation from the get-go, be able to invest internally for organic ads while also continuing to de-lever and improve the balance sheet, which just gives us continued optionality as we go on. So I think all of those things are embedded in how you should think about how we think of this going forward.

Great. Thank you very much for that. And then I guess maybe I want to sort of shift over to sort of the AI focus opportunities? And maybe is there sort of an area where you see greater client receptivity. And by that, I'm speaking of industry verticals or geography, if that's more appropriate. Are there any particular areas that are sort of leading as far as acting on those opportunities through Deluxe that you're seeing currently? Thanks.

I appreciate the question. I really don't think about it as a geography or client type. I really think about how we are applying AI, which is to solve specific problems, and we've applied AI in virtually every part of our company's business in our B2B space. We're using it in our lockbox operation to improve matching rates very dramatically, taking out labor and cost for our customers.

I've already talked about in our data business, how we're applying AI tools to get better outcomes and better ROI for our customers.

And in our Merchant business, we are using it specifically to drive our self-service chatbot at a very, very human experience. We also use it in the B2B space for the similar chatbot even on our deluxe.com website.

So we are applying AI technology to solve customer problems, and we've seen great receptivity and uptake on each one of those opportunities because they deliver and they fix a problem for a customer.

It's not about technology for technology's sake. It's not about having a shiny new toy. It's actually about delivering value. And that's one of the things that this company does so well is find opportunities to help a customer fix or solve a problem and then deliver for them. And AI is one more really big tool now in our toolkit and our toolbox helps solve those problems, and we're doing it across our full portfolio of products and solutions.

Great. Thank you very much.

Thank you. And at this time, we have no further questions. I will now turn the call back to Brian Anderson for additional and closing remarks.

Thanks, Rachel. Before we conclude, I'd like to share that management will be attending the JPMorgan Global High Yield and Leverage Finance Conference March 2 to 4 in Miami and the Sidoti Small Cap Virtual Conference, March 19, during the quarter.

Thank you again for joining us today, and we look forward to speaking with you all again in May as we share our first-quarter 2026 results.

This does conclude today's call. Thank you for your participation. You may now disconnect.