DLX

• Strategic Transformation Milestones

  • Deluxe achieved its three-year transformation plan early, reaching a key milestone in H1 2026 where payments and data segments represented 52% of total revenue (up from 50% in Q1 2026), marking the first time non-print revenue made up a majority of total revenue in the company's 111-year history.
  • The acquisition of Solero, a leading merchant services provider, closed on July 31, 2026, which will push payments and data's revenue share to ~60% by late 2027 and makes Deluxe a top 10 non-bank merchant acquirer with over $70 billion in annual processed volume across 210,000+ merchants.

• Overall Financial Performance

  • Q2 2026 total GAAP revenue was $499.3 million (down 4.2% YoY reported), with comparable adjusted revenue growing 2.6% YoY.
  • Comparable adjusted EBITDA grew 5.3% YoY to $108.8 million, with adjusted EBITDA margin expanding 60 basis points YoY to 21.8%.
  • H1 2026 free cash flow grew 65% YoY to $85.9 million, enabling $75.2 million in net debt reduction from year-end 2025, bringing pre-acquisition net debt to $1.32 billion and the pre-acquisition leverage ratio to 2.9x (down from 3.5x YoY).

• Segment Strengths

  • Data solutions has delivered over 15% YoY revenue growth for seven consecutive quarters, driven by strong demand for AI-powered data-driven marketing solutions with measurable outcomes, particularly from financial institution clients.
  • All core segments delivered adjusted EBITDA margin expansion in Q2 2026, supported by ongoing cost efficiency and operational optimization efforts.

• Capital Structure Updates

  • In conjunction with the Solero acquisition, Deluxe extended its $1.2 billion credit facility to a 2031 maturity, and entered into $600 million in floating-to-fixed interest rate swaps, fixing approximately 75% of total debt to insulate against interest rate volatility.
  • The board approved a regular quarterly dividend of 30 cents per share, payable September 1, 2026.

• Management updated 2026 full-year guidance to include the Solero acquisition's August-December 2026 results, while affirming baseline business guidance based on strong H1 2026 performance. The updated ranges are: revenue of $2.095 to $2.12 billion, adjusted EBITDA of $455 to $475 million (5% to 8% comparable adjusted growth), adjusted EPS of $3.60 to $4.00 (7% to 19% comparable adjusted growth), and free cash flow of ~$200 million (14% YoY growth).
• Segment guidance is maintained: DMS is expected to deliver mid-single-digit full-year revenue growth with a mid-20% adjusted EBITDA margin; B2B payments is expected to deliver low single-digit full-year revenue growth with adjusted EBITDA margins in the low-to-mid 20% range; data solutions is expected to deliver high single-digit full-year revenue growth (with growth moderating in H2 2026 due to tough year-over-year comparables); print is expected to deliver low-to-mid single-digit comparable adjusted revenue decline with adjusted EBITDA margins in the low-to-mid 30% range.
• The Solero acquisition is expected to be accretive to adjusted EPS in its first full year post-close, and management expects to return to a 3.0x net leverage target within two years of the acquisition closing.
• Assumptions for 2026 guidance include: ~$130 million in interest expense, 25% adjusted tax rate, $155 to $160 million in depreciation and amortization (with $55 to $60 million in acquisition amortization), 46.5 million average outstanding shares, and $100 to $110 million in capital expenditures.

1. Deluxe Merchant Services (DMS): Q2 2026 revenue grew 6.1% YoY to $107.6 million, with adjusted EBITDA of $25.1 million (15.7% YoY growth). Revenue contribution was approximately 21.6% of total comparable adjusted revenue. Adjusted EBITDA margin hit 23.3%, expanding 190 basis points YoY.
2. B2B Payments: Q2 2026 revenue grew 3.5% YoY to $73.5 million, representing 14.7% of total comparable adjusted revenue. Adjusted EBITDA came in at $18.3 million, growing 17.3% YoY, with an adjusted EBITDA margin of 24.9% (expanding 250 basis points YoY).
3. Data Solutions: Q2 2026 revenue grew 21.4% YoY to $82.3 million, accounting for 16.5% of total comparable adjusted revenue. Adjusted EBITDA was $18.1 million, with an adjusted EBITDA margin of 22%, in line with long-term guidance.
4. Print: Q2 2026 comparable adjusted revenue declined 4.3% YoY to $235.9 million, making up 47.2% of total comparable adjusted revenue. Adjusted EBITDA was $86 million, with a comparable adjusted EBITDA decline of 1.4% YoY, and adjusted EBITDA margin expanded to the mid-30s (up 110 basis points YoY) after the divestiture of the lower-margin Safeguard business.

• Prevailing macroeconomic conditions, including interest rate volatility, labor supply constraints, and ongoing inflation, may impact actual results relative to guidance.
• H2 2026 for the data segment faces very strong year-over-year comparables (Q3 2025 growth of 46%, Q4 2025 growth of 31%), which will moderate growth rates in the back half of the year.
• Integration of the newly acquired Solero business carries near-term uncertainty around integration costs and operational execution, which management accounted for by maintaining a wider EPS and free cash flow guidance range for 2026.

Q: What is the largest revenue synergy opportunity from integrating Solero into Deluxe's merchant business? / A: The biggest opportunities come from expanded scale that lets the combined company compete for larger partnerships and customers that neither Deluxe nor Solero could pursue independently. Additional synergies include leveraging Solero's strong position in the ISV space and its merchant onboarding and management technology, plus cross go-to-market opportunities between the two companies' sales teams and distribution networks.

Q: Why weren't adjusted EPS and free cash flow guidance raised to reflect Solero's five months of projected 2026 contributions? / A: The incremental EBITDA from Solero is offset by incremental interest expense from the new acquisition debt, near-term integration costs, and other tax and structural moving pieces from the transaction, resulting in a net neutral impact for 2026. Management also chose to be prudent given the transaction closed just one week before the call, and wanted to keep a wide enough range to account for early integration uncertainty, even though the midpoint of guidance still implies 13% YoY adjusted EPS growth. Solero will be accretive to EPS in the first full year post-close.

Q: What are the top priorities for Solero integration? / A: The integration is straightforward, starting by adding Deluxe's services to Solero's existing partner onboarding platform to keep merchant operations running smoothly while longer-term platform consolidation happens in the background. Key priorities include capturing cost synergies from overlapping operating costs, payment processing fees, and organizational streamlining. Management is also taking a thoughtful approach to combining the two talented teams, placing the best people in each role to support both cost delivery and future revenue synergy growth.

Q: Why has print's margin improved notably, and is this improvement sustainable? / A: The margin improvement comes from two sustainable factors: legacy check revenue is declining at a slower rate than expected, and operational investments (like print-on-demand) have lowered costs and expanded margins for the check business. The divestiture of the lower-margin Safeguard promo distribution channel also improved the segment's revenue mix, contributing roughly 80 basis points of margin improvement to the overall enterprise, and this mix benefit will persist for the remainder of the year.