Deluxe Corp. (NYSE:DLX) is a completely different company from what it used to be. Deluxe has focused on small businesses in its efforts to offer a wide range of services such as marketing solutions and financial data and support systems services. In doing so, the company has moved away from its traditional check-printing business, which has largely evaporated in light of the rise of electronic payment-based alternatives to paper checks.

Coming into Thursday's third-quarter financial report, Deluxe shareholders hoped for continued progress in spurring growth in key areas. Deluxe's results were better than many had expected, and the company sees itself taking further steps to take advantage of new opportunities in addition to the acquisition-led and organic growth it has already captured. Let's take a closer look at what Deluxe said and what it means looking forward.

Robert Hervajec and Amanda Brinkman in matching outfits on a Main Street in a small town, with graphics for Deluxe's Small Business Revolution program.

Image source: Deluxe.

Deluxe keeps looking for success

Deluxe's third-quarter results were encouraging for shareholders. Revenue climbed 8.5% to $497.7 million, which compared favorably to the consensus forecast among those following the stock for 6% top-line growth. GAAP net income fell due to transaction-related and restructuring costs, but adjusted earnings of $1.32 per share easily topped the $1.25 per share that most investors were expecting to see.

As we've seen in recent quarters, Deluxe got most of its revenue growth from its financial services segment. The unit saw top-line figures climb 28%, and the company cited growth in market solutions and related services as well as the positive impact of the acquisitions of RDM Corp., FMCG Direct, and Data Support Systems. Cost reduction efforts helped lift adjusted operating income for the segment by $1 million, although the acquisitions produced expenses of their own that held back some of the unit's bottom-line gains.

Elsewhere, the small business services division had more mixed performance. Revenue gains were limited to 2.5%, but that was in line with what Deluxe had expected. Calendar-related impacts cost the company 1.6 percentage points of potential top-line growth. Adjusted segment operating income was up 2%, with price increases, cost reductions, and a favorable product mix helping to lift Deluxe's results.

Still, Deluxe's check segment kept having a negative impact on the company. Revenue for the unit was down 8%, and operating income was down by double-digit percentages as check usage continued to decline.

Deluxe CEO Lee Schram highlighted particular victories. "Marketing solutions and other services revenue grew over 30% from the prior year," Schram said, "and accounted for over 40% of revenue in the third quarter." The CEO also pointed to gains on Deluxe's top and bottom lines as indicative of the success of its strategic vision.

Can Deluxe keep moving forward?

Deluxe remains optimistic about the future. In Schram's words, "Despite our expectations for a continued sluggish economy and the impact of multiple weather-related challenges affecting our customers across the country, we expect to deliver another consecutive year of growth."

The company also made favorable moves with its guidance. Most of the adjustments shifted Deluxe's projections to the upper end of previously offered ranges, including new sales predictions for $1.965 billion to $1.975 billion for the full 2017 year and earnings of $5.25 to $5.30 per share. Yet not everyone was pleased with the numbers for the fourth quarter, as guidance for revenue of $494 million to $504 million and adjusted earnings of $1.39 to $1.44 per share was less than what those following the stock were expecting previously.

Deluxe shareholders weren't entirely sure what to make of the results, and although the stock climbed modestly following the announcement, shares reversed course and were little changed once the regular market session began. In the long run, though, Deluxe continues to demonstrate its ability to keep moving forward with its business transformation, and that's good news for those who had worried that the former check specialist wouldn't be able to adapt to changing circumstances.

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