No one knows better how hard it can be to reinvent a business than Deluxe (DLX 3.33%). Once famous for its check-printing services, Deluxe has had to do a hard pivot toward small-business clients and provide a much broader range of services in order to deal with the downward pressure from waning demand for paper checks.

Coming into Thursday's fourth-quarter financial report, Deluxe shareholders were looking for the company to find ways to keep its modest growth momentum intact. Deluxe's numbers weren't all as good as many had hoped, but the business-services company still made headway and has an optimistic view for the coming year.

Deluxe logo.

Image source: Deluxe.

Deluxe sees its usual mixed results

Deluxe's fourth-quarter results were fairly consistent with what we've seen in recent quarters. Revenue increased by 3.1% to $494.9 million, which was a bit short of the $500 million in sales that those following the stock were expecting to see. Net income soared 56% based largely on one-time items, but adjusted earnings of $1.40 per share were up just 4% from year-ago levels and matched the consensus analyst forecast.

Tax reform played a major role in driving profits for Deluxe. The company said that federal tax benefits amounted to $0.42 per share, or roughly $20 million based on its outstanding share count.

The financial services segment did most of the heavy lifting for Deluxe again this quarter. Segment revenue climbed 11%, with substantial revenue coming from three key acquisitions over the past year. Stronger pricing was particularly helpful not only in driving sales but also in providing a 13% rise in operating income, although cost-cutting measures internally also helped make Deluxe more profitable.

Elsewhere, sales trends were mixed. The small-business services unit saw revenue rise 1.3%, with strength in marketing solutions and other services helping to offset the declines in usage of checks and business forms. Adjusted segment operating income rose by 7% due to cost reductions, price increases, and a more favorable mix of products sold. Yet the long-struggling direct checks segment saw further declines, including a 9% drop in revenue and a hit of more than 10% to operating income.

Deluxe CEO Lee Schram pointed to the successes of the past year. "The fourth quarter marked the end of a very good year for us," Schram said, noting that annual revenue climbed for the eighth straight year.

What's ahead for Deluxe?

Deluxe is still looking to stay the course. In the CEO's words, "Our strategy continues to deliver profitable growth, and looking ahead to 2018 and beyond, we have identified areas within [marketing solutions and other services] where we plan to pivot for faster organic growth and moderately more aggressive acquisition growth."

Those efforts are likely to produce better results down the road, if Deluxe's guidance ends up being accurate. The business services specialist said that it expects to bring in $482 million to $490 million in revenue during the first quarter, working out to adjusted earnings of $1.27 to $1.33 per share -- nearly right in line with analyst projections. For the full year, Deluxe boosted its guidance, now expecting sales of $2.065 billion to $2.105 billion and adjusted earnings of $5.55 to $5.80 per share.

Deluxe's success will rely on a continued rise in the proportion of sales generated from marketing and related sources. The company wants to get to 60% of total revenue coming from the marketing and other services area, and it's likely to pursue acquisitions where appropriate to help get there.

Deluxe shareholders weren't completely comfortable with the revenue shortfall compared to their expectations, and the stock fell 4% in morning trading following the announcement. Deluxe has come a long way in its rebound efforts, but it now has to figure out how to take things to the next level. If it can find complementary ways to add value to its existing client relationships, Deluxe can make better use of its customer base and accelerate growth in 2018 and beyond.