Ladies and gentlemen, thank you for standing by, and welcome to the Deluxe Quarterly Earnings Conference Call [Operator Instructions] 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 Third Quarter 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 will find additional disclosures regarding the non-GAAP measures, including reconciliations of these measures to the most comparable measures under U.S. 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 report our strong third quarter results. During the period, we drove organic growth across all key financial metrics, revenue, adjusted EBITDA, EPS, margin rate and year-to-date cash flows. Adjusted EBITDA grew significantly faster than revenue with margins expanding across each operating segment, demonstrating our ability to deliver consistent operating leverage. This was our 11th consecutive quarter of year-over-year EBITDA expansion with profits growing faster than revenue. Our strong expansion of earnings also drove robust cash flow results. Year-to-date operating cash flows have expanded by more than 25% versus the prior 9-month period. These profit and cash flow outcomes contributed to continued reduction of our overall debt, aligning to our clear capital allocation priorities. As a result of the strong performance through 3 quarters, we reached our targeted year-end leverage ratio of 3.3x, a full quarter ahead of our previously indicated pacing. We were particularly pleased with this result as we continue to drive efficiencies on path to our 2026 year-end debt-to-EBITDA target ratio below 3x. Based on these results, we are raising our full year outlook range for adjusted EPS while affirming all other guidance metrics, narrowing to the midpoint or better of the prior ranges. Chip will cover these updates in additional detail in a bit. Our overall third quarter execution remained very strong, including the following enterprise-level financial highlights. 2.5% comparable adjusted revenue growth driven by a fourth consecutive quarter of double-digit year-over-year expansion for the Data segment, nearly 14% growth of total comparable adjusted EBITDA, reaching nearly $119 million for the period; expansion of margin rates by more than 200 basis points, reaching 22% of revenue; adjusted EPS growth of nearly 30% year-over-year to $1.09 per share. Continued reduction of our net debt lowered by more than $20…

Thank you, Barry, and good evening, everyone. As Barry noted in his opening, we were very pleased with our third quarter progress and particularly our better-than-anticipated delevering pace. Continuing expansion of our comparable adjusted EBITDA and EPS growth rates accompanying our strong year-to-date free cash flow conversion highlight our progress through 3 quarters of the year. Over recent quarters, we've shown continued improvement in the health of our core fundamentals and quality of earnings continues to improve as we execute our clear strategy. I'll begin this evening providing some additional detail around our consolidated highlights for the period before moving on to individual operating segment results, our balance sheet and cash flow progress and updated full year 2025 guidance ranges. For the third quarter, we reported total revenue of $540.2 million, increasing 2.2% against prior year reported results, while expanding 2.5% on a comparable adjusted basis. We reported GAAP net income of $33.7 million or $0.74 per share for the period, improving from $8.9 million or $0.20 per share in the third quarter of 2024. This increase was driven by improved operating results aligned with expansion of revenues during the quarter as well as lower overall SG&A and restructuring-related expenses versus the prior year period. Comparable adjusted EBITDA was $118.9 million, up 13.8% versus the third quarter of 2024. Comparable adjusted EBITDA margins improved to 22% of revenue, expanding by 220 basis points versus the prior year third quarter, as Barry referenced. Q3 comparable adjusted diluted EPS of $1.09 expanded by 29.8% from $0.84 in 2024, driven by the operating income drivers previously noted, net of a slightly higher year-over-year share count. Turning now to our operating segment results, beginning with the Merchant Services business. The Merchant segment grew revenues by 4.8% year-over-year, finishing the quarter at $98 million, while…

[Operator Instructions] We will take our first question.

This is Kartik, Northcoast Research. Chip, I wanted to talk about free cash flow, impressive increase in guidance. And maybe you can talk through the drivers behind it and the sustainability of the free cash flow as we move into next year.

Yes, sure. Thank you, Kartik. Good to see you. I think you know over the last few years, we've been really focused on improving the free cash flow, not only absolute dollar, but on a conversion rate. And as we've outlined over the last couple of quarters, the goal of adding $100 million of annual run rate free cash flow coming into 2026 was one of the core tenets of the North Star program. And so we came into the year this year, and we laid it out for you exactly how we would get there, achieving the original guidance and ultimately raising it to where we did would be a function of improved profitability, having lower restructuring spend and continuing to execute strong working capital efficiency in terms of maintaining a solid DSO and a solid DPO. And so what you have seen throughout this year is us just execute on that strategy. So as we sit here today, executing nearly in line with what we delivered for the full year a year ago, that obviously gives us confidence in narrowing our guidance range up to the upper end and obviously puts us on a good path to be able to deliver that full run rate $100 million as we go into next year. So very pleased with the progress we've made improving the EBITDA and the underlying profitability of the business as well as pulling back on the restructuring spending, winding down that program and delivering that improved free cash flow conversion that we've been talking about.

Barry, on the merchant side, you talked about Peoples Bank here in Ohio as a partner. And I'm wondering if you could talk about a little bit about the pipeline for your distribution partners, whether it be financial institutions, ISVs or any other channel you're kind of focused on right now?

Sure. So let me just tell a little bit more about the Peoples Bank win because I think it's really a good small view of how effective our One Deluxe go-to-market solution, our process is. So as we mentioned in -- or as I mentioned in my prepared comments, I talked about how we can convert success in one part of the company into success across many parts of the company by building trust and delivering what the customer needs. And Peoples Bank is the latest example that we can talk about, which is follow that exact playbook and that exact model where we start with one place, we expand to multiple others. And in this case, now, it also includes the merchant business. And we have a very strong healthy pipeline of additional opportunities for us in financial institutions, but also in ISVs, our integrated software vendors. And we have recently hired a new sales leader in the ISV space that we think will also help us accelerate our efforts there. But I really think the main message here is the effectiveness of our One Deluxe model, where we can land and build a relationship with the customer, deliver on our promises and our commitments and then expand that relationship over time. And merchant is a clear beneficiary of that, which was central to our original hypothesis of moving into the merchant space.

And we will take our next question.

It's Charlie Strauzer with CJS. Just a couple of quick questions. Another impressive quarter from [indiscernible] and hoping that you can expand a little bit further as to kind of what the key drivers were and how sustainable this kind of growth can be a number of quarters in a row now where data has had some really good strength there. Maybe a little bit more about that.

Sure, Charlie. You'll recall that we had made an investment in building our infrastructure so that we have what we believe is the largest data lake of consumer and small business data, we think, in the country. And then, of course, we put our proprietary AI tools that sit on top of that data lake to help build high converting lead list helping those institutions or organizations identify, target and market to a customer that's likely to be interested in the offering of that organization. In this particular moment in time, financial institutions are increasing their investment, specifically around all of their core products, whether it is low-cost deposits, but it's also things like high-reward credit cards, it's around lines and loans and many other bank products. And we can see some great uptake on that. And we think that is sustainable, Charlie. Now probably not at the rate we've been talking about, and Chip did a good job, I think, of setting that expectation. But we have a very unique offering here that we can show a specific return on a marketing expense that delivers a customer with measurable value to a financial institution. And that is a very compelling proposition for financial institutions. But we're also expanding, as you know, Charlie, beyond financial institutions into other market verticals where there's a high lifetime value for that customer, and it's worth a significant marketing investment to acquire that customer. And we continue to make inroads there, and we feel very good and bullish about this business over the intermediate long term as well as what's right in front of us in Q4.

Excellent. Yes, very impressive. And just a follow-up question on the Print segment, margins were above where they've been in at least in recent memory. And what was this all from? Is it basically driven by promo having better margins? Or is it across the board? Maybe a little more color there, that would be great.

Charlie, we've been saying for a while that we have 3 core strategic initiatives for the company. We want to shift our mix towards payments and data. We want to drive efficiency across our portfolio. We want to increase EBITDA, free cash flow to lower debt and our leverage ratio. In the case of the print business, we have a great cash generator in the check business, and that had a very solid and very predictable Q3. We continue to struggle a bit in the promo business with just headwinds in the industry. We've also just been very clear, we're going to focus on profitable volume. We're not going to play the game that others in the space are playing, which is taking product or making sales that have little or no margin. And so we're walking away from deals that we just don't think we can make a decent profit on. And you can see that in the revenue part of that equation. But what you come down to what's really important here is that we're able to largely hold on to the EBITDA. And as you can see, we're expanding margin here as well. So we think it's just a matter of being really choiceful and really fully in alignment with our 3 big strategic initiatives around shifting mix to payments and data, driving efficiency, increasing EBITDA, free cash flow, lowering debt and the leverage ratio that we're being very choiceful and disciplined about the business we take and making sure we do have is operated with great efficiency. Chip, do you want to build on that?

Yes, I think you said it well. But Charlie, if you think about the extra materials we've added in the last few quarters, you can see while promo -- the promo side is still struggling and declining a bit higher than we would like, it has improved. But to Barry's point, the real story is how Check continues to deliver solid results, decline better than long-term expectations and how those 2 things together deliver a really solid mix story to the business. So I think Barry said it all right. When you put that all together and you add on top of it, the focus on efficiency that we've been delivering over the last 2 years as part of our efficiency improvement program, it's all leading to this solid sustainable low 30s margin rate that we've been talking about for print that you can see is really stabilizing. And so we're very proud of that result and very pleased with how that team is executing.

Great. And can I sneak one more in, kind of a bigger picture thing as we approach year-end here. Any initial thoughts for next year?

That was a really good try, Charlie. We'll be back at the next call with good guidance for next year.

[Operator Instructions] And we will go to our next question.

It's Jonathan from TD Cowen. Just one question for me. Now that you've reached your leverage target, and congrats on that, how are you balancing capital between, let's say, debt reduction, potential buybacks, some M&A and maybe even some reinvestments in the growth segments like payments and data?

Yes. Well, first of all, thank you for acknowledging that progress, Jonathan. I think you know we've been very committed to this goal of bringing the leverage ratio down and getting ultimately at or below 3x sometime next year. So obviously, the work is not done yet. Very pleased with the execution and progress that allowed us to reach our original target for year-end '25 a bit faster. But nothing really changes. Our capital allocation priorities remain. We're still focused on paying down that debt and bringing the leverage ratio down. We're still marching down the path towards that 3x or better by the end of next year. And we're going to continue to invest internally for high-return growth that helps Barry's #1 strategic priority, shifting the mix to payments and data. And then obviously, we'll keep returning value to shareholders through the dividend. So very, very pleased with the progress, but don't expect anything to change. We're going to keep executing based off this updated guidance range we've provided, I would say we're now in a place to land year-end around 3.25 depending on the rounding. So continuing great progress, and we're continuing on that journey to get at or below 3x by the end of next year.

And we will take our next question.

It's Marc Riddick from Sidoti here. I was sort of -- you've sort of covered quite a bit already. I wanted to sort of touch on how we should think about the -- how CapEx might flow out through -- we have for the year. Is it reasonable to think that we might see similar levels next year? Or how should we think about the potential for whether it's technology-driven investments or the like, how that might play into CapEx next year, just generally, not a specific guide on numbers, I suppose, but just sort of generally.

Yes. So again, to reiterate, we've been holding in this $90 million to $100 million guidance range for all of this year, and we're executing pretty well in that. Stopping short of providing full guidance. But where we are is a very comfortable level for us. Like I said, we continue to focus on good internal return projects that can allow us to drive that strategic initiative to shift the mix. And so we're obviously not going to starve the business, but we also feel good about the progress we've made. So as we get into next year, we'll go through our normal process of evaluating all the investment opportunities inside the business and stack rank them based off the best returns, helping drive the long-term strategy. And I would expect CapEx will settle somewhere around where it is right now. But again, stopping short of guidance, we'll wait to see where the final demands of the business land and what are the best returns inside the 4 walls to deliver the best outcome for both investors and our customers.

Great. And then I guess -- and admittedly, this might be a bit of a squishy question, but are there any parts of the business where you would like to expand bandwidth as far as internal, whether it's personnel or the like? Are there any areas that you feel as though you might need to expand bandwidth in the near term to take advantage of opportunities?

So I appreciate the question, Marc. We regularly look at our resource allocation, our capital allocation and where we're spending for maximum return. We don't anticipate any need for a surge in any one of our businesses. We are investing appropriately, particularly in the payments and data, the growth businesses for the future. I mentioned earlier, we're putting a bit more investment towards sales, particularly in the merchant business. But we like the mix of what we have today and how we're investing to grow and really like how it played out for us in Q3.

And at this time, we have no further questions. I would now like to turn the call back.

Thanks, Rachel. Before we conclude, I'd like to share that management will be participating at the Citizens Financial Services Conference in New York and the Stephens Annual Investment Conference in Nashville on November 18 and 19, respectively, and at the Bank of America Leveraged Finance Conference on December 2 and 3 during the fourth quarter, for which additional information will be posted on the Investor Relations website. Thank you again for joining us today, and we look forward to speaking with you all again in early February as we share our fourth quarter and full year 2025 results.

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