DELUXE CORP (DLX)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") includes the following sections:

•Executive Overview that discusses what we do and our operating results at a high level;

•Consolidated Results of Operations; Restructuring and Integration Expense; and Segment Results that includes a more detailed discussion of our revenue and expenses;

•Cash Flows and Liquidity and Capital Resources that discusses key aspects of our cash flows, financial commitments, capital structure, and financial position; and

•Critical Accounting Estimates that discusses the estimates that involve a significant level of judgment and uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Please be aware that this MD&A discussion contains forward-looking statements that involve risks and uncertainties. Part I, Item 1A of this report details known material risks and important information to consider when evaluating our forward-looking

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statements. The Private Securities Litigation Reform Act of 1995 (the "Reform Act") provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information. When we use terms such as “should result,” “believe,” “intend,” “plan,” “are expected to,” “targeted,” “will continue,” “will approximate,” “is anticipated,” “estimate,” “project,” “outlook,” "forecast," or similar expressions in this Annual Report on Form 10-K, in future filings with the Securities and Exchange Commission (SEC), in our press releases, investor presentations, and in oral statements made by our representatives, these indicate forward-looking statements within the meaning of the Reform Act.

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). Additionally, we discuss non-GAAP financial measures such as free cash flow, net debt, adjusted diluted earnings per share (EPS), consolidated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), and consolidated adjusted EBITDA margin. We believe that these non-GAAP financial measures, when reviewed alongside GAAP financial measures, can provide valuable insights for investors analyzing our current period operating performance and assessing our future operating performance. Consequently, our internal management reporting also includes these financial measures, which should be considered in addition to, and not as superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly filed reports in their entirety and not to rely solely on any single financial measure. Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and therefore, may not facilitate useful comparisons. The reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the Consolidated Results of Operations section.

The following discussion and analysis provides information we believe is essential for understanding our financial condition and results of operations. This discussion focuses on our consolidated financial results for the years ended December 31, 2024 and December 31, 2023. For a discussion of our consolidated results of operations for the year ended December 31, 2023, compared to the year ended December 31, 2022, please refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 ("the 2023 Form 10-K"), which was filed with the SEC on February 22, 2024, and is incorporated by reference into this Form 10-K. Since we revised our reportable segments effective January 1, 2024, the Segment Results section includes an analysis of segment performance for the years ended December 31, 2024, 2023, and 2022. We recommend that you read the following discussion and analysis in conjunction with our consolidated financial statements and related notes, which are presented in Part II, Item 8 of this report. This will provide a comprehensive understanding of our financial performance and the factors that influenced our results during these periods.

EXECUTIVE OVERVIEW

We help businesses strengthen their customer relationships through trusted, technology-enabled solutions that facilitate payments, drive growth, and enhance operational efficiency. Our comprehensive suite of solutions includes merchant services, marketing and data analytics, treasury management solutions, and promotional products, along with customized checks and business forms. We support small and medium-sized businesses, financial institutions, and some of the world’s largest consumer brands. We also provide checks and accessories directly to consumers. Our reach, scale, and distribution channels position us to be a trusted business partner, providing the tools and support our customers need to succeed.

Our Strategy

A detailed discussion of our strategy can be found in Part I, Item 1 of this report. Having substantially completed our infrastructure modernization efforts and the divestiture of non-strategic businesses, we have now redirected our focus toward growth investments. This shift is aimed at driving scale and accelerating profit growth at a pace that surpasses revenue growth. Our operations continue to benefit from our disciplined pricing actions and comprehensive cost management practices. In 2023, we launched our North Star program with the objective of enhancing shareholder value by (1) accelerating our adjusted EBITDA growth, (2) increasing cash flow, (3) reducing debt, and (4) improving our leverage ratio. We have started to realize the benefits of our North Star initiatives, as evidenced by the improvement in both adjusted EBITDA and adjusted EBITDA margin for 2024 compared to 2023, excluding the impact of business exits. A key driver of this improvement was a 14% reduction in the costs of our corporate operations for 2024, as compared to 2023. We also reduced net debt by $52 million from the previous year-end.

Realignment – Effective January 1, 2024, we realigned our organizational structure to better reflect our portfolio mix and offerings, and we updated our reportable segments to correspond with these changes. We did not operate under the new segment structure prior to January 1, 2024. Information regarding our realigned reportable segments can be found under the caption "Note 17: Business Segment Information" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Business exits – Over the past three years, we made strategic decisions to exit certain of our businesses. In 2022, we sold our Australian web hosting business, as well as our strategic sourcing and retail packaging businesses. In 2023, we sold our North American web hosting and logo design businesses, completing our exit from the web hosting space. Additionally, in 2023, we entered into agreements to exit our payroll and human resources services business, facilitating the transition of our U.S. and Canadian customers to other service providers. These customer conversions were substantially completed during 2024.

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We believe that these business exits allow us to concentrate our resources on our growth businesses, while optimizing our operations. Further information regarding these business exits can be found under the caption "Note 6: Divestitures" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

2024 Financial Results

Highlights of our 2024 financial results compared to 2023 include:

•Consolidated revenue – Decreased by $70 million to $2.12 billion, primarily due to the continuing secular decline in order volumes for checks, business forms, and some business accessories, as well as business exits, which drove a $45 million reduction. These declines were partially offset by pricing actions and growth in data-driven marketing and merchant services.

•Net income – Increased by $27 million to $53 million, reflecting the impact of our pricing and cost reduction actions and reduced restructuring and integration expense. These positive factors were partially offset by the loss of earnings from exited businesses, the secular revenue declines in the Print segment, and inflationary pressures on hourly wages, materials, and delivery costs.

•Adjusted EBITDA – Decreased by $5 million to $412 million, including the impact of business exits, which drove a $20 million decrease. Excluding the impact of business exits, adjusted EBITDA would have increased due to the benefits of our pricing and cost reduction actions and growth in data-driven marketing and merchant services. These impacts were partially offset by the secular declines in the Print segment, inflationary pressures on our cost structure, and a $6 million increase in bad debt expense, primarily in the Print segment.

Adjusted EBITDA margin of 19.4% for 2024 increased as compared to 19.0% for 2023. Our pricing and cost optimization actions more than offset the impact of the Print secular declines, the inflationary pressures, and the higher bad debt expense. A reconciliation of net income to adjusted EBITDA can be found in the Consolidated Results of Operations section.

•Cash provided by operating activities – Decreased by $4 million to $194 million, reflecting the secular declines in the Print segment, business exits, inflationary pressures on our cost structure, and an unfavorable year-over-year impact from certain working capital changes, primarily related to receivables, prepaids, and inventories. These impacts were partially offset by our pricing and cost management actions, reduced restructuring and integration spend, and lower payments for cloud computing arrangement implementation costs and performance-based employee cash bonuses.

•Free cash flow – Increased by $2 million to $100 million, defined as cash flows from operating activities less purchases of capital assets. We continue to reinvest the free cash flow generated by our Print business into our growth businesses. A reconciliation of free cash flow to its comparable GAAP financial measure can be found in the Consolidated Results of Operations section.

Recent Market Conditions

We continually monitor the interest rate environment and its impact on our outstanding debt. As of December 31, 2024, 61% of our debt had a fixed interest rate of 8.1%, which partially insulates us from future interest rate increases.

We also continually monitor the impact of inflationary pressures affecting our labor, delivery, and material costs. In response to the inflationary environment, we have implemented targeted price increases, primarily in our Print and Merchant Services segments. Despite these price adjustments, we continue to experience healthy revenue volumes, which underscores the strength of our business and the sustained demand for our products and services. We have occasionally experienced supply chain disruptions, particularly affecting the supply of certain printed products in our Print segment, and ongoing global unrest and potential uncertainties surrounding trade policies, treaties, and tariffs, could further disrupt the global supply chain and result in increased costs. To mitigate this risk, we continuously monitor our supply chain to avoid delays or disruptions. We have also experienced labor supply issues in certain portions of our business. The severity and duration of inflation, as well as supply chain and labor issues, remains difficult to predict and could continue to impact our business, financial position, and results of operations.

We also monitor trends in small business sentiment and consumer discretionary spending. We analyze various data sources, including information from credit card brands, the Federal Reserve, other economic forecast providers, and our proprietary data. These trends significantly influence multiple areas of our portfolio, particularly our Merchant Services and Print segments. The data suggests that downward trends in discretionary consumer spending have stabilized. Nonetheless, we have observed a softening in demand for some of our discretionary promotional products within the Print segment and our processing volumes within Merchant Services. We also monitor various factors that could influence our customers' purchasing power, including potential global trade disruptions due to tariffs and other changes to trade policy in the U.S. and other countries.

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Additionally, geopolitical events, such as war or other hostilities, could lead to a downturn in the global economy, which may negatively impact our performance.

Liquidity

As of December 31, 2024, we held cash and cash equivalents of $34 million, along with an additional $374 million available for borrowing under our revolving credit facility. We anticipate that capital expenditures will be between $90 and $100 million in 2025, compared to $94 million in 2024, as we continue to build scale across our product categories and invest in innovation. Our capital allocation priorities remain focused on responsible growth investments, debt reduction, and returning capital to shareholders through dividends. We expect to maintain our regular quarterly dividend payments. However, dividends are subject to approval by our board of directors each quarter and, therefore, may change.

We believe that net cash generated by operations, combined with cash and cash equivalents on hand, and the availability under our credit facility, will be sufficient to support our operations over the next 12 months. This includes meeting our contractual obligations, debt service requirements, and addressing our long-term capital needs. As of December 31, 2024, we were in compliance with our debt covenants.

CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Revenue

The decrease in total revenue for 2024, compared to 2023, was driven by several factors, including the continuing secular decline in order volumes for checks, business forms, and certain business accessories, as well as the business exits discussed in the Executive Overview section, which led to a reduction in revenue of approximately $45 million. Additionally, revenue was impacted by a reduction in treasury management revenue resulting from reduced lockbox processing volumes and a strategic shift from relying on one-time revenue to a more recurring revenue model.

These declines in revenue were partially offset by price increases in response to the inflationary environment, primarily in our Print and Merchant Services segments. Additionally, there was strong demand for our data-driven marketing services, which contributed a $22 million increase in revenue.

We do not manage our business based on product versus service revenue. Instead, we analyze our revenue based on the product and service offerings shown under the caption "Note 17: Business Segment Information" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report. Our revenue mix by business segment was as follows:

Consolidated Cost of Revenue

Cost of revenue primarily consists of raw materials used to manufacture our products, shipping and handling costs, third-party costs for outsourced products and services, payroll and related expenses, information technology costs, depreciation and amortization of assets used in the production process and in support of digital service offerings, and related overhead.

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The decrease in total cost of revenue for 2024, compared to 2023, was driven by several factors. Reduced revenue volume from the continuing secular decline in checks, business forms, and some business accessories contributed to the decrease. Additionally, our various cost management actions and the decrease in treasury management revenue further reduced cost of revenue. Total cost of revenue decreased by $18 million due to the business exits discussed in the Executive Overview section, and restructuring and integration expense included in cost of revenue decreased by $10 million. These decreases in total cost of revenue were partially offset by the revenue growth in data-driven marketing, as well as inflationary pressures on hourly wages, materials, and delivery costs.

As a result, total cost of revenue as a percentage of total revenue for 2024 was virtually flat as compared to 2023. The benefits of our pricing and cost management actions and the lower restructuring and integration expense were offset by the inflationary impacts.

Consolidated Selling, General & Administrative (SG&A) Expense

The decrease in SG&A expense for 2024, compared to 2023, was primarily due to various cost management actions, including workforce adjustments, marketing optimization, and real estate rationalization. Additionally, there was a reduction of approximately $11 million related to the business exits discussed in the Executive Overview section. These reductions were partially offset by a $6 million increase in bad debt expense, primarily within the Print segment.

Total SG&A expense as a percentage of total revenue for 2024 decreased compared to 2023, as the combined effects of price increases and our cost management actions more than offset the increase in bad debt expense.

Restructuring and Integration Expense

We are actively pursuing several initiatives aimed at aligning our business with our growth strategy and enhancing operational efficiency. As we implement these initiatives, the amount of restructuring and integration expense is expected to fluctuate from period to period. Further information regarding these costs can be found in the Restructuring and Integration Expense section.

Gain on Sale of Businesses and Long-Lived Assets

As discussed in the Executive Overview section, we substantially completed our exit from the U.S. and Canadian payroll and human resources services business during 2024. This transition allowed us to recognize income related to the customer conversion agreements during 2024. Additionally, in 2023, we finalized the sale of our North American web hosting and logo design businesses, recognized income from our decision to exit the payroll and human resources services business, and sold two facilities. Additional information regarding these business exits and asset sales can be found under the caption "Note 6: Divestitures" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Asset Impairment Charges

During 2024, we recorded goodwill impairment charges associated with our exit from the U.S. and Canadian payroll and human resources services business. Additional information can be found under the caption "Note 6: Divestitures" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

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Interest Expense

The decrease in interest expense for 2024, compared to 2023, was mainly due to a decrease in the average debt outstanding. This positive effect was partially offset by the impact of higher interest rates and expense of $2 million from the retirement of debt due to the debt refinancing completed in the fourth quarter of 2024. Further information regarding the refinancing of our debt can be found under the caption "Note 13: Debt" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report. Based on the amount of variable-rate debt outstanding as of December 31, 2024, a one percentage point change in the weighted-average interest rate would result in a $6 million change in interest expense for 2025.

Income Tax Provision

The effective income tax rate for 2024 decreased compared to 2023. This change was primarily due to lower tax rate impacts in 2024 from return to provision adjustments, share-based compensation, and the repatriation of foreign earnings. Partially offsetting these decreases in our effective income tax rate was the tax rate benefit from business exit activities in 2023 that did not recur in 2024. Additional details regarding other factors that impacted our effective income tax rates can be found under the caption "Note 10: Income Tax Provision" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Net Income, Diluted EPS, and Adjusted Diluted EPS

Net income and diluted EPS increased for 2024 compared to 2023, reflecting the changes noted above. Adjusted diluted EPS decreased $0.03 per share in 2024, compared to 2023, driven by the impact of business exits, which drove a $0.27 per share decrease. Excluding the impact of business exits, adjusted diluted EPS would have increased due to the benefits of our pricing and cost reduction actions, as well as growth in data-driven marketing and merchant services. These positive impacts were partially offset by the secular declines in the Print segment, inflationary pressures on our cost structure, and a $6 million increase in bad debt expense, primarily in the Print segment. A reconciliation of net income to adjusted net income, which is used in the calculation of adjusted diluted EPS, can be found in the following section.

Reconciliation of Non-GAAP Financial Measures

Free cash flow – We define free cash flow as net cash provided by operating activities minus purchases of capital assets. We consider free cash flow to be an important indicator of cash available for servicing debt and for shareholders, after making necessary capital investments to maintain or expand our asset base. One limitation of using the free cash flow measure is that not all of our free cash flow is available for discretionary spending. We may have mandatory debt payments and other cash requirements that must be deducted from our available cash. Despite this limitation, we believe that the measure of free cash flow offers an additional metric to consistently compare cash generated by operations. It also provides insight into the cash flow available to fund various items such as dividends, mandatory and discretionary debt reduction, acquisitions or other strategic investments, and share repurchases.

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Net cash provided by operating activities for the years ended December 31 reconciles to free cash flow as follows:

Net debt – Net debt is calculated by subtracting cash and cash equivalents from total debt. One limitation associated with using net debt is that by subtracting cash and cash equivalents, it may imply that management intends to use these funds to reduce outstanding debt. Additionally, net debt can suggest that our debt obligations are lower than what the most comparable GAAP measure indicates. Despite these limitations, management believes that net debt is a valuable metric for assessing our financial leverage and overall balance sheet health. It provides a measure of our debt burden by considering the funds available to offset our debt obligations.

Total debt reconciles to net debt as follows as of December 31:

Adjusted EBITDA and adjusted EBITDA margin – We believe that adjusted EBITDA and adjusted EBITDA margin are useful metrics for evaluating our operating performance. These measures eliminate the effect of interest expense, income taxes, the accounting effects of capital investments (i.e., depreciation and amortization), and certain other items that may vary for reasons unrelated to current period operating performance. Management uses these measures to assess the operating results and performance of the business, perform analytical comparisons, and identify strategies to improve performance. Additionally, we believe that an increasing adjusted EBITDA and adjusted EBITDA margin indicate an increase in the company's value.

It is important to note that we do not consider adjusted EBITDA to be a measure of cash flow, as it does not account for certain cash requirements such as interest, income taxes, debt service payments, or capital investments.

Net income for the years ended December 31 reconciles to adjusted EBITDA and adjusted EBITDA margin as follows:

Adjusted diluted EPS – We believe that adjusted diluted EPS is a valuable metric for providing comparable information that assists in analyzing our current period operating performance and assessing our future operating performance. By excluding the impact of non-cash items or items that we believe are not indicative of current period operating performance, adjusted diluted EPS offers a useful view of our underlying business performance. Adjusted diluted EPS is one of the key financial performance metrics we use to evaluate the operating results and performance of the business, and It helps us identify strategies to improve performance. While it is reasonable to expect that one or more of the excluded items will occur in future periods, the amounts recognized may vary significantly.

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Diluted EPS for the years ended December 31 reconciles to adjusted diluted EPS as follows:

(1) The tax effect of the pretax adjustments takes into account the tax treatment and related tax rate(s) applicable to each adjustment in the relevant tax jurisdiction(s). Generally, this results in a tax impact that approximates the U.S. effective tax rate for each adjustment. However, the tax impact of certain adjustments, such as share-based compensation expense and gains on sales of businesses, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable effective tax rate(s) in those jurisdictions.

(2) The total of weighted-average shares and potential common shares outstanding used in the calculation of adjusted diluted EPS differs from the GAAP calculation due to differences in the amount of dilutive securities in each calculation.

RESTRUCTURING AND INTEGRATION EXPENSE

Restructuring and integration expense consists of costs related to initiatives aimed at driving earnings and cash flow growth, including costs related to the consolidation and migration of certain applications and processes. These costs consist primarily of consulting, project management services, internal labor, and other items such as facility closure and consolidation costs. Additionally, we have recorded employee severance costs across functional areas.

We are currently pursuing several initiatives designed to support our growth strategy and to increase our efficiency, including several initiatives that we collectively refer to as our North Star program. The goal of these initiatives is to enhance shareholder value by (1) accelerating our adjusted EBITDA growth, (2) increasing cash flow, (3) reducing debt, and (4) improving our leverage ratio. North Star is a comprehensive, multi-year plan that balances cost reduction and growth opportunities. On the cost reduction front, we are focused on refining our organizational structure and transforming our infrastructure and operations. We have successfully completed the material elements of our organizational redesign, which included consolidating similar roles, reducing hierarchical layers, and expanding spans of control. We are also leveraging technology and process automation to digitize and streamline our operations. Additionally, we are scaling our operations by consolidating back-office functions and tapping into the global labor market. On the revenue growth side, our priorities include developing an integrated software channel in Merchant Services, expanding our Data Solutions business to cater to more industry verticals, and enhancing our marketing and sales capabilities. We have made significant progress on all of the remaining North Star initiatives and anticipate continued positive impacts on our results of operations throughout the coming year. For example, we have significantly reduced our corporate expenses, which decreased 14% in 2024, compared to 2023. Further information regarding restructuring and

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integration expense can be found under the caption "Note 9: Restructuring and Integration Expense" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

All investments under the North Star program are required to meet our internal hurdle rate and provide a higher return compared to other uses of capital, such as debt repayment. The North Star program aims to achieve a $100 million run-rate improvement in free cash flow and an $80 million run-rate improvement in adjusted EBITDA by 2026. Through December 31, 2024, we incurred related restructuring and integration expense of approximately $95 million ($50 million in 2024 and $45 million in 2023), and we expect to incur approximately $15 million in additional North Star restructuring and integration expense in 2025. These charges will include professional services fees, employee severance, and other restructuring-related costs.

The majority of the employee reductions included in our restructuring and integration accruals as of December 31, 2024, along with the related severance payments, are anticipated to be completed by mid-2025. As a result of these employee reductions, including those related to our North Star program, we realized cost savings of approximately $10 million in cost of sales and $25 million in SG&A expense in 2024, compared to our 2023 results of operations. For those employee reductions included in our restructuring and integration accruals through December 31, 2024, we expect to realize annual cost savings of approximately $5 million in cost of sales and $7 million in SG&A expense in 2025, compared to our 2024 results of operations. Note that these savings may be offset by increased labor and other costs, including inflationary impacts and investments in the business.

SEGMENT RESULTS

Effective January 1, 2024, we revised our reportable business segments to align with structural and management reporting changes that better reflect our portfolio mix and offerings. We now operate the following reportable segments, generally organized by product and service type: Merchant Services, B2B Payments, Data Solutions, and Print. The financial information presented below for our reportable business segments is consistent with that presented under the caption “Note 17: Business Segment Information” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report, where information regarding revenue for our product and service offerings can also be found. The segment information for 2023 and 2022 has been recast to reflect our current segment structure.

Merchant Services

Results for our Merchant Services segment were as follows:

Total revenue for 2024 increased compared to 2023, driven by customer wins across market channels, including our partnerships with banks, government clients, and our expanding reach with integrated software vendors, or ISVs. Additionally, revenue benefited from pricing actions implemented in response to the inflationary environment. These gains were partially offset by pressure on processing volumes in some verticals.

The increase in adjusted EBITDA for 2024 compared to 2023 was primarily driven by the price increases and other revenue growth, along with cost management actions. The scalability of our business model and the pricing actions also contributed to the slight increase in the adjusted EBITDA margin. Looking ahead to 2025, we expect to maintain this positive trajectory by capitalizing on our strong market position and growing customer base.

Total revenue for 2023 increased compared to 2022, as processing volumes increased despite soft consumer spending. Additionally, revenue benefited from pricing actions implemented in response to inflation and a significant customer conversion that went live in the fourth quarter of 2023.

The increase in adjusted EBITDA for 2023 compared to 2022 was primarily driven by the revenue growth and cost management actions. However, adjusted EBITDA margin remained flat year-over-year as the benefits from our pricing and cost management actions were offset by a shift in revenue mix linked to the higher processing volumes.

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B2B Payments

Results for our B2B Payments segment were as follows:

Total revenue for 2024 decreased compared to 2023, primarily due to reduced lockbox processing volumes and the absence of one-time hardware and license sales that occurred in 2023. We are continuing our migration from a dependency on one-time revenue to a more recurring revenue model. Consequently, we have intentionally shifted our focus away from selling products such as check imaging devices and one-time software licenses. These reductions in revenue were partially offset by a modest price increase to counteract inflation and the onboarding of new clients in the latter half of 2024. The revenue trend improved over the course of 2024, with a year-over-year decrease of 7.8% in the first half of the year, but a slight increase of 0.4% in the second half.

Adjusted EBITDA for 2024 decreased compared to 2023, driven mainly by the reduction in revenue, ongoing inflationary pressures on labor costs, and expenses related to the initial onboarding of new remittance processing customers in the latter half of 2024. These decreases were partially offset by our cost management actions, including the consolidation of our lockbox processing operations, as well as the modest price increase. Adjusted EBITDA margin decreased year-over-year, as inflationary pressures and the costs associated with new customer implementations exceeded the benefits from our pricing and cost management actions.

Total revenue for 2023 decreased compared to 2022, primarily due to reduced volumes for our fraud and security service offerings. Treasury management revenue remained virtually flat year-over-year, as price increases implemented in response to inflation were offset by the impact of one-time revenue in 2022 and demand softness for lockbox services.

Adjusted EBITDA for 2023 also decreased compared to 2022. This decline was primarily driven by the reduction in revenue and inflationary pressures on labor costs. These decreases were partially offset by the benefits realized from operational improvements across our lockbox sites. Adjusted EBITDA margin for 2023 decreased compared to 2022, as the investments in the business and increased labor costs exceeded the benefit from cost management actions.

Data Solutions

Results for our Data Solutions segment were as follows:

Total revenue for 2024 increased compared to 2023, driven by strong demand for customer acquisition marketing activities across both our core base of financial institution partners and our expanding portfolio of other clients. Robust new campaign activity underscores our success in collaborating with our customer base to deploy an optimized set of marketing capabilities.

Adjusted EBITDA for 2024 also increased compared to 2023, primarily driven by the rise in data-driven marketing volume, the benefits of our cost management actions, and a favorable mix of clients throughout the year. Adjusted EBITDA margin increased for 2024 compared to 2023, due to the cost management actions and favorable changes in client mix.

Total revenue for 2023 increased compared to 2022, driven by increased demand for our marketing services aimed at helping banks attract low-cost deposits and expand their business banking account offerings. This increase was partially offset by the pull-forward of some of our clients' marketing campaigns into the fourth quarter of 2022.

Adjusted EBITDA for 2023 also increased compared to 2022, mainly due to the growth in data-driven marketing and the benefits of our cost management actions. However, adjusted EBITDA margin decreased for 2023 compared to 2022, as the benefits of our cost management actions were more than offset by an unfavorable shift in client mix.

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Print

Results for our Print segment were as follows:

Total revenue for 2024 decreased compared to 2023, primarily due to the ongoing secular decline in order volumes for checks, business forms, and some business accessories, as well as demand softness for our promotional products. Increased competition, particularly in the lower-margin promotional, apparel, and branded accessory areas, contributed to this softness. This competitive pressure largely impacted our third-party sourced offerings, reducing the traditional fourth quarter increase in volume observed in the prior year. These revenue declines were partially offset by pricing actions implemented in response to inflation.

Adjusted EBITDA for 2024 also decreased compared to 2023, primarily due to the decline in revenue, inflationary pressures on materials and delivery costs, and increased bad debt expense. These decreases were partially offset by our cost management actions, as we continue to focus on operating expense discipline and overall efficiency within this segment. Adjusted EBITDA margin for 2024 decreased compared to 2023, as the benefits from our pricing and cost management actions were more than offset by the inflationary cost pressures and the increased bad debt expense.

Total revenue for 2023 decreased compared to 2022, driven by the continuing secular decline in order volumes for checks, business forms, and some business accessories, as well as demand softness within our distributor network. These decreases were partially offset by pricing actions implemented in response to inflation, as well as the acquisition of new small business clients and the expansion of relationships with some of our existing clients.

Adjusted EBITDA for 2023 increased slightly compared to 2022, mainly due to the benefits of our cost management actions and a more focused approach targeting products with better margins. These increases were partially offset by the revenue decline and inflationary pressures on materials and delivery costs. Adjusted EBITDA margin for 2023 also increased compared to 2022, as the inflationary cost pressures were more than offset by the benefits of the pricing and cost management actions, along with our focus on higher-margin products.

CASH FLOWS AND LIQUIDITY

As of December 31, 2024, we held cash and cash equivalents of $34 million. Additionally, we had restricted cash and restricted cash equivalents, which were included in settlement processing assets and other non-current assets on the consolidated balance sheet, totaling $275 million. The following table should be read in conjunction with the consolidated statements of cash flows located in Part II, Item 8 of this report.

(1) See Reconciliation of Non-GAAP Financial Measures within the Consolidated Results of Operations section, which defines and illustrates how we calculate free cash flow.

Cash provided by operating activities for 2024 decreased $4 million compared to 2023, reflecting the secular declines in the Print segment, business exits, inflationary pressures on our cost structure, and an unfavorable year-over-year impact from certain working capital changes, primarily related to receivables, prepaids, and inventories. These impacts were partially offset by our pricing and cost management actions, reduced restructuring and integration spend, and lower payments for cloud computing arrangement implementation costs and performance-based employee cash bonuses.

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Included in net cash provided by operating activities were the following operating cash outflows:

(1) Amounts reflect compensation based on total company and segment performance.

Net cash used by investing activities for 2024 increased by $27 million compared to 2023. This increase was primarily driven by lower proceeds from business exit activities in 2024 and proceeds of $8 million received in 2023 from the sale of investment securities related to our exit from the payroll and human resources services business, as discussed in the Executive Overview section. These increases in net cash used were partially offset by payments of $10 million in 2023 related to a joint venture aimed at launching and marketing a business payment distribution technology platform, which did not recur in 2024.

Net cash used by financing activities for 2024 increased by $230 million compared to 2023. This increase was primarily driven by changes in settlement processing obligations during each period, including the impact of our exit from the payroll and human resources services business, as discussed in the Executive Overview section. Additionally higher payments on long-term debt in 2024 contributed to the increase, along with payments of $15 million in 2024 for debt issuance costs related to the refinancing of our debt in December 2024.

Significant investing and financing cash transactions for each period were as follows:

When evaluating our cash needs, we must take into account our debt service requirements, lease obligations, other contractual commitments, and contingent liabilities. Detailed information regarding the maturities of our long-term debt, our operating and finance lease obligations, and contingent liabilities can be found in the Notes to Consolidated Financial Statements under the captions "Note 13: Debt," "Note 14: Leases," and "Note 15: Other Commitments and Contingencies," located in Part II, Item 8 of this report.

Furthermore, we have entered into contracts with third-party service providers, primarily for information technology services, including cloud computing and professional services. These agreements also cover outsourced services, data purchases, and payment acceptance services. These contracts commit us to payments totaling approximately $225 million, with approximately $70 million due in 2025, $60 million due in 2026, and the remaining amounts due through 2029. We anticipate that capital expenditures will be between $90 and $100 million in 2025, compared to $94 million in 2024, as we continue to scale our product categories and invest in innovation.

As of December 31, 2024, we held cash and cash equivalents of $34 million, with an additional $374 million available for borrowing under our revolving credit facility. We believe that net cash generated from our operations, combined with cash and cash equivalents on hand, and the availability under our credit facility, will be sufficient to support our operations over the next 12 months. This includes meeting our contractual obligations, debt service requirements, and addressing our long-term capital needs. We expect to maintain our regular quarterly dividend payments. However, dividends are subject to approval by our board of directors each quarter and, therefore, may change.

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CAPITAL RESOURCES

As of December 31, 2024, the principal amount of our debt obligations was $1.52 billion, compared to $1.60 billion as of December 31, 2023. Detailed information regarding our outstanding debt, including our debt service obligations, can be found under the caption "Note 13: Debt” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Our capital structure for each period was as follows:

During 2024, we made significant changes to our debt obligations. In March 2024, we established an accounts receivable financing facility with a capacity of $80 million. As of December 31, 2024, $79 million was outstanding under the facility at an interest rate of 6.22%. The proceeds from these borrowings were used to prepay amounts due under our former secured term loan facility.

In December 2024, we executed a $900 million amended and restated credit agreement, which includes commitments of $400 million under a revolving credit facility and $500 million under a term loan facility. Concurrently, we repaid and terminated our previous credit facility, recording interest expense of $2 million for the write-off of the related unamortized debt issuance costs. As of December 31, 2024, $518 million was outstanding under our new credit agreement, at a weighted-average interest rate of 7.23%.

Additionally, in December 2024, we issued $450 million of 8.125% senior secured notes that mature in September 2029. However, if any of our senior unsecured notes remain outstanding as of February 1, 2029, the senior secured notes will mature on February 1, 2029. The proceeds from this offering, net of discount and offering costs, were $441 million, resulting in an effective interest rate of 8.6%. The net proceeds, along with borrowings from the new credit agreement established in December 2024, were used to refinance the former senior secured term loan and revolving credit facilities.

Information regarding our debt covenants can be found under the caption "Note 13: Debt” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report. As of December 31, 2024, we were in compliance with our debt covenants.

In October 2018, our board of directors authorized the repurchase of up to $500 million of our common stock. This authorization does not have an expiration date. We have not repurchased any shares under this authorization since the first quarter of 2020. As of December 31, 2024, $287 million remained available for repurchase. Information regarding changes in shareholders' equity can be found in the consolidated statements of shareholders' equity located in Part II, Item 8 of this report.

CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimates are those that are most important to accurately portraying our financial condition and results of operations, or that place significant demands on management's judgment regarding the effects of inherently uncertain matters, and different estimates or assumptions could materially impact our financial condition or results of operations. Our MD&A discussion is based on our consolidated financial statements, which have been prepared in accordance with GAAP. Our accounting policies are detailed under the caption “Note 1: Significant Accounting Policies” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

We regularly review the accounting policies used in reporting our financial results. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the related disclosure of contingent assets and liabilities. These estimates are based on historical experience and various other factors and assumptions that we believe are reasonable under the circumstances. This forms the basis for making judgments about the carrying values of assets and liabilities.

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In some cases, we could have reasonably used different accounting estimates and in other cases, changes in the accounting estimates are likely to occur from period to period. Therefore, actual results may differ from our estimates. Significant estimates and judgments are reviewed by management on an ongoing basis and by the Audit and Finance Committee of our board of directors at the end of each quarter, prior to the public release of our financial results.

Revenue Recognition

We recognize product revenue when control of the goods is transferred to our customers, reflecting the consideration we expect to receive in exchange for those goods. Typically, control is transferred when products are shipped. The majority of our service revenue is recognized as the services are provided. Most of our contracts involve either the shipment of tangible products or the delivery of services with a single performance obligation or multiple performance obligations where control is transferred simultaneously. Some of our financial institution contracts include prepaid product discounts, which are cash payments made to our financial institution clients. These prepaid product discounts are recorded in other non-current assets on the consolidated balance sheets and are generally amortized as reductions of revenue on the straight-line basis over the contract term. Sales tax collected during revenue-producing activities is excluded from revenue. Amounts billed to customers for shipping and handling are included in revenue, while the related costs are recorded in cost of products and accrued when the related revenue is recognized.

When another party is involved in providing goods or services to a customer, we determine whether our obligation is to provide the specified good or service ourselves or to arrange for the good or service to be provided by the other party. If we are responsible for satisfying a performance obligation based on our control over the product or service, we are considered the principal and recognize revenue for the gross amount of consideration. If the other party is primarily responsible for satisfying the performance obligation, we are considered the agent and recognize revenue in the amount of any fee or commission we are entitled to. We sell certain products and services through a network of distributors and have determined that we are the principal in these transactions, recording revenue for the gross amount of consideration. Within Merchant Services, we present revenue net of the interchange fees retained by the card issuing financial institutions and the fees charged by the payment networks.

Certain costs incurred to obtain customer contracts must be recognized as assets and amortized in line with the transfer of goods or services to the customer. We defer costs related to obtaining check supply, treasury management solutions, and merchant services contracts. These amounts, which totaled $19 million as of December 31, 2024, are included in other non-current assets on the consolidated balance sheets and are amortized on the straight-line basis as SG&A expense. The straight-line amortization approximates the timing of the transfer of goods or services to the customer, generally over periods of two to five years. Costs are expensed as incurred when the amortization period is one year or less.

Accounting for customer contracts can be complex and may involve various techniques to estimate total contract revenue. Some contracts for data-driven marketing solutions include variable consideration that depends on the success of the marketing campaign, commonly referred to as pay-for-performance. We recognize revenue for estimated variable consideration as services are rendered, based on the most likely amount to be realized. As of December 31, 2024, the amount of conditional contract assets included in revenue in excess of billings on the consolidated balance sheet was $17 million. Estimates regarding the recognition of variable consideration are based on assumptions projecting the outcome of future events. Typically, the final amount of consideration for these contracts is determined within three to four months. We regularly review and update our contract-related estimates and do not expect that revisions to our estimates will have a material impact on our results of operations, financial position, or cash flows.

Goodwill Impairment

As of December 31, 2024, our goodwill totaled $1.42 billion, representing 50.3% of our total assets. We test goodwill for impairment annually as of July 31, or more frequently if events or changes in circumstances indicate a possible impairment.

To assess goodwill for impairment, we assign it to individual reporting units. Identification of reporting units involves analyzing the components that comprise each of our operating segments, considering factors such as the manner in which we operate our business and the availability of discrete financial information. Components of an operating segment are aggregated to form a reporting unit if they have similar economic characteristics. We periodically review our reporting units to ensure they continue to reflect the manner in which we operate our business.

During our annual goodwill impairment analysis, we may first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If this qualitative assessment suggests it is not more likely than not that the fair value is less than the carrying amount, a quantitative impairment test is unnecessary. For the 2024 annual impairment analysis, we performed quantitative analyses for specific reporting units: Merchant Services, Treasury Management, and Business Essentials. These quantitative analyses indicated that the estimated fair values of the reporting units exceeded their carrying values. For the remaining reporting units with goodwill, we conducted qualitative analyses, considering factors such as economic, market, and industry conditions, cost factors, and the overall financial performance of the reporting units. We also reviewed the most recent quantitative analyses from prior periods. Based on these assessments, we found no changes in events or circumstances that suggested it was more likely than not that the fair value of any reporting unit was less

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than its carrying amount. As such, no goodwill impairment charges were recorded as a result of our 2024 annual impairment analysis.

When a quantitative analysis is necessary, we compare the carrying value of the reporting unit, including goodwill, to its estimated fair value. The carrying value is based on the assets and liabilities associated with the reporting unit's operations, often requiring the allocation of shared and corporate items among reporting units. We use a discounted cash flow model to estimate the fair value of a reporting unit. This model involves projecting future cash flows using the reporting unit's financial forecast from the perspective of an unrelated market participant. We project revenue using historical trending and internal forecasting techniques, apply our fixed and variable cost experience rates to the projected revenue, and calculate future cash flows. A terminal value is then applied to the projected cash flow stream, and future estimated cash flows are discounted to their present value to determine the estimated fair value. The discount rate used is the market-value-weighted-average of our estimated cost of capital, derived using both known and estimated customary market metrics. To determine the estimated fair values of our reporting units, we estimate several factors, including projected revenue growth rates, EBITDA margins, terminal growth rates, discount rates, and the allocation of shared and corporate items. When completing quantitative analyses for all of our reporting units, we compare the summation of our reporting units' fair values to our consolidated fair value, as indicated by our market capitalization, to ensure the reasonableness of our calculations.

In 2023, we entered into agreements to transition our U.S. and Canadian payroll and human resources services customers to other service providers. This business, which comprised a reporting unit with a goodwill balance of $8 million as of December 31, 2023, underwent an impairment evaluation during the latter half of 2024 as we transitioned out of the business. During the third and fourth quarters of 2024, we recorded goodwill impairment charges totaling $8 million, as we determined that the remaining cash flows to be generated by the business no longer supported the carrying value of the reporting unit.

Further details about our goodwill impairment analyses can be found under the caption "Note 8: Fair Value Measurements" in the Notes to Consolidated Financial Statements located in Item II, Part 8 of this report. Evaluating asset impairment involves assumptions about future events, market conditions, and financial performance over the asset's life, requiring significant judgment. Actual results may differ from our assumptions. For instance, a sustained decline in our stock price, a downturn in economic conditions affecting our operating results, changes in business strategies or resource allocation, loss of significant customers, increased competition, or accelerated declines in order volume for checks and business forms could indicate a decline in the fair value of one or more reporting units, potentially necessitating additional impairment charges for goodwill or other assets.

New Accounting Pronouncements

Information regarding accounting pronouncements not yet adopted can be found under the caption “Note 2: New Accounting Pronouncements” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") includes the following sections:

•Executive Overview that discusses what we do, our operating results at a high level and our financial outlook for the upcoming year;

•Consolidated Results of Operations; Restructuring and Integration Expense; and Segment Results that includes a more detailed discussion of our revenue and expenses;

•Cash Flows and Liquidity and Capital Resources that discusses key aspects of our cash flows, financial commitments, capital structure and financial position; and

•Critical Accounting Estimates that discusses the estimates that involve a significant level of uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Please note that this MD&A discussion contains forward-looking statements that involve risks and uncertainties. Part I, Item 1A of this report outlines known material risks and important information to consider when evaluating our forward-looking

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statements. The Private Securities Litigation Reform Act of 1995 (the "Reform Act") provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information. When we use the words or phrases “should result,” “believe,” “intend,” “plan,” “are expected to,” “targeted,” “will continue,” “will approximate,” “is anticipated,” “estimate,” “project,” “outlook,” "forecast" or similar expressions in this Annual Report on Form 10-K, in future filings with the Securities and Exchange Commission ("SEC"), in our press releases, investor presentations and in oral statements made by our representatives, they indicate forward-looking statements within the meaning of the Reform Act.

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). In addition, we discuss free cash flow, net debt, liquidity, adjusted diluted earnings per share ("EPS"), consolidated adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") and consolidated adjusted EBITDA margin, all of which are non-GAAP financial measures. We believe that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide useful information to assist investors in analyzing our current period operating performance and in assessing our future operating performance. For this reason, our internal management reporting also includes these financial measures, which should be considered in addition to, and not as superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and therefore, may not result in useful comparisons. The reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Consolidated Results of Operations.

The following discussion and analysis provides information we believe to be relevant to understanding our financial condition and results of operations. This discussion focuses on our financial results for the years ended December 31, 2023 and December 31, 2022. A discussion of our results of operations for the year ended December 31, 2022, as compared to the year ended December 31, 2021, is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 ("the 2022 Form 10-K"), filed with the SEC on February 24, 2023, and is incorporated by reference into this Form 10-K. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes presented in Part II, Item 8 of this report.

EXECUTIVE OVERVIEW

We help businesses deepen customer relationships through trusted, technology-enabled solutions that help businesses pay and get paid, accelerate growth and operate more efficiently. Our solutions include merchant services, marketing services and data analytics, treasury management solutions, promotional products, and fraud and security solutions, as well as customized checks and business forms. We support millions of small businesses, thousands of financial institutions and hundreds of the world’s largest consumer brands. We are also a leading provider of checks and accessories sold directly to consumers. Our reach, scale and distribution channels position us to be a trusted business partner for our customers.

Our Strategy

A detailed discussion of our strategy can be found in Part I, Item 1 of this report. During the first quarter of 2023, we completed our 3-year corporate infrastructure modernization program with the implementation of the final major phase of our enterprise resource planning ("ERP") system. This effort required significant investment and management attention over the past 3 years. We expect that the new platform will now drive additional cost improvements and scale. We also made significant progress in our ongoing lockbox improvement efforts within our Payments segment, continuing to consolidate sites and shift work to optimize our operations. Having substantially completed our infrastructure modernization initiatives, we have shifted our focus to growth investments, primarily in Payments and Data Solutions, so that we can continue to drive scale, with the goal of growing profits faster than revenue. During 2023, adjusted EBITDA margin increased as compared to the prior year, as our operations continued to benefit from our disciplined pricing actions and overall cost management. We recently announced our North Star program, the goal of which is to further drive shareholder value by (1) expanding our EBITDA growth trajectory, (2) driving increased cash flow, (3) paying down debt, and (4) improving our leverage ratio. Further information can be found in Restructuring and Integration Expense.

During the first quarter of 2024, we realigned our organizational structure to better reflect our portfolio mix and offerings, and we updated our reportable segments to correspond with these changes. We did not operate under the new segment structure during 2023, and we continued to allocate resources and assess performance based on our current reportable segment structure. Information regarding our realigned reportable segments for the quarter ending March 31, 2024 can be found in Part I, Item 1 of this report.

Divestitures / business exits – In June 2023, we completed the sale of our North American web hosting and logo design businesses. These businesses generated annual revenue of approximately $66 million during 2022, primarily in our Data Solutions segment. In September and December 2023, we executed agreements allowing for the conversion of our U.S. and Canadian payroll and human resources services customers to other service providers. These businesses generated annual revenue of approximately $27 million in the Payments segment during 2023.

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In May 2022, we completed the sale of our Australian web hosting business, and we also sold our Promotional Solutions strategic sourcing and retail packaging businesses during 2022. These businesses generated annual revenue of approximately $24 million in our Data Solutions segment and approximately $29 million in our Promotional Solutions segment during 2021.

We believe that these business exits allow us to focus our resources on the key growth areas of payments and data, while allowing us to optimize our operations. Further information regarding these business exits can be found under the caption "Note 6: Acquisition and Divestitures" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

2023 Financial Results

Cash flows and liquidity – Cash provided by operating activities for 2023 increased $6.8 million as compared to 2022, driven by positive changes in working capital, pricing and cost saving actions, and a decrease of $9.5 million in payments for cloud computing implementation costs related to the implementation of our ERP system, which was completed in early 2023. Growth in data-driven marketing and merchant services revenue also contributed to the increase in operating cash flow. Partially offsetting these increases in operating cash flow was a $28.4 million increase in interest payments as a result of rising interest rates, as well as a $9.5 million increase in employee bonus payments related to our 2022 operating performance and a $9.3 million increase in income tax payments driven, in large part, by the timing of our federal tax payments. Operating cash flow was also negatively impacted by the continuing secular decline in checks, business forms and certain Promotional Solutions business accessories, inflationary pressures on hourly wages, materials and delivery, and the impact of business exits. Free cash flow increased $10.7 million for 2023, as compared to 2022. Total debt was $1.59 billion and net debt was $1.52 billion as of December 31, 2023. We held cash and cash equivalents of $72.0 million as of December 31, 2023, and liquidity was $312.5 million. Our capital allocation priorities are to reduce our debt and net leverage, deliver high return internal investments and pay our dividend. We continue to responsibly invest the free cash flow generated by our Checks and Promotional Solutions businesses into Payments and Data Solutions, businesses that we believe can generate more robust growth over time. A reconciliation of free cash flow, net debt and liquidity to the comparable GAAP financial measures can be found in Consolidated Results of Operations.

2023 earnings vs. 2022 – Multiple factors drove the decrease in net income for 2023, as compared to 2022, including:

•increased investments in the business, primarily costs related to our technology infrastructure and a $27.3 million increase in restructuring and integration expense as we continue to take actions to grow earnings and optimize our cost structure;

•a $31.2 million increase in interest expense resulting from increasing interest rates on our variable-rate debt;

•the continuing secular decline in checks, business forms and some Promotional Solutions business accessories;

•inflationary pressures on hourly wages, materials and delivery; and

•the impact of business exits.

Partially offsetting these decreases in net income were the following factors:

•price increases in response to the inflationary environment;

•the benefit of actions taken to reduce costs, including workforce adjustments, marketing optimization and real estate rationalization;

•a $15.7 million decrease in acquisition amortization, as certain of our assets are amortized using accelerated methods; and

•a $13.1 million increase in gain on sale of businesses and long-lived assets, driven by our business exit activity.

Diluted EPS of $0.59 for 2023, as compared to $1.50 for 2022, reflects the decrease in net income as described in the preceding paragraphs, as well as higher average shares outstanding in 2023. Adjusted diluted EPS for 2023 was $3.32 compared to $4.08 for 2022, and excludes the impact of non-cash items or items that we believe are not indicative of our current period operating performance. The decrease in adjusted diluted EPS was driven by the increase in interest expense resulting from the effect of increasing interest rates on our variable-rate debt, increased investments in the business, inflationary pressures on our cost structure, the continuing secular decline in checks, business forms and some business accessories, and the impact of business exits. These decreases in adjusted diluted EPS were partially offset by price increases in response to the inflationary environment and the benefit of various cost saving actions across functional areas. A reconciliation of diluted EPS to adjusted diluted EPS can be found in Consolidated Results of Operations.

Recent market conditions – Interest expense has increased as a result of the rising interest rate environment. As of December 31, 2023, we held interest rate swaps that effectively convert $771.7 million of our variable-rate debt to a fixed rate. As

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a result, 78% of our debt had a fixed interest rate of 7.0% as of December 31, 2023, which partially insulates us from future interest rate increases.

We continue to monitor inflationary pressures on our labor, delivery and material costs. In response to the inflationary environment, we implemented targeted price increases in all of our segments. Despite the price changes, we continue to experience healthy revenue volumes, demonstrating the strength of our business and continued demand for our products. We have, at times, experienced some supply disruptions impacting certain printed products in our Promotional Solutions segment. We continue to closely monitor our supply chain to avoid delays or disruptions. We have also experienced labor supply issues in certain portions of our business. It remains difficult to estimate the severity and duration of the inflationary environment or supply chain and labor issues on our business, financial position or results of operations.

The disruptions to some regional financial institutions earlier in the year had no impact on our business or results of operations. We do not bank with any of the directly affected financial institutions, and they collectively represent an immaterial portion of our revenue. Additionally, we have very little customer concentration risk, and we believe our diversified customer base positions us well going forward.

Outlook for 2024

We expect that revenue for 2024 will be between $2.14 billion and $2.18 billion, as compared to 2023 revenue of $2.19 billion. The 2023 amount included revenue of approximately $56 million that will not recur in 2024 due to business exits. We expect that adjusted EBITDA for 2024 will be between $400 million and $420 million, as compared to $417 million for 2023. The 2023 amount included adjusted EBITDA of approximately $26 million that will not recur in 2024 due to business exits. These estimates are subject to, among other things, prevailing macroeconomic conditions, global unrest, labor supply issues, inflation and the impact of business exits.

As of December 31, 2023, we held cash and cash equivalents of $72.0 million and $240.5 million was available for borrowing under our revolving credit facility. We anticipate that capital expenditures will be approximately $100 million in 2024, as compared to $100.7 million for 2023, as we continue with important innovation investments and building scale across our product categories. We also expect that we will continue to pay our regular quarterly dividend. However, dividends are approved by our board of directors each quarter and thus, are subject to change. We anticipate that net cash generated by operations, along with cash and cash equivalents on hand and availability under our credit facility, will be sufficient to support our operations, including our contractual obligations and debt service requirements, for the next 12 months, as well as our long-term capital requirements. We were in compliance with our debt covenants as of December 31, 2023, and we anticipate that we will remain in compliance with our debt covenants throughout 2024.

CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Revenue

The decrease in total revenue for 2023, as compared to 2022, was driven, in part, by the business exits discussed in Executive Overview, which resulted in a decrease in revenue of approximately $52 million for 2023, as well as the continuing secular decline in order volume for checks, business forms and some Promotional Solutions business accessories. These decreases in revenue were partially offset by price increases in response to the inflationary environment, primarily in our Promotional Solutions and Checks segments, as well as growth from new business and favorable volumes for data-driven marketing and merchant services.

We do not manage our business based on product versus service revenue. Instead, we analyze our revenue based on the product and service offerings shown under the caption "Note 17: Business Segment Information" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report. Our revenue mix by business segment was as follows:

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Consolidated Cost of Revenue

Cost of revenue consists primarily of raw materials used to manufacture our products, shipping and handling costs, third-party costs for outsourced products and services, payroll and related expenses, information technology costs, depreciation and amortization of assets used in the production process and in support of digital service offerings, and related overhead.

The decrease in total cost of revenue for 2023, as compared to 2022, was driven by reduced revenue volume from the continuing secular decline in checks, business forms and some Promotional Solutions business accessories, as well as a decrease of approximately $27 million from the business exits discussed under Executive Overview. Partially offsetting these decreases in total cost of revenue was inflationary pressures on hourly wages, materials and delivery, as well as the revenue growth from new business and favorable volumes, primarily data-driven marketing and merchant services. In addition, investments in the business increased, including some cost pressures in our Payments lockbox business earlier in the year as we continued to consolidate these operations. Restructuring and integration expense included in total cost of revenue increased $11.6 million as we continued to pursue cost reductions and growth initiatives.

Total cost of revenue as a percentage of total revenue for 2023 increased as compared to 2022, as the inflationary impacts, investments in the business and restructuring and integration expense more than offset the benefit of our pricing actions.

Consolidated Selling, General & Administrative ("SG&A") Expense

The decrease in SG&A expense for 2023, as compared to 2022, was driven, in part, by various cost reduction actions, including workforce adjustments, marketing optimization and real estate rationalization, as well as a decrease related to the business exits discussed under Executive Overview of approximately $15 million for 2023. Additionally, acquisition amortization decreased $15.0 million in 2023, as certain of our intangible assets are amortized using accelerated methods. These decreases in SG&A expense were partially offset by increased costs related to our continued investments in the business, primarily related to our technology infrastructure.

Total SG&A expense as a percentage of total revenue for 2023 decreased as compared to 2022, as the impact of price increases, our cost reduction actions and the decrease in acquisition amortization more than offset the impact of investments in the business.

Restructuring and Integration Expense

We continue to pursue several initiatives designed to focus our business behind our growth strategy and to increase our efficiency. The amount of restructuring and integration expense is expected to vary from period to period as we execute these initiatives. Further information regarding these costs can be found in Restructuring and Integration Expense in this MD&A discussion.

Gain on Sale of Businesses and Long-Lived Assets

As discussed in Executive Overview, during 2023, we completed the sale of our North American web hosting and logo design businesses, recognized income from actions related to the decision to exit our payroll and human resources services business, and sold 2 facilities. During 2022, we completed the sale of our Australian web hosting business, our Promotional Solutions retail packaging and strategic sourcing businesses, and a facility. Net cash proceeds from these transactions were $53.6 million during 2023 and $25.2 million during 2022. Further information regarding these business exits can be found under the caption "Note 6: Acquisition and Divestitures" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

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Interest Expense

The increase in interest expense for 2023, as compared to 2022, was due primarily to the increase in our weighted-average interest rate driven by the rising interest rate environment. Based on the amount of variable-rate debt outstanding as of December 31, 2023, a one percentage point change in the weighted-average interest rate would result in a $4 million change in interest expense for 2024.

Income Tax Provision

The increase in the effective income tax rate for 2023, as compared to 2022, was driven primarily by an increase of 7.8 points related to the repatriation of foreign earnings and the change in our foreign effective tax rate, as well as a 3.9 point increase driven by return-to-provision adjustments and a 3.5 point increase related to the tax impact of share-based compensation. These increases in our effective income tax rate were partially offset by a benefit of 4.1 points from the impacts of business exits, including related changes in the deferred tax valuation allowance. Information regarding other factors that impacted our effective income tax rates can be found under the caption "Note 10: Income Tax Provision" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

Net Income / Diluted Earnings per Share

(1) Information regarding the calculation of adjusted diluted EPS can be found in the following section entitled Reconciliation of Non-GAAP Financial Measures.

The decreases in net income, diluted EPS and adjusted diluted EPS for 2023, as compared to 2022, were driven by the factors outlined in Executive Overview – 2023 results vs. 2022.

Adjusted EBITDA

(1) Information regarding the calculation of adjusted EBITDA and adjusted EBITDA margin can be found in the following section entitled Reconciliation of Non-GAAP Financial Measures.

The slight decrease in adjusted EBITDA for 2023, as compared to 2022, was driven primarily by increased costs related to our continued investments in the business, primarily inefficiencies related to the consolidation of our Payments lockbox business earlier in the year and costs related to our technology infrastructure, as well as inflationary pressures on hourly wages, materials and delivery. Also reducing adjusted EBITDA was the continuing secular decline in checks, business forms and some business accessories, and the business exits discussed under Executive Overview reduced adjusted EBITDA approximately $14 million in 2023. Partially offsetting these decreases in adjusted EBITDA were price increases in response to the inflationary environment, the benefit of actions taken to reduce costs as we continually evaluate our cost structure, and the growth in data-driven marketing and merchant services revenue.

Adjusted EBITDA margin increased for 2023, as compared to 2022, driven by price increases, the benefit of cost saving actions and operating leverage, partially offset by inflationary pressures and our continued investments in the business.

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Reconciliation of Non-GAAP Financial Measures

Free cash flow – We define free cash flow as net cash provided by operating activities less purchases of capital assets. We believe that free cash flow is an important indicator of cash available for debt service and for shareholders, after making capital investments to maintain or expand our asset base. A limitation of using the free cash flow measure is that not all of our free cash flow is available for discretionary spending, as we may have mandatory debt payments and other cash requirements that must be deducted from our cash available for future use. We believe that the measure of free cash flow provides an additional metric to compare cash generated by operations on a consistent basis and to provide insight into the cash flow available to fund items such as dividends, mandatory and discretionary debt reduction, acquisitions or other strategic investments, and share repurchases.

Net cash provided by operating activities for the years ended December 31 reconciles to free cash flow as follows:

Net debt – Management believes that net debt is an important measure to monitor leverage and to evaluate the balance sheet. In calculating net debt, cash and cash equivalents are subtracted from total debt because they could be used to reduce our debt obligations. A limitation associated with using net debt is that it subtracts cash and cash equivalents, and therefore, may imply that management intends to use cash and cash equivalents to reduce outstanding debt. In addition, net debt suggests that our debt obligations are less than the most comparable GAAP measure indicates.

Total debt reconciles to net debt as follows as of December 31:

Liquidity – We define liquidity as cash and cash equivalents plus the amount available for borrowing under our revolving credit facility. We consider liquidity to be an important metric for demonstrating the amount of cash that is available or that could be available on short notice. This financial measure is not a substitute for GAAP liquidity measures. Instead, we believe that this measurement enhances investors' understanding of the funds that are currently available.

Liquidity was as follows as of December 31:

Adjusted diluted EPS – By excluding the impact of non-cash items or items that we believe are not indicative of current period operating performance, we believe that adjusted diluted EPS provides useful comparable information to assist in analyzing our current period operating performance and in assessing our future operating performance. As such, adjusted diluted EPS is one of the key financial performance metrics we use to assess the operating results and performance of the business and to identify strategies to improve performance. It is reasonable to expect that one or more of the excluded items will occur in future periods, but the amounts recognized may vary significantly.

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Diluted earnings per share for the years ended December 31 reconciles to adjusted diluted EPS as follows:

(1) The tax effect of the pretax adjustments considers the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). Generally, this results in a tax impact that approximates the U.S. effective tax rate for each adjustment. However, the tax impact of certain adjustments, such as share-based compensation expense and gains on sales of businesses, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable effective tax rate(s) in those jurisdictions.

(2) The total of weighted-average shares and potential common shares outstanding used in the calculation of adjusted diluted EPS differs from the GAAP calculation due to differences in the amount of dilutive securities in each calculation.

Adjusted EBITDA and adjusted EBITDA margin – We believe that adjusted EBITDA and adjusted EBITDA margin are useful in evaluating our operating performance, as they eliminate the effect of interest expense, income taxes, the accounting effects of capital investments (i.e., depreciation and amortization) and certain items, as presented below, that may vary for reasons unrelated to current period operating performance. In addition, management utilizes these measures to assess the operating results and performance of the business, to perform analytical comparisons and to identify strategies to improve performance. We also believe that an increasing adjusted EBITDA and adjusted EBITDA margin depict an increase in the value of the company. We do not consider adjusted EBITDA to be a measure of cash flow, as it does not consider certain cash requirements such as interest, income taxes, debt service payments or capital investments.

We have not reconciled our adjusted EBITDA outlook for 2023 to the directly comparable GAAP financial measure because we do not provide outlook guidance for net income or the reconciling items between net income and adjusted EBITDA. Because of the substantial uncertainty and variability surrounding certain of these forward-looking reconciling items, including asset impairment charges; restructuring and integration expense; gains and losses on sales of businesses and long-lived assets; and certain legal-related expenses, a reconciliation of the non-GAAP financial measure outlook guidance to the corresponding GAAP measure is not available without unreasonable effort. The probable significance of certain of these reconciling items is high and, based on historical experience, could be material.

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Net income for the years ended December 31 reconciles to adjusted EBITDA and adjusted EBITDA margin as follows:

RESTRUCTURING AND INTEGRATION EXPENSE

Restructuring and integration expense consists of costs related to initiatives to drive earnings and cash flow growth and also includes costs related to the consolidation and migration of certain applications and processes, including our financial management system. These costs consist primarily of consulting, project management services and internal labor, as well as other costs associated with our initiatives, such as costs related to facility closures and consolidations. In addition, we have recorded employee severance costs across functional areas.

We are currently pursuing several initiatives designed to support our growth strategy and to increase our efficiency, including several initiatives that we collectively refer to as our North Star program. The goal of these initiatives is to further drive shareholder value by (1) expanding our EBITDA growth trajectory, (2) increasing cash flow, (3) paying down debt, and (4) improving our leverage ratio. Our various initiatives include a balanced mix of structural cost reductions focused on organizational structure, processes and operational improvements, in addition to workstreams to drive revenue growth. We have already combined like-for-like capabilities, reduced management layers and consolidated core operations to run more efficiently and to create the ability to invest in high impact talent to accelerate our growth businesses of payments and data. The associated costs, which consisted primarily of consulting and severance costs, drove the increase in restructuring and integration expense during 2023. Further information regarding restructuring and integration expense can be found under the caption "Note 9: Restructuring and Integration Expense" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

We expect that the benefits of the various North Star initiatives will ramp up over the coming quarters. The overall program targets a $100 million run-rate improvement in free cash flow and an $80 million run-rate improvement in adjusted EBITDA by 2026. Through December 31, 2023, we incurred related restructuring and integration expense of approximately $45 million, and we expect to incur an additional $70 million to $90 million over the next 2 years. These charges will include employee severance, professional services fees and other restructuring-related charges.

The majority of the employee reductions included in our restructuring and integration accruals as of December 31, 2023, as well as the related severance payments, are expected to be completed by mid-2024. As a result of our employee reductions, including those related to our North Star program, we realized cost savings of approximately $7 million in cost of sales and $25 million in SG&A expense in 2023, in comparison to our 2022 results of operations. For those employee reductions included in our restructuring and integration accruals through December 31, 2023, we expect to realize annual cost savings of approximately $8 million in cost of sales and $25 million in SG&A expense in 2024, in comparison to our 2023 results of operations. In addition, we realized cost savings from facility closures of approximately $3 million in 2023, in comparison to our 2022 results of operations, and we anticipate savings of approximately $3 million in 2024, in comparison to our 2023 results of operations. Note that these savings may be offset by increased labor and other costs, including inflationary impacts and investments in the business.

SEGMENT RESULTS

As of December 31, 2023, we operated 4 reportable business segments: Payments, Data Solutions, Promotional Solutions and Checks. These segments were generally organized by product type and reflected the way we managed the company. The financial information presented below for our reportable business segments is consistent with that presented

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under the caption “Note 17: Business Segment Information” in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report, where information regarding revenue for our product and service offerings can also be found.

Payments

Results for our Payments segment were as follows:

The increase in total revenue for 2023, as compared to 2022, was due to an increase in merchant services revenue of 4.8%, driven by strong merchant fees and volume. Treasury management revenue was flat year-over-year as price increases in response to the inflationary environment were offset by the impact of non-recurring revenue in the prior year and continued demand softness for lockbox services. For 2024, we expect mid-single digit percentage revenue growth for this segment.

The increase in adjusted EBITDA for 2023, as compared to 2022, was primarily driven by the revenue growth in merchant services, benefits from operational improvements across our lockbox sites, and price increases in response to the inflationary environment. These increases in adjusted EBITDA were partially offset by continued information technology investments and inflationary pressures on labor costs, as well as the lower lockbox services volume. For 2024, we expect adjusted EBITDA margin to continue in the low to mid 20% range.

Data Solutions

Results for our Data Solutions segment were as follows:

The decrease in total revenue for 2023, as compared to 2022, was driven by the business exits discussed in Executive Overview, which resulted in a reduction in revenue of approximately $38 million for 2023. In addition, revenue from our North American web hosting business prior to the divestiture declined due to continuing customer churn. Partially offsetting these decreases in revenue was an increase in data-driven marketing revenue of $15 million for 2023, as demand increased for our marketing services in support of banks attracting low-cost deposits and expansion of business banking account offerings. This increase was partially offset by the impact of certain of our customer's marketing campaigns being pulled into the fourth quarter of 2022. For 2024, we expect that revenue will decline approximately $27 million as a result of the business exits and that the remainder of the business will deliver mid-single digit percentage revenue growth.

The decrease in adjusted EBITDA for 2023, as compared to 2022, was driven by the business exits discussed under Executive Overview, which reduced adjusted EBITDA by approximately $13 million for 2023, as well as the decrease in North American web hosting revenue prior to the divestiture. These decreases in adjusted EBITDA were partially offset by the growth in data-driven marketing and the benefit of various cost reduction actions. Adjusted EBITDA margin decreased for 2023, as compared to 2022, as the shift toward data-driven marketing revenue was offset by expense management. For 2024, we expect that adjusted EBITDA will decline approximately $9 million due to business exits, and we expect that adjusted EBITDA margin will be in the low 20% range.

Promotional Solutions

Results for our Promotional Solutions segment were as follows:

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The decrease in total revenue for 2023, as compared to 2022, was driven primarily by the continuing secular decline in business forms and some accessories and some demand softness in our distributor network. Additionally, the business exits discussed in Executive Overview resulted in a revenue decline of approximately $13 million for 2023. Partially offsetting these decreases in revenue was the impact of price increases in response to the inflationary environment, new clients and relationship expansion with existing clients. For 2024, we expect a low to mid single digit percentage revenue decline.

The increase in adjusted EBITDA for 2023, as compared to 2022, was driven primarily by price increases and cost reduction actions. In addition, we are taking a more focused approach and targeting products with better margins. Partially offsetting these increases in adjusted EBITDA were inflationary pressures on materials and delivery, the continuing secular decline in business forms and some accessories, and some demand softness in our distributor network. Adjusted EBITDA margin increased for 2023, as compared to 2022, as price increases, the benefit of cost reduction actions and our focus on products with better margins more than offset the impact of inflationary pressures. For 2024, we expect the adjusted EBITDA margin percentage to remain in the mid-teens.

Checks

Results for our Checks segment were as follows:

The decrease in total revenue for 2023, as compared to 2022, was driven primarily by the continuing secular decline in overall check volumes, partially offset by price increases in response to the inflationary environment. For 2024, we expect the percentage revenue decline to be in the low to mid single digits, consistent with our long-term expectations.

Adjusted EBITDA for 2023 was flat as compared to 2022, as the secular decline in overall check volumes and inflationary pressures on delivery and materials were offset by price increases and the benefit of cost saving actions. Adjusted EBITDA margin for 2023 increased as compared to 2022, as inflationary cost pressures were more than offset by the benefit of the pricing and cost saving actions. For 2024, we expect adjusted EBITDA margin to remain in the mid 40% range.

CASH FLOWS AND LIQUIDITY

As of December 31, 2023, we held cash and cash equivalents of $72.0 million, as well as restricted cash and restricted cash equivalents included in funds held for customers and in other non-current assets of $386.1 million. The following table should be read in conjunction with the consolidated statements of cash flows appearing in Part II, Item 8 of this report.

(1) See Reconciliation of Non-GAAP Financial Measures within the Consolidated Results of Operations section, which defines and illustrates how we calculate free cash flow.

Cash provided by operating activities for 2023 increased $6.8 million as compared to 2022, driven by positive changes in working capital, pricing and cost saving actions, and a decrease of $9.5 million in payments for cloud computing implementation costs related to the implementation of our financial management system, which was completed in early 2023. Growth in data-driven marketing and merchant services revenue also contributed to the increase in operating cash flow. Partially offsetting these increases in operating cash flow was a $28.4 million increase in interest payments as a result of rising interest rates, as well as a $9.5 million increase in employee bonus payments related to our 2022 operating performance and a $9.3 million increase in income tax payments driven, in large part, by the timing of our federal tax payments. Operating cash flow was also negatively impacted by the continuing secular decline in checks, business forms and certain Promotional Solutions business accessories, inflationary pressures on hourly wages, materials and delivery, and the impact of business exits.

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Included in net cash provided by operating activities were the following operating cash outflows:

(1) Amounts reflect compensation based on total company and segment performance.

Net cash used by investing activities for 2023 was $37.0 million lower than 2022, driven primarily by a $28.4 million increase in proceeds from sales of businesses and long-lived assets.

Net cash used by financing activities for 2023 was $10.9 million lower than 2022, driven by the net change in customer funds obligations in each period, partially offset by higher payments of debt during 2023 enabled, in part, by the proceeds received from business exits during 2023.

Significant cash transactions, excluding those related to operating activities, for each period were as follows:

In assessing our cash needs, we must consider our debt service requirements, lease obligations, other contractual commitments and contingent liabilities. Information regarding the maturities of our long-term debt, our operating and finance lease obligations and contingent liabilities can be found under the captions "Note 13: Debt," "Note 14: Leases" and "Note 15: Other Commitments and Contingencies," all of which appear in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report. In addition, we have executed contracts with third-party service providers, primarily for information technology services, including cloud computing and professional services agreements related to our various restructuring initiatives, as well as agreements for outsourced services, the purchase of data, and payment acceptance services. These contracts obligate us to pay approximately $230 million in total, with approximately $100 million due during 2024, $50 million due during 2025 and the remainder due through 2028.

As of December 31, 2023, $240.5 million was available for borrowing under our revolving credit facility. We anticipate that net cash generated by operations, along with cash and cash equivalents on hand and availability under our credit facility, will be sufficient to support our operations, including our contractual obligations and our debt service requirements, for the next 12 months, as well as our long-term capital requirements. We anticipate that we will continue to pay our regular quarterly dividend. However, dividends are approved by our board of directors each quarter and thus, are subject to change.

CAPITAL RESOURCES

The principal amount of our debt obligations was $1.60 billion as of December 31, 2023 and $1.66 billion as of December 31, 2022. Further information concerning our outstanding debt, including our debt service obligations, can be found under the caption "Note 13: Debt” in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

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Our capital structure for each period was as follows:

(1) The fixed interest rate amount includes the amount of our variable-rate debt that is subject to interest rate swap agreements. The related interest rate includes the fixed rate under the swaps plus the credit facility spread due on all amounts outstanding under our credit facility.

In October 2018, our board of directors authorized the repurchase of up to $500.0 million of our common stock. This authorization has no expiration date. We have not repurchased any shares under this authorization since the first quarter of 2020. As of December 31, 2023, $287.5 million remained available for repurchase under the authorization. Information regarding changes in shareholders' equity can be found in the consolidated statements of shareholders' equity appearing in Part II, Item 8 of this report.

As of December 31, 2023, total commitments under our revolving credit facility were $500.0 million. Our quarterly commitment fee ranges from 0.25% to 0.35%, based on our total leverage ratio, as defined in the credit agreement. Further information regarding the terms and maturities of our debt, as well as our debt covenants, can be found under the caption "Note 13: Debt" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report. We were in compliance with our debt covenants as of December 31, 2023, and we anticipate that we will remain in compliance with our debt covenants throughout 2024.

As of December 31, 2023, amounts were available for borrowing under our revolving credit facility as follows:

(1) We use standby letters of credit primarily to collateralize certain obligations related to our self-insured workers' compensation claims, as well as claims for environmental matters, as required by certain states. These letters of credit reduce the amount available for borrowing under our revolving credit facility.

CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimates are those that are most important to the portrayal of our financial condition and results of operations, or which place the most significant demands on management's judgment about the effect of matters that are inherently uncertain, and the impact of different estimates or assumptions could be material to our financial condition or results of operations. Our MD&A discussion is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. Our accounting policies are discussed under the caption “Note 1: Significant Accounting Policies” in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other factors and assumptions that we believe are reasonable under the circumstances, the result of which forms the basis for making judgments about the carrying values of assets and liabilities. In some instances, we reasonably could have used different accounting estimates and, in other instances, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results may differ from our estimates. Significant estimates and judgments are reviewed by management on an ongoing basis and by the Audit and Finance committee of our board of directors at the end of each quarter prior to the public release of our financial results.

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Revenue Recognition

Product revenue is recognized when control of the goods is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. In most cases, control is transferred when products are shipped. We recognize the vast majority of our service revenue as the services are provided. The majority of our contracts are for the shipment of tangible products or the delivery of services that have a single performance obligation or include multiple performance obligations where control is transferred at the same time. Certain of our financial institution contracts require prepaid product discounts in the form of cash payments we make to our financial institution clients. These prepaid product discounts are included in other non-current assets on our consolidated balance sheets and are generally amortized as reductions of revenue on the straight-line basis over the contract term. Sales tax collected concurrent with revenue-producing activities is excluded from revenue. Amounts billed to customers for shipping and handling are included in revenue, while the related costs incurred for shipping and handling are reflected in cost of products and are accrued when the related revenue is recognized.

When another party is involved in providing goods or services to a customer, we must determine whether our obligation is to provide the specified good or service itself (i.e., we are the principal in the transaction) or to arrange for that good or service to be provided by the other party (i.e., we are an agent in the transaction). When we are responsible for satisfying a performance obligation, based on our ability to control the product or service provided, we are considered the principal and revenue is recognized for the gross amount of consideration. When the other party is primarily responsible for satisfying a performance obligation, we are considered the agent and revenue is recognized in the amount of any fee or commission to which we are entitled. We sell certain products and services through a network of distributors. We have determined that we are the principal in these transactions, and revenue is recorded for the gross amount of consideration.

Certain costs incurred to obtain customer contracts are required to be recognized as assets and amortized consistent with the transfer of goods or services to the customer. As such, we defer costs related to obtaining check supply, treasury management solution and merchant services contracts. These amounts, which totaled $21.1 million as of December 31, 2023, are included in other non-current assets and are amortized on the straight-line basis as SG&A expense. Amortization of these amounts on the straight-line basis approximates the timing of the transfer of goods or services to the customer. Generally, these amounts are being amortized over periods of 2 to 5 years. We expense these costs as incurred when the amortization period would have been 1 year or less.

Accounting for customer contracts can be complex and may involve the use of various techniques to estimate total contract revenue. Estimates related to variable consideration are based on various assumptions to project the outcome of future events. We review and update our contract-related estimates regularly, and we do not anticipate that revisions to our estimates would have a material effect on our results of operations, financial position or cash flows.

Goodwill Impairment

As of December 31, 2023, goodwill totaled $1.43 billion, which represented 46.4% of our total assets. Goodwill is tested for impairment on an annual basis as of July 31, or more frequently if events occur or circumstances change that would indicate a possible impairment.

To analyze goodwill for impairment, we must assign our goodwill to individual reporting units. Identification of reporting units includes an analysis of the components that comprise each of our operating segments, which considers, among other things, the manner in which we operate our business and the availability of discrete financial information. Components of an operating segment are aggregated to form a reporting unit if the components have similar economic characteristics. We periodically review our reporting units to ensure that they continue to reflect the manner in which we operate our business.

When completing our annual goodwill impairment analysis, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after this qualitative assessment, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative impairment test is unnecessary. In completing the 2023 annual impairment analysis of goodwill as of July 31, 2023, we elected to perform qualitative analyses for all of our reporting units. These qualitative analyses evaluated factors, including, but not limited to, economic, market and industry conditions, cost factors and the overall financial performance of the reporting units. We also considered the most recent quantitative analyses completed in prior periods. In completing these assessments, we noted no changes in events or circumstances that indicated that it was more likely than not that the fair value of any reporting unit was less than its carrying amount. As such, no goodwill impairment charges were recorded as a result of our 2023 annual impairment analysis.

When performing a quantitative analysis of goodwill, we first compare the carrying value of the reporting unit, including goodwill, to its estimated fair value. Carrying value is based on the assets and liabilities associated with the operations of the reporting unit, which often requires the allocation of shared and corporate items among reporting units. We utilize a discounted cash flow model to calculate the estimated fair value of a reporting unit. This approach is a valuation technique under which we estimate future cash flows using the reporting unit's financial forecast from the perspective of an unrelated market participant. Using historical trending and internal forecasting techniques, we project revenue and apply our fixed and variable cost

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experience rates to the projected revenue to arrive at the future cash flows. A terminal value is then applied to the projected cash flow stream. Future estimated cash flows are discounted to their present value to calculate the estimated fair value. The discount rate used is the market-value-weighted average of our estimated cost of capital derived using both known and estimated customary market metrics. In determining the estimated fair values of our reporting units, we are required to estimate a number of factors, including revenue growth rates, terminal growth rates, direct costs, the discount rate and the allocation of shared and corporate items. When completing a quantitative analysis for all of our reporting units, the summation of our reporting units' fair values is compared to our consolidated fair value, as indicated by our market capitalization, to evaluate the reasonableness of our calculations.

Further information regarding all of our goodwill impairment analyses can be found under the caption "Note 8: Fair Value Measurements" in the Notes to Consolidated Financial Statements appearing in Item II, Part 8 of this report. Evaluations of asset impairment require us to make assumptions about future events, market conditions and financial performance over the life of the asset being evaluated. These assumptions require significant judgment and actual results may vary from our assumptions. For example, if our stock price were to further decline over a sustained period, if a further downturn in economic conditions were to negatively affect our actual and forecasted operating results, if we were to change our business strategies and/or the allocation of resources, if we were to lose significant customers, if competition were to materially increase, or if order volume declines for checks and business forms were to materially accelerate, these situations could indicate a decline in the fair value of one or more of our reporting units. This may require us to record additional impairment charges for a portion of goodwill or other assets.

As discussed under Executive Overview, during 2023, we executed agreements allowing for the conversion of our U.S. and Canadian payroll and human resources services customers to other service providers. These businesses comprise a reporting unit that had a goodwill balance of $7.7 million as of December 31, 2023. We evaluated this goodwill for impairment as of December 31, 2023, and, based on our quantitative analysis, we concluded that it was not impaired as of that date. In conjunction with our phased transition out of these businesses, we expect that this goodwill will be fully impaired in 2024, at the point when the remaining cash flows generated by these businesses in 2024 no longer support the carrying value of the reporting unit.

Business Combinations

We allocate the purchase price of acquired businesses to the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition. The calculations used to determine the fair value of the long-lived assets acquired, primarily intangible assets, can be complex and require significant judgment. We weigh many factors when completing these estimates, including, but not limited to, the nature of the acquired company’s business; its competitive position, strengths and challenges; its historical financial position and performance; estimated customer retention rates; discount rates; and future plans for the combined entity. We may also engage independent valuation specialists, when necessary, to assist in the fair value calculations for significant acquired long-lived assets.

We generally estimate the fair value of acquired customer lists using the multi-period excess earnings method. This valuation model estimates revenues and cash flows derived from the asset and then deducts portions of the cash flow that can be attributed to supporting assets, such as a trade name or fixed assets, that contributed to the generation of the cash flows. The resulting cash flow, which is attributable solely to the customer list asset, is then discounted at a rate of return commensurate with the risk of the asset to calculate a present value. The fair value of acquired customer lists may also be estimated by discounting the estimated cash flows expected to be generated by the assets. During 2021, we also utilized the multi-period excess earnings method to estimate the fair value of acquired partner relationship intangible assets. Key assumptions used in these calculations include same-customer revenue, merchant and partner growth rates; estimated earnings; estimated customer and partner retention rates, based on the acquirees' historical information; and the discount rate.

The fair value of acquired trade names and technology is estimated, at times, using the relief from royalty method, which calculates the cost savings associated with owning rather than licensing the assets. Assumed royalty rates are applied to projected revenue for the estimated remaining useful lives of the assets to estimate the royalty savings. Royalty rates are selected based on the attributes of the asset, including its recognition and reputation in the industry, and in the case of trade names, with consideration of the specific profitability of the products sold under a trade name and supporting assets. The fair value of acquired technology may also be estimated using the cost of reproduction method under which the primary components of the technology are identified and the estimated cost to reproduce the technology is calculated based on historical data provided by the acquiree.

The excess of the purchase price over the estimated fair value of the net assets acquired is recorded as goodwill. Goodwill is not amortized, but is subject to impairment testing on at least an annual basis.

We are also required to estimate the useful lives of the acquired intangible assets, which determines the amount of acquisition-related amortization expense we will record in future periods. Each reporting period, we evaluate the remaining useful lives of our amortizable intangibles to determine whether events or circumstances warrant a revision to the remaining period of amortization.

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While we use our best estimates and assumptions, our fair value estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to 1 year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Any adjustments required after the measurement period are recorded in the consolidated statements of income.

The judgments required in determining the estimated fair values and expected useful lives assigned to each class of assets and liabilities acquired can significantly affect net income. For example, different classes of assets will have different useful lives. Consequently, to the extent a longer-lived asset is ascribed greater value than a shorter-lived asset, net income in a given period may be higher. Additionally, assigning a lower value to amortizable intangibles would result in a higher amount assigned to goodwill. As goodwill is not amortized, this would benefit net income in a given period, although goodwill is subject to annual impairment analysis.

New Accounting Pronouncements

Information regarding accounting pronouncements not yet adopted can be found under the caption “Note 2: New Accounting Pronouncements” in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) includes the following sections:

•Executive Overview that discusses what we do, our operating results at a high level and our financial outlook for the upcoming year;

•Consolidated Results of Operations; Restructuring and Integration Costs; and Segment Results that includes a more detailed discussion of our revenue and expenses;

•Cash Flows and Liquidity, Capital Resources and Other Financial Position Information that discusses key aspects of our cash flows, financial commitments, capital structure and financial position; and

•Critical Accounting Estimates that discusses the estimates that involve a significant level of uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Please note that this MD&A discussion contains forward-looking statements that involve risks and uncertainties. Part I, Item 1A of this report outlines known material risks and important information to consider when evaluating our forward-looking statements. The Private Securities Litigation Reform Act of 1995 (the "Reform Act") provides a “safe harbor” for forward-looking

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statements to encourage companies to provide prospective information. When we use the words or phrases “should result,” “believe,” “intend,” “plan,” “are expected to,” “targeted,” “will continue,” “will approximate,” “is anticipated,” “estimate,” “project,” “outlook,” "forecast" or similar expressions in this Annual Report on Form 10-K, in future filings with the Securities and Exchange Commission, in our press releases, investor presentations and in oral statements made by our representatives, they indicate forward-looking statements within the meaning of the Reform Act.

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). In addition, we discuss free cash flow, net debt, liquidity, adjusted diluted earnings per share ("EPS"), consolidated adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") and consolidated adjusted EBITDA margin, all of which are non-GAAP financial measures. We believe that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide useful information to assist investors in analyzing our current period operating performance and in assessing our future operating performance. For this reason, our internal management reporting also includes these financial measures, which should be considered in addition to, and not as superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and therefore, may not result in useful comparisons. The reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Consolidated Results of Operations.

The following discussion and analysis provides information we believe to be relevant to understanding our financial condition and results of operations. This discussion focuses on our financial results for the years ended December 31, 2022 and December 31, 2021. A discussion of our results of operations for the year ended December 31, 2021, as compared to the year ended December 31, 2020, is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 ("the 2021 Form 10-K"), filed with the SEC on February 28, 2022, and is incorporated by reference into this Form 10-K. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes presented in Part II, Item 8 of this report.

EXECUTIVE OVERVIEW

We help businesses deepen customer relationships through trusted, technology-enabled solutions that help businesses pay and get paid, accelerate growth and operate more efficiently. Our solutions include merchant services, marketing services and data analytics, treasury management solutions, promotional products, and fraud and payroll solutions, as well as customized checks and business forms. We support millions of small businesses, thousands of financial institutions and hundreds of the world’s largest consumer brands, while processing approximately $3 trillion in annual payment volume. Our reach, scale and distribution channels position us to be a trusted business partner for our customers.

Acquisition – On June 1, 2021, we acquired all of the equity of First American Payment Systems, L.P. ("First American") in a cash transaction for $958.5 million, net of cash, cash equivalents, restricted cash and restricted cash equivalents acquired. First American is a large-scale payments technology company that provides partners and merchants with comprehensive in-store, online and mobile payment solutions. The results of First American are included in our Payments segment and contributed incremental revenue of $144.2 million and incremental adjusted EBITDA of $30.2 million in 2022. The acquisition was funded with cash on hand and proceeds from new debt. Further information regarding the acquisition can be found under the caption "Note 6: Acquisition and Divestitures" and further information regarding our debt can be found under the caption "Note 13: Debt," both of which appear in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

Recent market conditions – The impact of the global coronavirus ("COVID-19") pandemic on our business and results of operations for the years ended December 31, 2021 and 2020 can be found in the Executive Overview section appearing in Part II, Item 7 of the 2021 Form 10-K. The environment surrounding COVID-19 and any countermeasures taken to reduce its spread may impact our future performance and remains difficult to predict.

During 2021, we began experiencing increased inflationary pressures on our labor, delivery and material costs. In response to the inflationary environment, we began implementing targeted price increases in all of our segments in late 2021. Despite the price changes, we continued to experience strong revenue volumes throughout 2022, demonstrating the strength of our business and the continued strong demand for our products. During the first half of 2022, we began experiencing some supply disruptions impacting certain higher margin printed products in our Promotional Solutions segment. We continue to closely monitor our supply chain to promptly address any further delays or disruptions, and we did see some improvement in the second half of 2022. We have also been experiencing labor supply issues in certain portions of our business. It remains difficult to estimate the severity and duration of the current inflationary environment or supply chain and labor issues on our business, financial position or results of operations.

In 2022, our interest expense began increasing as a result of the rising interest rate environment. We executed an interest rate swap during the third quarter of 2022 to effectively convert an additional $300.0 million of our variable-rate debt to a fixed rate. As of December 31, 2022, 59% of our debt was effectively fixed rate, which will partially insulate us from future interest rate increases.

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Cash flows and liquidity – Cash provided by operating activities for 2022 decreased $19.3 million as compared to 2021. The decrease reflects a $40.5 million increase in interest payments as a result of rising interest rates in 2022 and debt issued to complete the First American acquisition in 2021, as well as a $22.8 million increase in employee cash bonus payments related to our 2021 operating performance. During 2021, a portion of our cash bonuses was paid in the form of restricted stock units and the bonus payments in 2021 were unusually low because of the impact of the COVID-19 pandemic on our 2020 performance. Operating cash flow was also negatively impacted by a $19.9 million increase in income tax payments, as well as inflationary pressures, supply chain disruptions in our Promotional Solutions segment, and the continuing secular decline in checks, business forms and some business accessories. The increase in income tax payments was primarily driven by the provisions of the Tax Cuts and Jobs Act of 2017 that became effective in 2022 and that require the capitalization of research and development and cloud computing arrangement expenditures for income tax purposes. We were able to substantially offset these decreases in operating cash flow through the incremental contribution of the First American acquisition, price increases in response to the current inflationary environment, continued cost saving actions, a $22.9 million decrease in payments for cloud computing arrangements, primarily related to our sales and finance technology infrastructure, and revenue growth from new business and strong demand for our products. In addition, we incurred acquisition transaction costs of $18.9 million in 2021 related to the First American acquisition that did not recur in 2022. Free cash flow decreased $14.7 million for 2022, as compared to 2021. Total debt was $1.64 billion and net debt was $1.60 billion as of December 31, 2022. During the third quarter of 2022, we retired $25.0 million of our $500.0 million senior, unsecured notes, realizing a pretax gain of $1.7 million. We held cash and cash equivalents of $40.4 million as of December 31, 2022, and liquidity was $335.6 million. Our capital allocation priorities are to responsibly invest in growth, pay our dividend, reduce debt and return value to our shareholders.

2022 results vs. 2021 – Multiple factors drove the increase in net income for 2022, as compared to 2021, including:

•price increases in response to the current inflationary environment;

•actions taken to reduce costs as we continually evaluate our cost structure, including workforce adjustments, real estate rationalization and marketing optimization;

•pretax gains of $19.3 million from the sale of businesses and a facility during 2022;

•acquisition transaction costs of $18.9 million in 2021 related to the First American acquisition that did not recur in 2022; and

•revenue growth from new business in all of our segments and strong ongoing demand for our products, reflecting the continued success of our One Deluxe strategy.

Partially offsetting these increases in net income were the following factors:

•a $38.9 million increase in interest expense resulting from the effect of increasing interest rates on our variable-rate debt and the additional debt issued in June 2021 to complete the First American acquisition;

•increased transformational investments, primarily costs related to our technology infrastructure;

•inflationary pressures on hourly wages, materials and delivery and supply chain disruptions within the Promotional Solutions segment that impacted certain of our higher margin printed products during the first half of 2022;

•the continuing secular decline in checks, business forms and some Promotional Solutions business accessories; and

•a $7.7 million increase in acquisition amortization, driven, in part, by the First American acquisition.

Diluted EPS of $1.50 for 2022, as compared to $1.45 for 2021, reflects the increase in net income as described in the preceding paragraphs. Adjusted diluted EPS for 2022 was $4.08 compared to $4.88 for 2021, and excludes the impact of non-cash items or items that we believe are not indicative of our current period operating performance. The decrease in adjusted diluted EPS was driven by the increase in interest expense resulting from the effect of increasing interest rates on our variable-rate debt and the debt issued in June 2021 to complete the First American acquisition, increased transformational investments, inflationary pressures on our cost structure, Promotional Solutions supply chain disruptions and the continuing secular decline in checks, business forms and some business accessories. These decreases in adjusted EPS were partially offset by price increases in response to the current inflationary environment and the contribution from First American, as adjusted EPS excludes the associated acquisition amortization. In addition, adjusted diluted EPS benefited from various cost saving actions across

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functional areas, as well as revenue growth from new business in all of our segments and strong ongoing demand for our products. A reconciliation of diluted EPS to adjusted diluted EPS can be found in Consolidated Results of Operations.

"One Deluxe" Strategy

As a result of our transformational strategy, we have realized the benefit of significant new client wins in all of our segments, and in 2022, we generated consolidated sales-driven revenue growth for the second consecutive year. We also completed the acquisition of First American in June 2021. The acquisition enables us to expand significantly in the fast-growing payments sector, a sector known for generating significant recurring revenues and cash flows, and revenue from our growing Payments segment is expected to surpass that of our Checks segment during the first half of 2023. We now have an even stronger foundation from which to pursue future acquisitions that will allow us to potentially realize significant revenue synergies, and we believe that our scaled back-end processing will readily support incremental volume. Further information regarding our strategy can be found in Part I, Item 1 of this report.

Divestitures – In May 2022, we completed the sale of our Australian web hosting business for cash proceeds of $17.6 million, net of costs of the sale. This business generated annual revenue in our Data Solutions segment of $23.8 million during 2021, and we recognized a pretax gain of $15.2 million on this sale during the second quarter of 2022. The assets and liabilities sold were not significant to our consolidated balance sheet.

In April 2022, we sold the assets of our Promotional Solutions strategic sourcing business and in August 2022, we sold the assets of our Promotional Solutions retail packaging business. These businesses generated annual revenue of approximately $29 million during 2021. Neither the gain on these sales, nor the assets and liabilities sold, were significant to our consolidated financial statements.

In January 2023, we entered into an agreement for the sale of our North American web hosting and logo businesses for an aggregate sales price of $42.0 million, plus up to $10.0 million of additional proceeds contingent upon performance against certain conditions following the closing. We anticipate that the sale will close by March 31, 2023 and that we will recognize a gain on the sale. In conjunction with this anticipated sale, we changed the name of our Cloud Solutions segment to Data Solutions. These businesses generated annual revenue of approximately $66 million during 2022, primarily in our Data Solutions segment.

We believe that the sale of these businesses allows us to focus our resources on the key growth areas of payments and data, while allowing us to optimize our operations.

Outlook for 2023

We expect that revenue for 2023 will be between $2.145 billion and $2.210 billion, as compared to 2022 revenue of $2.238 billion. The 2022 amount included revenue of approximately $69 million that will not recur in 2023 due to our divestitures. We expect that adjusted EBITDA for 2023 will be between $390 million and $405 million, as compared to $418 million for 2022. The 2022 amount included adjusted EBITDA of approximately $21 million that will not recur in 2023 due to our divestitures. These estimates are subject to, among other things, completion of the sale of the remaining web hosting and logo design businesses by March 31, 2023, prevailing macroeconomic conditions, labor supply issues, inflation and the impact of other divestitures.

As of December 31, 2022, we held cash and cash equivalents of $40.4 million and $295.2 million was available for borrowing under our revolving credit facility. We anticipate that capital expenditures will be approximately $100 million in 2023, as compared to $104.6 million for 2022, as we continue with important innovation investments and building scale across our product categories. We also expect that we will continue to pay our regular quarterly dividend. However, dividends are approved by our board of directors each quarter and thus, are subject to change. We anticipate that net cash generated by operations, along with cash and cash equivalents on hand and availability under our credit facility, will be sufficient to support our operations, including our contractual obligations and debt service requirements, for the next 12 months, as well as our long-term capital requirements. We were in compliance with our debt covenants as of December 31, 2022, and we anticipate that we will remain in compliance with our debt covenants throughout 2023.

CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Revenue

The increase in total revenue for 2022, as compared to 2021, was driven primarily by revenue growth from new business in all of our segments and strong ongoing demand for our products, reflecting the success of our One Deluxe strategy. Price increases in response to the current inflationary environment also contributed to the revenue increase, primarily in our Checks and Promotional Solutions segments. The revenue increase also reflected the acquisition and strong performance of First

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American, which contributed incremental revenue of $144.2 million in 2022. Partially offsetting these increases in revenue was the continuing secular decline in order volume for checks, business forms and some Promotional Solutions business accessories, as well as the divestitures discussed in Executive Overview, which resulted in a decrease in revenue of approximately $32 million for 2022, as compared to 2021.

We do not manage our business based on product versus service revenue. Instead, we analyze our revenue based on the product and service offerings shown under the caption "Note 17: Business Segment Information" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report. Our revenue mix by business segment was as follows:

Consolidated Cost of Revenue

Cost of revenue consists primarily of raw materials used to manufacture our products, shipping and handling costs, third-party costs for outsourced products and services, payroll and related expenses, information technology costs, depreciation and amortization of assets used in the production process and in support of digital service offerings, and related overhead.

The increase in total cost of revenue for 2022, as compared to 2021, was primarily attributable to the revenue growth noted above, and we experienced some inflationary pressures on hourly wages, materials and delivery. The increase in total cost of revenue also reflected incremental costs resulting from the First American acquisition of $88.7 million, including acquisition amortization. Partially offsetting these increases in total cost of revenue was reduced revenue volume from the continuing secular decline in checks, business forms and some Promotional Solutions business accessories, and Promotional Solutions was impacted by supply chain disruptions for certain higher margin printed products in the first half of 2022.

Consolidated Selling, General & Administrative (SG&A) Expense

The increase in SG&A expense for 2022, as compared to 2021, was driven, in part, by increased costs related to our continued transformational investments, primarily investments in our technology infrastructure, including sales and financial management tools, and commission expense increased, primarily as a result of increased volume from new clients in our Checks segment. The increase in SG&A expense also reflected the incremental operating costs of First American of $30.6 million. The First American acquisition also drove an increase in acquisition amortization of $10.2 million for 2022, as compared to 2021, and bad debt expense increased $6.3 million for 2022, driven by reserve reversals in 2021 as the impact of the COVID-19 pandemic lessened. Partially offsetting these increases in SG&A expense were various cost reduction actions, including workforce adjustments, real estate rationalization and marketing optimization, and during 2021, we incurred acquisition transaction costs of $18.9 million that did not recur in 2022.

Restructuring and Integration Expense

We continue to pursue several initiatives designed to focus our business behind our growth strategy, to increase our efficiency and to integrate acquired businesses. The amount of restructuring and integration expense is expected to vary from period to period as we execute these initiatives. Further information regarding these costs can be found in Restructuring and Integration Costs in this MD&A discussion.

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Gain on Sale of Businesses and Facility

As discussed in Executive Overview, during the third quarter of 2022, we sold the assets of our Promotional Solutions retail packaging business, and during the second quarter of 2022, we completed the sale of our Australian web hosting business, our Promotional Solutions strategic sourcing business and a former facility. Net cash proceeds from these sales were $25.2 million during 2022.

Interest Expense

The increase in interest expense for 2022, as compared to 2021, was due primarily to the increase in our weighted-average interest rate driven by the rising interest rate environment and the $500.0 million notes we issued in June 2021 to fund the First American acquisition with an interest rate of 8.0%. Based on the daily average amount of variable-rate debt outstanding during 2022, a one percentage point change in the weighted-average interest rate would have resulted in a $9.1 million change in interest expense. Also negatively impacting interest expense for 2022 was the increase in our weighted-average debt outstanding driven by the issuance of debt to fund the First American acquisition in June 2021. Further information regarding our debt can be found under the caption "Note 13: Debt" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

Income Tax Provision

The decrease in our effective income tax rate for 2022, as compared to 2021, was driven primarily by the impact of the sale of our Australian web hosting business. For tax purposes, we recognized a capital loss on the transaction, and we recorded a valuation allowance for the portion of the capital loss carryover we do not currently expect to realize. These impacts reduced income tax expense $7.1 million in 2022, reducing our effective income tax rate by 8.4 points. In addition, the impact of the repatriation of Canadian earnings drove a 2.7 point decrease in the effective income tax rate. Information regarding other factors that impacted our effective income tax rates can be found under the caption "Note 10: Income Tax Provision" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

Net Income / Diluted Earnings per Share

(1) Information regarding the calculation of adjusted diluted EPS can be found in the following section entitled Reconciliation of Non-GAAP Financial Measures.

The increases in net income and diluted EPS and the decrease in adjusted diluted EPS for 2022, as compared to 2021, were driven by the factors outlined in Executive Overview – 2022 results vs. 2021.

Adjusted EBITDA

The increase in adjusted EBITDA for 2022, as compared to 2021, was driven by price increases, actions taken to reduce costs as we continually evaluate our cost structure, and revenue growth from new business in all of our segments and strong ongoing demand for our products. In addition, the increase in adjusted EBITDA also reflected the incremental contribution from

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the First American acquisition of $30.2 million. Partially offsetting these increases in adjusted EBITDA were increased costs related to our continued transformational investments, primarily investments in our technology infrastructure, including sales and financial management tools; inflationary pressures on hourly wages, materials and delivery; an unfavorable change in product mix driven by the impact of Promotional Solutions supply chain disruptions for certain higher margin printed products and growth in Data Solutions's data-driven marketing revenue combined with declines in the higher margin web hosting business; and the continuing secular decline in checks, business forms and some business accessories.

Adjusted EBITDA margin decreased for 2022, as compared to 2021, driven by planned technology investments, inflationary pressures and the unfavorable product mix. These decreases in adjusted EBITDA margin were partially offset by price increases, cost saving actions and operating leverage from the revenue growth.

Reconciliation of Non-GAAP Financial Measures

Free cash flow – We define free cash flow as net cash provided by operating activities less purchases of capital assets. We believe that free cash flow is an important indicator of cash available for debt service and for shareholders, after making capital investments to maintain or expand our asset base. A limitation of using the free cash flow measure is that not all of our free cash flow is available for discretionary spending, as we may have mandatory debt payments and other cash requirements that must be deducted from our cash available for future use. We believe that the measure of free cash flow provides an additional metric to compare cash generated by operations on a consistent basis and to provide insight into the cash flow available to fund items such as dividends, mandatory and discretionary debt reduction, acquisitions or other strategic investments, and share repurchases.

Net cash provided by operating activities for the years ended December 31 reconciles to free cash flow as follows:

Net debt – Management believes that net debt is an important measure to monitor leverage and to evaluate the balance sheet. In calculating net debt, cash and cash equivalents are subtracted from total debt because they could be used to reduce our debt obligations. A limitation associated with using net debt is that it subtracts cash and cash equivalents, and therefore, may imply that management intends to use cash and cash equivalents to reduce outstanding debt. In addition, net debt suggests that our debt obligations are less than the most comparable GAAP measure indicates.

Total debt reconciles to net debt as follows as of December 31:

Liquidity – We define liquidity as cash and cash equivalents plus the amount available for borrowing under our revolving credit facility. We consider liquidity to be an important metric for demonstrating the amount of cash that is available or that could be available on short notice. This financial measure is not a substitute for GAAP liquidity measures. Instead, we believe that this measurement enhances investors' understanding of the funds that are currently available.

Liquidity was as follows as of December 31:

Adjusted diluted EPS – By excluding the impact of non-cash items or items that we believe are not indicative of current period operating performance, we believe that adjusted diluted EPS provides useful comparable information to assist in analyzing our current period operating performance and in assessing our future operating performance. As such, adjusted diluted EPS is one of the key financial performance metrics we use to assess the operating results and performance of the business and to identify strategies to improve performance. It is reasonable to expect that one or more of the excluded items will occur in future periods, but the amounts recognized may vary significantly.

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Diluted earnings per share for the years ended December 31 reconciles to adjusted diluted EPS as follows:

(1) The tax effect of the pretax adjustments considers the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). Generally, this results in a tax impact that approximates the U.S. effective tax rate for each adjustment. However, the tax impact of certain adjustments, such as share-based compensation expense and gains on sales of businesses, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable effective tax rate(s) in those jurisdictions.

(2) The total of weighted-average shares and potential common shares outstanding used in the calculation of adjusted diluted EPS differs from the GAAP calculation due to differences in the amount of dilutive securities in each calculation.

Adjusted EBITDA and adjusted EBITDA margin – We believe that adjusted EBITDA and adjusted EBITDA margin are useful in evaluating our operating performance, as they eliminate the effect of interest expense, income taxes, the accounting effects of capital investments (i.e., depreciation and amortization) and certain items, as presented below, that may vary for reasons unrelated to current period operating performance. In addition, management utilizes these measures to assess the operating results and performance of the business, to perform analytical comparisons and to identify strategies to improve performance. We also believe that an increasing adjusted EBITDA and adjusted EBITDA margin depict an increase in the value of the company. We do not consider adjusted EBITDA to be a measure of cash flow, as it does not consider certain cash requirements such as interest, income taxes, debt service payments or capital investments.

We have not reconciled our adjusted EBITDA outlook for 2023 to the directly comparable GAAP financial measure because we do not provide outlook guidance for net income or the reconciling items between net income and adjusted EBITDA. Because of the substantial uncertainty and variability surrounding certain of these forward-looking reconciling items, including asset impairment charges; restructuring and integration costs; gains and losses on sales of businesses and facilities; and certain legal-related expenses, a reconciliation of the non-GAAP financial measure outlook guidance to the corresponding GAAP measure is not available without unreasonable effort. The probable significance of certain of these reconciling items is high and, based on historical experience, could be material.

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Net income for the years ended December 31 reconciles to adjusted EBITDA and adjusted EBITDA margin as follows:

RESTRUCTURING AND INTEGRATION COSTS

Restructuring and integration expense consists of costs related to the consolidation and migration of certain applications and processes, including our financial and sales management systems. It also includes costs related to the integration of acquired businesses into our systems and processes. These costs consist primarily of information technology consulting, project management services and internal labor, as well as other costs associated with our initiatives, such as training, travel, relocation and costs associated with facility closures. In addition, we recorded employee severance costs related to these initiatives, as well as our ongoing cost reduction initiatives across functional areas. Further information regarding restructuring and integration expense can be found under the caption "Note 9: Restructuring and Integration Expense" in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report.

The majority of the employee reductions included in our restructuring and integration accruals as of December 31, 2022, as well as the related severance payments, are expected to be completed by mid-2023. As a result of our employee reductions, we realized cost savings of approximately $20 million in SG&A expense, in comparison to our 2021 results of operations. For those employee reductions included in our restructuring and integration accruals through December 31, 2022, we expect to realize cost savings of approximately $25 million in SG&A expense in 2023, in comparison to our 2022 results of operations. In addition, we realized cost savings from facility closures of approximately $4 million in 2022, in comparison to our 2021 results of operations, and we continue to evaluate our real estate footprint. Note that these savings were, and will continue to be, partially offset by increased labor and other costs, including costs associated with new employees as we restructure certain activities and strive for the optimal mix of employee skill sets that will support our growth strategy.

SEGMENT RESULTS

We operate 4 reportable business segments: Payments, Data Solutions, Promotional Solutions and Checks. These segments are generally organized by product type and reflect the way we manage the company. In conjunction with the anticipated sale of our North American web hosting and logo businesses in 2023, as discussed in Executive Overview, we changed the name of our Cloud Solutions segment to Data Solutions. The financial information presented below for our reportable business segments is consistent with that presented under the caption “Note 17: Business Segment Information” in the Notes to Consolidated Financial Statements appearing in Part II, Item 8 of this report, where information regarding revenue for our product and service offerings can also be found.

Payments

Results for our Payments segment were as follows:

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The increase in total revenue for 2022, as compared to 2021, was driven, in part, by volume increases in our major payments products, primarily lockbox processing services and digital payments, as well as growth in merchant services. Revenue also benefited from price increases in response to the current inflationary environment. The revenue increase also reflected the acquisition and strong performance of First American, which contributed incremental revenue of $144.2 million for 2022. In 2023, we expect mid-single digit percentage revenue growth for this segment.

The increase in adjusted EBITDA for 2022, as compared to 2021, was driven, in part, by price increases and the revenue growth in our payments and merchant services businesses. In addition, adjusted EBITDA benefited from the incremental contribution of the First American acquisition of $30.2 million. These increases in adjusted EBITDA were partially offset by continued sales and information technology investments and inflationary pressures on our cost structure, primarily labor costs in our lockbox processing business. Adjusted EBITDA margin increased for 2022, as compared to 2021, as the benefit of the revenue increases exceeded the impact of the investments in the business and the inflationary pressures. In 2023, we expect adjusted EBITDA margins will be in the low-to-mid 20% range.

Data Solutions

Results for our Data Solutions segment were as follows:

The increase in total revenue for 2022, as compared to 2021, was driven by growth in data-driven marketing of $26.8 million for 2022, resulting from relationship expansion with key clients, sales wins and increased marketing spend by our customers. Partially offsetting the revenue increases was the sale of our Australian web hosting business, which resulted in a $16.0 million revenue reduction for 2022, and customer churn in our North American web hosting business. In 2023, we expect that revenue will decline approximately $57 million as a result of the sale of our North American web hosting and logo design businesses, as discussed in Executive Overview, and that the remainder of the business will deliver low single-digit percentage revenue growth.

The decrease in adjusted EBITDA for 2022, as compared to 2021, was driven by the sale of the Australian web hosting business, which reduced adjusted EBITDA by approximately $3 million for 2022, and investments in our data-driven marketing platform, partially offset by the growth in data-driven marketing revenue. Adjusted EBITDA margin decreased, as compared to 2021, driven by changes in product mix resulting from growth in data-driven marketing combined with declines in the higher margin web hosting business, as well as the platform investments in the data-driven marketing business. In 2023, we expect that adjusted EBITDA will decline approximately $20 million as a result of the sale of our North American web hosting and logo design businesses, as discussed in Executive Overview, and that the remainder of the business will deliver adjusted EBITDA margins in the low 20% range.

Promotional Solutions

Results for our Promotional Solutions segment were as follows:

The increase in total revenue for 2022, as compared to 2021, was driven primarily by the impact of new clients, relationship expansion with existing clients, price increases in response to the current inflationary environment, and strong ongoing demand for our promotional and apparel products. Partially offsetting these revenue increases were lower sales of certain printed products due to supply chain disruptions in the first half of the year, as well as the continuing secular decline in business forms and some accessories. As discussed in Executive Overview, we sold our strategic sourcing business during the second quarter of 2022 and our retail packaging business during the third quarter of 2022. These divestitures resulted in a revenue decline of $16.2 million for 2022. In 2023, we expect that revenue will decline approximately $12 million as a result of business exits, and that the remainder of the business will deliver low single-digit percentage revenue growth.

The decrease in adjusted EBITDA for 2022, as compared to 2021, was driven by inflationary pressures on materials and delivery and supply chain disruptions for certain printed products during the first half of the year, partially offset by price increases in response to the current inflationary environment and the revenue growth noted above. Adjusted EBITDA margin decreased for 2022, as compared to 2021, as the impact of inflation and supply chain disruptions for certain higher margin printed products

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exceeded the impact of the price increases and revenue growth. In 2023, we expect adjusted EBITDA margin percentages will be in the mid-teens.

Checks

Results for our Checks segment were as follows:

The increase in total revenue for 2022, as compared to 2021, was driven primarily by the impact of new client wins, price increases and strong demand for business checks. These increases in revenue were partially offset by the continuing secular decline in overall check volumes. In 2023, we are expecting mid-single digit percentage revenue declines.

The decrease in adjusted EBITDA for 2022, as compared to 2021, was driven by inflationary pressures on delivery and materials and the secular decline in overall check volumes, partially offset by price increases, cost saving actions, the impact of new clients and strong demand for business checks. Adjusted EBITDA margin decreased for 2022, as compared to 2021, as inflationary cost pressures and the addition of lower margin new clients exceeded the benefit of the pricing and cost savings actions. In 2023, we expect adjusted EBITDA margins will be in the mid-40% range.

CASH FLOWS AND LIQUIDITY

As of December 31, 2022, we held cash and cash equivalents of $40.4 million, as well as restricted cash and restricted cash equivalents included in funds held for customers and in other non-current assets of $297.0 million. The following table should be read in conjunction with the consolidated statements of cash flows appearing in Part II, Item 8 of this report.

(1) See Reconciliation of Non-GAAP Financial Measures within the Consolidated Results of Operations section, which defines and illustrates how we calculate free cash flow.

Net cash provided by operating activities decreased $19.3 million for 2022, as compared to 2021, driven by a $40.5 million increase in interest payments as a result of rising interest rates and debt issued to complete the First American acquisition, as well as a $22.8 million increase in employee cash bonus payments related to our 2021 operating performance. During 2021, a portion of our cash bonuses were paid in the form of restricted stock units and the bonus payments in 2021 were unusually low because of the impact of the COVID-19 pandemic on our 2020 performance. Operating cash flow was also negatively impacted by a $19.9 million increase in income tax payments, inflationary pressures, supply chain disruptions in our Promotional Solutions segment, and the continuing secular decline in checks, business forms and some business accessories. The increase in income tax payments was primarily driven by the provisions of the Tax Cuts and Jobs Act of 2017 that became effective in 2022 and that require the capitalization of research and development and cloud computing arrangement expenditures for income tax purposes. We were able to substantially offset these decreases in operating cash flow through the incremental contribution from the First American acquisition, price increases in response to the current inflationary environment, continued cost saving actions, a $22.9 million decrease in payments for cloud computing arrangements, primarily related to our sales and finance technology infrastructure, and revenue growth from new business and strong demand for our products. In addition, we incurred acquisition transaction costs of $18.9 million in 2021 related to the First American acquisition that did not recur in 2022.

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Included in net cash provided by operating activities were the following operating cash outflows:

(1) Amounts reflect compensation based on total company and segment performance.

(2) See Other Financial Position Information for further information regarding these payments.

Net cash used by investing activities for 2022 was $986.3 million lower than 2021, driven by the acquisition of First American in 2021 and proceeds of $25.2 million from sales of businesses and a facility during 2022.

Net cash used by financing activities for 2022 was $961.6 million higher than 2021, driven by the net proceeds from debt issued in 2021 to fund the First American acquisition, as well as the net change in customer funds obligations in each period, primarily related to the portion of First American's business under which property tax payments are collected in December and are paid on behalf of customers in the following quarter. In addition, proceeds from issuing shares were $13.7 million lower in 2022, as certain employees of First American purchased our stock during 2021 in conjunction with the acquisition.

Significant cash transactions, excluding those related to operating activities, for each period were as follows: