DELUXE CORP

Previous wording

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

Current wording

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") provides a comprehensive overview of our financial condition, results of operations, and key factors affecting our performance. The following sections are included:

Previous wording

•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.

Current wording

•Critical Accounting Estimates that discusses the accounting policies and estimates that require management to make complex judgments and assumptions and their application can have a material impact on our financial condition and results of operations.

Previous wording

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 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.

Current wording

This MD&A discussion contains forward-looking statements that involve risks and uncertainties. Please refer to Part I, Item 1A, Risk Factors, for a detailed discussion of 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 statements to encourage companies to provide prospective information. Statements using terms such as “should result,” “believe,” “intend,” “plan,” “expect,” ”anticipate,” “estimate,” “project,” “outlook,” "forecast," and similar expressions are intended to indicate forward-looking statements under the Reform Act.

Previous wording

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.

Current wording

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). We also present certain non-GAAP financial measures, including 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 additional insight into our operating performance. Consequently, these measures are also used internally for management reporting. Non-GAAP measures should be considered alongside, but not as substitutes 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. Reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the Consolidated Results of Operations section.

Previous wording

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.

Current wording

The following discussion and analysis focuses on our consolidated financial results for the years ended December 31, 2025 and December 31, 2024. For a comparison of results for the years ended December 31, 2024 and December 31, 2023, please refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission (SEC) on February 21, 2025, and is incorporated by reference herein.

Previous wording

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.

Current wording

Adjusted EBITDA margin increased to 20.2% in 2025, compared to 19.4% in 2024. The margin improvement was primarily driven by our pricing strategies and cost management initiatives, partially offset by inflationary pressures. A reconciliation of net income to adjusted EBITDA can be found in the Consolidated Results of Operations section.

Previous wording

•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.

Current wording

•Free cash flow – Increased by $75.3 million to $175.3 million, reflecting the same factors that drove the increase in net cash provided by operating activities. We continue to reinvest the free cash flow generated by our Print business into our other businesses. Free cash flow is defined as net cash provided by operating activities less purchases of capital assets. A reconciliation of free cash flow to its comparable GAAP financial measure can be found in the Consolidated Results of Operations section.

Previous wording

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.

Current wording

As of December 31, 2025, we held cash and cash equivalents of $36.9 million, along with an additional $379.6 million available for borrowing under our revolving credit facility. We anticipate that capital expenditures will be between $90.0 and $100.0 million in 2026, compared to $95.3 million in 2025, as we continue to invest in innovation and scale our product offerings. Our capital allocation priorities remain focused on responsible growth investments, debt reduction, and returning capital to shareholders through dividends, which are subject to quarterly approval by our board of directors.

Previous wording

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.

Current wording

We believe that net cash generated by operations, together with our cash and cash equivalents on hand and available credit, will be sufficient to meet our operating needs, contractual obligations, and debt service requirements over the next 12 months. This assessment takes into account our working capital position and anticipated cash flows. We regularly monitor our liquidity position in light of potential risks, including market volatility, interest rate fluctuations, and macroeconomic uncertainty, and we are prepared to adjust our capital allocation strategy as needed. As of December 31, 2025, we were in compliance with our debt covenants. Additional information regarding our long-term capital requirements and debt maturities can be found in the Cash Flows and Liquidity and Capital Resources sections.

Previous wording

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.

Current wording

Cost of revenue primarily includes raw materials for product manufacturing, shipping and handling, third-party costs for outsourced products and services, payroll and related expenses, information technology costs, depreciation and amortization of production and digital assets, residuals paid to independent sales organization (ISOs), and related overhead.

Previous wording

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.

Current wording

As a percentage of total revenue, total cost of revenue remained relatively flat in 2025 compared to 2024. Inflationary pressures on our cost structure and a shift in revenue mix toward our lower-margin growth businesses were offset by the benefits of our pricing strategies and cost management actions, as well as the absence of accelerated amortization expense recognized in the prior year.

Previous wording

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.

Current wording

As a percentage of total revenue, SG&A expense decreased in 2025 compared to 2024, reflecting the impact of our cost management actions and lower amortization and bad debt expense, partially offset by the increase in medical costs.

Previous wording

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.

Current wording

We are actively pursuing 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.

Previous wording

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.

Current wording

In 2024, the income recognized was primarily associated with our exit from the payroll and human resources services business, a process that was substantially completed during 2024. Further information can be found under the caption "Note 6: Acquisition and Divestitures" in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Previous wording

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.

Current wording

As of December 31, 2025, our exposure to variable-rate debt remains a key consideration for future interest expense. Based on the amount of variable-rate debt outstanding as of December 31, 2025, a one percentage point change in the weighted-average interest rate would result in a $5.0 million impact on interest expense in 2026.

Previous wording

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.

Current wording

Net income and diluted EPS increased in 2025 compared to 2024, reflecting the combined impact of the factors discussed above. Adjusted diluted EPS also increased year-over-year, primarily driven by the benefits of our pricing strategies and cost management actions, strong growth in our data-driven marketing business, and a reduction in bad debt expense. These positive impacts were partially offset by softer demand for certain promotional products and the ongoing secular declines in our Print segment, inflationary pressures on our cost structure, and higher medical costs. In addition, business exits drove a $0.03 per share decrease year-over-year. A reconciliation of net income to adjusted net income, as used in the calculation of adjusted diluted EPS, can be found in the following section.

Previous wording

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.

Current wording

Free cash flow – We define free cash flow as net cash provided by operating activities minus purchases of capital assets. We believe free cash flow is useful to both management and investors, as it provides a consistent metric for comparing the cash-generating ability of our operations across periods. It also offers insight into the cash available to support dividends, debt reduction (both mandatory and discretionary), acquisitions, other strategic investments, and share repurchases. However, free cash flow has certain limitations. Not all free cash flow is available for discretionary spending, as we may have mandatory debt repayments and other contractual or regulatory cash requirements that must be satisfied. Despite this limitation, we believe free cash flow is a valuable supplemental measure for evaluating our financial flexibility and our ability to pursue growth opportunities and return capital to shareholders.

Previous wording

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.

Current wording

Net debt – Net debt is calculated as total debt less cash and cash equivalents. We use net debt to evaluate our financial leverage and overall balance sheet strength. By considering the cash and cash equivalents available to offset outstanding debt, net debt provides a more comprehensive view of our debt burden than total debt alone. However, net debt has certain limitations. Subtracting cash and cash equivalents may imply that these funds are readily available and will be used to reduce debt, which may not reflect management’s actual intentions or liquidity needs. Additionally, net debt may suggest that our debt obligations are lower than the most directly comparable GAAP measure.

Previous wording

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.

Current wording

Adjusted EBITDA and adjusted EBITDA margin – We believe that adjusted EBITDA and adjusted EBITDA margin are metrics that provide meaningful insight into our operating performance. These measures exclude the impact of interest expense, income taxes, depreciation and amortization, and certain other items that may vary for reasons unrelated to current period operating performance. Management uses these measures to evaluate our results of operations, facilitate period-to-period and peer comparisons, and inform strategic decision-making aimed at enhancing performance. We believe that growth in adjusted EBITDA and adjusted EBITDA margin reflects improvement in our operating efficiency and may be indicative of increased enterprise value.

Previous wording

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.

Current wording

It is important to note that we do not consider adjusted EBITDA to be a measure of liquidity or cash flow. This metric does not reflect cash requirements for interest payments, income taxes, debt service, capital expenditures, or other obligations.

Previous wording

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.

Current wording

Adjusted diluted EPS – We believe that adjusted diluted EPS is a valuable metric that provides insight into our operating performance. Adjusted diluted EPS is calculated by excluding the impact of certain non-cash items and other items that we believe are not indicative of core operating results for the current period. By removing these effects, adjusted diluted EPS offers a perspective on the underlying performance of our business and facilitates more consistent comparisons across reporting periods. Management uses adjusted diluted EPS as a key metric to evaluate our operating results, assess performance trends, and inform strategic decision-making. This measure assists both management and investors in analyzing current period results and in assessing potential future performance by focusing on earnings generated from ongoing operations.

Previous wording

(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.

Current wording

(1) The tax effect of the pretax adjustments reflects the tax treatment and applicable tax rates for each adjustment in the relevant tax jurisdictions. Generally, the resulting tax impact approximates the U.S. effective tax rate applied to each adjustment. However, for certain items, such as share-based compensation expense and gains on sales of businesses, the tax effect is determined by whether the amounts are deductible or taxable in the respective jurisdictions and the applicable effective tax rates in those jurisdictions.

Previous wording

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.

Current wording

The majority of the employee reductions associated with our restructuring and integration accruals as of December 31, 2025, and the related severance payments, are expected to be completed in mid-2026. As a result of these employee reductions, including those under the North Star program, we realized cost savings of approximately $5.0 million in cost of sales and $15.0 million in SG&A expense during 2025, as compared to 2024. Looking ahead, for those employee reductions included in our restructuring and integration accruals through December 31, 2025, we anticipate additional cost savings of approximately $2.0 million in cost of sales and $13.0 million in SG&A expense during 2026, compared to 2025. However, actual cost savings may be partially or fully offset by increases in labor and other operating costs, including inflationary pressures and continued investments in the business.

Previous wording

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 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.

Current wording

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

Previous wording

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.

Current wording

We operate four reportable segments: Merchant Services, B2B Payments, Data Solutions, and Print. Our segments are generally organized by product and service type and reflect the way we manage the business. The financial information presented below is consistent with that presented under the caption “Note 15: 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 various product and service offerings can also be found.

Previous wording

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.

Current wording

As of December 31, 2025, we held cash and cash equivalents of $36.9 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 $276.1 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.

Previous wording

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.

Current wording

Net cash used by financing activities decreased by $130.4 million as compared to 2024, driven by changes in settlement processing obligations during each period, including the impact of our exit from the payroll and human resources services business during 2024. Additionally, payments of $15.2 million in 2024 for debt issuance costs related to our debt refinancing contributed to the decrease.

Previous wording

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.

Current wording

When assessing our liquidity and capital resource requirements, we consider a range of factors, including scheduled debt service, lease obligations, other contractual commitments, and contingent liabilities. Detailed information regarding the maturities of our long-term debt, operating and finance lease obligations, and contingent liabilities can be found in the Notes to Consolidated Financial Statements under the captions "Note 12: Debt," "Note 13: Leases," and "Note 14: Other Commitments and Contingencies," located in Part II, Item 8 of this report.

Previous wording

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.

Current wording

In addition to these obligations, we have entered into multi-year agreements with third-party service providers, primarily for information technology services such as cloud computing and professional services, as well as contracts for outsourced operations, data procurement, and payment acceptance services. These contracts commit us to payments totaling approximately $210.0 million, with approximately $70.0 million due in 2026, $60.0 million due in 2027, and the remainder due through 2030. We anticipate that capital expenditures will be between $90.0 and $100.0 million in 2026, compared to $95.3 million in 2025, as we continue to invest in innovation and scale our product offerings.

Previous wording

Our capital structure for each period was as follows:

Current wording

As of December 31, 2025, the principal amount of our debt obligations was $1.44 billion, compared to $1.52 billion as of December 31, 2024. Our capital structure for each period was as follows:

Previous wording

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.

Current wording

As of December 31, 2025, total commitments under our revolving credit facility were $400.0 million, with $379.6 million available for borrowing. Detailed information regarding our outstanding debt, including our debt service obligations and debt covenants, can be found under the caption "Note 12: Debt” in the Notes to Consolidated Financial Statements located in Part II, Item 8 of this report.

Previous wording

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.

Current wording

In October 2018, our board of directors authorized the repurchase of up to $500.0 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, 2025, $287.5 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

Certain financial institution contracts include prepaid product discounts, which are cash payments made to clients and recorded as other non-current assets on the consolidated balance sheets. These amounts, with a balance of $29.8 million as of December 31, 2025, are amortized as reductions of revenue on the straight-line basis over the contract term, requiring management to estimate the appropriate amortization period and monitor contract performance.

Previous wording

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.

Current wording

For arrangements involving third parties, we assess whether we act as principal or agent. When we control the specified good or service before transfer to the customer, we recognize revenue on a gross basis. When another party controls the good or service, we recognize revenue on a net basis, limited to any fee or commission earned. 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. The assessment of whether to report revenue on a gross or net basis requires judgment and an evaluation of specific contract terms.

Previous wording

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.

Current wording

Sales commissions and other contract acquisition costs related to check supply, treasury management solutions, and merchant services contracts are capitalized as other non-current assets. These amounts, which totaled $17.1 million as of December 31, 2025, are amortized as SG&A expense on the straight-line basis over the expected period of benefit, generally ranging from two to five years. Contract acquisition costs with an amortization period of one year or less are expensed as incurred. When recording these costs, we must estimate the expected benefit period, which may require reassessment if contract terms or customer relationships change.

Previous wording

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.

Current wording

Revenue recognition for certain data-driven marketing contracts involves estimating variable consideration, such as performance-based fees. We recognize revenue for variable consideration as services are rendered, based on the most likely amount expected to be realized. This estimate is inherently subjective and requires management to make assumptions about future campaign performance and consumer behavior. As of December 31, 2025, the related amount of conditional contract assets was $19.0 million and was included in revenue in excess of billings on the consolidated balance sheet. Typically, the final amount of consideration is determined within three to four months. We regularly review and update our estimates as additional information becomes available.

Previous wording

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.

Current wording

Goodwill represents a significant portion of our assets, totalling $1.42 billion, or 49.7% of our total assets, as of December 31, 2025. We evaluate goodwill for impairment at least annually, as of July 31, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable.

Previous wording

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.

Current wording

Goodwill is assigned to our reporting units, which are determined based on the components of our operating segments that constitute businesses for which discrete financial information is available and regularly reviewed by management. Components of an operating segment are aggregated to form a reporting unit if they have similar economic characteristics. We periodically reassess our reporting units to ensure they reflect the current structure and management of our business.

Previous wording

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

Current wording

For the 2025 annual impairment test, we performed quantitative analyses for our Merchant Services and Treasury Management reporting units. These analyses indicated that the estimated fair values of these reporting units exceeded their carrying values. Qualitative assessments were completed for the remaining reporting units, considering factors such as current economic and industry conditions, recent financial performance, and the most recent quantitative analyses from prior periods. Based on these assessments, we concluded that no changes in events or circumstances suggested it was more likely than not that the fair value of any reporting unit was less than its carrying amount. Based on these assessments, no goodwill impairment charges were recorded in 2025.