DLX - Deluxe: Low Interest Coverage

2024-04-06 09:46:32 ET

Summary

• We won't talk about valuation since it's critical to focus on the debt situation where leverage is high and interest coverage is low.
• Deluxe is a growing business overall for now, but shrinking businesses command the majority of the EBITDA mix.
• The secular declines have been managed well, but it's an ongoing concern while interest rates are high.
• With a blowout jobs data rates will remain high, and even if they didn't they're hedged for two years where prevailing rate changes will have minimal impact up or down.
• Even moderate revenue declines depending on operating leverage assumptions could create basic interest coverage issues.

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