Barry McCarthy, president and CEO of technology solution specialists Deluxe, speaks with Acuris Capital Intelligence about the operational outlook amid a broad market decline and efforts to de-lever its balance sheet.

Interview by Rachel Stone

Q. What is your operational outlook as we near the second half of the year?

Inflation is going to be here for a while—I think it will carry through much of next year. Businesses are planning for that with ongoing price increases, cost containment, and other initiatives.

I would expect the Federal Reserve to raise interest rates by 75 basis points a couple more times before the year is out. That will drive up the cost of borrowing for those that already have debt, and, of course, drive up the cost of borrowing for M&A.

In our company, we came through the COVID-19 crisis well. It positioned us to make our largest acquisition in history of First American, a US$960 million purchase that we closed on June 1 of last year. That acquisition helps position our company especially well through this next cycle, whether it’s inflation and recession, or inflation alone.

Q. Has Deluxe’s growth strategy changed amid the broader market decline?

The stock market can be transient, but our growth across our business has accelerated—2021 was the first full year of organic growth since 2012 and we’ve told the street that we’ll do the same this year. When that happens, it’ll be the first time with two years of organic growth in a row since approximately 1996.

Our strategy of focusing on generating revenue organically is working. The madness of the market doesn’t slow us down from pursuing that strategy.

Q. Following your biggest-ever acquisition last year, what is your outlook on additional buys? Where are you in your aim to de-lever the balance sheet?

Our leverage ratio is 3.9x and working its way down. Our long-term goal is to be at around 3x, and we think we’ll get there later in 2024.

The company has great cash flow, and we’ll use that to pay down debt.

We’d be interested in opportunistic M&A. We really like our portfolio today, so we don’t feel compelled, but we always have our eye on the horizon to see if things are interesting and could make sense for us.

Q. What type of company would make an attractive target?

We generate income, unlike others in the fintech and payments arena, so we like companies that make money. A company that has a healthy margin and can grow would be something that would be attractive to us. We’re particularly interested in the payments space and the data space.

A bit of background: Deluxe helps enterprises, small business and financial institutions deepen customer relationships through trusted, technology-enabled solutions, from online marketing to digital payment tools. Barry McCarthy was named president and CEO of Deluxe in November 2018. He began his career at Proctor & Gamble and held executive roles at First Data, Wells Fargo, Verisign and MagnaCash.

This interview has been edited for length and clarity.