First American Payment Systems, L.P. (DLX) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Deluxe First American Acquisition Conference Call. [Operator Instructions] Today's call is being recorded. We will begin with opening remarks and introductions. At this time, I would like to turn the conference over to your host, Chief Communications and HR Officer, Jane Elliott. Please go ahead.

Thank you, and welcome to the Deluxe First American acquisition conference call. This press release announcing the transaction was released this morning at 6:00 a.m. Eastern Time. Today, you will hear prepared remarks from Barry McCarthy, our President and Chief Executive Officer; Mike Reed, our division President of Payments; and Keith Bush, our Chief Financial Officer. You will also hear comments from First American's CEO, Neil Randel. And we are joined by First American's President and CFO, Debra Bradford. Lastly, we would like to introduce you to Tom Morabito, our newly appointed Vice President of Investor Relations. Tom most recently led the Investor Relations program for a fintech company, GreenSky, and Fortune 500 packaging distributor, Veritiv. Barry, Keith and I look forward to working with him and we will be taking questions at the end of today's prepared remarks. Before we begin, I'd like to remind everyone that comments made today regarding management's current intentions projections, financial estimates or expectations about the company's future strategy or performance are forward-looking in nature as defined in the Private Securities Litigation Reform Act of 1995. These comments are subject to risks and uncertainties, including risks related to COVID-19, risk that the contemplated transaction and/or any other future acquisitions will not be consummated, that any such acquisitions do not produce the anticipated results or synergies, among others noted in the full forward-looking statements on this slide, which could cause our actual results to differ materially from our projections. Additional information about factors that may cause actual results to differ from projections is contained in our press release issued today and filed with the SEC on Form 8-K, in the company's Form 10-K for the year ended December 31, 2020, and of course, in other company SEC filings. On the call today, we will discuss non-GAAP financial measures, including adjusted EBITDA, net debt and free cash flow. Please refer to our Form 10-K for the year ended December 31, 2020, for further information regarding these non-GAAP financial measures. Now I will turn the call over to Barry.

Thanks, Jane. Welcome, Tom, and good morning, everyone. Today is an exciting and historic day for Deluxe as we accelerate our transformation. As you read in our press release this morning, we've agreed to acquire First American Payment, enabling us to expand significantly in the fast-growing payment sector, a sector known for generating significant recurring revenues and cash flow. On this call, we'll discuss why the transaction will be beneficial to Deluxe, First American, and importantly, our collective customers, suppliers, employees and shareholders. I'd like to welcome First American's Executives, Neil and Debra, to the call, and congratulate them and their team for building such a strong and healthy payments company over the last 30 years. Deluxe is honored to partner with you and support your acceleration. As you may know, Deluxe's growth history was historically driven almost exclusively by acquisition. So many assumed that, that would continue what I became CEO at the end of 2018. However, as I said then, and I stated in our Q4 earnings call, we paused on acquisitions to deliver sales driven, not just acquisition-driven growth, and we've delivered. I've regularly outlined 5 prerequisites before reentering the acquisition market as part of our One Deluxe strategy, and we've delivered on all 5 objectives. First, we said we wanted a modern tech stack capable of operating the company efficiently and importantly, integrating and scaling any new acquisition. For example, instead of 14 different CRMs, we now have 1, allowing us to see the entire relationship with the customer. Instead of 5 different HR platforms, we have 1. Second, we said we needed an enterprise-class sales organization capable of selling the entire portfolio of Deluxe products. This will enable us to scale any acquisition to our very large customer base. Our team closed 6 of the 10 largest deals in the last decade and 2 of the largest in the company's history, and we're experiencing record cross-sales performance in our contact centers. Excluding measurable COVID impacts, we delivered impressive sales driven growth for the full year in 2020. Third, we said we would build an organization focused on developing new and improved products, capable of helping any acquired company grow. As part of our strategy, we're continuing to expand our product offerings and intend to last several new products this year. Fourth, we said we would build a team of world-class talent. I will introduce you to a few in a moment. Finally, we said we would improve and strengthen our balance sheet. We eliminated underperforming assets, exited unprofitable businesses and sold others. We reduced net debt to the lowest level in more than 2.5 years and did all of this in the face of COVID. We call all of this One Deluxe. And we're now ready to opportunistically augment our business through meaningful acquisitions. With this success as our backdrop, we sought a transformative payments platform opportunity to accelerate our growth as a payments company and decrease the contribution from checks as a percentage of our business. This acquisition delivers on both. In fact, our Payments business revenue will now rival the scale of our Check business revenue. We are confident First American is the right partner for us to accelerate -- help accelerate our transformation into a payments company. We'll go into a compelling strategic rationale in a moment, but I say this with confidence as someone who has spent the majority of my career in payments, specifically the previous 14 years prior to Deluxe at First Data. I understand the ins and outs as well as the opportunities for value creation of the fast-growing payment space as do the members of our executive team, many of whom joined us as part of our One Deluxe transformation. These world-class leaders include Michael Reed, President of Payment, who came to Deluxe from Barclays in London and Bank of America, where he saw -- oversaw payments and merchant services. Amanda Parrilli, Head of Strategy, came from Home Depot and First Data. Damien Warner, Head of M&A and Tim Cooper, Treasurer, both have Roots at First Data and Worldpay. Jane Elliott, Chief Communications and HR Officer brings a wealth of experience from Global Payments and earlier First Data. And our newest board member, Paul Garcia, is the retired Chairman and CEO of Global Payments. With this deep bench of talent, with extensive payments knowledge and experience, I'm confident this transaction not only has compelling benefits but will be well-executed to deliver maximum value to all stakeholders. In short, as we continue our transformation, we believe the acquisition of First American will help accelerate our recuring of payments and trusted business technology company. This combination immediately doubles the size of our Payments business to over $600 million annually with healthy adjusted EBITDA margins in the 20-plus percent range and we will bring our significant sales and product engine to First American to help accelerate their growth. Equally important, First American and Deluxe are a strong cultural fit. We share the same values and go-to-market approach and look forward to working alongside our new colleagues. On behalf of all my fellow employee owners of Deluxe, I want to personally welcome the exceptional team at First American to the Deluxe family. The acquisition of First American for $960 million is an all-cash transaction, is the largest deal in our company's 106-year history. With an anticipated close in the second quarter, subject to customary regulatory approvals and closing conditions, we expect our payment segment revenue to double. We also expect to realize important revenue synergies, which Mike Reed will touch on in a moment. The addition of First American will enable our payments segment to approach the size of our legacy Check business. On a pro forma basis, the Payment segment will account for about 30% of Deluxe's revenue and 21% of total segment adjusted EBITDA compared to payments accounting for 17%, and 13% of our revenue and total segment adjusted EBITDA, respectively, for fiscal 2020. Next, regarding capital allocation. We have committed financing in place and plan to refinance our existing credit facilities and fund the transaction with this new debt, which Keith will discuss in a bit. And of course, we're delighted that the talent of First American senior executives will continue to lead their teams as part of our Payments division, led by Mike Reed. Neil will continue to serve as CEO of First American, a Deluxe company, and become a Managing Director of Merchant Services of Deluxe. Both Neil and Debra will also be working directly with me and the rest of our executive leadership team to accelerate Deluxe's growth overall. Now I want to talk about why we're making this acquisition and why we're so optimistic about the potential of the combined companies. First, the addition of First American gives Deluxe a powerful end-to-end payments technology platform with significant operating leverage. There are very few fully scaled end-to-end platforms and even fewer with 30 years of proven, robust, reliable and secure operating history. We will build upon this platform to accelerate our product services and product and services development in electronic payments. First American's platform doesn't just bring front and back-end processing technology, but it also brings a significant base of new partners and customers, strong talent and easily integrated business support tools. With this winning combination, Deluxe will expand its already proven, large-scale foundation, enabling us to accelerate our growth strategy. Second, the combination generates many cross-selling opportunities which are key to our One Deluxe strategy. Our millions of active small businesses and approximately 4,000 financial institution customers will benefit from First American's products and services. Deluxe will gain by leveraging the First American's impressive distribution channels, allowing us to offer new services, our existing services, such as payroll, receivables and digital disbursements to First American significant customer base. These combined offerings will complement the data and analytics, incorporation services, logo design, web design and other services offered by Deluxe. Third, with First American, we have an even stronger foundation from which to pursue future acquisitions and gain critical mass where it makes sense. Adjacent markets, including e-commerce, point of sale, vertical software and loyalty marketing, and this transaction opens the door for a wider range of future strategic acquisition candidates that will potentially yield significant synergies. And the combined entity scaled back-end processing will readily support incremental volume that we expect to see in the future. Last but certainly not least, in speaking with the First American team, it's clear that First American and Deluxe, especially with our One Deluxe mindset, share the same values when it comes to the prioritization of our customers and partners and are like-minded in the way we approach the market and identify areas of opportunity. As a quick reminder, let me provide you a brief overview of Deluxe. We operate in 4 distinct business segments: Payments, Cloud Solutions, Promotional Solutions and Checks. Our Data business within Cloud is another growth business with meaningful prospects and promotional solutions and checks are industry leaders that continue to generate a tremendous amount of free cash flow. A few numbers I'd like to highlight. Our payables as a service business dispersed $16.4 billion in transaction value in 2020. Our receivables as a service business processes about $2.8 trillion in payments annually, roughly 15% of the U.S. GDP. Our payroll business process is about $8.8 billion in value. And in 2020, we generated about $1.8 billion in revenues and $365 million in adjusted EBITDA and reduced net debt to the lowest level in 2.5 years despite the pandemic. In short, we're a strong and healthy Fortune 1000 company with a focus on capital efficient, scalable businesses in growth markets. Next, I want to take a whole much to talk about our segments, how our segments work together as we help businesses succeed in whatever stage of the life cycle they're in. You'll see how First American is an important addition. Today, Deluxe offers our customers everything from incorporation services, forms, merchant accounts, licenses, IDs and checks to support the start of a business. We help companies get online and grow and provide marketing support to differentiate their business. We help companies pay and get paid and to optimize their business. We help businesses operate more effectively and therefore, more successfully. Deluxe offers a portfolio of solutions for each and every part of a business' life cycle, making us the trusted partner for enterprises and institutions of all industries and sizes. While First American is a natural fit with our merchant services capability, the company's technology stack boosts our expertise and offerings across the entire life cycle of a company. In short, we've seen that merchant services is especially critical in the initial phase. But also essential in the later stages. As our customers move through their natural life cycle, First American fits perfectly into our already established cross-selling capabilities giving us yet another arrow in the quiver for future growth. Now let me introduce First American CEO, Neil Randel, to speak more about his strong company. Neil?

Well, thanks, Barry. Good morning, everyone. Let me share a little bit about the company my colleagues and I have built over the past 30 years. Founded in 1990, First American is a privately owned scale payment processor that provides partners and merchants with a full suite of omnichannel payment solutions, including in-store, online and mobile. We offer powerful digital payment processing services that help customers navigate through traditional mobile and virtual point-of-sale channels. The company generates more than $27 billion in annual processing volume. We service approximately 159,000 merchants, collaborating with over 100 independent software vendors, bring recurring revenue that is approximately 98% of the total revenue -- of our total revenues. And in 2020, we generated approximately $290 million in revenues and approximately $60 million in adjusted EBITDA. The multitude of merchants that we serve represents a highly diversified customer base across multiple industries, including restaurants, retail, salons, e-commerce, health care, government, software companies and not-for-profits. Our scale back in technology reduces cost per transaction affords significant operating leverage and provides substantial capacity for future growth. We have established a track record of disciplined risk management, deep operational and technological expertise and execution of growth initiatives. Our long-standing commitment to our technology stack, along with our stellar customer service, provides our customers and partners with configurable offerings and tools that are unmatched in the bank and processing industry. I believe, by joining force with Deluxe's expansive product capabilities and expressive sales and distribution footprint and deeply trusted brand, that together, we can significantly increase the opportunities for growth for both companies. I thank all of my colleagues at First American for their unwavering dedication, which has positioned us for the next chapter of growth and success with Deluxe. The entire team and I can't wait to join the Deluxe team and get started. And with that, I'll hand it over to Mike Reed.

Thanks, Neil. Let me go deeper on the many First American assets that Neil, Debra and their team have built. The company is the ninth largest independent nonbank merchant acquirer, adding First American scalable payment technology and custom back-end processing and settlement capabilities as well as a frictionless merchant and partner on-boarding will accelerate Deluxe's transformation into a full-service technology services provider. Next, First American brings to Deluxe a host of leverageable buried distribution channels, including independent software vendors, supporting diversified markets, financial institutions and independent sales organizations as well as a strong direct sales team. Through this transaction, we anticipate realizing significant cross-selling opportunities in new verticals, all supporting the unified customer-first One Deluxe approach to sales, technology and customer partnerships. We are especially optimistic because First American has very little customer concentration, and their offerings complement Deluxe's. With regard to the client base, First American's robust distribution channels easily snap into our expansive footprint of financial institutions and small business customers to fuel strong cross-sell opportunities and significantly expand our distribution scale. Nearly 60% of First American services are being sold through retail and wholesale independent sales organizations and financial institutions, with about 20% through independent software vendors and the remaining 20% through direct sales. We believe that First American's hundreds of clients represent new valuable opportunities for additional services offered by Deluxe. Revenue synergies is one of the key considerations when evaluating a company for an acquisition. And this transaction generates significant near-term and long-term opportunities, including promoting merchant services to Deluxe's financial institutions and small and medium-sized business customers. Payroll services to First American merchants, receivable services to First American's nonprofit customers and government payment solutions through Deluxe's financial institution. These are just a few examples of the near-term revenue synergy potential of the combined companies, and we look forward to realizing this potential over time as part of our pay-and-get-paid strategy. With adjusted EBITDA margins in the 20% range and a highly predictable and recurring revenue stream with strong free cash flow generation First American's financials also complement Deluxe's strong financial profile. Now I'll turn it over to Keith, who will provide more color on the financials of the transaction.

Thanks, Mike. We plan to finance the transaction with a combination of new secured debt and unsecured debt. Upon completion, Deluxe's cost of debt is expected to be approximately 4%, with our total net debt to adjusted EBITDA ratio anticipated to be about 4x. For the longer term, Deluxe's strategic goal remains to achieve a net leverage ratio of approximately 3x or below. Importantly, we have a very strong record of free cash flow generation and the ability to pay down debt, even amid the global COVID crisis. So we believe it's a reasonable and prudent decision to temporarily increase our leverage to acquire First American and reap the many strategic and financial benefits, my colleagues discussed earlier. I also wanted to convey that we have no current plans to cut or eliminate our dividend. Taking a look at the pro forma highlights, you will notice our revenue and total segment adjusted EBITDA before and after the impact of the proposed acquisition of First American. In 2020, Payments accounted for 17% of Deluxe's revenue and 13% of our total segment adjusted EBITDA. With First American, we anticipate the numbers to increase to 28% and 21%, respectively. As we've noted on many occasions, we plan to accelerate our growth segments within the overall Deluxe portfolio, and this transaction certainly jump starts that effort. Overall value creation will largely be driven by the revenue synergies Mike talked about. In connection with this acquisition, we will harmonize pay practices and invest to expand the company's gateway and provide a common customer interface to expand into new verticals. These actions taken together with increased interest costs resulting from the financing of the acquisition will modestly dilute our adjusted EPS initially that have less of an impact on adjusted EBITDA. Our strong cash flow generation will reduce our net leverage to approximately 3x or lower at rate of at least 0.5 turn per year. This strategic acquisition of First American will reinforce our foundation for future M&A to further build upon the expected realizable synergies over time. Before turning it back over to Barry, given that we will be reporting our first quarter results in 2 weeks on May 6, I wanted to give a quick high-level preview of our preliminary unaudited results. We delivered the steadily improved sequential performance as we promised, and exceeded consensus expectations. Adjusted EBITDA is expected to be up 7% to 9% year-over-year. Adjusted EBITDA margin is anticipated to increase 300 to 350 basis points year-over-year. And lastly, adjusted EPS will beat current consensus estimates. We look forward to providing additional details on the quarter and our full year 2021 expectations for stand-alone Deluxe on May 6. Now back over to Barry.

Thanks, Keith. I hope our remarks on this call may clear the obvious and compelling benefits this transaction offers. We looked at dozens of potential candidates, rigorously applying several strategic filters, before moving ahead with this foundation-boosting acquisition. This is a major, logical and responsible next step in our transformation. There are very few independent back-end platforms and even fewer with a significant scale and 30 years of proven, robust, reliable and secure operating history. With First American, in addition to acquiring a robust platform, Deluxe is acquiring a great customer base with attractive margins with the right technology, business services and a talented team all under one roof. The addition of First American's platform, diversified distribution channels and all of their verticals, will help drive and solidify Deluxe's leadership within the fast-growing payments industry, and importantly, position us for additional overall growth. Deluxe is a payments company. Operator, we're now ready to take questions.

[Operator Instructions] And your first question is from the line of Chris McGinnis of Sidoti & Company.

Congrats on the deal. Can you just maybe talk about the growth of First American compared to the pandemic and after the business around pandemic?

So I'll give you a quick overview of that, and then I'll have meal supplement that a bit. But the business performed well through COVID. Like all businesses, of course, they had impact, but have seen the volume of the company rebound and to be very healthy across the portfolio. Neil, what would you want to add to that?

I think it just is a testament to our diversified selling channel or diversified merchant group. We're diversified all over the United States and Canada. We were able to weather through the storm. We obviously had to make some concessions cuts, puts and travel bans in place. But other than that, we performed very well. We didn't make our budget. We certainly came darn close to it. I think just a testament to the entire team of we're focused in on expense management and then just being in the right place with the right types of verticals.

Great. Obviously, you're talking a lot about the cross-selling opportunity. Can you just talk about how quickly you would expect it to go after the Deluxe customers themselves? I hope it's not going to close until maybe later this quarter. But can you just talk about the timing of the integration and the expectations around that?

Sure. And by the way, Chris, I should have said that to begin with. We expect the deal to close still in the second quarter. And so of course, there's work to do to make that happen. But we would expect to offer the First American solution. It's added to our portfolio of our Deluxe sales team, on closing. Obviously, we would need to do training for the organization to help them lamp. That's part one. Part 2. Similarly, we would need to work with the First American team so they get trained and understand the portfolio of Deluxe products, so we can start selling that into the 159,000 small business and business customers that First American has. So I think, through the year, this year, we would -- I think you would expect to see us ramp. And I think we would anticipate starting to see some of those benefits later in the year going into next.

Okay. Great. And can you guys -- just around First American, can you just maybe -- the business by in-store, e-commerce and mobile, is there any breakdowns you could provide? Or just maybe just a little bit more granularity around the business in that, and the channel basis?

Let me give you the broad strokes and then Chris, perhaps later we can give you more detail. But I think in broad strokes, about 60%, which is what I said, I think in some of my comments, about 60% come from partners that are reselling the First American suite. About 20% of it is coming direct from direct to business sales, which First American is leading. And then importantly, there's another 20% that comes from integrated software vendors, where the First American platform is just simply embedded in that software. So when they take that software to new business, first American payments comes with that software. That's a good working approximation for the distribution of where the revenue comes from.

Okay. Great. And then just one quick question, Barry. You talked a little bit about additional acquisitions. I guess, how long would you want to integrate those before that appetite opens up? And then I guess, second, can you just talk about how Deluxe and First American came together? And how long maybe this has been going on in the background?

Yes. So there's several questions in there. Let me start with the first one. And let me tell you why we were so attracted and convinced that this is the right next step for the last. We were looking for a platform asset. And what does that mean? It means a platform is what we can build a business upon, where we can plug additional service offerings into and where if there are future acquisitions, when there are future acquisitions, they can snap into the platform. Without a platform, especially a scaled platform like the one we got with First American, it will be very difficult to accelerate and have tuck-in acquisitions. So those tuck-ins have to tuck into something. And in this case, we now have what we think is one of the industry's SaaS platforms that gives us that opportunity to plug-in additional future acquisitions. And that's why this was such a compelling offering for us. And as I said in my comments, this, they are just very skewed independent platforms. There's even fewer that have the kind of scale that Neil and Debra have built here with First American. So it's a very compelling platform and a story for us -- I'm not -- sorry, it's a platform for us to build the next chapter of our story upon. And so what we did that probably compelling part of the story, very scarce asset, very strong assets, it gives us the opportunity to plug-in and grow the business going forward. The second part of your question is sort of how long between now and whatever the next acquisition could be. Of course you see that, and I think you understand our philosophy, at this point, we're opportunistic, but we're also incredibly responsible. We manage our balance sheet with care and discipline. And if we find something that makes sense, that is a nice snap in a way we go. But we don't I'm not here to tell you that we're now going into a hyper acquisition phase. I tell you that we have a platform that gives us incredible opportunity for the future. And other question you were asking was like, what was the process that you went through to consider the First American. And we were, I would say, exhaustive in our search of the payments landscape. And we considered a variety of companies, dozens of them, in fact, across the spectrum of different maturities, a different size of different scale that on every screening filter, First American kept coming back to the top of the list. And for the same reasons that we've talked about already, strong, scalable platform with real history, real volume, a real company with real growth prospects. Second, they've got an incredibly talented team. This is not a team that just kind of gets thrown together this team has been together and has been building this company for 30 years, and they're hungry for what can come with the next chapter. And that is what the partnership and the combination with Deluxe really helps us deliver. And of course, we wanted to make sure that there was something to with pass our financial hurdles as well. And we're very proud that this is -- leaps those hurdles as well. And it comes back to, I think I said it in the script, we just really see this specific transaction as major for us, going forward, logical, we've been very clear for a long time that we were going to expand in the payment space, and it's responsible. We are still managing the company and the balance sheet with the same discipline we always have.

Your next question is from the line of Charles Strauzer of CJS.

That was very helpful. Just a couple of quick questions for you. When you look at the $290 million of revenue and $660 million of EBITDA, what would that look like in 2019? And potentially, what would that look like in 2021, kind of first year on a full year pro forma basis with synergies?

Charlie, I think our plan is, on the call on the sixth, we will be providing full integrated guidance for the original Deluxe, plus these assets. And we'll provide history and go forward projections at that point. So today, we're not going to be providing that level of detail. But as Neil said, they had a strong 2020, all considered, and very, very close to their original plan and the new year is off to good start to.

Any sense of what the organic growth rate might have looked like pre COVID for the business, looking back a few years, just to kind of get a general sense of the growth rate there?

You know what, I think it has been that solidly low to mid-single-digit revenue growth business, the period that have certainly surpassed that.

Excellent. That's helpful. And then when you agreed to buy -- yes?

Yes, I had trouble getting off of mute. That mute button has been plaguing me here for the last few weeks. One thing to be aware of is there is financing costs. So we are planning to finance this transaction. And I just encourage you to take a look at what we've shared with you, where we think that kind of average cost of that will be. That does introduce interest expense into the company's cost structure that's not there currently. It will be a source of dilution.

Understood. And Barry, when you agreed to buy the business, can you talk a little bit how you looked at it from a kind of a return perspective?

Yes. Let me just start at the highest level on the strategy. And we've been saying for some period of time that we intended to invest and leverage the high-growth businesses where we were in, which are payments and within our cloud business, the data business. As I said, we're going to be investing there and using the cash flow, invest in the cash flow from a promo and our check business to help us become a bigger and more successful payments and cloud data company. And so I think at the highest level, this is entirely consistent with what we said we were going to do. And here's why we like the payments industry specifically. It's known for having strong secular growth trends. First, second, it's known for having a healthy margin. And third, it has also known for having strong recurring revenue dynamics. So it is an area that the marketplace values highly for those same reasons that we do, and we made a strategic choice long before we announced this transaction today, that we are moving the company in that direction for those very same reasons. And that First American assets helps us accelerate our move into that market space. And so as we think about make the investments and capital allocation decisions for the company, we think about where can we deploy capital for the maximum return. And obviously, we've been clear about payments. And in this particular acquisition this acquisition brings us a scale asset, an immediately scale asset. We are now a major player in the merchant acquiring space, which for all the reasons we've outlined, is very complementary to the rest of our portfolio. And it's complementary to the competencies of our management team and of course, we're supplementing that with the great talent that we're acquiring from First American. So you put all of that together, and we have done plenty of calculation about the return, what we think it will mean for shareholders. And over time, what we think it means for multiple acceleration or multiple expansion as the company continues to become more of a payments company. So I think we've been pretty disciplined, Charlie, thinking about the total impact of what we're trying to do and how we're transforming the company. And back to what I think I said in the script, we just see it as a major, logical and responsible step for us.

Understand. I think you've been talking about that for a while. It's kind of one of the missing pieces, and it sounds like you found a good one to plug-in there. Keith, I want to ask what...

[indiscernible] Charlie, I should have said that. I think you're right. I mean we've been communicating this for a while, and I think this definitely represents a missing piece. And it just -- it maps and it plugs in so well. It's just -- it's so obvious. And the cultures are similar, and we just -- it works, it just fits.

Excellent. And then just last for me, just a question for Keith, on the 4x levered number, is that a trailing number or kind of end the first year number?

It'd be a trailing number.

And your final question will come from the line of Lance Vitanza of Cowen.

Just for those of us that are not familiar with the Deluxe, so just first on the pre announced, it sounds like EBITDA and margin were all up year-over-year. Is that on a like-for-like basis? Or how much of the growth there, if any, came from acquisitions or currency slaves?

Thanks for the question. So let me take that question backwards, and I'll let Keith provide some more color. But the company has been very disciplined in the time that I've been here. So we have not completed any transactions. That is a departure from the past, but it allowed us to get very focused on building the core technology platform, making sure it was robust and scalable and allowed us contemplate and snapping in additional acquisitions. Perhaps more importantly, we focus on our sales organization. Previously, the company was not effective. It's selling on an enterprise level, and we built an enterprise-class sales organization. And as a result, that new sales organization that's been in place approximately 18 months, has closed 6 of the 10 largest deals of the last decade, including 2 of the largest deals in the company's history. It is proving the point that we can sell our existing products and services and more of our existing products and services to our existing customer base while also building new logos or winning new logos. And that was so important because as we contemplated an acquisition, we wanted to make sure that we had the scaled infrastructure, the sales and product organization and the people platform that could snap in and take on a material acquisition of this size of scale and help accelerate its growth rather than just snapping it into something that couldn't help it grow. We now have a proven sales model and platform. We have a scalable infrastructure. We have a product organization. We have the talent that we can now combine with First American and accelerate the growth of both companies. We decided to do that foundational work. And we've done that foundational work. And I think I called it prerequisites in my opening comments. And so we delivered that in 2020, and we're showing you the prelim in Q1. So in the Q1 numbers, what you're asking was are there acquisitions in there, and there are not because we did not complete any acquisitions. Then on a like-for-like basis, and Keith, you can jump in and provide a bit more color commentary, we're showing you that the company continued sequential improvement. Of course, we got hurt in -- with COVID especially hard in Q2. But we told you we're coming out sequentially. And we told you Q1 would continue that sequential improvement, and we've done that. But we did even better. And we'll talk more about that in -- on the May 6 call. But I think the most important headline there is we said we would continue the steady improvement that we have, and we've done even better on, I think, on all the relevant measures. Keith, what do you want to supplement on that?

Yes. Barry, thanks. I want to be cautious here about not explaining the quarter in the details, but it was a clean quarter. So it's a good question. It's a clean quarter. We generally don't have much in the way of foreign exchange and those types of things that would cause oscillation in our numbers. So we'll provide more, very consistent with what we had shared.

That's perfect, I appreciate it. So next on the acquisition itself. The strategic fit seems compelling and obvious, but what about the price? The 16.4x EBITDA, if I just take the price over the trailing EBITDA, in a vacuum, that sounds high. But could you provide any context around how that was negotiated and the background on the process from the sell-side was First American looking to go public and you came in over-the-top with a better bid? Or was this an auction situation? Anything that would help would be much appreciated.

Yes. So to start with, we wanted to choose the right asset. We were not going to allow ourselves to be beholden only to things that were being hawked or marketed in the marketplace. So we did a pretty exhaustive analysis of the marketplace, and we kept coming back to this asset. And for all the reasons that I've outlined. As far as the price, you're right, it is a healthy multiple of EBITDA. But we think that, that is a fair price for the asset quality that we've acquired, especially the scarcity value of the platform that we're acquiring. And if you look at it and compared to precedent transactions over the last few years, this proves out to be a very fair price. And -- we are not -- we are well within the range, probably at the median or less on a multiple basis for the transactions, the precedent transactions over the last several years. And yes, the payment space is an expensive place, but for good reason because the characteristics of the industry are compounding, as I outlined before. And so we had great advisers from [indiscernible] that helped us analyze the market space and the pricing and reviewed on multiple occasions over multiple months with our Board. This didn't happen overnight. This was something that's been going on for many months. And we just feel really confident that we've got the right asset, and we paid a fair and appropriate price.

Last one for me is just to go back to the leverage. I think I heard -- during the -- maybe with the prepared remarks that this was a temporary increase in leverage to 4x. What is the multiple today before the transaction? And maybe where was that multiple, let's say, I don't know, 2 years ago?

Well, to give you -- a bunch of questions there. So to start with at approximately 4x, we think that we will delever at a natural rate of more than 0.5 turn a year. So we can do the math, and you can figure out when you think we will be delevered down to the 3x level. Previously, we had been around 2, but I will tell you that through COVID and the disciplined financial management of the company, we continue to pay down debt. And we have the lowest net debt going into this transaction, the company had in 2.5 years, even in the face of COVID, which I'd say just tell you an awful lot about the cash generated to the potential of this business, even with COVID impacts being able to generate free cash sufficient to pay our dividend and continue to pay down debt. I think it kind of tells the whole story about the power of the cash generation here.

I will now turn today's call over to Tom Morabito for any closing remarks.

Thanks, Stephanie. Thank you again for joining us today. Please stay healthy and safe, and we look forward to speaking with you on May 6 as we share our first quarter 2021 results. I would also like to note that we will be releasing earnings at 6 a.m. Eastern that day, with the conference call starting at 8:30 a.m. Eastern. Thanks again, and we'll talk to everyone then.

Thank you. This does conclude today's conference call. You may now disconnect.