Shifting a company’s focus is hard. Ask Minneapolis-based Deluxe

Switching a company’s focus to stem decline doesn’t happen overnight. In fact, it often takes years and multiple attempts.

Deluxe Corp. is a case in point. Realizing that paper checks were on the way out, the Minneapolis-based company started acquiring small-business services companies — and a lot of them.

When Barry McCarthy, the current chief executive, took over in 2018, he realized the company needed to focus its stable of new businesses. Besides the legacy check printing business, Deluxe would concentrate on business-to-business payments, merchant services and data solutions for financial institutions and small to mid-size businesses.

The company decided to sell off business lines that did not fit into its core focus. That came with some pain, including layoffs. It also included moving business lines to the same operating systems and consolidating employees at fewer offices.

With some of that transformation done, the company was ready to launch its new strategic plan in November. Called the North Star Initiative, it includes goals to drive sustained organic revenue and earnings growth for its next three years, increasing its free cash flow and earnings by about $130 million.

Those measures and others, Deluxe officials say, should help the company increase its annual total shareholder return by at least 15% by 2026.

“North Star is the next step that we take now that we have a healthy and robust and growing company to accelerate our progress from here that touches all aspects of the company,” McCarthy said in an interview last month.

After reviewing the North Star Initiative, Marc Riddick, an analyst with Sidoti & Company, raised his 12-month price target on Deluxe stock in December from $28 a share to $32 a share. The goals, he said, “are achievable without needing a significant macroeconomic tailwinds,” he wrote in a research note.

Deluxe stock has been beaten up in the past five years. Shares lost 31% of their value, but since the North Star announcement, the stock gained 18%. It went up 8% Thursday after the company reported fourth-quarter results that were down overall, but up if you factor out the divested businesses including the logo and web hosting services sold at the start of 2023 and a payroll business sold near the end of the year.

Adjusted earnings grew faster than revenue, and cash flow improved, McCarthy said.

“While our growth rate was modest, importantly it was our third consecutive year of organic sales-driven revenue growth, demonstrating our clear change in trajectory, and further shows our transformation into a payments and data company,” McCarthy said on the earnings call.

For the quarter, Deluxe earned $15 million, or 34 cents a share, on revenue of $537.4 million. Those figures were down from the $19 million, or 44 cents a share, it earned on revenue of $564 million in 2022.

But adjusting for divestitures and restructuring and other one-time costs, earnings were $106.4 million, a 0.7% increase.

There still is work to be done. Promised in North Star are $115 million to $135 million in cost reductions. While those already have included layoffs, the company declined to offer details. The company also has been trimming its real estate holdings, many of which came with acquisitions.

They are consolidating real estate holdings by putting more employees in fewer locations. This includes the company’s new downtown Minneapolis headquarters and a financial technology innovation center in Atlanta.

On the earnings call, company officials said they are past the peak of their restructuring spending and can focus more on their transformation.

As far as the legacy check-printing business, the company still wins new contracts for its historic business of printing checks and business forms, but that business has been in a long decline as electronic payments have matured. The company’s print business still maintains the strongest margins at Deluxe, and they continue to invest in the print side to preserve those margins.

Deluxe is installing six print-on-demand presses that can produce customizable checks faster and more efficiently. The presses take a multiple step process and reduce it to one step that goes from raw paper to completed checks ready to be mailed. “It is why we can stand up so firmly and say we are so confident of our ability to hold on to our margin rate, even as volume declines,” McCarthy said.

It plans to use those print margins to build its other business segments. The Merchant Services, B2B Payments and Data Solutions all have larger total markets that are growing and can carry Deluxe through its next 100 years.

“We’ve passed the point of inflection, where the company is no longer declining,” McCarthy said.