Ladies and gentlemen, thank you for standing by, and welcome to the Deluxe Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode and today's call is being recorded. We will begin by opening remarks and introductions. At this time, I would like to turn the conference over to your host, Vice President of Investor Relations, Tom Marabito. Please go ahead.

Thank you, operator, and welcome to the Deluxe fourth quarter and full year 2022 earnings call. Joining me on today's call is Barry McCarthy, our President and Chief Executive Officer; and Chip Zint, our Chief Financial Officer. At the end of today's prepared remarks, we will take questions. Before we begin and as seen on this slide, I'd like to remind everyone that comments made today regarding management's 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. Additional information about factors that may cause our actual results to differ from projections is set forth in the press release we furnished today and our Form 10-K for the year ended December 31, 2021, and in other company SEC filings. On the call today, we will discuss non-GAAP financial measures, including comparable adjusted revenue, adjusted and comparable adjusted EBITDA, adjusted and comparable adjusted EBITDA margin, adjusted EPS, and free cash flow. To streamline discussion of our ongoing business operations, today and going forward, we will discuss both revenue and EBITDA on a comparable adjusted basis which will exclude the inconsistency caused by acquisitions or divestitures in the prior periods. For purposes of full year 2022, this will exclude the partial year impact of First American and the impact of the divestitures done throughout the year. In our press release, our presentation, and our filings with the SEC, you will find additional disclosures regarding the non-GAAP measures, including reconciliations of these measures to the most comparable measures under U.S. GAAP. Also on the presentation, we are providing additional reconciliations of GAAP EPS to adjusted EPS, which should help with your modeling. Now I'll turn it over to Barry.

Thanks, Tom, and good morning, everyone. Deluxe delivered strong results for both the fourth quarter and full year 2022, further proving we have become a payments and data company. As I expect payments will become our largest segment by revenue during the first half of 2023. This will be a key milestone in the company's history. Before reviewing the results, let me take a moment to reflect on what was another strong year for Deluxe. Four key highlights from the year include; first, reporting our second consecutive year of sales-driven revenue growth, an achievement not seen over a decade, showing the strength of our One Deluxe model. Second, the accelerating success of our payments and data business. In payments, First American continues to perform well in its second year as part of Deluxe, and we're expanding blended margins across the segments. In the data business, we recorded record revenue. Third, strong performance in our print businesses Promo and Check. Promo strongly rebounded after the impacts of COVID and supply chain disruptions, and Check has delivered its strongest top line performance in over 10 years. This performance shows the durability of demand for these solutions. Fourth, our ERP implementation went live with its last major release earlier this week. This key milestone marks the completion of our major corporate infrastructure modernization. We also just announced the exit of our North American web hosting business, which was a non-strategic business line, allowing us to further focus on payments and data. Chip will provide more details on the transaction. We've also changed the name of our Cloud Solutions segment to Data Solutions to better reflect the more focused operations of that business. Let me also take a moment to thank my fellow Deluxers for another strong year, for their endless dedication to our customers, and for their continued commitment to making Deluxe a payments and data company. The sales team gathered last week for our sales kickoff, and the energy and excitement about 2023 was palpable. Now on to the results. For full year 2022, comparable adjusted revenue was $2.1 billion, up 5.2% year-over-year. Reported revenue increased 10.7% above our guided range. Once again, this is our second consecutive year of sales-driven revenue growth. This is a key milestone. We continue to demonstrate the success of our One Deluxe model. For 2022, all four segments demonstrated comparable adjusted revenue growth, an accomplishment which has not been seen in a very long time. Total adjusted EBITDA dollars increased 2.5% from 2021, and comparable adjusted EBITDA was down 4%. Going forward, we remain focused on driving growth in revenue, adjusted EBITDA, and free cash flow for the long term. All of our actions drive towards these goals, which in turn we believe will drive greater shareholder returns. Moving on to some segment revenue highlights. For the full year on a comparable adjusted basis, payments revenue grew 4.7%, and adjusted EBITDA dollars grew 8.3% with margins expanding 70 basis points from 2021. Merchant services revenue increased 4.4% on a comparable adjusted basis, in line with our longer-term expectations of mid-single-digit growth. The rest of payments, which includes our receivables and payables business, grew nearly 5% with growth across our product lines, primarily in digital payments and treasury management. Our pipeline continues to grow, and we continue to gain wallet share from existing customers as we remain on track for payments to be our largest revenue segment in the first half of the year. As I said earlier, this will be another key milestone for Deluxe as we've now become a payments and data company. Data had a strong year, growing comparable adjusted revenue 8.6% year-over-year as we continue to expand the business into non-interest rate sensitive verticals. Promo had a solid year on the top line, improving comparable adjusted revenue 6.1%. We were also pleased with the improvement in margins as the year progressed, which Chip will detail later. Finally, our Check business improved 3.7% year-over-year, an incredible accomplishment. However, we are expecting this segment to return to traditional secular decline rates this year as we've now lapped the growth from key wins in 2021. As discussed on prior calls, our strategic investments in new Print-on-Demand technology will help us manage costs to match volumes, allowing us to maintain our strong margin rate in this segment as we return to normal secular declines. We're about halfway through the implementation of this new technology. We're proud of both our fourth quarter and full year results which highlight our progress. Deluxe is now a fundamentally different company than what we were just a few years ago, with payments a strong secular growth business soon to be our largest revenue segment. And we've proven our One Deluxe model delivers top-line growth. This was achieved while simultaneously modernizing the company's entire infrastructure, navigating COVID and inflation, executing significant portfolio optimization, and more. Now I'll turn it over to Chip, who will provide more details on our financial performance.

Thank you, Barry, and good morning, everyone. Before we review the results for the quarter, I'd like to elaborate on the pending sale of our North American web hosting business. Last year, we sold our Australian web hosting operations, and upon completion of the latest transaction, we will have completely exited the hosting business. As a reminder, this business has historically been largely a white label service offered through telecom partners, which did not allow for material cross-selling opportunities and did not fit within our overall portfolio. This pending deal also includes our logo business. For the trailing 12 months, these businesses generated approximately $66 million in revenue with adjusted EBITDA margins in the mid to high 30% range. The web hosting business was previously fully impaired due to its capital-intensive nature and recurring revenue declines. This was further evidenced in the fourth quarter where revenue declined 8% year-over-year. 2023 revenue will be impacted by approximately $45 million, and adjusted EBITDA and free cash flow each will be impacted by approximately $20 million. These impacts are included in our guidance, which I'll discuss in a moment and mostly affect our data segment with a very small impact on the promo segment. I know there have been many changes to the portfolio recently, but they reflect a methodical effort to simplify and focus the business. For more information about the business exits and impact to guidance, please refer to the reconciliations in our press release and presentation. Additional details of the transaction can also be found in our recently filed Form 8K with the SEC. Now let's go through the consolidated highlights for the quarter and year before moving on to the segments. For the fourth quarter, total comparable adjusted revenue improved 1.2% to $564 million. On a reported basis, revenue declined 1.2% year-over-year. We reported fourth quarter GAAP net income of $19 million or $0.44 per diluted share, up from $14 million or $0.32 per share in the fourth quarter of 2021. Adjusted EBITDA came in at $112 million, down $3 million or 2.8% on a comparable adjusted basis from last year. Improvements in payments, data, and promo were offset by checks and employee benefit costs on the corporate segment. Comparable adjusted EBITDA margins were 19.9% and in line with our expectations. Fourth quarter adjusted diluted EPS came at $1.04, down from $1.26 in last year's fourth quarter. This decrease was primarily driven by interest expense. As a reminder, nearly 60% of our debt is fixed rate, which should help insulate the company from future rate hikes. For the full year, on a reported basis, we posted total revenue of $2.24 billion, up 10.7% year-over-year and above our guided range. As Barry mentioned, comparable adjusted revenue increased 5.2% year-over-year. We reported full year GAAP net income of $65 million or $1.50 per share for the year, up from $63 million or $1.45 per share in 2021. Full year adjusted EBITDA was $418 million, up $10 million or 2.5% as reported from last year. Adjusted EBITDA margins were 18.7%, down from last year's 20.2% due to business mix and the impact of pass-through price increases to offset inflation. On a comparable adjusted basis, EBITDA dollars declined 4% for the year and EBITDA margins were 18.5%, down from 20.3% last year. Full year adjusted EPS came in at $4.08, down from $4.88 in 2021, primarily due to higher interest expense, depreciation, and amortization. Now turning to our segment details, starting with our growth businesses, payments and data. Payments grew fourth quarter revenue 2.5% year-over-year to $171 million, with merchant services growing 3.3% year-over-year. As we indicated on the last call, we anticipated slower growth for a few quarters as all of payments was up against tough year-over-year comparisons. We do, however, expect growth rates to improve as the year progresses. Payments adjusted EBITDA margins were 21.6%, up from last year's 20.6%, largely driven by operating leverage in our treasury management business. For the year, payments grew revenue 33% year-over-year to $679 million, driven by the acquisition of First American and sales-driven growth for standalone Deluxe. For the year and including First American, adjusted EBITDA increased 36.9%, and adjusted EBITDA margins were 21.3%, up 60 basis points. On a comparable adjusted basis for the year, payments revenue increased 4.7%, EBITDA increased 8.3%, and EBITDA margins were 21.4%, up from 20.7%. For 2023, we expect to see mid-single-digit revenue growth and adjusted EBITDA margins in the low to mid 20% range. Data's adjusted EBITDA margin in the quarter increased 340 basis points year-over-year to 27.6%, which again relates to timing as well as operating leverage from strong DDM volume. On a comparable adjusted basis, EBITDA margins improved 300 basis points. For the year, the Data segment comparable adjusted revenue increased 8.6% year-over-year to $268 million. On a reported basis, Data grew 2% for the year. For 2022, Data's adjusted EBITDA margins declined 130 basis points versus the prior year to 25.5%, driven by business mix and the investments in our Data platform. On a comparable adjusted basis, EBITDA margins declined 170 basis points. For 2023, we expect to see low single-digit revenue growth on a comparable adjusted basis. We also expect to see comparable adjusted EBITDA margins in the low 20% range. Turning now to our Print businesses, Promo and Checks. Promo's fourth quarter revenue was $154 million, up 3.1% on a comparable adjusted basis, driven by new sales wins and pricing actions. On a reported basis, revenue declined 1.5% year-over-year. Promo's adjusted EBITDA margins increased 100 basis points year-over-year to 19.3%, but improved nearly 600 basis points sequentially as we benefited from continued pricing actions, stable supply conditions, and normal seasonal upticks. On a comparable adjusted basis, EBITDA margins improved 50 basis points from the fourth quarter of 2021. For the year, Promo's revenue was $563 million, up 6.1% year-over-year on a comparable adjusted basis or 3% on a reported basis. Adjusted EBITDA margins for the year were 14.1% and down 150 basis points, and on a comparable adjusted basis were down 190 basis points. For 2023, we expect to see low single-digit comparable adjusted revenue growth and adjusted EBITDA margins in the mid-teens. Check's fourth quarter revenue decreased 4.6% from last year to $176 million as the business returned to expected secular declines with Q4 results now lapping all the major new customer wins from 2021. Fourth quarter adjusted EBITDA margins were 42.5%, down 270 basis points year-over-year as we experienced off-cycle supplier price increases for both materials and logistics inputs, some of which are temporary seasonal base surcharges. We have factored these and future expected increases into our 2023 customer price increases. As a result, we believe the margin rate will improve in Q1. Check's full year 2022 revenue was $729 million, up 3.7% year-over-year, and adjusted EBITDA margins were 44%, down 210 basis points, but consistent with our long-term expectations of mid-40% margins. For 2023, we are expecting mid-single-digit revenue declines and adjusted EBITDA margins in the mid-40% range. As Barry mentioned, our print-on-demand technology will help maintain margins, and we are about halfway through the implementation. Turning now to our balance sheet and cash flow. We ended the year with a net debt level of $1.6 billion, down from $1.64 billion last year, demonstrating our continued commitment to paying down debt. Our net debt-to-adjusted EBITDA ratio was 3.8 times at the end of the year, improving from 4 times a year ago. Our long-term strategic target remains approximately 3 times. Free cash flow, defined as cash provided by operating activities less capital expenditures, was $37 million in the quarter, up from $34 million in the fourth quarter of 2021, due to improved working capital and lower cloud computing arrangement or CCA spend, partially offset by higher interest payments. This was also a sequential improvement from the third quarter. First quarter 2023 free cash flow was expected to be negative as it will be impacted by incremental interest expense, one-time expenses from our ERP implementation, and annual employee compensation payments, but should improve as the year progresses. For the year, free cash flow was $87 million, down from $102 million in 2021 due to higher interest payments, cash taxes, and working capital. Our Board approved a regular quarterly dividend of $0.30 per share on all outstanding shares. The dividend will be payable on March 6, 2023, to all shareholders of record as of market closing on February 21, 2023. We are focused on taking a balanced approach to capital allocation, and as a reminder, our capital allocation priorities are to responsibly invest in growth, pay our dividend, reduce debt, and return value to our shareholders. Turning now to guidance. Today, we are providing our expectations for 2023, keeping in mind all figures are approximate and reflect the expected impact of the web hosting and logo divestiture. Revenue of $2.145 billion to $2.21 billion, adjusted EBITDA of $390 million to $405 million, adjusted EPS of $2.90 to $3.25, and free cash flow of $80 million to $100 million. To be clear, on a comparable adjusted basis, 2023 revenue represents a range of negative 1% to positive 2% growth. The comparable adjusted EBITDA range represents negative 2% to positive 2% growth. To further clarify, EPS is expected to decline year-over-year due to the full year impact of rising interest rates, incremental depreciation and amortization, and an estimated $0.25 impact from the announced divestiture. However, factoring in the impact of the divestiture, the free cash flow guide is an increase year-over-year on a comparable adjusted basis. Also, in order to assist with your modeling, our guidance assumes the following; interest expense of $120 million to $125 million, an adjusted tax rate of 26%, depreciation and amortization of $170 million, of which acquisition amortization is approximately $75 million; an average outstanding share count of 43.7 million shares, and capital expenditures of approximately $100 million. This guidance is subject to, among other things, prevailing macroeconomic conditions, including interest rates, labor supply issues, inflation, and the impact of other divestitures. To summarize, we are pleased with the fourth quarter and full year 2022 results. Our sales pipeline continues to expand with new customers, and we continue to see increased growth from our existing customer base. We look forward to continuing the momentum in 2023, a year which we expect to be highlighted by continued revenue growth, increased operational efficiencies, and increased free cash flow.

Your first question comes from Lance Vitanza from Cowen. You may proceed.

Hi guys, thanks very much for taking the questions. A lot to unpack here. But let me start with the web hosting and logo divestiture. Did you call out the EBITDA margin on the asset sale?

We did. We said that it was mid to high 30s. And as you know, Lance, that is a business that was a consumer of capital, and it was in decline. We also mentioned that in the fourth quarter revenue in that segment declined 8%.

We had $665 million in revenue and approximately $25 million in EBITDA for the trailing 12 months. I'm considering your adjusted EBITDA guidance of $390 million to $405 million, which appears to be down from the $418 million reported for 2022. However, if we include the $25 million from the asset sales, we are approaching the slight EBITDA positive you mentioned in the 8-K filing. Is that the correct way to view it?

This is Chip. So as you have time to digest this, you'll see at the back of our earnings release and slides, we have provided some information that will reconcile that for you, especially on the guidance side. But your back-of-a-napkin math is roughly right around $25 million of EBITDA for a full year. We are, of course, modeling into our guidance only three quarters of impact; that's where we get the roughly $45 million revenue impact and approximately $20 million EBITDA impact that I just referred to on the call. But all of those things, plus the impact of last year's exits rolling forward, are reconciled in the back. And that's why we thought it was important to move just favorable adjusted dynamics so that it can be much more transparent on how the business is doing on an apples-to-apples basis.

Okay. Great. Maybe moving on to the Data segment that continues. You mentioned during the call, continued diversification into noninterest rate-sensitive verticals. And I'm wondering how much of the data segment, again, on a go-forward basis, how much of that Data segment currently is in noninterest rate-sensitive verticals?

Lance, I don't think we've ever provided sort of the sources of revenue at that level. But the reason that business continues to perform well in a period of rising interest rates, I think, is because those noninterest rate sectors or categories are experiencing really attractive growth rates that are more than offsetting things that were highly sensitive like mortgage. And if you look back in our history, you can see previous interest rate cycles like this, that business was pretty significantly impacted, and we're actually showing growth. And so I think that gives you a good sort of direction that it's increasingly about noninterest rate-sensitive categories.

Is it possible to talk a little bit about which of those noninterest rate-sensitive verticals present the most obvious or most compelling opportunities for Deluxe? And are there any examples of recent wins to call out anything along those lines?

We have two main aspects to discuss. Historically, our business concentrated on the financial services sector. Within this sector, companies are reallocating funds from interest rate-sensitive areas, like mortgages, to options such as certificates of deposit, standard DDA accounts, and high-reward credit cards, among other solutions aimed at fostering growth. We have demonstrated our capability to transition into these sectors beyond interest rate sensitivity. Additionally, we are now delivering campaign services across a wide array of solutions, partnering with one of the largest online retailers, insurance companies, and other businesses looking to expand and acquire new customers. Our focus is on organizations that have a high lifetime customer value. The value of our solution lies in providing these companies with highly effective lead lists, allowing them to invest significantly in their marketing strategies with the assurance that it will yield new customers. Our business is thriving because we excel at what we do.

That's helpful, Barry. I have a quick question regarding the check side. The margin was a bit lower than we expected. How does the margin performance compare to your own expectations? Was there anything in the quarter that influenced margin performance significantly that you think is worth mentioning? I apologize if I overlooked that in your prepared remarks.

It's Chip again. So you're right; the 42.5% for the quarter was a bit below our expectations. We mentioned kind of two factors. There were two out-of-cycle supplier price increases that we experienced both on the material side and logistics side. Logistics specifically was more of a seasonal-based surcharge that will correct itself now in the start of the year. But the out-of-cycle price increases obviously happened. They're out of cycle, which means as we set our final forecast for the year, we didn't see them yet. And so that was a bit of a surprise. But as I said, we'll be able to make those increases into this next price increase early in the year. And obviously, it's very great that the overall portfolio was able to offset that issue and deliver the results exactly where we thought they would be.

Thanks. Just one last question from me. Regarding corporate expenses, they increased by about 5% year-over-year. Is this mainly due to the inflationary environment, or is there something specific happening? Additionally, it seems like you're at nearly 9% of revenues on that corporate line, and it might even be higher when considering adjusted revenue. I'm curious if this percentage is appropriate for a company of your size, or should we expect some improvements in the future? Or is this a level you're satisfied with? Any insights you could provide would be appreciated. Thanks, everyone.

Sure. So turning to the quarter, I think you got to recall, we've mentioned a few times throughout the year that we restored our 401(k) match earlier this year, that's been weighing on the corporate segment. So when you really look at the growth year-over-year, it's mostly a function of that; there's puts and takes across the other areas, other increases related to inflation, offset by operational efficiencies. But net-net, the real driver year-over-year in the fourth quarter was that 401(k) match. As we look forward to 2023, you are right. I would tell you, as you're thinking about your guidance and your modeling, you have to roughly model somewhere around $200 million or roughly 9% of revenue to get to the ranges we provided. And let me just give you a little bit of context of what's going on there. We continue to deal with inflation; it's a factor of the environment that we've got the investments and the technology we've mentioned a few times. We also have the function of the divestiture. And once we divest those assets, there will be some stranded costs that are corporate in nature that will come back to the corporate cost center. And so all those things equally look like we are kind of staying flat, which we know is not where we need to be. So I'll just reiterate that this remains a major focus area for us. Getting cost out of the corporate segment is one of the most strategic factors for us as we get into the year and look to over-deliver our results and overdrive our internal plan. And so I would just advise you to kind of model it as this 9% roughly or $200 million for now. But know that’s a major focus of ours. And we think we can make progress as the year goes on to try to bring this spend down.

Thanks guys, appreciate it. Congrats on the solid quarter.

Your next question comes from the line of Charlie Strauzer from CJS Securities. Your line is open.

Hi, good morning. I want to discuss the divestiture that took place yesterday in the hosting business. Looking at the sale of the Australian segment earlier this year, it appears that the overall sale price was lower than what the business was purchased for back in May 2008. The price seems a bit low, and I'm curious about what happened during the process, particularly regarding any potential exploration of other sales options.

So Charlie, you're correct. The company acquired those assets quite some time ago. However, you'll remember that between 2019 and early 2020, we fully impaired the asset because the market conditions for that business changed significantly. Looking ahead, we realized that web hosting was not compatible with our transition to a payments and data-focused company. We searched for suitable buyers through a comprehensive process and ended up with what we consider a fair transaction. This move eliminates the ongoing need for us to invest substantial capital into a declining business and aligns better with the buyer, whose core business complements our portfolio. We recognized an opportunity that wasn't a good fit for us, so we decided to divest. We believe this will allow us to concentrate more effectively. As we mentioned, we're rebranding this segment from cloud to better reflect our focus on the data business, which we have identified as a key asset for a long time. We think this change clarifies our direction and is a positive development.

Got it. And then staying on the topic of divestitures, are you planning to potentially invest more businesses going forward here or are we kind of at the tail end of that process?

We will continue to look at the portfolio for pruning opportunities. But Charlie, if the question really is, are you going to look to us to lap off one of the four legs: Check, Promo, Data, or Payments, I think we're at the place where we feel confident that that's not on the horizon here.

Makes sense, thank you very much on that. And then looking at the guidance for the year, a pretty wide range of outcomes there at the high end on revenue growth, given that we're going into potentially a recession here with inflation and higher interest rates kind of in the forecast, what gives you confidence there at the high end of that range and kind of what are some of the assumptions behind the guidance overall?

Yes, I appreciate the question, Charlie. It's Chip. I would just say, I think the high end of the range, what gives us confidence is just the execution and success we've seen over the last two years, the ability to cross-sell within the portfolio, the way we've invested in the products over the last few years to improve the functionality, the market attractiveness of it, to build a robust pipeline, and just continue the sales momentum. So if I think about from a revenue side, I mean, obviously, we did our range responsibly for all the right reasons you mentioned; there still is uncertainty and you don't know what's going to happen. But we look at that top end, and I think it's very achievable. As you flow it down, obviously, the ranges get a bit wider as you go down my list of things I guided because of the uncertainty and room for variance can get larger and larger. But we just feel good about where the company is positioned, the internal plan we've established, and just being able to execute on the momentum we've had the last two years from a top-line perspective. And then when you get to EBITDA, it just can't be said enough how much we're going to focus on cost out, cost efficiencies, operating leverage, the corporate cost center as I said, and just get very maniacally focused on our cost profile so that we can make sure we deliver that EBITDA result and start to grow EBITDA even more, and that will obviously help our deleveraging.

Got it. Great. Quick housekeeping on the Check side. Just in terms of volumes, how did the declines look there, and then what should we think about in terms of volumes for the full year?

On checks. So I mean, checks did return to secular declines again in the quarter. So if you think about kind of volume-price dynamics, it's a little bit more difficult to describe here. Obviously, price continues to be a function of the revenue because we took pricing actions throughout the year that rolled forward. But after we lapped all the customer wins, we did return to kind of normal secular decline. So we still had volume increases despite that, but when you net it all out, net reduction in revenue, which is what we're anticipating will be the same for 2023. So we're forecasting mid-single-digit declines, but the ability to keep margins in that mid-40% range. If I take checks aside and look at the other three segments, we are continuing to see a nice blend of volume and price. It was actually nearly 50-50 once again for the quarter. So just excluding the secular decline aspect of the business, we are just continuing to see a really good healthy mix of volume and price, and that gives us confidence going into 2023 as well.

Thank you very much for that. Could you please reiterate what you mentioned about payments growth for the year and margin expectations? I didn't catch that.

Yes. So payments we see as a mid-single-digit grower for the full year. We do think it's going to be maybe a little bit lower in the first quarter, and then it will pick up some steam as it gets into Q2 and beyond, and that's a function mostly of just some year-over-year comps that we're coming up against. But we do believe it's going to be mid-single-digit on the revenue side. On the adjusted EBITDA margin side, this is an area that this business is finally really starting to show the value of why we love it so much as it's starting to get operating leverage. So low to mid-20% margins, I think if you look at the trend of that business over the last few quarters, you're starting to see this operating leverage that we've been talking about. And so we're feeling pretty good about the ability to, of course, grow the mid-single digits and then also just get EBITDA expansion, which would be nice to help hit that overall EBITDA guidance and offset the declines in checks that we're planning.

Great, thank you very much. And then just lastly, what should we be thinking about assumption-wise for share-based comp for the year?

Share-based comp, give me just a second, I would say somewhere around $25 million would be what I would assume.

Got it, it is great. Thanks for taking my questions. Appreciate it.

Your next question comes from the line of Marc Riddick from Sidoti. Your line is open.

Hey, good morning everyone. So I was wondering if you could talk a little bit, and I appreciate all the details that you've already provided. I was wondering if you could talk a little bit about thoughts on potential headcount adjustments for the year. You've talked about trying to keep the costs under control, but I was sort of wondering about maybe where you might stand as far as adding headcount and sort of maybe talk a little bit about any investment initiatives for the year?

Sure. So on headcount, we are very disciplined about managing headcount, and we go through periods of pruning, including one earlier in January, but we are not a company that has historically just done across-the-board reductions. But we're very disciplined at managing particularly professional staff. So I think that the rest of the question really is how do we think about cost management for the rest of the year and going forward. And the thing I would really tell you is we really focused on getting revenue growing in the company, and we've now proven the company is capable of that. Some people didn't think we would actually deliver that, but we've now delivered it for two consecutive years. And the next big thing we do, in fact, is profitability and particularly the corporate cost center is a particular target. And we're going to be very disciplined and thoughtful just like we have on the portfolio and just like we have been on growing revenue to attack that next to help us expand the profitability of the company from here.

Great. And then I was wondering if you could talk a little bit about it, and you touched on some of the customer behavior that you're seeing given the environment that we're functioning in here. So I wonder if you could talk a little bit about if there are any particular industry verticals or pockets that are a little stronger than others or is pretty much the behavior that you're seeing largely across the board with customer verticals?

Overall, we are observing very strong demand across our entire range of services. There are some shifts between different sectors or time frames, with volume fluctuating slightly in various areas. However, when looking at the big picture, we continue to see robust and steady demand for our solutions, which is reflected in our revenue performance.

Great. I wanted to revisit your comments about the divestiture and the potential for future adjustments. Could you share your broader thoughts on the M&A pipeline, specifically regarding current valuations? Have you noticed any changes in terms of willingness to engage or shifts in the landscape over the last few months, especially considering the recessionary environment? Thank you.

The broader M&A market, I think, has been fairly frozen for some period of time. We're seeing maybe a little bit of a slight pat in that. And I think our perspective for our business is, we really like the core assets that we have in payments and data. And we feel like we've got plenty of runway there. And our first objective is of course, invest in the company for its success and continue to pay down debt. So are we going to be active in the M&A market to acquire assets, which is where I think you're going? The hurdle rate for that kind of a transaction would be really, really high right now with interest rates. And I think that we believe that valuations are still a little bit frothy. So you never say never, but we like the businesses we have, and we like our pathway to continue to pay down debt, and we see that sort of as the first and primary path.

Excellent, thank you very much.

Your next question comes from the line of Chuck Nabhan from Stephens. Your line is open.

Hi, this is Alex Newman on for Chuck here. Sorry if I missed the call, but did you give expectations for revenue growth for the data segment in 2023, given some of that pull-forward of revenue from Q1? And then just some of the drivers behind that revenue growth for the year, that would be great.

Yes, Alex, it's Chip. Yes, we did. So for the full year, we're expecting low single-digit revenue growth. And it's important to note that we refer to that as on a comparable adjusted basis because that one will obviously have the change in the divestiture occurring over time. So we'll continue to reconcile that and give you guys that. But for the full year, we see low single-digit growth. That's a bit slower than what we saw across the data segment this past year, but that's because this past year was such a large growth year. I mean that business grew north of 20%. It's obviously we just know that it's a high hurdle to clear. The first quarter specifically, we're expecting to be a little difficult just because of those handful of campaigns that shifted into the fourth quarter out in the first quarter at kind of depleted the pipeline just a bit. The team continues to work their pipeline list of deals, but we do know that the start of the year may be a little slower, but we don't see any reason that that business can't grow low single digits for the full year.

Okay. And then just within the merchant services, could you speak to what you see in terms of what's on the ground from your SMBs and what volumes are looking like and just the overall health?

So I think in the merchant business overall, we continue to see robust volume and there's lots of media attention about and speculation what's happening in SMBs. But I think overall, we're seeing pretty solid volume there. And our fourth quarter delivered exactly what we expected it to do. I'm sure you've seen the commerce department numbers for December, but we didn't experience that. We delivered the quarter and the way we expect it to deliver it. So we feel like the variety of business we have there and the verticals where we compete help balance each other out in good times and in tough times. We feel like that's a pretty solid business right now.

Alright, thank you.

And we have a follow-up question from the line of Lance Vitanza from Cowen. Your line is open.

Thank you. I have a couple of quick follow-up questions. First, regarding the proceeds from the web hosting sale, I noticed there is approximately $10 million mentioned in the 8-K that is deferred over a 6 to 12-month period post-closing. Can you clarify if this involves an earn-out or if there are performance-related contingencies we should know about? My second question is about the payments business. Could you provide some insights on the margin outlook for 2023? I believe you mentioned some opportunities, so a recap would be appreciated.

This is Chip; I'll address both questions. Regarding the sale of the web hosting business, we announced a base sales price of $42 million recently. Of that amount, $32 million will be paid at closing, with $10 million to be paid 180 days later and another $10 million after 360 days. Neither of the $10 million payments is contingent. There is the potential for an additional $10 million, which could bring the total sale price to a maximum of $52 million, but those are contingent on performance obligations. So, you can think of the sale price as ranging from $42 million to $52 million. The $42 million is guaranteed, while the second and third payments are just timing issues as the business transitions. As for payments, we did discuss that a bit. We are forecasting EBITDA margin rates in the low to mid-20s. Looking at the past few quarters, we're beginning to see that business gain operating leverage, leading to expanding margins due to volume growth. We appreciate this business because as volume increases, it can contribute to an incremental margin rate thanks to how the platform operates. We are also seeing improved profitability from operational efficiencies in our treasury management business, particularly in lockbox services. Additionally, we are raising prices to keep up with inflation, which is contributing positively as well. Overall, we believe this business will see nice margin expansion in 2023.

Thank you so much.

And there are no further questions at this time. Mr. Tom Morabito, I turn the call back over to you for some closing remarks.

Thanks, Rob. Before we conclude, I'd like to mention that management will be participating in the Truist Securities Technology, Internet & Services Conference on March 7, 2023, and the Sidoti Virtual Small Cap Conference on March 22nd. Thank you again for joining us today, and we look forward to speaking with you in May as we share our first quarter 2023 results.

This concludes today's conference call. Thank you for your participation. You may now disconnect.