Company: DLX
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000027996-25-000051
Chunk: 78

Company: DELUXE CORP
Filing Date: 2025-02-21
Form: 10-K
Item: Item 7
Chunk 78
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During our annual goodwill impairment analysis, we may first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If this qualitative assessment suggests it is not more likely than not that the fair value is less than the carrying amount, a quantitative impairment test is unnecessary. For the 2024 annual impairment analysis, we performed quantitative analyses for specific reporting units: Merchant Services, Treasury Management, and Business Essentials. These quantitative analyses indicated that the estimated fair values of the reporting units exceeded their carrying values. For the remaining reporting units with goodwill, we conducted qualitative analyses, considering factors such as economic, market, and industry conditions, cost factors, and the overall financial performance of the reporting units. We also reviewed the most recent quantitative analyses from prior periods. Based on these assessments, we found no changes in events or circumstances that suggested it was more likely than not that the fair value of any reporting unit was less 

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than its carrying amount. As such, no goodwill impairment charges were recorded as a result of our 2024 annual impairment analysis.

When a quantitative analysis is necessary, we compare the carrying value of the reporting unit, including goodwill, to its estimated fair value. The carrying value is based on the assets and liabilities associated with the reporting unit's operations, often requiring the allocation of shared and corporate items among reporting units. We use a discounted cash flow model to estimate  the fair value of a reporting unit. This model involves projecting future cash flows using the reporting unit's financial forecast from the perspective of an unrelated market participant. We project revenue using historical trending and internal forecasting techniques, apply our fixed and variable cost experience rates to the projected revenue, and calculate future cash flows. A terminal value is then applied to the projected cash flow stream, and future estimated cash flows are discounted to their present value to determine the estimated fair value. The discount rate used is the market-value-weighted-average of our estimated cost of capital, derived using both known and estimated customary market metrics. To determine the estimated fair values of our reporting units, we estimate several factors, including projected revenue growth rates, EBITDA margins, terminal growth rates, discount rates, and the allocation of shared and corporate items. When completing quantitative analyses for all of our reporting units, we compare the summation of our reporting units' fair values to our consolidated fair value, as indicated by our market capitalization, to ensure the reasonableness of our calculations.

In 2023, we entered into agreements to transition our