November 6, 2020 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission file number: 1-7945

DELUXE CORPORATION

(Exact name of registrant as specified in its charter)


MN			41-0216800
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
3680 Victoria St. N.	Shoreview	MN	55126-2966
(Address of principal executive offices)			(Zip Code)

(651) 483-7111

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	DLX	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

The number of shares outstanding of registrant’s common stock as of October 28, 2020 was 41,893,988.


PART I – FINANCIAL INFORMATION


Item 1. FINANCIAL STATEMENTS


DELUXE CORPORATION CONSOLIDATED BALANCE SHEETS (unaudited)


(in thousands, except share par value)	September 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents, including securities carried at fair value of $35,009 and $9,713, respectively	$	310,430	$	73,620
Trade accounts receivable, net of allowance for uncollectible accounts of $6,488 and $4,985, respectively	138,349		163,421
Inventories and supplies	50,512		39,921
Funds held for customers, including securities carried at fair value of $23,613 and $34,450, respectively	106,199		117,641
Revenue in excess of billings	29,307		32,790
Other current assets	43,139		44,818
Total current assets	677,936		472,211
Deferred income taxes	5,834		3,907
Long-term investments	45,522		44,995
Property, plant and equipment, net of accumulated depreciation of $365,250 and $377,180, respectively	80,694		96,467
Operating lease assets	40,475		44,372
Intangibles, net of accumulated amortization of $596,778 and $557,023, respectively	234,764		276,122
Goodwill	736,779		804,487
Other non-current assets	185,175		200,750
Total assets	$	2,007,179	$	1,943,311
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	113,120	$	112,198
Funds held for customers	104,197		116,411
Accrued liabilities	161,542		179,338
Total current liabilities	378,859		407,947
Long-term debt	1,040,000		883,500
Operating lease liabilities	30,909		33,585
Deferred income taxes	4,794		14,898
Other non-current liabilities	41,173		32,520
Commitments and contingencies (Notes 12 and 15)
Shareholders' equity:
Common shares $1 par value (authorized: 500,000 shares; outstanding: September 30, 2020 – 41,893; December 31, 2019 – 42,126)	41,893		42,126
Additional paid-in capital	11,554		4,086
Retained earnings	510,805		572,596
Accumulated other comprehensive loss	(52,904)		(47,947)
Non-controlling interest	96		—
Total shareholders’ equity	511,444		570,861
Total liabilities and shareholders’ equity	$	2,007,179	$	1,943,311

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)


	Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2020		2019		2020		2019
Product revenue	$	298,751	$	346,315	$	908,146	$	1,043,896
Service revenue	140,710		147,278		428,142		442,749
Total revenue	439,461		493,593		1,336,288		1,486,645
Cost of products	(108,369)		(133,807)		(332,818)		(398,869)
Cost of services	(66,092)		(69,916)		(205,974)		(207,006)
Total cost of revenue	(174,461)		(203,723)		(538,792)		(605,875)
Gross profit	265,000		289,870		797,496		880,770
Selling, general and administrative expense	(198,871)		(213,318)		(634,645)		(665,787)
Restructuring and integration expense	(18,949)		(26,255)		(56,957)		(49,089)
Asset impairment charges	(2,760)		(390,980)		(97,973)		(390,980)
Operating income (loss)	44,420		(340,683)		7,921		(225,086)
Interest expense	(5,083)		(8,710)		(18,254)		(27,251)
Other income	2,201		2,183		8,482		6,118
Income (loss) before income taxes	41,538		(347,210)		(1,851)		(246,219)
Income tax (provision) benefit	(12,094)		28,717		(13,958)		1,498
Net income (loss)	29,444		(318,493)		(15,809)		(244,721)
Net income attributable to non-controlling interest	(27)		—		(46)		—
Net income (loss) attributable to Deluxe	$	29,417	$	(318,493)	$	(15,855)	$	(244,721)
Total comprehensive income (loss)	$	32,319	$	(322,150)	$	(20,766)	$	(245,326)
Comprehensive income (loss) attributable to Deluxe	32,292		(322,150)		(20,812)		(245,326)
Basic earnings (loss) per share	0.70		(7.49)		(0.38)		(5.65)
Diluted earnings (loss) per share	0.70		(7.49)		(0.40)		(5.65)

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)


(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, June 30, 2020	41,855	$	41,855	$	4,950	$	494,243	$	(55,779)	$	69	$	485,338
Net income	—	—		—		29,417		—		27		29,444
Cash dividends ($0.30 per share)	—	—		—		(12,855)		—		—		(12,855)
Common shares issued	44	44		593		—		—		—		637
Common shares retired	(6)	(6)		(128)		—		—		—		(134)
Employee share-based compensation	—	—		6,139		—		—		—		6,139
Other comprehensive income	—	—		—		—		2,875		—		2,875
Balance, September 30, 2020	41,893	$	41,893	$	11,554	$	510,805	$	(52,904)	$	96	$	511,444


(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Non-controlling interest		Total
Balance, December 31, 2019	42,126	$	42,126	$	4,086	$	572,596	$	(47,947)	$	—	$	570,861
Net loss	—	—		—		(15,855)		—		46		(15,809)
Cash dividends ($0.90 per share)	—	—		—		(38,562)		—		—		(38,562)
Common shares issued	334	334		2,860		—		—		—		3,194
Common shares repurchased	(499)	(499)		(9,767)		(3,734)		—		—		(14,000)
Other common shares retired	(68)	(68)		(1,994)		—		—		—		(2,062)
Employee share-based compensation	—	—		16,369		—		—		—		16,369
Adoption of Accounting Standards Update No. 2016-13 (Note 2)	—	—		—		(3,640)		—		—		(3,640)
Other comprehensive loss	—	—		—		—		(4,957)		—		(4,957)
Non-controlling interest, net	—	—		—		—		—		50		50
Balance, September 30, 2020	41,893	$	41,893	$	11,554	$	510,805	$	(52,904)	$	96	$	511,444

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued) (unaudited)


(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Total
Balance, June 30, 2019	42,928	$	42,928	$	—	$	904,748	$	(53,527)	$	894,149
Net loss	—	—		—		(318,493)		—		(318,493)
Cash dividends ($0.30 per share)	—	—		—		(12,977)		—		(12,977)
Common shares issued	51	51		1,472		—		—		1,523
Common shares repurchased	(876)	(876)		(6,109)		(32,666)		—		(39,651)
Other common shares retired	(4)	(4)		(200)		—		—		(204)
Employee share-based compensation	—	—		4,837		—		—		4,837
Other comprehensive loss	—	—		—		—		(3,657)		(3,657)
Balance, September 30, 2019	42,099	$	42,099	$	—	$	540,612	$	(57,184)	$	525,527


(in thousands)	Common shares	Common shares par value		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Total
Balance, December 31, 2018	44,647	$	44,647	$	—	$	927,345	$	(56,579)	$	915,413
Net loss	—	—		—		(244,721)		—		(244,721)
Cash dividends ($0.90 per share)	—	—		—		(39,445)		—		(39,445)
Common shares issued	150	150		3,411		—		—		3,561
Common shares repurchased	(2,632)	(2,632)		(13,615)		(102,300)		—		(118,547)
Other common shares retired	(66)	(66)		(3,010)		—		—		(3,076)
Employee share-based compensation	—	—		13,214		—		—		13,214
Adoption of Accounting Standards Update No. 2016-02	—	—		—		(267)		—		(267)
Other comprehensive loss	—	—		—		—		(605)		(605)
Balance, September 30, 2019	42,099	$	42,099	$	—	$	540,612	$	(57,184)	$	525,527

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


	Nine Months Ended September 30,
(in thousands)	2020		2019
Cash flows from operating activities:
Net loss	$	(15,809)	$	(244,721)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	15,510		12,206
Amortization of intangibles	67,555		83,224
Operating lease expense	15,044		15,145
Asset impairment charges	97,973		390,980
Amortization of prepaid product discounts	21,725		17,861
Deferred income taxes	(9,395)		(38,549)
Employee share-based compensation expense	15,335		14,580
Other non-cash items, net	15,231		10,082
Changes in assets and liabilities:
Trade accounts receivable	21,376		27,505
Inventories and supplies	(11,938)		2,728
Other current assets	2,158		(3,213)
Non-current assets	(13,335)		(3,346)
Accounts payable	(9,830)		(10,779)
Prepaid product discount payments	(24,947)		(20,370)
Other accrued and non-current liabilities	(19,842)		(45,309)
Net cash provided by operating activities	166,811		208,024
Cash flows from investing activities:
Purchases of capital assets	(42,707)		(49,679)
Proceeds from sale of facilities	9,713		—
Purchases of customer funds marketable securities	(3,742)		(3,817)
Proceeds from customer funds marketable securities	3,742		3,817
Other	1,326		3,147
Net cash used by investing activities	(31,668)		(46,532)
Cash flows from financing activities:
Proceeds from issuing long-term debt	309,000		203,500
Payments on long-term debt	(152,500)		(189,500)
Net change in customer funds obligations	(9,375)		(8,711)
Proceeds from issuing shares under employee plans	3,048		3,159
Employee taxes paid for shares withheld	(2,023)		(3,076)
Payments for common shares repurchased	(14,000)		(118,547)
Cash dividends paid to shareholders	(38,057)		(39,068)
Other	(2,734)		(5,001)
Net cash provided (used) by financing activities	93,359		(157,244)
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents	(3,297)		2,604
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	225,205		6,852
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year	174,811		145,259
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period (Note 3)	$	400,016	$	152,111

See Condensed Notes to Unaudited Consolidated Financial Statements


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


NOTE 1: CONSOLIDATED FINANCIAL STATEMENTS

The consolidated balance sheet as of September 30, 2020, the consolidated statements of comprehensive income (loss) for the quarters and nine months ended September 30, 2020 and 2019, the consolidated statements of shareholders’ equity for the quarters and nine months ended September 30, 2020 and 2019 and the consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 are unaudited. The consolidated balance sheet as of December 31, 2019 was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles (GAAP). In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial statements are included. Adjustments consist only of normal recurring items, except for any discussed in the notes below. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements and notes are presented in accordance with instructions for Form 10-Q and do not contain certain information included in our annual consolidated financial statements and notes. The consolidated financial statements and notes appearing in this report should be read in conjunction with the consolidated audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Form 10-K).

The preparation of our consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other factors and assumptions that we believe are reasonable under the circumstances, including the estimated impact of extraordinary events such as the novel coronavirus (COVID-19) pandemic, the results of which form the basis for making judgments about the carrying values of our assets and liabilities. Actual results may differ significantly from our estimates and assumptions, including our estimates of the severity and duration of the COVID-19 pandemic. Further information can be found in Note 15.

Non-controlling interest – Effective April 1, 2020, we executed an agreement to form MedPay Exchange LLC (MPX), which delivers payments to healthcare providers from insurance companies and other payers. This entity is a variable interest entity (VIE), as defined in Accounting Standards Codification Topic 810, Consolidation. As we are the primary beneficiary of the VIE, we are required to consolidate MPX in our consolidated financial statements. Our partner’s interest in MPX is reported as non-controlling interest in the consolidated balance sheet within equity, separate from our equity. Net income (loss) and comprehensive income (loss) are attributed to us and the non-controlling interest on the consolidated statements of comprehensive income (loss). The amounts attributable to the non-controlling interest were not significant for the quarter or nine months ended September 30, 2020.

Comparability – Amounts on the consolidated balance sheet as of December 31, 2019 and amounts within cash flows from operating activities and cash flows from investing activities on the consolidated statement of cash flows for the nine months ended September 30, 2019 have been modified to conform to the current year presentation. On the consolidated balance sheet, assets held for sale are included within other non-current assets. In the previous year, this amount was presented separately. Within cash flows from operating activities, loss on sales of businesses and customer lists is included within other non-cash items, net. In the previous year, this amount was presented separately. Within cash flows from investing activities, payments for acquisitions, net of cash acquired, is included within the other caption. In the previous year, this amount was presented separately.

During the quarter ended September 30, 2020, we identified the incorrect presentation of certain amounts reported in the 2019 consolidated statements of cash flows. We determined that holdback payments for acquisitions and asset purchases were incorrectly included in net cash used by investing activities and should be included in net cash used by financing activities. We determined that the amounts impacting payments for acquisitions were not material to the consolidated financial statements for the nine months ended September 30, 2019, and the presentation of these amounts has been corrected in the consolidated statement of cash flows for the nine months ended September 30, 2019 appearing herein. This revision had no impact on the amount reported for cash, cash equivalents, restricted cash and restricted cash equivalents as of September 30, 2019.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

The impact of the revision on the consolidated statement of cash flows for the nine months ended September 30, 2019 was as follows:


(in thousands)	As previously reported		Adjustment		As revised
Payments for acquisitions, net of cash acquired	$	(1,598)	$	1,598	$	—
Other	1,398		1,749		3,147
Net cash used by investing activities	(49,879)		3,347		(46,532)
Other	(1,654)		(3,347)		(5,001)
Net cash used by financing activities	(153,897)		(3,347)		(157,244)
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	$	6,852	$	—	$	6,852


NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Standards

ASU No. 2016-13 – In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments. Subsequently, the FASB issued several amendments to this standard. These standards replace the incurred loss methodology previously utilized for valuing financial instruments with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected losses under the CECL methodology is applicable to financial instruments measured at amortized cost, including accounts and notes receivable. The standards also made targeted changes to the accounting for available-for-sale debt securities. We adopted the standards on January 1, 2020 using the modified retrospective method for financial instruments measured at amortized cost. Under this method, prior period amounts continue to be reported in accordance with previously applicable GAAP. We recorded a net decrease in retained earnings of $3,640 as of January 1, 2020 for the cumulative effect of adopting the standards, which consisted primarily of an increase in the allowance for credit losses on loans and notes receivable, net of the related deferred income tax impact. We recorded no allowance for credit losses related to our available-for-sale debt securities. Further information regarding these investments can be found in Note 3.

An allowance for uncollectible accounts is a valuation account that is deducted from an asset's amortized cost basis to present the net amount expected to be collected. Amounts are charged off against the allowance when we believe the uncollectibility of an account is confirmed. In calculating the allowances related to trade accounts receivable and revenue in excess of billings, we utilize a combination of aging schedules with reserve rates applied to both current and aged receivables and roll-rate reserves using historical loss rates and changes in current or projected conditions. In determining the allowance for uncollectible accounts related to loans and notes receivable from distributors, we utilize a loss-rate analysis based on historical loss information, current delinquency rates, the credit quality of the loan recipients and the portfolio mix to determine an appropriate credit risk measurement, adjusted to reflect current loan-specific risk characteristics and changes in environmental conditions affecting our small business distributors. Changes in conditions that may affect our distributors include, but are not limited to, general economic conditions, changes in the markets for their products and services and changes in governmental regulations. In completing our analysis, we utilize a reversion methodology for periods beyond the reasonable and supportable forecast period, as many of our loans and notes receivable have longer terms. Further information regarding current risks and uncertainties affecting our loans and notes receivable can be found in Note 15. Further information regarding our allowances for uncollectible accounts can be found in Note 3.

Our trade accounts receivable and unbilled receivables are not interest-bearing. Interest rates on our loans and notes receivable generally range from 6% to 8% and reflect market interest rates at the time the transactions were executed. Accrued interest included in loans and notes receivable is not significant.

ASU No. 2018-13 – In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements. This standard removes, modifies and adds certain disclosures related to recurring and nonrecurring fair value measurements. During 2018, we adopted the provisions of the standard that remove and modify disclosure requirements. The additional disclosures were effective for us on January 1, 2020 and are required to be applied prospectively to fair value measurements completed on or after that date. Disclosures regarding our fair value measurements can be found in Note 7.

ASU No. 2018-15 – In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the new standard. We adopted this standard on January 1, 2020, applying it prospectively to eligible costs incurred on or after this date. Adoption of this standard did impact our results of operations and financial position, as we previously expensed these implementation costs as incurred. As of September 30, 2020, $19,617 of cloud computing implementation costs were included within other non-current assets on the consolidated balance sheet. These costs primarily relate to our planned implementation of a new enterprise resource planning system.

Accounting Standards Not Yet Adopted

ASU No. 2019-12 – In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This standard addresses several specific areas of accounting for income taxes. The guidance is effective for us on January 1, 2021. Portions of the standard are required to be adopted prospectively and certain aspects will be adopted using the modified retrospective approach. We do not expect the application of this standard to have a significant impact on our results of operations or financial position.


NOTE 3: SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION

Trade accounts receivable – Changes in the allowance for uncollectible accounts included within trade accounts receivable for the nine months ended September 30, 2020 and 2019 were as follows:


	Nine Months Ended September 30,
(in thousands)	2020		2019
Balance, beginning of year	$	4,985	$	3,639
Bad debt expense	4,174		3,718
Write-offs and other	(2,671)		(2,537)
Balance, end of period	$	6,488	$	4,820

Inventories and supplies – Inventories and supplies were comprised of the following:


(in thousands)	September 30, 2020		December 31, 2019
Raw materials	$	7,025	$	6,977
Semi-finished goods	7,151		7,368
Finished goods	33,144		21,982
Supplies	3,192		3,594
Inventories and supplies	$	50,512	$	39,921

Available-for-sale debt securities – Available-for-sale debt securities included within funds held for customers were comprised of the following:


	September 30, 2020
(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Funds held for customers:(1)
Domestic money market fund	$	7,000	$	—	$	—	$	7,000
Canadian and provincial government securities	8,968		137		—		9,105
Canadian guaranteed investment certificates	7,508		—		—		7,508
Available-for-sale debt securities	$	23,476	$	137	$	—	$	23,613

(1) Funds held for customers, as reported on the consolidated balance sheet as of September 30, 2020, also included cash of $82,586.


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)


	December 31, 2019
(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Funds held for customers:(1)
Domestic money market fund	$	18,000	$	—	$	—	$	18,000
Canadian and provincial government securities	9,056		—		(304)		8,752
Canadian guaranteed investment certificates	7,698		—		—		7,698
Available-for-sale debt securities	$	34,754	$	—	$	(304)	$	34,450

(1) Funds held for customers, as reported on the consolidated balance sheet as of December 31, 2019, also included cash of $83,191.

Expected maturities of available-for-sale debt securities as of September 30, 2020 were as follows:


(in thousands)	Fair value
Due in one year or less	$	13,057
Due in two to five years	6,595
Due in six to ten years	3,961
Available-for-sale debt securities	$	23,613

Further information regarding the fair value of available-for-sale debt securities can be found in Note 7.

Revenue in excess of billings – Upon adoption of ASU No. 2016-13 and related amendments on January 1, 2020 (Note 2), we recorded an allowance for uncollectible accounts related to revenue in excess of billings. This allowance was not significant upon adoption, or as of September 30, 2020. Revenue in excess of billings, net of the allowance for uncollectible accounts, was comprised of the following:


(in thousands)	September 30, 2020		December 31, 2019
Conditional right to receive consideration	$	19,611	$	24,499
Unconditional right to receive consideration	9,696		8,291
Revenue in excess of billings	$	29,307	$	32,790

Intangibles – Intangibles were comprised of the following:


	September 30, 2020						December 31, 2019
(in thousands)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Amortizable intangibles:
Internal-use software	$	400,964	$	(325,746)	$	75,218	$	380,905	$	(299,698)	$	81,207
Customer lists/relationships	328,967		(191,964)		137,003		348,055		(187,462)		160,593
Software to be sold	36,900		(22,827)		14,073		36,900		(19,657)		17,243
Technology-based intangibles	34,613		(26,863)		7,750		34,780		(22,122)		12,658
Trade names	30,098		(29,378)		720		32,505		(28,084)		4,421
Intangibles	$	831,542	$	(596,778)	$	234,764	$	833,145	$	(557,023)	$	276,122


DELUXE CORPORATION CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts)

During the nine months ended September 30, 2020, we recorded asset impairment charges related to certain intangible assets. Further information can be found in Note 7.

Amortization of intangibles was $22,515 for the quarter ended September 30, 2020, $26,736 for the quarter ended September 30, 2019, $67,555 for the nine months ended September 30, 2020 and $83,224 for the nine months ended September 30, 2019. Based on the intangibles in service as of September 30, 2020, estimated future amortization expense is as follows:


(in thousands)	Estimated amortization expense
Remainder of 2020	$	23,996
2021	75,519
2022	51,087
2023	33,349
2024	18,185

The following intangibles were acquired during the nine months ended September 30, 2020:


(in thousands)	Amount		Weighted-average amortization period (in years)
Internal-use software	$	28,268	3
Customer lists/relationships	21,627		7
Acquired intangibles	$	49,895	5

Goodwill – Changes in goodwill by reportable segment and in total for the nine months ended September 30, 2020 were as follows :


(in thousands)	Payments		Cloud Solutions		Promotional Solutions		Checks		Total
Balance, December 31, 2019:
Goodwill, gross	$	168,165	$	432,984	$	252,834	$	434,812	$	1,288,795
Accumulated impairment charges	—		(357,741)		(126,567)		—		(484,308)
Goodwill, net of accumulated impairment charges	168,165		75,243		126,267		434,812		804,487
Impairment charges (Note 7)	—		(4,317)		(63,356)		—		(67,673)
Currency translation adjustment	—		—		(35)		—		(35)
Balance, September 30, 2020	$	168,165	$	70,926	$	62,876	$	434,812	$	736,779

Balance, September 30, 2020:
Goodwill, gross	$	168,165	$

Form: 10-Q

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