Note 1 – Basis of presentation

The accompanying unaudited pro forma condensed combined financial information and related notes were prepared pursuant to Article 11 of SEC Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” The unaudited pro forma condensed combined statement of income for the year ended December 31, 2021 combines the historical consolidated statements of income of Deluxe and First American, as included in the audited and unaudited historical financial statements and related notes of Deluxe and First American included in Deluxe’s filings with the Securities and Exchange Commission, giving effect to the merger as if it had been completed on January 1, 2021. Deluxe historical includes the results of FAPS post-acquisition and FAPS historical includes the results from January 1, 2021 through May 31, 2021.

Deluxe and First American’s historical financial statements were prepared in accordance with U.S. GAAP. There were no material transactions between Deluxe and First American during the pre-acquisition period during the year ended December 31, 2021.

The accompanying unaudited pro forma condensed combined financial information and related notes were prepared using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, with Deluxe considered the acquirer of First American. ASC 805 requires, among other things, that the assets acquired, and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. For purposes of the unaudited pro forma condensed combined financial information, the purchase consideration has been allocated to the assets acquired and liabilities assumed of First American based upon management’s preliminary estimate of their fair values as of June 1, 2021, which was further updated for measurement period adjustments through March 31, 2022. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill. The acquisition was accounted for as a business combination and the allocation of the purchase price to the assets acquired and liabilities assumed is preliminary, pending finalization of tax returns for the pre-acquisition period, which Deluxe expects to complete prior to June 2022. Deluxe believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the acquisition of FAPS and the debt financing based on information available to management at the time of preparation of the unaudited pro forma condensed combined financial information and that the pro forma transaction accounting adjustments give effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

Note 2 - Preliminary purchase price allocation

On June 1, 2021, Deluxe acquired all of the equity of First American in a cash transaction for $958,514, net of cash, cash equivalents, restricted cash and restricted cash equivalents acquired, subject to customary adjustments under the terms of the acquisition agreement. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed resulted in non-tax deductible goodwill of $727,173. The transaction resulted in goodwill as First American provides an end-to-end payments technology platform, which Deluxe believes will provide significant leverage to accelerate organic growth.

The acquisition was accounted for as a business combination and the allocation of the purchase price to the assets acquired and liabilities assumed is preliminary, pending finalization of tax returns for the pre-acquisition period, which Deluxe expects to complete prior to June 2022. The following illustrates the preliminary allocation of the purchase price, as of March 31, 2022, to the assets acquired and liabilities assumed:

The table below sets forth the impact that a 0.125% increase or decrease in the hypothetical assumed interest rate would have on interest expense for the relevant periods for only the variable rate debt (the Term A Loan Facility and the Revolving Credit Facility). For the purposes of this unaudited pro forma condensed combined financial information, Deluxe assumed a drawdown of $200,000 of the $500,000 available under the Revolving Credit Facility.