Good day, ladies and gentlemen and welcome to the Deluxe Corporation Second Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host for today, Mr. Ed Merritt, Treasurer and Vice President of Investor Relations. Sir, you may begin.

Thanks, Ben, and welcome everyone to the Deluxe Corporation’s Second Quarter 2015 Earnings Call. I am Ed Merritt, Deluxe’s Treasurer and Vice President of Investor Relations. Joining me on today’s call are Lee Schram, our Chief Executive Officer; and Terry Peterson, our Chief Financial Officer. At the conclusion of today’s prepared remarks, Lee, Terry and I will take questions if there are any. I would like to remind you that comments made today regarding financial estimates, projections and management’s intentions and expectations regarding the Company’s future performance are forward-looking in nature, as defined in the Private Securities Litigation Reform Act of 1995. These comments are subject to risks and uncertainties, which could cause actual results to differ materially from those projected. Additional information about various factors that could cause actual results to differ from those projected are contained in the press release that we issued this morning, as well as the Company’s Form 10-K for the year ended December 31, 2014. The financial and statistical information that will be reviewed during this call is addressed in greater detail in today’s press release, which was furnished to the SEC on the Form 8-K filed by the Company this morning. The press release is also posted on our Investor Relations Web site at deluxe.com/investor. Any references to non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release. Now, I will turn the call over to Lee.

Thank you, Ed, and good morning, everyone. [Technical Difficulty] quarter and we’re well-positioned as we enter the second half of the year to grow revenue 5% to 7% for the year, despite a continued sluggish economic environment. We reported revenue and adjusted earnings per share in the second quarter above the upper end of our outlook. Revenue grew 7.5% compared with the prior year quarter. Small business services revenue grew over 5% and financial services revenues grew 19%. Checks and forms performed well and marketing solutions and other services revenues grew 31% over the prior year and represented 29% of total second quarter revenue. Adjusted diluted earnings per share grew 12% from the prior year and we generated strong operating cash flow of $68 million for the quarter. We were drawn $308 million in total on our credit facility and short-term bank loan at quarter end. As expected, we did not repurchase any common share in the quarter. We continued our brand awareness campaign to help better position our products and services offerings and drive future revenue growth. We also advanced process improvements and slightly over-delivered on our cost reduction expectations in the quarter as we accelerated initiatives. We also learned in the quarter that we will have the opportunity to ring the opening bell at the New York Stock Exchange on November 23rd, which will be the actual 100-year anniversary day for the Company. In a few minutes, I will discuss more details around our recent progress and next steps, but first Terry will cover our financial performance.

Thank you, Lee. Earlier today, we reported diluted earnings per share for the second quarter of $1.11, which included $0.02 per share for restructuring and transaction related charges. Excluding these costs, adjusted EPS of $1.14 exceeded the upper end of our previous outlook and was 11.9% higher than the $1.01 reported in the second quarter of 2014. The restructuring and transaction related charges are primarily for employee severance and a small acquisition in the quarter. Revenue for the quarter also exceeded the upper end of our previous outlook at $436 million, an increase of 7.5% over last year or about 2% excluding primarily the impact of the Wausau acquisition. Small business services revenue of $282 million grew 5.5% versus last year despite a continuing sluggish economic environment and unfavorable foreign exchange rates which negatively impacted revenue growth by 0.9 percentage points in the quarter. We delivered growth in marketing solutions and other services, checks and in our online Safeguard distributor, major accounts and dealer channels. SBS revenue also benefited from price increases implemented in the first quarter. Financial services revenue of $113 million grew 19.1% versus the second quarter of last year and would have down less than 1% excluding the Wausau acquisition. Higher marketing solutions and other services revenue driven by Wausau and Deluxe Rewards, price increases and revenue from Zion’s Bank more than offset the impact of lower check orders. Direct Checks revenue of $41 million was down only 5.1% from last year and ended ahead of our expectations, driven by higher conversion rates from email marketing offers and an improved call center incentive plan. From a product revenue perspective, checks were $220 million, representing 50% of total revenue; forms, accessories and other business products were $90 million or 21% of total revenue; and marketing solutions and other…

Thank you, Terry. I will continue my comments with an update on overall focus and then highlight progress in each of our three segments including the perspective on what we hope to accomplish during the balance of 2015 as well as an update on our brand transformation. Our primary focus in 2015 continues to be profitable revenue growth and increasing the mix of marketing solutions and other services revenues towards our goal of 40% by 2018. Here we will focus on growing organically as well as continuing to assess potential small to medium-sized acquisitions that complement our large customer base and add new technologies. We have strengthened our channels of small business to include financial institutions, online, retail, wholesale Safeguard distributors, dealers and major accounts. Deluxe is now more capable of helping small businesses pursue their passion as a trusted provider of a growing suite of products and services a small business needs to market and operate their business and helping financial institutions with customer acquisition, fraud, security and risk management, and commercial and treasury services offers. Here is an update on our four subcategories framework for marketing solutions and other services. We ended the second quarter right in line with our exceptions in revenue with mix in the four subcategories basically in line with our expectation. First small business marketing is expected to represent approximately 41% in 2015 with expected growth in the mid-20s this year. Key 2015 growth initiatives include scaling web-to-print by cross-selling to our customer base and continuing to add new customers through distributors, dealers and major accounts. In addition to the opportunity to penetrate web-to-print, we also seek strong growth opportunities in retail packaging, promotional products, and other marketing solutions. In the second quarter, we grew in the strong double-digits driven by new major account…

[Operator Instructions] And our first question comes from line of Tim Klasell of Northland Securities. Your line is open. Please go ahead.

Just a few quick questions here, first, eChecks continues to do -- had its best quarter ever; how are you guys feeling about the margin contribution of each eChecks versus the traditional Direct Checks?

This will be better.

That’s simple and fast like that. And then the check declines of 6% to 7% versus the initial expectations of an 8% decline, is that a little bit more on -- is there any particular market segment that is doing better that you can talk to or is it sort of broadly speaking a bit better than expectation?

Yes, Tim, first of all, we guided 6; we’ve been consistent on 6. We did see about 7 in the quarter but we saw 6 in June and we’re sticking to 6 for the year. It is the way to think about it. And that’s really again from a financial services perspective where we were stronger was that we expected was in the Direct Checks area. And a couple of reasons, as we alluded the last couple of quarters, we’ve been trying to get smarter and smarter about how we’re spending our marketing dollars to get to those consumers, both for new orders and then for reorders. And we just got better and better at how we’re converting what we call our email marketing where we’re reaching out to our base. And then believe it or not, we made a change in our -- we’re always looking at how we script our call center and how we work our call center, but we made an incentive change and that incentive has positively surprised us and it’s started early in the quarter as well. So that’s the way that I would think about it. Back to the banking channel for just a minute, I would say we’ve seen consistency from the national through the community banks. So not -- like national is declining faster, communities declining faster, it’s pretty consistent across the FI landscape.

We have one large account yet to renew on the financial services side, once that decision is made positively or negatively, how long of a gap do we have for the next big renewal?

We feel positive about that first of all and that will get it renewed and the next the biggest one we have is national 2016 and we actually feel positive about renewing that one in the process that we’re going through right now on that. Hopefully we’ll be able to report on our next call that we have all of our major deals closed not only through ‘15 but also through ‘16 as well.

And then one little accounting detail. You’ve mentioned FX a few times; how big was the impact on FX least wise on revenues and earnings, can you give us some exact number?

If you compare that our original guidance that we came into the year with, the FX rate has deteriorated and it’s about $5 million of revenue for the full year and on a year-over-year comparison that was closer to $10 million. So it’s a sizable but again we’re absorbing that within the outlook ranges that we have provided and have not lowered guidance for that.

And the profit profile on that Tim is right in line with our operating margins, so in that low 20% range.

Thank you. Our next question comes from line of Josh Elving of Feltl. Your line is open. Please go ahead.

I had a question on the financial services operating margin. If I just look at the past few quarters, I know that there was a significant impact in the first quarter due to the drag of Wausau to the tune of call it 5%. Did I hear you correctly and that there was still a 3.8% drag this quarter?

Yes, that business did lower that margin by 3.8 points correct.

And so, if I am just looking -- I am sorry?

Here’s the way to think about Wausau right now. So what we’ve guided and I think we’ve tried to be as transparent as we can here. If the revenues for the year are $75 million and we expect it to be slightly accretive for the year and we were slightly accretive for the quarter and we had $19 million of revenue. If you would make those adjustments, you’re going to need to adjust every quarter as you kind of roll through the balance of the year. When we get into the fourth quarter, we had told to the Street that we did about $17 million last year in the fourth quarter. So, you will get that full lapping will actually happen in the fourth quarter here. So we’re trying to be as transparent as we can. One of the things that we alluded to on the call, both in my comments at the beginning and Terry got into more details. We had a better quarter on cost reductions. We just got more initiatives earlier and we also said we expect there to be therefore lower cost reductions relative to how we originally planned a year in the third quarter. That benefit really helped us in the financial services segment in the second quarter. A lot of that work is -- some of it is the Wausau stuff as well as other efficiencies that we got both in our SG&A as well as in our manufacturing facilities. So that’s really why we had the stronger performance in terms of margin when you adjust for Wausau in FS. So, hopefully that makes sense for you.

I think so and I think you gave a lot of information. So, I appreciate that. I guess I was trying to get a sense for if I were comparing year-over-year theoretically without making the adjustments to the operating margin. If I look at the 22.6% in the second quarter here at 3.5% or 3.8%, the year-over-year comparison looks significant. And then extrapolating from there, what the back half looks like if you’re going to see significant improvements year-over-year then going forward.

Yes, Josh and that’s where you are seeing kind of the timing of some of those cost reduction benefits coming through more in second quarter, less expected in second quarter in particular with this segment. So, I wouldn’t take a straight extrapolation of what you saw in second quarter and setting that up to the balance of the year.

Looking at the interest expense line, I don’t know if there were some different balances, debt balances into quarter but it looks like a nice improvement there. Is that just due to a relatively lower cost of debt in the quarter and how do we think about that line going forward, because there are relatively significant?

Throughout the second quarter it was pretty stable from beginning to end. What’s really driving the big difference when you compare year-over-year, or even second quarter versus first quarter, it’s a couple of things. The average interest rate is down significantly because we paid-off a higher rate debt back in October of last year and then we refinanced a higher rate debt again in first quarter of this year. So it’s slightly coming down in first quarter but second quarter is that rate came to where the new normal level is going to be for the full quarter. And that average rate is less than 3% on a combined basis for all of the debt that’s outstanding. And then second but still important as well is our average debt level has come down. So, lower interest rate on a lower debt level has produced roughly about $5 million of savings in the quarter.

So, is that a fixed or relatively fixed rate or is that float?

That is all floating. What we have on the balance sheet today is all floating. Definitely we have a credit facility and a small bank loan. And then we have fixed rate debt due in 2020 to the tune of $200 million but we’ve hedged that. So it is actually floating as well.

And then I guess it kind of ties into I guess my last question that has to do with capital allocation. I know that you suggested that you may buy back some stock. I know that Company suggested that there is some tuck-in acquisitions you would like to do. Do you currently have the appropriate debt level for your case; what you do with -- how do you I guess prioritize way to do with your capital generation, your cash flow?

We’re not at all concerned about the debt level that we have. We don’t necessarily manage -- at the low level that we have today we’re not really aggressively managing to a specific number because our credit metrics are still incredibly strong. We’re really focused on that transformation. And our capital allocation priorities really kind of zero-in on that transformation. So again, we will spend money first and foremost on organic investments that help that transformation move along, small to medium size acquisitions is right up to the top of that list as well. And then secondarily, we got a dividend that we are committed to continuing to pay. We’ll do some share back generally to offset dilution and then maybe in some years a little bit more depending on what the M&A needs for capital hour. And then last but not least, to the extent that excess cash flow is left over, it comes through in the form of debt reduction like in a period we’re not adverse taking debt up from one quarter to the next quarter by driving more on a credit facility.

Thank you. Our next question comes from the line of Joan Tong of Sidoti & Company. Your line is open. Please go ahead.

A couple of questions here, regarding Wausau, it seems like it’s doing a little bit better. And then also Lee, you mentioned that the booking is getting stronger and it seems like things are improving. Is it a right characterization because it seems like last quarter -- in the last quarter it was little bit late? Are we seeing things improving now and how sustainable it’s going to be going forward?

You heard that comment Joan exactly right. We had a really nice quarter. We delivered the revenue that we expected but our bookings were stronger than we expected and obviously that supports us well for the balance of the year and getting to that $75 million. But we’re also looking forward and we want to get this thing to grow for us as well. And so what we’re hopeful is that not only the backlog that will be converted in the second half of the year will be on that 75, but hopefully helps us to build backlog as we continue to roll the business out in 2016. So yes, you read it right and we did a little better on -- we predicated a breakeven EPS neutral for the quarter; we did a little better than that and that helped our total company profitability; it also helped the operating margins in FS. So, you read it well.

And then Lee, how about the major account wins that you had on the small, medium size business in the first quarter; how the account wins activities in the second quarter, any major uptake or is kind of at the same pace? Any color you can give will be appreciated.

We slightly raised, if you go back and look at the MOS, small business marketing that four way breakout, we guided for the first -- end of the first quarter, what we guided end of the second quarter, we raised it in the first quarter but we raised it again a little bit. We tightened the range and then we raised the high-end of that. What we’re signaling is that we continue to see a very strong uptake and I’ll give you an example what we’re talking about. We’re reaching into what we call major accounts but then a factor they act like small businesses, so there are opportunities with financial advisory firms as an example. And they’re buying business cards and they’re buying marketing brochures and full color materials. Well what’s exciting for us and we’re also starting to introduce what we think our smart other cross-sell place. For example and one of the financial advisors we just introduced email marketing, so they can stay in touch with their clients and learn to stay in touch with them. One of the things that we’ve learned over the history of our small business and throwing products and services at them is make sure that they can swallow or absorb them smartly at the right time. And so, we think this is an area that we’re going to now test into that not only brings more and more of those marketing and product and some service only things, but now starts to bring in things like email marketing in the equation. So, yes, we’re bullish and we got I would say a little more bullish here Joan in the second quarter, based on what we’re seeing.

And then Lee, you continue to talk about like your long-term goal is to grow marketing solutions, get the product mix more favorable going forward and continue to drive top-line but I haven’t heard you talk about operating margin expansion. I am just wondering your top-line growth is very nice this quarter and your operating income actually grew nicely compared to the first quarter, it was down a little bit, is it one of your target or a long-term goal going forward is to bring that top-line to operating leverage to the bottom-line?

I think here’s what you’re going to see and I think we’ve been consistent with every time we’re out and every time we’re talking with investors on this. If you’re interested in the stock, we’re not going to improve the EBITDA. We always say EBITDA margins but you can think of it as operating margins as well. Our operating margins in the 21% range, our EBITDA margins in the 25% range, what we expect to happen is we will grow the dollars of operating income and grow the dollars of EBITDA and based on the fact that we’re growing revenue. We believe that we will improve and continue to improve the MOS margins while probably we continue to always feel a bit pressure in the more commoditized core print products. And that will lever out to that maybe slightly improving overall operating margin or EBITDA margin profile and yet driving more dollars and therefore more dollars of cash flow and that’s how we’re thinking about it because we also want to be investing smartly in the Company as we move forward as well. So that’s the way to think about what we’re trying to do.

And then one last question is regarding foreign exchange. I think Terry you gave guidance regarding the top line, how foreign exchange would affect the top line over for the full year. How about the bottom line and also you’ve mentioned that higher tax rate, what is the EPS impact for this year from foreign exchange and higher tax rate, can you just give me that number?

Yes, the impact on foreign exchange rate carries a pretty normalized profit or loss margin, but that’s I think the operating income impact to be in the 20ish percentage of the revenue numbers that I did provide. And then slightly higher tax rate this year is 34% on a year-over-year basis for the full year that will drive a negative EPS impact of about $0.07 per share.

Thank you. And we do have time for one final question from the line of Charley Strauzer of CJS Securities. Your line is open. Please go ahead.

Couple of questions, going back to the Direct Check segment really quick and kind of help me reconciling the strength in the operating margins, 37%ish in the quarter versus the guidance for low to mid 30s going forward. I know you’ve seen some success like you said with the call centers. You’re dialing back some of the spend there. So, why wouldn’t that be more sustainable in kind of mid to upper 30s kind of going forward through the year?

Because we pulled some of the cost reductions in, most of them Charley were in the FS space that had the largest impact but there was some impact in the Direct Check segment as well.

We also Charley mentioned in the prepared remarks too that we do have a higher mix of reorders, certainly versus expectations too. And the profit profile on reorders as opposed to initials or introductory offers is quite a bit stronger. So we saw a really good strength in the reorder side of that that really lifted that operating margin. And the period of time in which we’re seeing that strength is just really not long enough for us to kind of declare any trend here.

Right. So that could be an upward lever for you going forward as that continues?

Yes, we love to see that mix and that strength continue but again it’s too early to make that call.

And then just if you look at the MOS slide in your presentation, kind of the mix breakup between small business marketing and other FI services. I noticed that for last couple of calls now, you’ve seen kind of the small business marketing mix ticking up a couple of percentage points and other FI kind of ticking down a couple of percentage points, anything driving one way or the other those two buckets?

No, I think it’s just exactly what we just answered to Joan on the small business marketing that solutions that first category the four-way break Charley just continues to get stronger with SB. And what we are seeing a little bit of is while Wausau was very strong, some of the targeting campaign services offers are -- got a little bit slower, nothing that we’re alarmed about that got a little bit slower in the quarter. I mean this is some small tweaking. The problem we have we keep giving you guys more and more information if it moves by $1 million, you guys start thinking there is something alarming. I wouldn’t think that way; I think that’s just a framework. And I’m not alarmed by that at all.

Nor am I. Thank you for that. And then just lastly, on the cash flow statement, this looks like you spent roughly $28 million on acquisitions in the quarter, anymore color you can give there? Thanks.

Again, part of what you have to remember and we don’t always pay for the acquisitions all at one time. So, when we do a deal, we have a tendency to do hold backs. And depending on how the hold backs operator, the dollar amount of the hold backs, they can spike up within a quarter or whenever that hold back payment is due. So that’s why you saw a more of spike this quarter overall than what you would traditionally see.

Thank you. And that does conclude our Q&A period for today. I’d like to turn the conference back over to Mr. Lee Schram for any closing remarks.

Let me just thank everybody for your participation and for all the questions. I wanted to summarize in four points. First, we delivered an outstanding second quarter; second, we exceeded both our revenue and earnings outlook; third, marketing solutions and other services revenues grew over 31% and the mix improved towards our goal of 30% of total company revenue in 2015 and 40% in 2018; and four, we had a very strong first half of the year which we believe propels us towards revenue growth again in 2015 for the sixth consecutive year. We’re now going to roll up our sleeves, get back to work and we look forward to providing a positive progress report on our next earnings call. I’m going to turn it over to Ed for some final housekeeping.

Thanks, Lee. Before we conclude today’s call, I’d just like to mention that Deluxe management will be participating in a few upcoming events in the third quarter where you can hear more about our transformation. On August 4th, we will be in Boston at the UBS Midcap Conference; on August 5th, we will be in New York at the Needham & Company Interconnect Conference; and we will also be at the Minneapolis Investment Conference on August 5th; and on September 10th, we’ll be in New York City at the CL King Conference. Thank you for joining us. And that concludes the Deluxe second quarter 2015 earnings call.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program and you may all disconnect. Have a great rest of your day.