Jeff Johnson – VP, IR Lee Schram – CEO Terry Peterson – CFO

Charlie Strauzer – CJS Securities Jamie Clement – Sidoti & Company John Kraft – DA Davidson Michael Hamilton – RBC Capital Markets Dennis Xavier [ph] – Wells Fargo

Good day, ladies and gentlemen, and welcome to the first quarter 2010 Deluxe Corporation earnings conference call. My name is Shenil, and I will be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Jeff Johnson, Treasurer, Vice President of Investor Relations. Please proceed.

Thank you, Shenil. Welcome to Deluxe Corporation’s 2010 first quarter earnings call. I’m Jeff Johnson, Deluxe’s Vice-President of Investor Relations and Treasurer. Joining me on the call today are Lee Schram, Deluxe’s Chief Executive Officer, and Terry Peterson, Deluxe’s Chief Financial Officer. Lee, Terry and I will take questions from analysts after the prepared comments. At that time, the operator will instruct you how to ask a question. In accordance with Regulation FD, this call is open to all interested parties. A replay of the call will be available via telephone and Deluxe’s website. I will provide instructions for accessing the replay at the conclusion of our teleconference. Before I begin, let me make this brief cautionary statement. Comments made today regarding financial estimates and projections and any other statements addressing management’s intentions and expectations regarding the Company’s future performance are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, 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 news release that we issued this morning and in the Company’s Form 10-K for the year ended December 31st, 2008. In addition, the financial and statistical information that will be reviewed during this call is addressed in greater detail in today’s press release, which is posted in the News and Investor Relations section of our website, www.deluxe.com, and was furnished to the SEC on the Form 8-K filed this morning. In particular, any non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release. Now, I’ll turn the call over to Lee Schram, Deluxe’s CEO.

Thank you, Jeff, and good morning, everyone. In a continued challenging economic environment we delivered a very strong quarter. We reported revenue at the top of our expected range while adjusted earnings per share was well above the high-end of our range. All three segments delivered strong revenue. Checks and forms both performed well against our expectations, and new business services revenues grew 33% over the prior year. We had strong execution against our cost reduction program and spending controls, which drove better than expected EPS and operating cash flow. Adjusted diluted earnings per share from continuing operations grew 30% over the prior year. We generated strong operating cash flow, and we were not drawn on our credit facility as we ended the quarter. We completed the acquisition of Custom Direct in early April to extend our direct-to-consumer offerings and enhanced our cash flow generating capabilities. In late March, we started to invest in developing improved brand awareness to help better position our new business services offerings. We have started to invest more back into the business to drive revenue growth. But, we are continuing our processes improvements and cost reductions while driving strong operating cash flow as we continue to transform Deluxe and execute our turnaround plan. 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 first quarter of $0.65, which included $0.07 related to a one time income tax charged related to healthcare reform legislation. Excluding the one time healthcare reform related charge, adjusted EPS from continuing operation of $0.73 was $0.09 favorable to the upper end of our previous outlook, and 30% higher than the $0.56 reported in the first quarter of 2009. Revenue for the quarter came in at $335 million, which was at the top-end of the range of our previous outlook and down only 1% from 2009. All three of our business segments delivered strong revenue. Small Business Services revenue of $192 million was down less than 1% versus 2009. Revenue was unfavorably impacted by continued economic weakness, but business services showed solid growth. Financial services revenue of $101 million was also down less than 1% versus the first quarter of last year. The impact of lower check orders was mostly offset by higher revenue per order and higher non-check revenue. Revenue per order benefited in the 2010 quarter from last year’s price increase and the amortization of a past contract settlements. Direct Checks revenue totaled $41 million down 6.3% on a year-over-year basis, but better than recent quarter due to improved re-order performance. Gross margin for the quarter was 64.7% of revenue, up 2.8 percentage points from 2009. Benefits from improvements and manufacturing productivity, plant consolidations and delivery initiatives will partly offset by increased delivery rates. SG&A expense decreased $10.4 million in the quarter, and was 44.2% of revenue compared to 46.7% in the same period of last year. Increased SG&A associated with acquisitions and the acceleration of our brand awareness advertising was more than offset by benefits from the continued execution of our cost reduction initiatives…

Thank you Terry. I will continue my comments with an update on what we are focused on overall, and then highlight progress in each of our three segments. I will also include throughout a perspective on what we hope to accomplish throughout the balance of 2010. As mentioned on our last call, we are shifting our primary focus to revenue expansion, but we will not take our eyes off of cost reductions and process improvement initiatives. We are off to a good start with solid revenue results in all three segments in the first quarter. So we are optimistic our focus and actions are beginning to take hold. We believe there are four key enablers that are critical right now to driving revenue growth. First, strengthening our products and services portfolio, which is beginning better position to deliver sustainable future revenue growth as the broader economy recovers. It starts with Checks where we are stabilizing and pursuing share gains through new acquisition wins, through enhance customer experience and through simplifying offers. We also capitalized on our strategy of optimizing cash flow in our Direct Check segment through our acquisition of Custom Direct. Next, we are better optimizing our business product’s portfolio by broadening our distributor and dealer channel reach, by improving our Internet experience and through new offers including electronic tax forms, stamps and e-holiday cards. Finally, in business services, we are growing web and hosting services, surcharge in marketing, payroll, broaden security, loyalty and retention, analytics driven deposit acquisition, rewards checking and business networking services. We will also continue to assess potential small to medium size acquisitions that compliments our large customer basis with a focus on Small Business Services and new offerings aimed at helping financial institutions grow their core deposits. The second enabler is customers where we’re…

(Operator Instructions) Your first question comes from the line of Charlie Strauzer of CJS Securities. Charlie Strauzer – CJS Securities: Hi, good morning.

Hi, Charlie. Charlie Strauzer – CJS Securities: Great margins across the board there, I just want to talk a little bit more about the strength there, and what kind of – what drove back behind the scenes and sustainability of those kind of margins? I know that obviously in the Direct Check side with Custom Direct being fall within, those margins are obviously coming down as they are integrated in, but let’s start with Direct Check, if you look at kind of with the 38% whatever in the quarter and kind of look out – 2-3 years down the road. Is there anything or any impairment that usually once you fully integrate both companies to prevent those margins from kind of getting back above copy the low to mid-30s?

I think Charlie, it was going to happen there is, as we integrate the few companies, we will instead up to 20s right now, we are obviously going to continue to work to improve that from here, again I think we’ve had a couple of… we have 38% performance in Q4 and 38% performance is really the drivers are where as we leverage our cost structure really well. We did better than we expected in the fourth quarter, we did better than we expect in the first quarter on revenue and therefore able to again what level lot of that for right through the bottom line. And I don’t expect that you will see as strong as we – as we move to the balance for the year, but we are doing everything we can that continued to make sure that our cost structure in that segment, as well as when we introduced the Direct… the Custom Direct capabilities into the segment are going continue to help us. But, I am not going to point right now, Charlie we are going to predict way out and so we really look at and we got our teams out in Maryland and in Arkansas their two sides right now working with the teams and pulling things together, but it’s obviously we have expectations we build and we able to do this acquisition, but until we really understand in more detail what I would tell you is, this is probably best I can give you right now.

And the other thing to you Charlie in my prepared comments to, I did mentioned to that just the balance of this year we are expecting right now primarily about $11 million of additional acquisition related amortization, so we’ll have to drawback for few years here as well. Charlie Strauzer – CJS Securities: Understood, understood and then if you look at the in the strong margins like in Small Business. I think that was a much better than how you’re looking for and talk a little bit more about what drove that in and the sustainability of those margins?

We are really getting, first of fall we had a very strong Checks and forms quarter it was a little bit above what we expected in the segment and obviously we make good margins on those. I think the good news there as we’re just a little light on the more discretionary products and services there’re more products and that probably the Checks and form is a better place for us to have the strength. And therefore that will better overall operating margins. And we are… Charlie, we’re getting better and better at and I saw this many, many calls that turning and dials around where should we invest online through paper, through our call centers and this is the job that’s never over. And I think that we’re pleased but we also have been saying we expected to see some margin improvement in Small Business, and I think as we further develop and enrich our business services offers as well I think that you will see more sustainability towards what you’re margins that you saw that’s put out in the first quarter. Now, the flip side is that as we’ve made a lot of comments in this prepared comments about brand and getting brand awareness to be stronger, so that will impact our operating margins bit in the Small Business segment as we investing a little bit more in the brand space. But, we think it’s a good investment and the right investment because we also think that's going to help bring us revenue more top line revenue overtime and it’s time well as we all know this economy will get better at some point and I think that's when we are – we are positioned right and we are thoughtful about how we are doing this, we think it’s going to help us there as well. So, I think there was balancing factors to think about. Charlie Strauzer – CJS Securities: Great. And I just want to kind of macro question, when you – you maybe get some samples back from your call center etcetera, what are the Small Business customers telling you of the loosening of the first string little bit more, are they thinking about spending more, is it getting harder for them, what the general trend you’re seeing amongst your customer base?

I think as what I said in the prepared comments, I think they are just being exceptionally smart and prudent how they spend, where they spend and again what we are noticing more and more is they are looking for how do we get in keep customers and how do we differentiate ourselves out there and clearly like any company they are also looking for how they lean their structures as best they can. But, I think what we identified – I said in the prepared comments show you exactly where they are at this point. Charlie Strauzer – CJS Securities: Excellent. Thank you very much. Congratulations.

Thank you, Charlie.

Your next question comes from the line of Jamie Clement of Sidoti. Jamie Clement – Sidoti & Company: Good morning.

Hi, Jamie.

Hi, Jamie. Jamie Clement – Sidoti & Company: Lee, as you went through the brand awareness and market research process with some outside consultant that you mentioned, I had an increase in marketing spending for your own brand. Can you give us sense of some of things you found out about, a) Deluxe and perception of Deluxe and then, b) the market opportunities for some of these services?

Everybody that’s out there don’t – obviously, first and foremost think that Deluxe is a Check company. And by the way, that’s a wonderful thing for us because we want to obviously stay strong there, but it also can be determent if they don’t understand that there is all these other products and services that we offer. And so, what we – the research that we’ve done is to think about the decision making process Jamie that are Small Business owner goes through. And what we are trying to do is to bring ourselves forward in the awareness and interest area before we go further downstream into a… I am going to make a purchase of form or I am going to make a web services purchase or a logo purchase or whatever. So we are trying to bring the power of the Deluxe brand earlier in the awareness cycle for a Small Business owner. And then, we’ve done a lot of research and I’m always asked are we going to be on TV. On average what we’ve done through our research is more small businesses to radio and specific programs, and then hone in online to a lot of the areas that we talked about, show up at GrowCo type of events. So it’s a very robust barco process about all the different medias and places that we think we need to show up in a much deeper and richer way. So, I think that’s the process that we’ve gone through. We’ve always done some smaller testing in certain areas, but this is a more robust really thoughtful and positioned approach with all of the new, that will become on the new products and services that are out there and then how we target in segment more and more for our customers and we’re just getting better and better at the analytics and the understanding and that’s all we’ve been to how we’ve thought to this brand awareness approach. Jamie Clement – Sidoti & Company: Okay. And, you know, that sounds pretty tiny consistent with the message that you guys have given over the last couple of quarters. So, I mean, it’s sort of fair to say that you know, the research that you’ve done can only supports your own interpretation of what the market perceptions you guys is right?

Absolutely. It’s so fun you know, is out in the quarter when somebody have been to it so fun there, we see people just eyes laid up when they can come with Deluxe and realized that we have a wonderful it’s free to products and services, they can really help them and it’s just and again, what we believe is a more we can get that in front of people earlier on. We think it’s going to help us as they get to their point of purchase decision. Jamie Clement – Sidoti & Company: Okay. Thank you all very much for your time.

Welcome.

Thank you.

Your next question comes from the line of John Kraft with DA Davidson. John Kraft – DA Davidson: Good morning, gentlemen and nice work in the quarter.

Thank you, John.

Thanks John. John Kraft – DA Davidson: I wanted to go back to some of you’ve said, towards the end you’re talking about some of the newer growth to your acquisition and you’ve said it went – the revenues went from 91 million to 120 or 130 and expect in 2010. Was that just like, a total of all the recent acquisitions or where you’re going to putting in that category?

Again, John. What, you know, we’ve been asked more and more to can we help clarify it, what’s included in all these new Business Services based, which is if I think of the non perhaps [ph] non-check. And so in the 10-K file was the end of for 2009 we’re reported a $91 million number what we’re trying to do John as to give and indication for all of the segments again most of that obviously is in the Small Business Services but how much revenue to expect to generate that’s in that new business services area and that’s the 120 to 130. John Kraft – DA Davidson: That’s a non-paper stuff. And then just a couple of housekeeping items Terry the balance on the line as of today. Can you give us that?

We did – as we mentioned we did drive that kind of facility for the acquisition of Custom Direct so that represents the, the substantial portion of our outstanding borrowings today. John Kraft – DA Davidson: So most of that is just taken up now?

No, when the credit facility had nothing drawn on it… John Kraft – DA Davidson: 200 right, so you now have about 100 or so?

200 million capacity and then drew $98 million when we bought, when we bought Custom Direct to couple of weeks ago, so… John Kraft – DA Davidson: Okay. So, that’s about the balance.

That’s correct. John Kraft – DA Davidson: And then the – just specific to that pending RFP that you’re working on is there a date when that contract is due that you can give us sort of a time line up when that might be – you might have an answer?

I expect later this year. John with already sometimes they delay on. John Kraft – DA Davidson: Sure.

Give you a specific line and why would have comeback or the best I can give you as it will absolutely be this year and it will be, I think it will be the second half this year will not get to a decision. John Kraft – DA Davidson: Okay. And then just to the last just on the SunTrust is officially onboard at very beginning of Q3 or they are going to hit the tail in Q2?

No, it will be a second half of the year and we are looking for obviously getting started with our new partner here. John Kraft – DA Davidson: Sure. Thanks, guys. Congrats again.

Welcome John.

Your next question comes from the line of Mike Hamilton of RBC. Mike Hamilton – RBC Capital Markets: Good morning and thank you.

Hi, Mike

Hi, Mike. Michael Hamilton – RBC Capital Markets: I would like to come back to just – perhaps I missed it but in some of the earlier discussion on segment margin I wanted your thoughts on sustainability in the financial institution side of checks. Obviously best margin you have shown in long time in that business and you really are pretty different company when you were driving the kind of margin that you are showing now?

Yes, I know. I will go and take that one, Mike. We feel really good about the margin that we produced in the financial services along with the other two businesses and we do with the lot of the cost reduction initiatives that we have really pushed and delivered on, we feel pretty good about being able to sustain in that low 20% range as a margin in financial services related to the balance of this year. Michael Hamilton – RBC Capital Markets: Congratulations.

Mike something I want you to think about and this is important, it is also important competitively that – we believe we have been very consistent and I would say almost every script if you went back and look at them over the last four, five quarters. I always talk about we continue to work on process improvement and cost reduction specifically in financial services. In this quarter, I mentioned on the call that in the middle of second quarter we are going to introduce several new things in the way that we worked with financial institutions and their consumers on Checks. And so, we believe a lot these actions are, and we work really hard with banks of all sizes to create this offer. Again, we kind of stuck high level in describing that because we believe that competitively we have some things that are going to be powerful here for us. So, that’s how I would think about it Mike and therefore we expect those to gain us benefits as we roll these things out starting in the middle of the second quarter. Michael Hamilton – RBC Capital Markets: Tactically does this offering become a hybrid between Direct and traditional FI?

No. It’s specific to what we are doing with our financial institution partners. Michael Hamilton – RBC Capital Markets: Fair enough. But it’s not designed to be an offering that gives a lower price point to those who desire and who want to do things on their own. In other words, customer who comes in and says I’ll go through the portal on my own, get a little price on Checks, okay.

No, it’s more the way we work with financial institutions. And there is all sorts of reporting both at their end and our end, that’s always being worked and challenged. I’ve said this for years, make people think making a Check is a very simple thing and distributing it. It’s a very tedious and complex process between the financial institutions and the Deluxe. So, that’s more when I am talking about the portal and the benefits it gains the financial institution and the benefits therefore that it also gains with Deluxe. We didn’t do this on our own. We work really hard with the largest mega banks to the smallest community banks and really coming up with and we believe is a better offer for everybody. Michael Hamilton – RBC Capital Markets: So having interface efficiencies?

Yeah. Michael Hamilton – RBC Capital Markets: Okay, fair enough. Couple of detail questions. One the 600,000 restructuring in the quarter, I assume that is actually a million nine, if we add in a million three on insurance proceeds there is an offset. Is that accurate, Terry.

No, I mean, the insurance proceeds are fully independent and separate, there is a smaller restructuring actions that we took in the company and we had some partial offsets with some adjustments to pass the actions, but that is really nothing too significant that way going forward, the plans will be adjusted for more around the transaction related cost with Custom Direct, but the insurance that has really nothing to do with that. Michael Hamilton – RBC Capital Markets: So that was not booked in SG&A the insurance proceeds?

The insurance proceed, the insurance gain was booked in SG&A, yes, but it was not part of the restructuring number. Michael Hamilton – RBC Capital Markets: I will catch up with you offline and my maths doesn’t work there. One last one and Terry, on your 11 million amortization, is that incremental on 2010 just to be sure I understand?

That is strictly, that is strictly for 2010 all incremental and all directly associated with the acquisition accounting for Custom Direct. Michael Hamilton – RBC Capital Markets: Thanks very much. That’s it from me and again I, echo everyone else is congratulations.

Thank you, Mike.

Thanks Mike.

Your next question comes from the line of Bishop Cheen from Wells Fargo. Dennis Xavier – Wells Fargo: Good morning, this is Dennis Xavier [ph] calling in for Bishop. I just want to talk about the capital structure for a second. You have some bonds maturing in 2012 and 2013 or 2014 and I believe. And I just want to see what you thought of the high yield market right would you look to issue more debt at that guaranteed charge just wanted to get your thought there?

We just completed our work around the credit facility which is been our focus for the past as several months and our next focused area also again the 2012 so, we haven’t really come out in state articulated in strategy around that yet, but nevertheless we certainly are in the lot of communications with banks looking at options and ideas around how and also ramped when would be the optimal time to address that maturity. Dennis Xavier – Wells Fargo: Okay. Are you kept in anyway on that guarantee trench or do you have some flexibility there?

Can you explain what’s do you mean about the guarantee trench? Dennis Xavier – Wells Fargo: I am sorry through the seven within 3.8 [ph] debt through that level are you captured in terms the amount of debt you can’t guarantee best on the credit facility or in the debenture or anything like that?

This is Jeff there the 20.15 [ph] you have a security but not necessarily for upstream guarantees – they have a few guarantees. They already do have a few guarantees in 20.15 [ph]. Dennis Xavier – Wells Fargo: Okay. That’s all I have, thanks.

Welcome Dennis.

Your next question comes from the line of (inaudible) of Renaissance Technology.

Hey, good morning, guys.

Good morning.

I just had a couple of follow-up question on financial institutions. First, how big an impact of their contract settlement amortization have on pricing? And then the second question was, if you guys can talk a little bit about how big their Cornerstone acquisition was? I know you said it was small but I was curious what kind of revenue impact it had?

Let me take the Cornerstone, I’ll let Terry circle back on the financial institution question. It's small acquisition here. They primarily have been a partner with us for a little over a year now. And we partnered in the space with several others over last probably three years and finally found somebody that we think really matches what we like in terms of more analytics driven offers for primarily the community bank market in this space. And so, I think of it as very small right now, but we also believe this gives us strength and working with financial institutions, many of the ones we are working with or even saying to us, we like this, we'd like to have the more robust Deluxe name behind it, so why don’t you just buy these guys. So, obviously that was something that was always on our radar to think is that something that makes sense and we are just able to get that done. We do like the scale potential for this but right now I just think of it is a very small acquisition.

Then I go ahead and address the contract, amortization, that typically with our contract settlements and amortization and those, we typically disclose those actual numbers when they have been very, very large and very disruptive to trending and margins and such. In this case here, it was little more than the normal noise we would from quarter-to-quarter but certainly not of the magnitude that would disrupt revenue trending or margin trending. And I believe as I answered from a previous question, we expect to get those financial services margins will hold pretty steady throughout the balance of the year kind of in the low 20% range even without this amount coming through, so not material from a trending standpoint.

Thanks a lot guys.

You are welcome.

Thanks.

That concludes the Q&A session. I’d now like to turn the call back over to Lee.

Okay. I’ll just close by thanking everybody for your participation and we’ve got some new questions in here today from people, so I really appreciate that. So we’re going to get back to work here, and again we look forward to having another positive progress update on our next earnings call.

Thank you, Lee. This is a reminder that a replay of this call will be available until May 7th by dialing 888-286-8010. When instructed, provide the access code 12038330. The accompanying slides are archived in the News and Investor Relations section of Deluxe’s website at www.deluxe.com. Again, thank you for joining us, and have a good morning or good afternoon.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.