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

Charles Strauzer – CJS Securities John Kraft – D.A. Davidson Jamie Clement – Sidoti

Good day, ladies and gentlemen. And welcome to the second quarter 2010 Deluxe Corporation earnings conference call. My name is Eric. I'll be your audio coordinator for today. At this time, all participates are in a listen-only mode and we will facilitate the question-and-answer session at end of the presentation. (Operator instructions) As a reminder, the conference is being recorded for replay purposes. I would now like to turn your presentation over to Mr. Jeff Johnson, Treasurer, Vice President, Investor Relations. Please proceed.

Thank you, Eric. Welcome to Deluxe Corporation's 2010 second 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 this time, the operator will instruct you how to ask a question. In accordance 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 31, 2009. 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. Deluxe delivered a very strong quarter. We reported revenue and adjusted earnings per share above the high-end of our ranges. Revenue grew overall approximately 5% with all three segments delivering strong revenue and declined less than 1%, excluding the acquisition of Custom Direct. We are especially pleased that Small Business Services revenue grew slightly over the prior year and for the first time, since the fourth quarter of 2006. Checks and forms both performed well against our expectations. And new business services revenues grew more than 50% over the prior year. We had solid execution against our cost reduction program and spending controls, which along with strong revenue drove better than expected EPS. Adjusted diluted EPS from continuing operations grew 19% over the prior year and we generated strong operating cash flow. As indicated on our last call, in the quarter, we began investing in brand awareness and in organic technology initiatives to help better position our new business services offerings, and generate future revenue growth. At the same time, we are continuing our process improvements and cost reductions, while driving strong operating cash flow, as we continue to transform Deluxe and execute our turnaround plan. I am also pleased that we have hired a permanent leader for our Small Business Services segment. Dave Hemler brings to Deluxe more than 20 years of experience with specific expertise in small business. As President of Best Buy for business, he led the first year of profitable growth for that business in its history. He also turned around Microsoft's lowest-performing subsidiary to its fastest growing, in his role as President of Microsoft Canada. So welcome, Dave, to Deluxe. At the same time, I want to thank Joanne McGowan, a partner with Aveus, who will continue to support Deluxe for a period of time to transition Dave and work other key growth initiatives. For her leadership and the many significant contributions she has made to Deluxe in her interim role as our Small Business Services segment leader. Thank you, Joanne for your simply outstanding leadership and commitment. In a few minutes, I will discuss more details around our recent progress and the next steps, but first Terry will cover our financial performance.

Thanks, Lee. Earlier today, we reported diluted earnings per share for the second quarter of $0.65, which included $0.03 of restructuring and transaction-related costs, primarily associated with the CDI acquisition. Excluding the restructuring-related charges, adjusted EPS of $0.68 was $0.03 favorable to the upper end of our previous outlook and 19% higher than the $0.57 reported in the second quarter of 2009. Revenue for the first quarter came in at $348 million, which was at above the top end of our previous outlook and up approximately 5% from 2009. Consolidated revenue was down less than 1%, excluding the impact of the CDI acquisition. All three of our business segments delivered solid revenue. Small Businesses Services revenue of $193 million was up about 1% versus 2009. Revenue was unfavorably impacted by continued economic weakness, but business services showed solid growth. Financial Services revenue of $98 million was down about 2% versus the second 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 both last October's and this May's price increases, and the amortization of a past contract settlement. Direct Checks revenue totaled $57 million, up 43% on a year-over-year basis due to the CDI acquisition. Excluding the impact of the acquisition, Direct Checks revenue was down only around 3.5% due to strong reorder performance. Gross margin for the quarter was 65% of revenue, up 3.2 percentage points from 2009. Benefits from improvements in manufacturing productivity, plant consolidation, delivery initiatives and product mix were partly offset by increased delivery rates. SG&A expense increased $9 million in the quarter and was 46.2% of revenue, compared to 45.7% in the same period last year. Increased SG&A associated with acquisitions and the acceleration…

Thank you, Terry. I'll 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 perspective on what we hope to accomplish in the second half of 2010. Here is an update on our revenue expansion improvement initiatives and our key enablers. We continue to make progress with solid revenue results again in the second quarter. So we are optimistic our focus and actions are beginning to take hold. Our four key enablers to driving revenue growth again include strengthening our products and services portfolio, customers, technology and brand awareness and positioning. We made progress in the second quarter in all four enablers. Here are some examples. We grew new business services revenue more than 50% over the prior year quarter, improved our internet customer experience and added new distributors and dealers. In addition to organic initiatives to improve our products and services, we continued to assess potential small to medium-sized acquisition that complement our large customer bases with a focus on Small Business Services and new offerings aimed at helping financial institutions grow their core deposits. We completed more granular and targeted small business customer segmentation research that we will begin market testing in the third quarter. We extended investments in technology on new service offers that will drive over time to all offers having the same customer look and feel. We also accelerated our brand awareness and positioning through advertisements in network, national public and commercial radio and in online media, including CNN.com, entrepreneur.com, fastcompany.com, time.com, newsweek.com and others. We kicked off project REV by selecting nine small businesses to participate in our year-long Deluxe-sponsored marketing lab, designed to build marketing expertise for these small businesses. Over the balance of the…

Thank you. (Operator Instructions) Your first question comes from the line of Charles Strauzer with CJS Securities. Please proceed. Charles Strauzer – CJS Securities: Hi, good morning.

Hi, Charlie.

Hi, Charlie. Charles Strauzer – CJS Securities: Lee, just a quick question for you, when you look at the traction you are making on the business service side income on non-track businesses. What are the ones that really stand out as the ones that are driving more growth than others and what are the areas that you think you might need to make some tuck-ins and kind of bolster the ones that are not performing as well as you thought.

We are really doing well on all of the ones I mentioned. So web services and logo and the payroll services are probably three that stick out. The way I would look at what we're trying to do from a potential tuck-in standpoint is how do we get stronger at – again, the areas that allow our small business customers to get and keep customers? So if you think about what we're trying to do is, how do we help them with growing revenue? Either growing revenue through expanding the capabilities, they have already with customers that are in their full so to speak or attracting new customers. So a lot of what we're trying to do is bring those all together, again as I mention, get the same look and feel to all of the offers over time and then how do we really robustly continue to target more on that marketing services around getting key customers. So those would be the areas that I would look at in that space and then as we deal with the Cornerstone acquisition, we’re just trying to make sure that as you look at that core deposit stream and the focus that banks have in growing their core deposits, how do we find opportunities within there that seem to make sense, like – like our Cornerstone acquisition, to really, you know, allow us to help – scale capabilities that we don't have, or technologies that we don't have that really allow us to round out the offers for – for our FI clients. So I think that's the best way to think about it. Charles Strauzer – CJS Securities: And when you talk about kind of your going to small business end user and saying to them, look, we can provide you can a whole suite of services now. How is the pitch being made? Are they being made more on an outbound basis from your call centers or is that one that calling you to buy one or two products or services and they are trying to be upsold? Can you walk us through a little bit of the process there?

Yeah, Charlie, that's a great question. We're right now continuing to mention in the prepared comments to get better and better at how we do this every day, and every month and so on. And the way we're – what we're really trying to do is obviously first and foremost, you know, reach them through the online world and if we can do that and make the offers as simple as we possibly can over that media, that's the first and foremost initiative. But we also are extremely focused on improving the efficiency of our – the way we provide our personalized customer experience through our inbound and outbound call center agents that we have. And we're training people and for this test that I mentioned, we're going to do – this direct response test that will start here in the quarter, we are also training our – our call center agents to be even more targeted at being able to sell those – those – I'll use the generic term web-based services. So when you see these ads come out, you'll see they are much more targeted at the services center base. And so we're going to – we’re training up across the line to be able to able to – not only hit them through through the online world but they'll also be able to hit them through the – both the inbound and the call center agents. Charles Strauzer – CJS Securities: Excellent. Thank you very much, Lee.

Your next question comes from the line of John Kraft with D.A. Davidson. Please proceed. John Kraft – D.A. Davidson: Good morning, guys, and congrats on the progress.

Thank you, John.

Thank you, John. John Kraft – D.A. Davidson: Just wanted to go first back to the lost client and the termination fee there, judging from your guidance there, it looks like lost revenue per quarter's run rate is about $4 million. Is that fair?

Yeah. That's about right. John Kraft – D.A. Davidson: Okay. But you said that SunTrust would more than offset that?

Yes. John Kraft – D.A. Davidson: And the logic for them to move to the competitive reasons was economical. Would it come down to price or was there more to that and I'm assuming it was a dual force contract there for a while. Was there an RFP to both of you?

The way I would look at it is there was a – the other provider has a significantly larger share and they just decided look, running two vendors with a small share just doesn't make sense. Again, as I said from an economic standpoint and how they are looking at and consolidating and what they want to do from their vendor perspective, and again, what I would tell you is that it is hard for us to take the loss, especially when they have told us that they have done a good job. But, again, it's very logical and very obvious with just a very small amount of the revenue stream coming through that they would do something like this. John Kraft – D.A. Davidson: Sure. No, that's fair. And then Terry, you mentioned that – sort of the general declines in check usage was about 8% now. Is that a pretty good number going forward? It has kind of bounced around a bit?

It has – excuse me – it has bounced around a little bit, but, you know, from an outlook perspective. That is kind of the number that we are going with and the number that we have contemplated in the number we provided. So whether or not how permanent that becomes or how long it shows up at that rate, we don't know the answer to that yet, but certainly in terms of the outlook for the balance of 2010, that's where we're looking. John Kraft – D.A. Davidson: Okay. Fair. And then, I'm just going to try this. Last year, it seems to me about this time, you guys provided some – at least directional outlook comments on the out year. And, you know, I guess maybe last year was a special situation but any thoughts of sort of providing some directional commentary in 2011?

No. We're not prepared yet, John, to do that. I think the way to think about it is just given – we're starting to get a little more certainty, I think the whole roll, little more clarity here and all of a sudden taking a step back. So I think we're just being prudent at this point in time. And, you know, in terms of what we're doing for the balance of the year in terms of the approach we take in the forecast and no, we're not planning at this point in time – at this point in time to say anything about 2011 specifically. John Kraft – D.A. Davidson: Okay. And then Lee, while I have got you, this last question, a bigger-picture question, specifically on this – this small business lab, this pilot project REV. How do you – what do you think this looks like in a couple of years from now? I mean, I guess, maybe you could comment a little bit about the revenue model in particular?

Well, all we're – specific to project REV, what we're trying to do as I met all of these nine small business owners and they are terrific people. We had a three-day session with them in the quarter. And they are from all parts of the United States and all different types of small businesses and what we're trying to do is partner them up with a Deluxe person and all of the tools and then listen to their ideas and bring the marketing programs and initiatives and services to them and the printed capability that we have as well. And what we clearly expect to get – get from it is, once we test and learn, test and learn and we feel it's a broad enough geographic region and a broad enough small business – type of small business reach. That we're going to learn a lot that helps us with all of the research and work that we have really stepped up over the last three to six months, to be able to get more focused and then back to kind of Charlie’s question allow us to target more and more where we can scale revenue growth as we move forward. So that's the way to think about it. John Kraft – D.A. Davidson: Okay. Good enough. Thanks, guys.

You're welcome, John.

(Operator instructions). Your next question comes from the line of Jamie Clement with Sidoti. Please proceed. Jamie Clement – Sidoti: Good morning, gentlemen.

Hi, Jamie.

Hi, Jamie. Jamie Clement – Sidoti: Lee, a follow-up question to some of Charlie’s, as you market the – you know, the new Deluxe platform and all that you have built, I know that, you know, going back as – you know, when you were building up some of these businesses and getting product lines on the same systems and all of that, you know, one of the things you talked about was the – you know, the ability to, you know, cross sell some of the web services to existing print customers and vice versa. Is there with the worth the market research that you have done and with what you have seen over the last couple of quarters, can you talk a little bit about the nuances of the strategy of cross selling versus kind of the overall market strategy?

We believe that there is a clear continuing opportunity – we're already cross selling today from the use of the core Deluxe print world – in to the new Deluxe services world. And we're getting better and better and testing and learning again on where to find our customers and when to bring up various offers. And – and, again, a lot of my comments, Jamie around that how we're really granularly getting at the segmentation of our small business customers is teaching us where do we then target a cross-sell opportunity. And what product or what service do we start that cross-sell opportunity with? And then what is kind of the next-best product or service and so on and so forth. And rather than going out and saying – you know, whoever calls in, we just try to hit them with the same, the same stuff. So it's incredible how much more knowledge we have learned and how we're going to again continue to test and learn on that. So but the bottomline, Jamie, is we clearly expect that there is more cross-sell, up-sell opportunities, and the more we bring all of these offers together, allow them to have the same customer look and feel… Jamie Clement – Sidoti: Yes.

…: Jamie Clement – Sidoti: Lee, just changing gears a little bit. It sounded like going back to your fourth quarter conference call that your number of orders on the printed product side, that was around the time and maybe it was in the month of December. I don't specifically remember, maybe that stabilized a bit and you maybe started seeing a little bit of a lift, but at that time and I believe on your first quarter call, you were still talking about the size of the order and in certain cases the business mix still being pressured. I think – Here you talked about revenue per order coming up. Am I thinking about the timeline, right? Like in other words, number of orders starting to come back maybe six months ago, but, maybe the mix not being, quite, what it was during the second quarter here where it's better? Is that right?

I don't know the exact timing. Terry is looking at it. Jamie Clement – Sidoti: I don't know the exact time, but it seems like orders were coming back, but were smaller and now they are kind of getting – At least trending more towards what you’ve seen in prior years? I mean, is that an accurate statement or?

It has stabilized more. We have not gotten back to levels that we were. Jamie Clement – Sidoti: Of course not, of course not. But at least, you are not facing the same kind – At least in the numbers it doesn’t seems like you are facing same kind of pressure than you were facing in three quarters ago.

One thing to contribute positively, is we have taken some price increases in parts of each of the three segments and that certainly has contributed to the revenue per order trending that we're seeing right now. Jamie Clement – Sidoti: Sure. But, Terry, I just would assume the ability to take those price increases. Obviously, it says something about this future customer base versus where it was maybe nine months ago, right?

That's fair. Jamie Clement – Sidoti: Okay. Thanks very much.

Ladies and gentlemen, we have no more questions in queue at this time. I would like to turn the call over to Lee Schram for closing remarks.

Thanks. I’d just like to thank everybody for their participation today and again for the questions. As said before, we're now going to get back to work and we look forward to providing another positive progress report on our next earnings call.

Thank you, Lee. This is a reminder that a replay of this call will be available until August 5, by dialing 888-86-8010. When instructed provide the access code, 14755302. 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, have a good afternoon.

Ladies and gentlemen, thank you for your participation in today's conference. In concludes our presentation. You may now disconnect, and have a good day.