Good day, ladies and gentlemen. Welcome to the Second Quarter 2013 Deluxe Corporation Earnings Conference Call. My name is Dave. I'll be your operator for today. [Operator Instructions] As a reminder, the call is being recorded for replay purposes. I'd now like to turn the call over to Mr. Terry Peterson, Chief Financial Officer. Please proceed, sir.

Thank you, Dave. Welcome to Deluxe Corporation's 2013 Second Quarter Earnings Call. I'm Terry Peterson, Deluxe's Chief Financial Officer. Joining me on the call today is Lee Schram, Deluxe's Chief Executive Officer. Lee 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 the 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, 2012. 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 on our Investor Relations website at deluxe.com/investor, and it was furnished to the SEC on 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.

Thank you, Terry, and good morning, everyone. Deluxe delivered another very strong quarter, and we are well positioned as we enter the second half of the year to grow revenue for the year in the mid-single digits, despite a continued sluggish economic environment. We reported revenue in the second quarter at the upper end of our outlook, and earnings per share far exceeded the high end of our outlook. Revenue grew about 3% over the prior year quarter. Small Business Services revenue grew 8%. Checks and forms performed well, and marketing solutions and other services revenues grew 21% over the prior year. Adjusted diluted earnings per share grew 13% over prior year. We generated solid operating cash flow, and we were not drawn on our credit facility during the quarter, increasing our balance sheet cash position $7 million from last December. We also repurchased $19 million in shares in the quarter and now, $32 million year-to-date. We acquired VerticalResponse in June to significantly improve our e-mail marketing capability and fill a gap we believe we had in our offerings in the promote and market services space for small businesses. We also recently announced an exciting partnership with VerifyValid in the secure online payment market. We continued our new brand awareness campaign to help better position our products and services offerings and drive future revenue growth. We also advanced process improvements and exceeded our cost reduction commitment in the quarter. In a few minutes, I will discuss more details around our recent progress and 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 $0.94, which included losses of $0.02 per share from restructuring and transaction-related costs. Excluding these costs, adjusted EPS of $0.96 far exceeded the upper end of our outlook and was 13% higher than the $0.85 reported in the second quarter of 2012. The restructuring charges are primarily for employee severance and infrastructure consolidations, and the transaction costs are associated with the VerticalResponse acquisition. Revenue for the quarter came in at $381 million and grew 2.8% over last year and almost 2% organically. Small Business Services revenue of $252 million grew 8% versus last year. While we continued to operate in a weak small business economic environment, we delivered growth in marketing solutions and other services, which included the impact of recent acquisitions, accessories and checks revenue. Our online Safeguard distributor, major accounts and dealer channels each reported strong growth in the quarter. Financial Services revenue of $83 million declined 3% versus last year. The impact of lower check orders offset the benefits of price increases and higher marketing solutions and other services revenue. Direct Checks revenue totaled $47 million, which was down 11% on a year-over-year basis. From a products and services revenue perspective, checks were $217 million and represented 57% of total revenue. Business products were $86 million or 22% of total revenue, and marketing solutions and other services were $78 million, which was 21% of total revenue. Gross margin for the quarter was 65% of revenue, which was down 0.6 points from 2012. Less favorable product mix and increased material and delivery rates were only partially offset by benefits from price increases and improvements in manufacturing productivity and delivery initiatives. SG&A expense decreased $3.3 million in the quarter, and was 43.1% of revenue…

Thank you, Terry. I will continue my comments with an update on our key revenue growth area, marketing solutions and other services, including perspectives on our recent VerticalResponse acquisition and insights to date on our new brand awareness campaign. I will then highlight progress in each of our 3 segments, including a perspective on what we hope to accomplish during the balance of 2013. Our primary focus in 2013 continues to be profitable revenue growth and increasing the mix of marketing solutions and other services revenues. The most significant revenue growth opportunities continue to be in marketing solutions and other services. We will continue to assess potential small to medium-sized acquisitions that complement our large customer bases with a focus on marketing solutions and other services. We are adding more products and services to our portfolio and believe our strong, small business channel reach, including financial institutions, online, retail, wholesale, feet-on-the-street distributors, dealers, partners and major accounts, is a differentiator for us in the marketplace. 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 small to midsize financial institutions with customer acquisition, risk management and other value-add services offers. Here is an update on our 4 subcategories framework for marketing solutions and other services. We ended the second quarter right in line with our expectations for revenue and mix in the 4 subcategories basically in line with our expectations. First, small business marketing is expected to represent approximately 41% of revenue in 2013, with expected growth in the upper teens this year. We saw strong double-digit growth in the second quarter in the Web-to-print space as we cross-sold to our customer base and…

[Operator Instructions] And your first question comes from the line of Charlie Strauzer at CJS Securities.

Terry, Lee, if you could just talk a little bit more about margins. I mean, you had a very nice jump in margins in the Small Business segment sequentially from Q1 and nicely up year-over-year. And as we look out to the rest of the year and into next year, what are your expectations for margins in that segment? And are we seeing kind of, like, the bulk of the investment spend in some of the growth initiatives kind of starting to ebb a little bit there?

Thanks for the questions, Charlie. This is Terry, and I'll go ahead and address that. We're very happy with the margins that we really delivered in, actually, all 3 segments this quarter. They were quite strong across the board, but especially strong in Small Business Services, where we did see about a 3-point gain from first quarter and a nice year-over-year increase as well. We do -- the margin that we saw was stronger than, I think, we would expect to see on an ongoing basis. I think as we look at the first quarter to second quarter, we didn't have as much brand awareness campaign spending in the second quarter, and that was -- we planned it that way as well. So we did expect to see that pop up a little bit there. Plus, too, we referenced in our press release and some of the prepared comments there, too, that we did see -- we got a little bit ahead in our cost reduction, so that flowed through. And most of those cost reductions flowed through in the Small Business segment. And we also saw lower costs in some other areas, like the medical costs, and we aren't expecting that favorability will continue. So we do think that it'll bring our margins a little more in line with what we've seen in the past. Still, we really kind of expect over time that Small Business margin to be kind of in that 17% range, 17% to 18%, so in the 17s. That's probably more normal than something closer to the 19% we saw this quarter. So overall, we're, again, managing this business to deliver a stable and comparable margin rate, kind of in the low 20s, for the overall company, maybe just up slightly over time. But we're focused more on delivering increasing margin dollars with profitable revenue growth, not so much a higher margin rate overall. But again, we will see some volatility, especially at a segment level, from quarter-to-quarter.

Well said. That was very helpful. And Lee, maybe you could talk a little bit more kind of bigger picture. Now that you've kind of built out a nice portfolio of offerings in the Small Business, in the marketing services area, as you talk to customers and customers give you feedback, are there pieces that you feel that you're stronger in versus weaker in that you maybe can kind of bolster some of the weaker ones, like you did with the acquisition today -- that you announced today, I mean?

So I think, as we said in the prepared comments, the key for us in doing all our research and all the work we continue to do with Small Business customers, think of it like this. If you're an early in practice, so to speak, small business owner, we know now that they're looking -- once they've funded their small business and once they've come up with their idea, they generally go through a process of wanting to get -- brand themselves and start promoting themselves. So the presence package or the initial package is around logo and Web design, getting them hosted on their website. And then kind of moving up the maturity curve on marketing, as you kind of get more advanced on the Web and then get more advanced in social and then even head on towards wanting to find and get customers through search engine marketing and how you optimize there, and then continuing to move out in how you help manage and guide and handle and manage their marketing expense, an area that we found and we've been looking at very closely is how do we keep more day-to-day contact. So not just do a logo for somebody and put it on anything they want it on, or host their website or work with them on search. We wanted to get to the point where we were working more closely. And we felt -- we call that the promote and market space. And while we have an e-mail marketing offer, we just felt VerticalResponse is just a better offer than what we have. And the customer base. And then where they're going, they've completely revamped their model. I had my development people look very closely at the work they've done, and we've just been really…

Well, clearly, when you've embarked on a path where you've maybe brought in a small company to get you a new leg of the stool, so speak, in the offering portfolio, you've realized that maybe you could find something that can bolster, like with the OrangeSoda acquisition, for instance, where it added on to what you already have there and it kind of turbocharged it. It seems like those are the methodology you've been kind of going down the path of. Are there other pieces that you think that are kind of like that you can turbocharge it a little bit more with some acquisitions?

We're always looking for customer bases that make sense for us. Were looking for technologies. We're looking for process improvements, things that we think can add to our infrastructure. What I would tell you, Charlie, is those are the things that we'll continue to look at as we continue to look for tuck-in acquisitions that make sense for us.

Your next question comes from the line of Randy Hugen at Feltl.

I just wanted to dig in a little bit on the VerifyValid. What does their current customer base look like? And also, what was the decision there on your part to partner versus buy?

The current customer base at this point, Randy, we're just getting started. So we basically -- a lot of things that we do, and whether it was initially what we did in the logo design area or what we initially did in the Web services area, is we try to pilot and test how our various offer is received by our small business or our consumers. And so the VerifyValid is a pilot opportunity that we've now decided is something that is significant enough for us in terms of the initial interest that we decided to form a stronger partnership with VerifyValid. So we're very early stage at this point in time. We're working through all of the ramifications for how we want to do the partnership, and we want to continue to test into that at this point in time. But we thought it was worthy of announcing because we test a lot of different things, and this one was one we just felt was -- it has an opportunity to take off more than other things that we've partnered in. What I would tell you at this point in time, it's just too early to make a decision whether there's an acquisition opportunity with them or in the space in general.

All right. And then on VerticalResponse, you mentioned that you're expecting about $12 million there in revenue for the rest of the year. How much of that was their existing clients versus, I guess, cross-selling into your customer base?

Here's the assumption that we -- that's a good question, Randy. Here's the assumption that we made at this point in time. That's going to mostly come right now from their base of customers because, as I mentioned, this new freemium model is going to come out here in the fourth quarter, and we're getting close to being able to get this out. And that's when we're going to start to work our retail base and then work our wholesale base into that. So think of it as we're kind of investing, completing the investment in the technology and the platform in the third quarter and then kind of kicking that off into the fourth quarter. So we're going to try to be really smart about how we do this. So most of that business is going to be from the current base we have. I would look at the opportunity for scale here, Randy, going forward as more as we head into 2014.

Great. And then on the increase in hosted websites, is there a specific channel that's driving that, or is that really broad-based across the business?

Right now, as we've mentioned on some of our previous calls, we had a number of telco and media company deals that we closed in the second half of 2012, and they all go through this rollout. And they're all different, depending on what the telco wants to do, when they're ready to roll, how many they want to put in. And so we expected it to be lumpy as we kind of work through the year. But it's both on the retail side, but it's more on the wholesale side, just given the fact that a lot of these telcos are now rolling and migrating in. And we get both a base when we migrate and then the new business that comes in. And then in some of the deals, it's all coming from an organic buildup as they never really had a website-focused solution. So I would say it's more wholesale right now, but I don't want to not say we're adding retail because that's happening quite nicely as well.

There are no further questions for you now, gentlemen, so I'd now like to turn the call over to Mr. Lee Schram for closing remarks.

Again, I'd just like to thank everybody for being on the call today and thank Charlie and Randy for their questions. As I normally say, we're going to get back to work, roll up our sleeves, and I and Terry look forward to providing a positive progress report on our next earnings call. And obviously as well, I'm excited about getting Ed Merritt onboard, and we'll have Ed back, and he'll participate in the third quarter call. You'll probably see Ed, Terry and I also out on several visits in investor presentations through the quarter. So with that, I'm going to turn it back to Terry, and he'll go through the wrap-up of the call.

Thank you, Lee. This is a reminder that a replay of this call will be available until August 9 by dialing (888) 286-8010. When instructed, provide the access code 37879348. The accompanying slides are archived in our Investor Relations website at deluxe.com/investor. Again, thank you for joining us, and have a good afternoon.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.