Good day, ladies and gentlemen, and welcome the Quarter 1 2014 Deluxe Corporation Earnings Conference Call. My name is Tracy, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And I would now like to turn the call over to Ed Merritt, Treasurer and Vice President of Investor Relations. Please proceed, sir.

Thank you, Tracy. And welcome, everyone, to Deluxe Corporation's First Quarter 2014 Earnings Call. I'm 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 Executive Officer. At the conclusion of today's prepared remarks, Lee, Terry and I will take questions from analysts. 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. 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 press release that we issued this morning as well as in the company's Form 10-K for the year ended December 31, 2013. The financial and statistical information that we will be reviewing 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. This information was also furnished to the SEC on Form 8-K filed by the company this morning. Any references to 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, Ed, and good morning, everyone. In spite of a challenging severe winter weather season and continued sluggish economy, Deluxe delivered an outstanding quarter, hitting on all cylinders to start the year. We reported revenue and adjusted earnings per share above the high end of our outlook. Revenue grew 5% over the prior year quarter, driven by Small Business Services growth of almost 9%. We also saw over 2% revenue growth in Financial Services, which now marks the first time this segment has achieved 3 consecutive quarters of revenue growth ever. Marketing solutions and other services revenues grew 21% over the prior year and represented 22% of total first quarter revenue. Adjusted diluted earnings per share grew 7.7% over the prior year. We generated strong operating cash flow of $73 million. And we were not drawn on our credit facility during the quarter, increasing our balance sheet cash position of $20 million from last December. We also repurchased $32 million of common shares 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 delivered on our cost reduction expectations for the quarter. Further, we added a new board member, Tom Reddin, who adds deep development and marketing of digital services and brand management expertise, all of which are central components of our growth strategy. 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 first quarter of $0.93, which included $0.05 per share for restructuring-related charges. Excluding these costs, adjusted EPS of $0.98 exceeded the upper end of our previous outlook and was 7.7% higher than the $0.91 reported in the first quarter of 2013. The restructuring-related charges are primarily for infrastructure consolidations and employee severance. Revenue for the quarter came in at $407 million, growing 5% over last year. Small Business Services revenue of $270 million grew 8.7% versus last year with approximately 6% growth in the quarter, excluding primarily the VerticalResponse acquisition from last year. While we continue to operate in a sluggish economic environment, we delivered growth in marketing solutions and other services, checks and in our online, Safeguard distributor and dealer channels. SBS revenue also benefited from price increases implemented early in the quarter. Financial Services revenue of $89 million grew 2.2% versus the first quarter of last year and would have declined about 4%, excluding recent acquisitions. Price increases, higher marketing and other services revenue and revenue from HSBC more than offset the impact of lower check orders. Direct Checks revenue of $48 million was down 7.9% on a year-over-year basis, but ended ahead of our expectations. From a product revenue perspective, checks were $222 million, representing 55% of total revenue. Business products were $96 million or 23% of total revenue. And marketing solutions and other services were $89 million, which was 22% of total revenue. Gross margin for the quarter was 64.4% of revenue, which was down 1.2 points from 2013. 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 increased $2.7 million in the quarter…

Thank you, Terry. I will continue my comments with an update on our overall focus, and then highlight progress in each of our 3 segments. I will also include throughout a perspective on what we hope to accomplish during the balance of 2014. Our primary focus in 2014 continues to be profitable revenue growth and increasing the mix of marketing solutions and other services revenues towards our goal of 40% by 2018. We have created more differentiated technology check offers through investments in automated flat packaging, digital printing, high security checks and online portals and dashboards. We also have significant growth opportunities 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 have strengthened our channels in Small Business to include financial institutions, online, retail, wholesale, 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 that a small business needs to market and operate their business and helping small- to mid-sized 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 first quarter right in line with our expectations in revenue with mix in the 4 subcategories basically in line with our expectations. First, small business marketing is expected to represent approximately 40% in 2014 with expected growth in the mid-teens this year. We saw solid growth in the first quarter in the Web-to-print space as we cross-sold to our customer base and added new customers through distributors, dealers and major accounts. We also saw very strong double-digit…

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

Could you add a little bit more color on the new large check customer win that you expect to start in Q3? Is this a regional bank or a national bank?

I'm going to leave it as a large financial institution, Charlie, until we get done with the contract, until we can actually put the name or the logo out there.

Got it. But you anticipate maybe, I mean, some more information maybe on the next call?

Yes.

Very good. And then you talked about a growing portfolio of services to small business customers. And obviously, you've been adding some new things like Destination Rewards recently. When you look at the portfolio today, where do you think you need to either expand or add in certain areas to kind of get the portfolio a little bit more complete?

I think, Charlie, let me split it into the 2 largest segments. So think of it for Small Business Services, one of the comments I made about what we're trying to do or focus for 2014 is to really bring the brand and align the brand and the awareness of all the offers that we have there with this, what we call an integrated technology customer experience. So our focus is on bringing all of those offers that we've either organically developed or acquisitively done over the last several years and bring them into a simpler, more intuitive offer for our customer base. So it's less about adding capability there and new things, it's more about adding technology capabilities that allow us to integrate those offers and make those suites of offers better for our customers. It doesn't mean we won't continue to invest and look for other things that make sense as far as new services. But the focus is on getting those to be more intuitive and effective for our customers. Now shifting to the Financial Services space, we do see more opportunities to -- the primary focus is clearly in the customer activation and retention and acquisition space. We have added offers there. We're going to continue to look for other services offers that we believe can add capabilities there. The good news that we have right now, Charlie, is that more of those are now coming in the form of organically looking at capabilities that we've had. We've got a development team now in that organization who is starting to not only come up with enhancements to offers likes SwitchAgent for one, and then our tablet solution for Banker's Dashboard. But they're also looking at, along with my product management folks in that segment, for other offers and other services that can add to that customer acquisition space. So I would think there's more opportunity, Charlie, to bring more new technologies and services to that segment right now in terms of how we're thinking.

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

Could you give us some idea of what components of marketing services are driving the largest year-over-year dollar increases in revenue?

Yes. If we go kind of down the 4 categories, we had a super quarter in Q1 in the small business market. And not only do we have again strong growth, Randy, in the Web-to-print space, but we had a really strong quarter in the retail marketing solutions. And as I've mentioned in my prepared comments, we expect that to grow even more as the rest of the year unfolds because we're introducing new e-commerce capabilities and technologies there. And within the kind of the Web services space, the largest areas for expansion are in Web -- that Web hosting and the migrations that we're doing and in the email marketing space would probably be the top 2. But there's also opportunity in our search engine marketing and search engine optimization space. And we're adding customers, as I mentioned, in payroll services as well. But probably the biggest 2 would be more of the Web hosting and the email marketing space. And then we're adding fraud -- services in the fraud space. I mentioned a comment about e-checks. We're pleased with our progress. We finally got kind of the core working better, the call center working better. We're now introducing it into some of our other channels. We've also got a couple of more exciting opportunities. I'm going to hold on making any further comments yet until we see how some of those things play out in the quarter. But what I'll tease you with right now, Randy, is they're in check areas that we're not in today. So it doesn't do anything on the question of whether we would cannibalize anything on the paper check side with what we're doing with the e-check side. So we're excited about it. But I want to leave it at that until we get a little deeper into that into the quarter. And then finally, yes, we absolutely expect the scale, as we've mentioned, the Destination Rewards. We picked up some new accounts that we were aware of when the acquisition was done in December and the good news there, Randy, is those are starting to ramp already in the first quarter. And we expect to see further ramps as we move through the year. So the great news with that whole portfolio, Randy, is that we're not dependent on any one area or any one offer. Yes, some are going to grow faster than others, we believe. But the depth and the breadth of what we're offering -- our offerings there, we think, is going to really help us as we move forward.

And just as a reminder to you, Randy, the 2 categories that right now in the first quarter are still benefiting from acquisitions are the Web services with VerticalResponse from last year, and then the other FI services, which is really the Destination Rewards from the end of last year.

All right. I'm looking forward to hearing more about the check opportunity in the future. For Destination Rewards, is there anything -- any particular company that you can name?

We don't have the liberty to name. A couple of the names there are -- you would know them in 30 seconds. So we're just at a point where we're not able to disclose who those names are at this point. But we're working to get their acknowledgment or support to be able to do that. And I think when you see who they are and we can talk about them more, they'll add more confidence on what we're doing in that whole rewards and loyalty space as we move forward. So hopefully, as we -- I can't say it will be exactly on the next call, Randy, but as we get -- we work these in a little bit more and get the scale and work with these customers, we'll be able to get some of the names released.

Your next question comes from the line of Tim Klasell from Northland Securities.

So my first question is just really on the large financial institution that you signed on the check side. Has that contract been signed and you just don't have permission to go public with it? Or are you still in the negotiation phase?

We are finalizing it. We've been informed, it is our deal [ph], we are finalizing the contract terms. I don't expect any issues with getting the contract signed. But until I get the contract signed, both parties have decided it's best not to release the name. But it's going to happen. I'm confident in that. I just got to get the final Ps and Ts done, and then we can get it announced.

Okay, good. And we're getting some leverage on the sales and marketing side. And I'm sort of focusing in on Safeguard. Is Safeguard all incremental as Safeguard grows? Or are you moving maybe some business into that channel as it's just more efficient?

No. Again one of the great bedrocks, I think, that we have in terms of our differentiation is our channels. And so the goal, Tim, as we told the market is for us to grow in our financial institution channel, in our dealer channels, our partners that we have, our major accounts, our online channels, and then also in the distributor channel. So are we going to look -- we're always looking at where we get the lowest cost to acquire across all those channels and obviously targeting to get more efficient as we do that. But no, we're not moving something from one -- a program or an offer from one into another, and that includes what we're doing in Safeguard. We're trying actually to get all of them to grow.

In the Safeguard channel, the nice thing about that, too, is that our distributors are out there still growing through acquisitions, which ultimately benefits us. But we're also able to take some of our offers that originated in other parts of the business like our PsPrint Web-to-print offers. And we're able to take those to our Safeguard distributors and give them something else to sell. So we're seeing some really nice traction on both of those fronts.

Okay, great. And then on the brand awareness campaign, I mean, the results there look pretty fantastic from the traffic. Can you share with us anything about the monetization of that? Or is it just too early to be able to tell?

I think it's too early. I'm trying to give a little bit more color, Tim. We ran a national campaign, kind of just did it for 6 weeks at a time. We did 3 of them last year, as we reported. And what we're trying to do this year is go into specific targeted cities and do the whole campaign but do it at a more intensive spend levels and different spend levels. And then although it includes television, it includes online digital, it includes print, trying to change and modify as we do them, we're looking to get smarter and smarter at this. I mean, we were pleased with what we did last year. We're pleased with what we're doing now. But we want to get smarter and smarter on this. And that's the approach we're taking and we're committed to doing that as the balance of the year unfolds. And yes, so far, it's been very encouraging to see the awareness improve. We're also going to do a couple of surveys this year. In fact, we just finalized our thinking on that over the last couple of weeks. And once we get a little further into this, I'll describe how we're going to do that. And obviously, we hope to get some learnings for how the awareness is improving and again use that to allow us to continue to target those small businesses and the segments of small business to allow us to improve our revenue growth as we go forward.

Thank you for your question, Tim. I would now like to turn the call over to Lee Schram.

I just like to thank everybody for your participation and thank you for the questions today. And I want to leave you with 3 summary thoughts. First, we delivered an outstanding first quarter to start the year. Second, marketing solutions and other services revenue grew 21% and the mix improved towards our goal of 25% this year and 40% in 2018. And we also believe that we established a solid baseline first quarter to propel us towards revenue growth again in 2014 for our fifth consecutive year. We're going to roll up our sleeves, get back to work. And we look forward to providing another positive progress report on our next earnings call. And I'm going to turn it back to Ed for some closing housekeeping comments.

Thanks, Lee. Before we conclude today's call, I'd like to mention that Deluxe management will be participating in a few upcoming events in the second quarter, where you can hear more about our transformation. On May 7, we'll be in the Chicago at the R.W. Baird Growth Stock Conference. On May 13, we'll be in New York at the Wedbush Technology Conference. On June 3, we'll be in New York at the Stephens Spring Investment Conference. And also on June 3, we'll be in San Francisco at the Bank of America Merrill Lynch Technology Conference. Thank you for joining us. And that concludes the Deluxe First Quarter 2013 Earnings Call.

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