Good day, ladies and gentlemen. And welcome to the Deluxe Corporation Fourth Quarter 2016 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 call is being recorded. I'd now like to turn the call over to Ed Merritt, Deluxe's CFO, Treasurer and Vice President of Investor Relations. You may begin.

Thank you, Michele, and welcome everyone to the Deluxe Corporation's fourth quarter 2016 earnings call. I'm Ed Merritt, Deluxe's Interim Chief Financial Officer, Treasurer and Vice President of Investor Relations. Joining me on today's call is Lee Schram, our Chief Executive Officer. At the conclusion of today's prepared remarks, Lee and I will take questions. I'd 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 projections 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, 2015. Portions of financial and statistical information that will be reviewed during this call are addressed in more 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 or as part of our remarks during this call. Now, I'll turn the call over to Lee.

Thank you, Ed, and good morning, everyone. Deluxe delivered a fourth strong quarter of 2016. Revenue grew almost 4% over the prior year quarter driven by small business services growth of 5% and financial services growth of 4%. Marketing solutions and other services revenues grew 13% over the prior year and represented almost 36% of total fourth quarter revenue. Adjusted diluted earnings per share grew 7% over the prior-year quarter. We generated strong operating cash flow of $319 million for the year and we were drawn $759 million on our credit facility at year end. We repurchased $10 million in common shares in the quarter and $55 million for the year. 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 $50 million cost reduction commitment. On December 30, 2016 as already reported on our January 6 call, we completed the acquisition of FMCG which will further enhance our financial services marketing solutions and other services, products set by adding more data-driven marketing capabilities. In a few minutes I will discuss more details around our recent progress and next steps but first Ed will cover our financial performance.

Thanks Lee. Earlier today we reported diluted earnings per share for the fourth quarter of $1.11 which included debt extinguishment costs of $0.15 per share, acquisition transaction-related costs primarily for the FMCG acquisitions of $0.05 per share and restructuring charges primarily for employee severance of $0.04 per share. Collectively these costs were $0.24 per share. Excluding these costs, adjusted diluted EPS of $1.35 was 7.1% higher than the $1.26 reported in the fourth quarter of 2015. Revenue for the quarter came in $480 million growing 3.6% over last year and over 5% sequentially from last quarter. The growth rate excluding recent acquisitions was about 2%. Small business services revenue of $318 million grew 4.8% versus last year despite a continuing sluggish economic environment. We delivered growth in marketing solutions and other services and from a channel perspective, our online major accounts and dealer channels grew. Financial services revenue of $125 million grew 4.3% versus the fourth quarter of last year. Excluding revenue from acquisitions, financial services growth would have been about 1% per quarter. Higher marketing solutions and other services revenue more than offset the impact of lower check orders and Direct Checks revenue of $36 million was down 7.8% from last year and in line with our expectations. From a product and services revenue perspective, check revenue was $210 million representing 44% of total revenue. Marketing solutions and other services was $173 million or about 36% of total revenue. And forms and accessories were $97 million or about 20% of total revenue. Gross margin for the quarter was 63.2% of revenue and was slightly better than 2015. Higher delivery and material costs were more than offset but benefits of previous price increases and improvements in manufacturing productivity. SG&A expense increased 3.9% in the quarter and as a percent of…

Thank you, Ed. I'll continue my comments with perspective on what we accomplished overall in 2016. Looking ahead to 2017 including framing our four strategic focus areas for the year and review our key revenue growth area, marketing solutions and other services. I will then highlight progress in each of our three segments including a perspective on what we plan to accomplish in 2017. Deluxe grew revenue in 2016 for the seventh consecutive year for the first time in 20 years. We saw continued stability in our core check and product businesses and improved our mix of faster growing marketing solutions and other services revenues to over 33% of total annual revenue. We acquired InkHead, Payce Payroll, Data Support Systems and FMCG to expand opportunities and higher growth marketing solutions and other services. In addition to our strong print leadership, we continue to invest in our brand in digital technology and extending our sales channel reach and in improving our infrastructure. We ended 2016 with 4.4 million small business customers of which approximately 29% of them are MOS customers and now serve approximately 5600 financial institutions. Operating cash flow grew for the 8th straight year allowing us to pay our dividend, repurchase shares refinance our long-term debt and invest in acquisitions. We recognize that there is a tremendous amount of work to do but we made great strides in 2016. As we enter 2017, our primary focus continues to be profitable revenue growth for an 8th consecutive year and increasing the mix of marketing solutions and other services revenues. We are sharpening our focus to four strategic focus areas for 2017 including two each for financial services and small business services that we will provide regular updates through the balance of 2017. I will review each of the four focus…

[Operator Instructions] Our first question comes from Jamie Clement of Macquarie. Your line is open.

Lee, Ed thanks very much for taking my questions. Lee I was wondering can you expand a little bit on some of the comments you made on the January 6 call about First Manhattan's desire to market the small businesses and obviously the information on 4.5 million small business customers that you all have managed to accumulate over the years. What's the long-term plan there if you don’t mind expanding?

Right now as I mentioned their mix of revenue is about 45% in that commercial business space which is the largest percent of their result and that's where they have had a tendency Jamie to lead with their - if they are getting into an FI for the first they tend to lead there because they just have great data and information on small businesses and businesses in general and it's just an area that allows them to hit a high ROI in terms of what they do. So that will continue be their focus as well as the consumer deposit area, the credit card area and the other areas of them as well. What we expect is - the worst thing you can do Jamie when you buy somebody you bring him in as to kind of throw him into the middle of the bigger company and just say you know it's a free for all. What you want to do is make sure that you're focused initially and they are getting acclimated to just how we report, our language, how we talk and not messing around with anything that the great things that that the First Manhattan team is doing. So that's our focus in the near term but as this evolves as I mentioned and you picked up and remember well from the January 6 call is we believe there is an opportunity to bring the data and information that we have on those 4.4 million small businesses with the information that they have in their kind of their data and capability and sit down and bring those together and figure out how do we bring more overall full services to the financial services space, as well as services to the small business services segment. So that is our objective and that’s how we’re thinking about it. That is not something like I said January boom, we’re to hit on because we want to make sure this is integrated in and working really well and not upsetting the huge momentum and growth that they have on earth in their kind in their business but over time Jamie that’s where we see this going.

Okay, thank you that. If I could ask just one more question just shifting to SBS, as you all continue to emphasize cross-selling among MOS customers within SBS other than stuff like the main stream makeover stuff that people like me would see and it would obvious to us. What are the other things that you're doing from a marketing and kind of brand realization perspective pushing off that process?

Yes, remember we think the advantage we have is all those channels Jamie, so we have the banking channel that gives us small-business customers, we have our online channels, we have to the dealer channel, the distributor and the major accounts channels. So within all those we have various initiatives that we drive to market ourselves whether it’s online, things that we’re doing, whether it’s feet on the street things that we’re doing. So all of those channels are doing various marketing programs to generate awareness of what we're doing in addition to the overall brand awareness work that we're doing. One thing that we did not put in the commentary that Ed and I were talking about last night is Ink who is a very prominent small business and entrepreneurial focus in our company magazine and online media just named us numbers six I believe in their top nine kind of shows to watch for 2017 all around the small business revolution. So we view that as another positive thing along with again the thing I mentioned earlier about all the channel focus that we have. And Jamie the last thing I’ll add as I mentioned in the prepared comments is this whole small business, Deluxe marketing suite where we’re getting more and more of our products and services in their is making it easier and easier for a small business owner to go in get their logo from us and then see a populated say five to seven-page website with their logo on it and that kind of the that they're in and then also being able to see their logo on email marketing as well, so that is becoming another vehicle for us to be able to get out in front of small business owners as well. So it's last there but a lot of good focus areas for us.

Okay, go it. I really appreciate the time. Thanks very much.

Our next question comes from Joan Tong of Sidoti and Company. Your line is open.

And Ed, how are you guys doing?

Hi Joan.

Hi, just a couple of things to your. Lee you mentioned and obviously we know that we saw the index this small business, confident number have shot up pretty nicely last month definitely get people excited and you see the stock market has been reacting very favorably ever since the announcement of the new administration. So I'm just wondering for your 2017 guidance, obviously it seems like you kind of coaching somewhat of the positive things that we have seen even though could be just like a very short period of time that we are seeing these type of positive top. So I'm just wondering are you trying to be a little bit more conservative and there might be upside should like the environments you are really starting to work down nicely for you guys perhaps maybe in the second half of 2017?

Yes, I'm from Cleveland, Ohio originally but I'm actually from Missouri on this. I want to show me and I – it's interesting I have been spending a lot of time in the last few days listening to other CEOs and what they are saying and somewhere out there being very bullish, a lot of them are in the show me stage as well, we are absolutely watching that as I mentioned in the prepared remarks Joan we are excited we think this bodes well for us if this stays there but this is got to be commerce sustainable trend. Small business owners we're talking to them every day and I'm listening to them. They don’t automatically jump because there is enthusiasm and energy and just start fine like crazy, some might but they take time as they are very thoughtful and smart about what they are doing. So we have built kind of - we have not built a more aggressive past year. As Ed commented in his comments there are assumptions we have not done that. So if things do continue to go better, Joan is there are upside, I would tell you there is. But at this point in time, we are from Missouri, we want to be shown that before we are willing to go any more aggressive here.

That makes sense. Thank you. Got it and then moving onto the marketing solution and other services, that particular slide on Page 15 on the slides, thank you so much for the additional information regarding the expected - I'm sorry the estimated recurring revenue as a percentage and also the margin profile. So I'm just going down like all the different segment, sub segments within that category and there are obviously certain area that below like the corporate EBITDA margin and obviously these are - most of them are acquired businesses, can you maybe just talk to like whether you have seen improvements throughout the years that ever since you acquired this business, have you seen the EBITDA improvement and also which category you think that have the most opportunity to sort of like maybe structurally improve the margin going forward?

Yes Joan, thanks for giving us the call out on this. We spend a lot of time really Ed and I thinking through this. As you know we are out of line with investors you help us and certainly Jamie and Charlie's and Josh as well and we just felt that breaking first of all those two categories out and now these are all effect of $100 million businesses, it was really helpful thing for the investor. And we also felt that kind of giving some more color on the EBITDA margins overall and then where they are relative to our total is and the reason why we did that is Ed and I are convinced that the average investors not understanding that is we get 38% this year and head towards that 40%, our overall EBITDA margins are only moderately below the kind of the company average right now. And so that was the reason why and we also wanted to, we kind of sporadically answered questions on what's recurring and not as far as revenues. So we just wanted to come clear and just give a little better perspective on that. So, as far as, how things improved over time the answer is absolutely yes, and I would argue pretty much in every category and why is that. As we bring these in, integrate the acquisitions we're the pieces together, we keep getting opportunities as the revenue scales more efficiencies across the board. So it could be in web services where we had historical marketing people that were in each of the acquired businesses, and now we're seeing, we can leverage each other a lot better. We can leverage the support that we put behind the infrastructure for services and those categories as well. So, I would say that all of them are improving. One of the areas that we have the richest opportunity is in small business marketing because they are well below right now and you saw our move in January 6 to announce - look those were some of the categories we were not seeing some of the returns that we were looking at very low and by the way well below doesn’t mean they’re losing money by any expense. These are still double digit operating margins or EBITDA margins but we're going to continue to work each of these categories as we continue to transform the company and I think those opportunities across the Board here in the five categories to keep getting better overall.

That’s good. Thanks for the color and then if I can just - final one question I have here regarding check, another good quarter if you look at financials of the check volumes is down less than 4% as a matter of fact these federal reserve actually had a - put out a new study the last time they had it was 2012 and then they put out another one updating the past three year period and that seems to us that like the check volume decline has been continuing coming down in terms of the narrowing of the check decline. So I just want you to see your view obviously, you talk about 5% to 6% in terms of check decline for financial services and you mentioned that the magnitude is smaller just because the size is getting, like smaller for that particular segment but still just want to see if you have a view on that going forward maybe you’re really getting to some sort of inflection point that we would be declining a lot slower.

Yes, Joan I think you set it up really well, we’ve obviously seen the fed study, the initial style will come out in more comprehensive report and we performed right in line with what we saw in the fed study. In fact one of the things its interesting Joan is that, the consumer check usage now actually declined a little bit more within the overall compared to the small business usage and that’s been a trend we have seen for some time, when you kind of average everything and you don't yet see that in the fed study but we see it and certainly the competitors out there see the same thing. So, why -why last year why five to six, we just think that there's so much out there with continued electronic application right now and so many different choices and they’re coming at you every day with the potential for the new payment where it will be out there, we just think that's it's smart on our part to assume that, the 5% to 6% is a smarter play. Now as we said, if it’s a 1% less than annually it's about $2 million. So it’s not going to be a huge impact plus or minus on the business but we just think that's a smart way of guiding where we are, setting up our business in and again that’s where we think, we see things past. We would ask them to open slowdown where we hope it does. We also got a chuck a lot of the front page Wall Street waiting in line in retail establishments and writing checks and we of course said bring, keep doing that, we love them people do that. So, we just think that we can't yet predict that Joan. Be honest we can't yet say this is add some toping and the four will become stable at four or three or whatever so, we just think it's prudent and we, therefore we guided the 5% to 6%.

All right, thank you, Lee, thank you Ed. Thank you so much.

Our next question comes from Charlie Strauzer of CJS Securities. Your line is open.

Hi, good morning. Just looking at the results for Q4 you mentioned 2% kind of organic numbers that for SBS or for the overall company?

Total.

Got you. And do you have the number of what was going on with SBS, I think I don’t know if I caught that or not…

I don't think we do, I think Ed you mentioned 1% for FS, so it's got to be in the 2% range in order to make that work.

That makes sense. And when I look at the full year 2017 guidance and kind of the growth rate assumptions you have in there, can you kind of give us sense of kind of the organic assumptions if I go behind that?

We would say it's about flat, so the 5% to 7% overall is about we believe it's in the flat range.

Got it. And then by segment is it more kind of the same event as well or in terms of like FS and SPS?

It would be well again as you know in Direct Checks it's down, the exact numbers we gave you. In the other two segments I would say that the small business is growing a little bit whereas financial services declining a little bit.

Got it, okay. And then talking a little bit more about the recurring revenue which are very helpful, thank you. Can you maybe expand a little bit more on the types of things that you kind of view is recurring and kind of more short term versus long term recurring, can you help us little bit more about with some color there?

Sure. So Charlie if you think of web service, you think of where we are hosting customers and every month they pay us a set fee and as long as they stay on they don’t churn out where that is what absolutely are recurring stream. Same thing in the case of payroll services, there is initial set up fee when you are bringing a new small business on but then there is a recurring monthly fee for that. The same thing goes on - I'm going to just jump around here little bit, but bankers dashboard you sign a bank update, access the dashboard and there is a set monthly fee for that. There is basically a set fee for Deluxe rewards. You established a relationship with the financial institution and then there is a payment, there is a little bit of spiking up and down for the supplier income on the merchandizing and the gift cards but that's pretty darn stable as well. Same thing when you launch a campaign for First Manhattan or a campaign for Datamyx that is a stable predictive as long as there, you have that customer and you are staying in that market, there is a very strong predictability, a lot of our fraud and security offers work the same way. Really the only thing Charlie that's a little and you see it on the chart, little more transactional in nature is the small business marketing. That's where we get the little bit more of the lumpiness in our results and if we generally are having a harder time being predictive, it's generally in that area and by that I mean somebody can come along and do an integrated marketing campaign for their small business. They can do everything from full color to promotional materials but then they can move away from that and then it's - you may not see that for another quarter, another year. So there is a little bit more transactional nature to that. But again a lot of what we are doing now and I just think the investors have been missing this a bit and we haven't been as clear and I think we are just saying here is a better way to look at it and here is little more clarity for everyone.

That's very helpful. Thank you very much.

Our next question is a follow up from Jamie Clement of Macquarie. Your line is open.

Gentlemen if I may, on page 15 the fraud security risk management and operational services, is that - the horizon business you are obviously – that's being reflected in the outlook for 2017. I'm wondering why if that was minus 10, I'm wondering why the rest of that business wouldn't be grown in 2017?

Little bit Jamie because of the fraud offers around the check business.

Okay, got it.

That's really the check…

Okay. So just the inherent link there.

Inherent link there, yes.

Okay. All right, thanks a lot, I appreciate that.

There are no further questions, I would like to turn the call back over to Lee Schram, CEO for any closing remarks.

Thank you everyone for your participation and your questions today. I will get just three summary comments, first we delivered four strong quarters in 2016, second we delivered our seventh consecutive year of revenue growth, and third we have established a foundation for growing revenue again in 2017 for the eighth consecutive year. We're going to now roll up our sleeves, we’re going to get back to work and we look forward to providing a positive progress report on our next earnings call. And now I’ll turn it over to Ed for some final housekeeping.

Thanks Lee. Before we conclude the call today I just want to mention that Deluxe will be participating at the following conference in the first quarter we can hear more about the transformation. On March 21, we will be attending the Telsey Advisory Group Spring Consumer conference in New York City. Thank you for joining us and that concludes the Deluxe fourth quarter 2016 earnings call.

Ladies and gentlemen, thank you participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.