Deluxe Corp (DLX) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Deluxe Corporation Earnings Conference Call. My name is Keisha and I'll be your operator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to hand the conference over to Mr. Jeff Johnson, Treasurer and Vice President of Investor Relations. Please proceed.

Thank you, Keisha. Welcome to Deluxe Corporation's 2011 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 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 Web site. I will provide instruction 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 year ended December 31, 2010. In addition, the financial and statistical information that will be reviewed during this call is addressed at greater detail in today's press release, which is posted in the News and Investor Relations section of our Web site, 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 comparable GAAP financial measures in the press release. Now, I'll turn the call over to Lee.

Thank you, Jeff, and good morning, everyone.

In a continued sluggish economic environment, we delivered another strong quarter. We reported revenue at the upper end of our expected outlook, and adjusted earnings per share were well above the high end of our outlook. Small Business Services revenue grew 5%, which was our strongest quarterly growth rate since the NEBS acquisition back in 2004. Checks and Forms both performed well against our expectations, and marketing and other services revenues grew 9% over the prior year, but 18% excluding a very strong [Reg E] performance in the prior year quarter. We had strong execution against our cost-reduction program. Improved product mix and a lower tax rate drove better than expected results. Adjusted diluted earnings per share grew 10% over a strong prior year. Operating cash flow was strong, and we were only slightly drawn on our credit facility as we ended the quarter. We repurchased $12 million in shares to help offset dilution from the Banker's Dashboard acquisition and from employee plans.

In early July, we completed the acquisition of PsPrint, to extend our capability in the fast-growing Web-to-print market. We continue to invest in improved brand awareness to help better position our marketing and other services' offerings and drive future revenue growth. We also advanced our process improvement and cost reduction initiatives while driving strong operating cash flow as we continue to transform Deluxe.

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 second quarter of $0.68, which included charges of $0.07 per share from restructuring and transaction-related costs. Excluding these costs, adjusted EPS of $0.75 was $0.04 favorable to the upper end of our previous outlook and 10% higher than the $0.68 reported in the second quarter of 2010. Favorable product mix and a lower tax rate drove better-than-expected EPS performance.

The restructuring and transaction-related costs were primarily driven by infrastructure consolidations and acquisition-related expenses. Revenue for the quarter came in at $346 million, which is at the upper end of the range of our previous outlook. Revenue was basically flat from 2010 and down only slightly on a sequential quarterly basis. Small Business Services revenue, up $203 million, grew 5% versus last year, which was our strongest quarterly growth rate since the NEBS acquisition in 2004. While we continue to operate in a weak economic environment, we did deliver growth in marketing and other services, our Safeguard distributor and dealer channels, and Canada.

Financial Services revenue of $87 million was down 12% versus the second quarter of last year, but was nearly flat on a sequential quarterly basis with both the last two quarters. The impact of price increases was more than offset by the remaining amortization of a 2009 contract settlement in the prior year quarter and lower check orders. Excluding the impact of the contract settlement amortization, revenue in Financial Services declined less than 6% from last year.

Direct Checks revenue totaled $56 million, essentially flat on a year-over-year basis. However, the Custom Direct part of the business grew nearly 8% in the quarter, as planned revenue synergies and 6 extra business days more than offset lower check orders.

Gross margin for the quarter was 65.1% of revenue, up slightly from 2010. Benefits from price increases, improvements in manufacturing productivity, and delivery initiatives were partially offset by increased delivery and material rates. SG&A expense decreased $3.2 million in the quarter. It was 45.5% of revenue, compared to 46.2% of revenue in the same period last year. Increased SG&A associated with acquisitions, brand awareness campaigns, and investments and revenue-generating initiatives were more than offset by benefits from continuing to execute against our cost-reduction initiative.

Excluding restructuring and transaction-related costs, operating margin for the quarter of 19.9% was up from the 18.9% generated in 2010. It was above our expectations, with favorability coming from strong revenue performance including favorable product mix. All three segments delivered strong operating margins compared to expectations. Excluding restructuring and transaction-related costs, Small Business Services operating margin of 17.9% was up 2.2 percentage points from last year, due to price increases and continued progress with cost-reduction initiatives. Financial Services operating margin of 18% was down 2.7 points from 2010 due to the favorable contract settlement amortization in 2010 and lower volume, as well as higher investment spending in 2011. Direct Checks operating margin, up 30.1%, increased 3.2 points from 2010 as we continue to realize plan synergies from integrating Custom Direct and acquisition-related amortization begins to roll off.

Turning to the balance sheet and cash flow statements, total debt at the end of the quarter was $753 million, compared to $755 at the end of 2010. This decrease was primarily driven by improved operating performance, which was mostly offset by the April 2011 purchase of Banker's Dashboard for $35 million cash and $18 million of common share repurchases, $12 million of which was in the second quarter to offset dilution from the Bankers Dashboard acquisition and from employee plans. Cash provided by operating activities for the first half of the year was $104 million. The increase from last year was due to stronger operating performance and lower income tax, severance, and contract acquisition payments.

Capital expenditures for the first 6 months were $19 million and depreciation and amortization expense was $39 million. In early July, we purchased PsPrint for approximately $45 million in cash. The purchase was funded with a draw on our credit facility. The acquisition is expected to generate revenue of approximately $15 million during the balance of 2011 and be EPS-neutral in 2011 after absorbing transaction costs and acquisition-related amortization expense.

Given our strong performance in the second quarter and the PsPrint acquisition, we are improving our consolidated revenue outlook for the year to a range of $1.41 billion to $1.435 billion. At the high end of the range, we are no longer expecting any improvements in the economic conditions in the second half of the year. Adjusting diluted earnings per share from continuing operations are expected to range from $3.00 to $3.15, excluding $0.23 related to losses on the repurchase of long-term debt and restructuring and transaction-related costs. Improved operating performance, including our strong second quarter results, and ongoing favorable product mix, is expected to drive improved earnings performance.

There are several key factors that contribute to our full year outlook versus 2010, including -- Small Business Services revenue, including the PsPrint acquisition, is expected to increase in the mid to upper single digits range as volume declines in core business products are expected to be offset by benefits from price increases, our eCommerce investments, double digit growth in our marketing and other services offerings, and revenues from the PsPrint acquisition.

We expect Financial Services revenues to decline in the mid- to upper-single digit range, with check order clients from approximately 7% to 8%, driven by increases in electronic payments and lower revenue per order. These decreases will be partially offset by a new large customer win, which is expected to begin contributing volume in the fourth quarter, and increasing contributions from non-check revenue streams, including those from Banker's Dashboard.

Direct Checks revenue increased in the mid-single digits, driven by a full year impact of the Custom Direct acquisition, partially offset by check declines and a continued weak economy, additional cost and expense reductions, employee merit increases, which we reinstated in the first quarter of this year after a two-year freeze, increases in material and delivery rates, continued investments in revenue growth opportunities including marketing and other services, brand awareness, direct response campaigns, web-to-print and enhanced internet capabilities. An increase in interest expense of $0.05 per diluted share primarily due to the March refinancing of $195 million, a 5% note due next year with $200 million of new 7% notes not due until 2019, an effective tax rate of approximately 33%, and higher average shares outstanding.

We expect to continue generating strong operating cash flows ranging between $218 million and $228 million in 2011, driven by stronger earnings and slightly lower contract acquisition payments, which we expect to be approximately $20 million.

2011 capital expenditures are expected to be approximately $35 million, down 20% from 2010. We plan to invest in key revenue growth initiatives and make other investments in order fulfillment and IT infrastructure. Depreciation and amortization expense is now expected to be $74 million including $21 million of acquisition-related amortization.

For the third quarter of 2011, we expect revenue to range from $353 million to $361 million. Adjusted diluted earnings per share are expected to range from $0.71 to $0.77. In comparison to 2010, the list of factors affecting our full year outlook are similar to those affecting the third quarter, except the third quarter will not benefit from the new national financial institution client, since we are not expecting to start producing their checks until the middle of the fourth quarter.

In comparison to the second quarter, adjusted EPS at the midpoint of the range in the third quarter is expected to be in line with the second quarter, as higher revenue volumes driven by the PsPrint acquisition are only expected to be EPS-neutral. Additional contributions from higher marketing and other services revenue is expected to be offset by brand awareness spend, which will be at its highest level of the year in the third quarter.

Shifting to our capital structure, we expect to maintain our balanced approach of investing organically and through small- to medium-sized acquisitions in order to drive our growth transformation. We also expect to maintain our current dividend level and repurchase shares to offset dilution. To the extent we generate cash flow in excess of these priorities, we plan to pay down debt in order to further strengthen our balance sheet. We believe our strong cash flow, strengthened balance sheet, and flexible capital structure position us well to continue advancing our transformation.

I will conclude my comments with an update on our cost and expense reduction initiatives. Overall, we had another solid quarter and remain on track for delivering our $65 million target for the year. Again, these savings will not be linear through the quarters, as we expect a larger percentage of the total year reductions in the second half of the year, with an even higher weighting in the fourth quarter.

Our focus in sales and marketing for 2011 will continue to be on improving sales and marketing backend operations through process centralization, simplification, platform and tool consolidation and leveraging eCommerce capabilities. In the first quarter, we announced that we will be closing our Phoenix call center, which we now expect to be completed in the third quarter. We will also continue to improve the mix of paper catalog and online search engine marketing.

In fulfillment, we expect to continue our lead, product standardization, spoilage reduction, and direct and indirect spend reduction initiatives, plus further consolidate our manufacturing technology platforms, enhance our strategic supplier sourcing arrangements, and continue with other supply chain improvements and efficiencies. We also expect to realize a full year's worth of savings from our fully automated flat check package processing equipment, the last installation of which was completed in fourth quarter of 2010. In the first quarter, we also announced the closure of one of our smaller business products fulfillment sites, which was consolidated into a larger site in July.

Finally, for the shared services infrastructure, we expect to continue to reduce costs in all areas as more opportunities exist to centralize, streamline, standardize, and improve efficiencies.

Now I'll turn the call back to Lee.

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 during the balance of 2011.

Our primary focus continues to be on revenue growth. In the second quarter, we had a strong performance in the check space, with high demand for our new hologram checks in SBS and better revenue-per-order rates in Direct Checks, from improving our sales of additional accessories in Custom Direct. We also continued to improve on our differentiated technology-led check offers through investments in the direct-to-consumer segment in digital printing and flat check packaging.

For business products, we continue to enhance our internet and segmentation capabilities, and we grew revenue in the internet, distributor, and dealer channels.

Finally, we are introducing new terminology for what we have been calling business services, primarily due to the PsPrint acquisition. It is a more comprehensive name, called marketing and other services. You should think of this category as containing more of the faster-growing spaces, with checks and forms being more of the traditional core business.

Marketing and other services now include logo design, Web services, social media, search engine marketing, payroll, marketing and promotional Web-to-print Services, and fraud and security services, plus offers that help financial institutions with customer acquisition, regulatory compliance, and profitability. These areas grew revenue 9% in the second quarter.

We invested organically in the second quarter in marketing and other services for our small business customers and also in customer acquisition and regulatory compliance for our financial institution customers.

In addition to organic investments, in early July we also completed the acquisition of PsPrint. Going forward we expect to continue to assess potential small-to-medium-sized acquisitions that complement our large customer basis, with a focus on the marketing and other services space. PsPrint will compete in a market that is expected to grow on a compound annual basis over the next four years in the low 20% range, and along with our increasing services revenue mix, will help position us in higher multiple market spaces and continue to reduce our dependency on checks.

Going forward, each quarter we plan to provide insight into our full year expectations as well as actual performance in the marketing and other services space, as we know this area is critical to our continued transformation. We are on track to generate approximately $170 million to $180 million in revenue in 2011, up from $122 million in 2010, so we expect to continue to build scale capability here. If achieved, this performance would translate to a total revenue mix of over 12% against the midpoint of our revenue range, towards our goal of achieving a 25% mix over the strategic period, and up from the 4% level just a few years ago.

In addition to the items just mentioned, in order to accelerate revenue growth, we are continuing to invest more in brand awareness and positioning. We started last year through test-and-learn brand awareness and direct response advertisements including radio, online, television, and our small business Hero mobile tour events.

Based on our learnings, we have been expanding but refining our focus. We continue to invest in the second quarter and, as planned, will ramp advertising to our highest level in the year in the third quarter. Primarily through network in National Public Radio, but in addition we will advertise on Entrepreneur.com, Martha Stewart, CnnMoney.com, Business Week, FastCompany.com, Time.com, and others.

Further, we will also invest in events where small businesses actively participate. We also just completed the first year of Project Rev, our yearlong marketing lab designed to build marketing expertise for small businesses. The nine small businesses we work with have significantly increased the size of their revenue since working with us by improving their marketing. We plan to continue this project with our second yearlong class, set to start at the beginning of 2012.

We expect all of these activities to help us drive revenue growth over time as the economy improves. We are getting better and better at measuring our return performance from these brand initiatives and this will determine the size and extent of investment levels over time.

Now, shifting to our segments. In Small Business Services, as expected, we did not see any notable improvements as the economic climate for small businesses remained sluggish. We had strong performance, however, improving as we moved through the quarter, with revenue coming in at the high end of our expectations and growing 5% in the quarter.

Checks and forms were strong. Our results from targeted customer segmentation in the call center improved. We increased new customers from our financial institution Deluxe Business Advantage Referral Program and through our direct response campaigns. Response rates increased from better balanced and enriched content and online and print-based spend.

Average order value and conversion rates remain strong. Our Safeguard distributor and dealer channels and Canada grew revenue over the prior year. We also saw growth in Web, search engine marketing, and payroll services.

In the quarter we won a number of North and South America and Europe wholesale Web services deals, and also continue to expand additional value-added services on top of our core retail Web services offer.

We grew revenue over 50% sequentially in the quarter in the search engine marketing space by signing up new media partners and through a retail offer that is being cross-sold. 20% of these search engine marketing sales have been made to existing Deluxe customers.

We continue to closely monitor the small business market. Optimism indices have declined now for 4 consecutive months and remain in recessionary territory. We are not seeing the surge that should lead to economic growth. Small businesses are only slowly hiring, and they remain cautious in making any investments.

Capital spending, although improving, remains low. They continue to spend less, scrutinize purchases more, and experience tight cash flow. Small businesses' outlook that business conditions will improve over the next 6 months declined in June to the lowest level in a year. In summary, current optimism indices have been trending downward and are still below end of 2007 levels.

The good news is that increasing sales continues to be a small business owner's number one paying point, and we now offer many products and services to help them here. If the economy recovers, with the transformative changes we are making to deliver more services offerings that help small businesses get and keep customers, Deluxe is better positioned as that indispensable partner for growth.

Our focus for the balance of 2011 is on acquiring new customers, increasing our share wallet through our enhanced Shop Deluxe eCommerce site, growing distributor and channel partners, and improving segmentation. We will continue to improve the efficiency and effectiveness of our in-bound, out-bound, and online customer touch points to maximize revenue scale capability.

In marketing and other services, we expect to continue to gain new customers through our Telco focused wholesale Web services model -- including South America expansion -- add customers and services in our retail model, add marketing services, payroll services, [and global] customers, and continue to expand our search engine marketing customer base.

PsPrint extends Deluxe's existing core capabilities and provides a differentiated, compelling solution that supports small businesses' growth. It provides us with an immediate annual revenue base of $30 million, an expanded and leverageable base of 100,000 customers, and brings together two very complementary sets of online solution and fulfillment workflow capabilities.

In the short term, our goal is to increase PsPrint's revenue through additional customer acquisition programs and tactical improvement initiatives within the existing platform. In the medium term, our goal is to create a single, best-in-class, integrative platform that combines organic investments we have already made and front-end customer experience with PsPrint's strong back-end processes and scale Web-to-print offers for our combined small business customers. PsPrint's management team will lead the Web-to-print space with our team being integrated.

The acquisition of PsPrint, plus the other acquisitions and organic investments we have made over the past few years, fits within an overall strategy of providing technology and marketing solutions to our small business customers.

We thought it would be beneficial to share the model we are using to map our solutions with our customers' needs as we continue to build out our platform of helping our small businesses get and keep customers. Think of it as a collective framework for all the tuck-in acquisitions, partnerships, and organic capability we have created. We can help small businesses throughout the entire lifecycle of their marketing needs, as their maturity involves.

Starting online with branding and promoting themselves through our LogoMojo logos, Hostopia and Aplus.net hosting, Web site, mobile, and lead capture capabilities. We can help them get found online and get social through list management and social media capabilities, from our Partner Up acquisition and from partnerships in organic social media investments.

Next, we are able to work with them to acquire customers online with PsPrint Marketing and Promotional Services, as well as through search engine optimization and email marketing through our Hostopia and EasyContact products. After that, we can help them manage their marketing spend online through MerchEngines' search engine marketing.

Finally, we can help them be efficient by pulling all these services together and providing educational collateral, content, best practices, and access to their peer networks. All of this breadth and depth, with the best personalized customer experience to help them measure their results and manage their online business.

In Financial Services, revenue is right in line with our comments from our last call of roughly the same revenue level of the first quarter. We saw the rate of decline of checks perform right in our forecasted range of around 7% to 8% and remain stable throughout the quarter. We had strong overall new acquisition rates and our retention rates remain strong on deals pending in the current year in excess of 90%.

We are still finalizing contract and migration plans for the new large national financial institution that we now expect will start in the middle of the fourth quarter. That is included on our outlook. There still remain a significant number of competitive opportunities through 2012, many of which are now commencing RFP processes.

We also simplified our processes and took complexity out of the business while reducing our cost and expense structure. We are on track, actually accelerating, to the third quarter expected closure of our Phoenix call center.

In the second quarter, we also invested organically in both the customer acquisition and regulatory compliance areas for expected second half of the year revenue-generating opportunities.

We made progress again in the quarter in advancing non-check marketing and other services revenue opportunities. Revenue was about flat with the prior year quarter in these non-check services, which include customer acquisition, regulatory compliance, rewards checking, and other profitability offers.

Performance was flat due to a very strong quarter last year in regulatory compliance, with our [Reg E] overdraft protection offer that did not repeat this year. We saw continued growth from our Cornerstone acquisition and we are starting to see interest in our new regulatory compliance offer, which, again, is a comprehensive, Web-based service to help our financial institution clients manage through the challenging demands of the regulatory environment.

The Banker's Dashboard acquisition is performing quite well so far. This brings us a software-as-a-service financial management tool that provides community banks with instant, daily, on-demand access to data to help them improve their performance and profitability. We also believe it will help community banks with managing the increasingly challenging regulatory environment. We expect this acquisition will help us scale regulatory and profitability services offers more quickly and robustly for our financial institutions.

As you can see, momentum continues to build in these non-check revenue initiatives.

In Direct Checks, revenue was in line with our expectations, driven by accelerated reorder rates and strong Custom Direct accessories revenue. We continue to look for opportunities to provide accessories and other check-related products and services to consumers. We also continue to be very pleased with integration of Custom Direct as we leverage the best of both Direct Checks and Custom Direct into a best-in-class direct-to-consumer check experience. We continue to see a ramp in revenue-enhancement synergies through our call center scripting.

In addition, cost reduction activities continue with savings accruing in material, procurement, delivery, media and marketing expense leverage, and other SG&A. We expect continued revenue enhancements and cost reductions over the balance of 2011.

For 2011 we expect revenue growth in the mid-single digits range, driven by the Custom Direct acquisition and accelerated reorder rates, partially offset by declines in consumer check usage and spending and a continued weak economy. We expect to reduce our manufacturing costs and SG&A and derive operating margins in Direct Checks in the high 20s percent range, including acquisition amortization, while generating strong cash flow.

As we exit the second quarter on the heels of a strong quarterly performance in a continued sluggish economy, we have made good progress again in transforming Deluxe, but we still have a lot of work and opportunities ahead of us in the balance of 2011. We are now not expecting the economic climate to improve in the second half of the year at the high end of our outlook range. However, even with no improvement expected in the economy and with the continued delay in onboarding the new national account, we have maintained the high end of the range before adding in revenue for the PsPrint acquisition. We are gaining confidence that we can grow revenue and Small Business Services even in a challenging economy.

As I indicated earlier, our primary focus is on revenue growth, and we are investing in our future with better product and services offers in all three customer segments and an improved brand awareness campaign. We are playing offense, making positive strategic moves to reposition the Company for sustainable longer-term revenue growth.

If the economy improves, we should have further upsides in Small Business Services revenue, as we know it is important for us to continue to demonstrate growth in this segment. At the same time, we will not take our eyes off the cost reductions and process improvements, and we expect to continue to generate strong cash flows and provide a very attractive dividend.

Now, Keisha -- Terry, Jeff, and I will take questions.

(Operator Instructions) Charlie Strauzer with CJS Securities.

First of all, just want to touch base on the PsPrint acquisition. It sounds like a very intriguing addition to the service offering. The question I have for you, Lee, is -- I know the Johnson Group was building out a Web-to-print kind of capability, and how is this different from what you are trying to do organically there?

The way to think about what the Johnson Group really brought us was more of a storefront approach, but not as nearly, Charlie, as robust as what we then started adding on from the Johnson Group. As I've said in the past, part of what we actually picked up with the Custom Direct acquisition was some front-end and back-end Web-to-print capability as well, so think of it as we now have the benefits that we got started with the Johnson Group, the benefits we picked up from Custom Direct, started organically creating more strong technology at the front end, organically -- and we've been talking about that -- and we now just started to look at -- this is a great space, our customers are asking us more and more in this space to help them with marketing and promotional services, so we said -- are there other opportunities out there, and we were fortunate enough to find a good match with PsPrint.

Again, what I've said earlier is what we're trying to do, Charlie, is early on get more focused on better demand creation there and tweak a little bit of what we're doing to bring the two -- all the platforms together here both at the front and the back end. More what I would call medium term, we're trying to really bring it all together into a seamless flow. And, again, we've spent the investment already at the front end. Think of it as -- our small business cannot just get those services but have other services that are capable to be played right off the PsPrint solution.

So, we're actually just extremely excited about this because it not only brings pieces that we had before, and the investments we've made in those to the forefront, it gives us some immediate larger-scale capability than we had, and having met the team of players there, the people, it's just a great cultural fit for us as well.

And, Lee, can you talk a little bit about PsPrint's kind of growth history? Have they been seeing the same types of growth rates you've been experiencing in your services business too?

Yeah, it's been growing. You got to remember, Charlie, that the print -- the suffering that the print companies had when the recessionary period was going on -- but outside of that, they've been growing.

The thing that we like about them from a cultural fit, as well, is they want to make money at this and they're very strong operators and they're strong on not only the top line, but -- as you know us and the leadership we have here, we're focused on the bottom line, and the cash flow as well. So, yes, we're very pleased and we see nice growth in what they've been doing.

Great. Thanks for some of the color you gave on the small business side, in terms of not seeing the proverbial green shoots there yet, but -- what other kind of visibility can you see there when you're talking to some of the small business customers that are out there? Are they getting at least a little bit more optimistic?

I think it's tough. I think when I listen in on calls and when I hear what's going on with our customers -- either when I meet them or I hear from our call center or I listen in on calls -- I think what we like right now is the areas they're most struggling with is how do they find business and how do they find customers. Again, that map or that kind of bridge that I walked through in the prepared comments on how we pieced all these acquisitions and organic investments and some of the partnerships and investments that we have -- I think are hitting the mark more and more -- and, again, in my comments, are giving us more confidence that as the economy gets better, you know, that small businesses are going to need to lean on these kind of services that we have.

But, Charlie, I don't want to make it sound like it's wonderful out there for small businesses right now. As I also said in my prepared comments, it's a tough world for them right now. I think what we're doing, though, is focused on that market area, that sales area, with the services and the products that we have, and I think it's resonating well for them right now and they're getting value out of it.

Charlie, I think our small business customers are -- like the rest of them out there, there's a lot of uncertainty out there that's really causing them to hold back. Health care is still uncertain to them, taxes, and all those pieces just really create a lot of uncertainty for them and they hold back on their spending because of it.

Got it. And Terry, just one quick question -- on the amortization from that contract roll-up, are we going to see any more of that in Q3 and Q4 like we did in the first couple quarters?

No, that one is done, it just went through the middle part of last year. But let me remind you too, what you will see next quarter is -- we had that large contract settlement that we [called out], it was $0.31 of EPS, and it was all revenue and operating income and now it's split between the Small Business Services and the Financial Services segments. So, next quarter we will have that compare in those two businesses to deal with. But we gave good visibility and clear numbers on that by segments last year.

Got it, great. Thank you very much.

(Operator Instructions) And we have no further questions in queue at this time. I would now like to hand the conference back over to Mr. Lee Schram for any closing remarks.

All right, I just want to thank everybody again for joining. We have a softer summer participation list today here, but we're going to get back to work and we look forward to providing a 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 11 by dialing 888-286-8010. When instructed, provide the access code 53073331. The accompanying slides are archived in the News and Investor Relations section of Deluxe's Web site, at www.deluxe.com. 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 your lines. Good day.