Deluxe Corp (DLX) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Deluxe Corporation second-quarter 2016 earnings conference call. (Operator Instructions) As a reminder, today's conference call is being recorded. I would now like to introduce your first speaker for today, Ed Merritt, Treasurer and Vice President of Investor Relations. You have the floor, sir.

Thank you, Andrew, and welcome everyone to Deluxe Corporation's second-quarter 2016 earnings call. I am 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 Financial Officer. At the conclusion of today's prepared remarks, Lee, Terry and I will take questions.

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 described and 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, 2015.

The financial and statistical information that we review during this call is 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 as part of our remarks during this call.

Now I will turn the call over to Lee.

Thank you, Ed, and good morning, everyone. Deluxe delivered a strong quarter, and we are well-positioned as we enter the second half of the year to grow revenue 5% to 6% for the year despite a continued sluggish economic environment. We reported revenue in the upper end of our outlook range, and adjusted earnings per share was at the top end of our outlook range.

Revenue grew better than 3% over the prior-year quarter, driven by financial services growth of 10% and small business services growth of 2%. Marketing solutions and other services revenues grew more than 16% over the prior year and represented about 33% of total second-quarter revenue. Adjusted diluted earnings per share grew more than 6% over the prior-year quarter. We generated strong operating cash flow of $128 million for the first half of the year, and we were drawn $413 million on our credit facility at the end of the quarter.

We repurchased $15 million in 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 commitment for 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.

Thank you, Lee. Earlier today, we reported diluted earnings per share for the second quarter of $1.18, which included $0.02 per share for restructuring charges and transaction costs. Diluted EPS in the second quarter of last year also included $0.02 per share for restructuring charges and transaction costs. Excluding restructuring charges and transaction costs, adjusted diluted EPS of $1.20 was at the top end of our previous outlook and was 6.2% higher than the $1.13 reported in the second quarter of 2015. The increase was driven primarily by stronger operating performance in addition to a lower effective income tax rate and lower average shares outstanding.

Revenue for the quarter came in at $451 million, growing 3.4% over last year. The growth rate, excluding the Datamyx and FISC acquisitions and an unfavorable foreign exchange rate, was about 1%. Small business services revenue of $288 million grew 2.1% versus last year despite some timing-related shortfalls with rollouts of vertical marketing solutions in our major accounts part of business. A continuing sluggish economic environment and unfavorable foreign exchange rates, which alone negatively impacted revenue growth by 0.3 percentage points in the quarter.

For some added clarity, small business services revenue at the high end of our previous outlook range was only expected to grow approximately 3% in the second quarter, primarily, again, due to the timing of some major account vertical marketing solution rollouts.

In small business services, 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 $124 million grew 10.2% versus the second quarter of last year. Excluding revenue from acquisitions, financial services would have grown 0.4% in the quarter. Higher marketing solutions and other services revenue driven by Datamyx, Wausau and Deluxe Rewards, and price increases, more than offset the impact of lower check orders. Direct checks revenue of $38 million was down 6.6% from last year, slightly better than our expectations.

From a product revenue perspective, checks were $216 million, representing 48% to total revenue. Marketing solutions and other services were $147 million, which was 33% of total revenue. And forms and accessories were $88 million, or 19% of total revenue.

Gross margin for the quarter was 64.5% of revenue, which was up slightly from 64.2% of revenue in 2015. Higher delivery and material costs were more than offset by the benefits of previous price increases, improvements in manufacturing productivity and a favorable adjustment from an environmental reserve that was allocated proportionately to each of the three segments.

SG&A expense increased 4.6% in the quarter and was 44.1% of revenue, compared to 43.6% of revenue in the same period last year. Benefits from our continuing cost reduction initiatives in all three segments were more than offset by increased SG&A associated with recent acquisitions and a pretax gain in 2015 related to the sale of four small business distributors.

Excluding restructuring and transaction related charges in both 2016 and 2015, adjusted operating margin for the quarter was 20.5%, which was down slightly compared with the 20.8% generated in 2015. Financial services delivered an operating margin better than our expectations. Direct check margins were in line with our expectations, and small business services margins were slightly below our expectations.

Small business services adjusted operating margin was 17.3%, which was slightly below the prior-year rate. Financial services adjusted operating margin of 23.8% was up one point from 2015, driven by lower incentive compensation expense, additional cost reductions and price increases. Direct checks adjusted operating margin of 34.3% decreased 2.9 percentage points from 2015, driven by lower order volume compared to a very strong quarter last year, which was driven by a favorable mix of higher-margin reorders.

Turning to the balance sheet and cash flow statement, total debt at the end of the quarter was $614 million, which was down $15 million, or 2.4%, from $629 million at the end of 2015. Cash provided by operating activities for the first half of the year was $128.3 million, an $18 million decrease compared to the first half of 2015, driven by higher contract acquisition payments, an incentive payment related to a previous acquisition, and income tax payments partially offset by stronger earnings and lower interest payments.

Capital expenditures for the first half of the year were $22.2 million, and depreciation and amortization expense was $44.7 million. We are strengthening our previous consolidated revenue outlook for the full year to the upper end and now expect it to range from $1.855 to $1.875 billion. We are strengthening our expectations for adjusted diluted earnings per share to $4.90 to $5.

There are several key factors that contributed to our full-year outlook, including -- small business services revenue is expected to increase 5% to 6% as volume declines in core business products and the negative impact of foreign exchange rates are expected to be offset by growth in our online, dealer and major account channels; price increases; double-digit growth in marketing solutions and other services offerings; and continued small tuck-in acquisitions.

We expect financial services revenues to increase 9% to 10%, as recurring check order declines of 4% to 5% and some pricing pressure are expected to be more than offset by continued growth for marketing solutions and other services revenue including Datamyx, Wausau and Deluxe Rewards and some small tuck-in acquisitions. A direct checks revenue decline of approximately 7% to 8%, driven by lower check order volume stemming from secular declines in check usage. A continued sluggish economy, full-year cost and expense reductions of approximately $50 million net of investments. Increases in medical expenses, material costs and delivery rates. Continued investments in revenue growth opportunities including brand awareness, marketing solutions and other services offers, and enhanced Internet capabilities. And an effective tax rate of approximately 33%.

We expect to continue generating strong operating cash flows ranging between $320 million and $330 million in 2016, reflecting stronger earnings and lower interest payments partially offset by higher tax, contract acquisition and employee medical payments. We expect full-year contract acquisition payments to be approximately $20 million.

2016 capital expenditures are expected to be approximately $43 million, or the same as 2015, as we continue to invest in key revenue growth initiatives and make other investments in order fulfillments and IT infrastructure. Depreciation and amortization expense is expected to be $95 million, including approximately $48 million of acquisition-related amortization.

For the third quarter of 2016, we expect revenues to range from $456 million to $464 million. Adjusted diluted earnings per share are expected to range from $1.17 to $1.22. In comparison to the second quarter, we expect earnings per share to be around flat at the midpoint of our range, primarily driven by higher small business services revenue partially offset by higher brand awareness spend.

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 transformation. Additionally, we expect to continue paying a quarterly dividend and periodically repurchase common stock. To the extent we generate excess cash, we plan to reduce the amount outstanding against our credit facility, and we may from time to time consider retiring additional outstanding debt through open-market purchases, privately negotiated transactions or other means.

We believe our increasing cash flow, strong balance sheet and flexible capital structure position as well to continue advancing our transformation.

I will conclude my comments with an update on our cost and expense reduction initiatives. Overall, we had a solid quarter as we basically delivered on our expected costs and expense reductions towards our $50 million annual commitment net of investments. Approximately 50% of the $50 million in expected reductions will come from sales and marketing, another 35% from fulfillment and the remaining 15% coming from our shared services organizations. Our focus in sales and marketing for 2016 continues to be on sales channel optimization, platform and tool consolidation, leveraging sales and marketing efficiencies including integration from recent acquisition.

In fulfillment, we expect to continue our lean direct and indirect spend reductions, further consolidate our manufacturing technology platforms, drive delivery technology and process efficiencies, reduce spoilage, further enhance our strategic supplier sourcing arrangements, and continue with other supply chain improvements and efficiencies.

Finally, for shared services infrastructure, we expect to continue to reduce expenses primarily in IT, but we are also working opportunities in finance and real estate.

And now, I'll turn the call back to Lee.

Thank you, Terry. I will continue my comments with an overall market perspective and implications for Deluxe, an update on MOS revenue, and then highlight progress in each of our three segments using our eight strategic initiatives for a perspective on how we progressed in the second quarter, and then what we expect to accomplish during the balance of 2016.

From an overall macroeconomic perspective, clearly pressures continue, with challenges from a sluggish US economy; Brexit; volatile energy, oil and gas prices; and strength of the US dollar, as well as an uncertain central bank policy. And not to say we are completely immune to these pressures, but we believe the direct impact on us is insignificant.

We have developed an incredible execution-oriented culture that has operated through various market environments and has delivered strong top- and bottom-line growth for the past six years. We have built our business on large-size markets and relationships in the small business and financial institutions spaces with broad, robust and growing product offers that we believe sets up -- sets us up extremely well for 2016 and beyond.

As we have continued to grow marketing solutions and other services revenues, both organically and through tuck-in strategic acquisitions, our revenue mix is significantly diversified now. This has also positioned us to be a solutions-based provider to our customers. Our solutions allow us to address the broad range of our customers' needs and pain points, further enhances Deluxe as a trusted partner, and deeply embeds us in their workflows and ultimately leads to sticky relationships.

We expect to increase a broadening and more highly diversified marketing solutions and other services revenue stream to 34% of total revenue mix in 2016 towards our goal of MOS representing 40% of revenue by 2018. Within MOS, we also expect over 10% of total Company revenue mix to be in the even higher-growth multiple fin tech spaces.

In summary, given this perspective, we believe that the market is not fully understanding or valuing the exceptional strength and positioning of Deluxe right now.

Here's an update on our four subcategories framework for marketing solutions and other services. We ended the second quarter slightly below our expectations and revenue, with the mix slightly lower in other financial services and small business marketing solutions.

First, small business marketing is expected to represent approximately 40% in 2016, with expected growth of approximately 18% to 20%. Key 2016 revenue growth initiatives include profitably scaling integrated marketing on-demand solution offers with the largest opportunity in major account verticals including retail, health care, financial services, hospitality, service franchises, automotive, real estate and telcos. We also see strong growth opportunities in promotional products and holiday cards, and specifically in distributor, dealer and major account channels.

The second category, Web services, which includes logo and Web design, Web hosting, SEM, SEO, email marketing, social and payroll services is expected to represent approximately 19% in 2016, with expected growth rates in the mid-single digits. Key 2016 growth initiatives include scaling Web services offers through our Deluxe marketing suite across all customers and channels, delivering partnerships and acquisitive opportunities that both double down on existing capabilities and address gaps within our portfolio. We expect to close 2016 with nearly 1.05 million Web hosting customers, an increase of 11% from 2015.

The third category -- broad security risk management and operational services are expected to represent approximately 13% in 2016, with expected low single-digit declines. Key focus areas for growth in this category in addition to our standard fraud and security offerings include performance management by adding Banker's Dashboard customers as well as strategic sourcing new financial institution wins. In addition, we continue to see growth from scaling e-checks, including scaling in many areas where we do not sell paper checks today.

Finally, other financial services -- our other financial institution services are expected to represent approximately 28% in 2016, with expected double-digit growth rates. Key growth initiatives here include scaling Wausau, Deluxe Rewards and Datamyx.

We expect marketing solutions and other services revenues to be approximately $620 million to $630 million in 2016, up from $532 million in 2015, with growth about 16% to 18%. If achieved, this performance would translate to a total revenue mix of around 34% of revenue and up from almost 30% in 2015 and 26% and 22% the previous two years.

We continue to target increasing marketing solutions and other services as a percent of total Company revenue to approximately 40% by 2018, with checks expected to represent approximately 40% of revenue and forms and accessories expected to represent approximately 20% of revenue.

Now shifting to our segments. In small business services, we have five strategic focus areas for 2016. Before I review these, including accomplishments in the second quarter and opportunities through the balance of the year, here is a brief small business market and optimism index perspective.

As expected, we did not see any notable improvements as the economic climate for small businesses remained sluggish. Optimism indices improved in very small increments monthly through the second quarter, ending at 94.5 and at the highest level this year, but remained well below the 42-year average of 98.

Small businesses generally remain in maintenance mode experiencing little growth, although the outlook for business conditions six months out continues to improve. In summary, small business optimism showed modest improvement in the second quarter, so hopefully an encouraging sign for small businesses as we head into the second half of 2016.

The good news is that increasing sales continues to be very high on the list of small business owners' pain points, and our portfolio is significantly robust with many offers to help them here. As 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 is that indispensable partner for growth.

Now on to our focus areas, which I will review from largest to smallest by revenue. First, Operate Your Business products including checks, forms and accessories. Our primary focus is on driving customer acquisition and retention and improving distributor channels, processes and profitability. We ended the second quarter about on our expectation for checks, forms and accessories revenue. We made progress in improving distributor channel processes and profitability, but we have more work to do here in the balance of the year.

Second, Market Your Business products, which includes small business marketing solutions. Our focus here is on profitably scaling integrated marketing on-demand solution offers with the largest opportunity in major account verticals including retail, health care, financial services, hospitality, service franchises, automotive, real estate and telcos.

Second-quarter revenue was lower than expected at the high end of our previous outlook, driven by some major account rollouts that are still expected to recover and ramp in the second half of the year. We also learned that one of our largest retail vertical major accounts is expected to significantly increase their business with us over the next three years.

Third, Market Your Business services including Web services offers -- and where our focus areas are improving operating income by optimizing product portfolio channels and operations, delivering partnerships and inquisitive opportunities that both double down on existing capabilities and address gaps within our portfolio, and providing our integrated Deluxe Marketing Suite across all customers and channels.

Q2 set another logo record, eclipsing last quarter's record by 23%. We also saw a continued strong cross-sell ramp in logo customers who became Web design customers as well, with all marketing services offers now being fulfilled through our Deluxe Marketing Suite.

We also added more cPanel capability through another very small tuck-in acquisition where we simply migrated customers into our technology at strong operating margins.

Fourth, Operate Your Business services, which includes primarily fraud and security, e-check and payroll services, and where our focus is on scaling e-checks, assessing adjacent offer extensions like checks and e-checks for e-deposit, variable check printing, and remotely created checks, and payroll time and attendance tracking, as well as continuing to evaluate potential partnership and acquisition operating services opportunities.

Q2 was our best quarter ever for e-checks, and we continue to progress opportunities with financial institutions, medical and insurance payment processors, accounting services, software providers, and other document management and payment solutions companies.

The fifth small business services focus area is continuing to improve brand awareness. In 2016, we are telling more stories and packaging great advice for small business owners. The public selected Wabash, Indiana, as the winner of a small business revolution Main Street contest. We just completed last week the revitalization to their main street business community and upgrades to their public spaces. All of this will be showcased in a new Web series debuting on Smallbusinessrevolution.org in the fall of 2016. In every episode, experts from Deluxe help one small business conquer commonplace marketing challenges by providing services such as logo design, building their website or email marketing. Deluxe will also continue to work with Robert Herjavec's investments he makes through Shark Tank. The marketing help and expertise Deluxe provides these entrepreneurs will be featured as case studies on the Deluxe blog. These behind-the-business videos will be featured alongside a host of other small business resources. We see these efforts as a great platform to continue to increase our brand awareness with the small business community.

We also further enhanced our partnership with CNBC, where we will serve as an integrated marketing partner for a new series this fall called Cleveland Hustles, where Lebron James and his team will invest in and mentor small businesses through the help of partners like Deluxe.

In financial services, we have three strategic focus areas for 2016. First, retail banking which includes checks, marketing services, and rewards and loyalty. For checks, our focus is on improving retention rates and gaining share. In the second quarter, we saw the rate of decline of checks performed better than expected at only around 4%, driven by stronger performance in the mid- to lower-tier financial institutions space. We do not expect this decline rate to continue for the rest of the year. But we now expect the decline rate to be 4% to 5%, compared to our previous outlook decline rate of 5% to 6% for the year.

We had strong overall new-acquisition rates, and our retention rates were very strong on deals pending in the current quarter. We simplified our processes and took complexity out of the business while reducing our cost and expense structure. We have now extended all our large contracts through at least year-end 2016. And compared to the end of the second quarter last year to this year, we have about 25% fewer bank contracts left to renew, and we have more competitive opportunities coming up.

For marketing services, our focus is on leveraging Datamyx, data and analytics together with marketing services campaign execution to accelerate outsourced campaign targeting and multichannel execution.

Datamyx revenue was below our previous expectations in the second quarter, and we expect this will continue through the balance of the year. The revenue shortfall was primarily driven by current softness in the alternative consumer online lending market, which has experienced tremendous growth over the last several years. However, this lending segment has seen a pause in growth, and this is translated into a pause in marketing to consumers, which is where Datamyx fits in as a provider of prescreened direct mail to lenders who then find consumers who are a match for their products.

As an example, mail volumes in May for the largest marketplace lenders were one-third of the levels seen in the first quarter. Datamyx will continue with our diverse approach to vertical markets including mortgage lending, automotive finance, home equity, student loans, card, banking and insurance. We will continue to serve and monitor the online lending market segment, but our exposure here is minimal now, and yet we are still very bullish on not only this space longer-term but also the data and analytics space overall.

For rewards and loyalty, our focus is on profitably growing Deluxe Rewards revenue, which continued to perform very well in the second quarter.

The second FS strategic focus area is commercial banking and includes treasury management with our focus on profitably growing Wausau revenue and assessing and executing tuck-in acquisitions, along with assessing other adjacent opportunities in commercial banking. In the second quarter, revenue was strong, slightly exceeding our expectations.

The third FS strategic focus area is performance management and includes scaling Banker's Dashboard and strategic sourcing. Performance management revenue was slightly below our expectations for the quarter, driven by shortfalls in strategic sourcing.

For 2016, we expect marketing solutions and other services revenues to be approximately 43% of total FS revenue, with the following at the midpoint of the FS revenue range. Marketing services including Datamyx, $51 million; rewards and loyalty, $33 million; fraud and security, $24 million; treasury management, $93 million; and performance management including Banker's Dashboard and strategic sourcing, $15 million. We now expect Datamyx revenue to be approximately $38 million in 2016, down from our previous outlook of $44 million, with strong double-digit EBITDA margins, and we expect Datamyx to be about neutral per share from an EPS perspective.

In direct checks, revenue slightly exceeded our expectations. We continued to look for opportunities to provide accessories and other check-related products and services to our consumers as well as work on a number of initiatives to create an integrated best-in-class direct-to-consumer check experience.

We continue to see a ramp in revenue-enhancement synergies through our call center scripting and upsell capabilities as well as synergistic costs and expense reductions.

For 2016, we expect direct checks revenue to decline in the 7% to 8% range, driven by continued declines in consumer usage in a sluggish economy. We anticipate that marketing solutions and other services revenue, which is primarily fraud and security offers for this segment, to be about 10% of direct checks revenue. We expect to reduce our manufacturing costs and SG&A in this segment and to continue to deliver operating margins in the low to mid 30% range while generating strong operating cash flow.

As we exit the first half of the year on the heels of a strong performance and a continued sluggish economy, we have made tremendous progress in transforming Deluxe. But we still have many opportunities ahead of us in 2016 as we position ourselves for our seventh consecutive year of revenue growth. Despite the sluggish economy, our financial discipline has enabled us to invest in people, technology, products, services and our brand in order to position ourselves for sustainable revenue growth while continuing to improve profitability and operating cash flow.

Our technologies and sales channels are stronger. Our digital technology services offer is more mature; our infrastructure, better; and our management talent is deeper and aligned to grow revenue. We know it is critical for us to be able to grow revenue again in 2016 and improve the mix of our marketing solutions and other services revenue, and we are well-positioned to make this happen.

We have developed a strong platform for long-term growth with the objective of transforming Deluxe to more of a growth services provider from primarily a check printer, thereby changing our product mix and resulting stock-price multiples.

Now Andrew, we will open the call up for questions.

(Operator Instructions) Josh Elving.

Hey, good morning. Can you talk a little bit about acquisition activity in the quarter? I think around $22 million -- can you break out what -- or at least offer some more information on what those might have been, what segment they were in and if there is any revenue associated with them over the balance of this year?

Yes, as we said in the prepared comments, it's really in the small business services space. We did some tuck-in acquisitions in areas that we have been focusing and highlighting, Josh, principally in the Web hosting cPanel of those spaces. That's where most of the activity occurred.

We also -- remember, we also have been involved in a process that we look at the distributors that are out in the network and whether or not it makes sense for us to buy some of those distributors back. There really isn't any revenue enhancement opportunities there. It's really a smart process of profitability play. If there's opportunities, we did some of that as well in the quarter. So that's the primary spend.

Okay. Sorry I missed that. A lot of information you guys provided, which is great. I believe, then, probably some of those acquisitions are causing you to increase the small business component 5% to 6% from 4% to 5%. Can you talk maybe a little bit about the organic growth rate currently? How would you describe that today in small business?

First of all, we have raised from 4% to 6% to 5% to 6%. So what we did, Josh, for small business services is we raised the bottom end up slightly. And you would think, geez, we just came off a 2%. And I think for the first half, we grew 4.7%.

So, yes, we expect to have a stronger second half of the year, with the biggest strength in the fourth quarter principally because we get into seasonality -- the only kind of seasonality we have is in the fourth quarter with our retail packaging and our holiday cards and some of that other business. So we expect the growth rate in the fourth quarter will be even bigger than the growth rate in the third quarter there.

So, that's how to think about it. Organically, I don't know, Terry, if I have a number. It would probably be in the very low single digits in the year. So, I would think if we're going to grow 5% to 6%, it would probably be in the 2% to 3% overall organically for the year.

Great. All right. Thank you very much.

Joan Tong, Sidoti and Company.

I have a couple questions here. I guess on the check side -- the check business or segment within financial services, it seems like the decline rate has been stabilizing, so actually coming down. The first quarter we saw that, and this quarter it seems like also the case. So I was just wondering have you examined any possible reason for that?

It surprised us again, Joan. We've had two quarters now in this 4% range. We are looking at every -- talking to the financial institutions. We are looking at what are consumers writing checks for. We have seen -- interestingly, one of the things we saw from a study that we did in April is that we are seeing a little bit of strength over the prior year in the retail space. So, think of consumers that write a check for some type of a retail store or some type of a retail engagement. We continue to see positive trends or not declining trends in things like checks that are written to charities and gifting, which again is a lot of where we get our check business from today.

So, we have done some more study work, Joan, on where do we think this is going to go from here. As we've talked about on previous calls, we continue to look at statistical methods and metrics tied to things that are public markers. Things like housing stock, housing starts, which generally have been pretty positive for us as well. So, if you add all those things together, we're just seeing a little better strength there.

Again, we have guided now 4% to 5% for the whole year, so we're not expecting the 4% that we saw the first half of the year kind of collectively to stay the same. But we are also not expecting it to run away and get a lot worse at this point.

Okay, okay. That's good. And how about the e-check? You guys rolled that out a couple quarters ago. What's the progress there? Any new accounts? It seems like the pipeline was very strong in the beginning. Can you give us an update?

Yes, the pipeline is still strong. As I mentioned in the prepared comments, we set another record this quarter. You are still talking small numbers here, but we continue to get our -- think of it as kind of our small business core customer base to be buying more e-check. We also continued, as I mentioned in the prepared comments, in other areas like the medical and the health area where a lot of paper check traffic is today, that we don't really do any of those checks today. Also, companies that do accounting services and outsourcing for small businesses that write checks and send checks, we are continuing to make progress there.

So, yes -- and the other thing is we continue to see more and more banks, including banks where we are not the check print -- paper check provider today, that their customers -- their small business customers are using e-checks more and more.

So, we continue to be encouraged. We've got statistics, Joan, around most of these other companies that have rollout the PayPals and the Venmos of the world and what happened early on. I don't have the numbers. I don't know, Ed or Terry, if you have the number of how many dollars of transactions that we have. Either of you guys have that?

I know at the end of the year, it was over $1 billion transaction.

Yes. So you can see, we are starting to get some meaningful scale with people that are writing e-checks and the amount of dollars transacted, Joan, on those.

Okay, okay. That's fair. Then, I think I recall some of the conversations that I had with you guys earlier and maybe in the past couple of months, there was a particular interesting initiative in the small business segment. I believe you talked about the cross-sell integrated customer platform. It's a technology platform. It's a one-stop shop. I think you were beta-testing that. Can you just give an update? I just want to make sure I am saying the right thing, obviously, because like -- there was an initiative last year, and then I believe that last quarter you mentioned something similar. I'm not sure if an extension or something newer. Just can you elaborate that a little bit more?

Yes. And we did an (inaudible) -- let me just clarify what we said and just try to add some additional color for you, Joan. We're calling this the Deluxe Marketing Suite. And if you think about all the services that we offer today, it starts with logo design, servicing capability, Web design, Web hosting, email marketing, search -- search engine optimization, think of those kinds of services now all falling in and being fulfilled out of that suite.

What we are tracking right now is if somebody comes in -- and our primary focus has -- I'd say our focus has changed a bit in a positive way to start where small businesses start with us. So, generally they're going to start when they get themselves in business and they want to brand themselves through a logo. So we've been seen, as we reported today and then last quarter, nice run-ups in the growth rate in logo.

Once they get a logo and they get comfortable, they start putting it on multiple other things. So, I'm staring at a water bottle next to me that's got a logo on it. We can put a logo on somebody's -- something like that for a small business owner. Then what they do is they generally tend to move into Web design and Web hosting. And we are -- as I mentioned on the prepared comments, we are seeing small businesses now proliferate out of just logo and then now moving into the Web design and the Web hosting space as well.

So, what we're wanting to happen is all this stuff is happening. And in the third quarter, we will be -- by the end of the third quarter, we will be releasing something that we are calling right-time engagement or right-time marketing. What we want to be able to do within there is once they are in buying those various services from us, we want to be able to help them as they continue to look at what other things can they do from a marketing perspective that is going to help them out. And clearly, there is more -- and on the second-half-of-the-year ramp in small business revenue, we believe is going to come from getting more help in this space as well.

So, yes, we remain very excited about it. We are making all our gates and dates. My development team, hats off to all of them. They are doing a super job with all of the point releases. Think about it that way, Joan, as we continue to move this forward. So hopefully that helps.

Yes, yes, definitely helps. I just want to get sort of an update like what's going on there.

And then -- okay. Finally, regarding acquisitions, another high-level question already being asked. But I'm just looking at small business segments. Obviously, there's some volatility from one quarter to the next. But in general, you're still looking for 4% to 5%. And a lot of acquisitions you made in the past two years is more on the fin tech side. Do you think that we would see some sort of maybe stepping up in activities in the acquisition activities in the small business segment? And maybe consider making a -- like a little bit bigger acquisition than all these like very small tuck-ins?

What I would tell you is that, as we said in the prepared comments as well, we are very focused in small business in really two primary spaces -- both the Web services space. But the Web services from a -- more the marketing services part of that. And then we are also looking at is there operating services things either that we can partner with to help small businesses as they operate themselves -- their business in the payroll services space. Those are the areas that we are targeting either for partnerships or acquisitions.

Then in the fin tech space, as we again -- we tried to be clear in the prepared remarks, we are also still looking at and see an opportunity really in the treasury management space to do more. So, think of it as extensions from Wausau like we did with the FISC deal last year in December. And then we love the digital -- I mean, we love the data and the analytics space. And we're looking at are there other opportunities on top of the Datamyx opportunity.

Would we -- I don't know your definition of big versus ours, but I would tend to think of them right now, Joan, in how we kind of worked it is more programmatic deals that we keep executing on.

Okay. All right. That's fair. Thank you, guys.

Tim Klasell, Northland Securities.

On the prepared remarks -- I heard the prepared remarks -- you are going to spend a little extra on brand marketing. And wondering where you are spending it and what type of customer you are going to try and target with that -- with the increased brand. Thank you.

In the prepared comments, Tim, I talked about the small-business main street makeovers. So we just -- in the last week, actually, finished the work in Wabash, Indiana. It's a wonderful small town. And we sent our whole team down there, and we basically took and made over about six to eight businesses, helping them improve their marketing. And we also then did a bunch of seminars and down -- with our people in the town itself. And we just got an incredible, positive reaction to the work that we did.

And what we're going to do is we're going to translate all that into this production in the balance of the third quarter. And it will be a big-time hit in the fall where we are going to go online with my team and with Robert Herjavec into this Web series. We will be showing small businesses what we did there and then engaging them in how they can improve their marketing as they move forward. We think that this is going to create a wonderful opportunity for us to get Deluxe out there and known better for the capability that we have here.

And, as I announced today, we are doing another thing now in the fall. People tease me because it's in my hometown of Cleveland, Ohio. But we're going to work on a program called Cleveland Hustles, and I think it's out in the late August and it will go into the October time frame. And we are going to work with Lebron James and his team with small businesses in the Cleveland and Akron, Ohio, area and help them with marketing as well.

So, think of it as people, production, all things that will get refined and shown and then produced and be on various medium, including the Web, and it will be all over Smallbusinessrevolution.org. So, that's what we're trying to do. We love the initiative; we love the work. The responses that we've seen so far, Tim, have been phenomenal.

Okay. Great. And just a quick housekeeping. On check side, how is the pricing holding up particularly for any of the new banks that you sign up?

Pricing has been really stable there. You know, the past couple of years, we have rolled out our price increases, Tim, around the beginning of the year. And, again, each time we do that, there's a lot of work with the banks. So, it's not a new event. But as we are a couple of quarters past that last price increase, our patterns for how that's holding up is just spot-on to our expectations.

Okay. Great. Thank you very much, guys.

Charlie Strauzer, CJS Securities.

Most of the questions have been answered. Just wanted to touch base on the financial services side. When you look at the Deluxe Rewards and Wausau particularly, just some more color there as to how those businesses have been performing lately. And also some of the sales initiatives that you have going on there that ramp future new customer sales and kind of what's the approach there.

Yes, let me talk first -- in the order you asked. Deluxe Rewards, we had -- as I've mentioned in the comments, we had another very strong quarter. We continue to not only roll out the initiatives that we have with the customer base that we have already. So, think about it, Charlie, as the Verizons and the Citis of the world. But we also have the ramp going on with Allstate, and we are working -- I would call it additional pilot work now with other financial institutions and other big vertical companies that we expect will turn into larger rollouts as we progress over time. That's the history of how these have worked historically, and I think it will continue that way.

Wausau is just doing super for us. First of all, you didn't hear us talk about FISC today other than Terry had to call it out, I think, as a separate comment because we've got it fully integrated in. And the team is doing great. We grew the business nicely. As I said in the prepared comments, it grew a little bit higher. You'll notice that we raised the treasury management area in terms of the full-year revenue now.

We've got more customers, we have more opportunities not only in the core remote to positive capture, but really in the integrated receivables areas. And this is an area that we're looking at -- as some of the previous questions here -- as nice tuck-in opportunities. Smart things that we can bolt on to what we're doing, quickly get them integrated, leverage technology, leverage customers, leverage capabilities. So, I feel really good about this one. It has delivered for us, and I am very bullish as we move forward, Charlie.

Great. And then just touching bases more on the marketing spend that you have been highlighting a lot. Have you seen -- now that you have been doing some of this for a while now, have you started to see any kind of noticeable pickup in call center activity or new leads activity?

Yes, keep in mind the first thing that we're trying to do with this thing is just get the Company out there from an awareness standpoint. Our principal objective with all this is we've got to get people to think of us as -- and funny that somebody the other day told me they were in a meeting, and it was one of my talent director. And she said she was at an event, she was presenting and somebody said, do you know who Deluxe is. And she said the person raised her hand, not the check company. And it was all about marketing and what we're doing.

So, a lot of this is to try to get the outside world to understand that there's a lot more here than what we're doing. And one of the things you're going to see us do here is we will take, Charlie, and go from the Deluxe.com site to what we call a content hub and show all the capability that the Company has before we just automatically try to move somebody down into trying to sell them a logo or sell them a website or whatever. So, all that is a building proposition for us and the importance of the brand and the marketing work that we're doing around it.

I can tell you one thing -- if you put a phone call into anybody in Wabash, Indiana, right now, they know who we are. And we're going to -- it is another area we're going to look at -- are we seeing more activity and more penetration, more site, more things coming into our site, more business from those ZIP Codes.

So, that's the way to think about it. Hopefully that gives you a little help and a little more color.

Excellent. Thank you.

Thank you. This now conclude our question-and-answer session for today, so I would like to turn the call back over to Lee Schram for closing remarks.

I just want to thank everybody for your participation, and thanks to all the analysts for their questions. And I want to summarize the quarter in three points. First, we delivered another strong quarter. Second, marketing solutions and other services revenue grew 16%, and we did improve our mix again towards our goal of 34% of total Company revenue this year and on towards that 40% goal for 2018. And we had a strong first half of the year. We believe this propels us towards revenue growth again in 2016 for the seventh consecutive year.

So, as I normally say, we're going to roll up our sleeves; we're going to get back to work. And, again, we look forward to providing another positive progress report on our next earnings call. And I will turn it over to Ed for some final housekeeping.

Thanks, Lee. Before we conclude today's call I would just like to mention that Deluxe management will be participating in a few upcoming events in the third quarter where you can hear more about our transformation. On September 13, we will be in New York at the CL King Best Ideas conference. And in on September 14, we will be in New York at the Credit Suisse SMID conference.

Thanks for joining us, and that concludes the Deluxe second-quarter 2016 earnings call.

Ladies and gentlemen, thank you again for your participation in today's program. This now concludes the conference, and you may all disconnect at this time. Everyone have a great day.