Okay, good afternoon, everyone, and thank you for participating in the 22nd Best Ideas Conference here at C.L. King. My name is Dave Silver. I'm the director of research and an equity research analyst here, and we're very pleased to be hosting a Fireside Chat with the management of Deluxe Corp. Representing the company, we have the CEO, Mr. Barry McCarthy. Chip Zint is the Chief Financial Officer, and Brian Anderson is the VP of Strategy and Investor Relations. So just a comment on the format. I will turn the floor over to Barry and Chip for some opening remarks. I'm gonna follow with a series of questions. If you do want to ask a question, please type it in the box on your webpage. Alternatively, if you prefer anonymity, total anonymity, you can send an email to me at dsilver@clking.com, that's D-S-I-L-V-E-R @C-L-K-I-N-G.com. All right, with that, I'm gonna turn the floor over to Barry and Chip for some opening remarks. Gentlemen? Thank you, David, for the opportunity, and hello, everyone. I'm Barry McCarthy, and I want to tell you a little bit about our company, Deluxe, because I'm guessing for many of you listening in, the company is a very different story than you may have known even just a few years ago. The company's been on a fundamental journey, a transformation journey, to become a payments and data company, leveraging the company's history with financial institutions and in the paper check arena. Today, the company, almost half of our revenue comes from our future state digital businesses, which are B2B payments, merchant account processing, and data-driven marketing. The other half of our company are the legacy print assets, check, and promotional products. Our strategy is very clear, to take the relationships we've built over a hundred years in the legacy print business and some of the cash to invest in our growing data and payments businesses, and we're very pleased with our progress and success. We also are in the middle of an initiative we call the North Star project, which is both revenue and cost control. And we've promised, it'd be an Investor Day about nine months ago, that by the calendar year 2026, we would add an additional $100 million of cash flow, which is more than doubling the cash flow of the company and significant increase in EBITDA and all the related metrics. We think the story has become an exciting story for the future because of the company's growth trajectory and our ability to generate free cash flow while transforming the company into a payments and data company. Do you want to add anything on that? All these pieces are coming together to deliver what we call our value algorithm, and that is that we'll be a consistent low single-digit revenue grower with EBITDA margins and EBITDA dollars growing faster than revenue, delevering the balance sheet, free cash flow conversion improving, and ultimately leading to at least 15% compound annual total shareholder return. So we feel like we're on a great trajectory to create a lot of value to shareholders, and we're pleased with our progress. All right, thank you. You know, maybe I'll just pick up with your comments on North Star. But, you know, your company, under your leadership, Barry, Deluxe, has undergone steady reshaping and restructuring over the past several years, which we consider a function of several factors, including an evolving small business environment, industry consolidation, expanding digitalization, and, you know, as you have cited in the past, at least at the beginning, likely a somewhat overly diversified business mix. So the company has launched and is executing its North Star program, a multi-pronged, multi-year effort, which aims to structurally improve underlying profitability and cash flow. So could you maybe drill down on some of the key aspects of the program and your measured progress to date? How is North Star a natural progression from your previous round of reshaping efforts that you carried out under the One Deluxe banner? Sure. So, David, let me give you a part of that answer, and then I'll have Chip sort of fill in some of the financial details. But you are right, David. For those that are not familiar with the story, the company had diversified its portfolio quite dramatically, acquiring over 50 different assets over the seven years or so before I joined and Chip joined the company. And we've been very diligently changing the portfolio, selling quite a number of those assets to get the company very focused on three things where we think we have great growth prospects and the right to win, which are data-driven marketing, merchant services, and B2B payments, really accounts receivable and payables. North Star simply extends all of the work and puts it in an integrated whole that is already underway on that transformation. And it literally touches every aspect of the company's business, from balance sheet optimization, real estate optimization, how we go to market and how we sell, how we develop products, how we acquire inputs to the company, and all of that is designed to do two things, which is the promises we made at the investor conference about nine months ago, which is to accelerate the rate of growth of the company, improve the cash flow of the company so we can accelerate debt reduction and improve our leverage ratio and deliver a great shareholder return to our investors. We have made great progress, and we believe we're on or ahead of path for what we promised just nine months ago. And believe that the growth that we're going to be delivering in our businesses, as well as the work we're doing to improve our efficiency, will help us deliver those goals. Yep, and the program really has two clear, simple goals. The first is to drive $130 million of total EBITDA improvement so that we can offset secular declines, and it will net to $80 million of run rate incremental adjusted EBITDA by 2026. In addition to that, the goal was to add $100 million of run rate free cash flow to the business starting in 2026, with a step function improvement expected next year. So we're very focused on the cash flow improvement, as Barry said, along with the profitability and revenue growth trajectory, and the strategy is all integrated, and it's going well. Okay, great. Maybe just from another perspective, but Deluxe completed its third consecutive year of organic growth in 2023. You know, successfully offsetting secular declines within the legacy check business via growth across, most notably, your payments and data businesses. So could you just update us or tell us a little bit more about the recent journey that Deluxe has been on, in particular, driving towards those, you know, desired long-term results and trends? Sure. Perhaps the most important asset the company has, besides cash generation, are the relationships we have with thousands of our bank partners and millions of small businesses. Through those relationships, we have the right to deliver additional products and services. We are trusted by all of those customers, and we have found a way to cross-sell our products and services across the portfolio. We acquired our merchant business in June of 2021, with one of the fundamental theses being that we could take that product set and sell it into our existing customer base to accelerate growth, and that's exactly what we've delivered. We took the business that was a low single-digit grower, and as you've seen, David and others, that business is growing in the mid to high single- digits on a running basis, and we've had periods where it's been even double-digit growth. It's proof that the power of the relationships that are inherent in our company as a result of our hundred-year legacy with financial institutions and small businesses we can actually convert to new revenue. We have the model that we run, which we call One Deluxe, which means that the entire organization has a working understanding of the core products and the core features that we offer to the marketplace. We have salespeople that knock on doors, of course, that have an existing relationship or create a new relationship, and they know enough about our portfolio to get in the door, start a conversation, and bring an expert with them for the next call to help drive that opportunity to closure, and that is what is delivering this organic growth for the company, where we are t he new businesses are able to grow fast enough to offset the legacy check and the promo businesses. It's just a fundamental shift from where we were before. Barry alluded to it, but the legacy of the company, the print business, which is a slightly larger share of the business, it is in secular decline. The long-term goal is to make it decline roughly low single- digits, hold on to the cash flow, continue to leverage the relationships to grow the other side, and just really run that effectively. The growth businesses, the three growth businesses each play in large, growing target markets where we have a strong right to win, and they can each grow somewhere between mid-single- digits all the way up to low double digits with execution over time. We feel great about the path we're on, and like I said, that all comes together in our value algorithm. As those growth assets grow faster and become a bigger share of the company, our ongoing organic growth rate should be able to accelerate. So what may be 1%-2% growth trajectory now, based off the size and ratio of the business, can grow to be more like a 2%-4% growth rate over time. Blended growth, I guess, right? That's just including the potential further declines, you know, on the legacy check business. Okay. Next question would be about the payments outlook and the growth drivers there, but it's been a bit more than, I think, three years since Deluxe paid nearly $1 billion to acquire the First American Payment Systems omnichannel payments platform. So the transformative acquisition positioned your company as a scaled and leading provider in the high secular growth merchant services market, and what strategic initiatives have you implemented to continue to drive incremental payments growth on this platform, and what are, you know, your multi-year growth objectives there? So David, we're very, very proud of how that asset has performed. The fundamental thesis of that business was that within Deluxe, it would grow much faster than as a standalone company. Before we acquired it, it was growing in the low single- digits, and it's now a reliable mid to upper single- digit grower, again, with periods of time where the business grows in double digits.... We've achieved that growth primarily by turning on our cross-selling capability through the One Deluxe model that we've already talked about. But we haven't stopped there. We've also made responsible investments in the infrastructure there, specifically in something we call the Deluxe Payment Platform, that allows omnichannel merchants, those merchants that have multiple types of storefronts, physical and virtual storefronts, to have an integrated approach to managing their online payments. We are very pleased with the progress there, and we think it opens up additional avenues for product-related growth as well as the sales-related growth potential that we're already unlocking. Yeah, we've done a good job making smart investments in the product, expanding its capabilities, and helping grow the sales engine so that we can invest in new verticals, integrated software vendors, and just continue to accelerate the strategy away from, you know, boots-on-the-ground independent sales organization, more to kind of a self-fulfilling, kind of omnichannel growing organization. Okay, I guess could shift over to the Data Solutions side. But Data Solutions has been the segment that has recently experienced amongst, you know, the strongest adjusted organic growth in your company, with pretty healthy adjusted EBITDA margins as well. Can you just, discuss the broad trends supporting continued growth in your data-driven marketing product line, and what is your strategy to further accelerate growth and development of this business? And then maybe, you know, how integrated is this with the other DLX unit, Deluxe units? In other words, is cross-selling of DDM, you know, predominant or, you know, is DDM attractive to customers just on its own? So maybe just characterize the nature of the growth, if you could. Sure. David, first, let me just answer what the business is and what it does, and then I'll talk about the growth prospects, and then I'll let Chip talk about the financial side of it. So what this business does is we help businesses find their next customer. We have built what we believe is the largest and most comprehensive database of individual consumers and small businesses in the country. We ingest over a hundred different sources of data, so quite literally, we know defining characteristics of most people in the U.S. and most small businesses. On top of that database, we have a series of AI-based tools that query the database and help put together a target lead list based on what the customer's potential target audience looks like. We are very effective at it. Most of the major banks are our customers, as well as property and casualty insurers, home automation companies, unregulated utilities, online retailers trying to have more of a physical world presence. Those are all market verticals where we compete and we win, and we win, quite regularly by going head-to-head against other folks that have something that tries to compete with the scale and scope of our data and AI tools. The business can be a bit lumpy because it is based on what happens in any individual quarter, is based on what the companies are trying to do and when they want to send an offer. Is it at the end of one quarter or the beginning of the next quarter? And you saw that this year we had a very large Q1. We had a decline in Q2, which was expected, but we think over if you look at a couple of successive quarters, you can see the trend line of this business through that lumpiness, and that business is a mid- to upper single-digit revenue growth business. The way that business continues to grow is not only to penetrate more deeply in the financial institutions where we have relationships, but also add additional market verticals to take advantage of this very, very robust data set we have and the AI tools that sit on top of it. Anybody that has a high lifetime value for their customer is a great target for this product, and that is why the product wins, and particularly in the market verticals I've already described. You want to talk about margins and. Yeah, no, I think you hit it well about the group itself. So we've made very smart investments in the platform. So when it comes to the data delivery, the data platform itself, that does all that processing, that's a relatively fixed cost. We've made all the major investments. So it's really about investing in the sales capability of the human capital to go deliver more for more clients. And so because of the nature of the campaign, some campaigns get delivered with a heavy mix of data, some are data plus print, mail, email, all the different digital aspects as well, so the campaign margins can vary. Over the long term, we feel like it's a business that'll normalize in the low 20% range, with a bit of a few hundred basis points of margin expansion, potentially over time, as the business goes, grows scale and data becomes a bigger share of it. We did a very good job this year in particular of managing a good campaign mix, as well as finding some one-time cost improvement initiatives that have expanded margins. But we believe over the next few years, it'll normalize towards our long-term goal, continue to grow in the mid- to upper-single- digits trajectory, and just continue to get scale. And over time, as the business gets more scale, it shouldn't be as lumpy as it appears to be today. And as Barry said, that trend line will become evident. We have a lot of high confidence about our right to win in this space. Okay, very good. I'd like to maybe just ask you something about a topic that I think came up. You just mentioned it here, but it also came up, I think, in the second quarter conference call, and that was kind of transitioning some of your customers from maybe a transaction-based relationship to more of a SaaS or a subscription-based model. Can you talk about some of the challenges, you know, just with your typical customer base in, you know, making that desired kind of longer term conversion? And you know, maybe just chart the progress to date and how that's going. So David, I'm gonna start again with, just a bit more color on what the business actually does. So what we're specifically referencing there is our B2B business, which is really about digitizing accounts receivable and payables. The company really has two halves of our B2B business. One half is a software business that has eight individual modules that a business would buy to help them manage their receivables, specifically. Everything from lockbox management, remote deposit capture, archiving, disputes, reconciliations. These different modules solve different problems for mid-sized businesses, and that's what the software does. Sometimes businesses hire us to run our own software on their behalf to do things like run the lockbox operation, which is where we actually are processing inbound payments, for that customer. Often they're check payments, sometimes there's other types of payments there. And what we've been talking about, the conversion to SaaS away from licensing and one-time sales, is really on the software side of that business. So today, if you use all of our modules, you would have to log in to eight different software systems that the customer would have to host on their site, on their side, and you'd have eight different login IDs. Our new product brings all eight of those software products together in one unified experience, one unified set of tools. So with a single sign-on, you're able to see all eight different modules of information to help you manage your receivables on a much more streamlined basis. So we are not selling those individual softwares as individual licenses. We are moving to software as a service, and the reason that's important and value-creating for our customer is no longer will they have to manage distributed software within their own formats, but also for them in the cloud, and the reason that's helpful is it means that they are never on an outdated version of the software. Anytime that there are updates to the software, we do that in the cloud and everyone gets it all at the same time. If there's security enhancements, that all happens real time and is available to the customer instantly, so we are moving away from this notion of distributed software or on-prem, on-premise software, and moving to software as a service in the cloud. The reason we like that model is obviously it has a lower cost for us to manage over time, and also makes it much easier for us to sell the other eight modules. So if you have a customer using one of the eight modules, using our new integrated UI/UX, it's very easy just to have them activate another part of the software suite that they already have access to, of course, for a fee. We don't have to then go through a supplemental installation, getting in the IT queue with the customer to install a new software and figure out what hardware it's gonna run on. We can do it all on an outsourced basis as software as a service. It's a win for the customer and it's a win for our shareholders. Okay, thanks for taking my half-baked question and turning it into a great answer. I appreciate that. I do have a question from the audience, so here goes. In the most recent earnings call, you had discussed some industry-wide consumer weakness. Can you comment on the consumer behavior in the current quarter and discuss how Deluxe can continue to show improvement even with, you know, some lingering broad-based softness, softer demand by consumers? So I don't have anything specific to add for the current quarter, obviously, especially at this point in the quarter. But what I can tell you is the broad themes that we were highlighting in the second quarter, which was some generalized and modest consumer softness, is something that we have seen for some period of time, and episodically, and sometimes for longer periods of time. And specifically what we're talking about there is a shift in a mix of revenue towards less discretionary categories, away from more discretionary categories. And so in our merchant business, that's easiest to see because in our state and local government business, people always pay their taxes. They always pay for their parking ticket or speeding ticket. They always pay for a fishing license if they want a fishing license. They may not go as often to a fancy restaurant or to a special event. So we are seeing we have seen a bit of a shift towards the more. I'm sorry, the less discretionary categories, and we think that just is signaling some modest weakness among consumers, and we can see that sort of across our business. Now, what we think is so compelling about our business is that really in any economic environment, we do pretty darn well. Because our products are consumed in the normal course of doing business. Somebody pays with a credit card, we get paid. If someone has to pay a provisioner delivering provisions at the back door of a grocery store, or not a grocery store, a restaurant, somebody has to pay it. It gets paid most often with a check. If you have inbound payments, you're going to continue to get paid. You might have a bit of a decline or a weakness, softness in the rate of growth on revenue, but we have levers on the cost side that allow us to really do well on holding on to profit. Do you wanna build on that? I just, I think, you know, we, we thought it was prudent to tighten our guidance range slightly lower last quarter. But the things we're seeing across our portfolio are very consistent with what we're seeing in the broader economy. We, we follow the reports by Visa and Mastercard. We break down the volumes as compared to our verticals and end consumers, and everything we're seeing is very consistent. So that trend hasn't changed. As Barry said, it's, it's gone through periods where it lasts a bit longer than others. It's been a bit of an odd time for a lot of people, but we feel w e thought it was prudent to acknowledge that in our guidance range this last quarter, but it doesn't really change the trajectory we're on, the long-term value algorithm we're trying to deliver, and ultimately, the guidance to our profit and free cash flow, which in this moment, those two things is the most critical for us. Okay, great. I'm gonna shift the topic just a little bit away from the consumer, but to the small business environment. So demand for a number of your products, you know, such as payment services, direct DDM, and promotional solutions, is tied to the general economy as well as the health of the small business sector, including new business formation and overall profitability. So I would say small business costs for labor, utilities, insurance, and borrowing, you know, have all risen versus a couple, over the past couple of years. And then, you know, from your, from your perspective, I mean, how has demand from your small business customer trended overall? You know, as well as for, I think you touched on this, but as well as for your most economically sensitive products. So, I would just ask this. I haven't asked you this way before, but how does Deluxe define, you know, small business, right? I think that's a little bit of a, an amorphous term, but you deal with very large regional banks. You mentioned insurance companies and a lot of other companies. But, you know, maybe if you could, if there was a way to define your target, you know, business market, that would be, that would be great. I'll just say really broadly, David, how we think about the market. We think there are mega- scale companies, whether they're our bank partners, whether they're merchants. There are mid-market businesses of all kinds, banks, financial institutions, and otherwise, and there are smaller merchants all the way down to micro- merchants. Our business strategy has some elements cover all of that landscape, but our individual businesses are pretty targeted in the solution and the target market that they go after. Start with our merchant services business. We don't go after the giant Walmarts, Target, Amazon. We leave that to the couple of giant industry players. We also don't go after the micro- merchants, the guys that are using a phone, maybe a phone-based payment for the farmers market on Saturday. In our merchant business, we focus on that big, meaty middle market, where there are businesses conducting regular volume of transactions, because we are a shop that values volume, and rate, and we can get both of those in that big, meaty middle market area. In our B2B business market, we really focus on the mid-market and above. Those are solutions that wouldn't be attractive to that micro- merchant or even the small business. It's really a middle market and up business, set of tools. Of course, in our print business, we cover the landscape. The very biggest banks are our customers reselling our check product to their end consumer, whether it's an individual, a small business, or a large business. We serve the middle market or the middle-sized banks the same as well we do with community banks and credit unions. And our data-driven marketing business really skews middle market and above. And so we have a very nicely diversified portfolio that helps the business, we think, perform well in almost any economic condition. Okay, great. Thank you for that. Next question would be on, you know, capital deployment. So your company has been and remains a generator of significant free cash flow. You know, we would characterize your company's approach to capital deployment under Barry's leadership as balanced, with significant outlays for M&A, dividends, and debt paydown. Can you discuss your medium-term priorities, including, in particular, you know, does it make sense to, or how do you view share repurchases in the current environment, given, you know, the relatively modest valuation accorded your stock in the current market? So we have three very clear capital allocation priorities. The first priority is to internally invest in profitable organic growth inside payments and data. The second is to pay down debt. We're on a very transparent, committed journey down below 3x leverage, which we expect to achieve sometime towards the end of 2026, and then we pay a dividend. That dividend yields 6% today, represents roughly $0.30 per share per quarter, and really is more of a conversation around the annual cash flow of that dividend. We believe over time, with execution, as we improve the balance sheet, we grow the performance of the company, the yield will come down. Relative to share repurchases, that decision of how we return share to, cash to shareholders, whether through a dividend or a share repurchase, is a board decision. We have that conversation every quarter, and right now, the dividend is a key component of our capital allocation. We would, we would discuss share repurchases down the road, but not at this moment in time. So we're very clear against those three things. You've seen us execute all three in tandem over the last few years. We've managed to improve the balance sheet, bring the leverage down. We've obviously managed to internally invest in our profitable growth of our products, and so we feel good about those three things and our ability to keep executing against the strategy. Okay, great. You know, maybe time for one more question, I guess. And I would just say, you know, Barry, you've done a... And Chip, you know, the company has changed pretty dramatically under your leadership over a relatively short number of years or a limited number of years. And you know, you've set the course for the next couple of years, pretty clearly laid it out. You know, what might be the one or two key risks to you achieving your targeted, you know, your targets for 2026 and whatnot? You know, what either macro issues or what internal issues you know, are you focused on here in terms of a threat or risks to achieving your multi-year growth and profitability targets? So, David, I would tell you here, we get really focused on controlling the things that we can control. Of course, we pay attention to macro-market conditions, and we think about what we would do in different environments. But we really like where we are positioned today. We've spent a lot of time and a lot of effort to get the company well-positioned in three growth areas: B2B payments, merchant services, and data-driven marketing, as well as in responsibly investing to support the cash flow and protect the cash flow of our legacy print businesses. I think we're past the place where we feel like there is strategic risk in our plan. We have proven now that we can grow past the decline of our legacy print businesses, and we are on to the execution of accelerating the growth of our B2B payments, merchant business, and data-driven marketing businesses, and so I think the risk that would be out there is our ability to continue what we've proven we can do over the last few years of accelerating growth in those nice businesses. We feel pretty confident. We hear often about questions about, you know, is there gonna be a faster decline in the print businesses? We just don't think so. There is no evidence that would suggest that's true. The trajectory in those businesses has been consistent for a very long time, and with no viable substitutes on the horizon, we feel great about the ability to generate cash flow there, to continue investing in our three growth businesses, really building the company for the future. Okay, great. You know, we are kinda right at the end of our allotted time. With that, I'd really like to thank Barry and Chip for participating in our conference, and especially for sharing their insights and perspectives on their business. I'd also like to thank the audience for their participation, and with that, I'm gonna end the fireside chat. Wish everybody a great rest of the day and a great rest of the conference. Thank you all. Thanks, David. Thank you. Thanks, guys. I really-