Q3 2019 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.
Ladies and gentlemen, thank you for standing by welcome to third quarter 2019 Deluxe Corporation earnings Conference call.
At this time, all participants' lines are in listen only mode. After the speakers presentation, there will be a question and answer session.
Good question during the session you wouldn't each press star one on your touched the telephone.
Please be advised that today's conference is being recorded if people are any further assistance. Please press star zero.
Now I'd like to have the conference over to speaker today.
Merritt Treasurer, and Vice President of Investor Relations. Please go ahead Sir.
Thank you Catherine and welcome everyone to Deluxe Corporation's third quarter 20, Nike earnings call.
I've been Merritt Treasurer, and Vice President of Investor Relations and joining me on today's call is very Mccarthy, President and Chief Executive Officer, and keep the Bush, our Chief Financial Officer.
At the end of today's prepared remarks, Barry and I will take questions.
Let me remind you that comments made regarding projections financial estimates and managements intentions expectations regarding the company's future strategy in performance are forward looking in nature as defined in the private.
<unk> Litigation Reform Act like 95.
These comments are subject to risks and uncertainties, which could cause actual results could differ materially from offerings from our projections.
Additional information about factors that might cause actual results could differ projections is contained in the press release issued this morning as well as in the company's Form 10-K for the year at December 31st 20 team and other filings made with the FCC.
Portions of it financially physically commission that would be discussions call are addressed in more detail in today's press release, which are posted on our investor relations website at <unk> Dot com.
This information is also furnished to the FCC on form 8-K filed by the company itself.
Any references to non-GAAP financial measures are reconciled the comparable GAAP financial measures in the press release or as part of our presentation. During this call.
Now I'll turn the call Barry.
Thanks, and good afternoon, everyone.
I'm pleased to be with you today to share our strong third quarter operating performance.
Metal rather than commitment and exceeded our adjusted diluted EPS outlook.
And that we're affirming our full year revenue and adjusted EPS outlook range.
We're executing well on our new strategy.
Reinvigorated the culture driving equity ownership implementing a water technology infrastructure and Friday, new contracts at a song of Crawford answered right.
Yeah, Yeah, the new deluxe.
I really strategy has attracted world class talent.
We've already brought ought to do Chief revenue Officer, Chief Human Resources Officer, She doesn't development strategy officer, and the general managers for what will become our cloud services and promotional product businesses.
In addition to our new management team. We also welcome to Sheryl Mayberry, because secures our new Board chair.
Share with the first female and first the African American Board chair in or 105 year history.
There was a great partner that we execute our transformation to exceed the Martin Redgrave <unk> remains our board after seven years of distinguished served as chairman.
Overall, we delivered a solid quarter and made tremendous progress driving our transformation former.
As you saw on <unk> earnings release, we recorded a non cash impairment turned the corner.
Well protocol overseas to provide more color on our third quarter financial result.
Thanks, Mary and good afternoon, everyone.
Revenue in the quarter was $494 million and within our outlook range about flat year over year, and we generated very strong operating cash flow.
We will continue reporting our results in the current segment structure for the fourth quarter, and then expected transition toward new segment reporting early next year, we're making solid progress and acting with urgency to transform our business into the four new focus areas of payment cloud promotional products and trucks.
Small business services revenue was $310.2 million declining 1.7% year over year.
Services revenue.
With $154.6 million growing 5.3% year over year.
Direct checks revenue was $28.8 million declining 6.5% year over year about in line with our expectations.
For the quarter marketing solutions, and other services or a whole lot.
Revenue expanded to about 44% of total revenue.
Checks accounted for about 39% of total revenue and forms and accessories accounted for 17% of total revenue.
GAAP diluted loss per share for the third quarter was $7.49 below the low end of our outlook range as a result from the noncash impairment charges.
Employee severance and facility closure costs, none of which were contemplated in the original outlook.
Adjusted diluted EPS of $1.71 cents per share exceeded our outlook.
In the third quarter of each year, we conduct and accounting assessment of the carrying value of our goodwill assets. We do this in addition to our quarterly review for triggering event.
As a result of completing these reviews, we recorded noncash asset impairment charges in goodwill and certain intangible assets totaling $391 billion.
And recording the charge, we consider recent softness in the performance of the web services and data driven marketing business units.
The decision to exit certain contracted customer relationships and that sustained decline in the company stock price. That's factors in this technical accounting calculation.
The softness of performance as a result, because historically running these businesses business units and silos or a lack of integration and underinvestment in tools sales and marketing resources have limited the achievement of aggressive business case assumptions.
Our new strategy is focused on integration to become one of the walks, enabling our sales team to generate revenue growth across the company not in silos.
We see recent wins like the Ingram micro and the Vodafone India Web services deals previously announced its clear evidence of our new strategy is working.
We remain bullish about for future growth opportunities and are committed to deliver our 2023 growth plans.
Barry will discuss these in greater detail in a few minutes.
Now turning back to the rest of our third quarter results.
As I said, a moment ago adjusted diluted EPS was $1.71 cents per share exceeding our outlook.
We're proud that we delivered this performance while simultaneously driving our transformation.
Last year adjusted diluted EPS was $1.74 cents per share.
A reconciliation from diluted EPS to adjusted diluted EPS is included in our earnings release.
Reported EBITDA for the quarter was a loss of $308 million and includes $427.3 million of expense related to asset impairments restructuring integration and other costs as well as other non-GAAP adjustments. Excluding these amounts adjusted.
EBITDA was $119.3 million compared to $128.5 million in the same period last year.
Adjusted EBITDA declined about $9 million year over year.
Year over year EBITDA compression resulted from revenue mix changes.
Price concessions on long term contract renewals and customer churn.
Although that's off the scene and web services and data driven marketing that I discussed earlier the compression we saw in the third quarter was expected and consistent with what we've seen throughout the year.
We continue to deliver substantial adjusted EBITDA and free cash flow, which allows us to reinvest back into our business itself on much of our ongoing transformation.
We are setting the stage for accelerated revenue growth at the same time, we continue to return capital to shareholders to a regular dividend in common stock repurchases in the open market.
Moving onto the balance sheet and the cash flow statement at the end of a quarter, we were drawn $924 million on the credit facility and increase of about $14 million from the beginning of the year, primarily due to additional common stock repurchases and planned transformation investment spend partially offset by strong operating.
Cash flow.
Through the first nine months of your cash provided by operating activities was $208 million and capital expenditures were $50 million.
Free cash flow to find is defined as cash provided by operating activities less capital expenditures was $158 million in declined by $18 million from the first nine months of last year.
The primary driver of the decline in free cash flow was lower adjusted EBITDA the cash payment of certain previously disclosed legal related costs and previously disclosed investment in our transformation, partially offset by lower tax payments.
In the third quarter, we repurchased $39.7 million, a common stock, bringing year to date share repurchases to $118.5 million.
We ended the third quarter, we had $301 billion of share buyback authorization remaining.
While we don't provide a share repurchase outlook, we plan to Opportunistically buy stock in the open market from time to time.
Now, let's move onto our outlook.
For the full year, we are affirming our previous outlook range.
We expect revenue to be at the lower end of our previous outlook of 2.005 billion to 2.04 or $5 billion.
We're also affirming our adjusted diluted EPS range for the year.
We expect adjusted diluted EPS to be near the low end of $6.65 per share to $6 in 95 cents per share.
In summary, we delivered a solid third quarter.
We're on track with our transformation and the team is working with a common sense of urgency to drive revenue growth in our business.
Now I'll turn the call back to vary.
Thanks Keith.
As I said earlier, our team continues to making excellent progress on all fronts and is executing with a deep sense of urgency.
It is the new dialogue.
As we've discussed on each of our previous calls this year. Our strategy is focused on profitable revenue growth into key markets.
Payments and cloud.
We will continue to invest cash flow from promotional products have check into these two high growth markets and plan to supplement our organic growth with strategically targeted acquisitions overtime.
We're confident that the strategy will deliver sustainable mid single digit organic revenue growth at adjusted EBITDA margins in the low to mid Twentys in 2023.
We also continue to expect our strategy to Gale $300 million net new revenue or total reported revenue of about $2.3 billion and 2020 three.
Just to be clear.
Strong growth numbers are net of the expected secular declines in checks over the next few years.
Just as a refresher our incredible assets upscale include nearly 5 million small business customers.
Four and a half million hosted small business website, and a 4600 financial institution customers.
Our reputation as a trusted partner is on parallel and our customers are very pleased with the quality of our services.
Hi regularly here our customers Express a high interest in doing more business with us.
But they frequently don't know all but a lot has to offer or the many ways in which we can help them succeed.
To address that we're changing our go to market strategy and instead of being a company of companies operating dozens of silos. The result of over 50, partially integrated acquisition.
We are becoming a company a product solution.
Instead of each product being an independent silo, having a separate sales team visiting the customer we're moving to a single failed at a relationship manager at bottle to represent the breadth of our offerings.
This will enable us to build deep customer into intimacy across the breadth of our offerings.
Of course, well have sales specialists to support these relationship leader with specific subject matter expertise.
We will be won the company in our customers off or on the phone we call. This approach one dumb luck.
The drive market focused on product specific customer needs, we're moving the company away from managing and reporting by customer type small business financial services and direct to consumer.
Instead, we will manage for primary product area.
Hey, Matt cloud or promotional products and checks.
This new structure will be easier for customers and thereafter at our employee owners to understand.
It provides are much better comparison to similar businesses and they'd only a proper several other parts valuation and well internally focused management attention on delivering market leading product solution.
The first growth area of payment.
Multibillion dollar market growing and 10% to 15% annually.
Our payments business can be categorized into three soccer.
The first group is Treasury management solution.
In this area, we're seeing tremendous success, winning new business.
During the quarter, we won more than a dozen new contracts across many different industries, including financial institutions insurance companies public utilities, and even large charity.
Our teams have brought together the back of the Lucky Treasury management to create receivables management solution for these businesses.
Our pipeline of opportunities continues to expand.
The second area payroll for small and midsize business.
In the past, we Didnt look to families institution at the White label distribution partners for payroll.
The third quarter, we signed two community banks as resellers and we haven't even officially launch the product yet.
While still early we're definitely encouraged here.
The third payment the area, it's focused on helping businesses pay and to get paid.
The space includes our E checks solution, we announced last week that alike solutions, a third party payroll provider will use deluxe you Chuck as an additional payment solution.
Additionally, we hope to without soon and exciting relationship we Fortunately electronic medical payment space as well move in a small business and b to b payment faces.
I'm pleased to announce we've identified a transformative and dynamic paying up leader, we expect will join our team in the coming weeks.
That's just the last open roll without our new senior management team and will provide details on death in the coming week.
The next growth area cloud based solution.
Multibillion dollar market growing at double digit annually.
Keith explained we booked a non cash impairment at some of these execs existing businesses, but we remain optimistic about our growth prospects for us.
Overall market space.
Our current cloud business gets into three suffer for our software as a fairness or SaaS solution, which encompass a corporation services loyalty offers offering literally profitability tools and bank accounts switching and utilization solution.
Second cloud based web designer website hosting.
We see future opportunities to expand from our base for growth through new reseller relationship rolling up customer lists and consolidating other smaller competitors.
Third.
Wow to deliver data analytics, which include offerings from FMCG and data mix.
FMCG recently signed a leading west coast bank to utilize our data driven marketing solution and we're in discussions with others could become new client.
As we announced on October Onest, Gary Tapers joint Deluxe as the general manager of what will become our cloud business.
Gary is a proven senior executive with previous experience, a ATP Equifax and thing and company, where he led software and data at services businesses growing revenue profitability.
While improving client satisfaction.
Our third area cultural products includes.
Retail packaging banners business farms and other promotional products designed to help customers manage and promote their brand.
We're optimistic about our growth prospects here and achieved early cross sell success lumpy solution.
On October 1st we announced the Tom Ricchio Joint Deluxe as general manager of our promotional product area.
I'm joined US Some office depot, where he was area senior executive roles over the last 10 years.
Most recently he led the 1.7 dollars billion dollar business solutions debenture.
Tom to expertise and business solutions is a great fit for our promotional products area and we're excited to add is fantastic operational and sales focus to our team to drive to drive growth here.
The fourth area its checks.
Tracy angle hard to companies that veteran some of you may already know is our general manager for checks.
We were recently awarded a contract with a major bank to print and deliver checks for their customers.
This is an important win and another proof point of the one deluxe approach.
It is not material take away from a competitor.
Absolutely clear validation of our product and service superiority.
While checks if not a primary growth area for us we continue to operate to explore opportunities like this where we can gain share leveraging our existing infrastructure.
Our chuck's business generates strong margins and cash flow and under traces leadership. We believe we can maintain healthy profitability and opportunistically capture even more market share.
Recapping, our new strategy payments and cloud our multibillion dollar market with great growth potential and we're aiming for nice growth and promotional products.
We had a strong leadership position in checks and we plan to invest cash flow from this business into payment and cloud.
Our last call we provided updates on several do day technology initiatives.
The most important point here these initiatives continue to be on track and on budget.
There are two highlights.
Our implementation of Workday continues to be on track and we expect to be operational by January Onest of 2020.
And we are selected at four Han as our enterprise resource planning tool and IB MSR implementation partner.
We recognize the complexity of installing a new ERP system, we're being cautious and responsible with this longer term implementation to route to reduce risk, but we continue to move with urgency.
We will provide updates as the project progressive.
Now let me give you an update on the four areas of intense focus we previously discussed, namely sale product innovation efficiencies and culture.
First sale.
Chris Paul This is our new Chief revenue officer. He comes to US not that impressive track record of sales transformation at HP DXP and more.
Chris is the first company wide sales leader, we have had in over a decade.
I will say it again to highlight our opportunity.
It has been over a decade since we have had a company wide sales leader.
In a short time with off Chris that's helped close many of the wins I identified earlier.
Credit is also driving fundamental transformation in our corporate culture to become a sales driven organization.
Nearly immediately upon arrival, Chris launched a program we call every one cell.
We used our new Salesforce tool to quickly bill on internal supply site I collect leads and product ideas from our 6500 employee owners.
We received dozens of leads an idea within the first hours after launch.
Our fellow Dishwashers watch out the company grow they just didnt know how.
All of this is changing under Chris to sales leadership. He is clearly the right guy at the right time.
During our last earnings call, we announced that we selected Salesforce as our enterprise CRM platform.
We continue to look for ways to four job broader alliance with them and I'll be speaking at their annual Salesforce Dreamforce event in San Francisco next month.
Additionally on October Eightth, we launched Cesar four of our small business make over show small business Revolution.
On a few weeks since launch we've already experienced more than a 400000 views by the hard to reach small business owner target market.
The small business Revolution will also be feature at the Salesforce Dreamforce event, highlighting our unparalleled expertise and reach in the small business market.
My last comment on sales were linked to our call centers, where we have good news.
We continue to see nice progress.
Our inbound call center, which involve new training replied selling skills.
I have modify the sentence that promotions to drive cross sell and organic revenue growth.
Early results have been very promising showing how material increase both an items sold per order and an increase in total order value.
Clearly validating our cross selling season.
Additionally, employee satisfaction is up driving lower employee attrition rate.
This is another proof point that gives us confidence in our new it one go locks go to market strategy.
The second focus area is product and innovation.
For the first time in memory, we have a single leader for product development has with consolidated that disparate and silo development teams into one team.
This gives us visibility and more importantly, fungibility of our clinical development assets.
This is clearly part of our strategy easily efficiently flowing resources to our best opportunities.
Moving to the third focus area efficiency.
I told were first we set the foundation for organizational restructuring design can move us closer to our new segment operating structure.
We reduced management layers from seven to four creating a nimble reporting at operating structure and providing for clear accountability at a faster decision, making with more transparency.
We also announced the closure of nine additional real estate locations during the quarter, allowing us to eliminate inefficient spending to redeploy resources into our growth area.
The fourth focused area if culture.
Cultural change stockpiling, everyone for the same goal.
As you know we made it every north American employee shareholder of the company on April 1st.
This has clearly a line shareholders at our employees on the said same goal.
Appreciation.
The depth of questions and new perspective. This has brought to our company has that inspiring.
Weve updated our core values and share them with the entire organization.
We're positioning the organization to operate in the new segments and new reporting structure for 2020 .
As Steve mentioned, you can expect to see our performance reported that these new segments next year.
Today, we've given you the highlights of the changes underway and the momentum we're building.
We continue to deliver the financial results, we committed to earlier on the year at aspire to do even better in the future.
Operating with an extreme sense of urgency, but are executing at a thoughtful and responsible pace.
Transform the company to deliver organic growth.
We are going to planning stage of our Investor day, which we intend to hold in Manhattan in mid February 2020 .
Well said that more information on the event soon.
Look forward to showcasing our new strategy in detail and allowing you to meet the new senior leadership team.
In closing I'm very pleased with the progress are made during the quarter, adding my first 11 months here executing on our transformation.
While we still have quite a bit of work ahead of us and we won't get it all done overnight. The team is proud of their accomplishments and in fact in such a short time and energized aligned and focused on delivering organic revenue growth in 2020 and beyond.
Now Keith and I will open the call for questions.
Thank you as a reminder to ask a question you need to press star one on you touched on telephone.
So it's all your question press the pound Keith.
Please standby why we've compiled the Q and a roster.
Again to ask a question press star one.
And our first question comes from Charlie Strauzer with C.J.S. Your line is open.
Hi, good afternoon.
Hi, Charles Howard.
Good just a couple of housekeeping questions for Keith to start off keep in mind sharing the organic growth numbers and small business and financial services.
Sure so organic growth for the company in the quarter was down about 3%, that's about 100 basis points better than where we were in the third quarter of last year.
Got it and did you have it but by segment as well.
Well.
Yes, we're going to lots to come back to you on that one.
No problem, there and then talking about.
In your remarks.
But the M&A and things of that does in terms of being the part of the strategy I'm kind of pass the moratorium.
It was about six months or so and but yeah. We haven't seen any any deals with what's kind of your appetite now versus where the first came aboard.
Yes, so Charlie first of all I.
I think it's important to understand we've made so much progress on the integration here I'm getting the previous acquisitions alive and in the sales organization stood out having a product development team in place.
We've made a ton of progress, which is what we set out to two bye.
Making acquisitions like you said in the first half of the year or even in the third for the first three quarters of the year.
So this is will still be an important part of our go forward strategy. So we still believe we have so much opportunity with the products that we have.
And how that we're going to continue developing and pushing that in the marketplace to sell and to cross sell more to our existing customers that you know this this program. We're working on the call Center is very encouraging what we're saying with our new sales organization very very encouraging but that doesn't mean leave off if we find the right assets that will be called.
Entre to less.
Our business about the we wouldn't that but we don't feel any rush, we don't feel any pressure when we are ready and we find the right asset will make a move.
Terrific and then just switching gears to the impairment charges in the quarter, maybe get a little more color as to where the predominant part of those charges were were taken from.
Sure.
The asset impairment charges, you're referring to.
Yes.
Sure so.
Thanks.
During the in the quarter, we took an impairment charges in goodwill primarily $242 million of impairment in the web services business.
And a $115 million in data driven marketing.
Got it was that related to any shutdowns of the businesses are just to see.
Right.
Thank you for that question.
We are expected to continue to operate the businesses.
And Oh, we have millions of customers through these businesses.
And.
Great customer list over time, we think we still have great growth potential and honestly at one of these places we had to material wins that Ingram micro deal on the Vodafone India deal really are validation.
That the solutions, we have have value.
The only thing, we really impaired here, our intangibles and goodwill.
Excellent that's great color I'll I'll jump back in queue. Thank you.
Thank you and our next question comes from Jamie Clement with Buckingham. Your line is open.
Good afternoon gentlemen.
Hey, Jamie.
Hey, good. Thanks, Barry you know I think you mentioned you know you're you're shooting for organic revenue growth next year.
As you look at the product lines by let let's.
Obviously, you you sound optimistic on promotional products, but as we look at components of ammo outs.
Where do you think you can see acceleration faster or what would those product lines be and then for the ones that may take a little longer what are the actions you feel that the company still needs to take to get that done yes, Jimmy great question. So.
The first remind our another here with last but we still operate the company today in three business units, which are small business financial services and direct track, where we're going in the new year will operate in 45 minutes, which are payments cloud promotional products and check.
Jamie we are most optimistic about our growth prospects in payments and cloud based services.
The immediate horizon, especially excited about what's going on and payments.
Just a minute ago that we've had 12 wins on our trend our Treasury management business, which is we think it's clear validation that our product or service offering is best in class because we're winning separately just winning market share in the marketplace and so we're very optimistic about that I also mentioned our payroll business for small businesses the company did not.
Really considered using partners as distribution channel, specifically bags and Jamie.
Launch the product we have two business the signed up and are already selling you're referring to our customer.
How many customers are telling us customers.
We're looking at a number of other places on the payment space be to be paid less.
And payments for small businesses that you know perhaps by the next time work together I'll be able to give you more insight into that but this company's heritage is the payments company people, maybe sometimes get they missed that but you know W.R. ask if the founded this company 100 years ago, starting with checkbook and our customers talk dot online.
Anyone else.
Popping up accomplice break payment solutions. So we think with 5 million small businesses 4600 financial institutions, four and a half million small business last night.
You really uniquely position us to bring additional services to the marketplace on win.
Okay.
Do you feel listen I know, you're you're not guidance for next year or anything like that but just kind of big picture.
Do you feel that there need to now that you've been with the company.
Closer to your eye.
There has to be any big changes to the company's cost structure.
To be able to accelerate revenue growth where you.
Gee do you feel.
Obviously, you need to make some some tweaks here and there are obviously you've done a lot of work but.
Are there any surprises on the rises basis would have done that.
You know Jamie another great question and I've been talking as long as I've done here about the notion of efficiency.
How I believe this company has that operationally efficient summit as volumes change up or down we've been very response and been able to manage sort of operational efficiency that way, but we do believe that I continue to see structural efficiency savings here.
Henry and so for example in the quarter, we began moving towards looking structure, we eliminated we month talent management layers before.
That's a reduction in headcount and management level, we're taking the money and the savings from that are on that right back into our business.
We have a real estate footprint that I've mentioned before that.
As a disproportionate to our employing footprint.
I think we have significant opportunity there to streamline our real estate footprint and make the company and take notice pick those dollars and reinvest into our path into our core business.
So as I look across the business. We all think for doing that technology are going to yield structural savings.
I think the way I think about it in that we have structural opportunities to it.
Improve how the company structure and we're taking on hot I think I'm pretty transparent to places we're working on I feel great about the progress of articles and we're on track on budget all things were going on technology.
And I guess, one I would make gareth.
He's going to take time to actually deliver the out color.
Very specific plan on every.
Revise your an outbreak.
No every proof point there was cop ourselves we are on every stage, we are on or ahead of plan.
Okay, so without the risk of putting words in your about you think you could largely self funds.
You don't.
Keith said.
Sure Okay.
Just a quick.
'cause Barry I think you know with was transformation stories often times.
Yeah, you know there there's there's a.
At some point in time in the kind of the early to mid early innings.
Company, you say, hey, we're gonna have to you know invest a whole bunch more and that kind of thing and you see this like step down in the profitability of the enterprise, but it sounds like we don't have to worry about that.
Yes, I would really clear I think on my first call, but we were going to invest in app or infrastructure.
With that and we're on path on budget on track. We're just like we were going to do and we're doing what I said, yeah, Edwin Entre Asbury last last thing the forms and accessories number for the quarter.
Down less than a million dollars I mean, that's terrific what what what do you what do you what would you point to there because I mean I think that's that's outperforming the market.
Significantly.
You know what I think that we get.
We are seeing it.
Like there like a couple of Oliver businesses.
With more invigorated management and focus on sales and providing the next I'll listen to the customer Ann.
Within our call centers do anything selling we are saying an opportunity somewhere.
I was just try to that in the section about our call Center performance, where we're seeing increased and the number of a profit per order and an increase in total revenue.
So the whole decently path here, we've been talking about as long as about here, which is that we think there's a huge opportunity to sell more to our existing customers that were talking to all the time and we're starting to see early proof of that and you know form accessories promotional products.
Our some of the easiest thing for us to sell quickly on a call him.
We're optimistic Thats why I said earlier I'm I'm optimistic about our promotional products.
And the new high the new check customer that you referenced.
Did you already did you start seeing revenue during the quarter is that to comp.
I will comment on next year. Okay. Okay. Thank you very much your time guys. Appreciate the enterprise lets you go I, just I want to reinforce by that about important if they material bank and as they take away added absolutely clear validation that our product our service.
And the quality of our company gives us a competitive advantage.
And so while taxes on our growth business, it's an up I would just like up. Another example of being able to sell ourselves and tell our story and I do want a compelling way have us bring us win that we wouldn't have experienced before okay.
I appreciate it thank you.
Thank you and as a reminder, she would like to ask a question press Star one.
Our next question comes from Chris Mcginnis with Sidoti and company. Your line is open.
Good afternoon, Thanks for taking my questions. Thank Greg.
Hey.
I apologize if you did mention this has had some issues getting on Q3 and talk a little bit about the integration the boards and with the prior acquisitions I know you've mentioned that just before to me section, which is a big where are we switch with.
The prior integration pieces of bringing everyone.
Kind of platform.
Yes so.
We call. This whole program once the locks, which means that we want to present ourselves.
As one company in the customers often for on the following that and so we want to be able to present, the entirety of our suite of solutions to our customer.
So previously.
All the different acquisitions, we have we would have different sales people, sometimes even showing up on the same day going to see the same customer about different product solution.
And we think that there's a much bigger opportunity for the company by pulling those things together. So we can have a single person in the customers office talking about the range of solutions and how the locks can help that business ROE instead of going into trying to sell a point solution. We can now go in say explain to.
Unless you're challenges and problem and then we can match a solution to help on fixed that problem.
Fruits are really encouraging here, we have chris' comments here, who spent his career in this type of a model and we're getting yeah, we're saying first fruit you saw us land.
Number of more a dozen new contracts and the treasury does not.
And we are having all these lands come our way out or improvements in our call Center.
And we have a number of all our win that having a different approach to our customer and go into that I talked about how the lots can help them grow their business jets and leads to very different outcomes. So.
All of that we see as this incredible validation and prove that we are on the right path towards.
Organic revenue growth and all of this we called one deluxe.
Okay.
And it sounds like early indication is that.
That cross selling opportunities finally from me solution to the company. So references will Jamie but also since most comments as well starting with that.
That opportunities really becomes apparent now.
Absolutely.
Oh, hi that on the phone on her fun.
Netting ceos or some of our largest customers.
And then the universal message I hear from that as while we had a very long standing relationship with your customer you're one of the very few costs companies that we trust what personally identifiable information or pie and that puts you at a very unique position with us because you are a trusted partner.
And we five walk from you if we just knew that you did more.
That is light speed up and it gives the opportunity solid.
Wait so appreciate your business in one area, but we have so many other things that we do they can help your company operate your bank your business more efficiently.
From a promotional products to marketing solutions to website hosting the payment solution and all the Sun. We are engaged radically different conversation at the top of the house, because we're simply telling our story as one company rather than in talking about the check company as well.
The company or the data driven marketing company or the payments business. We are in talking about how our company to create value for their company. If they fundamentally different approach and we're really excited about the these first went sourcing and that really to feel the momentum.
Great. Thanks for taking the time answering questions and good luck in Q4.
Thank you.
Thank you and we have a follow up some Charlie styles are with C.J.S. Your line is open.
Hi, Thanks, just a couple more just picking up on the other new customer win Barry if you could expand more on on.
Asia, the national banking customer and be sometimes you see these things where do you have a big customer win but is also.
Customer loss on the other side with the where there any.
Additive losses in the quarter.
So let me take the first part of that I can't give you any more description on who that is because I can't I owe that duty trucks to the customer.
I will leave with you as a very major financial institution that if I told you their name do it right now.
And we have not had any material losses in the third quarter.
Got it excellent and then I'm looking at organic rather than it was asking about the sequencing for but maybe talk about.
Bye Bye ammo west was or let's say about 3% growth is that all organic in the quarter and also if you you Havent Charlie Chaplin Charlie candidates have acted upon deterrent absolutely right I think you're asking me about the check business right.
About five I lost track because that's what that is absolutely correct. Obviously as a result as some of the charges, we had some loss and other businesses, but not in checks.
So let's go back to the next question.
Sure just just looking more or.
On organic basis MLS grew I think about 3% was that all organic in the quarter.
Yes, most of that almost all of it is because recall, we haven't bought anything right to left that certainly made was a very small.
My Corporation that transaction that we made at the very end of last year.
But we are.
We.
We're pleased with we're pleased with our results.
So is it to say that the segments.
Again, it goes numbers are similar to what was reported as well.
Yes, So let me let me address that for you. This is Keith so small business services saw contraction of 3.2% organic.
Financial services contraction of 1.8% organic.
In direct enters into direct checks as all organic so though that that gives here. Your overall decline of 3% that we that we referenced earlier.
Great and then just just lastly, when you look overall at the the progress you're making here, especially when you're talking about getting to maybe potentially going to growth next year with them or was it kind of low single digits growth right now.
Taking that part of the business to ramp more more significantly over the next few quarters.
You know we were not to give you forecasting our guidance on future quarters I.
I hope you care, our optimism about our payments business opportunities on the future cloud and even promotional products.
And how come the new year way, we'll be moving towards that segmentation, you'll have much more insight into those businesses.
And that you know, we're very excited about that and think that that's going to be.
I think you will be two will be able to pay a lot more because we're going to have an analyst day somewhere in the middle of February .
Analysts they were willing to give you got lots of detail about the copper progress that we're making the customer win the <expletive> Hobbs talent honestly that we're able to attract to the strategy that want to be part of the very historic transformation and we can give you details then and give you a lot.
Visibility as to the future and how each one of these businesses, we expect to expand.
Thank you and looking forward to that just one last housekeeping for for Keith could on the the margins on direct checks were a little bit better than what we're forecasting what you've seen in the recently was what kind of drove that.
It's really just normal just normal variation that we see.
Within the quarter.
Got it okay, great. Thank you very much.
Thank you and I'm showing no further questions in the queue I'd like to turn it back to Mr., Barry Mccarthy for any closing remarks.
Well, thanks, everyone for participating on the call and for your questions.
In summary, first our momentum continues to build.
I shared many examples of client wins and cross selling successes utilizing our new go to market strategy that will begin to bear greater fruit in 2020.
Second.
Our strategy focuses on payments cloud of promotional products and checks.
We continue to gain traction in these markets.
Third from a technology perspective, we continue to be on track and on budget Rolling out our new enablement technologies.
Fourth our senior leadership team is almost a full staff and we expect to announce the last roll the GM up payment sooner.
I'm honored to have these extraordinary and accomplished executives joining me in leading the historic transformation.
Fifth and finally, we again delivered on our financial outlook.
And our outlook for the year.
Executing with urgency, but thoughtful then responsible pace to unlock the incredible growth potential here.
In closing I want to thank our employee owners for their commitment.
Third the ads on the passion and can't do spirit.
I'd ask them to think differently acted differently become increasingly customer in sale focused.
Oh, well reorganizing the company and delivering solid results.
Certainly there's much more to do but I'm very proud of how we've come together as one team.
Bill why the company one the luck.
It really is a new day and a new deluxe.
Now I'll turn the call back to add for some final comments.
Thanks, Barry before we could conclude today's call just like the mentioned the following events in the third quarter.
That's very previously mentioned on November 20, it will be presenting at the Salesforce Dreamforce event in San Francisco.
On December 34 will be at the Wells Fargo TMT conference in Las Vegas.
Moving meeting with investors at various locations across the country that first two weeks of December where you can hear more for must regarded are ongoing transformation.
We plan to be in New York on January 14th at the 22nd annual Needham and company growth Conference and finally, we plan to sort of save the date Nov. Shortly regard or mid February 2020 analyst day, which we intend to hold in Manhattan.
At the event, you'll have an opportunity to meet our new leadership team and gained a deeper understanding of the new deluxe.
Thanks for joining us and that concludes the deluxe third quarter 2018 earnings call.
Ladies and gentlemen, just conclude todays conference. Thank you for participating you may now disconnect.
On Sunday.