Q2 2020 Deluxe Corp Earnings Call

[music].

Ladies and gentlemen, thank you would standing by welcome to the second quarter 2020 to learn earning conference call. At this time, all participants are listen only mode.

Occupancy presentation, there will be a question answer session.

Asked the question during the second please press Star then one when you touched on telephone.

As a lot of this conference call is being recorded.

I'd now turn the call somebody else's, Ed Merritt or you may begin.

Thank you are welcome to block the deluxe second quarter 2020 earnings call.

Hi, Good Merit, Vice President of corporate Finance and Treasurer and joining me on today's call is very Mccarthy, our President Chief Executive Officer. He Bush, our Chief Financial Officer, and Jane Elliott, Our Chief Communications and HR upstream.

At the end of today's prepared remarks, Barry Keith Jane and we'll take questions.

I'd like to remind you that comments made today regarding management's intentions projections financial estimates or expectations about the company's future strategy or performance.

Forward looking in nature as defined in the private Securities Litigation Reform Act makes 95.

These comments are subject to risks and uncertainties, including risks related to coordinate team, which could cause our actual results to differ materially from our projections.

Additional information about factors that might cause our actual results to differ from injections is contained in the press release issued today.

In the company's form 10-K for the year ended December 31st 2018.

Form 10-Q, which will be released in conjunction with her second quarter earnings released shortly as well as other FCC filings.

Fortunes of the statistical cool and financial information that will be reported today.

It will be addressed in more detail in today's press release, which is posted on our Investor relations website that deluxe dot com.

Information will be furnished to the FCC form 8-K filed by the company. This afternoon.

I'm told that editor Edgar is currently down for finding an FCC documents, but we'll finish these as soon as their systems backup.

Any references to non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release or as part is our presentation. During this call.

Like last quarter, we continue to work remotely from different locations today and remain committed to safety and health related protocols are forward to keep our employee ownership.

Please bear with us should we experienced any time technical difficulties. During this call given our virtual status no I'll turn the call to Barry.

Thanks, Ed a good afternoon everyone.

Before I begin I'd like to share with you. This will be adds last earnings call.

He'll be retire yet the ended the year and will serve as a special advisor to keep during that time.

That was made many contributions to the Lux over the past seven years, let me thank him for his leadership and dedication and wish him all the though in a retirement.

Also on the call with US today, as Jane Elliott, Chief Communications, and Human Resources Officer.

Jay will lead Investor relations, which will be integrated with all of our communications capability.

Many of you have no Jane for many years given her two decades of successful experience running I our mobile.

An earlier at first data.

Well the processes conducting national searches for permanent head of Investor Relations and a new treasurer, both rolls currently filled by yet.

Hi, Jane.

New why our leader I don't know Treasurer will work together with me to deliver meaningful insight into our performance.

We're proud of our strong performance in the second quarter in context of the pent up.

We delivered stronger than expected results with free cash flow exceeding last year.

We delivered stronger than expected result.

Yeah, what cash reserves, we restored margins into our target range.

Certainly promise we would do.

We estimate we delivered sales driven growth, excluding cobot impact for the second consecutive quarter.

We won new business had an accelerated rate and close four of our cost 25 target.

And we materially adjusted our company's infrastructure position us to drive sustainable growth over the long term.

We're still confident in our financial strength, we declared a regular dividend and pay down $100 million on our revolver earlier this month.

Our net debt is now at a two year low.

All of the.

Yes, compelling evidence or one deluxe strategy is working.

So here are some specifics on the summary.

We reported revenue of $410 million.

April was the lowest performance at minus 28%.

Performance improvements, you're really over the remainder of the quarter, finishing down 16.9% for $84 million for the quarter.

We believe we delivered sales driven growth again in Q2, excluding cobot impacts.

This follows our similar performance in Q1.

You will recall prior Q1, the company to get not experienced sales driven revenue growth in nearly a decade.

We also overstored adjusted EBITDA margins to 20%.

Just as we promise to do pretty cold.

We grew cash on hand by $62 million, reducing our debt that to a level not seen in two years.

Our payments business grew at 12.6% out of the first half achieved our original annual plan disliked colder.

Our 12 month sales.

One expanded double digits to over $50 million.

We saw all time record success telesales, though.

We excel at our transformation accelerated our transformation momentum materially, including closing 2065 locations or 30% of our real estate footprint.

Finally, we did all of the wall supporting small business recovery and our communities, particularly our homes, how Minneapolis, Saint Paul and the Shadow of the tragic death of your workforce.

We stand strong on racial and social Justice and we're committed to being part of the solution.

Like many others given the ongoing economic uncertainty, we will not provided detailed outlook for the third quarter or the for your today.

No wants a deeper details on our encouraging results.

Our business began to decline in mid March then begin to stabilize or we may.

That's the ability and improvements continued into June although performance remains below pre cobot level.

We expect total revenue in the second half the slightly improved sequentially from the second quarter, unless there are worsening economic impact.

Before I talk about the segments I want to share details on our great progress and becoming a sales driven revenue growth company.

I'm very pleased to reports that are one bill Lexapro is producing strong results. Despite the current economy.

Our Chief revenue Officer, Chris Thomas has done a fantastic job with the rest of this team turning this into a reality.

We closed 690 deals with multiyear contracts already outperforming our pre cobot sales plan.

This includes four of our 25 targets.

A couple more verbal commitments from our clock 25 target.

Some of these wins include Cambridge financial for promotional solution expansion of RBC you'd see relationship inside an opt the bank.

Portland lease signaling our ability to we didn't do vertical for chess insurance industry.

We continue to expand our pipeline and have achieved record average order value in our telesales centers.

Of course, they will take some time onboard all of these wins.

However, we are very proud the we're expanding our pipeline and closing new business at record rates the slight Holden.

Giving us much optimism for our future.

We drove further sales innovation in early July launching our small business advisory fees.

New customer needs based selling approach focused on helping small business stay at the forefront of their industry.

Additionally, we focused on selling to health care providers, helping accelerate their digital capabilities and streamline operations.

And a little over two weeks the small new team is interact with 572 small businesses in the healthcare industry scheduled 100, a D to follow up discovery meeting and it's already closed sales in each of our four segments.

Well, it's still early on this effort, we're seeing the power of our one's a lock sales strategy.

In April we implemented several improvements to our shops Alexey commerce like focus on simplifying the customer experience and pricing options.

These improvements generated increased revenue for checks and promotional solutions.

This is another example seals innovation.

All of this demonstrates the speed and agility of the new deluxe team and success of our one is the luck strategy.

Neither of which are yet a year old.

Now onto our second.

Promotional solutions and cloud solutions continue to experience the greatest cobot related impacts.

Both segments help small businesses directly and indirectly through enterprise customers get started operate and growth.

As a result at the overall economy not surprisingly our cloud solutions segment with most in passive.

Promotional solutions was materially impacted the performed better than we had expected.

We continue to expect cloud and promotional revenue profit and margin will be well significantly lag the recovery.

No more on cloud solution specifically.

Gary Keepers argue division President has done a great job aggressively managing costs, while positioning for a rebound dislike previous under investment of these businesses and the accompanying up here.

The part of the cloud business at least impacted by the pandemic with our website design and hosting business.

We quickly operationalized ecommerce site for customers to shift their business on line of Betty brick and mortar businesses were significantly impacted by colder.

We also launched a digital digital signature capability, our customers needed to execute on line agreement.

A great example of rapidly adjusting to the change in corporate environment gearing in team entered into a new relationship with each in our block to provide our small business customers with advisory tax preparation and online application for governmental funds.

This is another example of how the new Deluxe thinks an act like a tech company forging partnerships for success.

I think the old the locks wouldn't consider.

Incorporation of logo services saw a decline in orders however, not as much as originally expected. The good appears many unemployed workers have started to businesses or turned hobbyist businesses into full time jobs.

This is consistent with the performance on our web hosting business.

In data driven marketing, we have continued to experience significant pandemic related challenges.

Financial institutions puts customer a small business marketing later into the year and into next.

We have optimism for the ultimate rebound here and expect to see some additional revenue toward the ended the year as our customers plants Hamas 2021 successfully.

Now onto our promotional business.

We have good news here.

Tom Ricchio, our division President promotional support solutions radically cut costs and found a way to partially offset the volume decline with a record beat.

Tom mid teen introduce a new product line in a new markets literally over night.

Comps on obvious opportunity with personal protective equipment RPP, but admitted April he had no market intelligence customers or product supply.

How quickly identified key customer targets secured and leverage our supply chain partners and equipment sales organizations to sell into our existing distribution channels.

The result.

We sold and shipped $26 million of new revenue during Q2 in a market. We previously did not even no.

This demonstrates the new innovative thinking and speed of action and the new deluxe.

And also highlights the incredible power distribution reach our do sales model and our newly integrated supply chain.

None of these capabilities existed just six months ago.

One of my favorite client success stories move as what we did that help reback.

And existing promotional products customer.

We met with Lucky for solution to help sellers and buyers you'll see for property children.

We created rematch branded P. P E kits for agents and clients to enable showings and sales.

Remember that the information out to 65000 retailers and quickly have orders for more than 90000 kit.

Now I wanted to check.

As anticipated the secular decline in the Czech business accelerated during the quarter as a result at the recessionary impacts of cold.

Fracing Inglehart, our checks division President and Pete go to our Chief Abbas or operations has done an excellent job scaling our plants operating expenses to mass current volumes.

On a positive though.

Based on internal customer survey over 50% of new truck customers order checks as a result of opening an account tied to a new business startup.

Well this is anecdotal it does give us confidence so we're seeing some early economic rebound in new business formation.

Further good news, we've seen an acceleration in self service digital order volume in the second quarter driving improved profitability.

Importantly, we are competitively winning new checked customers our financial strength is a key factor in our accelerating sales success.

We continue to expect checkpoint a partial attract with the recovery in the second half of 2020, and ultimately return to traditional secular trends in 2021, consistent with how the business has recovered from previous recession.

I want to pause and affirmed the strategic importance upside to our business.

In addition to outstanding margins and cash flow our checks client relationships are strategic.

Providing us with a robust and low cost cross sell opportunity.

Now onto the payment.

Our payments business continues to shine likely even admits covance.

Mike Reed, our new payments Division President continues to drive double digit revenue growth and the second quarter delivered 12.6% growth.

This segment continues to benefit from previously announced wins with synchrony financial and Pfizer as well as from other new business we sign.

The payments business is on original plan for the first half of the year.

Delivered this well Miss pandemic gives us much confidence in our long term opportunities.

Importantly, our overall financial health is helping us win new paint as opportunities to.

We see new and longstanding customer shift in volume to the safety of the deluxe balance sheet and our rock solid service levels.

Weve quietly become a significant player in the receivables as a service ecosystem.

Our receivables as a service platform is based on a robust industry, leading software, which plays a central role in the order to cash applications cycle, including remote deposit capture Kurdish lockbox processing and electronic bill pay and presentment.

Clients use our platform on fronts.

Posted on our servers or we can manage on their behalf on a fully outsourced thesis.

Our platform already have massive scale.

As I told you that Investor day.

For processing is approximately 2.8 trillion dollars a year and annual payment volume equivalents, a 13% of the U.S. CDP.

On the U.S. Federal Reserve report real relies upon our platform for payments reconciliation to.

And we still have plenty of room for growth.

None of this is wishful thinking.

Over half of our receivables as a service revenue comes from the platform itself on a recurring revenue base.

By investing in our platform for growth.

The Lux introduce automation, which our customers utilize to reconcile their payment.

For example, using AI technologies and product extensions like electronic invoice presentment are matching we could digitize the process and were reduced manual intervention by over 85%.

Our continued deliberate market share gains and the traditional lock box space.

Actually quite strategic.

Each of these newly acquired customers will operate on our platform and have immediate access to all our current and future innovation.

With every customer joining our platform, we extend our reach more deeply into major billers financial institutions and syntax.

This gives us a clear leadership pathway in the emerging high growth automation of ordered the cash application process.

Consistent with this strategy during the second quarter, we added several new financial institutions, and new verticals, including nonprofit insurance and education and multiyear deals for one or more of our receivables as a service platform product.

We also advanced our capabilities with our Dispersals products and platform, which include the Lux payroll services and the due to Lux Haven exchange that we called BPX.

Bottom line.

Recurring revenue platform is robot.

We're trusted we have significant scale and we have significant growth potential.

Not surprisingly, we expect payments revenue to continue to outperform macroeconomic conditions in the third quarter unlikely throughout the year.

Next let me briefly on the health and safety of our team.

As I reported during our first quarter call, we continue to protect our employee owners and our business, but continuing to promote health and safety related protocols for our employee owners that are required to be physically present to deliver services to our customers.

For over 3000 up our employees owners, we continue to work from home and we'll continue to do so through at least early September.

Before I pass it onto the key for more detail I want to reiterate our team made tremendous progress on the second quarter.

The loxa financially solid our sales engine is working and we have a bright future ahead.

Now I'll turn it over to keep.

Thanks, Barry Good afternoon, everyone and congratulations and thank you to add for your past leadership.

So congratulations to Jane I look forward to deepening our strong working relationship.

It's very noted our one deluxe strategy is working and we continued to be proud of how our teams have rallied to become more innovative and agile than ever before.

Given the challenging economic environment, we delivered stronger than expected results for the second quarter.

We've also solidified our financial position, while advancing our business transformation.

For the second quarter total revenue declined 16.9% or $84 million to $410.4 million as compared to the same period last year.

While we benefited from sales driven growth it wasn't sufficient to overcome the impacts of Cowen.

The pandemic impact was most acutely felt in cloud solutions promotional solutions and checks.

Importantly, we took inserted options in the quarter to address the loss of revenue in change in mix.

These actions improved adjusted EBITDA margins by 330 basis points sequentially.

The first quarter results.

20.4%.

I will cover this in more detail shortly.

The second quarter revenue decline was partially offset by new wins.

The reduction in revenue and change in mix did affect our results.

Gross profit margin for the quarter improved 150 basis points from the prior year with the loss of lower margin promotional revenue.

That's DNA expense as a percentage of revenue increased 340 basis points.

Well as DNA reductions of $23.9 million were achieved during the quarter.

These reductions did not match the pace of cobot related revenue declines.

In addition, we made the prudent decision to continue spending to onboard new client wins.

Together these changes reduced operating income by $27.5 million.

The $24.3 million for the quarter.

Also included in our results for a number of actions, we took to provide cash preservation and cost reductions.

Some actions were temporary.

Others take it will continue to provide benefits over future periods.

A summary of these actions includes.

We pulled back on spend in many areas.

Targeted furloughs and a 20% salary reductions taken from nearly all done the walk salaried employee owners, including the entire leadership team in board of directors.

We estimate these actions improved second quarter operating expense by about $15 million.

We announced the closure of 20 of our 65 locations or 30% of a real estate footprint.

The benefit of these closures will be ramped in future quarters.

Additionally, we recorded a noncash asset impairment charge of $4.9 billion associated with our real estate restructuring.

In late June we made the difficult decision to exit approximately 250 to Luxor.

As we implement our post cobot operating model.

Resulting in severance charges of $5 billion with future period benefits.

Other one deluxe integration work continued in the quarter with our systems implementation and integration of businesses within associated $15.4 billion of expense.

Regarding other non operated operating items, our interest expense declined $3.1 million due to lower interest rates and higher borrowing levels compared to last year.

We reported net income a $14.9 million in the quarter, a decrease of $17.7 million from the same period the prior year.

Our adjusted EBITDA for the period was $83.8 million.

$33.7 million lower than the same period last year.

The adjusted EBITDA margin declined 340 basis points to 20.4%.

This did represent a sequential improvement from the first quarter of 330 basis points.

Before I review the segment results I want to point out. The we are in the process of filing an 8-K. This afternoon with our historical quarterly segment views for 2019 in 2018.

As Ed mentioned at the opening we are currently experiencing problems with the Edgar services, and it's causing a delay in getting this posted but we'll get it out there as soon as we can.

Now onto the second quarter results by segment compared to the same period the prior year.

Painless revenue grew 12.6% to $72 million grew faster than the overall market.

The strongest performance was a 20.5% increase in Treasury management platform revenue.

Additionally, as you would expect we experienced softness in our payroll business as a result increased unemployment.

Adjusted EBITDA margin decreased to 21.6%, primarily due to cost related to on board Onboarding client wins, which we expect to continue in the back half.

Cloud solutions revenue declined 31.7% to $54 million from last year.

Revenue for data driven marketing solutions declined 50% as financial institutions suspended data driven marketing campaigns in the quarter.

Wed and hosted solutions experienced less declines of about 14% related to the loss of customers previously discussed and the impact of coated.

Adjusted EBITDA margin increased to 26.2% its cost reductions outpaced revenue declines along with revenue mix improvements.

Promotional solutions revenue declined 24.2% to $118 million.

This segment has the lowest margins and the reduction in revenue had the least impact on our profitability operating cash flow.

While significant expense reductions were achieved during the quarter.

Adjusted EBITDA margins declined 260 basis points.

Check revenue declined 14.9% to $166 million.

We expect slight improvement through the rest of the year.

Adjusted EBITDA margin decreased to 49.8 person.

Year to date cash provided by operating activities was $109.7 million.

Capital expenditures were $27.1 billion.

Free cash flow defined as cash provided by operating activities less capital expenditures was $82.6 billion in the quarter.

An improvement of $9.8 billion.

The primary drivers of stronger free cash flow were lower cash taxes.

Improved working capital and a reduction in capital investments.

During the second quarter, we did not repurchased any shares of common stock and as we noted on our last earnings call. We plan to purchase less stock in 2020 than in previous years.

Cash balances in the quarter grew by $62 million to $372 million driven by cash flow from operations with no new borrowers.

Our outstanding credit facility balance remained at $1.14 billion at the ended the quarter.

Net debt decreased to $768 million the lowest level since the second quarter 2018.

As a reminder, the revolving credit facility matures in 2023 and has a total size of $1.15 billion.

The facility includes an accordion feature, allowing us subject to lender consent, which we would expect to receive to expand by up to $275 billion to 1.4 to 5 billion dollar facility size.

Our financial covenants related to this facility continue to have substantial cushion.

As discussed the impact of the pandemic event significantly changed our revenue mix importantly in the second quarter, we weren't able to able to remain in the range of our long range profit expectations.

We improved adjusted EBITDA margins by 330 basis points over the first quarter results consistent with our earlier expectations.

As previously announced we have suspended our 2020 outlook and we're not providing third quarter for full year guidance.

Barry has already provided a general perspective on how we expect our for businesses to perform relative to the overall macro economy.

We expect to resume sharing our specific outlook when the environment becomes more stable and predictable.

While we remain cautious about the pace of recovery, we believe we've taken the actions necessary to preserve and stabilize the companys financial strength into position the company for long term growth.

Looking forward, our financial priority will be to maintain this financial strength Weiss, while simultaneously continuing our historic business transformation.

Since the ended the quarter, we've taken a number of additional steps towards these objectives.

We believe these actions further signal our confidence in the durability of our business model and the future potential we can unlock with the transformation that is already well underway.

We've made the decision to selectively resume certain capital projects continue important systems implementation work, including the S. Four Han and Salesforce implementations.

Since the ended the quarter, we reinstated salaries impacted by the 20% pay cuts while this will be a headwind in the back half of the year as compared to the second quarter, we feel the improvements in our liquidity position achieved in the first half provide us with the financial strength to take this action.

Earlier this month, we made the decision to pay down $100 million on our credit facility.

We now drawn $1.04 billion on our credit facility and continue to maintain substantial liquidity.

Furthermore, the company's board of directors approved a regular quarterly dividend of 30 cents per share on all outstanding shares with the company the dividend will be payable on September eight twentytwenty to all shareholders of record as of the close of business on August 24 2020.

I'm very pleased with our quarterly results in light of the pandemic.

Our financial position is strong our.

Our strategy is working.

We are well positioned to accelerate our transformation to drive growth and deliver shareholder returns.

Now I'll turn the call back to Barry.

Thanks Keith.

I want to build on your comments about our strength and reiterate a remarkable to second quarter achievements.

Importantly, our one deluxe strategy is working.

We're delivering sales driven revenue growth and becoming a trusted business technology company.

Our customers are engaging with us more deeply.

As we help customers of all sizes Roe and navigate their new reality.

Continue transformative actions taken to streamline our operations and footprint also drive benefits in the years ahead.

Our financial position and ability to generate cash flow is strong.

As a result, our confidence in our ability to achieve our long term goals is unchanged by this crisis.

Even if the timeline has been extended.

While we're not providing outlook for 2023, we continue to believe we will be a company over the long term with mid single digit revenue growth and margins in the low to mid twenties.

We're proud of our progress and we're confident in our bright future.

Before we get the Q and I want to recognize the exceptional contribution or myself with the lockers.

The team has risen to the unprecedented challenges of cobot and continue to deliver for our clients without interruption.

While others may have focused on their difficulties our team just went to work.

That is the character of the Luxor.

Living our purpose values and ownership culture every day, because we're all shareholders too.

Now chief agenda, I will open the call for questions.

Thank you.

As a reminder to ask a question. Please press Star then one on your Touchstone telephone.

Again to ask a question. Please press Star then one.

One of them if our first question.

Our first question constant trolleys, rather our T.J.S. your line is open.

Hi, good afternoon.

Thanks, Charlie.

Hey percentage went to say thanks, Ed just in a pleasure working with you over the years and where she is about the very best in retirement Sir.

And with that just a couple of questions for you guys.

You look at the kind of progressive improvement you've made since April how much do you think that's attributed attributable to some of the stimulus actions that are out there from the government and should stimulus kind of fall short next week as the Senate and house kind of wrangle back and forth.

You think that could be another speed bumps along the way here to recovery or do you think that's something that you can kind of work through.

But surely you know we can't precisely measure the impact of stimulus.

But 2.31, we have seen across our business, you know improving stability, which gives us confidence about the future of the remainder of the year.

Clearly the stimulus has had some impact but again, it's difficult for us to be able to measure specifically what that direct impact was on the business.

We're very confident sort of serves no additional efforts additional shaw from the back half of the open here you know, we've got playbook that tried and true and we have options to keep the company health.

That makes sense. Thank you very much and then.

Either for you on the breakdown on revenue growth or.

Declines in the quarter could you share with us the organic numbers as well.

So.

Think of all of it as we are reporting organic any longer so it's all sales revenue.

Revenue with how we think about it so so none of it is there's there's no acquisitions in there. So that's I would take that as.

As organic contraction.

Excellent. Thanks, that's helpful. Thank you very much on that and then.

When you look at some of the the recent success you've had in the payment side, winning business said, what kind of the the factors driving your wins there and is it. If you think it's a share gain a thing where you just have been more competitive. It ahead of all compelling offering or do you think it's you know that's your competitors, maybe saying that you know what it's a business.

I don't want to be involved anymore, but there are the scale. It you have.

You know what actually I think a three things, which I'll tell you the strength of our company and the work we've done already first we believe we have the strongest product offering in the marketplace.

I'd buy side comparison, we win and we know when he business because the quality of our product and the level of service we provide.

Second we do believe where we are winning share not because people are not interested in the space. We have plenty of other competitors on the space, but our product is better we've ramped up our sales organization. So we're just having more conversations with people than ever before and so that leaves us to additional sales results.

Certainly, but I would tell you is that the this crisis has highlighted is that the value of this and the strength of our balance sheet is a compelling value proposition. In addition to the quality of our products is helping us win business. So I believe we have with that product.

We have strong balance sheet, and we have a sales organization out there about selling so we're pretty confident we're winning share and again as I said earlier the reasonably since that's an important strategically the more people we bring onto our platform as you know the bigger base, we have to sell additional product and service as this migration continue.

For the automation of.

Order to cash in receivables, we think we're incredibly well positioned there and by winning more market share here.

No. It really helps us both near term life with immediate income, but also for the long term, giving us a bigger and bigger market share in the to go chase them deliver additional product and service.

Great. Thank you very much.

Thank you again, ladies and gentlemen, if you'd like to ask the question. Please press Star then one.

One moment please.

Again to ask a question. Please press Star then one.

Well the question from Chris Mcginnis of Sidoti and company. Your line is open.

After that thanks for taking my questions.

Nice quarter like the congrats.

Who wouldn't just keep keep so you know in the last question just on something that are just has the competitive dynamics changed at all I mean, it sounds like obviously, losing a lot of substance implement business and really drive growth.

Or is the competitive landscape maybe.

Tempered because appropriate and you're just really executing or at a higher level taking advantage of us.

If you talk a little bit about that crop nims and for across.

Segments.

I'd be happy to talk about it you know what we see all different players in the marketplace Saba Workover.

But we have continued to advance our product.

We did that some of last year, we continued to make enhancement this year and we're better able to tell that story to our customers. Because we now have sales organization, that's fully engaged and ready with schools to go tell our story for customers and really take the fight for the street.

Where we can go win.

So I think we're doing much better job.

During our story and show and the competitive differentiation, we can offer to our clients part one.

Part two and money parts of our business.

Where customers are thinking about long term relationship.

It is a huge advantage to partner with deluxe given the strength of our balance sheet.

And you know the castle than we have.

And the quality of the crop so not only do we have a better products were able to bring that product to market explain our slightly better than ever.

We put icing on the take five having an incredible balance sheet and financial stability.

We think gives us.

Additional material competitors.

Okay, and I guess, just with a new wins in the larger size for the enterprise class.

Does that more cross promotion for cross selling capabilities that you're adding.

What's been the change in approach to drive on the new customer wins, especially the larger ones one lately.

Do you know what this is what are the most exciting things about our transformation among many exciting things.

Because we in the middle of the co bid crisis, we not only sold you enterprise class deal.

We sold and market verticals, we muscle before we create products gossip loss in market booked $26 million of revenue in record time and it really in no time, all within the same quarter.

The wins are both new so the company.

We are also cross selling to is that some customers.

I mentioned earlier that we sold additional service 80, anti there a longstanding clients of ours and important client of ours and be able to expand the relationship and there are number of other wins, where we have an existing relationship when we've actually been able to ski and simulation one of the things we suddenly we're gonna do left here and we're actually.

Really doing where we have existing customers.

Going to the customer and probably the hold the love story, that's a whole point of our one deluxe strategies well into the customer probably the whole story, but more importantly listen to what their needs are we can help solve their problems. So what.

Then a sales opportunity for one product parts of the sales opportunity for multiple products simply because we can tell the whole story and we are trading our team to better listened to what the customer needs are we can help solve problems.

You know it sounds very simple, but it's very fundamental in how we've changed to go to market of folks here and it's a pretty massive change.

Sales organization, that's enough trained across the entirety of our product suite. They can get the second faithful to baseball analogy and if they need additional support help we still have sales specialists that can come in health and closed the sale.

Well, we are getting the best of all of the loss, while maintaining what were you know a special specialty proteins and bringing that to the customer to won't.

So all of those things at the same time, we're able to sell into new market verticals because their sales engine is working we're able to deliver create and deliver and sell new products that we didnt have even in quarter.

Able to sell the customers a personal products across our portfolio.

That's why we feel good about our future yeah cobot it is copel.

But we said we were going to actually get built to fill season. We have we said, we're going to deliver sales and revenue growth we have.

You know said, we're going to improve our operating efficiencies.

No we directly address a realistic footprint in quarter. So we put all those things together.

The put together with all the results we've already reported and I think it becomes pretty clear that are you know our long term prospects are very very soft.

I appreciate that color.

Just system around the small business and it doesn't seem you were talking about kind of largely focused on health care is that kind of moved to other verticals or other kind of markets going forward and.

How long that that team, but in place and just provide a little bit more call. It sounds like anything else.

Yeah. So think about this is our first step towards having.

Market vertical specialisation.

And that we thought that we saw an opportunity. We attended to go down. This path. We saw an opportunity immediately at healthcare, we set up a small team he got pretty immediate results, which I shared with.

And so we're very optimistic that that pathway will continue to bear fruit fruit and health care, where it's aimed today, but proving that successful we think that there's no reason that can't expand it would get even more vertical focus.

Our sales organization going forward, so we'll be able to bring the fast about product with a very specific focus on a type of customer and again, we should be able to do even better than by showing understanding what a typical group of customers needs might be that's showing how our products and help them salt common file.

It is sort of the next step on the evolution of becoming.

A world class sale sales organization.

Okay sounds like him or something else and I'm, just a couple more I apologize.

On the small business our needs are heavily weighed on funds and one kind of vertical itself or there's a pretty widespread don't mind just.

Highlighting that real quick.

Well, you know, what four and a half million small businesses of course.

We have very very broad distribution.

Customers.

And.

In our small business portfolio. We currently have some concentration, but I don't think about us having.

Over concentration in any one of them.

It's different levels of penetration by segment or vertical.

But we don't we don't think we see anything in our portfolio that is.

You know says we're over extremely overweighted in one place or not.

Can sit there and then just real question around one the margin profile for me I don't know if you can talk a little better about next quarter. It sounds like some costs are coming in with a new business wins and then maybe just on the senior levels.

In relation I guess, if you think about from Q2.

Finally, as we head into Q3 in the back half of your any color you Brian. Thank you Yeah, you know what.

You know unfortunately, given the uncertainty in the market run co, but we can't give.

The guidance.

In my comments I gave general direction about what thought what happened.

Which we think of that.

Cloud and promo will lag if the recovery.

We think the checks will largely followed recovery, maybe slightly slower than we had a lot of optimism for the growth.

Continuing and payment.

I think we showed in the second quarter, our ability as a leadership team in.

Just I know you notice, but it's a new leadership team the team Didnt exist in its current state until Thanksgiving last year.

And that we can manage the expense really well and we expanded margins 340 basis points sequentially from Q1.

So I feel pretty good about our ability to.

And as margin obviously in this marketplace, it's very hard to predict.

But we.

Based on what we can see now.

No we.

We told you how it feels slight improvements sequentially from the second quarter going forward.

Okay.

Fair enough. Thank you very much of the time again every quarter and a good luck.

Thanks.

Again, if you like that the question comes back Star then one.

One moment please.

I'm showing no further questions at this time, let's turn the call back over the Jane Elliott for any closing remarks.

Thanks, operator.

This is Jane Elliott, let me wish add well in his retirement and I look forward. She is continued partnership and the transition and I look forward to working again with so many and new and existing friends on this call and in the future before we conclude today's call I'd like to men.

In the filing conferences in the third quarter, where management will be participating.

In September 16th we will be virtually participating in the C.L. King 18th annual best ideas Conference.

And in September 20, Threerd or 24, not exactly decided yet we'll be at their virtual Sidoti 2020 conference.

Thank you everyone for joining us on our deluxe second quarter 2020 earnings call. We look forward to sharing more good news it better accelerating transformation next time and in the meantime stay healthy and say.

Thank you.

Ladies and gentlemen, this does conclude today's conference. Thank you participating email disconnect have a great there.

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