Q2 2022 Deluxe Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Deluxe second quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. Today's call is being recorded we will begin with opening remarks and.
At this time I would like to turn the conference over to your host Vice President of Investor Relations. Tom Morabito. Please go ahead.
Thank you operator, and welcome to the <unk> second quarter 2022 earnings call.
Joining me on today's call is Barry Mccarthy, our President and Chief Executive Officer, and Scott <unk>, Our Chief Financial Officer at the end of today's prepared remarks, we will take questions.
Before we begin NSE on this slide I would like to remind everyone that comments made today regarding management's intentions projections financial estimates or expectations about the company's future strategy or performance are forward looking in nature as defined in the private Securities Litigation Reform Act of 1095.
Comments are subject to risks and uncertainties, including without limitation risks associated to Covid. The risks at the company's recent acquisition of first American payment system or any other acquisition does not produce anticipated results of our synergies and the risk of any future acquisitions or divestitures will not be consummated.
Any of these risks and uncertainties could cause our actual results to differ materially from our projections.
Additional information about factors that may cause our actual results to differ from projections.
Contained in our Form 10-K for the year ending December 31, 2021, and in other company SEC filings.
On the call today, we will discuss non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted EPS and free cash flow and our press release or presentation and our filings with the SEC you will find additional disclosures regarding the non-GAAP measures.
Reconciliations of these measures with the most comparable measures under U S. GAAP.
I'd also like to note that beginning this quarter and on slide 23 to 26 of this presentation. We are providing additional reconciliations of GAAP EPS to adjusted EPS, which should help with your modeling.
Now I'll turn it over to Barry.
Thanks, Tom and good morning, everyone.
Deluxe delivered its fifth consecutive quarter of year over year sales driven growth.
With healthy increases in all four of our business segments.
Importantly, we're now on track to deliver our second consecutive year.
Sales driven revenue growth.
Performance not seen by this company in over a decade.
Beyond this.
This trajectory shows the success of our transformation into a payments a data company and our one deluxe model.
How big that revenue increase this quarter, nearly 18% to $563 million.
Excluding incremental revenue from first American and business exits during the quarter revenue increased nearly 7%.
Similar to the first quarter ongoing demand for our products and services remained strong.
We also benefited from pricing actions.
Spite these moves we continue to experience strong volumes, which demonstrates the durability of the business across our segments.
Total adjusted EBITDA dollars increased year over year, while our adjusted EBITDA margin rate of 18, 1% was impacted by inflationary pressures.
Fly chain disruption, specifically at a higher margin portion our promotional solutions business and other factors, which Scott will detail in a few minutes.
We do expect supply availability to improve going forward.
Like most companies inflation is having an impact on our operations.
But between price increases and effective cost management, we expect these pressures to moderate throughout the year.
Even with the impacts of inflation.
We have not seen indications of a slowdown in business activity from our small and medium sized business customers.
Before we go into the second highlights I want to be sure to thank my fellow deluxe room for their continued dedication and long term commitments to our customers.
For the critical role they play in making the locks are trusted payments and a data company.
Moving onto some segment revenue highlights.
For the second quarter revenue in our payments segment increased nearly 66% year over year with stable margins.
This was driven by the 2021 addition, and strong performance with first America, which grew this quarter as nearly 7%.
As a reminder.
First American has been a low single digit grower prior to acquisition.
While our fundamental thesis was that we could allocate these growth rates.
Since the acquisition.
We've proven the deluxe Halo is real.
Our trusted reputation solid balance sheet and deep customer relationships has enabled first American to consistently exceed all expectations.
We clearly prove that our one deluxe model works.
Now proven how the model extends well strategic acquisitions like first America.
Excluding first American payments revenue increased nearly 7%.
As we saw strong growth across our major product payments products and.
In particular, we saw strong growth in our payables as a service offerings, which include our deluxe payment exchange or Gtx and lockbox.
In terms of new wins, we signed <unk> credit Union, a large Midwest regional credit Union and also an existing deluxe customer for checks branch capture and remote deposit capture.
We will now be providing merchant services to Chicago and this is a.
Great example of how our cross sell strategy that works.
Similarly, we'll also be providing merchant services choice one bank one of Michigan's largest banks.
We remain on track for our payments business to a C checks, becoming our largest revenue business in 2023.
This will be a first in our 170 year history at another key milestone as a payments and a data company.
Cloud solutions had another strong quarter growing 7% year over year, not including business exits.
Cloud performance was driven by our DDS business, which experienced record revenue and double digit growth.
Our continued investments have allowed us to further develop the platform and the results have been very positive.
These investments have enabled meaningful relationship expansion with key clients and new sales wins and has led to expansion into non EFI verticals, such as retail E Commerce and high Tech security among others.
We continue to have success diversifying our business to less interest rate sensitive areas.
We're doing five we're seeing non mortgage related growth in business banking mortgage lending consumer checking and consumer deposits.
Anticipating these market trends and adjusting to meet new and changing demand.
A key driver of our success and DBM.
Now on to our promotional solutions segment.
Promotional solutions had another strong quarter on the topline improving nearly 6% year over year, excluding business exits.
The growth was driven by key wins that benefit from our cross sell model.
Today, we announced that we sold our retail packaging business within promotional solutions.
These businesses did not fit into our long term strategic plans, although divestitures will allow us to focus on business with better growth and margin profiles.
Finally, our very profitable cash generating check business had its third strong quarter in a row growing 7% year over year, which is significantly better than long term industry trends.
Going forward, we continue to expect very high renewal rate and to win share in the marketplace.
In addition, we expect to support our strong margins in this business through our new print on demand technology, which we've discussed previously.
In summary.
Particularly pleased with our revenue growth in the second quarter, which demonstrates our clear momentum and transformation into a payments and a data company.
We have plans in place to ensure delivery of the second half and solid full year performance, despite inflationary and supply chain pressures.
Now I will turn it over to Scott, who will provide more details on our financial performance.
Thank you Barry and good morning, everyone. Let's go through the consolidated highlights for the quarter before moving on to the segments for the second quarter, we posted total revenue of $563 million of 17, 7% year over year.
Not including any incremental revenue from the first American acquisition and business exits during the quarter.
<unk> increased six 6% year over year.
Revenue performance was driven by a combination of solid ongoing demand for our products and price increases.
We reported second quarter GAAP net income of $22 1 million or <unk> <unk> per share in the quarter and included gains of $17 $5 million from the sale of the Australian web hosting business and also your facility offset by an $8 million increase in acquisition and amortization from the first generic.
Can acquisition.
And an increase in interest expense of $11 9 million driven by the transaction and rising interest rates.
Adjusted EBITDA came in at a $101 $7 million.
Four 3% from last year, driven by the acquisition and strong performance of Firstmerit.
Adjusted EBITDA margin was 18, 1% down from 24% in last year's second quarter.
The adjusted EBITDA margin rate decline was largely due to inflation supply chain disruptions within the higher margin products and our promotional solutions segment.
The previously announced technology investments.
Firstly offset by pricing actions and operating leverage from strong revenue growth.
We expect margin rates to expand in the second half of the year.
Second quarter adjusted EPS came in at 99.
Down from $1 25 in last year's second quarter.
The decrease was driven by the operational items and incremental interest expense previously mentioned.
Well as increased depreciation and amortization.
Now turning to our segment details.
Payments grew second quarter revenue 65, 7% year over year to $171 $2 million, largely driven by the acquisition and outperformance of Firstmerit.
As a reminder, we closed in the first American acquisition on June one 2021. So it was only in the Q2 prior year Comparables for one month.
Excluding first American payments revenue increased six 7% year over year.
In addition to the first American strong performance, we also experienced growth in our core payments business.
Including first American payments adjusted EBITDA margin was 24% consistent with last year.
With the addition of first American our payments segment has more than doubled in size in the second quarter of first American's margins were modestly dilutive to payments, but accretive to overall company margins.
Longer term, we expect the payments segment to deliver high single digit revenue growth rate for 2022, we expect adjusted EBITDA margins to be in the low 20% range.
Power solutions had another strong quarter.
<unk> segment revenue increased 7% year over year to $68 $6 million in the quarter.
As reported which includes the impact from exits.
Approximately 1% year over year.
<unk> growth continues to be driven by our <unk> solutions, which delivered record results and is benefiting from meaningful relationship expansion with key clients sales wins and increased marketing spend by our customers.
We continue to add new <unk> clients in new industry verticals and extending into new product lines, we should generate solid revenue growth going forward.
Adjusted EBITDA margin in the quarter declined 210 basis points versus prior year to 25, 5% due to changes in product mix, resulting from strong revenue growth in the DDS business.
For 2022, we expect to see low single digit revenue growth, reflecting a $16 million impact from business exits.
Adjusted EBITDA margins in the low to mid 20%.
Promotional solutions second quarter revenue was $139 3 million or three 2% year over year, driven by new sales wins and pricing increases partially offset by business segment.
Excluding the impact from business exits promotional solutions second quarter revenue grew five 9%.
Virtual solutions adjusted EBITDA margin for the quarter was 10, 5% down 540 basis points.
Largely as a result of inflationary pressures.
Lower revenue and higher margin products due to supply chain disruptions.
As Barry mentioned, we have sold our retail packaging business within promotional solutions.
The previously announced exit of our DSS business all of these smaller exited businesses from this segment generated approximately $30 million in revenue and negligible adjusted EBITDA in 2021.
Including DSS is divestitures are expected to have about $15 million revenue impact for the remainder of the year with very little impact if not dollars.
These factors are included in our updated guidance.
We do anticipate that the segment will see meaningful improvements to adjusted EBITDA margins in the second half consistent with our long term expectations.
Check second quarter revenue increased 7% from last year to $183 million.
New competitive wins pricing actions to strengthen our business checks outpaced the secular declines in the industry.
As was the case in Q1, you were very pleased with these results, which do not expect this level of outperformance to continue through the remainder of the year as we will begin to lap new customer onboarding activity that occurred in the second half of Q3 2021.
As a result, we expect to have low single digit revenue declines for the remainder of the year, primarily driven by the tougher comparable to Q4 of 2021.
Second quarter adjusted EBITDA margins were 44, 9% down 180 basis points year over year, largely driven by the addition of lower margin new customers.
This was a sequential improvement from 44, 3% in the first quarter and reflected strong performance given the inflationary environment.
Turning now to our balance sheet and cash flow.
We ended the quarter with a net debt level of $1 $63 billion down from $1 $67 billion last year as we continue to pay down our debt levels, which would increase due to the first American transaction.
Our net debt to adjusted EBITDA ratio was three nine times at the end of the quarter slightly improved from four zero times at the end of 2021.
Our long term strategic target remains approximately three times.
Free cash flow defined as cash provided by operating activities less capital expenditures was $13 $5 million in the second quarter.
Around $5 8 million from the second quarter of 2021.
Driven by working capital changes.
Due to the strong growth in the business.
Interest expense and higher cash taxes.
We do expect overall free cash flow to improve in the second half of 2022 as compared to the first half of the year.
Our board approved a regular quarterly dividend per.
For sure on all outstanding shares.
Dividend will be payable on September six 2022 to all shareholders of record on August 22022.
Okay.
As a reminder, our capital allocation priorities are to responsibly invest in growth pay dividends reduce debt and return value to our shareholders.
Turning now to guidance.
Given our strong revenue growth and the impact of inflation and supply chain disruptions have had on our margin rates.
Today, we are updating our guidance for 2022.
This guidance includes a partial prior year of first American and is subject to among other things prevailing macroeconomic conditions.
Debated continued supply chain constraints labor supply issues inflation and the impact of recent divestitures.
For the full year of 2022, we are now expecting the following keeping in mind that all figures per project.
We are increasing our revenue growth rate, 10% to 12%, excluding the impact of business segments.
This equates to 8% to 10% revenue growth on an as reported basis.
We are modifying our full year adjusted EBITDA margin rate to 18, 5% to 19%.
But on higher than planned revenue.
This reflects the margin impact of the pass through of inflationary pressures and supply chain disruptions for higher margin goods and our promotional solutions businesses.
Interest expense of $95 million in.
And adjusted tax rate of 26%.
Depreciation and amortization of $180 million of which acquisition amortization is approximately $90 million.
Average outstanding share count of $43 5 million shares.
And capital expenditures of $105 million.
To summarize I believe the second quarter results demonstrate our successful transformation is where payments in datacom.
The ongoing success of our <unk> model.
We look forward to further executing on our plan in the second half of the year.
Operator, we're now ready to take questions.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Again, that's star then the number one to ask a question.
Your first question comes from.
Lance Vitanza with Cowen.
Hi, guys, thanks very much.
Last year.
Bear with me here, because I want to set this question up but there is a question coming here, but so revenue came in obviously well ahead of our expectations. While EBITDA in dollar terms forget about the margin in dollar terms was a little bit weaker than we had expected. So my question is how much of the revenue outperformance that you're seeing.
With volume rather than price and the reason I ask is and I want you to comment on my operating hypotheses is that to the extent that this revenue outperformance that you are seeing any excessive is triggered by a better than expected volumes.
That bodes well for next year when costs, presumably youre going to ease at some point and at which point you'll be growing revenues off of this higher 2022 base.
If on the other hand, the revenue outperformance is simply an artifact of higher pricing that to cover cost inflation that I'm worried that youll, probably have a harder time growing EBITDA dollars next year, let alone getting back to a better margin structure. So do you agree with the premise and in any case I am curious on the split between price and volume.
On the outperformance thank you.
Yes, good morning, Lance this is Scott.
So similar to the first quarter, we saw a nice even balance with slightly more than half of the revenue growth coming from increased volume and so we felt like that was a.
A healthy combination of.
Okay.
Volume and.
Pricing.
So look we do think that we're certainly cautiously optimistic about the back half of the year and the volumes that we will see but feel like there is some decent momentum and it's not all price driven Gary anything you want to add to that the other thing I would just add on Atlanta this quarter in particular.
Supply chain inflation impact and one piece of our promotional products business was the place that really slowed up a bit here, but all of the four businesses had great revenue growth except for the promotional business because of this one impact had really healthy margins. So it gives us a lot of optimism for the future.
Okay, Great and then just.
So.
The July side, you mentioned this Barry in your remarks that the July 6th announcement regarding Taco community that looks like a really strong embodiment of the cross selling protection, but I wonder how competitive was two pockets process did you need to offer promotional pricing or bend over it was there.
Anything there that would make that.
Perhaps less attractive than it would seem at first blush.
Any color around that would be would be helpful. How the how the process came to.
To fruition.
We're really proud of this deal as well as a few other deals that we can't use their name and it's a real true example of leveraging the relationship that exists within <unk>.
<unk> for the balance benefit of first American and.
And I would call it a pretty vanilla straight up transaction that we had multiple products already with the credit Union and we expanded that relationship by offering the additional service.
And we were able to get them to have a conversation with the decision makers, because we had an existing relationship.
And we're doing that over and over again and that was part of the hypothesis of a thesis for the investments first American is bearing fruit and proving and proving the point that one deluxe extends not only across the existing enterprise products that we have but even two strategic acquisitions like with first American.
Okay, Great and then you mentioned that youre not seeing a slowdown in that.
So let me get this wrong, but I think you said youre not seeing a slowdown in activity. Despite inflation from your small and medium sized customers what about the pace of new business formation, which I would imagine it's fairly critical for you right you want to see lots of new business is being formed any changes there that youre seeing.
So the message I think overall Lance is that despite those lots of messages in the media.
We just don't see it in our performance, we see healthy volumes volume growing across all four of our businesses.
And we just we.
We just don't see it.
Slowdown and then in the small business sector now could it happen if inflation and interest rates keep going perhaps.
The important point today.
Don't see it we just don't see it in our volume or in our in our current trajectory.
Great Okay. Thanks.
I'll pass the baton Thank you.
Your next question comes from the line of Charlie Strausser with CGS.
Good morning.
Good morning, gentlemen, good morning.
A little bit more expanding on.
On the top line and the organic growth there looking at the drivers behind some of that growth.
Especially on the volume side.
How sustainable longer term as that.
More near term how should we think about the top line for Q3 Q4 separately as we look at the back half of the year.
Charlie so.
I'm talking for some time about aiming the stead.
Deluxe shift to become.
<unk> organic revenue growth company.
Now five consecutive quarters of non weighted on our way to delivering the second consecutive year.
Organic what we call sales driven revenue growth.
We think that that is a sustainable story for this company for the future very specifically in each of the businesses there is different.
Drivers for the volume.
The common theme across all of them is that the one deluxe model works, meaning that we can sell more product and service to existing customers, while onboarding new customers.
You see the great wins, we've had in check you see it in promo you see it in our cloud business and you certainly see in our payments business. So I'll tell you, it's pretty broad based across all of the segments and it's just we think real evidence improved but the model works.
And that we have changed the trajectory of the company to be a sales driven revenue growth company going forward.
That's helpful. Thank you and Scott I apologize if this out before but any updated thoughts on interest expense for the back half of the year.
Yes.
Now guiding interest expense of $95 million for the year of the original guide was 85 and so that includes the impact from obviously all the rate hikes do we see.
Happening in our forecasted.
For the balance of the year as a reminder, about 60% of our.
Of our existing outstanding debt is variable rate debt and so that's the driver of the $10 million increase for the year.
<unk>.
Great. Thanks, and then just lastly from me ill get back in queue, just kind of.
Global thoughts on cash flow for the back half of this year.
Yes, So Q2 represents the low point in cash flow for for the year for us for a number of reasons many of which are timing related. We also saw drag on free cash flow for the quarter based on working capital as we had such strong revenue growth in the quarters, we do expect to see free cash flow pick up meaningfully in the back.
Half of the year, particularly in Q3, we have a strong cash flow quarter.
There is a few timing related things, we don't have a bond payments as an example in Q3 so.
So we do expect cash flow to pick up meaningfully both in Q3 and Q4.
Great. Thank you very much.
Your next question comes from Marla backer with.
With Sidoti.
Thank you.
Cool.
Alright.
In the current.
Economic environment to a rather with economic uncertainty rising interest rates and inflation.
What kind of implications you think that has for M&A.
That might be applicable to yet.
Good morning.
We have been pretty clear that we were driving in the company to be a sales driven revenue growth company and as I said a minute ago. We feel like we have accomplished that we've also said that we would look to supplement.
Our portfolio with strategic acquisitions, which you saw us do with first America.
And then.
We have I think very been very disciplined in the time that we've been together as a team leading the transformation or not.
Making multiple transactions and we don't intend to make multiple transactions.
Specifically the next transaction, we might consider would be something that would help us extend.
Bring more volume specifically bring more volume to businesses were already in our second added capability. Our features functionality, we don't have today.
And we will be opportunistic about that.
And we will make decisions that are.
For the best interest of shareholders that meet our.
Internal rates of return and et cetera, and obviously interest rate higher interest rates makes those hurdle rates more difficult to achieve.
So we will be opportunistic and keep our eyes on the horizon for a smart opportunities going forward and Meanwhile, we're very focused on debt repayment and reducing our leverage ratio, which we think is more than manageable today.
We will continue to drive that down and we know that will help drive shareholder value as well.
Okay. Thank you and are you.
<unk>.
Growing awareness.
Well potentially adoption of banking as a service.
And if you are how do you think it might impact your opportunity.
So we're very bullish on the notion of banking as a service and we know there are multiple parties that are playing playing in that space.
We think it's probably a little bit further on the horizon. There may be some of what we're reading about in the media, but ultimately we think that is a good pathway for us because especially in our payments business, we have relationships with millions of small businesses 100 over 150000, where we're actually running there.
<unk> card processing today, and I think that puts us in a particularly good strategic position over time to leverage that as those small to midsize businesses are really looking for alternatives and more integrated financial services and I think we can be a player there over over the intermediate term.
Thank you.
Your next question comes from David Silver with CL King.
Yes, hi, good morning, gentlemen.
I had kind of a big picture question, I think you've kind of touched on it different.
At different aspects of it but I was just wondering from your perspective.
This question would be kind of more of a pre pandemic or pandemic versus post pandemic period.
But in terms of the way you operate your business and go to market and whatnot.
How are you looking at.
The landscape here now post.
Post pandemic, let's call it.
Versus how you had to adjust and adapt kind of on the fly over the past, let's say.
Couple of years in other words is it harder to reach your target customer or are they more.
Spread out or disparate and tougher to locate the decision makers.
Have you had to kind of shift your models around so.
How are you operating your business now differently, let's say versus maybe a year or so ago.
Sure Good morning, David.
I would start with.
Is the the importance and the durability of our one deluxe model.
And the one deluxe model is focused on bringing the very best of deluxe to our customers.
Rather than trying to sell one product at a time instead, we go and understand the customers' needs and then put together a bundle of solutions that help the customer solve their problems.
During COVID-19 some of the demands we are different than they are in a post COVID-19 higher inflation environment and so we just simply adjust the bundle of the mix of products that we are that we helped that we offer to our customer to solve their problems. So that's number one so the bundle of offerings changes as a result of the market.
Changes of course.
But the bigger thing is that we're actually able to now be in person and see our customers face to face, whereas obviously during the Covid period, we had to grow the company and deliver the wanderlust model remotely.
Seeing great success in response from that.
Had earlier in the year, we had our deluxe exchange, which we hadn't been able to do for a couple of years, we had an in person and we had many one hundreds of our customers come and join and participate and visiting and meeting with our customers in their offices and go into their facilities and more deeply able to engage in their problems. So that we can help.
Solve their problems.
But the notion and the basic model of how we're growing the company around one deluxe, bringing the best of the company to every customer gets foundational and it's shown its durability through COVID-19 and now through <unk>.
An inflationary period of time.
Okay, Great and then I had another question may be just about.
The cost inflation.
Youre dealing with and in particular.
How durable or how variables certain aspects of that are going to be so if you look out a year or two.
<unk> and these are my words, not yours, but.
To the extent that wages have to move up.
To compensate for workers, you need I mean that might be a more sticky or durable element of your cost base, but I do wonder if office expenses and electricity.
Travel and things like that.
May also moderate.
<unk> forward from where they are right now but.
As you look at your tackling the company cost base, let's say over a one or two year period.
What are the elements, where you think you have some opportunity to kind of drive.
Cost base, a little bit lower and reduce the.
The impacts of the inflation that you're currently dealing with.
Hey, David I'll turn the very highest level, a little Scott I'll, let Scott kind of double it.
And so for you, but at the highest level, we think we.
We are able to continue to take price increases.
Proportionate to what's happening in the marketplace and as you know we've discussed before there's a lag between the time, we announced the price increase and we actually can the implemented.
Some limitations, we have on our agreements, but we think we'll be able to continue to do that over time, which we think will provide us some.
Some profit protection overtime, but of course, obviously, we're looking at the cost side as well Scott you want to sort of double click on that subject.
There is really core to deluxe as DNA is continuing to focus on driving efficiency and we're certainly watching the inflationary impacts to see if theres specific line items, and where our focus areas shift over time to mitigate inflationary pressures that we've seen.
We have.
And the entire organization built around lean principles and how we do simply gets better and do value reengineering.
Up and down our supply chain on a continuous continuous basis, we've got a heavy.
Focused on sourcing and procurement to make sure that we have and we're buying it.
At World class pricing and so it is something that we live every day is trying to figure out how to get.
More productive and that's independent of the inflationary environment.
How we operate but certainly has created some interesting opportunities and to your point there is elements of inflationary impacts that are.
More durable than others.
But we're certainly looking to manage that portfolio and look for ways to drive productivity. It's not always in the same line item and so we may see pressure in a particular portion of the business we have to solve it somewhere else that's something we're keenly focused on.
Okay. Thank you and then just one more but.
I personally I always view or I tend to view the discretionary element of your Capex budget is kind of a good.
Fine good.
The road map for where the more immediate priorities are so if you could just discussed in that 100 million or so cap budget capital spending budget for this year can you remind me what the sustaining level of that is and then if you could just highlight the one or two biggest items.
In the discretionary portion of that spend thank you sure. So we don't break it out in a high level of detail but.
More than half of our capital spend is what we would consider growth capital is capital spend again striving.
Our position in the marketplace much of that is concentrated.
Our payments and data businesses, where we have a major technical re platforming of our some of our data capabilities continuing to build out our software offerings within the payment space and then a third big capital project.
Yes.
<unk>.
We're deploying both this year and into next year.
Investment in our printing technologies to modernize the manufacturing process for our truck production and so those are sort of the three big buckets of investment in the in the check printing.
Printing capabilities, it's continuing to push our payments software services forwards and its investment in the data business.
Very good thank you very much.
Okay.
Your next question comes from Lance Vitanza with Cowen.
Okay sure let me jump back in here I did also want to ask you about corporate overhead, which I noticed was down sequentially and I'm wondering if that reduction was sort of seasonal or was there something that made the <unk> number higher than it normally would have been in really just thinking about how we should think about.
The second half of the year Directionally on the corporate overhead line any color there would be helpful.
And there is seasonality from Q1 into Q2 that explains part of that so maybe let's split to have the conversation and talk about it year over year from a Q2 perspective corporate was up.
A few million dollars that is entirely explained by the reintroduction of some benefits that it had been employee benefits that have been paused during COVID-19.
Exclude that one timer, which will conclude at the end of this year and be in their baselines corporate overhead year over year was flat. We should think about that in this inflationary environment. I think that tells you how much cost that we've taken out of the corporate corporate line. It is a heavy area of focus for US is to drive efficiency, there and in fact with the.
Strong revenue growth corporate as a percentage of sales was down 70 basis points year over year. So.
To the earlier questions around driving productivity corporate is something that we're always focused on and continue to get more efficient there.
Thank you.
At this time I will turn the call back to Tom Morabito for any closing remarks.
Thanks, Erica before we conclude I'd like to mention that management will be participating in the following conferences.
Susquehanna financials, 2020 to get carded, our payments and Fintech Conference Tomorrow August 5th.
Wells Fargo seventh annual Fintech and technology services arm on August nine.
And C L. King Best ideas Conference 2022 on September 12.
Thank you again for joining us today, and we look forward to speaking with you in November as we share in the third quarter 2022 results.
Thank you for participating you may disconnect at this time.
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