Ed Merritt – Treasurer and Vice President-Investor Relations Lee Schram – Chief Executive Officer Keith Bush – Chief Financial Officer.

Charlie Strauzer – CJS Securities Chris McGinnis – Sidoti & Company Jamie Clement – BRG.

Good day, ladies and gentlemen, and welcome to the Q3 2018 Deluxe Corporation Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Ed Merritt, Treasurer and Vice President of Investor Relations. Mr. Merritt, you may begin. .

Thank you, Jimmy, and welcome, everyone, to Deluxe Corporation's Third Quarter 2018 Earnings Call. I'm Ed Merritt, Deluxe's Treasurer and Vice President of Investor Relations. And joining me on today's call is Lee Schram, our Chief Executive Officer; and Keith Bush, our Chief Financial Officer.

At the end of today's prepared remarks, Lee, Keith and I will take questions.

I would like to remind you that comments made today regarding financial estimates, projections and management's intentions and expectations regarding the Company's future performance are forward-looking in nature as defined in the Private Securities Litigation Reform Act of 1995.

As such, these comments are subject to risks and uncertainties, which could cause actual results to differ materially from those projected.

Additional information about various factors that could cause actual results to differ from projections are contained in the press release that we issued this morning as well as in the Company's Form 10-K for the year ended December 31, 2017.

Portions of the financial and statistical information that will be reviewed during this call are addressed in more detail in today's press release, which is posted on our Investor Relations website at deluxe.com/investor. This information was also furnished to the SEC on the Form 8-K filed by the company this morning.

Any references to non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release or as part of our presentation during this call. Now I'll turn the call over to Lee..

Thank you, Ed, and good morning, everyone. Deluxe delivered a solid third quarter. We reported revenue in the middle of our outlook range and adjusted earnings per share above the high end of our outlook.

Overall, total revenue declined about 1% from last year, driven by Financial Services, down 7%; and Direct Checks, down 9%; partially offset by Small Business Services' 3% growth in the quarter. On an organic basis, revenue declined approximately 4% and was about in line with our expectations.

Marketing solutions and other services revenue grew about 5% over the prior year and represented nearly 43% of total third quarter revenue. Adjusted diluted earnings per share grew almost 3% from the prior year.

Year-to-date, we generated strong operating cash flow of $219 million, and we ended the third quarter with $889 million on our credit facility. During the third quarter, we repurchased $80 million of our common stock, bringing the year-to-date share repurchase total to $120 million, nearly twice the amount we repurchased all of last year.

We also announced today that the Board of Directors increased the share repurchase program to $500 million, effective immediately. We continued our brand awareness campaign to help better position our products and services offerings and drive future revenue growth.

Consistent with our strong track record, we advanced process improvements and continued our aggressive cost-reduction performance for the quarter. Today, we also announced the successful conclusion of the search for my successor.

This executive, whose appointment received the unanimous approval of the board, has an exceptional record of developing, building, organically growing and scaling businesses that serve both the financial institutions and small business markets.

An innovator in fintech and other technology-driven businesses, with a strong sales and marketing background, this individual has the requisite experience and leadership capabilities to drive Deluxe's next phase of transformational growth, building on all we have achieved over the past 13 years.

We look forward to announcing the appointment on November 6. As this will be my 50th and last earnings call, I want to express my sincerest appreciation to everyone at Deluxe who I've worked with throughout the past 12.5 years.

We have accomplished significant milestones in our transformation over this time, and I honestly believe we have built a solid foundation for continued growth for the future. In a few minutes, I will discuss more details around our recent progress and next steps. But first, I'll turn the call over to Keith for an update on the financials. .

Thanks Lee. Revenue for the quarter came in at $493 million, declining 0.9% over last year. Organic revenue, which excludes acquisitions, FX and other noncomparable items, declined approximately 4% and was about in line with our expectations. Shifting to our segments.

The Small Business Services revenue was $316 million and grew 3%, and we delivered continued growth in marketing solutions and other services. Financial Services revenue was $147 million and declined 6.7% on a reported basis and about 10% organically compared to the third quarter of last year.

While disappointing, the FS revenue decline was driven by lower check orders, lower data-driven marketing revenue and the loss of a previously discussed customer in Deluxe Rewards. Direct Checks revenue was $31 million, declining 9.1% from last year, but ending slightly better than our expectation.

Our strategy to transform Deluxe into more than a check printer is playing out, as this marks the first quarter that marketing solutions and other services represented the highest products and services mix, contributing $210 million or about 43% of total revenue for the quarter.

Check revenue ended the quarter at $198 million, representing 40% of total revenue. And forms and accessories ended at $85 million, representing 17% of total revenue. Gross margin for the quarter was 59.9% of revenue and declined from 61.2% in 2017.

The impact in margins from product and service mix and increased delivery and material costs and acquisitions were only partially offset by previous price increases and improvements in manufacturing productivity. SG&A expense increased $5.3 million from last year to $208.6 million in the quarter or 42.3% of revenue compared to 40.8% last year.

Additionally, the expenses from acquisitions, the CEO transition process and planned innovation investment spend were only partially offset by our continuing cost-reduction initiatives and lower medical costs.

Excluding non-GAAP adjustments, which I will discuss shortly, adjusted operating margin for the quarter was 18.2%, down 2.3 points from 20.5% in 2017. The margin decline was driven primarily by the mix of product and service revenue and acquisitions, partially offset by previous price increases and continued cost reductions.

Small Business Services adjusted operating margin was 17.9%, down 1.8 points from 19.7% in 2017, with the decline driven by higher acquisition spending, a higher average commission rate and increased material and delivery costs, only partially offset by previous price increases and continued cost reduction initiatives.

Financial Services adjusted operating margin of 15.3% was down 3.8 points from 2017. In addition to check usage decline and continued check pricing allowances, the loss of the large customer in Deluxe Rewards and higher delivery rates were only partially offset by continued benefits of cost reductions.

Direct Checks adjusted operating margin of 34.1% increased 0.5 points from 2017, driven by cost reductions that were only partially offset by lower check order volume and higher delivery costs. Diluted earnings per share for the third quarter was a loss of $0.67.

These results include aggregate non-GAAP adjustments of $106.9 million or $2.03 per share.

Of this amount, $1.59 per share was a noncash goodwill impairment in the Small Business Services segment, primarily in the distributor channel attributable to changes in strategy and in the mix of products and services sold, including declining checks and forms.

We also recognized a noncash asset impairment of $0.34 per share, primarily for the Safeguard tradename. Additionally, we recognized charges for restructuring and the CEO transition cost of $0.13 per share and a benefit of $0.03 per share related to federal tax reform.

As Deluxe pivots towards financial technology solutions and Small Business Services offerings, away from the legacy forms and checks business, noncash charges such as this may occur.

Adjusted diluted EPS was $1.36 and ended about $0.04 better than the high end of our outlook, driven by lower brand spend timing and medical expenses, additional share repurchases and slightly lower tax rate. These benefits were partially offset by lower revenue and a change in revenue mix. Turning to the balance sheet and the cash flow statement.

We were drawn $889 million on our credit facility at the end of the quarter, with the increase primarily due to acquisitions and higher share repurchases.

Year-to-date cash provided by operating activities was $219 million, a $7 million decrease compared to 2017, driven by higher earnings and lower prepaid product discount payments, offset by higher interest payments and higher payables. Capital expenditures were $43 million year-to-date, and depreciation and amortization expense was $97 million.

Now moving to our outlook. We are adjusting our previous consolidated revenue outlook for the full year to range from $1.995 billion to $2.005 billion, which equates to about 2% overall growth. We removed all of the remaining unannounced acquisition revenue from our 2018 outlook.

We are disappointed that our current full year revenue is expected to be lower than the outlook we provided at the beginning of the year by about $100 million at the high end of our guidance. The key drivers of the change were primarily $53 million in delays on acquisition revenue and $29 million lower data-driven marketing revenue.

The remainder of the change was from a few other items, including the impact of slower eChecks ramp and other items, including foreign exchange. We continue to be pleased with our checks product performance, and we expect to achieve the high end of our initial check expectations for the year.

We are modifying our adjusted diluted earnings per share outlook to an expected range from $5.63 to $5.70. Here are some additional color on our 2018 full year outlook. Small Business Services revenue is expected to increase 3% to 4%.

Financial Services revenue is expected to increase 1% to 2%, and Direct Checks revenue is expected to decline about 10%. We delivered on our third quarter cost and expense reductions commitment and expect full year reductions of approximately $55 million.

We expect to see continued inflation in material costs and delivery rates, and we continue to plan for revenue growth investments of approximately $8 million.

In addition to this, we also plan to invest $7 million, most of which is driven by data-driven marketing and treasury management and talent, technology and process improvements to accelerate strategic sales and drive more development innovation. We expect our full year non-GAAP effective tax rate to be approximately 24%.

We expect to continue generating strong operating cash flow, ranging between $350 million and $355 million in 2018, reflecting stronger earnings, lower tax payments and lower medical costs, partially offset by higher interest payments.

We expect prepaid product discount payments to be approximately $25 million for the year, and 2018 capital expenditures are expected to be approximately $60 million. Depreciation and amortization expense is expected to be approximately $132 million, including approximately $79 million of acquisition-related amortization.

For the fourth quarter of 2018, we expect revenue to range from $522 million to $532million, and adjusted diluted earnings per share is expected to range from $1.48 to $1.58.

The comparison the third quarter, the fourth quarter is expected to have higher revenue and higher operating income flow through, partially offset by higher medical expenses and brand spend and on web services. Moving on to our capital structure.

We expect to maintain our balanced approach of investing organically and through small-to medium-sized acquisitions to drive our growth transformation. And we have noted – we have intended to be moderately more aggressive in our acquisition plans going forward.

As previously mentioned, our Board of Directors increased our share repurchase authorization to $500 million. We expect to continue to be in the market to repurchase common stock. Now I'll turn the call back to Lee. Lee Schram Thank you, Keith.

I'll continue my comments with the recap of where we are and implications for the full year and highlight our progress in each of our segments, focusing on the three primary MOS key growth areas, to provide a perspective on how we progressed in the third quarter and outline what we expect to accomplish during the balance of the year.

As Keith mentioned previously, we are disappointed that our current full year revenue is expected to be lower than the outlook we provided at the beginning of the year. Nonetheless, we remained bullish about our strategy.

53% of our revenue reduction has been not being able to close new acquisitions quickly enough, and another 29% driven by data-driven marketing. Note, as Keith also highlighted, that our check businesses are performing very well, and we expect to achieve the high end of our original expectations.

To protect our adjusted EPS, we continued to prudently manage expenses, continued to refine and reduce our income tax rate, slightly reduced our planned innovation investment spend, and we also have repurchased more common shares than originally planned.

We believe we will continue to execute well, and outside of data-driven marketing right now, that our business continues to improve both operationally and strategically. Given all this, for 2018, we expect to deliver continued growth in MOS revenue and a ninth consecutive year of total revenue growth.

If we achieve the low end of the range of our revenue target for the year, this will set an all-time record. And achieving the middle of the range would mark the first time in the history of Deluxe that our revenue exceeds $2 billion.

Additionally, we continue to believe we remain on track towards our 3-year goal through 2020 to pivot for faster organic growth, with more moderately and more aggressive acquisitive growth.

While accelerating progress toward our three year strategic goals and growing EBITDA, there may continue to be an impact to operating income and EPS, depending on the mix and pace of new acquisition growth and the organic performance of MOS. There is a cost to transform more quickly.

So as we have been indicating, we may experience small, near-term EPS dilution in 2019. But we expect EBITDA growth and immediate cash flow and cash EPS accretion. We are committed to delivering enhanced shareholder value while we continue our pivot for faster organic growth and more moderately more aggressive acquisitive revenue growth.

We are also targeting to increase our overall MOS to total company revenue mix to be approximately 43% this year, growing to 60% by year-end 2020.

In 2020, in marketing solutions and other services, we expect revenue to be approximately $843 million to $852 million, up from $756 million in 2017, with an expected 12% to 13% growth rate, including 3% organic growth. Now shifting to our segments. In Small Business Services, Q3 revenue grew about 3%.

Forms, accessories and small business marketing solutions were slightly below the high end of our expectations, while checks and web services performed about on our expectations.

The NFIB Small Business Optimism Index remained very strong throughout the third quarter, finishing September at 108, which was slightly up from June, so a strong positive indicator.

Clearly, there remains strong optimism for the economy, with small businesses signaling they expect better market conditions and increased business activity and capital spending.

However, small business owners appear to be increasing wages for existing employees, and in some instances, hiring more employees, neither of which have driven marketing spend through Deluxe. We have seen new small business customers in our payroll services business, which we believe is a result of a strong labor market.

If the optimistic trend continues, we believe this bodes well for us in the future for SBS revenue growth. Small business marketing solutions were below our expectations for Q3. However, positively, they are expected to outperform our original expectations for the year.

Growth initiatives here include scaling marketing on-demand solution offers in the financial adviser and real estate verticals and growing web-to-print, retail packaging and promotional products. Web services were about on our expectations for Q3, with our focus remaining on targeting additional cross-sell and upsell as well as new customers.

We continue to ramp our cross-sell for "do it for me" logo customers who became web design customers. We are scaling payroll services. And in Q3, payroll services revenue was slightly better than our expectations. eChecks and eDeposits are included on our fraud, security and operational services category.

Our focus on eChecks and eDeposits continues to be in building out opportunities with financial institutions, medical and insurance payment processors, accounting services and software providers and other document management and payment solution companies.

In Q4, we expect to ramp in a second medical insurance payment processor as well as two insurance companies, which are expected to initiate rollouts. Finally, we are continuing our brand awareness transformation. In early October, we had a media event launching the Main Street makeover web series, highlighting the makeover of Alton, Illinois.

And we announced our plans to complete a fourth town makeover in 2019. We continue to improve the link between smallbusinessrevolution.org to our content and demand creation to deluxe.com as we focus on driving more revenue-generating capabilities.

In Financial Services, Q3 revenue was disappointing, down about to 7% last year, primarily driven from declines in the loyalty rewards business from the previously announced lost large customer, from lower data-driven marketing revenue and from checks or units decline, about 6% in the quarter.

For 2018, we continued to expect check units to decline approximately 7% as well as we expect to continue our process simplification and cost and expense structure-reduction initiatives. For data-driven marketing, organic growth rates have been in the mid-20s over the past four years.

However, our organic growth in DDM is now expected to be only about 4% this year.

Unfortunately, we have not yet seen the expected increase in marketing spend nor have we seen higher spend from a combination of tax reform savings, anticipated regulatory relief and ascending interest rates, all of which typically improve bank earnings and drive more marketing.

Our focus in DDM is on growing the business with both existing FIs and acquiring new FIs and expanding our pay-for-performance initiative. For all of 2017, we added seven new FMCG customers. Positively so far in 2018, we have added 10 new FMCG customers, which is more than any year in the history of FMCG.

For all of 2017, we only had one pay-for-performance customer, but we have added five customers in 2018. In Q3, we had eight new customer wins in non-top 100 FIs, plus four expansion wins with existing top 100 customers.

To accelerate revenue growth in response to market softness, we recently added several new strong senior sales and marketing executives and expanded our data platform capabilities, which we believe will help drive improved data-driven marketing revenues.

For 2019, many of our very large financial institutions are indicating a heavier need for deposits, along with credit card processing, which are sweet spots for FMCG more than mortgage.

One of our 2019 strategic initiatives is also forging new third-party partnerships, leading to an expansion of offerings, which will support our client's evolving needs. For treasury management solutions, our focus is on profitably scaling the business and integrating acquisitions.

In Q3, treasury management solutions revenue was slightly below our expectations. However, we had three significant sized new wins in the quarter, which include multiyear rollouts and four cross-sell wins with existing customers.

On August 16, we announced the acquisition of REMITCO's remittance processing business, which will be integrated into treasury management solutions. The acquisition unifies two market leaders, with best-of-breed offerings in a fast consolidating market, where FIs are moving towards trusted outsource providers on a national scale.

This acquisition, consolidated with our offers, will provide more revenue opportunities as we expect 70 of the top 100 banks to make a decision to implement integrated receivables management over the next three years.

Customer reaction to this acquisition has been very positive, as this makes us a significant player in serving commercial finance institutions and enables a foothold to future receivables management expansion opportunities.

In Direct Checks, revenue finished slightly better than our expectations, and we will continue to look for revenue opportunities to provide accessories and other check related products and services to our consumers, and for synergistic cost and expense reductions.

For 2018, we expect Direct Checks revenue to decline around 10%, driven by continued declines in consumer usage and lower reorders. We expect to reduce manufacturing cost and SG&A in the segment and continue to deliver operating margins in the low 30% range, while generating strong operating cash flow.

Looking ahead to the fourth quarter, we expect 6% to 8% overall revenue growth and slight organic growth. Organic growth in the fourth quarter will be an encouraging sign heading into 2019. In 2019, we are planning for what we expect to be a 10th consecutive year of revenue growth, including some organic growth.

And we expect to deliver adjusted diluted earnings per share and operating cash flow growth.

Given that we plan to announce my successor on November 6, we will not provide additional color on 2019 and beyond at this time, as we want to give that individual time to transition into the company and work with the management team to assess the current 2019 plan before providing additional guidance.

Now Jimmy, we'll open up the call for questions..

Thank you. [Operator Instructions] Our first question comes from Charlie Strauzer with CJS Securities. Your line is now open..

Hello, good morning..

Hi, Charlie..

Lee, I just want to say thank you for all the help over the years, and I wish you well on the next chapter of your life. And thanks for taking my questions today..

You’re welcome..

Quick question for you on the last part of your prepared remarks about the organic growth. Just to clarify, you said some organic growth.

Does that imply the full year, some organic growth? Or just at some point during the year?.

Full year organic growth in 2019, is that what you're referring to, Charlie?.

Yes.

Is that what you're trying to imply there?.

Yes. Yes. Here's what I've mentioned. Specifically, we're expecting some organic growth in the fourth quarter this year, so in 2018. And then we're also expecting some organic growth now in 2019..

Excellent. Great. And then also, you talked about Q4, you removed the expected acquisition from your guidance at this point.

Does that mean that the deal is basically gone? Or is it just being delayed to 2019 now?.

What we're seeing is that we're just getting too late in the year. We have things that we're working on there in the pipeline right now, but our view is we're just not certain that things are going to close this year.

And we just decided that rather than pump and pecking around what we expect is we talked through the pain of this is – we talked about through the year, and so we decided to just take it out at this point in time.

That's the equivalent now of – the way to think about it is it was really targeted in the data-driven marketing space and also, it's the timing issues that we've had with closing the REMITCO deal.

As far as the things that we expected to get done in Small Business Services, we've done those, as we've reported earlier in the year, between the ColoCrossing deal and the LogoMix deal..

Great. And then you mentioned that checks declined 6% in the quarter, and you expect it to be 7% for the year.

Was that just in small business? Or is this just overall for the company?.

No. That's again – so if you think about the trend we've seen, we're about 7% in Q1 and Q2. We did see a little bit improvement in Q3 at 6%, and yet the timing and all that for the year, Charlie, we expect to be about 7%. And that's again within financial services..

Got it. That's – got it. Okay. Great. And then just lastly, if you could just talk a little bit more – maybe this is for Keith, the impairment on the distribution channel.

Is that related to Safeguard and the shift there?.

Thanks Charlie. Yes. So as we continue to focus on this transformation and more focuses and emphasis in the fintech parts of our business and web services, we continue to monitor what the impact is on overall business. So those impairment charges do relate to that portion of our business that is attached to the distributor network.

And that also relates to the Safeguard impairment as well..

I think something's really important here, to add on what Keith's talking about, is we got our Safeguard distributors out there, listening to this call. And it doesn't mean we are giving up on the Safeguard distributors in the network. It's an important part of what we're doing.

But if you think about what we've strategically decided to do is to really shine the spotlight on our data-driven marketing, treasury management, web services businesses, we think, again as you heard our prepared comments around eChecks, there's some incredible opportunities in the market for us there as well.

And therefore, deemphasizing more, a lot of the hard work that we started many years ago to try to really scale up some of the print business in the safeguard area. And it doesn't mean we're stopping doing that at this point in time.

But just because we're not shining the spotlight, making as much investments in those areas, so we're making what we think are better investments in those other areas, we've made a – we've had a strategic inflection point right here in the quarter as we went through our annual strategic review with the board.

And that's really what the driver of most of the impairment, either between the trade name or the Safeguard goodwill is, Charlie..

Great, thanks Lee. And again best wishes on the next chapter of your life..

Thank you so much Charlie. Appreciate it..

Thank you. And our next question comes from Chris McGinnis with Sidoti & Company. Your line is now open..

Good morning, thanks for taking my questions. And Lee, congrats and again, good luck. Just to touch a little bit more on data driven.

Just that deceleration in the growth rate from that 4% we are seeing now, can you maybe just dig a little bit into just talking to the customer base? What they're – what kind of their thoughts are around data management and the data-driven product that you do have out there? It does sound like you have some wins recently.

Should that help drive that rate, that increase? And if maybe that's some of the thought of around organic growth in Q4? Thanks..

Thanks. Thanks for the question, Chris. Clearly, this is frustrating for us right now. I mean, the stock's getting pounded, and it's getting pounded a lot because of this specific issue. We know that. I mean, we've obviously talked in the – you and Charlie and Jamie and the investors. But there's so much positive going on right now in the space.

And the challenges that we're seeing right now is we do have more new customers right now. These are the largest of the financial institutions, which is where our focus is. Some of those new customers aren't ramping as quickly on their campaigns – number of campaigns, size of campaigns as originally indicated earlier in the year that they would.

Some of the current customers that we've had have pulled back on certain parts of their campaigns as well. And those are the things that have challenged us as we worked through the year. We, obviously, seen what's been going on in the mortgage market, and we've seen a pullback in Datamyx with a couple of our customers in that area as well.

But Chris, what we're hearing right now, and what we highlighted in the call, is that, yes, we are getting new customers, which is fabulous. We're not losing customers at this point. And what we're also doing is we're getting – we decided to bring on some bigger sales and marketing execs and players right now.

We've done a lot more to expand our data platform at this point. And then what our – what some of our largest – and I can't give you all the names, but you would know all these names in a minute if I could. They are saying, look, we are going to go heavier into deposits and credit card processing. And right now Chris, for us, that's music to our ears.

Because those are real sweet spots for the largest piece of the DDM business, which is FMCG, they do mortgage? Absolutely, but their target is much more in the deposit area and much more on the credit card area. And the other thing that's positive is we've really not done a ton with third-party partnerships in the past.

And we're starting to bring those to the forefront as well. So the frustration is, is a lot of us, we believe, is timing in where – and some of the spend and how – and a lot of these FIs have pulled back.

But by no means do we not continue to be incredibly bullish on this and as we said, it's going to be a little lumpy on the ride as we go through quarters in the space, but we love the space. We believe in the space. I can tell you that the new person coming believes in the space, loves the space as well. And so I – temporary is the way I look at it.

And I think we've taken some good action and we've also talked to our customers. And again, we got some really powerful, positive learnings what we think is going to happen in the new year..

Great, thanks for the color. And just then technically following up on something you mentioned just with FMCG.

Is there a change that's happening in 2019 that you're seeing, this pickup in demand in the processing side?.

I think what we're hearing is that we do consumer deposit and loan programs. We do business deposit and loan programs, Chris, and then we do credit card. That's primarily what we do. And when you go through these peoples – we have customers that do them all with us.

We have customers that will start – generally, the starting area is something in the small business area, the deposit or loan area. But now what's starting – what started here is both from new customers and current customers, hey, we're going to have a higher emphasis going into next year on deposits and credit card processing.

Which again, these are traditionally sweeter spots for us than mortgage within the FMCG world..

Great, okay. And then just lastly, just to follow up on that organic growth that you think about sort Q4.

Which – if you think about the three lines of business, if you want to do it that way, what's changing from this quarter? Is it more seasonality of the business? If you don't mind just digging into a little bit of that expectation, a little bit more behind it? Thanks..

Yes. When you add all of them up, the way to think about it, kind of solutions by solutions, we had a really – probably one of our strongest quarters ever in bookings in the treasury management space. We won three nice-sized deals. All customers, if I can tell who they were right now, you would go, wow, those are the big names.

and so we expect some of those to start rolling out. And they're newer customers. So think of it, Chris, as we have our customers already going in treasury management, that we expect to build. And then we expect some bump. Not all of those new customers will roll. And these are all multi-million-dollar deals.

Not all of them are going to roll that level in the quarter. But they are going to start to ramp, and that is – they're new customer. That's organic growth for us. In the data-driven marketing space, we just got to the point where – and I talked about this on the last call. We had a big hurdle, we had our biggest quarter last year in FMCG in Q3.

$30 million of our roughly $90 million for last year was in Q3. Well, in the fourth quarter, the tide has turned a little bit, and we expect to actually have a stronger quarter this year there than we had last year. And again, it's just tightening of campaigns and all the various banks.

And then web services, the way to think about it is we have now – we're getting stronger at bringing all these assets that we've had together and we just believe that the ramps that we've got over the years are starting to scale a little bit more and will scale more in the fourth quarter.

By the way, the LogoMix and the ColoCrossing continue to go well. Those, of course, we don't count from an organic standpoint. But the rest of the pieces of that, we brought forward all along, again, Chris, we just expect to be a little bit stronger in the quarter as well..

I’d really appreciate it. Thank you very much. And again congrats and good luck going forward..

Thank you, Chris..

Thank you. And our next question comes from Jamie Clement with BRG. Your line is now open..

Good morning, everybody..

Hi, Jamie..

Hey, Lee. I want to echo the words of Chris and Charlie, and also just say really appreciate all the personal time that you've given analysts over the years. Probably as CEOs go, probably more personal time for us than just about any other CEO out there. So thank you..

You’re welcome..

All right. So now that you've owned these businesses, some of the financial services businesses a little bit longer, I think there's a lot of confusion out there among investors into the puts and takes in terms of interest rate sensitivity to some of your business lines. It seems to me that – I think a lot of people assume, well, it's all negative.

But I think there's some positives as well.

So can you kind of run through some puts and takes on how to think about some of your FS lines of business? And what benefits in a rising rate? And what maybe becomes a little bit more challenging?.

Yes. It's a great question, Jamie. So think of it this way. In the Datamyx business, that is the one that's going to be – tend to be more interest rate-sensitive, because it – primarily in the past, that's been more mortgage intensive. So we have – our largest customer there is Quicken Loans. And well, they're a great customer.

They've been a great customer of ours. But we've seen them pull back a little this year, not leave us, but pull back, because they know that the interest rate market in the mortgage space and the housing market, what was reported today in the housing is not where it's been. I think they said it's the worst now since December of 2016.

So that is going to be a little bit more of an interest rate-sensitive for the mortgage rate market. And what we're doing though is we're bringing some of the players that are in those spaces that we've done work with in the past, they're looking to other areas that are not as interest rate-sensitive historically as they've been.

Because they're trying to expand and build out their businesses, and they need data, and they need to market alerts, and they need some of the capabilities that we have there. Flipping to the FMCG side of the house. Again, we've done new – both the consumer loan and the consumer deposits and the small business loan and the small business deposit.

And what we've been working on with our customers right now is – and what they're telling us, a bit late in the year, this is when we start building those campaign, thinking and building our models out, translating those to revenue, Jamie.

What we're hearing is, again, those with heavier need for deposits and credit card processing, those traditionally are better areas for us, more expansive areas for us, not as, obviously, negative interest rate-sensitive from the mortgage market.

If deposit rates are going that going to go up, then there's opportunity for the financial institutions to target people better and wanting to pick up both consumers and small business in those markets.

So – and that's, by the way, why we got into both of these businesses, because we were concerned too interest rate-sensitive, Datamyx area wanting to be more balanced and less than interest rate-sensitive in the FMCG. So hopefully, that gives you some….

Yes. It really does. And another thing, just final question. I don't know, Keith, if you want to take this.

But in looking at the share repurchase, upsizing the authorization and Lee's comments about moderately more aggressive acquisition strategy going forward, am I – do you have an accordion feature on the credit facility? Or would you, before too long, be looking to go out and raising more capacity?.

Let me take the strategic part of the question, and then I'm going to turn it to Keith to take the features and how this all works, okay. So what we're signaling today is, we are – came out and said, we've got more board support to raise the level of our repurchase. So we believe that's a prudent thing, and we did more in the quarter.

We also have said today, that we're going to continue the pivot for faster acquisitive growth. We believe that, given where our leverage ratio is right now, that we have room to do both.

We have room to increase the amount that we're doing in the share repurchase world, and we have room to increase the amount that we've got targeted for new acquisition. And so that's the way to kind of think. We're not trying to signal, hey, we're moving away from doing new acquisitions.

We're going to do more – spread it all back over into the repurchase world. We are signaling – we think we can absolutely do both and keep a very reasonable leverage ratio in terms of what we're doing. So I'll turn it over to Keith and let him go through the kind of how it really works..

Sure. Thanks Lee. So today, we do have a credit facility that's sized at $950 million of available capacity. And we do have an accordion feature that's associated with that, that would allow us to expand with our lending group another $475 million..

Okay.

Would you – I mean, just given rising rate environment, would you consider terming some of that out at a more junior level?.

Yes, the thing is that – we looked at it. We could swap some of the floating to fixed. But I'm starting to see some forecasts from economists going out to 2020 that are actually forecasting maybe interest rates start to decline a little bit.

So for us to swap it out to fixed today and then see it go the other direction in a year or two – or probably a year, we'd have to align the swaps. So financially, it doesn't really make that sense right now to do it for us..

Okay, fair enough. Okay, thanks very much for your time as always guys. Good luck, Lee..

You’re welcome. Thank you, Jamie..

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back over to Lee Schram, CEO, for any closing remarks..

Okay. Again, thank you, everyone, for your participation, everybody else on the line today. And thank you to the three analysts for their questions. I just want to summarize the call here. So we delivered a solid third quarter. We saw marketing solutions and other services revenues grow about 5%.

And we saw our mix of total company revenue there improve to 43%. And that keeps us on the path towards our goal of 60% in MOS mix in 2020. And we believe we've established a solid three-quarter baseline that will take us to the ninth consecutive year this year of revenue growth. And as I’ve always said, we'll get back.

We're going to roll up our sleeves. We'll get back to work, and we look to providing a positive report at our next earnings call. And I'm going to turn it over to Ed for some final housekeeping..

Thanks, Lee. Before we conclude today's call, I just want to mention that Deluxe management will be participating in the following conferences in the fourth quarter where you can hear more about our transformation. We're going to be in New York at the Mizuho Investor Conference in December, on December 3.

We'll be in New York for the SunTrust conference, the 2018 Technology & Services Conference on December 13. And we also have a conference in January with Needham & Company, I think January 14, we'll be attending. So with that, thanks for joining us, and that concludes the Deluxe’s third quarter 2018 earnings call..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude your program, and you may all disconnect. Everyone, have a great day..