Deluxe Corporation (DLX) Earnings Call Transcript & Summary

Good day and welcome to the Deluxe Corporation Annual Meeting of Shareholders. I would now like to turn the conference over to Barry McCarthy. Please go ahead.

Good afternoon and welcome to the Deluxe Corporation 2020 Annual Shareholder Meeting. I'm Barry McCarthy, the President and CEO of Deluxe. I thank each of you for joining us for this first ever virtual meeting, which allows us to be inclusive and reach a greater number of shareholders, especially in the current COVID-19 environment. I will now turn the business portion of our meeting over to Jeff Cotter.

Thank you, Barry. Good afternoon, everyone. I am Jeff Cotter, Chief Administrative Officer and General Counsel of Deluxe. And it is my pleasure to welcome you today to this meeting. As Barry mentioned, we have shareholders attending via the web portal and the 800 number that we provided. We will conduct this meeting in accordance with the Rules of Conduct posted on the virtual meeting login page. Today, we will conduct the business portion of our meeting first and answer questions at the end of the meeting. Though we may not be able to answer every question, we will do our best to provide a response to as many as possible. Please note that only validated shareholders may ask questions in the designated field on the web portal. Out of consideration for others, please limit yourself to 1 question. Please also note that this meeting is being recorded. However, no one attending via the webcast or telephone is permitted to use any audio recording device. In keeping with the digital approach to this year's meeting, it is now shortly after 3:00 Central Time on April 29, and this meeting is officially called to order. I would like to acknowledge all of our Board members, each of whom is participating virtually in the meeting as well. I would like to also recognize the representatives from PricewaterhouseCoopers, our independent accounting firm. Participating virtually today is Jill Walker, Lead Audit Engagement Partner. Jill will be available to answer questions during the question-and-answer period following the business portion of the meeting. The Board of Directors has appointed Broadridge Financial Solutions to serve as Inspector of Election for this meeting. Representing Broadridge in the meeting today is Tony Carideo. Now let's proceed to the business portion of the meeting. Notice of the annual meeting, along with instructions for accessing and receiving copies of our proxy statement and annual report, was mailed to shareholders beginning on March 20, 2020. I have received an affidavit of mailing from Broadridge as Inspector of Elections, which will be filed with the records of this meeting. The inspector has also reported that 37,282,848 shares or 88.37% of the shares outstanding and entitled to vote at this meeting are represented today in person or by proxy. Therefore, a quorum is present and we may proceed the meeting. Today, we have 4 matters of business on our agenda. They were presented in detail in the proxy statement provided to shareholders. The first proposal is to elect 9 directors to hold office until the 2021 Annual Meeting of Shareholders. The second item of business is to cast an advisory vote, nonbinding, on executive compensation. The third item of business is to approve the Deluxe Corporation 2020 long-term incentive plan. And the fourth item of business is to ratify the appointment of PricewaterhouseCoopers LLP as Deluxe's independent registered public accounting firm for the year ending December 31, 2020. It's now 3:06 p.m. Central Time and the polls are open for voting. Any shareholder who hasn't yet voted or who wishes to change their vote may do so by clicking on the Voting button on the web portal and following the instructions there. Shareholders who have sent in proxies or voted via telephone or Internet and who do not want to change their vote do not need to take any further action. [Voting]

I see that now everyone has had the opportunity to vote. And as a result, we'll now declare the polls closed at 3:07 Central Time in the afternoon. Based on the preliminary report of the inspector of election, I am pleased to report that all 4 of the proposals have passed. As required by SEC rules, the definitive vote tabulations will be reported in a filing to be made with the SEC within 4 business days of this meeting and also will be entered in the records of this meeting. I will now adjourn the business portion of our meeting, and we will open up the meeting for any questions. Again, please note, we will attempt to answer as many questions as time allows, but only questions that are germane to the meeting will be addressed.

Okay. We do have 3 questions. So the first question is from the Carpenter Union Pension Funds with combined assets of $70 billion, have a collective ownership position of 219,056 shares of company common stock. As long-term shareholders, we appreciate the efforts of the company to address the difficulties faced by employees, customers and other important stakeholders during the COVID-19 pandemic. Our funds are strong advocates for a majority vote standard in director elections. The majority standard provides shareholders a meaningful voting right and provides an appropriate level of Board accountability. Will the Board consider the adoption of a majority vote standard for uncontested elections? [ And if it ] has, could you indicate why investor retained plurality vote standard? Thank you. Mr. Cotter, could you answer that question, please?

Yes. Thank you, Ed. And that was Ed Merritt, our Treasurer and Vice President of Finance. The Board would absolutely be willing to consider this proposal and would appreciate the opportunity to engage in a discussion with the shareholder concerning this question. Thank you for that question.

All right. Thank you. Our next question is the recent growth in the size of passive mutual funds. Corporate ownership assets in U.S. corporation have been dramatic, raising important public policy and corporate governance issues. Currently, BlackRock holds 12%, and Vanguard, 9% of the company's outstanding shares. BlackRock is an investment manager for a portion of the company's retirement plan. Has the Board see this growing ownership concentration as a positive or negative development as regards to long-term corporate planning and performance? Also, are there any potential conflicts of interest when a 5% holder is managing company retirement plan assets? I'll take that one. So as far as the growing ownership of passive investors, that's really an industry-wide event that we're seeing. I don't know that it's necessarily a positive or a negative for us. It doesn't impact our strategy. We continue down the strategy that we've undertaken and we've announced to investors. And this ownership continues to grow in passive funds across most of -- most companies in the market. With regard to the question on the retirement plan, so the retirement plan has a separate Board of Directors, with the fiduciary duty to act in the best interest of participants. We also want a separate management firm, which assists with the selection of asset managers in that fund. So I do not see that there's a conflict of interest as we do remain independence and we act in the best interest of the participants in the 401(k). The last question is probably for Madam Chair. It says, "Are there any goals to recruit more women on the Board of Directors?" Ms. McKissack, can you take that?

Thank you. This is Cheryl Mayberry McKissack. We obviously are very open to being inclusive, as indicated certainly by my Chair role of Deluxe. And we are always looking for inclusivity in candidates to serve on our Board, and we will continue to do so as we move forward.

Currently, Mr. Cotter, I do not see any more questions in the queue.

Thank you, Ed. And thank you again, ladies and gentlemen, for attending this year's Annual Meeting of Shareholders. We are pleased that you participated virtually with us today and for being active participants in Deluxe's transformational journey. With that, I will now adjourn the meeting.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.