Global Payments Inc.
Q3 2008 Earnings Call Transcript

Published: 28 Mar 2008

[Operator:]

Ladies and gentlemen thank you for standing by and welcome to Global Payments’ third quarter fiscal 2008 earnings conference call. At this time all participants are in a listen only mode. Later we will open the lines for questions and answers. If you should require assistance during this call please press *0. As a reminder today’s conference will be recorded. At this time I’d like to turn the conference over to your host, Vice President of Investor Relations, Jane Elliott. Please go ahead, Ma’am.

[Jane Elliott:]

Thank you. Good afternoon and welcome to Global Payments’ fiscal 2008 third quarter conference call. Joining me on the call today are Paul Garcia, Chairman, President and CEO, Jim Kelley, Senior EVP and COO and Joe Hyde, EVP and CFO. Before we begin I’d like to remind you that some of the comments made by management during the conference call contain forward-looking statements that involve a number of risks and uncertainties. For these statements we claim the protection of the Safe Harbor for Forward Looking Statements contained in the Private Securities Litigation Reform Act of 1995. While these statements reflect our best current judgment, they are subject to risks and uncertainties that could cause actual results to vary which are discussed in our public releases including our most recent 10K. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events. In addition, some of the comments made on this call may refer to normalized results which are not in accordance with GAAP. Management believes that normalized results more clearly reflects comparative operating performance. For a full reconciliation of normalized to GAAP results in accordance with Regulation G, please see our press release filed as an exhibit to our form 8K dated today, March 27, 2008, which may be located under the Investor Relations area on our website at www.GlobalPaymentsInc.com. Now I’d like to introduce Paul Garcia.

[Paul Garcia:]

Thank you Jane. Good afternoon everyone. Before I begin I know most of you have heard about the tragic passing of our colleague Raul [Lamon] who served as President of our Money Transfer segment. Last weekend Raul was involved in a fatal car accident in Mexico. He was a visionary and superb executive and a good friend. Raul will be greatly missed. As a credit to Raul his management team is deep. To that end, George [Zalinsky] will assume responsibility for North America and Jose [Salinas] will continue to run Europe. Both George and Jose have been with DolEx since its inception and will report to Jim Kelley. Moving now to our financial results. We are pleased with our third quarter performance. For our third quarter our revenue grew 19% to $310 million and our normalized diluted earnings per share grew 5% to $0.44. Our growth was primarily driven by solid performance in our merchant services segment. In addition our money transfer segment had improved revenue growth primarily due to recent favorable pricing trends. Now let’s look at the segment details. Starting with our merchant segment, our ISO’s continue to drive strong organic growth in our domestic direct channel. Our credit and debit card transactions grew 27% for the quarter with the revenue growth of 26%. Based on these results we are raising our expectation for fiscal 2008 revenue growth to the low to mid 20% range for our domestic direct channel. In Canada our credit and debit card transactions grew 3% while our revenue grew 12% as anticipated. Revenue growth was largely driven by a favorable Canadian currency exchange rate. In addition, we expect to benefit from pricing initiatives related to changes in the Canadian Market Interchange structure starting in April 2008 with the majority of the benefit to be realized in fiscal 2009. Based on this expected benefit and a continued strong Canadian currency exchange rate, we are raising our fiscal 2008 revenue growth expectation to the mid-teen percentage ratings for our Canadian channel. Our Asia Pacific channel had strong revenue growth of 29% for the quarter. Due to these results, we are increasing our expectation for fiscal 2008 revenue growth for this channel to 44% to 47% on a reported basis, or the low to mid 20% range on a pro forma basis. This growth reflects solid momentum gained from our continual sales, initiatives and investments in addition to strategic pricing initiatives and a positive turn in our revenue growth from Taiwan. We continue to make operational progress on our goal to be fully converted from HSBC’s back and front end system platforms by calendar 2010. Our Central and Eastern European channel had revenue growth of 18% for the third quarter with growth in credit and debit card transactions of 13%. Our revenue growth was driven by a favorable year-over-year Czech currency exchange rate and solid transaction growth. This growth was partially offset by the de-conversion of the previously discussed large customer and to a lesser extent pricing reductions granted on contract renewals. Based on the continued strong Czech currency exchange rates, we are raising our fiscal 2008 revenue growth expectation to the low to mid-teen percentage range. Our domestic, indirect and other revenue declined 8% during the quarter as anticipated primarily due to industry consolidation. We expect a fiscal 2008 revenue decline in the mid-single digit to high single-digit percentage range for this area. Moving on to the money transfer segment. In the U.S. our transactions grew 8% for the quarter while our revenue increased 4%. These improved results are primarily due to the anniversary of last year’s competitive domestic pricing environment in addition to steady transaction growth. Although pricing trends in this business can change quickly, we are very encouraged by the stability of the current pricing environment. During the quarter we closed a number of unprofitable domestic branches and we ended the quarter with 825 domestic DolEx locations. In Europe we ended the quarter with 71 branches compared to 57 locations last year. For the quarter we achieved 27% transaction growth and 33% revenue growth in this channel. For fiscal 2008 we continue to anticipate money transfer segment revenue growth in the high to mid single-digit percentage range. I’ll now ask Joe to further discuss our financial results. Joe?

[Joseph Hyde:]

Thank you, Paul. In our press release we included GAAP income statements and schedules that reconciled GAAP to normalized results. Our third quarter GAAP results include a non-recurring, non-cash operating tax item of $7 million that reduced our SG&A expenses. The impact of this item has been excluded from our normalized results. We were pleased with the performance of our core businesses during the quarter. Our merchant services normalized operating income grew 5% to $65.1 million. These results were better than expected due to the strong revenue growth that Paul discussed in addition to lower than anticipated operating expenses. In particular, we did not see a slow down in our U.S. revenue growth during the quarter as the result of the economic environment. Our ISO growth was steady during the quarter and we saw a modestly higher growth in our direct sales channel due to improved sales force effectiveness. As expected, the successful market penetration and high growth in our ISO channels lowered our total company operating margins on a reported basis during the quarter. Importantly, however, our contribution margin from this channel has remained steady with the prior year and our contribution income has grown over the year. Also in the U.S. our operating expenses were lower than planned which includes a benefit from our facility consolidation program and lower than expected merchant operating losses from credit and debit card processing. As expected, we also received a foreign currency benefit during the quarter similar to the level we saw in our second quarter. Partially offsetting these favorable impacts were non-recurring, Canadian Card Association incentive payments received in last year’s third quarter in addition to higher losses in our check guarantee channel compared to the prior year. Both of these items were previously discussed and anticipated and we expect our check guarantee loss trend to improve during the fourth quarter. Looking ahead at our merchant services segment we expect an operating margin between 25.2% and 25.4% for fiscal 2008. Moving now to money transfers. This segment’s operating income was $1.2 million for the quarter, which was consistent with our second quarter results. This is significant because we have historically experienced a sequential decline in earnings between the second and third quarters as the third quarter has seasonally lower money transfer volume. We also incurred costs during the quarter associated with the unprofitable branch closures that Paul discussed. As such we are encouraged by our money transfer results for the quarter and we are beginning to see a stabilization of this business. If the improved pricing and steady transaction growth trends that Paul discussed continue during our fourth quarter we would expect to see growth in money transfer earnings and operating margin in that period compared to the prior year. For fiscal 2008, we are expecting a money transfer operating margin in the mid to high single-digit percentage range. Our corporate expenses increased 2% during the quarter and we continue to expect fiscal 2008 expense growth ranging from 0% to growth in the low single-digits. We also expect a fiscal 2008 total company normalized operating margin of 18.9% to 19.1%. For our non-operating line items, we expect the following for fiscal 2008. $12 million to $13 million in interest income net of interest expense, $8.5 million to $9.5 million for minority interest net of tax, an effective tax rate of between 33.3% and 33.5% and average diluted shares of approximately $81 million. Capital expenditures for the quarter were $9 million which primarily related to technology and merchant terminal spending. For fiscal 2008 we continue to expect capital expenditures of $40 million to $50 million. Moving to the balance sheet our reported cash increased to $388 million due to strong cash flow generated during the quarter, partially offset by timing differences related to settlement processing as expected. Excluding our merchant reserve funds and other operating cash, we had approximately $170 million in excess cash at quarter end. Our primary strategy for this excess cash is to focus on new acquisitions which we believe represent the highest potential return for our shareholders, in addition to future share repurchases or other strategic initiatives. Paul will now discuss our fiscal 2008 guidance. Paul?

[Paul Garcia:]

Thanks Joe. Based on current trends and our ongoing growth strategy, we are raising our revenue guidance for fiscal 2008 to a range of $1,250,000,000 to $1,260,000,000 or approximately 18-19% growth over $1,062,000,000 in fiscal 2007. We are also raising our fiscal 2008 diluted earnings per share guidance to a range of $1.95 to $1.97 reflecting 10-11% growth over our fiscal 2007 normalized diluted EPS of $1.77. This guidance includes stock option expenses but does not include any other significant acquisitions, restructuring or other charges and the favorable operating tax item that Joe discussed. I continue to be very confident and enthusiastic about the long-term prospects of Global Payments particularly in our international markets and in the continued strength of our North American merchant channels. We are expecting robust growth in our fourth quarter with normalized diluted earnings per share ranging from $0.49 to $0.51 or 14-19% growth over the prior year. Operator, we would now be delighted to take questions.

[Operator:]

Thank you. Ladies and gentlemen we will now conduct a question-and-answer session. If you wish to ask a question please press * then 1 on your touchtone telephone. You may remove yourself from the queue at any time by pressing *2. If you are using a speakerphone we do ask that you please disengage your mute function to ensure that our equipment can hear your signal. Once again, if you do have a question please press *1 at this time. We will take our first question from Kartik Mehta with FTM Midwest.

[Kartik Mehta:]

Good afternoon. Paul, I wanted to get your thoughts on the ISO business which is obviously doing extremely well. I was wondering what the drivers were? Is it that you just have a few ISO’s that are doing extremely well, or is it that you are gaining market share and signing more ISO’s or that they are all participating and that’s the reason the business is doing so well?

[Paul Garcia:]

I think, Kartik, it is a little bit of everything. We do have a number of big ISO’s who continue to go from strength to strength, but we are also signing smaller ISO’s who I believe are going to be successful and some we signed a couple of years ago who are growing to be quite sizeable themselves. I can’t really pin it on one thing other than we are fortunate to have a very robust group of ISO customers.

[Kartik Mehta:]

What is the sustainability do you think of this growth? Obviously comps will get tougher and tougher. I wanted to get your thoughts on the visibility and sustainability of the growth.

[Paul Garcia:]

You know, Kartik, I think the law of numbers have to kick in here some time. Quite frankly the ISO’s are exceeding our growth expectations in our growth budget. Every year we budget for something less and the ISO’s seem to exceed it. I believe they can still sustain above market growth but over time this channel has to slow somewhat.

[Kartik Mehta:]

Paul, I think in your prepared remarks or Joe’s prepared remarks you said one of the obvious uses for cash will be acquisitions and I’m just wondering what is the competition like for acquisitions? How has it changed over the past year? Do you think it is more difficult or less difficult?

[Paul Garcia:]

Well Kartik it has changed for a couple of different reasons but I think the biggest of course is the most acquisitive competitor is no longer aggressively pursuing acquisitions. It doesn’t mean they aren’t doing it altogether, but they are less visible in these activities. I also think that sellers have a more realistic, for whatever reason, objective in mind and I think the acquisition pipeline has never been more robust. I’m confident we will get some deals done. We promise near term accretion and we promise deals that we can explain to you pretty simply that make sense for our company to fulfill our mission. I hope to deliver on all those promises in the not to distant future.

[Kartik Mehta:]

Thanks a lot.

[Operator:]

We’ll take our next question from Charlie Murphy with Morgan Stanley.

[Charles Murphy:]

Paul, in the fourth quarter you anniversary large conversion – are there any deals out there for ISO’s that you are bidding on that could help the comps in fourth quarter and into fiscal 2009?

[Paul Garcia:]

You know, Charlie, you’re right. That is true. We do anniversary a big conversion. We obviously have baked all that in. When we tell you we are expecting a robust quarter we of course have anticipated the benefit of path findings and of course the rest of our business. I’m sure the 29% growth in Asia wasn’t lost on anyone. We also will be getting a smaller benefit from some of our other activities including Canada. At the end of the day we’re feeling very good about the fourth quarter.

[Charles Murphy:]

Okay. As a quick follow-up is it possible to remind us what the benefit to EBIT in the third quarter was from foreign exchange?

[Joseph Hyde:]

As I said, it was similar to the second quarter level. It is running between $0.04 and $0.05 of positive impact the past couple of quarters and we would likely expect that in the fourth quarter.

[Charles Murphy:]

Thanks very much.

[Operator:]

We’ll take our next question from David Koning with Robert W. Baird.

[David Koning:]

Hi guys. You have mentioned the Canadian interchange benefit the last couple of quarters. I know it kicks in April 1. I’m wondering sequentially how big of a benefit that is to Q4 and more importantly on a full year basis how big do you expect that profit benefit to be in Canada?

[Paul Garcia:]

You know, Dave, sequentially it won’t be that large because it is a partial quarter. We have not finished the whole budgeting process on that so it is a to-be-seen. But we think it will have some impact of some importance for us. We haven’t really given a lot of specificity on that. When we give our guidance for fiscal 2009 in our July call we will be as specific as common sense and the competitive nature of these things will allow us to be. That’s why I’m being a little cagey on that too. You want to have as much full disclosure as you can, but you have to understand you live in a competitive world. I’ll just summarize by saying it doesn’t have a huge amount of impact in Q4. We do think it has a nice lift for us in 2009 and we have not specified at this point, nor am I prepared to, exactly how much.

[David Koning:]

That’s helpful. Just one follow-up. In Asia the last couple of quarters you have grown mid to high 20%. I know originally you had talked about strong double-digit growth. Is there any reason the growth was so strong recently? Is this the type of growth that could continue for the foreseeable future?

[Paul Garcia:]

That’s a great question. It’s all about sustainability. I’ve said publicly that I thought the Asia Pacific was a 30% organic grower. I just didn’t give specific time frames. I’m not prepared to say we can sustain 29% at this point. I was very happy. I will say though that what we have seen in the turnaround in Taiwan I believe is sustainable. We continue to do very well in virtually every market with the exception of India which continues to be very slow for us. In terms of sequential growth in India, in year-over-year in India even that is looking good even though it is a much smaller base. So, I got to tell you I’m very pleased. Once again we’ll give some more guidance for 2009 in July on that, but our expectation for Q4 is pretty solid growth in AP.

[David Koning:]

Alright. Thanks. Great job.

[Operator:]

We’ll take our next question from Adam Frisch with UBS.

[Adam Frisch:]

Hey guys. Good afternoon. A couple of quick questions here. SG&A costs, and I’m sorry if I missed this on your prior question-and-answer. I’ve been bouncing between your call and another one. Your SG&A costs were a little bit higher than we thought. I was wondering if that is a greater commission payout to the ISO channel, or is there some other dynamic going on there?

[Paul Garcia:]

I’ll give Joe a chance to dig that out and I’ll first chide you for saying that there is a call that you would leave us for. Typically a lot of the SG&A growth is ISO growth. It is kind of a barometer of our ISO growth. If you look at SG&A they do track pretty closely. Joe?

[Joseph Hyde:]

There wasn’t anything in particular in the quarter. The biggest driver as Paul said is the growth in the ISO channel, but I didn’t see anything else significant in the quarter.

[Adam Frisch:]

Okay. So this then leads me to what the real crux is with your stock and that is great to see the revenue coming back, you’re raising your targets and all that kind of stuff and that is great to see but I think the real issue is on margins and if we are going to continue to see compression on the merchant side like we have been in the last couple of quarters or we’re actually going to see some kind of actual stabilization or some kind of reversal in 2009. So I know Paul you don’t want to give formal guidance yet and I’m not asking you to but that is what’s going to basically determine the direction of your stock I think for the next twelve months. Are you prepared to give directionally what you are thinking for 2009?

[Paul Garcia:]

Well I tell you what I can tell you. I can tell you about Q4. We are anticipating a nice bounce in margins in Q4. You haven’t seen that in a long time, I mean sequential bounce in margin Q3 to Q4. Clearly you didn’t see that last year. You saw a little bit of something in 2006, but clearly nothing as robust as we are going to see in fiscal 2008. I think that is reassuring for all of us. Secondly, and the very first question we got from Kartik, is how sustainable is this ISO growth? I think the ISO growth is very important to us, it is very profitable, they are great partners. But over time you can’t grow at this amount. As we grow the company around it, the impact on margin from the ISO’s is going to be less dramatic and ditto with the revenue we’re getting from Canada which a lot of that falls to the bottom line. All of that conspires I think for a happy story for 2009. But we are not really prepared to say too much beyond that.

[Adam Frisch:]

Okay. So, looking at the May quarter, let me ask you this way, I’m not asking the same question but let me ask it a different way. The uptake, the sequential uptake, the year-over-year uptake, is that because of the efforts that you are building around the ISO channel or are there some specific things in the May quarter which are just breaking your way and that is going to add to a higher profitability?

[Paul Garcia:]

Excellent question. You got a couple of things. You have Asia, which is now becoming more meaningful. You have good things happening in Europe. We’re going to see a nice bounce in DolEx. That foundation has been laid. You’re going to see that. I think those are all material. You’re going to see something from Canada. Joe, anything else you’d like to throw into that mix?

[Joseph Hyde:]

With the check guarantee losses it was an item specific for this quarter and we don’t expect that to be a drag either for the fourth quarter or beyond.

[Paul Garcia:]

And I think this is inherent leverage as you well now. We’re not adding expenses as quickly as we’re adding revenue. So you’re just going to get an inherent lift that leverage provides. So I think that all that produces…I wish I could tell everybody an exact date when the margins start climbing but that’s what we’re working towards. I couldn’t agree with you more strongly on your observation about what is holding the stock back.

[Adam Frisch:]

Okay, but all the things you stated for the fourth quarter are not necessarily one-hit wonders, they are longer term trends?

[Paul Garcia:]

Every single one of them I mentioned is a longer term.

[Adam Frisch:]

Okay. Then the last question I had is on the money transfer business. You said pricing is getting a little better; it looks like we are getting a little bit of a bounce here. Is it something that is sustainable there as well? I know it is a small part of your business and everyone is more focused on the merchant side, but are you generally more optimistic for the next couple of months or are we just saying this is just going to be…the same kind of question as the merchant side. Is this just going to be a temporary thing?

[Paul Garcia:]

I think I’d be less bullish on answering that one. I think the merchant I could say I see sustainability there. The money transfer business can change. We kind of carefully put in a line of the speech saying that the sustainability of the pricing environment can change. Now, if that does stay with us and we’re able to sustain these pricing then you’re going to see that type of growth. We’ll also see much better comps in Q4 too. That will continue into next year. We still have some work to do in that channel. I’d say stay tuned.

[Adam Frisch:]

Thanks a lot. Thanks for the great color. I appreciate it.

[Operator:]

We’ll take our next question from Josh Elving from Piper Jaffray.

[Josh Elving:]

Thanks. Good afternoon. Those were good questions. Those were a lot of my questions. I guess I had a couple of quick ones. I guess on the check and gaming side is that still viewed as a core business line for you? And I think the last time we talked about this last quarter that business was somewhere in the 5-10% revenues. Is that still kind of in that same range? Are you seeing faster or slower growth in that business?

[Paul Garcia:]

I’ll take the first one and I’ll let Joe handle and Jim handle the last. First of all it is core, particularly the gaming part. We really like that business. There are some visible competitors that are struggling a little bit and we are doing what you are supposed to do in a free market and we’re taking advantage of that. So I’m very pleased with that business. In terms of the check guarantee business we remain committed to it. It is not a big business. The gaming has grown from nothing to be a much larger driver of that whole business but taken in its totality it is still like 5%. I mean, it’s not a big business. Do you want to add anything Jim or Joe?

[James Kelley:]

I would follow-up to say in terms of the sale profits on the direct side and also on some of our ISO’s this is a product that they sell together with the bank card services. Our competitors offer in-house solutions as well so I would say it has been core to our main core and the growth rates, the gaming side maybe because of economy more than anything else are a little bit slower than maybe years past, but still it is a great business, great returns and losses there are much less than in the core guarantee business.

[Josh Elving:]

And then were the third quarter losses kind of in line with what you expected? I know that you guys talked about that last quarter.

[Paul Garcia:]

I think they were in line and as Joe said we have taken action internally which generally means price increases to merchants. The contracts on the checks side have tremendous flexibility in adjusting prices if loss rates change materially and we did see that as we have talked about the last couple of quarters and we think we are past the lion’s share of that and we’ll see improvement into the fourth quarter and beyond.

[Josh Elving:]

Great. On the Asia Pacific business, it seems to be that we were going to be expecting a little bit of a headwind here in the third quarter and growth was extremely strong and there was some talk of maybe pick up in the fourth quarter. Is it possible to maybe accelerate your growth in the fourth quarter or is that too much information to get into?

[Paul Garcia:]

Yeah, I think it is a little too much to that degree. I will say I am pleased with everything that is going on there. We’re not telling you we’re going to get 29% growth in the fourth quarter from Asia Pacific, however, but I think long term this thing is a 30% grower and we are working diligently to get there – sooner than later. I just don’t think it starts now and goes forever.

[Josh Elving:]

I guess I have just one more sticky question. It has to do with the guidance on the tax rate of 33-33.5%. In the third quarter I calculate about a 31% tax rate and I’m guessing this has something to do with the tax benefit of this third quarter. Is that kind of included in the outlook or how do we think about that?

[Joseph Hyde:]

The lower tax rate in the third quarter did not relate to the one-time operating tax item $7 million. That is a separate issue. We had a reduction in valuation allowances that we had established for certain of our Asia Pacific subsidiaries during fiscal 2007. We were able to release those as a result of higher than expected earnings performance from those subs over the next several years. Those were the biggest impact. A secondary impact was the statutory income tax rates in the Czech Republic were recently lowered.

[Josh Elving:]

Okay great. Thanks.

[Operator:]

We’ll take our next question from Andrew Jeffrey with SunTrust.

[Andrew Jeffrey:]

Hi. Thank you. Paul, 2008 has obviously been a pretty focused investment year especially in emerging markets and it seems like you are reaping the benefits of some of those investments. Can you just comment of where you think you are in terms of especially with regard to HSBCO, building out the infrastructure, building out the sales apparatus and consequently where we are in the margin progression in the business? I know in the past you have stated it is effectively a loss leader. I’m wondering if we’re nearing the end of that investment cycle or if you think this is something that will persist beyond fiscal 2008, for example?

[Paul Garcia:]

The short answer is it does improve but the drag on margin does go beyond fiscal 2008. Here is the headline about it. We are getting a real return on our sales investment. We have something north of 300 sales people. We have opened 14 offices in China. That is expensive but once again that is producing benefit. Obviously prior to the Beijing games this is a big deal. The infrastructure per se is pretty well set. With the exception of India we kind of have what we’re going to have with just some tweaking. The big benefit will come from getting off of the HSBC system. Right now we have kind of the worst of both worlds. We have all this infrastructure. We have the costs we have here and we have the costs we have there. Until we can eliminate those costs we’re really not going to get the quantum leap in margins. Over time this business is margin accretive to our corporate margins. That will steadily progress in 2009 and I will make a note to give more color on that if we can in July when we give more guidance.

[Andrew Jeffrey:]

Okay thank you. And then with regard to the domestic merchant business it is almost a foregone conclusion and maybe this is in the wake of the success of the Visa IPO that credit card processors and associations, merchant acquires, etc. are effectively immune to consumer spending downturn either by virtue of market share or secular shift in consumer behavior. Can you address that broadly? Clearly the ISO channel has been a driver for global well in excess of the market, but at what point – and maybe it’s a function of transactions versus payment volume – but at what point does a consumer led recession start to dent your business to the extent that we can see it externally?

[Paul Garcia:]

You know, Andrew that is an incredibly important question. It is one I don’t have an answer for. All I can say is what we have seen. What we have seen is steady volume. I think for all the reasons you said – consumer behavior, we all know the story about discretionary versus non-discretionary use. We are fortunate that we have a portfolio that is made up of a lot of non-discretionary charges; medical, education, taxation, government services, etc. Those benefit in this kind of economy. I will tell you the day after September 11 when the world stopped spinning we had no transactions whatsoever. Anybody who would suggest a severe downturn doesn’t impact merchant acquirers or Visa/MasterCard quite frankly, at least domestically, I think that would be foolish. But I can tell you we haven’t seen anything of any note. And unlike Visa and MasterCard we are rapidly approaching a significant percentage of our revenues coming from outside of our borders. I think that is a good thing.

[Andrew Jeffrey:]

Thank you very much.

[Operator:]

We’ll take our next question from Tom McCrohan with Janney Montgomery Scott.

[Thomas McCrohan:]

Hi. Thanks for taking my question. I just have a follow-up on the check guarantee business. What did you see in that business that would lead you to believe that things are getting better, not worse, given what is going on in the economy going in to Q4? That’s all I have, thanks.

[Joseph Hyde:]

As Jim said, we have assessed our merchant portfolio and identified those merchants who are higher risk and have higher bounce rates or loss rates. We have gone back and raised those rates. We have changed our risk management approach to those merchants. In that sense you can absolutely control the earnings that you are getting from those merchants. You just simply raise the rates. The third quarter also had a negative impact partially because the third quarter of last year was so low. So two things happened. I just know the fourth quarter of last year was a more normal amount and based on the current trends we’re seeing already in the current fourth quarter I feel very confident that the type of negative impact we saw in the third quarter will not exist in the fourth quarter.

[Paul Garcia:]

I have to add one thing to that just to be clear. We’re not suggesting that losses go down. I mean we think the economy still continues. I think that as a percentage of increase over last quarter that is a big part of it and we are, in fact, taking some measures that will have some impact. But we’re not saying that losses will return to Q1 levels here. But we have taken all that into our forecast.

[Thomas McCrohan:]

Have you disclosed the allowance for credit losses?

[Joseph Hyde:]

I’m sorry, Tom, can you say that again?

[Thomas McCrohan:]

The allowances for losses? What was it this quarter?

[Joseph Hyde:]

It will be in the 10Q but it was roughly $7 million in the third quarter compared to $3.6 million in the quarter last year. We can’t take the absolute variance between those because we have also had higher revenue as well. So the earnings difference is not simply the subtraction of those two numbers. But it is a higher number and we had a lower margin in that third quarter compared to the third quarter last year.

[Paul Garcia:]

One other thing too which we didn’t mention, and this is an important point, the gaming business which is a larger driver of that whole check group has significantly lower balance but even more importantly significantly higher collection rates. So the ability to collect a bounced gaming check is magnitudes higher than a bounced check from a small merchant.

[Thomas McCrohan:]

Thank you.

[Operator:]

We’ll take our next question from Tien-tsin Huang. Please go ahead.

[Tien-tsin Huang:]

Hi. Thanks. I jumped on a little bit late. The first question I had was on interchange legislation. Paul I was wondering if you had any updated thoughts on that and any impact on global payments given what we’ve been reading about on the hill?

[Paul Garcia:]

I’ll do my best. That is HR 5546. This is a wild piece of legislation that is not the clearest document. I think the most aggressive interpretation would tell you that the House is proposing that they control the entire pricing to merchants. I think probably a more reasonable read is they are really talking about interchange. They would appoint some type of panel of expert judges should the parties not agree. It sounds like a train wreck quite frankly. We’ve seen this before. We saw it in Australia. I think well meaning legislation poorly drafted but well meaning legislation to supposedly help consumers had just the opposite impact. They lowered interchange dramatically. The banks then went to the consumer and said, “You have a rewards card. You’ll pay more. You used to get a 30 day free ride. No more. We’re going to charge you for this and charge you for that.” They recouped their full cost. The retailer got the benefit. The consumer didn’t get lower prices from the retailer and got higher prices from the bank. It was exactly what they didn’t want to accomplish. I’m a big free market guy. I hope these things die of their own weight. I couldn’t imagine how this would work. I personally think it is not going to happen. But I think over time we will see pressures to lower interchange. That at the end of the day is good for us. I think this piece of legislation is terrible. But I think interchange will come down over time and at the end of the day that is very good for acquirers.

[Tien-tsin Huang:]

I agree. How about the idea of greater transparency around interchange? Do you think there is potential there and what are the implications there for the acquirers?

[Paul Garcia:]

I think that Visa/MasterCard is doing their darndest now. They are separate organizations. They have some great governance in place as to how this is done. I think it will kind of just take care of itself over time. Plus there are other products out there that offer zero interchange. I don’t know if they have a lot of legs, but it is a competitive world and I think that is all good at the end of the day too. I personally think interchange comes down. I think that is a good thing for everyone. I think it is a good thing for Visa and MasterCard at the end of the day. I think their visibility will only increase.

[Tien-tsin Huang:]

I agree. The question I guess on their call they gave a lot of interesting data points. They talked about a mixed shift towards the big box retailers, warehousing, etc. They also talked about a mixed shift with pin debit. They also looked like pricing was weaker. Do you see any of those trends as well? Can you guys comment on any of that?

[Paul Garcia:]

I read that script several times. I would say we don’t do the level of interrogation against the database that First [Adam] may be doing. We do look at absolute numbers, which we shared with you. We haven’t gone back and done comps or even parts it to big box versus little guys. He seemed to indicate that the little guys were hurting. That would run contrary to what we’ve seen with our ISO’s. It could just be just great growth from our direct business and our ISO business. But Tien I think at the end of the day I think the best thing for us to do is just report and try to give you as much color as we can without trying to equate that to what the economy does overall because I don’t think any of us really know that.

[Tien-tsin Huang:]

Very good. Also if you could just follow-up quickly on the Europe operations. I know it is still pretty small but I was hoping you could maybe remind us on the business mix in that segment? I was trying to do some more work there. In particular how much is coming from card issuer processing versus merchant acquiring, the ATM driving, etc. Can you rank that for us in terms of contributions?

[Paul Garcia:]

Let me talk about what we’re trying to do there and then I’ll ask Joe or Jim to throw those numbers out. The business is in a 100% indirect at this point. Our hope is to work that to more of a direct model. We have some opportunities to expand into some very attractive geographies. There are some acquisition opportunities we are pursuing all of that. We also have some partnership opportunities with existing financial institutions. It is primarily driven by merchant, followed by ATM and a little bit of equipment sales. Did we share the exact numbers, Joe, in the past?

[Joseph Hyde:]

We have a slide on our various road show material either on the website or our most recent investor day where you can get a good sense for the revenue split. I don’t have an update at this time.

[James Kelley:]

Yeah, I don’t want to guess just off the top of my head.

[Tien-tsin Huang:]

How much of the business is actually generated outside of Czech Republic today?

[Paul Garcia:]

It is still pretty Czech Republic focused for now. We are starting to get some meaningful business out of Russia and the Ukraine and Slovakia. A little bit in Poland. We are expanding. We are getting some.

[Joseph Hyde:]

It is 10 or 15%.

[Paul Garcia:]

Yeah I’d say 80% plus is Czech Republic.

[Tien-tsin Huang:]

Very good. Thank you as always.

[Operator:]

We’ll take our next question from Robert Dodd with Morgan Keegan.

[Robert Dodd:]

Hi guys. On the ISO side you mentioned that the contribution margin was stable and profits were up. Can you give us directionally any color on what the margins are going to do within the ISO business? Are they going to grow fast because the bigger ISO’s are growing faster? Are they going to expand? What is the movement going to be in that business?

[Joseph Hyde:]

I don’t know if we can add any more color there. I think our point was that on a contribution basis the margin has been steady and most of the revenue earnings there come from the large core group of ISO’s that we’ve had for many years but I don’t believe we’re in a position to provide you with additional color.

[Paul Garcia:]

Robert I can tell you this. Clearly the big ISO’s either through contractual abilities because they hit volume thresholds or contracts expire, although we’re through most of those, they will get concessions and sometimes they just get concessions because they are just good partners and we try to keep every body as happy as we can. They clearly their pricing continues to go down. That is offset somewhat by the leverage in the business. But it is also partially offset by smaller ISO’s who grow and who have much higher pricing. One of the reasons we haven’t parts this thing exactly – you remember we talked about giving you some non-GAAP data. If we did that it would be really competitively…it would hurt us from a competitive standpoint because someone could get pretty quickly at what their price is. A customer could get pretty quickly at what their price is. I think at the end of the day if your question is do the ISO prices come down for the big guys, of course. Is it replaced with leverage and what we’ve seen with smaller – I would say to date that is exactly what has happened.

[Robert Dodd:]

Okay. Thank you. Can you give us an update on what the status is on the Discover portfolio both with your direct affiliation and with the ISO reselling that you are doing with the portfolio there?

[James Kelley:]

Sure. We started the conversions last September and we converted our direct portfolio as well as our lines with Comerica in September, followed by our four largest ISO’s in October. This February we started moving the rest of the base and the expectation is by August. Our phase I which is really all the ISO’s that were here about a year or so ago will be complete and then there will be parallel efforts to enable our front end for indirect customers and then any ISO’s added after the fact. Most of it will be done by the summer in terms of our direct business and then it will probably complete within the next six months for the rest of them.

[Robert Dodd:]

Thank you. Just one more nit-picky one if I can. On the minority number you had almost $8 million through the first three quarters and you guided $8.5 to $9.5. That’s a pretty substantial decrease in expense in Q4. Can you give us an idea of what is going on?

[Joseph Hyde:]

There is some variability in the net and line items particularly that relate to Asia. There is just a lot of moving the pieces. It is not really a reflection of the business itself or performance. It relates to how we are accounting for it and how we are charging certain expenses into the joint venture. But I do agree there is some movement there.

[Robert Dodd:]

Thank you.

[Operator:]

We’ll go next to Tim Willi with Avondale Partners.

[Tim Willi:]

Thank you. I had two questions. One was just a housekeeping one. First could you just go back over what the revenue and transaction growth was in the domestic money transfer? I didn’t catch all of that Jeff.

[James Kelley:]

Just one second. The domestic money transfer segment the transactions grew 8% for quarter and the revenue grew 4%.

[Tim Willi:]

4%. Okay. And then is there any way that you could just talk about the progression of the domestic business in terms of transaction run rates as the quarter moved along? I know you talked a lot about pricing and that was probably a nice surprise there, but is there but was there anything relative to transactions that caught your eye as the quarter progressed?

[Joseph Hyde:]

Nothing significant. As we said the transactions were fairly steady with the second quarter. I don’t have the number in front of me but I believe it was close to 8% transaction growth in the second quarter and we had a revenue decline of 5% in the second quarter. So when you have similar transaction growth and revenue growth of 4% in the third quarter that tells you that the spread in your pricing improved significantly.

[Tim Willi:]

It wasn’t like one quarter on transaction growth might have made the entire quarter whereas a couple of other months might have been a little bit weaker than you had thought? It was fairly evenly disbursed in terms of transactions across all the months? Because domestic numbers are fairly bad in January.

[James Kelley:]

The transaction rate stayed…as Joe said they were relatively constant for well into the last year or so. We’ve been trying to maintain the transaction growth rate and we’ve given up margin as a result of that. That has really been the historical mindset. In the last…we anniversaried a fairly large decrease a year ago December and we started to stabilize because of factors in the market place coupled with just our desire to see if we could press prices up a little bit. So far we have been able to press them up without sacrificing transaction growth at least at this time. As Joe said in his comments and Paul also reiterated it is a soft fluid market. Right now we feel good about it but it still remains a work in progress.

[Tim Willi:]

If I could just ask one last question on platform conversion over the next couple of years as you move everything over to one platform. Could you maybe just sort of frame looking at the investment you have spent on the new platform and the ongoing benefit you would expect in terms of cost savings or returns. What kind of magnitude would you be thinking? Could you get say $2 of ongoing annual savings once this is all taken care of for every $1 you have invested in building it? Any way to think about that longer term?

[Paul Garcia:]

I think we’re going to be hard pressed to put a metric to savings. We embarked on the G2 platform many years ago really out of necessity. We have platforms that have been with us since really the inception of the previous parent company in D.C. so some of it is just moving to the next generation which is just a requirement to be in the business. We are now also going to benefit from the consolidation of Asia onto these platforms and our Canadian business onto these platforms. So I think you can be assured that what we are spending we are expecting to recover and then some. So they all have returns but to try to give you a metric at this point I think would be a guess that wouldn’t have much value anyway.

[Tim Willi:]

Okay thank you.

[Operator:]

We’ll take our next question from Glenn Greene with Oppenheimer.

[Glen Greene:]

Thank you. I was going to ask a very similar question that Tim just asked on the platform consolidation. Could you just give us an update on where you are with sort of the time frame? I think you have alluded to previously that you didn’t expect much cost benefit in fiscal 2009 it was more of a 2010 issue. Could you just sort of remind us where you are in that process and how to think about the potential benefit? Or are you in response to Tim’s question sort of backing off of cost savings?

[James Kelley:]

No we’re not backing off of cost savings but to be able to put a metric to $2 to $1 spent or something of that magnitude. I don’t know it will ever be that grandular. What I did say there is a return. It is not a dominium return but there is a return on all our investments and this is going to equally be a return not only for the U.S. business but it provides opportunities for savings some of which we have already seen this year which we commented on previously for consolidation of our Canadian business which is on a third party platform for the front end and also the consolidation is underway for Asia onto these platforms. It is all good news. It is going to come over a period of time. It is not something that can occur instantly because we are talking about four front ends in Asia, another front end in Canada, two in the U.S. and then back ends in Asia that needs to be converted and that is going to take several years to complete.

[Glen Greene:]

Is the time frame still the bulk of it to be completed in 2010’ish?

[Paul Garcia:]

I think Glen the financial benefit is really we really enjoy that in fiscal 2010 because it comes from a lot of shutting down systems and you can’t really do that until you totally complete it. We get a lot of benefits, more customer support systemic benefits, but the real dollars are absolutely in 2010. We haven’t given exact dollars on this but we have said it is material. It will be material. Our expectation is it will be material. We’ll give as much guidance when we get a little closer to the event as we can.

[Glen Greene:]

I assume its tracking to your expectations in terms of the whole process at this point?

[Paul Garcia:]

I would say that initially if you had asked me that a year ago it was behind. We are back on schedule. Like all big projects what happens is you expand the scope and you fall behind. We have expanded the scope significantly but we are on track and I’m feeling darn good about it. In fact we just did a review with the board so I’m very pleased where we are.

[Glen Greene:]

Okay. And just a little bit of color on your acquisition focus, Paul? I suspect it is predominantly international but any sort of domestic focus? Whatever magnitude. Whether you do large deals, small deals, all merchant acquiring? Just a little more ground on how you are thinking in terms of your priorities from a strategic perspective.

[Paul Garcia:]

Well it would be all merchant acquiring with the exception of maybe adding a little something to DolEx, probably a little more European based. It is merchant acquiring. We would consider opportunities domestically. They would have to meet all our criteria. Most of our focus and most of the names in our pipeline are international. But we wouldn’t rule out domestic. We are pretty active. I’m hoping to have some real conversations with everyone about these opportunities as they become reality.

[Glen Greene:]

Is there anything that has been precluding you from getting deals going? Is it just a matter of negotiations? It’s been awhile since you’ve done anything pretty materially significant. Is it the credit market? The environment? It just seems a little strange it is taking so long.

[Paul Garcia:]

It is none of those. I appreciate that last comment, thanks a lot. It has taken us awhile to get some deals done. We are very cognizant of that particularly the business development guys. No it is the complexity. It is particularly in international transactions that are very complex particularly when you have various shareholders in various domains. That is primarily it. We have been working diligently on these and stay tuned.

[Glen Greene:]

Thank you very much.

[Operator:]

We’ll go next to Wayne Johnson with Raymond James.

[Wayne Johnson:]

Hi. Good afternoon. I was just wondering if you could just give us an update on how you felt the FDC takeover by KKR if that has changed the competitive landscape for better or worse?

[Paul Garcia:]

Well Wayne I have to tell you they are still an aggressive competitor. They are signing business and working diligently towards getting new opportunities. I think they have been less acquisitory and I know they have been talking about having some money put aside for some acquisitions but I suspect we’ll see some less activity. I think it is public record that they have reduced a lot of costs associated with business development staff and that is common knowledge and I think that is translating for them being less acquisitory and less aggressive. So that is good. But in terms of a head to head competitor they are still very tough.

[Wayne Johnson:]

Do you think that the cost benefit of migrating all the various platforms to G2 do you think that will come before or after first data center consolidation is complete?

[Paul Garcia:]

I would say [mind is complex] theirs is a different level of complexity. I can’t opine how long it will take them. I do know something of those. I sold a previous company to them and they have a much more complex environment and a bigger task at hand.

[Wayne Johnson:]

Great thank you.

[Paul Garcia:]

You’re welcome.

[Operator:]

We’ll go next to Pat Burton with Citigroup.

[Pat Burton:]

Hi. Congratulations on the quarter. Paul similar to that question on First Data let me ask a different one. With both the associations being now public how do you think that might change the business over the next few years?

[Paul Garcia:]

Thanks Pat and welcome back. The associations I think is a net game for all of us. First Data, Global Payments, anybody in the acquiring space. The associations were more bank centric. They were controlled by the banks. The banks kind of called the shots. The issuing financial institutions. It is a different world now. We as merchant acquirers drive a lot of revenue for the associations. I think they are fully cognizant of that. I have seen tangible changes in attitude and activity so I think it is a net positive for all of us in the acquiring space.

[Pat Burton:]

Thank you.

[Operator:]

We’ll go next to Greg Smith with Merrill Lynch.

[Greg Smith:]

Hey guys. On the association issue is there any possibility of them somehow raising pricing that could potentially impact you in a negative way or would you have the ability to pass that on? Something along those lines?

[Paul Garcia:]

Greg we would. Of course what funds the association activities are assessments. They are cognizant of that. As you have seen some assessment increases very cleverly with across border transactions, some quite dramatic ones from the associations quite frankly. We just pass those on. They are complex to do because you have to separate transactions. We do that as part of our job. We pass them on. I would hope they wouldn’t be too aggressive with those. It isn’t inconceivable, Greg, but I haven’t seen a tax per se aimed at merchant acquirers. I think quite frankly and the question that Pat asked I think the associations see us as partners more now than they have and quite frankly we are.

[Greg Smith:]

Good. Then do you have much gas station business? Is there any sort of incremental benefit from higher fuel prices for you?

[Paul Garcia:]

We don’t have much petroleum. But you are right that is going to raise those av tickets dramatically for those that process them. We have some small petroleum exposure. We do some check business with petroleum but we don’t have a ton of it.

[Greg Smith:]

Okay. Then lastly I’m sure you have looked at your accounting every which way just the issue with ISO’s and the margin pressure but any chance you could ever move to more of a net revenue rather than running the commission through the SG&A line?

[Paul Garcia:]

We talked about non-GAAP….we talked about non-GAAP measures but what I said earlier is that if we did that our competitors and even our customers – I don’t think they’d want people to understand exactly where they are with that, would have significant visibility into that pricing. That is what is holding us back more than anything. What I prefer to do is make it a non-issue, growing our company and expanding our margins and then we won’t have to answer these questions.

[Greg Smith:]

Good answer. Okay thanks a lot.

[Operator:]

We’ll take our next question from Hilel [Patapshe] with Goldman Sachs.

[Liz [Dawson]:]

Hi guys. This is actually Liz [Dawson]. I had a question. You talked a lot about discretionary versus non-discretionary components of your portfolio but if you could help us maybe quantify how you think about portfolio makeup with global processing, maybe what percentage of debit and credit, what percentage your transactions are coming from each of these categories and then also how you merchants break out. How you see as the most defensive, non-discretionary as a percentage of your portfolio today?

[Paul Garcia:]

You know, Liz, once again Joe had this answer for an earlier question. We do have some of this on our website. I have to think back to some earlier investor presentations but we show kind of what are the major categories, retail and restaurants, and then in the non-discretionary we have things like education and taxes and healthcare and other services and we have a bunch of that. We have a pie chart that shows some of it. I don’t have the exact and I don’t want to guess but I will tell you that you definitely see a movement and it is a significant enough piece of business for us that quite frankly is one of the reasons why our transaction counts are what they are.

[Liz [Dawson]:]

And the debit versus credit break down? Do you know what percentage of your transactions?

[Paul Garcia:]

We do actually. I will tell you that I don’t have that in front of me. I will tell you that we describe…when we talk about debit we talk about pin debit. Signature debit is just the same and I think you are referring to pin debit. We have given that. It is growing steadily. That growth has slowed a little bit. It is still growing nicely. It is still growing faster than credit but it slowed a little bit just because it is being penetrated. I don’t have those, I’m sorry. It hasn’t changed material from what we’ve shared.

[Joseph Hyde:]

It is around 10% of the total for the U.S. in spending.

[Liz [Dawson]:]

And then on the MNA [marmot] one last question on that. It seems like your comments that a lot of that activity may be focused in Europe. Has the currency environment impacted your ability to work on those deals? Do you see European little competitors actually bidding on those properties making it more difficult for you as you approach them?

[Paul Garcia:]

Yeah that’s an excellent question because the dollar has changed pretty dramatically particularly against the Euro or currencies that are soon to become Euro. I would say little competitors are always out there. Fortunately some of our focus is in Asia. I’m still very optimistic [in all fields] in complex areas where currency has made the deal more expensive but it is still a pretty good deal.

[Liz [Dawson]:]

Thank you.

[Operator:]

We’ll take our next question from Dan Perlin with Wachovia.

[Daniel Perlin:]

Thanks. I just wanted to try and reconcile one thing. Your fourth quarter incremental margins in merchant services are expected to be pretty significant. I’m not complaining there clearly. But the question that I have is I have listened to you talk about Canada, Eastern Europe and all the other line items…they all seem like they should be flat sequentially with the exception of the domestic direct market which causes me to be a little bit weary because of all of those I would have thought that would have been the one with the pressured margins. So how should I think about that? Is it that the domestic non-ISO piece of business is actually growing faster and you’re getting a bigger mix shift of smaller ISO’s versus larger?

[Joseph Hyde:]

We are getting an improved benefit from the domestic direct non-ISO sales force but it may be difficult to try to address that question in the angle that you have approached it. I think it is easier to explain that the 4th quarter margin should improve relative to the third quarter because of a variety of factors; improved growth in Asia, in Europe the customer we are nearing the anniversary of their exit – we’ll have a partial anniversary in the fourth quarter and a full in the first quarter of next year, we’ll get a benefit in Canada from the re-pricing initiative, in the U.S. we won’t have the Canadian Card Association senate headwind felt in the third quarter, the check guarantee impact will be much less in the fourth quarter and the money transfers is also expecting to have better earnings in the fourth quarter as well. So there are a variety of factors for why we feel the fourth quarter will be better.

[Paul Garcia:]

I wanted to add too, Dan that it is possible that you are referring to revenue and not necessarily earnings. For example I did say we had a wonderful Q3 in Asia. I’d love to see 29% again. We’re not necessarily telling you that is going to happen in the fourth quarter but I do think we’ll have better margins in the fourth quarter as we continue to improve margins. So even if I have a little less revenue growth I would expect greater profitability and I think if you ditto in Central Europe with that operation. So that is a bit of a change too. So we’re not telling you these businesses are going to be flat in the fourth quarter. We expect to see growth in those as well.

[Daniel Perlin:]

Right, growth for year-over-year…how could it more sequentially fall. Asia Pacific being $19 million on an absolute dollar base in the fourth quarter, I don’t see why it shouldn’t be there again. The same thing with Central Europe, I don’t understand why it shouldn’t be around $14.7 or $15 million. So the big out layer to me seems to be domestic. But we can follow-up off line. I’m happy margins are going up.

[Paul Garcia:]

Anything else Dan?

[Daniel Perlin:]

No. I’m sorry. Thank you.

[Operator:]

We’ll take our last question from Josh Elving with Piper Jaffray after which Mr. Garcia will give his closing remarks.

[Josh Elving:]

Great thanks. I just had a couple of quick follow-ups. Just with regards to the money transfer segment real quick. On the European side that has kind of been the little more exciting piece of that and after seeing some pretty significant growth in revenue it kind of slowed a bit here in the third quarter and I’m just wondering is there any particular reason why we had less quarter-over-quarter revenues there?

[Paul Garcia:]

I think as we have described this business it does tend to be a slower quarter than the summer or the fall quarters historically. Secondly as the business in the U.S. struggled in the last year we made less of investment of opening new branches. In Spain we slowed down the pace of which we were opening them. We have looked at acquisition opportunities there in lieu of just straight opening. Opening costs a lot more money from the standpoint of running losses generally for the first six months to a year until you get the business up to a cash flow profitable business. But the business itself on a year-over-year basis where the stores have been opened over a year continues to do very well from all the metrics which is transaction growth, revenue growth and it is very stable.

[Josh Elving:]

Okay I got ya. Last question on that. As far as some of the outlets, we have the deluxe outlets they have been turning down here for a couple of quarters. Is that going to continue to be the trend or at what point do we start to see that stabilize and start to grow again?

[Paul Garcia:]

Well I think we have mentioned in this last quarter we have seen improvement in the pricing market and therefore with pricing stabilized and transactions growing you are just going to naturally see growth. The business does have leverage characteristics. That is what originally attracted us to it among other things. So you’ll see those as well and I think Joe outlined those in his comments for the fourth quarter if prices stay stabilized into the next fiscal year we’ll see that continue.

[Josh Elving:]

Okay great. Thanks.

[Paul Garcia:]

Well ladies and gentlemen thank you so much for joining us on today’s call. Thank you for your continued interest in Global Payment and we appreciate your continued support.

[Operator:]

Ladies and gentlemen this conference will be available for replay starting today at 7 p.m. Central and ending at midnight on March 9, 2008. If you wish to listen to the replay please dial [phone], or international participants can dial [phone]. This concludes our call. You may not disconnect.