Global Payments CEO Discusses Q2 2011 Results - Earnings Call Transcript

Jan. 7.11 | About: Global Payments (GPN)

Global Payments Inc. (NYSE:GPN)

Q2 2011 Earnings Call

January 6, 2011 5:00 PM ET

Executives

Jane Elliott – Vice President, Investor Relations

Paul Garcia – Chairman and CEO

Jeff Sloan – President

David Mangum – Executive Vice President and CFO

Analysts

Tien-Tsin Huang – JP Morgan

Adam Frisch – Morgan Stanley

Kartik Mehta – Northcoast Research

Darrin Peller – Barclays Capital

Bob Napoli – Piper Jaffray

Dan Perlin – RBC Capital

James Friedman – Susquehanna

Jason Kupferberg – UBS Securities

Bryan Keane – Credit Suisse

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Global Payments Second Quarter Fiscal 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will open the lines for questions-and-answers. (Operator Instructions)

As a reminder, today’s conference will be recorded. At this time, I would like to turn the conference over to your host, Vice President of Investor Relations, Jane Elliott. Please go ahead.

Jane Elliott

Good afternoon. And welcome to Global Payments fiscal 2011 second quarter conference call. Our call today is scheduled for one hour. Joining me on the call are Paul Garcia, Chairman and CEO; Jeff Sloan, President; and David Mangum, 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 are subject to risks and uncertainties, that could cause actual results to vary, which are discussed in our public releases, including our most recent 10-K. We caution you not to put undue reliance on forward-looking statements. Forward-looking statements made during this call speak only as of the date of this call.

In addition, some of the comments made on this call may refer to certain measures such as normalized and cash earnings for second quarter fiscal 2011 which are not in accordance with GAAP. Management believes these results more clearly reflect comparative operating performance.

For a full reconciliation of normalized and cash earnings to GAAP results in accordance with Regulation G, please see our press release furnished as an exhibit to our Form 8-K dated January 6, 2011, which may be located under the Investor Relations area on our website at www.globalpaymentsinc.com.

I’d like to introduce Paul Garcia. Paul?

Paul Garcia

Thank you, Jane, and Happy New Year, everyone. And thank you so much for joining us this afternoon. I am happy to report solid second quarter revenue and normalized earnings per share performance and as a result, we are modestly increasing our full year revenue and earnings estimates.

In addition, we are pleased to announce the closing of our joint venture with la Caixa ahead of schedule. David will discuss our financial expectations with and without la Caixa and cash earnings in more detail in just a moment.

Now for the highlights of the quarter and some recent events. I am delighted with our recent expansion into Spain with la Caixa. The largest retail bank in Spain and the largest merchant acquirer with over 20% market share and over 150,000 merchant outlets.

While the Spanish economy has indeed been challenged of late, la Caixa’s financial stability has allowed the bank to successfully pursue its growth strategy during these turbulent times. On that note, both of our organizations are focused on expanding our market share and growing the merchant acquiring business through our new joint venture.

This joint venture will be led by our own Darren Wilson, who leads our western European region which of course includes our U.K. business. As with our initial U.K. joint venture, we intend to leverage our sales strategies and add approximately 50 sales people over the next few quarters. When combined with la Caixa’s brand and 5000 plus branch footprint, we expect to drive significant market expansion and long-term growth.

Turning now to North America where we delivered solid revenue growth in the quarter with U.S. and Canadian transaction growth rates of 18% and 3%, respectively. During September we made a difficult decision to eliminate over 70 positions in Canada to match our investment levels to the near-term economic opportunity in that market. We continue to anticipate that our Canadian performance improves over the remainder of the year that we exit the fiscal year in a stable position.

Our international segment produced another quarter of strong results with the U.K. and Russia both performing well in the quarter. Regarding the U.K., we continue to be on track to complete our backend migration by the end of February 2011.

Our Asia-Pacific business delivered extraordinary results in the quarter with significant increases in revenue and operating income. These results were driven by good growth areas across the region and a very successful rollout of a new product by one of our major retailers.

As we prepare for successful transition from the HSBC customer service facility in India that serves our U.K. business, we have begun to staff for customer service and operations in our Philippines Global Service Center or GSC. We are also transitioning other customer support services to the center from other regions over the remainder of the year.

I will now turn the call over to David.

David Mangum

Thank you, Paul. I’ll review currency, operating performance and outlook, cash flow and cash earnings. During the second quarter on a year-over-year basis currency changes benefited revenue and normalized earnings by about $1 million and nearly $0.01 per share respectively.

Our outlook for fiscal 2011 continues to assume that the U.S. dollar remains constant or slightly weakens against the Canadian dollar and remains constant or slightly strengthens against the British pound, Czech Koruna and the Russian Ruble. But we now believe the aggregate effect will likely be about neutral for us in 2011. Fluctuation in exchange rates of course may cause variances to our outlook.

North America merchant services revenue grew 9% for the quarter driven by U.S. merchant services revenue growth of 11%. U.S. results reflect continued strong growth from our ISO channel. Our expectation for low double-digit revenue growth from the U.S. in 2011 remains unchanged.

Transactions in Canada grew 3% for the quarter. In local currency Canadian revenue was flat with the prior year. We continue to expect Canada’s local currency annual revenue to be about flat or to perhaps grow modestly when compared to prior year.

North America merchant services normalized operating margin was 20.5% for the quarter as compared to 24.6% in last year’s quarter. North America operating income for the second quarter also reflects some incremental investments in our information technology infrastructure.

International merchant services revenue increased by 6%, as compared to last year and operating margins there improved to 30.4% for the quarter, compared to 28% last year.

Asia-Pacific’s revenue growth substantially exceeded our expectations. Growth there reflects a successful rollout of new products by a major retailer with both physical and eCommerce transactions in several markets in the region. We do not expect growth to continue at this pace now that a launch is completed.

We also experienced strong DCC revenue growth and DCC is now available in all of our Asian markets. Due to the extraordinary performance this quarter, we now expect revenue growth of about 20% from Asia for the full year.

Our annual expectation for overall international growth in U.S. dollars remains unchanged at low single digits. Total normalized company operating margins from continuing operations for the second quarter were 19.6% down from 21.7% last year but slightly up from Q1 margins of 19.4%.

We expect fiscal 2011 normalized operating margin in North America to be down compared to last year with material offsetting margin expansion in our international segment driving our overall company operating margins to be slightly down compared to our 2010 margin.

During the second quarter, we generated free cash flow of $64 million. We define free cash flow as net operating cash flows, excluding the impact of settlement, assets and obligations, less capital expenditures and distributions to non-controlling interests. During the quarter, we spent $27 million on capital expenditures and our full year total expected outlay of about $85 million remains unchanged.

In early December, we expanded our financing capability with a new five-year $600 million revolving line of credit which replaced our previous $350 million line. At closing, we used the facility to pay off the remaining $150 million outstanding on our 2009 U.S. term loan.

The net impact of these transactions to our full year 2011 estimates is a relatively small increase in expense which we have accommodate in our earnings outlook and which will be driven by a write-off related to unamortized fees from the 2009 term loan in December, which will be partially offset by lower interest expense.

With the acquisition of la Caixa, we now intend to supplement our financial reporting by reporting results on a cash earnings basis as we pursue our global expansion strategy. We believe this will facilitate investor’s ability to review and analyze underlying company performance.

Cash earnings exclude the impact of acquisition relate amortization, special or non-recurring charges and their related tax effects. Our GAAP and cash earnings are reconciled on Schedule 7 of our earnings release.

In order to ensure consistency and ease any transition, we have reported earnings for this quarter and our full year expectations on a GAAP, normalized and cash basis all of which are reconciled at the segment level in our earnings release.

In addition, in an effort to assist you with your financial models, we’ve included fiscal 2010 and year-to-date 2011 quarterly income statements reconciling GAAP and normalized earnings to cash earnings, which can be found in our press release Schedules 10 through 13.

For the second quarter, the company reported $0.76 of earnings per share on the cash basis, compared to $0.70 on a normalized and $0.67 on a GAAP basis and compared to last year’s performance of $0.76, $0.71 and $0.71, respectively.

We are pleased with our performance to date and expect similar execution in the second half of the year. In addition, currency added nearly $0.01 of earnings per share to the quarter and we expected to add another $0.01 to earnings per share in the second half of the year. The combination of the two will allow us to absorb modest dilution from our start-up investments in Brazil and still increase our full year organic revenue and normalized earnings expectations.

For the full year of fiscal 2011 prior to the addition of la Caixa we expect revenue of $1,755 billion to $1,790 billion. We expect GAAP earnings per share of $2.58 to $2.67, normalized earnings per share of $2.70 to $2.79 and cash earnings per share of $2.93 to $3.02.

We expect la Caixa to add about $25 to $30 million of revenue for the remainder of the year and be dilutive to GAAP and normalized earnings per share by $0.02 to $0.04 per share, roughly offsetting the increase we expect in organic earnings per share and accretive to cash earnings by $0.02 to $0.04 per share. We anticipate the joint venture operating at a higher operating margin than our total company margin but not having a material effect on total company normalized or cash margins for fiscal 2011.

Our normalized effective tax rate for the quarter was 30.6% and we continue to expect our full year 2011 normalized effective tax rate to be about 29.5%. Our cash tax rate was 31.1% and we expect our cash tax rate for the year to be about 30%.

From a timing perspective, we continue to expect a seasonally weak third quarter followed by a strong fourth quarter to achieve these expectations.

Now, I’d like to turn the call back over to Paul.

Paul Garcia

Thank you, David. Based on our current outlook for normalized continuing operations and prior to our la Caixa joint venture, we are raising our revenue expectations by $20 million and our normalized earnings per share expectations by $0.02.

For normalized continuing operations including our la Caixa joint venture, we expect fiscal 2011 annual revenue of $1,780 billion to $1,820 billion or 8% to 11% growth over fiscal 2010. We expect fiscal 2011 normalize the diluted EPS of $2.66 to $2.77 reflecting 5% to 9% growth over fiscal 2010.

Based on our current outlook and including our la Caixa joint venture, we expect fiscal 2011 cash earnings per share of $2.95 to $3.06 reflecting 5% to 9% growth over fiscal 2010 cash earnings of $2.80.

As I reflect upon our 10-year anniversary next month as a public company, I am both proud of our past accomplishments and excited about our long-term opportunities. Over the past 10 years we’ve grown our revenues six fold from $300 million to $1.8 billion. We have also increased our employee base three fold from 1,200 associates to over 3,600 associates.

10 years ago we were in two countries and today we are a Fortune 1000 company operating in more than 20 countries and settling in more than 40 different currencies. I am confident in our ability to continue executing on our growth strategies and I also believe that the opportunities continue to be abundant.

Operator, we will now go to questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question today comes from the line of Tien-Tsin Huang with JP Morgan.

Tien-Tsin Huang – JP Morgan

Hi. Sorry, can you hear me now?

Paul Garcia

Tien-Tsin, we hear you loud and clear.

Tien-Tsin Huang – JP Morgan

Sorry about that. Had you on mute. Sort of couple of quick questions if you don’t mind. I’ll ask on the la Caixa deal first. Looks like my math shows about a 40%, actually closer to 50% EBITDA margin business. I’m curious if that sounds about right?

And secondly, if that’s sustainable or if it’s improvable and what kind of growth we might see coming from that joint venture? Sounds like obviously you’re pretty excited about it, but if you could give us little more color that would be helpful?

David Mangum

Yeah. Tien-Tsin, maybe in reverse order I’ll talk little bit about the margin structure and Paul, you talk little bit about the marketing and relate the two together as well. Your numbers are high. But it is a very nicely profitable business and obviously not going too far in disclosing margins. You can tell probably from the five months of it we have certainly not going to make a difference to our company margins…

Tien-Tsin Huang – JP Morgan

Okay.

David Mangum

… so not quite as high as you think but it’s north of the company margins. We will probably sort of like the trajectory you saw take with the U.K., actually take that margin south a little while as we add, we referenced in the prepared comments the 50 sales folks over some number months or quarters. But we’ll remain accretive to company margins.

But again, just, I won’t go too directly but it’s not quite as high as you think, but it’s a very nice which is north of the company margins and let Paul then turn this into the growth and strategy comment.

Paul Garcia

Okay. Thanks David. So Tien-Tsin the opportunities there, I think really can’t be overstated. It’s at, quite frankly to give you a plug, you point out nicely in your note. It’s a market that is under penetrated from a credit perspective, but yet does enjoy a relatively high GDP and on a per capita basis in particular a high GDP.

So the opportunities, the capacity are significant, it is a country roughly 50 million people and this is a business la Caixa that has gained a leadership role without a significant investment in sales infrastructure. They do enjoy over 5000 branches that’s been the primary delivery mechanism. But without a lot of new products innovation or sales resources, they’ve really built just a terrific franchise and a terrific business.

We think there is some fairly low hanging fruit, we are very excited about Darren Wilson and his team working with the la Caixa team on this JV and I believe this thing expands overtime. I think Dave is right, initially we take it back a little bit, but this thing will grow significantly and we have high expectation for the future.

Tien-Tsin Huang – JP Morgan

From a revenue standpoint Paul is it more analogous to the Canada opportunity when you first broke there or is it more similar to the U.K. opportunity?

Paul Garcia

No. You know, I think, that such a great analogy, so it’s about not quite twice a size of Canada, but with the much smaller per capita penetration on credit, small GDP but I would tell you, it is, I think, it is fairly comparable to Canada. So Canada is the size it is, la Caixa is the size it is, why shouldn’t this be as big as Canada in a reasonable period of time? That’s kind of our internal expectation.

David Mangum

I think, maybe a little more color on that twist it back to the margin question you asked earlier, I would think the trajectory looks more like what you used to with the U.K. Nice, solid business coming in, perhaps we take the margin a little bit south though still again accretive to company margins as we invest in the infrastructure and sales strategies Paul is describing and then you build this nice path upward for margin expansion from there.

Tien-Tsin Huang – JP Morgan

All right. I’ll end by asking, I guess, the regulation question, much as I’m sick of it. Is China’s size the benefit to Global? I know it’s going to be difficult for you to disclose but maybe just to think about analogies or case studies again, can you remind us how much financial benefit you received in the Wal-Mart settlement with debit change was settled lower then and how it might compare this time around with Durbin?

Paul Garcia

Well, it’s similar, but yet it’s different. The Wal-Mart, I tell you what it similar. It’s a specific interchange adjustment which overtime rationalizes.

Tien-Tsin Huang – JP Morgan

Right.

Paul Garcia

So if nothing changed with this and I’m about to tell you, I think a lot of things are going to change with this. But if nothing changed with this, I think it would be completely analagous. And now, it is, we have more business, but if anything we probably have less than a percentage that is subject this type of pricing. So that’s kind of a mitigating aspect, so that’s a little different.

You are right. I’m not going to give you an exact number. Tien-Tsin, this could be significant if you wanted be greedy and maybe short-term in focus, I think, but I don’t -- we can’t even put the opportunity together yet because not only is this just a suggestion. I mean, we’re going to see where this comes out but I think we haven’t heard from the banks here.

I mean, they clearly are going to change the game here a little bit, that the [SIG], I think probably the signature, excuse me, the PIN debit is going to be the PIN debit, and we get that. But the signature debit, I can’t imagine that that isn’t going to be more and more morphed over to a credit vehicle. And someone suggests it is going to go to a PIN debit vehicle, which I don’t buy. So, I think there’s a lot of moving pieces here.

I think it’s fair to kind of compare there was a pickup there. I think there will be a pickup here. We’re going to be very cautious because it is not only a very competitive market. You don’t want to invite any regulation of something, number one, so we’ll be very cautious with that.

Tien-Tsin Huang – JP Morgan

Right.

Paul Garcia

Number two, is really is a very competitive market. One of our public competitors has made a huge point about giving every penny of that back and God bless them. That’s their strategy.

So, I think, we will share some more data when it comes up. It clearly, I will say this. I’ve said from day one interchange will go down, interchange is going to go down. That is good for all of the acquirer, even if you give every penny back, it takes a little margin pressure off you.

It also, quite frankly, takes away the specter of some emerging payments that may or may not participate in the same manner. I think ultimately this is good news for, believe it or not Visa and MasterCard long term, because I think it speaks for their vitality in the future. So a lot of moving parts, keep you guys very busy for the next six months writing notes on this.

Tien-Tsin Huang – JP Morgan

Yeah. No doubt. Appreciate your view fellows. I’ll let others have questions. Thanks.

Paul Garcia

All right, Tien-Tsin.

Operator

Our next question comes from Adam Frisch with Morgan Stanley. Please go ahead.

Adam Frisch – Morgan Stanley

Thanks, guys, and Happy New Year. On Durbin, I know Tien-Tsin just asked the question and you gave a pretty comprehensive answer. But in terms of working through the math, it seems like it will help your margins for your owned account but hurt margins on the ISO accounts because of the accounting. But the numbers of accounts are greatly towards ISOs, the volume gap is not as extreme. So, could we actually see a scenario where Durbin is a wash to your margins or slightly dilutive?

David Mangum

I think, Adam, this is David. It is likely to be dilutive to our margins. Now, I think, if I’ll link this to Paul’s comments. We don’t know what we don’t know right now.

Adam Frisch – Morgan Stanley

Yeah.

David Mangum

The size and complexity and all the other pieces. But having said that, you are correct and it is worth making sure we say this publicly on this call. That the significant majority of our U.S. business is indeed through the ISOs. And yeah, it is a different structure in terms of tickets and everything else, but it is still the significant majority of our volume, our transactions, et cetera, which is likely to come through the income statement assuming an ISO were to keep a portion of the interchange reduction as both revenue and expense.

We have a nice direct business wherein, in the worse case, we can see as Paul mentioned less pricing pressure. But it is so much smaller than the ISO. So, it is more likely, depending which scenario you believe, but I’ll go with your question, the way you phrased it. That this has a bit of a deleterious effect on our margins rather than the ability to keep it neutral.

So, as we get out toward a better line of sight as to what Durbin is or isn’t from a quantification perspective, we’ll have work to do from a disclosure standpoint to make sure folks can understand what the core business is doing versus a Durbin gross up effect…

Adam Frisch – Morgan Stanley

Yeah. Okay.

David Mangum

… having on that.

Paul Garcia

I’ll add quickly, though that there isn’t a scenario that this isn’t good news for us ultimately. So even if you make a dollar, it’s a dollar more than you would have made. Now Adam, we can argue the whole margin accounting issue, I mean, that is a reality. It is what it is. But and we don’t really know what that reality is going to be. But the scenario you laid out and the way David answered it, you can’t argue with.

Adam Frisch – Morgan Stanley

Okay.

Paul Garcia

The bottom line is that there will be money made. It flows directly to the bottom line. There’s no costs associated with it and it will have some drive on EPS, end of story.

Adam Frisch – Morgan Stanley

Okay. Just wanted to kind of frame it a little bit. Just two other quick questions and I’ll hang up. The -- we heard there was another pricing increase in Canada recently and a greater emphasis placed on the ISOs for distribution up there. I’m sure some of the sales people up there were involved in the headcount reductions. Are those accurate assumptions and can you explain how that strategy plays out over the longer term?

Jeff Sloan

Sure. It’s Jeff, Adam. I’ll take a turn answering that and David and Paul can join in. I guess, Paul mentioned in his comments, we’ve done a number of things in Canada since we last spoke. The first thing is on the expense side. I think we addressed that in the commentary. But we continually look at our business from a revenue point of view as well.

So our revenue in Canada is affected by a number of things. One is pricing. The second is introducing and gaining market share by way of customers and that can include customers in the U.S. going into Canada and that can include our ISO partners as well.

A core part of our strategy is to grow our share of the pie up in Canada. So while we talk hard needed steps on the expense side, we also looked very closely what we can do on the revenue side to enhance our business there and we’ve done both of those things. Price is a part of that as it necessarily is as competitive as that marketplace is, but gaining share with existing customers, adding new customers including additional ISOs is part of our strategy in that business.

Paul Garcia

Yeah. I think, Adam, to dovetail your comment about the expense actions, part of it certainly conceptually was the idea of where should we or should we not be applying direct sales resources and where are other parties better positioned to chase this small merchant to small to medium merchants and that would lead you to think about selectively introducing ISOs successfully, so into the market over some period of time.

Adam Frisch – Morgan Stanley

Okay. Thanks for that. And then last question, just on Lat Am, you announced this week or last week on Brazil. How much do you think you need to spend there? When do you start seeing returns and are these build-out cost going to be excluded from GAAP earnings or they are going to be included in the normalized?

Paul Garcia

Yeah. Great question. So I think what you’ll see in the back half of this year is an incremental penny or a little north of a penny of dilution. I also think as you head into next year that means probably more dilution before we can turn into profit maker.

I do think that the beauty of that market, the economic characteristics of some of the incumbent processes in the market where you can turn that quickly into a profit making venture, but I think it’s fair to say through 2012 I don’t expect that.

So when you look back then at how we’ll report that, as you may have heard in the prepared comments, we absorbed that penny of Brazil dilution in our expectations. It’s a part of what takes us up a little bit given performance in Asia as well as FX and then down a little bit given a little bit of dilution from Brazil at the end of day you end up with this organic $0.02 raise and when we add in la Caixa brings us right back to where we started on normalized basis $2.77 at the high-end, so we get $2.77 up to $2.79, back $2.77 with the la Caixa add, but it is all in the numbers.

Adam Frisch – Morgan Stanley

Okay. Thanks a lot, guys. Appreciate it.

Paul Garcia

Thank you.

David Mangum

Thanks, Adam.

Operator

Our next question today comes from Kartik Mehta with Northcoast Research. Please go ahead.

Kartik Mehta – Northcoast Research

Thank you. Hi, Paul and Dave.

Paul Garcia

Hi.

Kartik Mehta – Northcoast Research

Yeah. With conversion and processing initiatives underway throughout the world, it may be inevitable that you encounter minor delays at certain points in the process. I know you mentioned that U.K. remains on schedule. As you assess the U.K. backend processing now, what remaining risk could result for delays in the U.K. that would push timing for full migration beyond the stated goal of end of February?

Paul Garcia

Sure, Kartik. When you go to this stage of a project, this one, you’re down to half a dozen to a dozen key deliverables, but you still have them. That means you’re still testing them on live data and still running them through parallel processing and not, you don’t have them in production so you’re running in parallel.

To the extent you found something in the processing that was sort of a fundamental challenge in terms of how you process a transaction either from sort of how you run it through interchange tables or how you balance it off of any other pricing or whether you’re fully ready to communicate is clearly and transparent customers you want. Those would be the things that would pop up and what’s really the final seven weeks of a process like this.

The good news as we described before about this project. We have done seven of these in Asia for the same backend, still very happy with teams running this, as you know the requirements gathering and some of the other issues we’ve seen on another projects happen from the very same some of the very same U.K. teams, really running the platform and operating for years in the HSBC environment. So we’re feeling good about that. It really isn’t matter of getting the final pieces in place and fixing what are the inevitable final sort of bugs you find as you do the big system test and the unit testing.

Kartik Mehta – Northcoast Research

So, Dave, what is the biggest risk to the U.K. -- getting that migration completed?

David Mangum

The biggest risk is really the summary I gave which is that something you’ve coded as you do final testing doesn’t quite operate perfectly. We expect this to operate perfectly. We talking about the money flows, the settlement and what goes to and from our customers. So that would really be the biggest risk. By the way, I should correct myself. We’ve actually done eight of these migrations in Asia, having done Malaysia just a few months ago on top of the other seven.

Kartik Mehta – Northcoast Research

All right. And if we could go back to Canada, I just to want make sure I understand, Jeff, the answer a little bit. So to what extent did a price increase play a role in Canada’s growth this quarter?

Jeff Sloan

Well, we don’t disaggregate the pieces. What I would say, Kartik, as I mentioned to Adam, is on the revenue side of the equation as we described in the script. On the revenue side of the equation we of course look at price. It’s a very competitive marketplace. But we do look at price but we also look at product and we look at the way we distribute. So we examine all of those things in the aggregate and we make sure when we introduce new technologies and come in with new partners that we grow our share with the pie as well. So price is (inaudible) of it but it’s one of the few.

Kartik Mehta – Northcoast Research

And one question, Paul, for you on Asia. Obviously very strong results there, execution there seems to be excellent. And one of the factors you mentioned was dynamic currency conversion helping you? And I’m wondering if you could talk about what -- how much that played a part in the growth in Asia?

Paul Garcia

Yeah. DCC is in fact Kartik a driver. It was something we introduced very successfully. It’s rolled out aggressively and it’s generating some meaningful revenue. Asia is still fairly small in the scheme of things, in the scheme of the potentials Asia is fairly small. So DCC itself can be a mover. So it has been.

I don’t literally have exactly what that percentage is, but it was a meaningful driver and I think David actually made a point in his prepared comments that because it is pretty well fully rolled out, it won’t be as much of a mover in the future and that’s why we backed off a little bit about some of the aggressive growth we’ve enjoyed in Asia that we got a nice lift from a major merchant rolling out some interesting products.

So, but make no mistake, Asia is a great grower, great, great accretive grower and CUP is successfully being rolled out. Once again, that’s not massive at this point. We’re only in Beijing, but it’s encouraging and it’s working and we’re getting great reviews and all the seeds have been sown for this to grow up and to be a big tree.

Kartik Mehta – Northcoast Research

Sounds good, Paul. Sounds like so that the growth you got from DCC probably gives you some comparison issues as we move forward?

David Mangum

Yeah. I think that’s, Kartik. This is David. The growth was very nice again this quarter. The growth we didn’t expect really came from the retailer. But your point is a good one in that now that we’re fully rolled out with our ongoing solution with our partner in each market and every market in Asia, you will take a little edge off growth. Doesn’t mean it’s still not a great grower as Paul described but you’ll take edge off as you begin to annualize rollouts in places like Hong Kong over the next couple of quarters.

Kartik Mehta – Northcoast Research

Thank you very much, gentlemen.

Paul Garcia

Thank you.

David Mangum

Thanks, Kartik.

Operator

Our next question today comes from Darrin Peller from Barclays Capital. Please go ahead.

Darrin Peller – Barclays Capital

Hey, Paul and David. How are you doing?

Paul Garcia

Great.

Darrin Peller – Barclays Capital

The first question on EPS guidance, can you first verify last time you give guidance of $2.68 to $2.77 that also included $0.12 impact of the termination in I guess Manila?

David Mangum

Say your numbers again, Darrin?

Darrin Peller – Barclays Capital

Well, last year’s -- last quarter you gave guidance for the year of I think $2.68 to $2.77. I’m just making sure that was normalized for $0.12?

David Mangum

That was normalized so just to put a little blunt, I mean, excluded the $0.12.

Darrin Peller – Barclays Capital

Right. Okay. So, that did exclude it then as well. And to break down that $0.12 a little more now is all of that related to Manila or some of that also Canadian termination fees or anything?

Paul Garcia

It is a great question. I am glad you asked that. Originally, as we started the year the whole $0.12 was Manila. As we rolled through, we’ve been efficient in Manila. So I actually now think for the whole year, we’re sort of done with these things and the Canadian severance and the little bit of relow and stuff you remember from Q1 will all mix inside that original $0.12.

Darrin Peller – Barclays Capital

Okay. So it’s apples-to-apples, 2.68 to 2.77 versus the new guidance normalized of 2.70 or so is apples-to-apples?

David Mangum

It is absolutely apples-to-apples. Yeah.

Darrin Peller – Barclays Capital

Okay. And then the other side of it is I think you said last time that you had expected a $0.02 to $0.03 head wind from currency impact for the year, now you’re saying neutral but you’re only changing your numbers by a couple of cents. Is that because of the Brazil build-out that it wouldn’t be more than that given the revenue?

Paul Garcia

Let me walk you through a little bit. I don’t think we quantified the $0.02 to $0.03. Depends on where you are in the earnings range and your model as we think about what FX would or wouldn’t do. We certainly said modest and I like my adjective. So we stuck with that kind of language. Where that leaves you is as we perform in Q2, we get almost the penny of help from FX and then we get almost $0.02 or so help from Asia. That’s sort of the unexpected piece of Q2. And we go, look at the rest of year and figure out what we’re going to annualize or not, to that point, we think some of the FX sticks, right. So the U.S. dollar been a little weaker in a couple of places and the real answer has been less strong against the U.K. pound than we thought.

Darrin Peller – Barclays Capital

Okay.

Paul Garcia

So you pick up relative to last quarter’s guidance, you know, you round $0.02 from FX after the pickup. We keep our $0.02 from Asia, so we expect as we said earlier in response I think to Kartik’s questions, we expect Asia to go back to more normal growth so just $0.02 from Q2 flowing through, then you bring in Brazil and a couple cats and dogs on tech and some other spending and you go back down again to really $0.02 overall of increase for the year.

Darrin Peller – Barclays Capital

Okay. That’s helpful. And then just a quick comment on transactions -- I didn’t quite catch if you had said anything on transaction growth in Canada and the U.S. this quarter. If you didn’t, would you mind quantifying that?

David Mangum

It is 18% growth in the U.S. year-over-year, so pretty much in line with the last couple of quarters, last quarter was 19. It was 3% transaction growth in Canada. It was flat last quarter year-over-year. So those are the two key metrics.

Darrin Peller – Barclays Capital

In Canada, are you still seeing putting aside the price increase because obviously there is an improvement here on the constant currency basis, I guess, pricing may have been a part of that but it seems to be with transaction growth picking up, price increase, obviously it’s getting a little better there. Is there any of that also sort of a mix shift into the higher sort after way from the larger retailers that I think had an impact previously?

Paul Garcia

No. So that volume shift has hung around and as you might imagine volume mixes vary plus or minuses, a couple of points and a few bips here or there but that change really hasn’t reversed itself for lack of a better word. You see a continuing growth of ISO in that channel.

And you see us to your point stabilizing so solid transaction growth where as you might imagine cautiously optimistic that we’re on the verge of doing exactly what we said, solid transaction growth is stable, business and stable performance. I can tell you spread is looking more stable as you know we have been through four or five some odd quarters of really some challenging spread situations and it is becoming more predictable as well which is as you might imagine for us at least here to stay about half the battle.

Darrin Peller – Barclays Capital

Great. All right. Thanks, guys.

Paul Garcia

Welcome.

Operator

Our next question today comes from Bob Napoli from Piper Jaffray. Please go ahead.

Bob Napoli – Piper Jaffray

Good afternoon. Follow up on Asia. I just want to make certain the major retailer that rolled out new products, is that a -- was there any one-time benefits in there or is this a -- is that a sustainable revenue number? What kind of products were rolled out?

Paul Garcia

Unfortunately, Bob, we really can’t tell you the products or we would end up telling you the retailer and we can’t do that but what’s different about this is it is the rollout itself, the launch, that creates the outsize growth. The products are still there and they’re going to continue to be there and grow for this retailer next month and the month after that and the month after that. But this is a retailer and I am probably helping out too much here who when it launches a product, lots of volume moves really, really quickly.

Bob Napoli – Piper Jaffray

Okay. So you’re suggesting that volume level may be there, the initial rollout there is a maybe we would expect to see a little bit of a step back as the initial rollout has been passed and so you’re still going to get a lot of volume from it but probably less than you did this quarter?

Paul Garcia

Well said.

Bob Napoli – Piper Jaffray

All right. On la Caixa in this year’s guidance how much -- are there any one-time cost with regards to the acquisition that you expensed that’s in your guidance numbers? So I mean, I think the real important thing is here is what has la Caixa had in 2012 versus what it does to 2011?

Paul Garcia

Yeah. You know, it is interesting, Bob. I foresee very few one-time type charges and in fact, the cost of the deal for the most part are already in our actuals for Q2 or they will be in Q3 as we head into December and is sort of baked into our forecast.

And as you know these days your expensing your deal costs as you go given accounting changes and this is not the kind of business or the kind of deal where you have things like IPRD and those kinds of traditional technology write-offs.

So most of what you are seeing when we set the guidance, first off is everything we expect all in, and really talking about the amortization we’ll create when you deal with the valuing of assets like customer lists and other intangibles. So it is all, all in, it is what we expect to see.

David Mangum

Bob, even on a GAAP basis as you know we have talked about $0.02 to $0.04 dilution right out of the box. That’s pretty sweet. That’s pretty sweet. So it is an obviously we’re looking for GAAP accretion, too, in the near term. So this from a cash basis makes money right out of the box. So it is a nice deal and two of the questions I got earlier, too, it is a nice deal and we intend to grow.

Bob Napoli – Piper Jaffray

What is the amortization expense, the level of amortization expense that you are going to expect on a quarterly basis?

David Mangum

Well, you can back into that off the delta between expecting it to produce on a cash basis $0.02 to $0.04 and so you have a $0.06 delta at a pretax number, one two or one three and that’s really the math. Of course, we’ll have to go, do the actual valuation as you know, Bob and finish off a purchase accounting and have that vetted by our advisors and that’s really the next step for us.

Bob Napoli – Piper Jaffray

Last question. Deal flow. I know these deals are hard to get consummated and what are you seeing globally? Are you still evaluating a lot of different opportunities and was Spain just happened to be that that was an attractive opportunity and that was the one you could get done? What else is out there?

Jeff Sloan

Bob, it is Jeff. I will answer that. So I think Spain and la Caixa is really good example of a great way to pursue our acquisition business. We spent a number of years in discussions with the guys at la Caixa and the better part of half a year really consummating the deal and that was done on an exclusive basis. I think it is a real tribute to the way we approach these transactions which is we are able to picks each other as partners.

So I think that was the culmination of a very good bit of work that was done here and also on la Caixa’s behalf to reach a very good conclusion on both sides. I think we’re very proud and if that’s the template for future deals, that’s terrific.

In terms of the rest of the business, as Paul mentioned in his comments with David, we just closed that at the end of the year. We have a number of opportunities in the United States and in addition as well as around the world in addition to la Caixa, so we’re comfortable with where we are from a pipeline point of view.

Bob Napoli – Piper Jaffray

Thank you.

Operator

Our next question comes from Dan Perlin from RBC Capital. Please go ahead.

Dan Perlin – RBC Capital

Thanks, guys. Just revisit Canada for one moment, you talk about share gains and introducing new customers in that market. We’ve seen kind of the pains of the ISO channel in North America and it sounds like that’s going to be increasingly a strategy in Canada, so I have two questions. One is I think the revenue direct and the revenue model in Canada is different. So can you remind us of that and, two, have you right sized the business enough as we think about ‘12, you’re not going to have to reduce head count?

David Mangum

Dan, it is David. You are correct in remembering the revenue model is different. The revenue model in the U.S. is the product of a couple decades of relationship building and volume driving and also the sheer volume driven by very large ISOs across any number n of different acquirers.

In Canada, it is a little different in terms of both the buy rate. So the per transaction services rate one would charge an ISO and also there is typically some version of a revenue share, and the [direct] there. So in other words there is a little bit of a share before you can calculate the buy rate. So the economics are a bit different, the margin characteristics are different. It is fair of you to say at the beginning of a trajectory that will look like the U.S. over some very long period of time. It is quite possible and probably quite likely.

The other way to think about the pieces of this are that’s a 20-year production. That’s really the history in this state. So one final piece as you think about the rollout, we said very consciously selectively roll out and really target the small-to-medium merchant market, we think we’ll be successful with that and we’ll drive real meaningful share and volume. This revenue comes at a very nice margin. It doesn’t look like the margin in the U.S. at all. So we’re feeling comfortable with the strategy overall.

Jeff Sloan

Dan, it is Jeff. I will address your second points on right sizing the business. We took the hard steps that Paul described earlier this year in Canada. We don’t anticipate any additional ones. We feel like we did what we needed to do to put the business in the right perspective and the actions we have taken to date reflect all of that. We feel good about where we are as David described in that business today. And at this point, we don’t anticipate any additional changes along the lines of what we have done this year in the Canadian business.

Paul Garcia

And another thing, Dan, as stated, there is one public piece of your question, I should answer which you asked about 2012. We’re not speaking about 2012 specifically but our goal for this year was having a stable situation as we exit the year. We think we’re on track for just that.

Jeff Sloan

And just one other piece to follow up on the first part of what David said (inaudible) Dan question but in the first piece, we already have a number of ISOs with us today in Canada. So the other piece of David’s commentary about what could happen, what might happen, that reflected in some of our numbers today when the very successful with that and very pleased with our partners in the marketplace in Canada today. So I agree with what he said about a longer term horizontal, but I also say we’re successful in that today.

Paul Garcia

I have to throw in on this, too, David. I think it is the -- I can’t imagine a world for years and years and years and years and years and years up there where the ISOs are driving anywhere near the amount of revenue growth either in absolute numbers or as a percentage that we have here.

So the Canadian we already have several very successful ISOs up there. We’re going to introduce some partners to reward them for their partnership with us and we’re looking at opportunities around the globe with these ISOs by the way. ISOs are a great model. ISOs are a good thing. ISOs are a great revenue generator. We make wonderful net margins on these. We’re very proud of those associations.

We’re not going to come to you and say the Canadian margins are under pressure because the ISOs have driven some massive numbers. That isn’t going to happen. It isn’t going to happen while I am before my retirement, I promise you that. Okay?

Dan Perlin – RBC Capital

Okay. And then I have never heard you say take the ISO around the world. Is the concept there you would take existing relationships, because have you some pretty big ones and help introduce them somewhere else or build a relationship foreign market with a domestic ISO?

Paul Garcia

I think we will take -- well, it is kind of the same thing. We take the existing ISOs we have around the world and some of them are interested in some geographies and some are interested in others. But we’re also going to augment that where it makes sense with local, but a lot of these geographies which will lend themselves beautifully to ISOs don’t exist. So we may even do some internal ISOs, right, think of us as our own commission only sales force in some of these markets.

So we’re looking at all of those models. The ISO model remains a great model or people wouldn’t sell businesses for a billion dollars that build these things in a short period of time. So it is a great model. I think what we have differently in Canada, we’re taking that around the world. It is not give away every bit of it. It is the share in the ongoing success and I am pretty pleased with that.

Dan Perlin – RBC Capital

Okay. And then the margin believed to be over the previous quarters in North America seemed to kind of hold firm. Is that more a function of what did you in Canada this quarter?

David Mangum

No, Dan, because we didn’t see much of the benefit this quarter. The action happened in September so we got a partial quarter benefit. What you are seeing which is actually a satisfying to us is we thought the North America margin quarter by quarter this year would be consistent with our exit margin last year despite challenges in Canada and everything else, so our Q4 margin last year and that really is what we’re seeing.

So we’re actually pleased and I guess satisfied is a better word to see that it is operating according to plan but no we haven’t seen the benefit or certainly on a full quarter benefit of those actions yet in Canada.

Dan Perlin – RBC Capital

Okay. So as we think about the back half of the year, we shouldn’t kind of carry forward some 300, 400 basis points margin contraction, we should maybe keep it more straight line?

Paul Garcia

Well, I would focus -- I want to make sure I don’t confuse you or anyone else on the call. Focusing sequentially only, so forget year-over-year for a second.

Dan Perlin – RBC Capital

Yeah.

Paul Garcia

Fairly consistent margin performance over the course of this year and as I said, it will look a little bit like our exit rate from Q4 ‘10, not our exit rate but our actual rate from Q4 ‘10 and so this 20-point X percent kind of thing is kind of the place to be.

Dan Perlin – RBC Capital

Okay. That’s excellent. And then I will ask one more if I could. The -- in Asia, I thought you had rolled out some of the front end of G2 in some of those markets and I am wondering is this Asia product rollout, was that -- if in fact that is true was that a helpful tool to have in order to launch it at that level of success or am I kind of off base on that? Thanks.

Paul Garcia

You’re not off base. It certainly helps us from a loss perspective, helps us certify and helps us ensure any compliance sort of automatic across all seven markets, each of the seven markets where G2 operates for us. G2 doesn’t play a role in the success of the product itself being purchased by consumers because that as I was describing earlier trying not to describe earlier perhaps the feature of really the product itself in the retailer and how the rollouts work.

But yeah for our purposes, the ability to bring something new and process it rapidly across G2 for authorizations and in some cases a lot of ease for e-commerce across our global transport platform is very helpful for us from an efficiency and processing standpoint.

Dan Perlin – RBC Capital

Okay. Thank you, guys.

Paul Garcia

Thanks Dan.

David Mangum

Welcome Dan.

Operator

Our next question comes from James Friedman from Susquehanna. Please go ahead.

James Friedman – Susquehanna

Hi Paul, hi David, hi Jeff. I wanted to ask in addition to Durbin, the other hot button in the market these days is mobile and just a simple question is, is mobile a good or bad thing for a merchant acquirer?

Paul Garcia

I think it is a great thing. I mean it’s, anything that allows more ubiquity of acceptance and makes it easy for the consumer to use their credit and debit cards, that’s a great thing. In fact, I don’t want to gobble up a lot of time here, but I would like to know your perspective on why you would think it could be a bad thing.

James Friedman – Susquehanna

You know, I would be inclined to agree with you but it is more important if you say it than if I say.

Paul Garcia

I tell you what, we’ll do it off line. I know have you an opinion.

Jeff Sloan

James, it is Jeff. I would add to what Paul said. Our view of the world is anything that touches a merchant in any form is good news for us because our ability to allow those transactions to be processed in a way that is appropriate is very helpful. So things like mobile are great news and as long as it provides some connectivity back to a merchant who wants to get paid, we’re happy to be in the middle of it.

James Friedman – Susquehanna

Okay. And then just switching gears for a second back to Asia, so could you -- so I believe, Ian was in the process of shifting and I was wondering if you could update us in terms of the management structure specifically relevant to China?

Jeff Sloan

Okay. So during the Investor Day, we announced that Ian would be phasing out his doing that over the next quarter and James Hicks has assumed responsibility. James came from the Czech Republic and ran our Global Payments Europe business and James has relocated with his family in Asia and I could not be more delighted. He is just a world class executive, just a terrific guy.

We have actually replaced James with an individual that came to us from right Pfizer. Prior to that he was with Euronet, his name is [Rodney Farmer]. Rodney is currently living in Vienna. He will be relocating to the Czech Republic with his family. Rodney will be assuming his role I think literally next week. We also -- you didn’t ask but we also have a CIO search under way and I am delighted with the Canada pool we are getting.

You know, it’s we have added thousands of thousands of people to our company and I will tell you that our goal is to constantly upgrade our talent. And I could not be more tickled with the people who are interested in us and the applications we’re getting. Specific to China, we are in a number of markets in China. We’re expanding that role or adding sales people and will be adding management as well. And James is getting his hands around all of that as we speak.

James Friedman – Susquehanna

Okay. And then the last thing just a housekeeping detail, I don’t recall you mentioning the share repurchase in the quarter. Could you elaborate on that and where it stands and I will close with that?

Paul Garcia

Sure, Jamie. We did not repurchase any shares this quarter. That’s probably the short answer.

James Friedman – Susquehanna

Okay. Thank you.

Paul Garcia

Thank you.

David Mangum

You’re welcome, James.

Operator

Our next question comes from Jason Kupferberg from UBS Securities. Please go ahead.

Jason Kupferberg – UBS Securities

Thanks, guys. Maybe I missed it but did you guys give any update on the estimated day to complete the G2 rollout in the U.S.?

David Mangum

Jason, this is David. No, we did not. We continue really with where we were when last speaking publicly before the quiet period which is we got to finish off requirements gathering. We got to finish off the right plan for the right kind of coding and QA to absorb those changes and then link it to the ability of our customers to work with us on a migration path so we have got work to do on that front.

Jason Kupferberg – UBS Securities

Sometime next fiscal year but stay tuned on more precision there?

David Mangum

I think stay tuned is exactly the right message. When I step back and think about G2, we’re going to work on day and date when we’re going to nail when the time comes. You already know the various sundry financial implications. You also know that we have absorbed the lack of G2 savings in our expectation this year.

Jason Kupferberg – UBS Securities

Right.

David Mangum

So from that perspective we will keep you posted, but I wouldn’t suggest this is a focus area for us as we go forward.

Paul Garcia

Jason, I think David said two important things I want to reemphasize. Number one whatever we say, we got to nail it and we just nail it. So we’re going to be very circumstance spective. That’s why you should take comfort when we tell you we’re going to get this back end migration in the U.K. Because it is important and we’ve got to make it happen.

And in terms of the implications for G2 for the company, it is a great thing. It works -- it’s working right now. It is going to work. It is going to produce some savings but as David said, until we can explain that a great detail, we’re just trying to kind of keep you informed as we go. Okay.

Jason Kupferberg – UBS Securities

Okay. And that certainly makes sense. I guess segwaying into a more general discussion around overall operating margins for the company, I know you’re not going to be in a position to give any kind of formal guidance on next year. But I think a lot of folks across the street are trying to get a sense of rough orders of magnitude. It sounded like at the analyst meeting you were certainly committed to some degree of margin expansion next year.

There is a mix of kind of head winds and tail winds it seems like in the business across different geographies and attributable to different factors, but any incremental insight you can lend there just to give people a feel for are we talking about a tiny amount of arrange margin expansion next year when all said and done or something more significant as you see it right now?

David Mangum

Jason, it is David again. Unfortunately for any details you have to stay tuned until we set our FY ‘12 outlook in the summer. We remain committed to margin expansion on the core business, expect to see it. I guess I will remind you of that definition which is the one I stated at the Investor Day which is obviously that pre-Durbin -- actually it is pre-Brazil, I pointed out on that day as well.

Business as you knew it at the moment we did that and we expect to do just what we said. I would tell you the other part of this is our goal and our plan is to be able to deliver solid margin expansion for a sustained period of time and that’s really what we’re trying to build the business around is three of us work on the pieces as it comes together.

Jason Kupferberg – UBS Securities

Okay. I will leave it there. Thanks, guys.

David Mangum

Thanks, Jason.

Operator

We will take the last question from Bryan Keane from Credit Suisse after which Mr. Garcia will give his closing statement.

Bryan Keane – Credit Suisse

All right. Great. I will try to keep my questions to about 25. I guess I thought I asked a lot of questions. But I guess my peers do as well. Let me ask you this. The Europe was down obviously year-over-year. I don’t know, I might have missed it, David. What’s the constant currency growth rate in Europe and how does -- what’s the outlook in Europe look?

Paul Garcia

Bryan, we don’t take constant currency down to that level. But let me just remind you of some of the pieces in Europe. You’re right, it is down. You have really a couple of things. Year-over-year currency is harming the U.K and it is pretty substantial.

It is north of a couple million dollars and in addition, the acquiring business we’d call the international acquiring business, you will recall we exited some of the more challenging verticals in that. That creates a year-over-year challenge and that will annualize in April and you will see Europe go back on path.

So the U.K. business that is sort of fundamentally for this full year, before we deal with international acquiring and in local currency only is actually going to be a double-digit grower when you do what we do, what we expect to have happen in Q4 in the U.K. You marry it to ruse which is growing solidly in the high single digits why we really wanted to be and the Central Europe business with the major customer reprice is continuing to shrink.

Then you’ve got your decline right now on the way to coming back to in aggregate and okay year but all in you have a challenge of growing over that international acquiring business plus the Central Europe business.

Bryan Keane – Credit Suisse

Okay. That’s helpful. And then the raise in revenue, the 20 million, is that all currency, David about ex acquisition?

David Mangum

No. What it is, is a little bit of ISO fees in the U.S., so no earnings from that. It is classic empty (inaudible) as they do the fees here in the state. It is FX and it is Asia. The largest number of that is the ISO although it is not even half of the 20 raise and then the Asia and the FX were kind of split the difference from there.

Bryan Keane – Credit Suisse

Okay. Last question for me. If I remember correctly, I think 50% of your U.S. volume is signature debit and about 10%, I guess, is that right and the second piece is that can you remind us how much less revenue it is for merchant acquirer when you are doing PIN processing versus signature?

David Mangum

Yeah. I will even -- I’ll put a little more precision. It is less than 10% of our transactions of PIN right out at third are credit and the remainder is six, it is north of 50%. One thing that anecdotally may interest you is the percentages and the split this is quarter were dead on where they were last quarter which is interesting and in fact, watching the piece of this hang right where they were in proportion over any number of quarters. In terms of breakout, we don’t go that far in terms of proportions.

You guys all know the interchange structure and have a view of how the pieces will come together. In absolute dollars, it is substantially less revenue to move from signature to PIN at a margin level, percentage level. We make totally good money in the margins, the incremental margins or even the contribution margins, it’s about the same but it is significantly less revenue.

Bryan Keane – Credit Suisse

That is the question, I guess. When you guys say that Durbin will automatically be positive for you, I mean a lot of people, a lot of experts are arguing that you will see a migration in from signature over to PIN and in fact, that would actually have a negative, probably impact on you guys on total dollars.

Paul Garcia

Bryan, this is Paul. I would -- I disagree with that. I don’t disagree people are saying it. I disagree with the conclusion. Just why you have PIN based debit now, and at a significantly lower rate than credit or [SIG] debit. I mean, a quarter of where it is today. Now, it is going to go down from the $0.20 range to the $0.12 or $0.10 range, right. It is a big reduction but what is happening in signature debit is 90 basis points maybe. I mean, it is massive.

Now, what I fail to understand, merchants have already had a huge incentive to move consumers to PIN-based debit and although this is a further incentive for them, that incentive already existed and I think at some point the consumer is going to do what the consumer does.

And I just -- I don’t think it is nonsense call to me that a lower rate for a merchant will enter into a consumer’s decision. I think grocery stores have been successful, some big box merchants have, prompting for PIN makes sense and consumers are not going to use a PIN-based product for transactions with an average ticket over a certain amount period, end of story in my opinion.

Bryan Keane – Credit Suisse

Yeah. We can follow up on that. Some people are saying that even the issuers because the profitability, the margin is so much is going to be capped at a certain level in the process -- the cost of processing when you include fraud is so much higher on signature debit, that they’re going to actually be interested in pushing PIN.

Paul Garcia

Well, I do agree. Listen, I agree with that actually. I do -- not pushing the PIN. I do agree that the issuers are clearly going to be taking that into consideration and even if they’re given that extra amount of money for credit, they’re going to say wow, but for credit risk, but I think they would be pushing, more likely pushing you to a credit product and not to a signature -- excuse me -- not to a PIN debit product. The future is going to be interesting, Bryan. So we will see.

Bryan Keane – Credit Suisse

Thanks so much, guys.

Paul Garcia

Our pleasure.

David Mangum

Our pleasure.

Paul Garcia

Okay. Ladies and gentlemen, thank you so much for your continuing interest in Global Payments. Happy new year to everyone. Thank you.

Operator

Ladies and gentlemen, this conference will be available for replay starting today at 6 p.m. and ending at midnight on January 18, 2011. If you wish to listen to the replay, please dial 800-642-1687 or international participants can dial 706-645-9291. This concludes our conference for today. Thank you for your participation. You may now disconnect.

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