Ladies and gentlemen, thank you for standing by and welcome to Global Payments First 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. [Operator Instructions]. And 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.

Thank you, operator. Good afternoon and welcome to Global Payments fiscal 2008 first quarter conference call. Joining me on the call today are Paul Garcia, Chairman, President and CEO; Jim Kelly, 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 as 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 10-K. 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 reflect 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 8-K dated today, September 27, 2007, 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?

Thanks Jane and good afternoon everyone. The agenda for our call today is as follows. I will summarize our financial results and review recent trends and events. Then Joe will further discuss our financial results. Next, I will discuss our fiscal '08 outlook and then lastly; Jim, Joe and I will be available for a question-and-answer period. Now for our financial results. We are very pleased with our first quarter results. For the first quarter, our revenue grew 19% to $311 million and our normalized diluted earnings per share grew 6% to $0.54. Our growth was driven by solid performance in our merchant services segment while our money transfer segment met our near-term expectation, both of which I'll discuss in more detail in just a moment. Starting with our merchant segment, our ISOs continue to drive strong organic growth in our domestic direct channel. We continue to have success in retaining our customers and in signing new ones including three new ISOs signed during the past quarter. Our credit and debit card transactions grew 30% for the quarter, with revenue growth of 24%. Due to the continued success of our ISO channel, we are raising our fiscal 2008 annual expectation to high teens to low 20% revenue growth for our domestic direct channel. In Canada, our credit and debit card transactions grew 4% for the quarter, while our revenue grew 9%. Our Canadian revenue growth was largely driven by our transaction growth and a favorable Canadian currency exchange rate. Due to continued strength in this exchange rate, we are raising our fiscal '08 annual expectation to high single-digits to low teens revenue growth for our Canadian channel. Our joint venture with HSBC contributed $16.1 million in revenue for the quarter. Our expectation for fiscal '08 annual Asia-Pacific revenue growth remains…

Thank you, Paul. In our press release, we included GAAP income statements and schedule of that reconcile GAAP to normalized results. Our first quarter GAAP results include $1 million in restructuring charges relating to employee termination benefit in connection with the operating center consolidation plan that we announced in March 2007. These restructuring charges have been excluded from the following discussion. Our merchant services segment operating margin was 27.6% for the quarter, which reflects a decline compared to last year, primarily due to high growth in our lower margin ISO channel and the impact of our Asia-Pacific acquisition, including the effect of investments in sales and infrastructure. For fiscal '08, we continue to expect a merchant services operating margin of 25.5% to 25.9%. Our money transfer segment operating margin was 10.6% for the current quarter, which reflects a decline compared to the prior year, primarily due to the competitive domestic pricing environment that Paul discussed, combined with our branch-based high fixed cost model. For fiscal '08, we continue to expect a money transfer operating margin in the low double-digit percentage range. Our corporate expenses declined during the quarter, primarily due to lower share-based compensation expenses, although we do not expect this trend to continue for the remainder of fiscal '08. For our corporate area, we expect fiscal '08 expense growth ranging from 0% to growth in the low single-digits. Based on our second guidance, we continue to expect a fiscal '08 total company operating margin of 19.1% to 19.5% compared to a normalized fiscal '07 operating margin of 20.8%. These amounts include the impact of stock option expenses in both years, but exclude the impact of restructuring and other charges. Moving to our non-operating line items, we expect $9 million to $12 million in income from the net of our interest and other income, and interest and other expense during fiscal '08. Also for next year, we expect minority interest, net of tax of $8 million to $11 million and an effective tax rate of between 33% and 34%. Lastly, we expect average diluted shares outstanding for the fiscal year to be in the range of 81.0 million to 81.8 million. During the quarter, we completed $67.9 million in open market repurchases of $1.8 million of our shares outstanding at an average price of $37.27 per share, including commissions paid. Capital spending for the quarter was $9.6 million. Our capital expenditures for the quarter primarily related to technology spending including for our new G2 Platform in the U.S., in addition to merchant terminal spending and our operating center consolidation plan. For fiscal '08, we continue to expect capital expenditures of $40 million to $50 million. Paul will now discuss our fiscal '08 guidance and outlook. Paul?

Thanks Joe. Based on current market trends and our ongoing growth strategy, we are raising our annual revenue guidance for fiscal 2008 to $1.195 billion to $1.247 billion or approximately 13% to 17% growth over $1.62 billion in fiscal 2007. We are also raising our annual fiscal 2008 diluted earnings per share guidance to $1.87 to $1.96. This reflects growth of 6% to 11% over our fiscal 2007 normalized diluted earnings per share of $1.77. This guidance includes stock option expense, but does not include any other significant acquisitions or potential restructuring and other charges. When I consider the long-term growth prospects of Global Payments, particularly the emerging Asian and Central and Eastern European markets, I continue to be very enthusiastic about our future. We will now go to questions.

[Operator Instructions]. Our first question today comes from Charlie Murphey, Morgan Stanley. Please go ahead.

Joe, quickly, did you say the 33% to 34% tax rate was for this year?

For fiscal 2008.

Okay, is that a modest raise from last call?

I am sorry, is that a modest range --

Rate.

Is that up from last call, and if so why?

Yes, it is a modest range... rate from last call, and it's really the effect of relatively more earnings in our higher tax rate jurisdictions like North America, relative to our international areas. We are continuing to have to take valuation allowance in certain Asia-Pacific subsidiaries due to the investment that we are making there, and we are just not able to take advantage... full advantage of the lower tax rate in that region.

Okay. And then... thanks very much. Paul, I was wondering if you could describe how your business plans may change in the event of a forced lower interchange in Europe.

Yes, you're referring to some of the... some of the news as also some news out that hit the wire today about Justice is looking at possible collusion with the associations domestically to an interchange. And there is always a rash of these, Charlie, as you well know. Bottom line is lower interchange, typically so along as it is still significant enough to encourage card issuers to be in the business. Lower interchange is a good thing for the merchant acquirer. It's a good thing for our merchants obviously because they receive some benefits of that. But typically, depending on the size of the merchant, there is something leftover for the acquirer, so generally that's very good news in any geography.

Okay. Thanks. Thanks a lot.

Liz Grausam from Goldman Sachs, your line is open.

Great. Having seen [ph] the merchant services, we certainly saw a pretty steep acceleration particularly in your direct business this quarter. Can you help break this out certainly with some of the concerns around consumer spending in the market just given the overall economic backdrop? How much of that was really driven by ISO conversions and new wins in your business and what are you seeing from kind of a same-store sales transaction trends in your business right now across credit and debit?

Liz, let me do the beginning of that and than I'll ask Joe to pick up. I would say that in having discussions with our ISO customers and some of the experience we have with our own sales force, we are not seeing much of an impact from consolidating credit markets and issues that are affecting our economy. Now, you know, it isn't a precise science and we have such a diversified portfolio that we are fairly buffered it from any impact anyway. But I would say, we are not seeing much change either in same-store or an impact from our ISOs. Joe?

The fourth quarter in asset direct revenue grew 18% and the first quarter of this year grew 24%. That's a 6% variance. Half of that came from the improvements in the ISO channel and the other half were improvements in our direct sales and check and gaming channels. The ISO channel is... most of the ISOs are continuing to grow very strong, if not one in particular. There was a decent extra repricing that we believe that the ISOs took advantage of and that has a positive impact on our revenue. And then on the direct sales and check and gaming, we've just gotten past some repricing that have occurred in prior years and we're just making good progress in both of those channels.

Okay. And after being in kind of a teen, high teens growth range last year in that direct business, should we be looking for this type of growth in the 20% plus range sustainability for the end of the year or through the end of year? Is that the vast majority of the upside in your guidance going forward?

We did raise the guidance in domestic direct for the year and the ISO revenue is not an easy number to forecast. We basically are basing it on recent trends. I would expect... I haven't seen anything that would cause them to think that those trends are going to change over the next couple of quarters. I would expect in the fourth quarter to have sequential slow down compared to the third quarter just as a result of the big ISO conversion that we completed in that fourth quarter and the effect of some of these Visa, MasterCard repricings that have occurred.

Great. And then just on the money transfer segment, we certainly saw better data come out of Mexico for the month of July. Can you kind of help us understand what you've seen in that business in terms of transaction trends versus pricing trends over the course of the quarter and how you're feeling about that market now? It certainly feels a little bit more stable across the industry?

Liz that's relative to pricing... actually, that's stabilized at least against the major competitors, our two larger competitors. Our sales to smaller players, it would mean pretty intense on price, I'm not sure that it is over in terms of price compressions, but nothing close to what we've seen in the past for the last couple of quarters. It's been relatively constant. As Joe said in his comments, we should see that annualize by the third quarter in the second half of the year.

And the transaction trends?

We've seen... at least domestically, we've seen pretty good transaction growth in the low teens. Europe as we commented on is substantially higher but hasn't faced the headwinds of our construction market, change in the U.S. together with the innovation challenges.

Great. Thank you.

Thanks Liz.

Kartik Mehta, FTN Midwest, your line is open.

Thank you. A question on the HSBC joint venture policy, if you look at that joint venture, I am assuming you're anticipating better margins as we move forward. Would the margin impact be the result of investments you are making now or is it scale? So, I guess, what I am trying to figure out is, is scale going to solve all your margin issues or is it that the investments using less money for the business is going to help?

Well, I think it's a... it's actually even a little more complicated than that. The... Kartik, the issue is this was a pretty profitable business and we've taken it if anything as, pretty significantly downwards to profitability because of the amount of investments we are making in the business. And it's all about building that scale. It's all about growing that business significantly. But you will add to that the conversion efforts. Now this first conversion that we did in Macau is a big deal. I mean that is... it worked well, we picked Macau because it's the smallest market, but it worked well. And we are going to be rolling out Hong Kong next in actually pretty short order. Hong Kong is the biggest market of that entire JV as it currently stands. So that would yield some pretty significant savings down the road as well. So its kind of a double pronged approach, make big events means to grow this business aggressively taking advantage of HSBC's fantastic footprint through Asia. And then make the investments to have the most efficient operation you can, and its going to be a while before these margins are even close to what we are joined here in the U.S. but over time I think these are very accretive margins, I mean significant accretive is my expectation over time.

Great and then a last question maybe a little bit bigger picture Paul. You've always said you have opportunities for acquisitions. As you look at the marketplace today, do you believe those opportunities are still relevant out there or does it make sense to leverage the balance sheet and buyback shares. So I guess, you know, you weigh those two options, the options to invest in the business and grow the business and improve margin through acquisition, a bigger opportunity than buying back shares?

Yes, that's a great question Kartik and you can imagine I hit that fairly often else was the dividend question is still on the top of it, you know, how about some how about a big dividend. I think that we have a fair amount of cash, we are great cash generator. We actually believe that the first and foremost use for our cash is to make acquisitions. Now we haven't exactly been announcing a lot of them recently, but you shouldn't read into that that we don't have very active pipeline and quite frankly, we've walked away from a number that we could have, we could have done if we were simply prepared to do dilutive deals or deals that didn't meet our criteria. And there should be some sense that we are still very disciplined. I think the acquisition pipeline has been... never been better. We have a major competitor whose position changed recently, and who knows that that has any impact on particularly international opportunities. I believe it could, although we'll have to wait and see. So I'd say, stay tuned, hopefully, we will have the thing to talk about in the next quarters on activity in terms of acquisitions and you'll be pleased where we are putting that money to use. However, that said and done, we did... we did announce a $100 million buyback. We've purchased almost three quarters of that, $68 million of that stock, about 1.8 million shares. And I know that's modest but that's just the first time we've ever done that. And would we consider other programs? We might and that's something that we would discuss with our Board from time to time after we get through this $100 million authorized amount.

Great. Thank you very much.

Okay, Kartik. Thanks.

Dan Perlin, Wachovia Securities, your line is open.

Thanks, hey Paul. I wanted to talk about your ISO conversion pipeline. As I went back and looked at the numbers today, it looks like you've done, including the three that you'd just announced, somewhere between 13 and 15 new ISO signings in the past, kind of 12, 18 months. So I'm wondering you've signed them, but how many of those have actually been converted?

Well, Dan, there's a couple different mixed metaphors here. The one that Joe referred to would be a question that Liz asked earlier about, is this growth because you had a big ISO, can it continue? You announced 24%. Why doesn't that continue in your direct channel? And we're telling you to... it's high teens to low 20% range. One of those ISOs were the really big guy and that really annualized, and that will have an impact on this overall growth. But --

Was that the one you did in the fourth quarter?

Say it again?

Was that the one you did in the fourth quarter?

Yes. It was one we've talked about last year and it began, I think in mid of --

You did it in October.

Quarter, so by now the fourth quarter.

Okay, yes.

Now, the other ISOs, you know, Dan, I don't want to guess, but my guess is after saying I am not going to guess, I am going to guess. I would say we are virtually all converted because a number of these are ISOs that have been started by individuals we are familiar with that perhaps sold their businesses or incubating new one, or their concepts we believe in. And they are starting at a smaller base. It's more of a build scenario and they pretty much don't have any big portfolio to convert. Jim, you want to add some color.

All the ones that we've announced previously, they have been converted. Generally, the largest ones take maybe six months, longest; maybe nine months. But generally from sign to conversion, it's a three to six-month time period.

Okay. So there is not a big conversion kind of number of merchants that are going to come over because I know in the past, you had kind of two kinds of ISOs. One was you had a big conversion portfolio of merchants that would come over and this is probably the one you are talking about in the fourth quarter. And then you had some merchants or some ISOs that would give you the incremental business but not the entire business?

I see what you are driving at. There isn't another big guy that we announced amongst those ISOs that you mentioned that is waiting to swing huge amounts of business to us. These have been smaller deals.

And generally what you are describing notably is the front-end... the terminal side of the business, the front-end with a competitive platform. And instead of repeating a conversion of the front-end --

Right.

They would convert the backend and all the new business would be... would be on global at that point.

Are there opportunities as a result of first data that you see that could happen in the course of the next six to nine months?

I think any time there is a change, change causes people to look around and so we hope it's an opportunity, but... and they are very strong competitor and I don't expect that because they are in a different structure that they are going to be less of a competitor.

Thanks. We have been hearing that the interchange categories in Canada might be expanding. So I guess one, is that true? And then two, if so, do you think you are going to be able to benefit from price increases potentially?

Yes. The plan I think it is for next fiscal year, but I am not entirely precise on that. But for us, next fiscal year there at least the Visa side is changing its pricing structure. I don't know whether it's been publicly announced, if I would want to comment here.

Okay.

But that they are going to modify it pretty substantially the way they calculate and reimburse or pay each of them and acquire us on interchange.

And that should presumably be pretty good for you guys?

Well, it's Dan. I would say that Canada as you recall, it has a portfolio of much larger versions.

Right.

In that scenario they are priced similarly to large merchants in the U.S. which is more of a pass through.

Okay.

So, that's scenario, there is no opportunity to really do anything but pass through interchange. For the smaller merchants, however, that opportunity certainly exists, to keep a reasonably small amount.

And then one last quick question. With this I guess Visa deadline ultimately looming for the end of this calendar, at least start of it, I am wondering if you are supplying your ISOs with on a terminal... new terminals that would give them the opportunity to go in and maybe incrementally drive their revenue growth for you?

This started probably 7, 8 years ago. It is... it hasn't been our practice to resell terminals to ISOs unless they are very small ISOs that need our systems. All our major ISOs have multi-year relationship with the major providers of phone, Hypercom, Jennco [ph] used to be with in prior and so they were seeing them directly and many of the ISOs that we did business with have attractive placement programs with merchants that effectively put a merchant... internal help for free provided that there is a multi year contract or relationship with the ISO. And I think that's one of the things that has driven growth, accelerated growth in the last couple of years is this concept of placing terminals. Not all ISOs do it but some of the larger ones have been very effective in that market.

Okay. I was just really referring to Jim's earlier comments, or Joe's earlier comments, excuse me, about capital spending and he mentioned terminal spending?

Yes, our capital spending would largely be Asia where price terminals are sold, those terminals are ours. As well as in Canada we are in a rental model there and this a fact when we acquired the business those businesses from CIBC and National Bank, they would own the terminals in random to the customers and therefore we are required to have those terminals on our balance sheet as an asset. In the last starting maybe 18 months or so ago, we've gone through a process of having to recycle all our terminals in Canada from non-ENB terminals to ENB terminals. That's causing a more significant investment that will run out in the next 18 months or 2 years we should be just through bulk of that replacement.

Super. Thank you very much.

Dave Koning from Baird; your line is open.

Yes. Hi, guys. Nice results.

Thank you.

When we look at the merchant operating margins going forward, I guess first of all when you kind of look at last year's progression from Q1 to Q2 that there was a pretty significant fall offs some where around 500 basis points. I know last year we had some re-pricings in Asia-Pac coming on. I am just wondering this year how we should think a margin progression from Q1 to Q2. It seems like it should be down, but probably not as much as last year and maybe if you could comment on that a little bit?

Yes. I do believe that the first quarter margin is higher relative to season... or due to seasonality, and you would expect a similar drop off in Q2, maybe not as much as we saw last year, but it should likely drop off. And the rest of year isn't as affected by seasonality. I will remind you though that in the third quarter... last year in the merchant business, we benefited significantly from Canadian card association centers, a multimillion dollar revenue and earnings impact in that quarter that caused that third quarter margin to be higher than it otherwise would, so pay attention to that in the third quarter of this year when you are looking at year-over-year margin comparisons.

Great, thanks. And just one follow-up, if you could comment a little bit about the Discover relationship and what impact you estimate for this fiscal year?

Well, I don't believe we've separately disclosed the size of it, but the Discover relationship for our Global Direct and our Comerica relationship began effective September 1st. So we've converted off the Discover system all merchants that were previously accepting cards and processing through Discover. They're now processing through Global. And then in addition, we've enabled and contacted all the merchants that are Global, again Global Direct and Comerica through our joint venture. We've contacted those who were not previously accepters to now let to know that they can accept Discover cards as they would a Visa, MasterCard. So we're excited about the program and the conversion was very smooth, and we are now poised starting October to convert our ISOs. We will be purchasing our portfolios and then reselling to ISOs beginning October and that will run the balance of our fiscal year.

Great. Thank you.

Thank you.

Tony Wible, Citigroup, you're line is open.

Hi. I had a question, Paul. Are we entering a phase in the U.S. market where just the ISOs are just naturally going to continue to gain more market shares, a kind of maturity creeps in and we see a lot of dichotomy emerging between what the compensation is if these ISOs versus some of the direct sales forces some of the bank on processors?

Tony, I didn't get the last part of that. Tony, could you repeat that last part of your comment.

Sure. It just basically it seems like there's a dichotomy that's emerging where you have different compensation structure for some of these ISOs and you do with some of the bank on processors that clearly aren't growing at the same kind of rates that you are. So I am wondering if this is the beginning of a bigger secular trend you see emerging where ISOs are going to continue to pick up more share?

You know, Tony, that's a tough one. I will tell you that we do have a high expectation for our ISOs, but they seem to favorably surprise us every quarter. I mean these guys are... we keep saying, the large numbers are going to kick in and the bottom line is we are blessed with some of the largest, most successful ISOs. And it just seems that they go from strength to strength. They get stronger, they get bigger, they get more creative and I do believe you clearly have two sets of ISOs, have the have and have nots. I think it... but the ISOs are pretty strictly focused on the mid-market to small merchant. I mean there are exceptions where some of ISOs have fairly decent size customers, but typically their sweet spot because of the commission or the sales force is the mid to small size merchant.

Great.

And the direct efforts that go on with our competitors and our own are kind of in a different sphere and they are not growing as quickly as the ISOs grow either. So there, you know, in that scenario there are probably it's a dichotomy.

Got you. And within Asia, is it possible to get us... I know we'll soon have an organic year-over-year kind of growth rate that we are now seeing and where would you anticipate some of the investments made to-date in Asia starting to pay dividend?

Well, I will take the last part and I'll let Joe speak to the... to the first part. In terms of paying dividend, Tony, I would argue we're getting dividends now. I mean we have a sales force that's over 300 and growing. They are costing us more than they are producing, but yes, the seeds are being sown for a successful program. We look at how much business they are bringing per person and a number of metrics, and that's all looking very good. So I'd say that we are getting the return of that investment right now. In terms of the investment we made, we talk about Macau, that's a big deal; getting Hong Kong converted, it's a big deal; adding management; adding expertise; getting relationships with FARs [ph]. I mean all the things we are spending time and energy. But in terms of producing those accretive margins that I talked about that's a much longer... I would be hesitant to give you an exact timeframe, but it's not this fiscal year clearly. I mean this is going to be... it's going to be a bit until... I think these margins improved and the business is showing steady improvement. But it's going to be sometime before this thing really pays the dividend. I just give one quick aside. Coca-Cola, never don't... commented recently although Asia is a massive part of China in particular, massive market for them, one of their largest still continues an investor strategy.

Right.

Looking to continue to make investment to reap different rewards down downstream, does not try to maximize the near-term and I think that's a good lesson.

Is it fair to say that when you are looking to deploy cash then that is probably makes more sense to spend cash on acquisitions in other markets outside Asia other than in Asia to spend it more organically?

Yes, I think that is correct and part of it is, is more difficult to make acquisitions in Asia too quite frankly. I mean it's... you have to have years of relationship with financial institutions and of course it has to tuck-in with our relationship with HSBC, but there really is some opportunities to do some smaller deals there. But it is more of an organic structure and the acquisitions we are looking at probably are more focused outside of those markets, Central and Eastern Europe in particular.

Last question, dealing with the money transfer business. Can you just talk about the competitive environment particularly when it comes to foreign exchange spread, I don't know if you have been seeing less competition there, as the peso was weakened versus the dollar, seems like some of your competitors might be capturing more of the foreign exchange spread, is that also an opportunity for DolEx?

Our pricing is market by market and it's really branch-by-branch and it will be against the competitors and each of the major competitors are always around the corner, So, I don't think that you give a sweeping statement. We have... we remain competitive whether it is commission... on the commission side or on the FX side relative to the market, and what works in the local market and one price does not fit all these different markets. As I said earlier though, I think the large decline we saw last year in price, we have not seen a continuation of that, it is flattened out substantially from where it was previously.

So quarter-to-date is that trend still hold up, is there been in the more recent change kind of post quarter-end?

Yes it is still holding up.

Great.

As we speak.

Thank you.

Thanks, Tony.

Andrew Jeffrey, Robinson Humphrey; your line is open.

Hi, good afternoon. Paul, thinking about Europe, a market that should give you some pretty growth here, I realize you are sort of yet to anniversary a major customer deconversion, but as you get out to the back half of this year and you look out to '09, shouldn't this be a market for you that drives not only some pretty decent revenue growth acceleration, but also maybe a little better contribution to segment profitability?

Andrew you are exactly correct on both fronts. In fact it's... the margins in our business today are quite attractive. So it already is a great margin driver and in terms of revenues, we... when these things anniversary including the price concessions we made, which happens in not too distant future, we are looking at I think solidly growing business that's expanding steadily without benefit of any acquisition opportunities. And I am hopeful, one or two of those pops too. So with all that said and done, I'm very bullish of that market and unlike Asia, there is near term margin accretion in that business, immediate.

Right, okay. And then it seems like we are creeping toward some stabilization in the domestic merchant profitability, if you sort of try to strip out HSBC. And if you look at the ins and the outs of ISO conversions and pricing, and growth within the installed base of ISOs, is that... directionally, as we look at past 2008, a decent assumption or does the continued growth in the ISO is just mechanically given the gross revenue reporting drive down the margin maybe to slower pace. I am just trying to gauge directionally how you think about segment profitability given all the plusses and minuses?

Andrew, as the ISOs continue to grow, that's what's causing the margin impact. So those ISOs are going back in '09. That margin impact will likely be there. Our strategy is to continue to invest in that channel. It's a wonderful channel. It's providing earnings growth for us. But to also ultimately get back to margin growth through expansion in earnings in our international areas, as well as improvements in our non-ISO areas in our North America channels, but no other really detailed comment other than that for future years.

Okay. Can I infer Joe then, that there is the potential for a deceleration in the decline?

Yes, that's clearly the potential as our investments. If international can grow that will cause a deceleration of that margin decline relative to where we are today.

And then we necessarily DolEx is also much smaller impact, but Andrew, DolEx was the margin just producing highly dilutive to what we are experiencing.

Right, right. I appreciate that. Thanks a lot.

You're welcome.

Larry Berlin from First Analysis, your line is open.

Good afternoon guys. Hope you're doing well.

Hi, Larry, how's it going?

Good. Good. Go Cubs?

It's interesting who Hillary Clinton will support, which is for the Yankees or the Cubs.

Hey, it depends on which stake has more money of course.

Yes. That's what she said last night.

Yes. I'm sure. A couple of quick questions for you. First, Paul, you spoke so fast I missed what you said is growth for the Asian markets?

Yes, I think what I talked about growth in Asian markets, it was in answer to a question of at what point do you produce... first of all, can you produce accretive volumes in Asia, and I said yes, we actually can. And then secondly, when do we think that will happen? I didn't give a definitive timeframe.

I meant your guidance at the very front, when you did the original comments.

Oh, sure I got that. I think I said.

The Asia guidance on a pro forma basis is low double-digit revenue growth to high teen revenue growth, and on a reported basis, its growth of 30% to 40%.

Okay, great. Hey, and what was the stock-based compensation for the quarter or the option-based compensation?

Well, the total share-based compensation, which would include not only stock options but also restricted stock of roughly $3 million in the quarter.

Okay. So then one last thing, on your direct sales force within the United States, I am just curious how you feel about their progress and how they are doing in hitting the merchants and merchant categories, and where you might have them focused at this point?

That's a great question, Larry. I am delighted with the progress we've made during the quarter. We are getting stronger and stronger. It still have to go some to move the needle just to get the base businesses so big. But I feel very good about the management there. I think we are finally figuring this out. I mean years ago, we had it and we kind of lost our way and I think we are back to getting it again. It's about referrals and we are signing up some referral sources primary community banks, but also some very clever other sources such as web hosting businesses that are involved in merchant activity, and some other kind of atypical referrals sources, plus just good solid management in that group. So I saw some great statistics for the quarter and I'm hopeful that continues. And since that's under Jim, I will give him a chance to say something.

Thank you. There is nothing more to add there.

That's good enough.

I think you are serious... sorry Larry. [Multiple Speakers]

It's okay.

We've replaced essentially the entire management team over the last 18 months, and the team today is headed up by Ed Myers and Ed and his team are doing a terrific job. And as Paul said, this is a multiyear effort, but we're seeing numbers for the first time that are moving in the direction that we are pleased with.

Great. Thank you very much guys. Have a good evening.

Bye, Larry.

Tim Willi from A.G. Edwards, your line is opened.

Thanks. Actually, it's Tracey McMillin sitting for Tim. Starting off, I guess in Europe I am curious about your comments, the challenges that you faced in the past I suppose as far as bank's resistance to adopting let's say your more traditional sales method. Can you talk about that? I understand your opportunities the banks' stance and sort of that cultural difference if you will. Can you kind of touch on that topic?

Sure. I think the European issue is that we are in a indirect processing business today in Europe. So we... you have a pretty big uphill battle to sign a financial institution and convince them to switch all over to merchant processing. It's not like signing big ISO. To switch to merchant processing from members are using internally, externally to you and then of course you don't have the control on how much business they bring in because it's their sales force; it's an indirect model, great way to enter market. But long term, I think you want to move up to a direct model. But find a way to do so that you are in partnership or at least not competing or least have the blessings of your major customers. Now, we had a process of developing that strategy, we are executing on our indirect model. We have signed new customers well beyond the Czech Republic. We have opened new markets, I think probably most significantly Russia, with our efforts in those markets are yielding results. We've expanded to Slovakia, obviously we are in Poland and we are going to other markets in Eastern and Central Europe. Also, with an acquisition in the Bosnia in the Balkans, offers opportunities too. But for now these are indirect models. We are looking at our potential to pursue the next phase of added conjunction with our customers and... but I am excited about what we are getting, we are getting a reasonable revenue lift from the indirect model, but the expectation is that you could accelerate that through a direct model.

Is there I guess, are you getting the sense that there's the potential for one of your major clients or a new signing to be in the more traditional direct model?

I think it's fair to say that European banks are not unlike U.S. banks. They recognize, they do some things well, and some things they don't do as well. So, the answer is... the short answer to that is yes.

Okay. Switching to Asia, just want to hit on the couple of the big key points I think you offered before and if you've mentioned these I apologize, you just mentioned your sales force is still slightly above 300, is that right?

Correct.

Okay. And you've made one conversion so far. I guess just maybe update on the training process you've talked in great detail in the past as far as almost starting with... from scratch, you know, sort of how that's going, the success that they are having, maybe some challenges that you are having in bringing on... or moving people up the chain as far as in training and management positions and sales activities?

Well, I could speak... I could speak for hours on that, but I will say that we've been more successful in some markets than others. We haven't made the success, the leaps I hope to in India, we still have a long way to go there. It's a massive market, but there is massive training obstacles. But in some markets we made huge advances in added people. We are actually starting to turnaround Taiwan. We are seeing a positive impact that business has gone south significantly. We have new talent in there. We have better tools, better training, better management, and I am seeing that turnaround. Some other markets that were not significant for us are starting to look pretty good. So I would say it's still very much a work in progress and we are spending a lot of time and energy on it.

Okay. And then as far as the changes... the final changes, I suppose in China and foreign banks allowance issue cards, can you talk about I guess your... when do you think that's going to start to trickle through or you guys would be able to benefit from that in any --?

We actually have an application to be able to acquire R&D transactions, local currency transactions. Our financial institutions can't today issue cards --

Right.

Local currency, and we are in the process of applying to the governmental authorities to... and the regulatory bodies within China to give us the ability to do that and that process is in place. But even when that happens, you are not going to see a huge swing. Most of the... I mean the lion share of the revenue in China comes from international transactions.

Yes, okay. Switching to the U.S. markets, as far as the ISOs, I wanted to dig into that... the specific industry as a whole. Just curious if you look at the ISO industry and what's going on within that specific sector, are you seeing consolidation say, among the... let's call it the unregistered ISOs and registered ISOs? Are they... are you seeing sort of the growth of the larger more tech savvy, if you will, gobbling up the smaller ones. The smaller ones maybe having more difficulty in kind of disappearing or are you seeing growth throughout from the... let's say, the level three or four small ones up through the full liability and larger say super ISOs?

I would think it's a little more the latter, although the big guy seem to be growing at a disproportionately quicker rate. But they are not moving through acquisitions. This is organic growth where our ISOs haven't done any big deals acquiring other ISOs. This is true organic growth because they have the means. We talked about terminals earlier. They have the ability to do a number of things including provide free devices. They have new products. They are aggressive in pricing because they have the ability to pay commissions at a more handsome rate. So the big ISOs as I said earlier are going from strength to strength, but the smaller ISOs are doing okay too. They still have nice growth rates, just not these massive growth rates the big ISOs are experiencing.

Okay. And just sort of touching on one last topic on that item. We've heard more and more about smaller tech providers or companies that are focusing on helping ISOs with whether it's data analytics, reporting, different devices. I mean, is that... do you see that as a) do you see it? b) do you see it any threat as far as taking some opportunities from you or is that a complement to what you guys are currently doing?

I think there is very little of that in the marketplace. If you go to the ETA, you'll see a lot of vendors showing. But traditionally, ISOs are self service. They handle everything in-house and what they can't handle in-house, they use processors such as Global and in rare instances, they will use companies maybe to assist in creating a CRM solution for their customer service tools. But beyond that, I think it is fairly limited. Now there are some ISOs that are much more focused on technology solutions where they are not selling terminals and they are more gateway providers, or mini gateway providers. But beyond that, I think the ISOs run a very efficient lean organization and they generally don't use outsiders.

Okay, all right. Two last quick ones on. Can you breakout your depreciation by segment. Do you have that available?

I do not have that in front of me, but it will be in the 10-Q that we will file next week.

Okay. And then as far as your... the actual agent location growth, did you close any locations in the recent quarter in the U.S.?

You mean in terms of our processing facilities?

I'm sorry. I'm speaking of DolEx.

Okay. I'm sorry.

Each quarter there are branches that we either opened, we acquire, and then there are branches that are underperforming and that could be for a variety of reasons; but yes, we do close branches. I don't think we report. We would report a net number. I don't think we report open and closes and acquisitions. We're doing very little in terms of opening new locations and for those that are circling because of the recent price impressions, we've closed some.

Okay. And in Europe, I was just wondering. It seems like a white number, I guess, and just a quarter-over-quarter growth maybe, maybe not, but was there some slowdown or reason for... I know it's a very small area, just curious.

No. I don't think there was a slowdown. We're continuing to open branches. Maybe at a slightly slower rate than we had in the last year, but...and we closed one or two outside of the Spanish market where Spain is clearly our largest market, but nothing significant. Actually, all the branches in Spain are doing quite well.

Okay, great. Thanks a lot.

Okay.

David Parker from Merrill Lynch, your line is open.

Good afternoon everyone.

Hi.

I just have one question. You mentioned in one of your responses that your success in gaming was driving some of the growth in the direct domestic business. Can you just provide some more color specifically around maybe some of that wins that you had? How you are differentiating yourself in the marketplace and your strategy going forward in that business?

Well, we offer three primary services: ATM as we do through our third party, and then two in-house solutions. One, which is cash advance, and the other is a check cashing effectively. We do that through a card that we issue called a VIP card. We believe at least on the check side that our product is a better mouse strap than we win a lot of deals not because of price but because of the solutions that we offer. I think it is an area that we in the last couple of years have struggled on was the cash advance side of the business, cash on the credit card, that product is called player cash. You speak of cash and win and that has seen a turn, where we are able to successfully sell multiple products into properties as opposed to just one or the other. We wouldn't necessarily list of the names, but these are everything from reservation properties to properties along the Mississippi coast and river boats as well as the primary properties in and around Las Vegas.

Great. Thank you.

Thank you.

Adam Frisch from UBS, your line is open.

Thanks. Good afternoon, guys.

Hi Adam.

I was wondering if you could talk about the domestic direct channel, I am surprised its almost 6 o'clock and no one has asked about margins yet, because the turn of events are on the revenues you kind of touched on, but the up tick in margins, I think is also pretty significant last quarter since the first quarter of last year. Do you guys track this segment on a sequential basis to asses the operating trends or is there enough seasonality to look at it on a year-over-year basis?

Well, we look at both it ways, Adam, but we do have a seasonality issue in the first quarter. It's not an issue but just that in Canada we have higher spending in June, July and August. So the first quarter margin from that perspective will likely be the highest margin of the year on an absolute basis.

Okay. So we are seeing revenues get better, margins do... should we continue to see that transpire through the year or are there events we should be aware of that would create a tougher comp at some point or a bump in the road later on in the year like a conversion or renewal anniversary or something like that?

We are talking about the merchant market?

Yes.

They had... and as I said before, the third quarter of last year, we benefited from Canadian card association incentive, and the year-over-year margin difference in that third quarter will probably be the second largest decline of the year. The first quarter, we had 450 basis point margin decline, in this quarter what we are calling for a 200 to 240 basis point decline for the full year. So that implies that decline gets better over the last three quarters of the year, which is a positive. The second biggest decline, as I said, will likely be the third quarter. So you should definitely take that into account when looking at your model for margins and for earnings per share.

Okay, great. And then one final thing, are there any areas or metrics in which you are seeing signs of increasing or beginning weakness in the economy, some people look at things like furniture stores or electronic stores of something like that, is there anything out there that's suggesting to you that the consumer is starting to roll a little bit?

I will tell you kind of... this is more anecdotal but I will tell you that I have association with somebody that has a big furniture operation and he says it's a very tough market. He is also in the Southeast in a big way, and in particular in Florida, he is feeling it. But as I said earlier, Adam, we are probably not in Delaware that everyone thinks we are because our portfolio is so diversified that in our ISOs and I had conversions with ISOs as does Jim and Joe, we just aren't seeing that as much, but I will tell you that I see it, I read it and I talk to guys about that but it just not necessarily translate into something that's palpable.

Even in the restaurant space because I know you guys are diverse and maybe not a good indicator, but you know the signs that you saw in prior downturn, and stuff so I thought?

Yes. We have and... but I'll tell you a lot of our ISOs are heavily restaurant-based and --

And they are still doing okay?

Adam, we don't generally try to measure as a rule all our merchants' comp year-over-year, you have allocations and other changes. It would be a challenge to measure at that level. I think it's a good comment, but I don't think we have good statistics on year-over-year. Most of our... all of our growth is coming through gaining market share either in our direct business or in ISO business.

Okay, got it. Thanks guys.

And Adam, there's one other thing you have to say that, that there is another peculiarity. It is even in this guy that I know who has this French operation, credit cards still accounts for a larger percentage of the sales every year, and you have that up tick too, and that kind of throws a curved ball into all those measures.

I think a lot of people forget that the secular trends versus the consumer trends?

Exactly.

Those are two different concepts --

I think a lot of people forget about that stuff. Okay, guys. Thanks a lot.

Thanks, Adam.

Nice quarter.

Thank you.

Our last question will be from Mark Sproule from Thomas Weisel. Your line is open.

Hi. Thanks guys. This is Dan Hayes in for Mark. If you could just comment briefly on your Canadian segment, do you know despite almost 10% growth lag in the rest of the segment and this with a fairly strong currency, is there anything that we should know about there, any issues or any opportunities, just a little more color there? Thanks guys.

I think the Canadian business that we've talked about in the past is a much more mature market, slower growth rates. We are not as invested in the ISO although we have some of our U.S. ISOs as well as Canadian-based ISOs that support the business. We have also a much larger market share in Canada than we are in the United States and therefore we are going to move more like to market than you are going to see in the U.S. And we have a heavy concentration of debit, and debit growth in Canada is at a much slower speed than what you would see in the United States. Otherwise... and there was size, the businesses we think doing terrific. It's a high margin business and a great management team that's been supporting it since we acquired the business in 2001.

Perfect. Thanks, guys.

Thank you. Well, thank you everybody for joining us on our call today. We tremendously appreciate your continued support of Global Payments.

Ladies and gentlemen, this conference will be available for replay starting today at 6:30 PM and ending at midnight on October 11th, 2007. If you wish to listen to the replay, please dial 866-385-0198, or international participants can dial 203-369-0395. This concludes our conference for today. Thank you for your participation. You may now disconnect.