Ladies and gentlemen, thank you for standing by and welcome to Global Payments’ first quarter fiscal 2010 earnings conference call. (Operator Instructions) At this time I would like to turn the conference over to your host, Vice President of Investor Relations, Ms. Jane Elliott. Please go ahead.

Good afternoon and welcome to Global Payments’ fiscal 2010 first quarter conference call. Our call today is scheduled for one hour and joining me on the call are Paul Garcia, Chairman and CEO; Jim Kelly, President and COO; 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 made during this call and they are made only as of the date of this call. In addition, some of the comments made on this call may refer to certain measures and normalized results for full year fiscal 2009 which are not in accordance with GAAP. Management believes these 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 today as an exhibit to our Form 8-K dated October 1, 2009 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.

Thank you, Jane and thanks to everyone for joining us this afternoon. For our fiscal 2010 first quarter, we delivered solid financial performance with revenue growth of 9% to $441 million and diluted earnings per share of $0.71, which was flat compared to last year’s quarter -- however, on a constant currency basis, our first quarter revenue and EPS growth would be 14% and 10% respectively. Our North American merchant services revenue grew 6% for the quarter, driven by strong performance from our ISO channel as evidenced by U.S. transaction growth of 20% and some modest U.S. pricing initiatives partially offset by an unfavorable Canadian currency exchange rate. Despite unfavorable currency exchange rates, we delivered revenue growth from our international merchant services segment this quarter of 29%, drive by the impact of our June 30, 2008 acquisition of the HSBC U.K. business as well as solid sales execution. I am very pleased with the initial performance of United Card Services, UCS, in Russia which performed better than anticipated. Our central European indirect processing businesses continues to be challenged but I am very pleased to announce that we have now renewed our three largest customers for multi-year periods. Our Asia-Pacific business grew 23% due to the September 2008 addition of the Philippines as well as continued sales success. Not surprisingly, macroeconomic conditions have caused our average ticket amounts to decline across all of our geographies compared to prior year with the U.S. experiencing the greatest decline in average ticket. The U.S. trend continues to be driven by a combination of weakened consumer spending, the industry shift of increasing debit transactions, and the continued addition of merchants with smaller average tickets through our ISO channel. However, I am pleased to report that we continue to expand market share in each of our direct merchant acquiring markets around the world. Finally, the money transfer business continues to face challenges and macroeconomic headwinds, as well as immigrant labor trends. We are not aware of anything that would suggest that these trends will change for the remainder of fiscal 2010. However, despite these difficulties, we maintained double-digit operating margins for the quarter and will work to maintain this for the remainder of the year. As part of our acquisition strategy, I am pleased to announce that on September 28th, we acquired auction pay, a small technology business in the U.S. that provides software solutions, technology, and processing for periodic payments and fundraising to not-for-profit organizations. While small enough to be literally inconsequential to current year revenue and earnings, this is an example of our strategy of acquiring technological providers operating in attractive vertical markets with proprietary technology, global opportunity, and sustainable competitive advantages. Now, here’s David to discuss the financial results in detail. David.

Thanks, Paul. I plan to discuss currency trends, operating margins, financial statement presentation, and balance sheet and cash flow. Our first quarter financial performance met our expectations and provides us with a solid start toward achieving our full-year revenue and earnings goals. Exchange rates in our key currencies did not vary materially from our outlook in Q1, nor has our outlook for a slightly weakened U.S. dollar over the course of fiscal 2010. Thus our full-year EPS outlook for growth of 9% to 14% still includes a favorable impact to earnings growth of about 1 percentage point due to potential weakening of the U.S. dollar. Any fluctuations in currency rates of course may cause variances to our outlook. Total company operating margins for the first quarter were about what we expected at 21%, and we continue to anticipate the opportunity for modestly expanding margins for the full fiscal year of 2010. On a year-over-year basis, North America margins were primarily affected by unfavorable Canadian currency exchange rates while international merchant services margins benefited from solid performance in the United Kingdom. We adopted FAS-160 non-controlling interests in consolidated financial statements and EITF topic D98 classification and measurement of redeemable securities, at the beginning of the year, resulting in four retroactive changes to our financial statement presentation that I would like to highlight. First, we have renamed minority interest to non-controlling interest on the balance sheet, statement of cash flows, and income statements. Second, we now reflect our redeemable non-controlling interests at their estimated redemption values in the mezzanine section of the balance sheet between total liabilities and shareholders’ equity. Third, we now show non-redeemable, non-controlling interests in the equity section. And finally, we now start the cash flow statement with net income including non-controlling interests, which adds the $4.6 million of…

Thank you, David. Based on our current outlook, we continue to expect 2010 annual revenue of $1.69 billion to $1.74 billion, or 6% to 9% growth over fiscal 2009. And normalized diluted earnings per share of $2.43 to $2.54, reflecting 9% to 14% growth over fiscal 2009. We continue to be pleased at the prospect of expanding margins and we are actively pursuing acquisitions in all of our markets with a focus on merchant portfolios and other technology companies as we expand our global presence and product offerings. Operator, we will now go to questions.

(Operator Instructions) Our first question comes from Kartik Mehta with Northcoast.

Good afternoon. David, a question on the debt -- obviously you have that debt from the HSBC transaction and I am wondering what the goal is as far as reducing that debt? Will it be like you’ve done previously or you try to pay it off as quickly as you can or do you have intentions to continue with that debt for a while?

I think what you will see is the debt will continue for a while but as we accumulate cash, you should not be surprised to see us work to pay down to the most expensive portions of that debt, so it shouldn’t surprise you in the least to see us start paying down a little bit of debt as we have accumulated a bit of cash now in the last couple, three quarters.

Paul, you had a fantastic first quarter, obviously much better than anybody expected yet you are keeping your full-year guidance where it is. I am just wondering, is it that we just all under-estimated what you could earn in the first quarter or did something happen in the first quarter that gives you pause about the remainder of the year and as a result you are not raising guidance?

It’s primarily the first part. We give you guys annual guidance and I think you guys generally, the street consensus built in a little more of a hockey stick into the plans than quite frankly our expectation and we are pretty spot on with our plan, so that’s the primary reason.

So would you expect in the past, you’ve had a second quarter that is seasonally a lot lower than the first quarter -- would you expect similar seasonal trends this year as in the past, or because of FX, you will see something different?

I think what you will see, if we focus on just the current year, not comparisons to last year, as Paul mentioned Q1 was about right on our plan and at the end of the day, if you look annually, you will see FX drive swings in the growth so let’s set all that aside for the moment -- what we really expect to see now is a year that is shaped like our traditional years have shaped. So go back to 2008 or even before where you will see the traditionally our first quarter contributed something in the order of 27% of our full-year earnings and then Q3 contributed substantially the least of our earnings for that year with each of Q2 and Q4 somewhere in between. That is generally how we see the year shaping, meaning that we exit Q1 on track for our full year expectations but it is as Paul said really we’re kind of dead on our own plan for full year as we exit Q1. I realize we are ahead of published estimates because you guys are jumping really off of Q4 but we do see the year shaping like you have traditionally watched Global Payments have a year shape.

And then last question, Paul, just on your most recent acquisition of Auction Pay -- obviously a small acquisition but what is it that you acquired that you didn’t have and -- or what will this acquisition let you do that you couldn’t do before?

There are several great verticals and philanthropic giving is one of them. And this is -- this company, although it’s not a big company, it’s a very good company with some great product sets and it’s actually a leader in this space, particularly in the auction space so the -- you have an auction at your kid’s school and that’s a sweet spot for these guys and they probably have more of that business than anyone. So we believe we can take this company beyond its initial geographies. We can add some product suites to it. We like what they do. We think we can actually improve upon it and immediately take these to Canada and to the U.K. for starters. So we like this deal, it’s a great vertical. We also like the management team. The CEO and the people that helped build this are all coming with the deal. They are excited about doing this with us and I think I would say small but powerful. We feel very good about this deal.

Thank you very much.

Your next question comes from the line of Thomas McCrohan with Janney Montgomery Scott.

I had a quick question on the operating leverage and just conceptually, you know, [if you adjust] for currency, you know, your revenue grew faster than earnings per share so could you just give us a sense for what is going on in the model that is causing that phenomena and can we expect that trend to change sometime in the future where your bottom line growth will grow at the same rate as your top line?

I think what drives most of that phenomena, I think you are particularly looking sequentially, is going to be ISO progress that brings us the revenue growth that doesn’t bring a resulting earnings growth with it and I think you will see that phenomena continue to carry as we go through the year. Now, as we build more mass globally with countries like the U.K., as Russia grows, as we build more mass in Asia, you will see that being [end of turn]. And if you were to look out a few quarters, you will begin to see a different relationship what you might term I suppose a more logical relationship between revenue and earnings growth but for the moment, as we do Q1 and probably Q2 as well, you will see that effect continue.

And certainly international is the growth, a big growth opportunity here and the margins were really much better than I would have thought this quarter, so you mentioned in your prepared remarks that international benefited from improved performance. Can you kind of drill down on that a little bit?

I would be happy to. So if you think about international in total, we continue to make very steady progress in Asia with sequential as well as annual revenue growth and margin expansion. Now that’s happening literally sequentially so we are not jumping five points at a clip but we are growing substantially. In addition, as we rationalized our U.K. investment levels, remember we invested in, for example, 50-some odd new sales folks over the course of the last year or so. Those kinds of investments are now fully in the run-rate, the sales folks are beginning to become productive, which has sort of double the leverage at that point. You get the run-rate leverage then plus performance eventually on top line and then you will see us begin to introduce price increases to a market like that. You will see very nice progress at the operating line in the U.K. over the course of this year. Now, going the other way, we’ve got our challenges with the indirect business model into central Europe but frankly Asia and the U.K. are trumping that and carrying the water.

Okay, and maybe just to close, my last question on international opportunities, it seems like there is a lot of activity in Europe. We just saw your competitor, [Elevon], I guess form a partnership with [Santandair]. But can you just talk about what you are seeing out there in the market and is there an expectation that more banks will look to exit or partner on the merchant processing side?

That’s clearly our hope and that is a primary focus for us. I think those are -- when you can get those deals, those are most usually very good ones, so we are focused on those and we do think we will see some more of those in all of the geographies we are currently in. So Europe, Central Europe, and Asia. So we are hopeful. Jim, do you want to add any color there?

I think as you saw in the announcement with [Elevon] that banks are combining and looking for ways now that the initial crisis -- beyond -- [passed all of it] that they will look to liquidate pieces of their business to raise capital and looking forward to those opportunities in Western Europe, Eastern Europe, and potentially in Asia.

Tom, I think what [inaudible] the [Elevon] deal is [inaudible] [Santandir] actually acquiring a bank in the U.K. that had an existing relationship with [Elevon].

-- the bank and [Elevon Nova] at the time had a deal with them years ago.

Fair enough. Thanks, guys.

Your next question comes from the line of Dan Perlin with RBC Capital Markets.

It sounds like increasingly you are reporting from remote locations but the question I had, Paul, last quarter I didn’t get a chance to follow-up with you on this but you had mentioned that you were interested or would be willing to pursue acquisitions in ISOs and then I think there was some sort of clarification about what that really meant. Can you just remind us where your head is and what you mean by that?

Sure, I will but Dan, let me comment on the first part about the sound check. We’re all sitting here in this one room and somebody just came in from one of our staff and said they couldn’t hear on their PC so Operator, I don’t know what that means but if we’re having problems with the audio, I just want you to do what you can. All right, Dan, so thanks for the ISOs question -- what I meant was that we kind of lump everything in as ISOs. I mean, you could say we’re an ISO, quite frankly. If you’re not a financial institution, you are by definitions of Visa and MasterCard, you’re considered an ISO and there are ISOs that have very traditional models with commission only sales people and they go after successful verticals and add some value-add and build very nice businesses. And what I said was that’s not a business that I think you are going to see us acquiring. But there are other companies that are primarily in interesting niches with the technology play and they don’t employ tens of -- or hundreds or thousands of commission sales people and I think Auction Pay is a great example.

So we should think about -- you’d be open to the idea of acquiring companies that have technology, like a small enterprise solution?

Dan, I don’t want to -- we’re swapping out phones as we are speaking here. This is a little bit like changing the tires on your car as you are driving down the road, so I am literally following the speaker phone around the conference room. It kicked up the difficulty level a couple of notches.

I hope G2 goes better than this.

Well, that is our hope. We do have some things to say about that, so --

Did you hear the question I had?

Why don’t you repeat that, that would be helpful?

Okay, so it sounds like removing the traditional ISO vertical, you’d be open to acquiring businesses that have maybe even enterprise technologies in verticals where you may be in but aren’t traditional payment companies?

That’s correct and I think Paul was alluding to Auction Pay as an example of a couple of things -- one, it’s technology focused so it’s not selling simply the acquiring services but they are offering a solution for people running auctions and it’s a software solution. I think we would also be interested in businesses that focus on more the traditional bank model, referral model, those that have a direct sales force and I don’t think that’s located just in the U.S. -- that’s Canada, that’s Europe, that’s Asia. That tends to be the model that we are best at and the model that describes more the traditional ISO model where there is not a referral source, it’s brute force and relationships. We leave that to those who are best at it, which are the people that we rely on here in the U.S. and some in Canada to deliver those smaller merchant sets.

That’s a great clarifier. Let me just say one other thing on top of Jim’s point -- so to be very crisp, it’s not a business -- we attempted to do this eight or nine years ago with a commission only sales force. We did not do a good job of it. Along the same time, our ISOs were building up very successfully this large market presence. We fortunately aligned ourselves with some wonderful ISOs who were doing very well. Number one, I don’t want to compete with them. I -- in fact, I wouldn’t flatter myself to think I could, even if I wanted to, and we are not that stupid so that’s not what we are all about.

Got it. And then I just want to clarify a point to David -- I just want to make sure you are talking about fiscal year 2010 margin improvement year-on-year, not just throughout the year.

Yes, that’s exactly right. So the opportunity for expanding margins on a full year over full year basis.

Okay, and then Paul, since the Russian acquisition is performing a little bit better, can you just remind us kind of what your near-term action plan is for that asset? Is it that traditional -- you know, you make an acquisition, you invest heavily in it, it kind of pulls the margins in and then you kind of let it run? So is that where we are in the story or are there some things that you learned are you are doing differently this time around?

I’m answering at least a piece of this -- I think that [inaudible], unlike a lot of the ones you’ve seen where this had a self-contained business that was separate from the bank, there’s no conversion involved, we may ultimately convert pieces to our G2 system but it’s not necessary out of the box. So I think this is investment similar to what David was describing for Europe where it’s a direct sales force -- remember Russia is somewhat new to this business and their number of sales resources are limited, so that’s an area of expansion. I think we have opportunities for additional acquisitions from financial institutions that are in the market that we are associated with today and just others that we compete with. So I think the future for those type of growth levers are very bright.

So just to add on to Jim again, so to clarify, we are going to invest. That is going to have a little bit of an impact on the margin, in that we are adding a lot of sales people because we think these guys are incredibly well-positioned. We love the management and so we are encouraging them to add sales resources, because I think that market is becoming more and more attractive every day.

Each of Jim’s and Paul’s comments are incorporated into our existing expectations so remember we told you it’s earnings neutral or thereabouts for this year, so those investment levels are incorporated into that expectation.

I expect nothing less. One other -- I guess two other real quick questions -- can you just give us an example of what you are considering in terms of pricing opportunities in the U.K. that maybe didn’t exist previously? And then the last question and I’ll jump off, doesn’t HSBC have a put option on it and when does that come due?

Let me just ask one question first and then Jim is going to take the U.K. one -- is the sound any better? We just tried to fix this. Can you hear us? Is it crystal?

Yes, it’s very good. Thank you.

In reverse order, they had a put option. There was a put in call provision -- that’s gone. We purchased the business outright, so at this stage it’s ours for the U.K., if that was your question.

For Asia.

Oh, for Asia, yes.

Sorry.

Asia still has opportunities for them to put the business -- it’s in pieces beginning I think in the fifth year. We’re in year four so they could sell down -- I think it’s 15% a year -- and then at a -- I think below 20% or 15%, we just buy the rest out.

So that’s 2012 that kicks in?

I believe it was five years, but --

Okay.

You know, I think that it’s more likely that they decide they want to do it or they -- and they would do something probably not in pieces; they would just do it or they would decide -- and as of now the bank seems interested in keeping the JV going. We are completely agnostic. We have a great relationship. In either scenario, we have a long-term marketing alliance. They seem to feel comfortable with the JV in Asia right now. The U.K. guys had a different feeling. You know, either scenario is great with us.

And then pricing in the U.K. and I’m hanging up.

In terms of the U.K., the pricing is really coming back to interchange increases that have occurred over the last year while it was still on the bank systems. Some of these we’ve delayed implementing, given the financial crisis last year. Some of it is coming back to what we’ve -- to neutral. Some of it would represent opportunities to price for services that were not previously charged by the bank. I think you will see more of that after we convert the back-end, which is not slated for a specific date but that’s when we have an opportunity to take advantage of the tools that are on our back-end system.

Thank you.

Your next question comes from the line of Dave Koning with Robert W. Baird.

First of all, just to computer organic growth in Q1, I am wondering if you can give us kind of the combined Russia acquired revenues, the Philippines and then I guess one month of U.K. before it anniversaried?

I probably won't call it out specifically but I think you have the tools. You know that Russia came in at about a $2.5 million a month run-rate and it’s just marginally exceeded that for Q1. If you take a look back at disclosure previous, you know that the U.K. has been running about $50 million or so of revenue a quarter and we are not breaking out its revenue anymore specifically. You’ll see we report Europe now in total, so I think take a glance back at last year’s Q1 and our Q4 exit rate and you can get a pretty good feel for that. And really frankly the Philippines is de minimis except within Asia itself, where you can cut the growth in half or a little north of in half, frankly, without the Philippines growth.

Okay, that’s great color. And then secondly, you did a nice job reaccelerating U.S. revenue growth and I’m wondering if you can talk a little bit about if that just came from existing ISOs or maybe if there were some new ISOs that helped out or maybe even your direct business got a little better. Maybe you can talk about each of those business lines.

Well, I think you answered the question. It is a piece of all of them, the ISOs, while we all felt the effects of last year, we felt surprisingly for us a strong rebound in growth from our major large ISOs. I think they’ve plowed their way through a difficult market, which is a testament to how strong an organization they are. I think on our direct business, we continue to be pleased with its performance as our gaming business continues to do well, our alliance with Komerica, as well is performing. We’ve had some opportunities for repricing in the summer and spring, all that has been factored into the performance that you’ve seen.

And were there some new ISOs that came out in the quarter too that helped out a little bit?

No, this has really been the group that’s been with us for seven, eight years continue to execute well on their plans.

Great. Thank you.

Your next question comes from the line of Greg Smith with Duncan Williams.

Can you give us the transaction growth rate in Canada? I don’t think I heard that.

No, Greg, we haven’t been breaking out the transaction growth rate in Canada but as I think you know, it tends to run about the level of the local currency revenue growth so I think you are looking about low-single-digits, pretty traditional kind of growth there.

Okay. That makes sense. And then, just Paul, the whole interchange debate, I feel like we go over this every quarter but still want to get your reaction if interchange were regulated in the U.S. and it were to come down quite a bit, how do you think it would impact Global Payments?

I think you know the answer. It is going to impact us favorably. Even Australia, if you look at what happened there, and there is a lesson for our regulators not to go down that pipe because that didn’t have the result I think the Australian officials thought it would. But even the processors there ended up keeping some of that, those that process for smaller merchants. You know I think the bigger issue here is we have credit card legislation, like the CFPA and that is really geared at consumers and financial institutions and the Obama administration is in the middle of that and there’s been a lot of rhetoric. And then on the other side, you have a B2B fight between retailers and the associations on interchange and people are trying to couple them and they are very, very different. I mean, the consumer on the street doesn’t care what the interchange level is and I think that you are seeing an awful lot of interest now from regulators, Dodd most recently got a big splash a couple of days ago. That hit the tape and the associations both took a big hit in stock price. You know, I don’t know where this is going to go. I will maintain though that over time, it goes down. I can guarantee you that over time it will go down and when that happens, that’s good for us and basically everybody in the space.

Yes, I agree. And then just lastly, the gaming business, I know it’s a small piece but can you talk about how that business is progressing, sort of market share in the quarter and then just overall activity levels? It seems like things are pretty down -- are you seeing any signs of hope there?

I think the characterization of down -- I think they are challenged because of the economy but we continue to see wins in the major market, being Vegas, but also smaller markets around the U.S., also in Canada. I think we are doing well. I don’t think we break out the specifics in terms of transactions or revenue but it continues to be a growing piece of our business.

And sales success is quite solid, Greg. It hasn’t all translated to revenue yet for any number of reasons you touched on -- think about the conditions outside but it’s operating nicely.

Okay, great. Thanks, guys.

Your next question comes from Bob Napoli with Piper Jaffray.

A couple of questions -- first of all, the prepaid industry has been growing pretty rapidly. [inaudible] -- you haven’t talked about it much with regard to Global Payments. I just wondered what you guys are doing in prepaid and where do you think that -- what is your strategy there?

In each of our markets, we’ve tended to partner with either the leader or an independent, a group of independents and lead it up to the merchant to decide who they wanted to be affiliated with. They may have a pre-existing relationship coming from another processor. We have a in-house solution as well, both open and closed loop and I think from that perspective, we can offer a myriad of options but ultimately it’s going to be left up to the customer to decide. Now that’s predominantly U.S. It will soon be U.S., Canada, with the conversion of G2 at some point in the future, as well as the other markets. So as we pull the markets onto common front-end and back-end, all these tools will be made available to each of those geographies.

What size -- I mean, how large is that business for you today and how fast is it growing?

You know, we really don’t treat it -- when prepaid got started 10 years ago, five years ago and it was hot, a lot of businesses growing up with a lot of funding, the processors, us included, generally sold it as an add-on service. It was a way to -- or is a way to retain customers more than a separate defined business. Now, some look at it differently. There are still businesses that run this exclusively but for us it’s an add-on product. I wouldn’t characterize it as a standalone business.

And Bob, just to clarify, you’re talking about prepaid non-Visa and MasterCard products -- these are standalone prepaid products, gift cards primarily.

Or prepaid reloadable cash cards?

Sure, yeah. The same.

We wouldn’t treat that as a separate standalone business that we look at it as a separate P&L. We just look at it as a product that’s offered as credit is, debt is, check service is, what ever the need of the merchant at the time.

I think parenthetically, you are going to see a lot of activity on Visa, MasterCard prepaid just because of the economics is changing pretty dramatically and if some of the things happen that some of the issuers fear, they are going to be driven into that. It’s the only way they are going to be able to justify a big section of the market that has a higher risk profile. If they can't price accordingly, they are going to be forced to just offer that product. Now, when that happens, it’s just a transaction for us. I mean, as you know, we just process it.

Okay. A question on Canadian debt -- what is -- is there an opportunity there for you and is it material?

The answer is yes and yes. It is -- there is an opportunity for us, clearly. We are a big processor in Canada and I do think that over time, and there’s nothing we’re looking at this year. It’s a next year event and I think that in time is going to take time as well. I mean, MasterCard has announced they are going to do this. They are going to price it in a similar way as Interac and that means we are going to earn similar fees. Over time I think because this is truly a better offering for the Canadian consumer, I think this is going to be embraced and the merchants aren’t anxious because what they have now is the lowest cost alternative but it doesn’t have the functionality of a more robust Visa/MasterCard product. So I think over time this thing builds up some momentum. I think it’s going to be next year and the year beyond and the year beyond that. Clearly this is good for us and we are very much looking forward to it and we will keep you informed.

Last question -- did you give -- I mean, I guess what I was trying to get at is organic revenue growth constant currency for Asia and transaction growth?

No, Bob, we did not so really when you look at Asia, there’s almost no currency impact to Asia. The currency impact we see is Canada, as you well know, and the U.K. and a little bit of the Euro affecting Central Europe here and there but there is literally almost no -- it’s rounding barely currency impact in Asia.

But transaction growth running above revenue growth --

No, no -- I think you are aware, it really hasn’t been running above that level in that market for a while and nor should you expect it to, I don’t think. That’s also, as you’ll remember, one of our more challenged markets in terms of having a few health and beauty merchants, things like that, a different sort of profile. But as a general rule, it’s healthy and performing as we expect, given margin expansion and very solid revenue growth.

Thank you.

Your next question comes from the line of Darrin Peller with Barclays Capital.

Dave, could we touch a bit on the U.K., the acquisition of the JV again? I know your guidance initially had estimated $0.09 to $0.12 in EPS from that, buying out the remaining of the JV. Now has that changed given the currency exchange? I know you guys said you expected some change but it may have been a little more than initially expected when you gave that guidance. So is that $0.09, $0.12 still actually what you expect from that acquisition?

Yeah, it’s still what we are tracking. I would tell you as we exit the quarter, we are feeling more comfortable about the higher side of that than the lower side where we gave ourselves the room as we started the year. I think as you think about currency and how it affected Q1, it’s important to realize that we keyed our Q1 or our full year expectations on that Q4 off of where the currency was as we had the call. And so while we’ve all watched the U.S. dollar weaken fairly materially over the course of May, June, and even July against currencies like the Pound and the Canadian Dollar -- by the time we got to that call and since then, the currency like the Pound has only -- or the dollar against the Pound has only weakened 0.3%. So it really did not change the story over the course of Q1 from what we expected for that quarter or really for the full year -- in other words, most of that weakness was already baked in. There was just marginal weakness beyond what we expected so really not a lot of change to the story, to tell you the truth.

All right, and if there is further weakness in the dollar going forward then, is that kind of beyond your initial expectations?

No, so there is still further weakening of the dollar we expect at the high-end of our range, which has always accommodated kind of a 1% decline, or actually, excuse me, always accommodated weakening of the dollar that would drive 1% growth in earnings, so our range of 9 to 14 could be 8 to 13 without the weakening we’ve assumed in the dollar over the rest of the year. Now, weakening beyond that, yes -- that would be upside.

Okay. What about -- Paul, maybe for you on Brazil -- you touched on this in the past but there is certainly more -- some more excitement coming around that area, given the changes between Rediguard and Visa -- and I know in the past you mentioned it being sort of a long-term opportunity but is there anything kind of maybe that’s changed that view over the past couple of months being more near-term?

No, it’s -- it is very interesting and you’re right, the market is certainly fascinating to watch and as we’ve talked before, it’s Brazil, Russia, India and China, so we are kind of RIC, we’re not in BRIC yet and Brazil clearly is in our radar but we are looking more at a five-year horizon for having any real presence in South America, absent some wonderful opportunity. And what’s down there right now is very expensive and very -- an evolving and quite complicated but also very interesting so I would say stay tuned and we are getting more involved in that market.

What about -- I mean, I know you touched on JV already, kind of alliance relationships in maybe Asia or Europe, what about in Mexico or the U.S.? I mean, is there anybody left that is on your radar right now?

Yes, the answer is yes. You know, Mexico is -- we talked about North America and Mexico, of course, is the southern portion of that and it clearly is an area we are focused on and I do think there is some opportunities and we are hopeful to actually get something to happen.

Okay, and then lastly on money transfer, can you just talk a little bit about the trends, the more recent couple of months?

I’ll let Jim fill in a little more color on that but I’ll tell you that the business has kind of stabilized. It’s not doing wonderfully. We are concerned that we don’t see anything that gives us any indication that business is going to improve and we have been able to maintain some reasonable margins but we can't manufacture people to send money so we are concerned about that business and I think -- and that’s part of our -- that’s part of our disclosure when we were chatting with you even in our prepared speech. Go ahead.

As Paul was alluding to, the declines which have run as high as the mid to upper teens, have settled down in probably the lower teen range, which seems to be pretty consistent with where the marketplace is. I think the challenge we are seeing beyond that has been around average ticket, as Paul was saying, the money that was available to send years prior is less because the work is less, the pay is less and therefore there’s less to transfer. So it remains a challenge but the team is doing an outstanding job managing through a difficult situation and conserving cash where we can, closing facilities that we don’t see a prospect for turning around. These branches are easy to open, they are equally easy to close. They have a very short tail on their leases and the severance costs are nominal so we are doing what we believe to be the best in a difficult season right now.

All right, thanks and then actually real quickly, you commented on 20% I think transaction growth in the U.S., right? Can you give us any color on that trend in September?

We have -- we are kind of seeing steady state. We are not seeing any improvement but not unlike the money transfer business, although we have happier scenarios, we are actually talking about growth, we are seeing the kind of decline in growth kind of bottom out and we are hopeful that it will turn around, so it’s not getting worse. We’re not seeing any jump up in average ticket but we are not seeing a further decline so it’s pretty -- we’re seeing pretty much steady state.

All right. Thanks, guys.

Your next question comes from the line of Julio Quinteros with Goldman Sachs.

I might have missed this on the front-end here but on that transaction growth number, was there a split between credit and debt perhaps?

No, there’s really -- we don’t break that out. I’ll just tell you the trends continue to be consistent with what we talked about the last couple of quarters, Julio. You do find debit growing a little bit faster than credit, a little more than half of our transactions combined are signature debit and PIN and still PIN debit is substantially below 10% of our total transactions, so still no see change in the mix of transactions overall but we are really not breaking out the overall growth.

Okay, that’s -- thank you, and then --

Let me just say one thing -- it is assumed that that’s largely driven by the ISOs, of course.

Right. Understood. And then just on the margin part, again I apologize if you guys already went through this but the upside in margins, I think if the notes I’m looking at are correct, it looks like it came from the U.K., not necessarily from currency changes, especially on the North America side with some of the currency impact that you guys can have with Canadian/U.S. dollar cost basis -- can you just walk through that one more time, if you don’t mind?

So just to make sure I am answering exactly what you are asking, you are talking about the sequential expansion, right?

Well, I guess both the street estimate and the M&R estimate, we were all kind of in that mid-60s range or so for the quarter. And the revenues came in more or less in line but obviously there was a lot of upside on the EPS side, so just to triangulate on that, obviously it looks like it came from margins. I’m just trying to understand when you guys talked about your margin commentary, it sounded like it was more U.K. than it would have been currency or anything along those lines.

Right, so the sequential improvement in margin is really not currency driven. Yes, there is a little bit of weakening at the end of the day but what really is driving that is business performance. It’s progress in the U.S. It is substantial progress in the United Kingdom. It is continued progress in Asia at the margin line, a sequential basis. But I think since you referenced the mid-60s, Julio, I am going to take another crack at that question -- we really are on our plan as we exit Q1. I realize we are ahead of estimates by a nickel or so on Q1 and I think that’s because you would have built a model logically off of Q4 as a jumping off point. But we are really looking at when we think about 2009 is the same kind of traditional seasonality in the business you have seen previously, years like ’08 and before. ’09 seasonality was skewed with the massive strengthening of the dollar over the course of October/November. So we are back now, we think, to watching a year where our first quarter is going to contribute on the order of 27% of the total earnings, where Q3 is going to contribute the least, and then Q2 and Q4 are going to be somewhere in between. So I think your models or the estimates out there were very logical given the jumping off point but we sort of think we are back to traditional seasonality and we are dead on plan in aggregate as we exit Q1.

Understood. And then just lastly, any comments on potential price increases on the MasterCard Visa side that you guys might have already been alerted on?

I don’t think there’s anything beyond what David has already put in the -- put in the guidance for the year.

Okay. Thank you, guys.

Your next question comes from the line of Larry Berlin with First Analysis.

A couple of quick questions, first on the G2 conversions, just curious how they are going and are they meeting timetable and have there been any major ones lately, or --

Well, I think in a word, they are doing excellently. [Multiple Speakers]

We’ve converted seven of the 11 Asia markets on the front-end and we are heading toward a U.S. conversion starting next year and everything is tracking to the plan and we are looking forward to beta next year for the U.S. to get the conversion done some time between the spring and summer and move on to Canada, U.K., and other markets thereafter.

Okay, and then on the [Dull-X] side, has there been any difference in performance if you break down non-North America versus North America this quarter [inaudible] press release? How was Europe versus U.S. and so forth in there?

Actually the Europe business performed on a comparative basis and against plan and did better than we would have expected. They were helped largely by I guess two factors -- one, we exited a few branches, Belgium and the U.K., the quarter before. They were a distraction to management and they were either neutral to loss linking. But more importantly, we’ve been benefited by the weakening dollar. FX has been a big improvement in the businesses off of a commission and currency and currency has worked in our favor -- the more volatile it is, the more difficult -- somebody has to know where the stock should be and that’s our sweet spot.

And last one for the moment, in the three new contracts, or the three renewals of your major clients in central Europe, and congratulations, that -- were there serious price breaks that you had to give or did pricing manage to hold its own?

You know, we generally wouldn’t discuss that on the call but you can imagine negotiations are very challenging.

Okay, great. Thank you, guys.

Your next question comes from Wayne Johnson with Raymond James.

I was hoping you could shed a little bit of light on the ISO contract renewal front. As far as the most significant, you take the top 15 or 20 ISOs, that contributes the bulk of business domestically to Global Payments, could you give us a sense of when those are coming due and what kind of pricing pressure there might be and what kind of strategy Global Payments has to offset that?

Well, since they are all on the phone listening, it probably wouldn’t be a good conversation for us to have but I think David wants to take that.

I think I would point you back to what we have said previously, which really is at the end of the day, we’ve renewed the major ISOs as a general rule over the last year with multi-year extensions and I think they have been fair renewals for both sides and we’ll keep processing but the key to that is we’ve renewed the bulk of the major ISOs over the last year or so.

Okay, and so -- and this is going back in time, before you were there, David, so this may not be a fair question to you, but there was when the initial big step down in operating margins started to take hold, despite management’s best efforts to warn the street that it was coming, it was a surprise to some and it seemed to me like at that time there was a step down in pricing because of big volume increases from ISOs in between the time the contract began and when it ran out and it was time for renewal. Would you say that going forward in these previous rounds that the pricing renewals, the pricing decreases in the contracts was less severe than it’s been in the past?

I think I would address that in two ways -- one talking about the past and then where we are today. I think a couple of things happened, if you were going back four or five years, three years, where there was a run from the time we spun through 2005 where margins increased sequentially year after year, 50, 100, 150, 200 basis points and during that time period, the ISOs were relatively small part of our business, they were tiny. There were effectively no ISOs here when we spun of any size. By the time we got to ’05, ’06 and clearly today, their impact on the U.S. business was much more dramatic in terms of size. So I don’t think it was much as pricing -- I think they were just a bigger mix and therefore had a bigger impact on the margin. Now clearly when we go through any renegotiation as we talk in all these calls, these ISOs have done incredibly well in their -- for Global Payments and in their own right. Their businesses have grown, they have gotten bigger and in any renewal, there is a give and take and pricing is clearly one of the levers that gets pulled but I don’t think there is a rush to the bottom and there is a point at which it wouldn’t be as an attractive business for us if we were just to continue to lower prices indefinitely. So I don’t anticipate anything that’s going to be draconian in terms of price reductions. I think we will have a good discussion when that time comes but as David said, there’s nothing on the near-term horizon.

And could you talk about what the expected benefits of G2 may be over time as you have seven of 11 from Asia of the front-ends now on the system? Could you talk a little bit about how we should see that impacting the P&L going forward?

I don’t think so right now. There’s more to come on that as we enter fiscal ’11. The geographies that have moved, they have moved very successfully. There are some benefits in the income statement now but as you know, the material benefits begin to accrue when we bring the truly material geographies live, which is not an event happening in this fiscal year so more to come on that.

Great. Thank you. Great quarter, guys. Appreciate it.

Your next question comes from the line of Robert Dodd with Morgan Keegan.

Three questions, if I can -- first you mentioned on your prepared remarks that you’ve been gaining share in all your major -- two that I would like to ask particularly about are the U.K. -- obviously you’ve added headcount on the sales front. You also have obviously have got one of your major competitors in that market now essentially controlled by the government. Are you having any discussions with major retailers beyond the 15 you already have? And what’s the feedback from them about how they feel about processing with a government owned entity? And how does that affect your market share in that market?

I think as you would anticipate, there is a lot of anxiety from a large merchant who has a relationship with somebody whose future is uncertain and so I think our sales force, our management team in the U.K. feels very good about approaching or being contacted by large retail opportunities. And I think if they were on the call, they would tell you that the prospects are bright here and that they feel good about their position now part of Global Payments 100%.

I would just add though, Robert, we certainly aren’t counting out our competitors. I mean, we are number three. We have two guys that are bigger and have bigger market share and they like this business and they are not giving up on it and although they have their challenges, I mean, this isn’t a lay-down. So we are all about the hard work, the better products, adding sales people, as you said, giving them more tools and we are adding this. I wouldn’t want to create an expectation that I don’t think Jim was implying that we are just going to sign anybody we want. I mean, there is still a lot of hard work -- we are in fact -- we do believe though we are gaining market share.

And in China, obviously very, very small PC business right now but big opportunity. You talked about your relationship with China [union pay] for local currency transactions there. What’s kind of the feedback, if any so far, from the sales force in that market in terms of actually signing customers for that local currency processing?

Well, you have to be talking about PRC Mainland -- People’s Republic -- we are doing China union pay right now for Macau and Hong Kong and have been and have a direct relationship and are authorizing transactions and being part of that process but for PRC, we are in the process of going through the requirements to be fully licensed to operate. We are actually making significant progress. We have not processed the transaction in PRC yet to date. We still have a couple more hurdles to go over but we are enthusiastic and hope to share some news with you in the not-too-distant future about tangible progress in that part of the world.

Got it. Thank you. Last one, if I can, go back to the North American margins and just actually the op profit dollar number obviously down, if I can do my math right, $7 million year over year. The bulk of that obviously from translation on Canada. Was there any other incremental investments -- I mean, are you having to staff up and is it affecting the North American margins for G2 to run the Asia-Pacific businesses or investing in any other platform or systems that’s having a drag over and above the ISOs effect and the FX effect?

That’s a great question. The answer to your question is no -- any of those other effects you are talking about, whether they be investments or just general staff are at the margin at best. G2 operations is not turning into an incremental expense when we bring a small country on, so you really do have largely FX, some investments at the margin and that’s really about it. Obviously the ISOs don’t contribute to the operating income progress the way the rest of the revenue streams do. And keep in mind too, Q1 of last year is a fairly different macroeconomic environment from Q1 this year, so whether you are talking about our tech and gaming business or any other ancillary or less prominent is probably a better word businesses that we operate, they see more challenges now at the operating line than they did 12 months ago. So in aggregate, you lay that on top of FX and that’s kind of where you end up.

Got it. Thanks a lot.

We will take our last question from Tien-tsin Huang from J.P. Morgan, after which Mr. Garcia will give his closing statement.

I have a few quick questions, if you don’t mind, just on the merchant contribution margins sequentially it was quite high relative to our expectations. I heard a lot of different answers to different questions but just in the U.K. and the U.S., I just want to make sure we are modeling this right -- it sounds like it is primarily new pricing and if so, is it sustainable? I just want to make sure we carry that forward properly.

No actually it’s not new pricing. There’s some modest re-pricing effect in the U.S., not a lot of re-pricing in the U.K. for this quarter. It is nice progress from a volume perspective. It is tight cost controls and nice leverage overall but it’s really not driven by pricing. As you know, particularly in the U.S. we could only get so much operating income benefit even from decent sized re-pricings, much less marginal re-pricing.

Got it. So if we assume, if we just look at the cost side of things, ignoring the revenue, that’s a good clean level to consider, all else equal?

It is because you now have a full quarter of Russia, for example, in as a jumping off point and obviously full quarters of all the other pieces, so yes, this is a reasonable jumping off point, in particular the two categories of expense in the face of the P&L, that’s a reasonable -- those are reasonable jumping off points as well.

Perfect. Okay, we’ll go with that. That’s helpful. Then the -- just two more, just I guess curious to hear Global Payments' view on this whole security and encryption at the point of sale, First Data is working with RSA, Hartland with Voltage. I think Verifone is positioning as a new revenue source -- is there something here that could be new?

I think it’s early to say. I think there’s a lot of different theories out there. The RSA is a [inaudible] which is not new technology but clearly RSA is a leader in that space. It does represent an exclusive relationship and I think those sometimes have challenges for merchants because the implementation of this is not without effort on behalf of the merchant. Hartland has end-to-end encryption as a strategy. We put in a program here called Global Secure over the last year, which is really based on a combination of encryption if we have to make the data available, redacting it is our preference or not making available to merchants at all for the merchants’ benefit because this data clearly when it gets out into the open becomes a problem, so we’ll continue to look at what’s available from a technology standpoint to improve the offering to our merchants but ultimately let them decide.

I would just add to Jim’s comments that we look at it more as a value-add than as revenue source, quite frankly.

Okay. Makes sense -- last one and I’ll let you guys go get dinner, pipeline for M&A in North America, has that changed at all?

I would say no, it hasn’t. There are some opportunities we are still very interested in and we think that our sweet spot is probably more the smaller size but there’s some [inaudible] hunting opportunity as well, so it’s still fairly robust.

I think this is our second deal in eight years in the U.S. -- maybe we are starting a trend.

Thanks a lot guys, appreciate it.

At this time, we will turn the call over to Mr. Garcia for his closing statement.

Thank you and ladies and gentlemen, thank you for your continued interest in Global Payments.