環匯 (GPN) 2004 Q1 法說會逐字稿

Welcome to the Global Payments' first-quarter earnings release. At this point all of your phone lines are muted or in a listen-only mode, however, later in the conference there will be opportunities for questions and those instructions will be given at that time. (OPERATOR INSTRUCTIONS). As a reminder, today's conference is being recorded for internal purposes and with that being said here with opening remarks is Chairman, President and Chief Executive Officer of Global Payments, Mr. Paul Garcia. Please go ahead sir.

Good morning and welcome to Global Payments' conference call for the first quarter of our 2004 fiscal year. Joining me are Jim Kelly, EVP and CFO; Joe Hyde, Sr. VP Finance and Business Development; and Jane Forbes, our Vice President of Investor Relations. I would like to remind you that some of the comments made on this call may contain certain forward-looking statements pursuant to the Safe Harbor provisions of 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. These risks and uncertainties are discussed in our recent 10-K. In addition some of the comments made on this call will refer to normalized results which are not in accordance with GAAP. Management feels that normalized results will 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 September 17, 2003, which can be located under the Investor Relations area on our Website at GlobalPaymentsInc.com. The agenda for our call today is as follows. I will give an overview of our first-quarter results and review recent trends and events, then Jim will discuss the financial results in detail and give an update on our operational consolidation efforts. I will provide an update on our fiscal 2004 outlook and our pending DolEx acquisition, and lastly, we will have a question and answer period. Now for Q1 results. Before I begin my Q1 over review I would like to note that some of my comments -- excuse me -- that my comments exclude the impact of a previously disclosed restructuring charge for a facility consolidation. The charge for the current quarter is 1.6 million which Jim will explain during the call.

We reported solid financial results for the first quarter ended August 31. Our revenue grew by 7% to $136.5 million resulting in net income of $16.8 million for a 15% increase over prior year. Diluted earnings per share grew by 13% to 44 cents. These results reflect mid-teen growth in our domestic direct merchant channel offset by declines in our indirect channel. In addition, we reported a 130 basis point operating margin improvement to 21.1% as a result of our acquisition integration efforts and continued cost containment programs. Now for our recent trends. Our domestic direct transactions continued to grow in the high teens for the quarter driven by continued momentum in our direct and ISO sales channel. In addition our domestic average ticket and spread remains stable for the quarter which we believe is a result of our diversified midmarket segmentation. Our Canadian transactions for the quarter grew in the mid single digits. This is down as anticipated from the prior quarter's growth rate primarily due to the impact of reduced consumer spending in our Canadian markets attributed to the SARS threat specifically in the travel and entertainment sector. Average ticket and spread in Canada also declined primarily due to the recent mix of merchant signings, such as the addition of significant petroleum and grocery retailers. Although we expect Canadian volumes to rebound by the second half of the year the peak trouble season was impacted and consequently the overall Canadian growth rates will be affected for FY '04. Moving on to other recent events. Our ISO sales channel continues to be an area of growth and management focus. We have completed a number of significant multiyear renewals for our major ISO relationships.

In addition we signed three new ISO's that will bring in more than 500 new accounts per month. Our domestic direct sales channel continues its momentum by signing midmarket merchants in various verticals to maintain our diversification. As such our domestic direct sales force successfully signed thousands of midmarket merchants this quarter. As part of our diversification strategy for our Canadian portfolio, we signed thousands of new midmarket merchants during the quarter in Canada as well. In addition, we continue to sign larger Canadian merchants, a few of which are Accommodation Canada, Canada's National Hospitality and lodging association; Mediplan, a drug wholesaler; Cannom (ph) Health Services; Princess Margaret Lottery; and Econogas, a petroleum retailer. Consistent with our strategy to provide customers with secure enhanced products and services, I am pleased to announce a new suite of Internet connectivity products called Global Net Advantage. These products will allow our merchants to lower their communications cost and reduce customer checkout times. We also completed the first IP host to host connection with a major merchant in Canada which we believe is a first within the Canadian payment processing industry. In summary, we had a very solid quarter. I will now ask Jim to review the financial results and to give you a progress report on our consolidation of operations.

In our press release and as posted on our Website we included a GAAP income statement and a schedule which reconciles current period GAAP to normalized results. We believe our normalized results more clearly reflect comparative operating performance for the periods presented. Our GAAP results include a onetime item that I will discuss further this morning. For the quarter revenue grew 7% to 136.5 million driven by mid-teen growth in our domestic direct sales channel. As our largest revenue channel we continue to be encouraged by the success we are experiencing in this area. In Canada our direct sales growth slowed relative to prior quarters primarily due to the impact of the SARS threat to the Canadian economy offset by a change in the foreign exchange rate. We anticipate that Canada will slowly recover by the second half of the year as spending in Canada's travel and entertainment sector stabilizes. Overall, direct sales growth was partially offset by high teen declines in our indirect sales channel. Indirect is declining at a higher rate than prior periods primarily due to de-conversions of select authorization and non-authorization services and continued merchant attrition from our existing bank customers. Funds transfer revenue for the quarter was 2.9 million. Also for the quarter normalized operating expenses were 107.7 million resulting in operating margin of 21.1% as compared to 19.8% in the prior year quarter for a 130 basis point increase. The operating margin increase was primarily due to the integration of past acquisitions and the implementation of other cost reduction initiatives. These cost reductions were partially offset by the ongoing investments made in our direct and ISO sales channel as well as the increase in commission payments to our ISO's.

Net income for the quarter grew 15% to 16.8 million, up from 14.6 million in the prior year quarter and diluted earnings per share for the quarter grew 13% to 44 cents up from 39 cents in the prior year quarter. Our effective tax rate remains at 37.4%. Diluted shares were up slightly due to the impact of in the money stock options. Now turning to the cash flow and the balance sheet. As we define free cash flow we reported 23.3 million in free cash flow for the first quarter as compared to 21.4 million for the last year. We define free cash flow as net cash from operating and investing activities excluding business development and changes in working capital. Capital spending for the quarter was 3.1 million primarily for software and infrastructure development. We anticipate capital spending in the range of 15-20 million in fiscal '04. In addition, there is a new line item on our cash flow statement under the financing section called, net borrowings on line of credit restricted for merchant funding. This reflects the net borrowings required to provide Canadian Visa merchants with same day value which is standard industry practice in Canada. Turning to the balance sheet the decrease in the net merchant processing receivables for May 31, is primarily due to the transfer of 36 million in cash balances from our Canadian merchant settlement accounts to our U.S. cash account in anticipation of the DolEx transaction closing. This cross-border cash transfer resulted in a higher payable on our CIBC merchant line of credit and a decrease in merchant processing receivables on our balance sheet. As a result our actual cash balance has increased to 96.1 million due to this transfer and a positive cash flow generated by our business during the quarter. Now for an update on our consolidation efforts.

During the fourth-quarter we announced the closure and the consolidation of three operating facilities and their related functions into existing operation centers. We implemented the plan in April '03 and expect to complete it during the fourth-quarter of fiscal '04. I am pleased to report that we have made significant progress on each of these moves. We anticipate total cost and expenses associated with the plan to be approximately 8 million, 4 million of which will be associated with onetime employee termination benefits and the balance related to contract termination and other related facility closure costs and expenses. The first quarter results include a restructuring charge of 1.6 million related to this consolidation plan. Paul will now discuss our fiscal '04 guidance and our pending DolEx acquisition.

I will now discuss our fiscal 2004 guidance. We are reaffirming our full year revenue guidance of $542 million to $562 million or 5-9% growth over $516 million in fiscal 2003, and a full year diluted EPS guidance of between $1.57 to $1.64 reflecting 10% to 15% growth over our $1.43 normalized diluted EPS for fiscal 2003. This guidance does not reflect the impact of a restructuring charge or our DolEx acquisition. With respect to our pending DolEx acquisition we have made progress toward completing this transaction and eagerly anticipate our entrance into the consumer segment of electronic money transfer business in the U.S. to Latin America corridor. To that end, we recently submitted our Hart-Scott-Rodino filing and in each of the states where DolEx is a licensed money transmitter we have either applied for approval of the acquisition or given notice of the pending transaction depending on each state's statutory requirements. Several states have already either approved the transaction or confirmed that they have no objections and we are working with and awaiting responses from the remaining states. We do not anticipate any delay in these respective filings and continue to expect the closing of this acquisition before the end of 2003. We remain optimistic with the growth prospects of this acquisition which include investing in or the acquisition of new branch locations, the entrance into new fund flow corridors and the introduction of new products and services. We are currently evaluating all of these opportunities which we will discuss further after the acquisition closes. We are very pleased with our first quarter performance and we look forward to continued success in this new fiscal year and we will now go to questions.

(OPERATOR INSTRUCTIONS). Credit Suisse First Boston, Dris Upitis.

Nice job in the quarter. Just wondering on the cost of service line, you had again a lot of leverage there. We were expecting something along the lines of 500 basis points. You came in closer to 700. Just wondering what we might expect for the full year in cost of services, where that might potentially go for the full year?

I think in terms of the guidance, we are revenue and earnings focused in terms of direction. We have talked about 19-19.5% when we started this fiscal year and I think we will be in that range. If you remember the first two quarters tend to be stronger quarters versus third and fourth and I think we are going to stay in that range.

Okay. You mentioned the currency benefit. Is that -- was that pretty consistent this quarter with what you saw last quarter, a couple of points or so?

It was down Dris. We had a more favorable impact in the fourth-quarter than we did in this quarter from the currency conversion.

Okay. Lastly on the ISO front. It sounds like you continue to get pretty good growth there. Can you give an update as far as how much of your revenues are from the ISO channel at this point?

We have not broken that out at this point. We did sign three new ISO's for the quarter, but I think we're not breaking that out at present.

Okay, thanks.

Tony Wible with Salomon Smith Barney.

Great quarter. Could you run through the receivables that you had talked about before with raising cash? It sounds like you're transferring some of it over to CIBC? Also kind of address the financial cost that we can expect from the acquisition, how much will be cash versus debt and what do you expect the interest cost to be?

I will take them in the order asked. First, I think as you know we fund our merchants in Canada in advance of actually receiving payments from Interchange. We accumulate and have a certain amount of cash on hand at any point in time to fund that and we just simply moved some cash down in anticipation of DolEx and locked in a rate for conversion to move into U.S. dollars as we will close the DolEx acquisition in U.S. dollars.

I think in terms of your second two questions we are going to use a combination of cash and debt to close the DolEx acquisition. It will all depend upon exactly when it closes. So I couldn't be entirely precise but it is probably right now about 50/50 cash and debt. In terms of cost of funds I think like everyone the marketplace is still pretty attractive for borrowing money and we anticipate that to continue for some time.

Returning to the foreign exchange, is there any way you could quantify how much the exchange rate has moved for you in the past quarter?

We haven't been breaking that out separately. As Paul said in the guidance 5-9% for the year. We take into account all, a variety of factors to come up with that range and so any one piece is not something we separately comment on.

Thanks a lot.

Greg Gould (ph) with Goldman Sachs.

On Canada did the business miss this the expectation that you guys -- implicit in the expectations when you discussed the outlook in July or are they in line?

I would say that they came in a less than we were hoping. We were surprised at the impact of the SARS hit. I mean we knew when we started seeing a terrific falloff in travel activity and unfortunately it was kind of the peak period for travel in Canada and it really did have an impact. Because we have over 30% of all of the business in Canada, we have a wide spectrum of travel oriented merchants, we were effected. But when we first formulated earlier in the year and clearly before SARS was a factor, this came below those expectations. Even when we factored in SARS it still came in a little lower than we expected.

So for the whole fiscal year given what we see right now, can you sort of quantify the difference in revenue versus let's say July?

I will tell you that the impact of SARS is pretty much over in Canada. Unfortunately what we have missed is that travel period. So although we are expecting Canada to pick up more in the second half of our fiscal year we are concerned that it is not going to be enough to make up for what we missed in the first quarter. However with that said and done, we are clearly reiterating our revenue guidance of between 5-9%. So we haven't seen anything that is making us adjust guidance by any means.

So the direct, domestic direct and ISO are making up for the difference?

Absolutely and we do expect Canada to eventually pick up too. We feel very comfortable with our 5-9%.

Are they, direct -- are domestic direct and ISO beating quota then?

Domestic direct and ISO are doing very well and they are doing a little better.

Okay, great. Thank you.

Jeff Baker with Piper Jaffray.

Good job on the quarter, good margin expansion. Can we get any update on your check business, some trends that you are seeing there? I missed, Jim I apologize, if you gave the revenue breakout from Canada. Thanks.

I didn't comment specifically on a revenue breakout for Canada, just the funds transfer business. With respect to the check business I think we saw good growth relative to where it has been in the last couple of years in the check business. I think you may have seen some announcements in the last several months about signing up certain of our products in the Vegas market place, Bellagio, one of our new customers. So both our gaming business which we talked about at our conference last year continues to do quite well in this marketplace and specifically in the Vegas area.

That has helped propel some growth in an otherwise tough market. But our core guaranty business is doing quite well -- as well. We have recently launched some new products and signed some larger customers than has traditionally been our focus and that has helped propel both volume growth as well as revenue growth in that business.

I will say Jeff that as you would suspect, the percent that Canada makes up of our overall revenues was down by a pretty good bit first quarter compared to what we have seen in previous periods.

That's fair enough. Can you talk a little bit about any kind of benefit you guys picked up from the lower debit rates?

Yes, there is a couple of events as you know that happened effective August. The Interchange actually increased for certain Visa and MasterCard Interchange qualification levels. In addition, there was an approximately 48 basis increase for check card or pinless debit cards. The impact of that varies by merchant. Overall for us we did pick up a little benefit. In general we passed on the benefits to our customers while increasing their rates appropriately for the Interchange levels. So all of our customers almost without exception, got some benefit from that activity, but we did retain a little bit of it and we did get a little pick up in August and we are expecting that to continue.

Is there anyway Jim, to quantify that and to the continued margin expansion we are expecting throughout the year?

I think the margin expansion has more to do with acquisition, integration and cost reduction initiatives renegotiations with vendors, all that kind of stuff, more than it does specific to the Visa MasterCard event as Paul just talked about. In terms of quantifying it, I think we are better to stay with the overall guidance range for the year and break it out specifically.

Last question and I will let someone else. Acquisitions outside of DolEx, can you talk about other areas you may be looking at?

Jeff, we continue to be very focused on opportunities to where we can bring -- opportunities in a payment space, opportunities where we can bring something to the party in terms of our balance sheet, our management team, leveraging our infrastructure and at the end of the day once it passes all those gates, it has to be accretive in a reasonable period of time. So acquisitions that fit those characteristics, we are very focused on both domestic and internationally. Other than that I can't make any specific comments.

Okay, great. Thanks, guys.

Kartik Mehta with Midwest Research.

A question for you on DolEx. As you look at this acquisition now that you have had a couple of months since you announced it, do you anticipate staying predominantly from a agent base or do you anticipate that you would go more to a branch type of Western Union moneygram type of a model?

I am going to let Joe Hyde who is very much the architect of that deal talk a little bit about it.

Kartik, I think we are going to stick with the branch approach where the cashiers are employees for the time being and that is the direction we are going to go in. We have a limited number of agents today and we may add selectively in that area but we're not going to go after the Western Union model.

I would really encourage you to think about our expansion being our employees in our branches or occupying Latino based merchants in our kiosks. That is our plan.

A question for you on the check business. You said the check business was doing well. Is that because Global is doing a good job gaining market share or is that check volumes are coming back and you are just seeing overall good same-store growth?

I don't know if that it's -- I think it is the former more than it is the latter. I think this is a business that we have put a lot more energy in the last couple of years. We have made some investments in technology and some products. I think the gaming business in particular has done quite well and the team that is driving the business has made a pretty good push in the last year and signed some good customers. I would say it is more market share than it is -- taking more market share more than it is anything else.

Thank you very much.

Don MacArthur (ph) with Stifel Nicolaus.

Can you -- I'm trying to get a handle on this decline revenue growth. Can you quantify the SARS impact? Is that a 10-12% of Canadian revenue or even with the currency appreciation? You have talked about a rebound in the second half of the year and kind of wondering about this quarter, how it is progressing in that area?

The currency impact didn't do it. I mean we were -- we had an overall disappointing growth rate because of that SARS epidemic. We haven't broken that out in particular Don, but it is not immaterial. I mean it caused Canada to be a significantly smaller part of our company for the first quarter than it historically has been.

Have you seen great margin improvement? Have we seen the benefit from the consolidation of those three locations or are we just getting the consolidation of other acquisitions and other cost controls in this quarter?

You are seeing the benefit of work we did last year more than what we have just talked about. The consolidation effort underway for those three facilities, one is effectively done. The two others are on the way to being done and we will see those toward the tail end of this year and more into next year.

Great, thank you.

Wayne Johnson with SunTrust Robinson.

My question is (inaudible).

We can't hear you. Please check your mute key.

The question is for Paul. On the U.S. economic environment can you find a give us an overview on how you see general business trends in the second half of calendar '03 versus first half?

I can't speak to the overall economic environment, I can speak to our little slice. We were very pleased with our first-quarter results in our domestic, both our domestic direct and our domestic ISO growth. It has been robust in the first quarter and we are hoping for similar trends. I don't see anything on the horizon that would give me reason to think anything else. So we are pleased. It looks like things are roaring back here.

And on the ISO channel, can you remind me how many ISO's do you have in total? You said you added three new ones in the quarter. What does that bring the total to?

It is something north of 50, probably closer to 55, 56 ISO's we have. Keep in mind there is probably 15 of them that really account for probably 70% of the activity. These three we added we're pretty excited about. They all look like good growth businesses. We are focused on not only resigning our existing customers, but attracting more ISO's of this quality.

Okay. A question for Jim. The percentage of indirect versus direct in the quarter?

It is around an 85/15 break.

Eighty-five percent direct, 15 indirect. Okay, thanks.

John Mathis (ph) with Camelot Capital.

Good morning, good quarter. The outlook for pricing Paul, you talked about spreads and average tickets being okay so far. What do you expect for the rest of the year around pricing?

We are cautiously optimistic. I mean August, we did pick up a nice little benefit from the Interchange activity. We did -- we could have kept a lot more. We didn't choose to because we are always focused on merchant attrition too. But we think we did that one pretty accurately. That is going to carry through. We are going to continue to enjoy that, so we are very optimistic on our spreads for the remainder of the year.

A big picture of you -- Paul you have been in industry a long time. The Visa and American Express Discover case, if it ever comes to a conclusion, is there a positive for your business there?

I think that remains to be seen. I think I know it is going to be appealed now, there has been a ruling. But you could see financial institutions issuing American Express and Discover cards. I think that in and of itself is not necessarily positive or negative. What is unknown is what kind of impact that has on the bank card associations and what do they do then to respond to that competitive pressure and therein could be an opportunity for the merchant acquiring community. I really don't know enough to comment at this time other than we are very closely watching these developments.

Okay Lastly the trends that you see in the first couple of weeks of September, can you comment on those in your business?

I would say pretty much what we have seen from the first quarter has been carrying through so far in the first couple of weeks of September, John.

Great, thanks very much.

Greg Smith with Merrill Lynch.

Just on the interchange issue, the benefit you get, we would see that in revenues correct, rather than an expense savings? It would be in revenues, is that correct?

It is actually, it is overall pricing so you see it in revenue and you see it in margin and you see it to the bottom-line.

Okay, great.

Greg, it is primarily -- I mean that stuff falls right to the bottom line. So it is kind of disproportionately reflected on the bottom line, i.e. margins and EPS as opposed to revenue.

Okay, great. Is there anyway you can give us what percentage of your U.S. business is done based on bundled pricing?

We wouldn't be able to break that out between bundle because there is such a matrix of pricing models in place. We have very few merchants that are on what is called interchange assessments and a fee. Most of them are on a bundle and the bundles are across the board.

To the spirit of what Greg is asking, Greg I think it is certainly the great majority. You're referring to national customers that have straight pass-throughs with interchange and assessments as opposed to smaller merchants who do get a bundled rate. Because we are a midmarket processor primarily the great majority of our customers are bundled. To Jim's point, we do have additional authorization fees and excess charge-back fees, in some cases help desk fees, etc., but the interchange assessment and discount is usually expressed as one, typically the same for Visa and MasterCard.

Okay. Just back to the question about banks potentially issuing AMEX cards and whatnot. Can you just review how you handle the processing of an AMEX or a Discover card and what the fees are relative to a Visa or MasterCard transaction?

I would be happy to. Typically when we're providing authorization, settlement, data capture and payment for Discover we are earning very similar fees. Obviously the merchant is paying a discount to Discover, although Discover does have a hybrid program called EISA (ph), that allows you to actually acquire on behalf of Discover, they appear to be a Visa and MasterCard. We are a participant in that and driving a fair amount of business. We also have a relationship where Discover refers business to us in a Visa/MasterCard scenario. We actually have a pretty robust relationship with Discover. American Express is a little different. American Express does not encourage by any stretch of the imagination, any third party participation whether that be us or anyone else. Merchants for ease of having one source for authorization and processing many times do have us provide those service and we charge a fee. Typically it is close to what we charge for just the authorization and processing elements of a bank card but that is a much smaller part of our revenue. We do however have a relationship with American Express where we redeploy terminals for them nationwide and have recently renewed that agreement.

, Okay. Lastly Jim, I know you said maybe a 50/50 split between debt and cash for the DolEx acquisition. Can you just give us maybe a ballpark interest rate we should be modeling for the cost of debt?

I think as I mentioned in the K we are in the process of redoing the line when it comes due in February. So we are in that area now of the market and I think my sense of the market, your sense of the market are probably about the same. We're not expecting an increase of any significant proportion to where our line has been historically, and maybe you can use the historical rates and what you have seen with us, where we are projecting forward.

Okay, great. Thanks a lot.

(OPERATOR INSTRUCTIONS). Robert Dodd (ph) with Morgan Keegan.

Good morning. This is A.J. Kassnergon (ph) with Morgan Keegan. First question, thank you for taking my call, is regarding credit facility. Do you have any update on credit facilities on when you might be able to close that? I know you disclose that in your K, that you were working on it? When you talk about using debt for the DolEx transaction, 50/50 cash and debt, are you talking about using the facility or using a fixed instrument?

we're looking to close on a facility in the next couple of months. I would say within the next eight weeks we should have a view toward closing that facility. In terms of a if the rate -- it will not likely be a fixed rate, it will likely be a bank debt rate which will be floating.

Okay. Thank you. Secondly, in terms -- I think we have exhausted a lot of questions on Canada and its impact, but Paul one question that you didn't make was that the impact was less in the first quarter than it was in the fourth quarter of '03. Can you let us know, what was the Canadian impact on the top and bottom line in the fourth quarter of '03?

I would be guessing if I gave that to you. The question is what kind of impact did Canada have in fourth quarter versus the first quarter?

The question was what was the impact in the fourth quarter of '03? Do you guys have that available?

We don't A.J., I'm sorry.

That answers my questions for right now, thank you.

Greg Gould with Goldman Sachs.

Can you guys comment on how DolEx is performing so far in the September quarter? Has there been any impact from the distraction around the merger?

That is a great question. Management is very excited at DolEx. If anything they are focused on expanding even more aggressively than they have in the past and we have even -- we have contemplated allowing them to do some deals even prior to close. In other words you may see them actually buying some branches that perform similar services in a similar manner they are providing at DolEx. So we might even see an acceleration. So just the opposite, these guys -- we're very excited with that management team. These guys are on fire and we can wait to close that deal.

One other question. I didn't understand, on the AMEX comment for processing, do you get the same fee for excluding interchange for processing an American Express transaction or roughly the same as a MasterCard or Visa?

It is a little less. It is a little less on the AMEX side because they don't really do anything necessarily to encourage a different processing relationship, discover however we do. When I say we make something less on AMEX it is what we would make for settlement authorization -- excuse me -- authorization and processing. But because we typically don't pay American Express merchants and we do do that with bank cards, you could argue it is the same amount if we were to (technical difficulty) pre-elect that in a bank card. But in the spirit of your question we actually are going to make a little bit less overall on an AMEX than we are going to make on American Express. One last thing, because we do express our fees in basis points typically, the American Express transaction is typically higher. So on a cents per transaction, they are fairly close.

Okay, so then you guys should be ambivalent, generally ambivalent, to a shift in market share of American Express if banks are allowed to issue those cards?

I would say Greg, as much as I would like to say that, I would say that is not exactly 100% accurate. Our break is still very much buttered on the Visa and MasterCard side, and while we do have a good relationship with American Express from deploying devices and we do provide lots of American Express services because we are so, we are very heavily into a lot of their verticals, we would have to watch that very carefully.

Okay, thanks.

With that Mr. Garcia, Mr. Kelly and our host panel, I will turn the call back to you.

Thank you all for joining us on the call today. Look forward to seeing all of you at our investor conference October 15, in New York City. Thanks again.

Ladies and gentlemen, that does conclude our earnings release for this quarter. Thank you very much for your participation as well as for using AT&T's executive teleconference service. You may now disconnect.