環匯 (GPN) 2004 Q4 法說會逐字稿

Thank you for standing by, and welcome to the Global Payments fourth quarter earnings release. At this time, all participants are in a listen-only mode. Later we will open up the lines for questions and answers. If you should require assistance during this call, please press star then zero. 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 Forbes. Please go ahead.

Good morning, and welcome to Global Payments fiscal 2004 fourth quarter and year-end conference call. On today's call, we will discuss the quarterly and year-end financial results, and business highlights. Joining me on the call are Paul Garcia, Chairman, President, and CEO; and Jim Kelly, Senior EVP and CFO. I would like to remind you that some of the comments made by management during the conference call contains forward-looking statements that involve a number risks and uncertainties. For these statements, we claim the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. While these statements reflect their best kind of judgments they are subject to risks and uncertainties that could cause actual results to vary. These risks and uncertainties are discussed in our public releases included in our most recent 10-Q. In addition, some of the comments on this call may refer to normalized results, which exclude restructuring and other charges, and are not in accordance to the GAAP. The management believes that normalized results from us clearly reflect conservative operating performance. For full reconciliation of normalized to GAAP result in accordance with Regulation G, please see our press release filed as an exhibit to our Form 8-K dated July 21, 2004, which can be located under the Investor Relations area on our Web site www.globalpaymentsinc.com. Now, I would like to introduce Paul Garcia. Paul?

Thank you, Jane. Good morning everyone. The agenda for our call this morning is as follows: I will summarize our normalized fourth quarter and full year results and review recent trends and events, including an update on our recent acquisitions. Then Jim will discuss the financial results in detail. I will then discuss our fiscal 2005 outlook. And, lastly we will have a question and answer period. We've reported strong financial results for the fourth quarter ended May 31, 2004. Our revenue grew to 35%, to a $181.8m, primarily due to the impact of recent acquisitions and high-teen growth in our direct channel. Excluding the impact from our DolEx and MUZO acquisitions, fourth quarter revenue would have grown 13%. We also achieved a 120 basis points operating margin improvement to 18.8%, as a result of gaining greater economies of scale and continued cost containment programs. Our revenue growth and margin improvements resulted in a 30% net income increase to $18m, and a 28% diluted EPS increase to $0.46.

Now, for our full year results. I am very pleased to announce another year of solid financial results. For the year we've reported revenue of $629.3m, or 22% growth over prior year, and net income of $68.1m, or a 26% increase over prior year. These results include the impacts of our recent acquisitions with revenue of $52.7m; excluding this impact revenue growth would have been 12% over prior year. Additionally, diluted earnings per share grew 22% to a $1.75 over the prior year. These results reflect a solid year in our core processing business and continued success with our acquisition, integration, and strategy.

Now, for recent trends. Our domestic direct transactions grew in the high-teens for the quarter. In addition, our domestic average ticket remains stable for the quarter and we continue to experience an increase in our domestic spread. Our Canadian transactions for the quarter grew in the mid-single digits, which reflect our previously announced exit from higher risk between these sectors. We expect stronger results in Canada as the impact from last summers SARS crisis, and our decision to exit certain higher-risk lower-margin merchants annualized during fiscal 2004. Moving on to recent events. I am pleased to announce the successful completion of our public offering of shares owned by CIBC. As you will recall, we purchased the CIBC merchant acquiring business in March of 2001 in exchange for Global restricted stock.

The contractual restrictions on CIBC sale of Global common stock expired in March 2004, and upon CIBCs request, we were pleased to help facilitate the sale of the banks shares. Through a public offering in May, CIBC effectively sold all of its shares in three stages. First, through an underwritten offering of 1.3m shares at a price of $44.25 per share. Second, through the exercise of the underwriters over allotment option for an additional 1m, and third, through CIBCs entry into derivative transaction with an affiliate of Citigroup Global markets, for the remaining 6m shares. CIBC entered into these derivative transactions primarily to participate in any increase in our stock price over the next several years, while at the same time limiting the banks downside risk. As such, let me remind you that these 6m shares effectively reflect a short position in our stock that may remain in place for some time. As previously noted, Global did not receive any proceeds from the public offering.

Now to quarterly results. Our quarterly results include a full quarter of MUZO operations primarily, at the 52.6% ownership level. On May 14, 2004, I'm pleased to say, we completed a public tender offer, for the remaining outstanding shares of MUZO, and ended our fiscal year owning approximately 98%. We are extremely pleased with MUZO's performance and we continue to work on our strategy to expand MUZO into other geographic areas. Now, for an update on our DolEx operations. We continue to pursue our branch expansion strategy and have added more than 20 branches during the quarter, raising our total branch network to more than 620. We also continue to pursue market share growth through our competitive pricing and product strategy and as such reported $21.4m in revenue for the quarter. For fiscal 2005, we anticipate DolEx transaction growth in the mid-to-high teen levels and revenue growth in the low double-digits to mid-teens. In addition, we are expanding our settlement reach throughout the Latin American market and we have approximately 10,000 settlement location choices today for our customers. Moving on to our North American merchant business.

We continue to expand and strengthen our various channels to grow our market share. In Canada, we continue to focus on signing national to midsize merchants as well as target and develop new sales channels such as trade associations and third-party sales force. On that note, I am pleased to announce the signing of Canadian restaurant and food services association, which has over 17,000 members throughout Canada. We also continue to sign 1,000s of new merchants the most notable of which is Telus Mobility one of Canada's largest mobile phone carriers. We also remained diversified in our domestic merchant channel and as such we continue to sign a large number of mid-market merchant accounts, reaching into many different vertical markets. Such as retail, professional services, universities, government, and healthcare. We also continue to build our gaming channel with the acquisition of Comerica's banks 49% interest in our Cash and Win product for $7.8m in cash.

Cash and Win, is a superior cash advance service sold in casinos through our alliance with Comerica. This transaction, which was completed last month, will not impact our revenue or EPS in the short-term. The primary benefit, however, is the increased control we will have over this product offering and the strong potential for enhanced revenue growth and EPS accretion in the longer-term. To that end our primary objectives will be to merge our Cash and Win, and VIP check gaming products together in unified sales and marketing effort to the gaming marketplace in addition to pursuing cost savings through acquisition integration. To summarize, very pleased with our strong financial results and accomplishment during this past year. I'll now ask Jim to review the financial results in detail. Jim?

Thanks, Paul. In our press release and it's posted on our Web site, we included GAAP income statements, and schedules which reconcile the quarter and year-to-date GAAP to normalized results for both periods presented. Our current GAAP results include $4.9m in restructuring charges, partially related to our previously discussed facility consolidation program announced in the fourth quarter of fiscal '03. This program was successfully completed this quarter and resulted in a more streamlined consolidated back-office operation. Total net charges taken for the program including the fourth quarter of fiscal '03 were approximately $8.2m, half of which was associated with one-time employee termination benefits, and the remainder related to contract and lease terminations, and other related facility closure costs and expenses. In addition, we incurred $2.7m in charges related to certain employee termination benefits, of which $2.2m was non-cash.

Finally, interest and other income for the quarter includes a one-time gain on the sale of stock in an unrelated public company of $583,000. Global initially received these shares in partial consideration for the sale of certain assets in June 2000. My comments this morning, excludes these charges and reflect our normalized quarterly results. For the quarter, revenue grew 35%, to $181.8m, primarily due to the $30.6m in revenue from our recent acquisitions, and strong growth in our domestic direct-sales channels driven by high-teen transaction growth. Our direct sales growth was partially offset by high-teen declines in our domestic and direct-sales channel as expected. Our MUZO acquisition added $9.2m of revenue for the quarter. We continue to assume mid-to-high-single digit revenue growth for fiscal '05, due to the plan loss of a significant customer who provided a notice of an intent to move his business prior to closing the MUZO acquisition, which we have previously disclosed. Our money transfer revenue for the quarter was $24.5m, of which $21.4m relates to our DolEx acquisition. As previously discussed, our fiscal fourth quarter is one of the strongest seasonal periods for DolEx, primarily due to the mothers-day holiday.

Operating expenses for the quarter were $147.7m, resulting in an operating margin of 18.8%, or 120 basis point improvement as compared to last year. The operating margin increase was due to continued ongoing cost containment programs and other margin improvement initiatives. These cost reductions were partially offset by the ongoing investments made in our direct and ISO sales channels, as well as investments to grow our money transfer branch network. Interest and other expense of $2.6m for the quarter, reflect the cost of additional outstanding debt as a result of our recent acquisitions. Excluding, of the impact of the non-recurring stock sale, we anticipate the amounts reflected on the interest in other income, and the interest in other expense-line items, that if together for the quarter were approximately a quarterly run rate for these line items in fiscal '05. In addition, we expect minority interest to be modestly below the current level for fiscal '05 due to the anticipated growth of our Comerica alliance, offset by the elimination of minority interest relating to cash event acquisition and our ownership, our recent ownership increase in MUZO to 98%.

Net income for the quarter improved 30% to (indiscernible), and diluted earnings per share from 28% to $0.46. Our effective tax rate during the quarter remained at 37.4%, and our diluted shares increased due to a combination of additional restricted shares issued to employees as a part of retention programs and the effect of in-the-money stock options. We anticipate lowering our effective tax rate to 37% for fiscal '05 due to tax planning initiatives and the impacts of lowering income tax, lower income tax rates in the Czech Republic.

Now, turning to cash flow and the balance sheet. We reported $96.1m in free cash flow for fiscal '04. We define free cash flow as net cash from operating and investing activities excluding business developments, change in the working capital and cash impact over restructuring activities. Capital spending for the quarter was $9.9m, primarily for DolEx branch expansions, software, infrastructure, and headquarter relocation. We anticipate capital spending in the range of $25m to $35m in fiscal '05. This includes ongoing operating capital for our recently acquired businesses as well as systems development and hardware relating to our next generation front-end processing systems, which we anticipate will be completed over the next two years. Our business development line primarily reflects the additional purchase price for MUZO ownership, interest completed in May '04. We also paid down $39m on our line of credit during the quarter, primarily as a result of our strong cash flow generated during the quarter and the usage of excess operating cash generated during prior quarters. On the balance sheet, accounts payable and other accrued liabilities increased over prior year primarily due to the impact of the DolEx and MUZOuzo acquisitions. Paul will now discuss our ongoing strategy and fiscal 05' guidance. Paul?

Thanks Jim. Now on to guidance. Based on our strong annual result and our ongoing commitment to build shareholder value, we are providing full year fiscal 2005 annual revenue guidance of between $722m to $743m or a 15% to 18% growth over the $629m in fiscal 2004. In addition, we are providing annual full year fiscal 2005 diluted EPS guidance to $1.96 to $2.05. Reflecting 12% to 17% growth over our $1.75 normalized diluted EPS for fiscal 2004. We are also providing annual fiscal 2005 operating margin guidance of 19.5% to 19.8%. This guidance does not reflect the impact of any potential new acquisitions. We are very pleased with our achievements this past year, which continue to reflect the ongoing execution of our strategy. We will continue to focus on integrating and expanding our acquisitions as well as pursuing other domestic and international opportunities to position Global Payments as a solid, long-term revenue and earnings grower. Operator we will now go to questions.

Thank you. Ladies and gentlemen we will now conduct a question and answer session. If you wish to ask a question please press star then one on your touch-tone phone. You may remove yourself from queue at any time by pressing the pound key. Once again if you do have a question, please press star one at this time. And our first question today comes from Karthik Mehta from FTN Midwest Research. Please go ahead.

Good morning. First question on the guidance, Jim and Paul. What's the biggest assumption you are making in terms of whether you end up on the low end of guidance or high end of the guidance?

You know, Kartik, a year is a long time and we are pleased that we have never had to go back to you guys and adjust downward. It's keeping kind of with -- not kind, it's keeping with the spread that we've had percentage wise both on a revenue and in EPS. So other than that I really can't give too much color. Jim, do you have any take on it? .

Yes, as Paul mentioned during the comments Kartik, both Muzo MUZO and DolEx are doing terrific. I think it was reflected in the quarter, but these are also new acquisitions for us and we will know them better by the end of fiscal '05.

As you at look DolEx and you could expand your branches. Does it make more sense for your purchase branches or go ahead and build branches. What strategy do you think you will pursue in 2005, and what could be the implications from a casual perspective on either one of those strategies?

Well, firstly, it's -- we have gotten to a point with these branches that if you are looking at kind of the discrete acquisitions we are making, it’s kind of a push. It's about the -- when you take to consideration the build cost, I don't mean just a 20,000 in CAPEX to our build a location, I mean the revenue build, the dollar, sales, etc. versus paying a monthly transaction fee, you take monthly transactions you pay a range of fees. We have gotten that to a point Kartik, where it's a push, I mean, one, you know is just about as good as the other, depending on the price you pay but within this range they are very similar. So consequently, we are pursuing both. If someone has a model, meaning it's a not an agent, it's an owner operator, they have a reasonable market share there, in markets that are attractive to us. I think you can look for us to be making some of these acquisitions if they're available. If not available, then we are pursuing opening locations. And we have done a little bit of both in the -- you know, during the last fiscal year.

And one last question on DolEx. Your ability to push other products through DolEx, you had DolEx for a limited amount of time, but so far from that, does your experience tell you, you will able to push other products through the DolEx branches or will the key be just to focus on their core money transfer business?

That's – Kartik that is another great question. We absolutely are counting on other products through there and I would -- it's not to take too far a field, but there are some things we are testing today with the store value card for example, we are looking at some other opportunities. We have a couple of betas. We are not really in position to discuss too much at this point, but we're clearly testing 10 different concepts in various DolEx locations with additional services and products. And the way we look at it, 38m Latinos who need to have a wide range of financial services. We have a footprint of 620 own locations that can serve them uniquely in their native tongue, and it would be -- I think a missed opportunity us not to understand what their needs are and provide products that service them.

Thank you very much.

Our pleasure, thank you.

And our next question comes from the line of Greg Gould from Goldman Sachs. Please go ahead.

Thanks. Hi, guys. On DolEx, how much of the CapEx in the May quarter and what's your assumption for fiscal '05?

I'll take '05 and I’ll ask Jim to do for the quarter. You know, '05 Greg, if you just kind of do the math, we talked about a 120 locations times, $20,000 just about $2.5m if we did each one of those at that level. So, it's not a lot of money, because it's -- we got this down to a science. So, all that range that it just gained between $25m and $35m, we need a couple -- $2m to $3m to open, to execute your DolEx strategy, if you open every one of those. I'm not sure of the fourth quarter. Jim?

Fourth quarter was a little less than $2m, but in addition to branch openings, they are business that has a system and infrastructure. So, just like with MUZO both these acquisition are going require additional investments beyond the run rate of what you've seen here in the past, which has been around $20m to this year, a little higher than $20m, expectation will be, as we've said $25m to $35m next year.

Okay. And then, in terms of the money transfer business overall, any changes in pricing fronts?

We are -- as you know Greg, we talk about third quarter, our strategy of taking the pricing down which we did. It is -- it's kind of at a steady state, it certainly had built transactions and as you could see we had a nice revenue growth in the quarter too. We've given some guidance as to revenue growth and transaction growth for the year, and that kind of reflects the kind of steady state -- steady state kind of on the very competitively priced steady state of where we're today. So, no change from where the strategy, we announced at the Q3 call, but remember that was a reduced price to drive business and it's working very nicely.

Okay. And sorry, one last question to sneak in. The indirect -- North American indirect business, did that decelerate in the quarter versus the year-over-year growth rate decelerate further from the third quarter?

No, it's still declining at kind of the high teens rate. Now, that did accelerate last year, when we first started talking about it, it was kind of low-to-mid and then it accelerated to high, it's kind of sticking at the high teens. And that's our forecast for the guidance for '05.

Great. Okay. Thank you.

Thanks Greg.

Thank you. And our next question comes from the line of Tony Wible from Smith Barney Citigroup.

Thank you. Great quarter.

Thanks Tony.

Few questions on Europe. Can you talk a little about the MUZO growth strategy at this point and maybe strategically, any particular countries that might attract you to move beyond out of Czech Republic into --?

Okay, without Tony, we're giving away too much of our strategy. We believe MUZO with its wonderful EMV compliant platform, terrific cadre of engineers, and the position it has in the Czech Republic newly entered EU that there's lots of opportunities to expand. We are talking to all the border countries right now and hoping for some success, and in particular we really like Russia. And we're hopeful that we will be able to talk to you about Russia, some time during, maybe on our Q1 call about some potential opportunities we're pursuing there. It's looking good, there are some great Russian institutions, there's unique relationship between the Czech people and the Russian people. And, so we think we are uniquely qualify with MUZO to provide some processing to Russian institutions.

What are your expectations generally speaking for MUZO transaction growth? And just as a quick follow up, can you recap on the indirect, how big of a percentage of revenues that is now?

On MUZO, we are actually forecasting fairly modest growth this year, because there was a previously announced customer that left prior to -- as announced prior to us buying it and that would some impact. Also it takes a while to build these relationships and even if we're fortunate enough to get some of these relationships that we're contemplating in Russia and other countries, it takes a while to build volume. Particularly in Russia, this is the easier to noble strategies of new card issuing efforts for a financial institutions and this could take while to build some volume on that. So, consequently we are looking at kind of high single-digit for MUZO. Is that correct? Or going to be a high single-digit for MUZO for guidance for '05. Jim, why don't you take the second part?

In terms of the break out, again, we don't segment it, but roughly around 10% to 12% of the total revenue in the indirect business.

Great, thanks a lot.

Thanks Tony.

Thank you and our next question comes from the line of Dris Upitis from CSFB, please go ahead.

Hi guys, it's Dris. Nice job in the quarter.

Thanks Dris.

Just a question on the cost side. The SG&A as a percentage of revenue stabilized versus last year for the first time in about three years. Can you just elaborate on what prompted that change?

You know there is a lot of moving parts coming into the business between DolEx, MUZO and ISOs. I am not sure there was one event, in particular our SG&A line has moved most significantly around ISO growth.

Is that indicative at all of a change in your thinking on ISOs or their contribution in the quarter?

No. I think the ISOs going back 3 years have been and continue to be a terrific part of the business and continue to grow, we have a core group of ISOs have been with us most of this time period and continue to do well. I think when you look at a quarter-over-quarter, there is so many different moving parts, it's hard to draw a specific trend.

Okay, and then just a question on debit interchange friction. Is that -- have you seen a change in the contribution since August? And how do you expect that to play out as you anniversary that this fall?

Dris, as you recall there, there are three anniversaries for the interchange, August, January, and April. There were three changes last year, so there are three anniversaries and there was a reduction in August. There were was increases in January and April. All of those occasions, we were able to appropriately get a little bit --- some rounding etcetera, etcetera. Spreads are still looking very strong. That is, they go to -- as you ask, they just go to anniversary here for those three time periods. But we've taken all of that in consideration with our guidance.

Also want to point out Dris, that well, August was more significant of the three, there is nothing that wouldn't suggest that this year, that associations will go through another round of evaluation of interchange.

There’s nothing that would suggest it.

To date, they haven't said, but the trend has generally been that there has been that there has been evaluations in the future.

Okay, and then last question just on the acquisition pipeline. Can you talk about that status and then how you think about acquisitions in terms of international versus money transfer versus the domestic business?

We have a full pipeline. We are pretty diligent on identifying opportunities and very disciplined on making sure that our core businesses --- making sure they are accretive and making sure there is something we can do to make it better. In terms of DolEx, we really look at that and just a kind of an answer to an earlier question too. We look at that as kind of build and buy push based on the price formula we have. So, we don't -- I guess they are acquisitions we would kind of look at them more as kind of a build and buy strategy for DolEx. In terms of international, we look at opportunities domestically, but a lot of our focus is internationally, prices still remain a little better over there and it will help us leverage our MUZO business as well as potentially get into some new very exciting markets. So, we are still optimistic that there are opportunities there and we are working diligently on them.

Okay, thanks.

Thanks Dris.

Thank you, and our next question comes from the line of Wayne Johnson from SunTrust Robinson Humphrey Capital Markets. Please go ahead.

Yes, good morning.

Hi Wayne.

Can you talk a little bit about the cost of services in the fourth quarter as a percentage of sales as it relates to -- compared to the rest of the fourth quarter? I mean, I assuming the rest of last year.

I think we have discussed in the past of fourth quarter is seasonally lower. So on a percentage basis, you may see it increase, which has been the trend over the last couple of years. We also have in the fourth quarter both DolEx and MUZO for the quarter, which is going to as I mentioned on an earlier question, it's going to make a comparative basis difficult for the year and difficult year-over-year, but overall the margin for the quarter and for the year on the bottom line operating margin improved for both of those measurements. Program center and place are not limited to just the US business and Canada, but they extend to DolEx and MUZO in terms of opportunities to leverage these acquisitions against our existing infrastructure, it's something that we do everyday here and we'll continue to focus on.

Great and you guys did a terrific job of that, earlier in the year and should - going into the fiscal '05, should we expect a slightly lower gross profit margin but still a solid operating margin? Is that what we should be looking at?

I'll answer the operating margin. We have forecasted a continued improvement in operating margin and have given some guidance on that. So,

I think on gross profits, your comments are - I think we'll be in a general range of where we were this year, plus or minus a couple of points, 100 basis points.

Thank you and our next question comes from the line of John Mihaljevic from Thomas Weisel. Please go ahead.

Good morning guys. Few questions on DolEx. Do you mind just repeating the transaction growth expectation for fiscal '05?

Yes, we said transaction was mid to high teens John. So, 14, 15, 16, 17, 18, 19 kind of transaction growth.

Got it. And I assume that you're still looking at sort of mid teens operating margins on DolEx for fiscal '05. Paul, at what point does the leverage in that employee model for DolEx really start to shine through. What sort of transaction growth would you need to have to move that perhaps above the mid teens?

Yes John, it is a wonderful question. We have modeled that and I'm not going to share a ton of detail on that other than to say you've kind of broken the code because it's not an agent model and it is an employee model. Obviously, the first transaction is the terrible loser, by the 20th during the day it is looking great and once you start building some real volume, this is an incredibly profitable thing. You can almost back into it understanding what our general costs are to operate and our general revenues. You can probably get pretty close to the back of an envelope, but it clearly is about driving in transactions. So that brings us to the point of offering additional services and products that bring customers into our location.

Okay. Paul any updates on New York/New Jersey?

We do have approval from New Jersey. We're pursuing - we haven't opened anything yet. We are waiting approval on New York. They got hung up in something and we have the attorneys' focus on that now, some I am hoping to nail something in the not too distant future in New York. We think there is a buy strategy that may present itself there as well as a build strategy and we'll probably have some more color on that Q1.

Great, and then on MUZO, the contribution in the quarter seemed pretty high to me at $9m given sort of the $27m , I believe, that you disclosed this as the most recent annualized revenue for MUZO. Was that just stay a seasonal thing or is their business really starting to pick up there?

Well, the business is starting to pick up, but we also were able to hold on to that customer a little longer than we initially thought. So, we're not convinced that trend continues. That's why we've kind of given high single digit guidance for MUZO for fiscal '05, but that's a good catch.

Okay, got it. And then lastly Paul, looking at your fiscal '05 guidance, June was a bit weak in terms of overall retail sales. What impact did that have on your business and to what extent do you try to forecast retail sales as you come up with your own guidance?

You know John, because of the diverse nature of our portfolio, we really - we've not profited by these changes up and down as much. And we're delighted with what we've seen so far this year. And we feel very comfortable.

Excellent. Thank you, Paul.

Thank you and our next question comes from the line of Robert Dodd from Morgan Keagan. Please go ahead.

Hi, just one - several questions. First of all, can you repeat what you gave as that Canada growth --- anything on transactions whatever, I didn't write that down. And then I've got a couple of other questions related to DolEx.

Okay, just a second here Robert. Okay we said that -- I don’t think we did. Just one second Robert. I want make sure I am consistent, I didn't say something now, I didn't say earlier. Okay, we said that the transactional growth for Canada was in the mid-single digits and that was a byproduct of two factors. Number one, we announced on several calls that were exiting certain high-risk tiny (ph) sectors and we have in fact executed that. So, we got now there is some kind of empty calorie but still some business that produces an awful lot of transactions. But we also temper that by saying, that we're banging up against SARS last summer. This summer we are obviously, Canada is enjoying a much by comparison, much more robust growth rate. So, I'm feeling more comfortable even understanding the impact of exiting some of those businesses. So we're anticipating stronger growth from Canada in '05 than we witnessed in '04.

Okay, and then on DolEx, can you give us some kind of color on what it's doing in same-store sales or what they're doing in same-store sales, and where you think you can take that by launching additional products?

Robert, I'll be guessing on the latter. We have our optimistic assumptions on driving a new product, but I'm not prepared to really give any guidance on that. And in terms of same-store we measure it, we haven't released that data and I kind of hesitate at this point to do so.

In the low-double digits.

Same-stores?

Yes.

Okay. Now, that's for the record.

Thank you. Finally on New York, you mentioned the potential build strategy or buy. Are there really opportunities to build, I mean New York's got some bizarre regulations about proximity of certain types of stores. I think it may (indiscernible) but I'm not sure. I mean are there opportunities to build or are you going to get pushed into buy strategy there?

The buy strategy in New York actually will work out pretty well, if some things turn out the way we hope. But because you kind of deal with all of those, you're exactly right. New York and we are not even approved in New York, so this is very premature. New York is tough. We got approved in California, if you can get approved in California you can get approved anywhere. But New York is tough. There are some peculiar rules and regulations, and you're right. But we think even if we can't execute a buy strategy we can still build in New York.

Okay, thanks.

Thank you.

Thank you, and our next question comes from the line of Jensen John from J.P. Morgan. Please go ahead.

Hi, it's Jensen, good morning. Nice job in the quarter.

Thanks Jensen.

Can you talk about the trends you're seeing in the check business and I guess in the gaming side, any P&L implications from recent high end casino consolidations? A lot of news there.

In terms of the trends on the checks side, the gaming business is growing at a very strong growth rate our overall guarantee business vis-a-visvis-à-vis the traditional electronic check or straight guarantee is low double-digit. I think the consolidation always provides challenges and opportunities in any market, I think. All the recent announcements in the casino area in Vegas, in particular, is no exception. But I think where our products, in particular, in this channel are superior, and as a result I think they are sought after by the properties on the VIP side in particular and with the acquisition of the cash and win product rolling that in for suite of VIP preferred and Playernet, I think we will be able to manage through those quite nicely.

Thanks, also did you disclose ISO growth in the quarter?

We did not, and ISO growth is together with the rest of our direct business and we disclosed that as the high-teens.

Very good, thank you.

Thank you, and our next question comes from the line of Peter Swanson from US Bancorp Piper Jaffray. Please go ahead.

Hi, thanks, congratulation on the good quarter.

Thank you, Peter.

Paul, I was wondering about the sales force productivity in the domestic direct business, what you saw in '04 and what your expectations are for 2005?

Well. We saw massive improvements in '03, '04 was kind of a steady state. We're hoping for a little pickup in '05. We have a couple of new products, we've put in a couple new refinements that will make the sales force more efficient. But, Peter, I'm not expecting any quantum leaps, I think that we made one of those a couple of years ago, and I'm happy with a kind of a steady state.

Okay, and any plans on increasing the size of the sales force, and if you could kind of remind us where you are at today?

We have about 300 sales people who work for us, who have salaries and commissions and those are split between Canada and United States. And we are not planning, and the guidance does not anticipate any significant change up or down with that number.

Okay, thank you.

You're welcome.

And our next question comes from the line of Roger Freeman from Lehman Brothers. Please go ahead.

Hi, good morning.

Hi.

I got on a couple of minutes late. So, let me know if you answered any of these. When you look at potentially buying in the money transfer business to add to MUZO? Would you be looking primarily at companies that serves the Mexican market or would you look to grow outside of the -- into the rest of Latin America, even elsewhere?

That's a great question, DolEx. But -

I'm sorry DolEx.

I know what you meant, that's a great question Roger. And that kind of gets back to a question that was asked earlier about New York. New York does not have a significant Mexican population and that would have some moderating impact. That is our primary market, that's where the majority of our 10,000 distribution where you can get money from are located. However, with that said and done, we are interested in expanding our presence in Central and in Latin America and South America. But our real bread and butter is Mexico and a pretty significant percentage of the $38m Latinos in the state that we are heavily in are Mexican heritage. But that -- so, we initially focused on that because that's a machine well oiled and we have better products and services than anybody. But we will be interested in expanding that reach. And the one exception is Brazil, and that's because it's Portuguese and we are not at this point in a position to have our offices speak Portuguese.

All right. Okay, and in terms of the pricing, have you seen any incremental pressure and I think Wal-Mart and MoneyGram dropped pricing to Mexico, substantially like 40% during the quarter. Has that caused you to have to be even more aggressive when you go into some of the new neighborhoods?

Our pricing answer is no. Our pricing is very competitive with what Wal-Mart has, as are the services we offer, we call the recipient for free several times from our customer care centers in Monterey to make them aware of the pending transaction. We do some very unusual and different things. So, no, our pricing is highly competitive with what Wal-Mart is offering today.

Okay. And then I guess lastly, with regard to EPS growth, is it fair to assume that the first quarter this year the growth would be better than the first quarter last year, which was impacted by some of the weakness in Canada following on SARS?

Yes, we are just -- we are focused on annual guidance, I don't think we are prepared to break it out quarter-by-quarter.

Okay, I'll give it a shot. Thanks.

Thanks Roger.

Thank you. And our next question comes from the line of Don MacArthur from Stifel Nicolaus. Please go ahead.

Good morning guys, great quarter.

Thanks Don.

Can you talk about the expansion in Europe from MUZO? Is that more of a - entering new countries by a build decision? Or is there other acquisitions that can be coupled in and still gain some efficiencies with MUZO?

The answer is yes, and yes. We clearly with MUZO can extend beyond the borders without having to buy anyone. But, there maybe opportunities available, which we could put into MUZO and you have all the efficiencies and advantages of making that acquisition. So, we are pursuing both of those. But, we don't have to do one or the other. We can pursue both and we are.

And then I think MUZO doesn't just -- have you looked hard at the prepaid market in Eastern Europe to expand?

We're actually doing a little prepaid right now. We have a deal with -- what's the cellular -- I'll think of it in a second. We have a deal right now, we are doing top up and doing business, or with MUZO in the Czech Republic with one of the big cellular providers, the name just the escapes me.

Great, thank you.

Pleasure.

Thank you for your question and we have a question from Greg Gould from Goldman Sachs.

Thanks. Just a follow-up. Can you give us a sense of the seasonality in DolEx in the new fiscal year, for example would -- should revenue be up in DolEx sequentially, because you don't have the Mother's Day obviously in the current quarter?

You have a couple of things going on there. There is some seasonality, again the work force that uses this service is predominantly agriculture and construction, so that summer months tend to be stronger than the winter months. It's not significant, but again, we are -- as we mentioned on the third quarter call, we are comparing against a year prior when we did not control pricing. So I think that we, as Paul said, we put a pricing strategy in place in January and had a lot of transaction growth during this first six months of ownership and we continue to see that accelerating into the rest of this year.

Okay, so for the current quarter, revenue from DolEx should be sort of flat to up, correct? And then sort of taper off a bit in November and February?

I think if you go back to the guidance, it's revenue in the low- to mid-teens and transaction growth a little bit higher than that and you can kind of work with that along with what you've seen from Q3 to Q4 and get a sense of what the year will look like.

Okay, thank you.

Thanks, Greg.

Thank you, and our next question comes from the line of Craig Peckham from Jefferies & Company. Please go ahead.

Hi, it's Craig Peckham. It is okay, I don't have a question on DolEx. The question would be on how much currency benefited in the quarter or tracked on the revenue side?

As we have mentioned before, we don't separately break out the foreign exchange impact in the businesses. But, I think if you look at rates, they have pretty much stabilized during our fourth quarter. So, there hasn't been much in the way of benefit in this quarter.

And Craig, we've taken that into consideration in our guidance and are forecasting that the benefit we received we'll no longer be receiving.

Okay great, took the words out of my mouth, and then on the MUZO side, what are the currency dynamics there, just broadly speaking?

I don't think that's going to be a material impact. The business itself is pretty small compared to the overall company at this point and we haven't seen a lot of fluctuation in the crown (ph).

Okay, thanks.

Okay, and our next question comes form Dan Perlin form Legg Mason. Please go ahead.

Thanks, hi Paul, I was wondering if you could give me an update on the Amigo Latino cards. What kind of growth have you seen there in this quarter and to what extent is that at all playing into the growth that we've seen in DolEx in the past quarter?

Dan, we think there is about $0.5m in round numbers, active Amigo Latino cards out there.

Has that changed?

It is actually up a little bit.

Okay.

It's kind of going along with our transaction growth, pretty much. Virtually every customer, we give you one, and most customers are using. It's close to 80% of the customers. Actually, over 80% of the customers actually use the card. We are delighted with that, which --

You have an 80% hit rate with that? Is that what you just said?

Absolutely. So, if you come in 80% our customers have their Amigo Latino card or we give them one and they use it, I mean, their first time. But it isn't --- they are not repetitive users and they have forgotten them , they actually carry these things and use them, which is amazing.

Can you remind me how many times they are actually using or making money transfers per year, on average?

Per month, it is almost two times a month.

I think 1.7 is the number and the cool thing about that is that, it is higher, if you look at the industry standard, it is higher than what the industry is reporting. Our average transaction is about the same. That leads us to believe may be Amigo Latino has something to do with it.

And one another quick question on DolEx, if you could just remind me what the break even point is, on average at the DolEx locations, either in terms of revenue or what you think transactions need to be?

We wouldn't -- we haven't disclosed or discussed that in the past. What we've said is that on the new branch that starts up, it roughly takes 9 to 12 months to break even on a contribution basis. That doesn't necessarily -- that doesn't pay back the cost of the investment, which is probably around 4,000 or 5,000, or branch closer to 15,000 to 20,000.

And how many locations would you say are --- that you rolled out in the past 12, well, I guess, just 6 to 9 months that are approaching that break even point or inflection point where it actually gives a proper accounting break even?

Typically, if they don't reach it within that prime period they don't -- we move the store. It's not very difficult, especially in a booth that takes a matter of an hour to disassemble one. And even with a branch location, we can pretty much disassemble it, exit the lease and move down the street to another location. So, I would say within 12 months, in rare instances unless there is some other strategy that goes along with it. Within 12 months they are all contributing, if they are not contributing they are not here

And the number we gave you for the quarter of twenty new locations was net. We closed locations still.

Okay.

What that netted was twenty new openings.

Gotcha. Okay, thank you very much. I appreciate it.

Thank you.

Thank you, and this does conclude our Q&A session of the conference and I'll turn back the call to Mr. Garcia for any concluding remarks.

Thank you operator. And thank you all for joining us on today's call. We appreciate your continued support of Global Payments, Operator.

And ladies and gentlemen, this conference will be available for replay starting today at 5:30 pm and ending at midnight on July 29. If you wish to join the replay, please dial 1-800-475-6701, our international parties can dial 320-365-3844 and the access code for this call today is 733198. And this does conclude our conference for today. Thank you for your participation, and thank you for using AT&T Executive TeleConference. You may now disconnect.