Jane Marie Elliott - Senior Vice President of Strategic Planning and Investor Relations and Chief of Officer Staff Jeffrey S. Sloan - Chief Executive Officer and President David E. Mangum - Chief Financial officer and Senior Executive Vice President

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division Timothy Wojs - Robert W. Baird & Co. Incorporated, Research Division Roman Leal - Goldman Sachs Group Inc., Research Division Tien-tsin Huang - JP Morgan Chase & Co, Research Division Georgios Mihalos - Crédit Suisse AG, Research Division Bryan Keane - Deutsche Bank AG, Research Division Timothy W. Willi - Wells Fargo Securities, LLC, Research Division Ramsey El-Assal - Jefferies LLC, Research Division Glenn Greene - Oppenheimer & Co. Inc., Research Division Kevin D. McVeigh - Macquarie Research Brett Huff - Stephens Inc., Research Division Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division Christopher Shutler - William Blair & Company L.L.C., Research Division Ashwin Shirvaikar - Citigroup Inc, Research Division Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division

Thank you for standing by, and welcome to the Global Payments Second Quarter Fiscal 2014 Earnings Conference Call. [Operator Instructions] And as a reminder, today's conference will be recorded. At this time, I would like to turn the conference over to your host, Executive Vice President and Chief of Staff, Jane Elliott. Please go ahead.

Thank you. Good afternoon, and welcome to Global Payments Fiscal 2014 Second Quarter Conference Call. Our call today is scheduled for 1 hour and joining me on the call are Paul Garcia, Chairman; Jeff Sloan, President and CEO; and David Mangum, Senior Executive Vice President 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 which are discussed in our public releases, including our most recent 10-K that could cause actual results to vary. We caution you not to put undue reliance on forward-looking statements. Forward-looking statements made during this call speak only as of the date of this call. In addition, some of the comments made on this call may refer to certain measures such as cash earnings, which are not in accordance with GAAP. Management believes these results more clearly reflect comparative operating performance. For a full reconciliation of cash earnings to GAAP results in accordance with Regulation G, please see our press release furnished as an exhibit to our Form 8-K dated today, January 8, 2014, which may be located under the Investor Relations area on our website, www.globalpaymentsinc.com. Now I'd like to introduce Jeff Sloan. Jeff?

Thank you, Jane, and thanks, everyone, for joining us this afternoon. We delivered strong results for the quarter, growing revenue by 8% and cash earnings per share by 15%. As a result, we are raising our annual fiscal 2014 cash earnings per share expectations by $0.05 to a range of $4.03 to $4.10 or 10% to 12% growth. We are pleased to confirm that we remain on track to achieve stable total company cash operating margin for the full year. This performance demonstrates that we are executing the right strategies to drive sustainable growth across our regions. Now for quarterly highlights. I am delighted to report that North America continued to deliver strong results, both in the U.S. and Canada. The U.S. results were driven by strong performance across all channels, headlined by our integrated solutions business. Canada had another quarter of stable performance with 5% credit transaction growth and low-single digit spread declines on a comparable year-over-year basis. In addition, Canadian revenue benefited from assessment-based pricing changes. We are also pleased with our international performance, reflecting strong execution on our strategic initiatives in all our markets in Europe and Asia. Now I will turn the call over to David.

Thank you, Jeff. We are gratified by the strong business performance across our markets during the quarter. North America revenue grew 6% with U.S. revenue growth of 6% and transaction growth of 8%. Canada revenue grew 11% in local currency for the quarter and we now expect a mid- to high-single-digit revenue growth in local currency for the full year. North America cash operating income grew 6% to $78 million with cash operating margin of 17.4%. Our full year expectations for North America cash operating margins remain unchanged at flat to slightly increasing as compared to prior year. International revenue grew 12% for the quarter in U.S. dollars. Europe delivered solid revenue growth in all markets with particular strength in our e-Commerce business, Global Solutions, and in Spain. Asia-Pacific revenue grew 10% over last year, driven primarily by strong transaction growth and successful product launches from our largest customer in the region. International cash operating income of $70 million grew 12% with cash operating margins increasing to 37.3%. We continue to expect stable cash operating margins in international for the full year. Currency trends were generally in line with our expectations for the quarter and we continue to expect foreign currency effects to be about neutral to a slight headwind for cash earnings per share for the full year. We continue to expect both GAAP and cash effective tax rates to approach 29% for the full year. For the quarter, our total cash operating margin was 19.4%. This includes over $4 million of an expected full year $17 million incremental security spend. Excluding the security spend, our total cash operating margin for the quarter would have been 20.1%, an increase of 30 basis points over last year. We generated free cash flow of $91 million this quarter. We define free…

Thank you, David. We are executing well on our strategies around the world and we maintain substantial capital flexibility to achieve our goals. Jane?

[Operator Instructions] And operator, we will now go to question.

[Operator Instructions] Our first question today comes from Dan Perlin with RBC.

I wondered if you could just elaborate a little bit on what the dynamic is that's playing out in Europe. I know you mentioned Spain was strong and your e-Commerce partnership there, but I'm just wondering if you could provide maybe something a little more detailed in terms of the dynamics that are building in that region.

Sure, Dan. This is David. Europe is an amalgamation of a number of markets and services that actually are all performing about on our plan for the year, so we're pleased about that. If I walk through them one by one, maybe that'll help a little with the color about what you're asking. I mean, it's headlined by the largest single asset there is our United Kingdom business, which is a mid- to high-single digit grower. It's growing in a very solid fashion, delivering very nice profit, had a good second quarter. On top of that, or with that actually comes our multi-business, which goes hand in hand with the United Kingdom. In Spain, we continue to see, what, from the surface, is probably just remarkable growth, double-digit revenue growth. We think we'll do high-single for the year in Spain. Right now, we're running a little bit ahead of that. We had a very strong first quarter as you'll recall with the DCC product driving a lot of tourist space revenue in Spain over the course of that quarter. So Spain continues to move along, given the remarkable partnership we have with CaixaBank there, the marketing they drive to this asset and then just really good execution in that business overall. In Russia, we have a terrific, sort of secular adoption acceptance story, going with high-teens growth, mid-teens growth quarter-after-quarter as we continue to see more and more Russians transacting and more and more acceptance of merchant locations around the country. We do have a Global Payments Europe business, which is our indirect business, which is performing right on its expectations for the year. That's never going to be a fast grower, as you know. When you bring all those pieces together, you're sitting right on the edge of high-single-digit growth in Europe, double-digit, depending on the quarter, and that's before we talk about Global Solutions, which is our e-Commerce platform, which is growing very well this year. Recall we have one large customer in that whom we service all around the world, with the exception of the United States. But in addition, we've added 40, 50, 60 customers to that platform in the last year, so much smaller than our lead customer, so we continue build out the volume on that platform. So when you bring together a big asset like U.K., running the mid- to high-single digits and operating at -- right at its plan, solid Spain asset growing double digits, nice growth in Russia and then marry that to an e-Commerce platform that's growing in the double digits as well, you have really, really nice performance overall in Europe.

Yes, and the U.K. growth, is that more a function of pricing opportunities that you've identified or is that just kind of cyclical rebounds in volumes?

Well, there's always pricing in every market we serve that's helping from time to time or about flat, depending on the timing of which period about which we're discussing. In the U.K. alone, credit is solid in terms of the metrics. Debit is very solid, and we've added some very nice new customers over the last year or so.

Okay. And then I'll ask one more, even though I'm going go over my allotted 2. Are there any kind of proof points that you can kind of talk to about this partner of choice that's really provided incremental growth, in particular, in this quarter or something you see coming down the pipeline?

Well, Dan, it's Jeff. I'll start and David can add as well. We really don't get into specific customers and how they translate into revenue and profit in a given period. I would say, as we think about partner of choice, it's really a few things. First, when you think about the announcements we made around mobility and the ecosystem we've built, and we've announced this in prior calls, in this fiscal I believe, with people like PayPal on mobile, Intuit on mobile, O2 Telefónica, et cetera, I don't think we would have them as customers if we weren't an incredibly good partner, and the nature of those relationships really varies in terms of what we provide to them based on who the partner really is. So I think you can look at each one of those as a very good example about the success of our partner of choice model. Second, I think we're a very good joint venture partner, and David discussed rightly our terrific performance in Spain with Caixa at -- or [ph] our Comercia business. And while that transaction is a number of years old, I don't think we have that kind of performance in a market like Spain, which, as you know, has its macroeconomic challenges and that kind of execution without a very good relationship and partnership with a terrific partner at Caixa. I think those are 2 examples how partner of choice really translates into something distinctive for Global Payments.

Your next question comes from the line of Tim Wojs with Baird. Timothy Wojs - Robert W. Baird & Co. Incorporated, Research Division: I guess, just looking at the model for Q3 in the back half of the year, I think typically EPS is down about mid-single digit in percentage terms sequentially and I just want to make sure that there's nothing that we should be aware of in Q3 this year that, that trend wouldn't hold.

No. Tim -- this is David, there's nothing new or different about trends. As you know, I often like to talk about how to think about the quarterly flow based on what percentage of full year earnings does each quarter contribute. And that, as we sit here today reporting to you on Q2, is unchanged in terms of our view of what Q1, Q2, Q3 and then Q4, what each of those will contribute toward the $4.03 to $4.10 range that we've now established with the raise today. And as you know, that looks an awful lot like the distribution we saw in each of FY 2013 and FY 2012. Timothy Wojs - Robert W. Baird & Co. Incorporated, Research Division: Okay. Okay, that's helpful. And then just on Canada, another good quarter there. Is there a way to give us a little bit of a bridge between maybe transaction growth and then what you're seeing just from a pricing perspective and then maybe a market share perspective?

Yes. I'll start, Tim, and David can add additional color. So as we said in our prepared comments, we saw mid-single digits credit transactional growth year-over-year in Canada and very low-single-digit spread declines in that market. That is a pretty good raw indicator of what that business is doing on a normalized basis without some of the network pricing actions that have taken place over the last period of time, which generally gets added on the assessment side to our revenue stream and then of course, in some cases, we have margin on top of that. So one way to think about how is that business really in a normalized environment is our prepared remarks of mid-single-digit credit transactional growth, which is mostly how we get paid, coupled with low-single-digit spread declines is a good way to think about it relative to the low-double-digit local currency revenue growth that David cited in his comments.

Yes, and to add a little more color maybe, those are the very dynamics we've been discussing to you guys probably going back 4 quarters now that, to the extent we see manageable spread declines married to our traditional transaction declines, we -- again, I used the same words twice, we have a very manageable situation in Canada. And so we continue to see those solid metrics right now, and that would then be the outlook from here on as well.

Your next question comes from Roman Leal with Goldman Sachs.

First, on the capital allocation efforts, it's good to see another round of buybacks. But just help us think through what the next step is in terms of -- you're always kind of, I guess, balancing what you see in M&A opportunities versus buybacks. Anything changed in that dynamic at all?

No. Roman, it's Jeff. So we have, as David mentioned in his prepared comments, 2/3 of $1 billion of available capacity today between cash on hand that is available, coupled with existing financing capacity. So I would say nothing's changed there. We obviously generated a lot of free cash flow in the quarter, which also helps. So with that kind of firepower, there's really no change in our capital allocation philosophy. I would also say that we view our M&A pipeline as being full, which it has been for a period of time, and we intend to continue with the same kind of capital allocation in terms of strategies that we shared with you and the public previously.

Yes. I think, Roman, just to put a fine print on a couple of those pieces, you're quite correct. We think the first and best use of the capital -- the excess capital is global expansion. We continue to look at that and as Jeff said, we have a full pipeline. Let us get through the current accelerated share repurchase, which closes this quarter and see where the pipeline stands and see what we're going to do next. But I think we've certainly shown you over the last 12 to 18 months that when we talked about buybacks, we're committed to doing them on an ongoing basis and committed to doing them as a core part of the strategy married to M&A. So let's first come back with -- to you with more communication, but let us close out the current ASR.

Okay. And as a follow-up, Jeff, recently, I think you articulated maybe a slight change in the type of M&A deals that are in the pipeline. I think the kind of phrase you used was we're not looking only for home runs, we're also looking for those singles and doubles and more kind of technology-oriented M&A deals. Is that a change of just the actual deals that are available or is that something that you are constituting [ph] because you just see that the distribution and technology makes a lot more sense than maybe another -- other sorts of distribution channels?

Well, thanks, Roman. We're always looking, of course, for grand slams, not just home runs and doubles. But I appreciate what you said. So I think the answer is we feel very good, for example, about our transaction with APT, which we announced in August of '12 and closed in October of '12 and we've owned it now only for over a year. So very comfortable with how that's performing and I do think that's given us a perspective that's slightly different in our business than it may have been historically, as we feel very good about making transactions and investments in that area. And if we could find more of that type of thing, given our experience with APT, of course we'd be very open-minded about it. I would say also our business is changing as an industry. So this isn't just APT or experience in that area. I think as you've seen over the last couple of years the importance of technology to our business, the importance of preserving our role in the financial intermediation of what we do, the importance of expanding in geographies that we're already as David said, as well as additional geographies that are attractive that we're not in today. We've mentioned before, for example, Australia, South Korea and Japan, as 3 examples in Asia. Those are all important to us for filling our strategy. And I think we recognize, as our business changes, that not every deal going forward in this environment is going to look exactly like every deal that we've done historically over the last 13 years as a public company. So first, I think it's comfort level with what we've done, in particular with APT, and deals like that and second, an acknowledgment that our business is changing and we need to make those investments to get ahead and skate to where the pop [ph] is going to be in our business in the future.

Your next question comes from the line of Tien-tsin Huang with JPMorgan. Tien-tsin Huang - JP Morgan Chase & Co, Research Division: Just wanted to ask about, first, transaction growth in the U.S. Looked like, what, 8%, I think I heard. So can't remember the last time it was in the single digits. Is that cyclical or something else going on there?

Tien-tsin, it's David. It was 8% for the U.S. You heard correctly. It was 9% last quarter, so we're right where we were before. I think what you're seeing, and this is a happy piece of really how the U.S. North America are coming together, business slowed down from the ISOs. And as you well know in the face of income statement, that's not a bad thing, particularly when you've got other assets, our integrated payments assets headlined by APT growing very nicely, expanding margins, et cetera. So that 8% is really quite consistent with where we were last quarter. And even exiting last year was only 10% in Q4, so we're right in line with where we were. Tien-tsin Huang - JP Morgan Chase & Co, Research Division: Okay. So that's going to be into cyclically or from a structural standpoint, in your mind?

Only in my comment about really what works out to be a happy thing for us in aggregate, which is the ISO channel will going to be a little bit slower. At the same time, our direct integration -- integrated payments space assets are growing very well. Tien-tsin Huang - JP Morgan Chase & Co, Research Division: Got it. Got it. And then just on the EPS revision, just wanted to clarify, I heard the margin commentary, no change. And then the revenue guidance, no change there. So the guide -- the -- what's the $0.05 comprised of, I suppose, is what I'm asking?

Yes. I mean, so let's walk through that a little bit and I'll give you probably far more color than you actually want. First off, I'd suggest that we all think about the $0.05 -- there's a bit of an illusory component to the $0.05 in that it's actually a little bit of a higher increase than you might think when you look beneath the covers. With the recent upward movement in the share price, we now expect our accelerated share repurchase, the one we announced last quarter, to probably deliver $0.01 less in earnings per share than we announced last quarter. That's really given, again, the fact that share prices moved from $50 roughly when we announced this on the 1st of October up to, and you'll see in the 10-Q we filed about 0.5 hour ago or 1 hour ago, the average price of our repurchases so far has been below $55. And of course, yesterday the stock closed nearly $65. So when you think about that, first off, we're really happy to have executed that in an accelerated fashion. But second, the only downside to that, and this is a very happy outcome, is that we'll likely only see $0.04 of incremental EPS instead of the $0.05 we announced. So we think of this as a bit of a $0.06 increase just for business and operating purposes. So if you then talk about, "What are the components of this?" our performance in Q2 was right about where we expected. We're getting nice performance in Europe, as I'd sort of outlined a little bit and answered to Dan's question. We saw Asia kicked back to a higher revenue growth rate than we've seen in the past. And yes, some of that is with a large customer and a product release but that doesn't that customer is going away next quarter necessarily. It just means you won't necessarily see the same huge uptick. So really, it's about business performance and having the increments relative to our expectations be just a little bit north of where we were a quarter or so ago. So we're really happy, quite honestly, with where we stand and it is these components: Canada executing well, Europe executing well, Asia executing well, U.S. executing well. So you pull all that together and, quite honestly, other than, a little bit of increased earnings, we think we have the same outlook we have, whether it's margin at a segment level, international versus North America, or the total company level that we had just a quarter ago but we're rolling through this year pretty well into about the rest of the year.

Your next question comes from the line of George Mihalos with Credit Suisse. Georgios Mihalos - Crédit Suisse AG, Research Division: So I wanted to start off on the margin front, specifically in North America. You reiterated your outlook for flattish margins year-over-year there. Yet over the back half of the year, you're going to have a bigger headwind from FX in Canada. So maybe what's performing a little bit better than your expectations to allow you to reiterate?

Yes. So George, a couple of things. One is, and I'd point back to your first point, FX is not wildly different from what we thought when we started the year. It's a little bit worse in Canada as you might imagine, especially given the recent movement. But it's not wildly worse than we might have thought. So first note that the headwind created by FX when you translate that Canadian growth into U.S. dollars is not maybe as bad as you might think from the outside looking in. If you then marry that to -- we've got a U.S. business where the ISOs are a little slower than we might have thought. We get a little bit of help there from the margin line and then we've got, again, these integrated payments businesses that are a little ahead of what we might have thought at the start of the year. The end of that sort of happy mixture is -- we're right on track for what we thought even with FX being a hair worse than we might have thought going into the year from a Canadian perspective. Georgios Mihalos - Crédit Suisse AG, Research Division: Okay, that's great. And then just second question for me, looking at APAC and the good growth that you saw there. You called out the successful launch from your large partner there. What would the growth rate have been x that partner? Or maybe another way to ask is, how should we be thinking about growth now over the back half of the year?

I would think about it as -- but first, you know we're not going to pull up the growth of any specific customer. But know that, that customer obviously isn't large enough to be a factor for something on top of the growth. We've seen, I think, a very solid recovery towards solid metrics in Asia overall over the last quarter or so, so it's performing fine and then this extra growth from the large customer is kind of the cherry on top. Georgios Mihalos - Crédit Suisse AG, Research Division: Right. And then long term for APAC, there's no reason that business should not be able to drive double-digit growth. Is that safe to say?

We don't believe there's any reason to believe otherwise. We have a mixture of markets there that includes some relatively mature markets like Taiwan, a little bit of Hong Kong to that as well, all the way to the other end of the spectrum, but really, early stage markets that should grow well over time as we improve our distribution across the region. Those will be your Indias, the Chinas, a little bit of Philippines. We do need, as you know, to round out our distribution capabilities across Asia but our expectation is that, that's a fast grower for a very long period of time.

Your next question comes from the line of Bryan Keane with Deutsche Bank.

Just wanted to follow up. On the ISOs, the slower growth, is that a function of slower transaction growth inside the ISOs, like a same-store sales number? Or is that a little bit of a share shift where they could be doing it on their own or they'll [ph] shift share somewhere else to another processor?

Yes. Bryan, it's David. It's a great question. I think it's not much other than the law of large numbers. So if -- when we analyze what's going on, we don't see a share shift away from our ISOs to other channels at all. And I think if you look at some of the external reporting and analyses and surveys that have gone, that supports that conclusion thus far. I think that within the ISOs themselves, we don't believe anyone has moved any volume away from us and we would have pretty good insight into that. So right now, I think all you're seeing is a very large channel, very large numbers. They're continuing to grow and grow in absolute transaction count. It's just not going to be the same percentage level as it's been in the past.

Okay, that's helpful. And then just a question on the international margins. On a year-over-year basis, they were slightly up. It's the first time in a couple of quarters. Just wanted to make sure I understand, what's driving the -- a little bit of a margin improvement in international? And then as we go forward the next couple of quarters, is that sustainable kind of a slight improvement year-over-year or do they fall back down?

Yes, it's a good question. So for this quarter, we get a little bit of help from Asia because the metrics of snap back. It's not just the large customer, who you might imagine, we brought on the greatest margins on that customer's revenue anyway. Well, we had a solid quarter in Asia, which is nice for a change and, hopefully, is a nice sign of continuing improvement there. When we have good quarters in each of U.K. and Spain, you'll find slightly better margins than you would have the year before or than you might have thought as you were building your model. When I look out to Q3 and Q4, I don't think margins are going to be -- they're going to vary around being flat with each of those quarters. You could be slightly down in Q3, depends on how the seasonality affects us across the international markets. You could be around flat in Q3, which is about what we expect. And again, same in Q4, although Q4, I think, is more likely to be up year-over-year than flat or down.

Your next question comes from the line of Tim Willi with Wells Fargo.

Two quick questions. One is, can you just give an update on Brazil and any thoughts about that operation and its trajectory or progress, as you look out through the balance of fiscal '14?

Yes. Tim, it's Jeff. So we're pleased with where we are in Brazil. Our transaction with our partner, Caixa, closed during the quarter and we think that's gone well. We're up to just under a couple of thousand merchants live on us today in Brazil, and we intend to continue to grow that throughout the fiscal year. We've added fast, as we've added transaction count. Mainly that's on the sales side but also includes infrastructure. Business that was based in São Paulo and also a bit of Brasilia. So we're very happy with how we're doing, and we're getting ready to manage as most of Brazil starts to think about the World Cup in June, July of 2014 and then the Olympics a couple of years thereafter.

Okay. And then my follow-up, and I'll hop off, was with APT, any thoughts about geographic expansion into places like the U.K. or Spain or Hong Kong or any markets where, let's say, within the 12- to 24-month window, there would be geographic expansion opportunities for that type of platform?

Yes. It's a great question, Tim. So we are actually in the process of bringing APT today to Canada. So the most obvious market for us outside the U.S., which is most similar for a variety of reasons for APT's business, is Canada. I believe that we're in pilot this quarter in Canada with APT on an integrated basis. We think we're early in that market for what we're doing with the native solution. That is for Canadian customers in Canada rather than customers in the U.S., just going cross-border into Canada. So Canada is the next most obvious market and we're already doing that. Thereafter, we'll look at each one of our markets and we've got VAR sales folks in most of our markets around the world, including in Europe, in Asia, and we're also looking at bringing that business to Brazil. So while the initial business case for APT was really focused on successful execution of that business plan, I think we all agree, as we discussed in January at the Investor Day, that we would be missing something at the end of the day if 3 or 5 years from now, all we have is a very good and well-performing U.S. business because while we think that we're early and underpenetrated in the U.S., we firmly believe that we're early and underpenetrated in the markets outside of the U.S. So we think there's a great opportunity for APT, and we are very excited to be entering into Canada this quarter with that product.

Your next question comes from the line of Jason Kupferberg with Jefferies.

This is Ramsey El-Assal for Jason. Can you give us an update on the CUP partnership adding more cities to China, where we stand there?

Sure. So we've a very good partnership with CUP in China and that involves, by the way, not just Mainland China, but that involves the rest of the world, too. We've a very active partnership and relationship outside of Mainland China. We do feel like our ability to expand into the rest of the People's Republic of China is a very good opportunity for us. We've got active discussions with CUP about it and many of the investments that David had described over the last couple of quarters into our Asia business have gone into Mainland China to get ready for that expansion of the business throughout all of China. So it's very important to us. I think our relationship is very good with CUP, both in China and around the world, and they think they, too, fit into the partnership mode that we described earlier.

Okay. And then I wanted to ask about the DCC, the Direct (sic) [Dynamic] Currency Conversion solutions. Are the timing and magnitude of the rollout of that solution across your business kind of happening according to plan? And I guess, sort of what -- I would imagine there's pretty high-quality revenue. At what kind of inning are we in terms of rolling that out across your business? Is there a lot of space out there left for it or is it pretty much kind of installed where you want it to be?

I would tell you that there's actually a lot of room left from that product. It's a recent rollout in Spain. It's been quite successful for some period of time in Asia, and we've talked about that before relative to annualizing into Asia's growth. It is available without a huge level of penetration in North America and the rest of Europe. So we still think -- I don't want to necessarily pick an exact inning, but we still think it's relatively early days, particularly in those last few markets I described and that there's still room there. As I said earlier, there's the occasional seasonality to it, summer being a big tourist season in Europe. You might see more rather than less. But if we're sort of waving our hands over that and talking about full years in rollouts, there's still a lot of room for further rollout of that product around the world.

Your next question comes from the line of Glenn Greene with Oppenheimer. Glenn Greene - Oppenheimer & Co. Inc., Research Division: I guess, Dave, for the first question, going back to North America margins, which is sort of thinking about it for the quarter as opposed to the full year, and maybe they got spoiled a little bit by last quarter's healthy margin expansion. But kind of like looking at this quarter and thinking it was flat year-over-year despite the benefit of 11% constant currency in Canada. So I'm just trying to reconcile those sort of dynamics.

Yes. It's a great question, Glenn. So if you think about the pieces of North America, I think you're right to put your finger on the first question being a little bit of Canada. Now recognize that Canada, when you translate that nice growth in local currency, was the hardest hit of any market we have by currency translation. So by the time you bring all that back in U.S. dollars, you don't have 11% anymore. You've got something substantially less than that. That's part of why, as we sit here today, we're talking about Canada will do mid- to high single in local currency, which by the time you marry that to U.S. in mid- to high-single unit, even our total North America U.S. dollar growth isn't going to approach that Canadian sort of upticks of -- the double digit we posted year-to-date. So recognize the chunk of that came back the other way. And then beyond that, in any given quarter, you've got the timing of investments expenses, et cetera, so there's really not a lot going on. I would also suggest to you that flat margin is a nice place to be. We're still on track for everything we've got, everything we expected for the full year there. And remember, too, that Canadian growth is fueled by assessments. So with the assessments, they're going to come with dilutive impact on margins overall before we even talk about the currency translation. Glenn Greene - Oppenheimer & Co. Inc., Research Division: Got it, that's helpful. Drilling down on the U.S. a little bit, and you talked a little bit about this to Tien-tsin's question, but maybe you could put a little bit more of a fine point on the kind of the components of the revenue growth sort of thinking about the ISO channel versus direct versus APT. Is it reasonable to think the ISO revenue growth was kind of in line with that 8% transaction growth and is APT kind of still mid-teens?

The way I'd answer that without calling each is that in line or even perhaps a little below the transaction growth is the ISO channel right now. That obviously can vary from time to time, depending on fees and timing. Know that APT is well above that and obviously, well into the double digits, yes.

Your next question comes from the line of Kevin McVeigh with Macquarie.

Could you just give us, so we have the numbers kind of where we are in terms of the ASR, in terms of absolute dollars now and then as we think about that into Q3?

I can. We announced $100 million ASR. As you well know, Kevin, what happens is you take -- deliver essentially 80% of that into the share count at the time you announce it and then, over time, the actual purchaser are effectuated by a broker-dealer then you settle up at the end. So we haven't settled. We don't have a final accounting for it, but I know enough now to tell you when I look at the average price that we're going to get a little less earnings, again, for a happy reason with the $65 stock price, which is a little north of that as we sit here at the moment. But the mechanics really are we'll finish that. This quarter, we'll finish -- we'll round out, having spent the full $100 million. It'll be whatever it'll be in terms of the final share exchange for the final count of shares delivered to us and then we'll take a look at where we are from a capital planning perspective as we're describing earlier.

Got it. And then, if I did my math right, it looks like you've bought a little less in Q2 than Q1. Was that just a function of where the stock was? Or anything in terms of just different priorities for the remaining capital on the balance sheet?

It's a function of where the stock is. It's a function when we entered into ASR relative to previous purchases in Q1 under a 10b-5 and then it's just how quickly the things roll through. Now things roll through in ASR based on stock price itself, volumes, et cetera just as they do with any other buy. So there's nothing to be seen there in terms of the strategy around buying because when you enter into an ASR, you're receiving [ph] the broker-dealer the timing and pace of the buybacks then you settle with them at the end of the period.

Your next question comes from the line of Brett Huff with Stephens Inc.

A big-picture question on -- a question -- a kind of follow-up to this question asked earlier on the geo expansion focus versus the let's buy technology pieces and use our distribution channel focus. And I'm curious, which of those 2 -- I guess, I'm not thinking in terms of M&A, really, but in terms of growth, as you guys see big growth drivers the next couple of years, do you still see geographic expansion as the most likely biggest growth driver in driving more pieces of technology or more value add through your existing geos? Do you still see that as #1 and #2? Or do you -- could you see that flip, given -- and Jeff, you mentioned this, given the -- your desire to kind of protect where you are in the value chain and protect your distribution system?

Yes. I think, Brett, as I said before, I mean, I think you have to start all M&A conversations with what's actually for sale because you really are looking for the right partnership and the right transaction. You typically have a lot of irons in the fire to make sure that you are the right partner as you're at the right place at the right time. So I would say today, Brett, we actually do both at the same time because we're not exactly sure of what order our partner is going to want to proceed in. So from a geographic expansion point of view, for example, and most focused in Asia, in Australia, South Korea and Japan and markets that we're not in from an expansion point of view and, of course, getting bigger in India and Mainland China in terms of market that we're actually in today. In Latin America, we're obviously in Brazil. We'd like to be bigger in Brazil. We're not in Mexico and some other markets directly in Latin America today, as we would like to be. So we're focused on those as well. In Europe, I think we're opportunistic. As I've said on prior calls, we haven't seen transactions and assets there that have a great rate of return to make us feel comfortable to pursue them. So it doesn't mean that we don't see opportunities. We see opportunities all over the world. But it does mean, as David mentioned, that we do balance from a capital allocation point of view where our returns are. And today, we haven't really seen those across Europe, although an exception to that would be in markets like Spain, where we have a direct partner in Caixa, and we've been able to add portfolios like Civica because we find those economics to be attractive because of our joint venture, Comercia. And then in North America, I would say we see opportunities continually in the U.S. Those tend to be more technology-enabled to the point that you were making unless, by definition, less expansion in the sense that there's a region that we're not in. We're in all of the U.S. and in all of Canada. So it's less about the regions necessarily by definition and more about, are there vertical markets that we can make a difference in, and are there technologies like APT and integrated, that we think we can really make additional returns in from pursuing those avenues? So to come back where you started, I think we're opportunistic on all these things. It really depends on what's available and what those returns are.

Great, that's helpful. And then just quick follow-up. David, on the P&L, there was a fairly large other operating benefit that we saw and they were just larger than what we had modeled in kind of in the past. Was there anything unusual there that we should think about?

What we -- Brett, when you say other operating, are you talking about on the GAAP income statement? Are you talking about other income?

I'm sorry, other income. I apologize.

And a -- from a cash earnings perspective or...

I was just looking at it from just a straight-up GAAP.

Oh, yes. So straight-up GAAP, what you're seeing there is the gain on Brazil. So when we had our partners at Caixa enter into the 50-50, they put $2 million into the venture and then as I think we've discussed, they also committed to incrementing their investment level up until it matches our life-to-date investment level. So that initial capital inflow resulted in a gain and that's what you're seeing on the GAAP income statement.

And do you back that out? How do you adjust that, if at all, for the cash?

Right. So we back that out for cash earnings purposes.

Your next question comes from the line of Tom McCrohan with Janney.

I had a question on the ISO channel and the trends you're seeing in the strength of the interchange. Have you seen -- can you just talk about the trends you're seeing there? And I think last quarter you mentioned that there was some expectation that there's some prices or fees that the ISOs were going to possibly layer on during the quarter and if you actually saw that happen with the impact where it was on the spreads there?

Yes. Tom, it's David. The ISOs -- I think what we tend to say about the ISOs and fees is the piece of the ISOs that are difficult to predict for us tend to be when they choose to fee their customers. So we have, as you might have imagined, a reasonable forecast model how their transactions flow and what that's going to turn into in terms of their spreads and how it drives revenue for the company and then our per-transaction rates to them, what that's going to mean for real revenue and economic benefit to the company. But then if they happen to fee their customers on top of that, that's 100% revenue, 100% expense for the company and it affects margins. If you look at Q2, our last reported quarter, the actual fees were really not different from what we thought going in. Hence, we're really not talking about them today in terms of variance analysis or something analytic that's going to affect your view of the model. But from time to time, those will vary. And to the extent an ISO decides, particularly one of our larger ISOs, decides to heavily fee a customer in any given quarter, that can affect revenue growth to the positive but margins the negative but really not a lot on that and nothing new and nothing really quantify for you for Q2.

Okay, great. And then given the very well-publicized data breach at Target, is there any takeaways from that, that you feel you can tell or share with us in terms of implication longer term for the merchant-acquiring industry?

Tom, it's Jeff. I'll start. I'm sure David will contribute as well. So listen, I think it is absolutely something, as you know, that we're very focused on, given the exposure in the industry and given our background. As you've mentioned a number of times, we're investing $17 million incrementally this year in added security and that, of course, is a cost of doing business in our industry. It's certainly unfortunate in terms of what's going on at Target. I don't really know the details any more than you do. I do think changes over time from the networks, like EMV, will help certain aspects of what's going on in the industry but they're not cure-alls. So for example, EMV, by itself, doesn't really address non-face-to-face or card-not-present transactions. And I don't know all of the specifics of Target, but that is an area that people are focused on. And you probably saw the networks announced in the last few months that they're also lobbying tokenization for some of the mobile and other types of transactions to further enhance security. So we're a big proponents of all those things. We're obviously making substantial investments in our own infrastructure. But I'm not sure if there's anything other than what we've seen to date that would change our view or anyone's view in the industry as to how important security is and the fact that there are bad guys out there.

Yes, and I think that's very well said. I would just say no one knows better than we what folks at Target are going through. We've a lot of empathy for them and wish them well. It certainly reminded all of us to stay vigilant, but I can't add anything to what Jeff had to say.

The next question comes from the line of Chris Shutler with William Blair. Christopher Shutler - William Blair & Company L.L.C., Research Division: So just a couple of quick questions. One, I just wanted to clarify in the reconciliation in the back of the press release, it says there's about $3.3 million of termination costs be added back in the quarter. And just wanted to clarify what kind of headcount reductions you've been doing, and where and to what extent does that benefit the guidance?

So Chris, that's a couple of movements that had to do with our leadership transition and having nothing to do with anyone on this call, to be very specific, and it has actually absolutely no benefit to the cash earnings for this year. Christopher Shutler - William Blair & Company L.L.C., Research Division: Okay, got you. And then just one quick one on the ISO comment. Just wanted to clarify the slowdown in growth there, at least, the slight slowdown in growth, is that purely being driven by the ISOs themselves? Or is there any decision on your part to kind of consciously slow that down?

No. It's not a decision in our part, Chris. I think David hit the nail on the head with his comment before. It really is growth rates relates to law of large numbers. If you think, Chris, about the comparisons over the last 3 or 4 years in terms of our rates of growth, you had things like Durbin regulatory reform come down the pipe, which, as they've annualized, substantially at the time, increased the rates of revenue growth. And then from a transactional point of view, to the extent that it lowered the cost of acceptance for merchants, also had the beneficial effect of changing demand in the market for card-acquiring services as price reductions, in general, if you sense [ph] that their pass-through do. So I think as David said, you're really lapping large growth rates and large numbers, and that's our -- really our view of what you're seeing. And to add to what David said as well, I do think this is probably the second or third quarter that we've gone through with you guys in a row, where we've seen the law of large numbers impact the rate of growth of the ISO business. So I really view it as nothing new.

The next question comes from the line of Ashwin Shirvaikar with Citibank.

My question was really about just going back to the slower ISO growth and I kind of get the law of large numbers comment. But as you think of North America and particularly, the U.S., you have APT pretty doing well. You have the ISO portion potentially slowing. Could you comment on the eventual direct versus indirect ratio that you want to get to and what you're doing to further increase the direct portion? It's clearly more profitable as well.

Yes. Ashwin, it's David, and it's a great question. So pieces of this, as Jeff said a moment ago, are out of our control. The ISOs are great partners. We serve them well for the last decade and beyond. That will continue to grow. It's certainly incumbent on us to continue to grow our other channels around them and make sure that we, with the partner-of-choice strategy, have arrayed a series of channels and distribution mechanisms that allow us to grow for the long term, hence, our focus on integrated payments, our focus on either directly or with partners driving access to mobility, mobile payments, tablet processing, whatever is going to be the paradigm that merchants use and consumers use for processing over time. And that kind of complexity is nothing but good for us. So I think it's fair to say if we're to look out, we expect an ever-greater proportion of direct distribution base revenue, in other words, revenue we control more directly, merchants we control more directly. Look for us to do that organically with investments in additional channels, investments in additional technology, like rolling out the mobility we've rolled out over the last 2 years, but also that's obviously a core part of the M&A strategy Jeff has described a couple of times in the questions earlier tonight.

Okay. Does that -- down the road, I know you guys have not talked about G2 for a while, but down the road, does that affect how G2 eventually rolls out in your client base?

No, I really don't think so. It's an interesting question. I think it affects how we bring transactions to G2 and to our other front ends around the world. And we are happy and capable of processing -- or happy to and capable of processing any transaction coming to us in any fashion around the world. That can be coming to us on a mobile device acting as a terminal. It can come to us -- bring a transaction from a mobile device functioning as a wallet, can sort of a [ph] completely different application in mobile. We're happy to process sort of any transaction anywhere in any fashion. From there it can go to whatever authorization engine and platform we process because we'll enable that to accept transactions from any adapter or any device.

We will take the last question from Steven Kwok with KBW, after which, Mr. Sloan will close the call. Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division: Just a quick question around the tax rate. Was there anything particular in this quarter? And then I believe you're guiding to a full year of about 29%, just wanted to see what the moving pieces are, what to expect in the coming quarters.

Yes, nothing particularly odd this quarter, Steven. And in fact, we're on sort of a similar path to the flow of last year. Our -- because of the way some of the tax rates have changed, particularly in Europe, we typically will have our highest tax rate in Q1. We posted 30.8% on a cash basis, a face [ph] of the P&L tax rate in Q1. We just posted 27.8%, on the way to approaching 29%. You should see quarters similar to this one over the course of Q3 and Q4. But there are no one-timers or anything like that. This is actually the pattern we expected for the year.

Thanks very much, everyone, for joining us this evening.

Ladies and gentlemen, this concludes our conference for today. Thank you for your participation. You may now disconnect.