Ladies and gentlemen, thank you for standing by, and welcome to the Global Payments Fiscal 2015 First Quarter Conference Call. [Operator Instructions] 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 morning, and welcome to Global Payments Fiscal 2015 First Quarter Conference Call. Our call today is scheduled for 1 hour, and joining me in the call are Jeff Sloan, CEO; David Mangum, President and COO; and Cameron Bready, 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, which are subject to risks and uncertainties discussed in our SEC filings, including our most recent 10-K. These risks and uncertainties could cause actual results to differ materially. We caution you not to place undue reliance on these statements. Forward-looking statements made during this call speak only as of the date of this call, and we undertake no obligation to update them. 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 filed earlier this morning. The press release is also available in the Investor Relations area of our new website at www.globalpaymentsinc.com. Now I'd like to introduce Jeff Sloan. Jeff?

Thank you, Jane, and thanks, everyone, for joining us this morning. We are delighted with our performance for the first quarter, which represents a terrific start to our 2015 fiscal year and further demonstrates the continued success of our focus on solid business execution and disciplined capital deployment. For the quarter, we delivered strong revenue growth of 12% to $705 million, cash earnings per share growth of 22% to $1.22 and operating margin expansion of 10 basis points. Our North American business contributed better-than-expected results for the quarter, both in the United States and Canada. U.S. results were driven by consistent execution across our direct channels, including the addition of PayPros. Canada also reported strong performance in local currency with 8% revenue growth and stable business fundamentals. Our international business performance reflects solid results across most of our markets, with particularly strong revenue growth in Spain and our e-commerce channel. These results also include favorable currency rate trends in the quarter for the British pound sterling and the euro as anticipated. Importantly, we've also made tremendous progress transforming Global Payments into a unified, worldwide-operating company with an emphasis on direct sales and product innovation, while continuing to enhance our core technology platform. Recognizing that today's merchant is increasingly connected in an omni-channel environment, we are dedicated to providing our merchants an edge in terms of technology and value-added payment solutions. Our efforts to combine APT and PayPros into a single integrated solutions business, which we have rebranded as OpenEdge, are further evidence of this commitment. OpenEdge helps software developers and merchants by delivering secure and personalized payment solutions. Aligned with our overall strategy, OpenEdge is driving payments innovation, adapting, scaling and simplifying how payments are processed across platforms and points of interaction in an increasingly complex landscape. Consistent with my…

Thanks, Jeff, and good morning, everyone. It is a pleasure to be speaking with you today and to be a part of the Global Payments team. As Jeff noted, our 2015 fiscal year is off to a strong start with better-than-expected business performance and the positive effect of our recently executed share repurchases driving earnings growth for the quarter. Before I summarize our segment details, I would first like to remind you that we operate payment solutions businesses in multiple geographies in various stages of payments evolution. Each of these markets has its own dynamic economic and competitive environment, which allows us to achieve certain portfolio diversification benefits, while also driving some variability in our results. As a such, I would like to begin my commentary by providing a brief overview of the key drivers of performance for the first quarter relative to our expectations. In the United States, all of our direct businesses performed better than anticipated, and we experienced continued businesses stability in Canada, while also benefiting from successful selective pricing initiatives. In Europe, our e-commerce channel in Spain also performed better than expected. This was partially offset by Russia, which underperformed our expectations. In addition, our effective tax rate was slightly lower than our forecast for the quarter, largely due to our geographic earnings mix and tax planning strategies. Further, subsequent to our last earnings call, we completed $75 million of share repurchases that resulted in a lower average share count for the quarter. Lastly, overall foreign currency translation impacts for the quarter were slightly better than expected and contributed positively to our results. Now for the quarterly details. As Jeff noted, total company revenues for the first quarter of fiscal 2015 grew to $705 million, reflecting 12% growth over fiscal 2014, and cash operating margins expanded…

Thank you, Cameron. For the past 5 quarters, we have delivered strong and consistent performance resulting from the ongoing successful execution of our strategic initiatives. We remain committed to driving sustainable growth in each of our markets and dedicated to creating value for our shareholders, partners, customers and employees. As the first quarter demonstrates and our increased fiscal 2015 expectations suggests, we continue to anticipate another strong year. Now I'll turn the call over to Jane.

Thanks, Jeff. [Operator Instructions] Thank you, and operator, we will now go to questions.

[Operator Instructions] Our first question comes from Ashwin Shirvaikar with Citibank.

My first question, normally, you guys go through sort of a breakout of -- sort of give us more of a flavor of what's going into your underlying assumptions with regards to specific geographies and stuff like that, country level details in Europe and such like. Could you do that work up again? Because when I look at how you raised your guidance, like you said, roughly half through the acquisition of Ezidebit I'm assuming and the other half is basically the beat minus the impact of currency. So seems like there's possibly some elements of conservatism in how you're looking at your outlook.

So Ashwin, it's Jeff. I'll start. I think as we've said before, we're sitting here at the end of the first quarter, so we're very, very pleased with where we are currently. We're very pleased to raise revenue, margin and cash earnings guidance for the year. But we are at the start of the first quarter. And I think as you've seen us do historically, we like to be in a position where we expect that as the year goes on, that we increase our confidence level around the continuing performance of the business, and I think that's something you probably have heard consistently from us over time. And with that, though, I'll turn it over Cameron. And perhaps, Cameron, you can take us a little bit around the globe and just walk through some of the trending in terms of what we see that ties into the guidance.

Sure. Ashwin, I'll start by just noting that, as you look at the outlook for the revenue guidance for fiscal '15, we are obviously incorporating the first quarter performance and the Ezidebit acquisition. But the FX impacts that we have for the full year are fairly meaningful. For example, the Canadian dollar has weakened, roughly 3% relative to what we had in our July expectations. And as you know, that's particularly impactful currency, given that our revenues are in, obviously, Canadian dollar and much of our expenses are in U.S. dollars given how we manage that business. But as you go around the globe, and I think I covered some of this in my prepared remarks, we continue to expect good fundamentals in the U.S. market. We've seen strong growth in our direct businesses on a revenue basis, and we expect that momentum to carry through for the full year, recognizing again, however, that we are in the first quarter. As you flip over to Canada, again, we expect a relatively stable environment in Canada, which is what we experienced in the first quarter, and we think that sets up reasonably well for the full year as well. In Europe, the U.K. business is generally performing in line with our expectations. Our e-commerce business, again, is a little bit above expectations, and we continue to expect good performance out of Spain, but that's somewhat tempered again by what we're seeing in Russia. Russia continues to be a fairly meaningful headwind for Europe, just particularly in light of the overall macro environment in Russia. You've got the market there down 20% year-to-date. Ruble's off 18% year-to-date, in an all-time low against the euro and certainly, near an all-time low against the U.S. dollars, and GDP estimates there are not good. So that clearly creates a little bit of a headwind for our European business. And generally, in Asia, x the Ezidebit acquisition, we're generally expecting fairly much consistent performance in line with our expectations, and Ezidebit is obviously going to be additive to that. The last thing I would note just from a revenue perspective, is we continue to accommodate our view of the ISO market. And our revenue growth continues to, I think, reflect what we have seen in that business, which is obviously low single-digit growth, and we've accommodated the potential that, that could degrade even a little bit further in the back half of that year or the back 3 quarters of the year. So when you roll all that together, we've guided up at a midpoint basis about $40 million. We think that obviously, given where we are, we're 1 quarter into the year, it's a reasonable outlook for the full year.

No, that's quite understandable. I guess, a quick follow-up on Canada. Obviously, good to see it has a stable business here. But as you roll out the APT offerings in Canada, first of all, I guess, what sort of reception are you getting? And is that a good, solid start and enough potential that down the road, you can maybe call Canada better than stable?

Yes, Ashwin, this is David. The initial reception has been quite good for the rollout of integrated solutions, which we've now, as you know, rebranded OpenEdge on a worldwide basis, particularly in North America. Initial reception's quite good and you've put your finger on an important thing to watch for Canada over the coming years really. Initially, this is the initial roll out of integrated solutions into one of our largest markets. So you won't see a big change in Canadian trends, but certainly, our hope is we can drive greater organic growth at high profit levels through the integrated channel and the initial signs are quite positive.

Your next question comes from Dave Koning with Baird.

I guess, just one other thing. Just -- I mean, Canada got quite a bit better sequentially. I mean, it was 5% constant currency growth I think in Q4, and up to 8%. And you mentioned a little bit of pricing benefit. Is there something incremental? Because I know we have thought it would start to decelerate with some of the MasterCard and Visa interchange adjustments and things anniversary-ed but it actually seemed to pick up a little bit. So was there, yes, a new pricing benefit?

Dave, it's Jeff. I think it's just continued good execution. We have a newer management team up in Canada in the last year. I think you're starting to see the fruits of that reinvigoration of the sales channel. We're very pleased with the new initiatives that we have in Canada. And I would say, financially, for the quarter and outlook for the year, Dave, that Cameron expressed that we have seen a higher retention rate on some of those actions that we had taken through, I think, good management up in Canada than we had seen historically. So I would say, more stickiness, Dave, is probably one thing I would point to and better sales execution.

Okay, great. And then my follow-up, the FIS gaming acquisition, it sounds like a lot of revenue synergies so we should see growth there. But maybe you could give us kind of the baseline annualized revenue and kind of margin profile just so we could start thinking about how that impacts fiscal '16?

Dave, this is David. I don't think we're going to walk through a lot of detail. But the base business we're buying is on the order of about a $50 million business with margins that are accretive to Global Payments' margins. We obviously expect the combination will drive even better margin expansion over time, and maybe it's worth doing a little bit of a reset for everyone on what the gaming business is and isn't within Global Payments. We don't spend a lot of time talking about it, but just as a reminder, it's been a consistent mid to high single-digit grower, operating at margins higher than the company's margins, and it's a very consistent business when you think of the theme of technology-enabled distribution. This is a series of products, innovative products, by the way, that are focused on very specific vertical, gaming and cash access on the floor in casinos. Our technology there helps everyone -- helps casinos manage credit exposure, get cash onto the floor and really delight their most important customers. Fidelity does exactly the same thing. So we really love the idea of putting these 2 together, the ability to cross-sell and the geographic expansion that comes with it. We're very excited about this transaction.

And Dave, it's Cameron. I would just note, in addition to David mentioned, the complementary nature of the business is very attractive to us. And end of day, the price that we're paying, from our perspective, is also very attractive. We view the effective purchase price of the transaction to be in the neighborhood of $180 million after taking into consideration the tax benefits that we realized through the transaction structure. So we think that price relative to what we're getting and the complementary nature of their business to our business and what we could do with that going forward, is a very attractive use of our capital.

Our next question comes from Glenn Greene with Oppenheimer.

A couple of questions, maybe just drilling down a little bit on the U.S. revenue strength. Can you just sort of help us understand a little bit more on the direct side, kind of the components? How well integrated payments did? And then -- I mean, it sort of gets my read through. Is integrated payments either -- did better than expectations, or the ISO drag has been not as bad as expected? And the follow-up related to that would be, given the strong Canada results and North America revenue growth -- U.S. revenue growth, I'm actually surprised margins weren't a little bit better in North America.

Well, I think -- it's Cameron. And Glenn, I'll start with just the revenue side of the equation. I would say for the U.S. business, all of our direct business has really performed better than our expectations in the first quarter, and that's really what's driving, from our perspective, the overall performance. I would say ISO's generally performed in line with what we had anticipated for the quarter, and that's largely why you're seeing kind of such strong U.S. revenue growth, in particular, integrated -- the integrated channel, which we've now, as you probably saw, rebranded as OpenEdge. OpenEdge performed, again, slightly better than our expectations. We're continuing to make very good progress, I think integrating APT and PayPros and that has generated, I think, positive performance and momentum as we look to the back 3 quarters of the year as well. As it relates to the overall margin, we did see margin expansion year-over-year, which again, I think, is very much a good story for the U.S. business. As we look to the balance of the year, we continue to expect to see strong margin improvement across the U.S. business. We do expect margin expansion for the U.S. business as well, consistent with the outlook that we gave in July. Obviously, our confidence around that is a little bit bolstered by the results we saw in the first quarter.

Okay. And then, just a quick follow-up on maybe the growth in the margin profile for the Ezidebit business.

Sure. Ezidebit as we mentioned before, is a business that will be additive, again, and accretive to the overall corporate margin. It's generally in line with what we see across our international businesses. So as we look to the back -- the 3 quarters of the year as well, we expect to see Ezidebit contributing a little bit to the margin improvement that we're currently anticipating for the overall business.

And I would say -- Glenn, it's Jeff, that the revenue growth we expect at that business is slightly higher -- in line, but slightly higher than our OpenEdge businesses here in North America.

The next question comes from Jason Kupferberg with Jefferies.

Just a couple of sizing questions, if we could. First off, on OpenEdge, I mean, now that you've put PayPros and APT together, can you give us a sense of what percent of your total company revenue is OpenEdge? And I think the growth rate there is still kind of low double digits or so. If you can verify that. And maybe we can just start there and then just -- oh, just an update on the percent of North American revs and op income from the ISOs?

It's Cameron. I'll jump in there. I don't think we're in a position today to give an absolute sort of sizing of the integrated business relative to our overall North American channel or the entirety of Global Payments. As you think about, obviously, the combination of those businesses going forward, we look at the revenue growth for that business more in the mid-teen range. We think it has very positive momentum, again, as we look again to the back 3 quarters of the year and going forward beyond that. So we view that as a mid-teen growing business and are very, very confident in that expectation. Can you remind me the second part of your question?

Yes, just the update on the percent of North America revs and operating income coming from the ISOs.

Yes, we gave that number a few quarters ago, I believe. I don't think we're going to provide a specific update to that today. But I think it's easy to assume that given the growth of the direct business in the intervening period, that those numbers are less than probably what we quoted to you previously and continuing to decline. So I think that's a trend that we would expect as we move forward in time. But we don't have a specific update to that today.

And just last, the integration of the actual technology platforms for PayPros and APT, I know that's an ongoing process. Should we be thinking of that as a material source of cost savings once that's completed? And should we be thinking of kind of roughly end of fiscal '15 for when that might be done?

Yes, Jason, it's David. We think it's quite important to the integrated business to bring those technology platforms together. We're not in a rush. We want to do it very well and serve our 2,000 partners around the U.S. and Canada very well. It is fair to think that around the end of fiscal '15, we'll be well on our way to completing that integration, which should create very nice margin expansion opportunities for the integrated business. Now that would be within the greater context of the U.S. business and North American business and total Global Payment. So I don't know that you'll necessarily see it on the face of the income statement but it's a part of running the business very efficiently and very well. It will be great for the integrated channel.

Our next question comes from George Mihalos of Crédit Suisse.

Maybe to start off on the U.S. side again, you spoke in the past about targeting mid-teens growth for the i-paw [ph] solutions. It sounds like you did a little bit better in the first quarter. Is that fair to say that the growth rate accelerated a little bit in the first quarter?

George, it's Cameron. I do think that's a relatively fair statement to say. We did see some acceleration of that growth in the first quarter. Again, I think that does set up well for us to meet our overall expectations for that business for the year. But I think that is a fair characterization of the results thus far.

Okay. And you're affirming the long-term growth of the channel as mid-teens?

Yes, I think that's right.

Okay. Also curious, we're hearing a lot about tokenization opportunities from a number of different payment providers. How significant could that be? Or will it be significant to Global Payments as you look out, maybe 1 year or so? Is that something that could be meaningful to the U.S. operation?

George, it's Jeff. I'll start. I think you probably had seen our announcement last night with Apple Pay, that we're fully supporting Apple Pay here in the United States across all of our channels, but in particular, through OpenEdge, which is our integrated business. As you know, based on your question, tokens, of course, are part of the solution as it relates to that mobile construct, and we're pleased to be, I think, an early user of the tokens that are used in that kind of a solution. I would say more generally, on the strategy side of what you said, we kind of view it as a combination of EMV, tokenization as well as encryption. And we think all 3 parts of that, George, are going to be important for the ultimate solution. So I do think over a period of time that we will incrementally do better in the United States market with all 3 of those as a package. Whether that would meaningfully influence our results, time will tell and you'll have to see. I do think that the market though, will evolve toward a place where, for the right merchant set, and of course, you saw as in OpenEdge and Apple with us last night, it will be a meaningful point of distinction, I believe, for us. I would also say, though, in the case of tokens, well Apple is a very good example of an innovator and a leading partner and a company who has done very well with what they've done to date. I think it's important to realize that there is still in a lack of uniformity on what the right baseline for tokenization should be. So for example, we, here, on our side, are using -- at least in the United States currently, the EMVco tokenization specs. But there are variety, as you probably know, George, of alternative specifications for tokens. Some are at the issuer level, some are at the acquirer level, et cetera. I think it's going to be important for us as an industry to see some kind of rationalization and uniformity of specification, George, for tokens really to have a meaningful impact on payments across all of us in the marketplace.

Okay, so it sounds like a bit of a wait and see on that. Last question for me. Should we be thinking any differently about the tax rate for fiscal year '15? Any changes there?

George, it's Cameron. Generally, no. I think we're guiding toward a tax rate approaching 28%. It was 27.4% for the first quarter, so I think that's generally in the ballpark of the overall guidance we provided for the full year. We may come in a little light of that, but we're still guiding towards that approaching 28% level.

Our next question comes from Bryan Keane with Deutsche Bank.

I wanted to ask about the guidance coming from a slightly different angle. If I just look at the first quarter, you guys did about 12% revenue growth. How do we get down to 7% to 9% growth for the full year? What's going to deteriorate in the business, even given the Ezidebit acquisitions going to be in there as well?

Bryan, it's Cameron. I don't know that I would say anything is going to really deteriorate in the business, but for perhaps, FX. And also, I think it's important to remember that PayPros annualizes in Q4, so that's going to obviously have an impact on the overall annual revenue growth as well. So as I described earlier, I think when you look at the revenue guidance, we've obviously factored in the first quarter performance. We are including our expectation for Ezidebit. We are being conscious, I think, of the momentum we have going into the back 3 quarters of the year, but also recognize it's very early, despite the fact we're pleased with our overall performance thus far. And I think when you layer in FX on top of that and accommodate, again, for the ISO channel, which again, we view as growth being relatively light in the low single-digit range, and potentially worse, I think that kind of gets you to an overall 7% to 9% level. Frankly, I'm less focused on the 7% to 9%. That's really just math. I think ultimately, what I'm focused on is the actual revenue numbers themselves, and I think, again, we guided the midpoint up $40 million. We think that's a good place for us to be right now given we're 1 quarter into the year.

How much was FX a headwind going in, I guess, on the original guidance? How many points? And then, how much is it now into -- when I look at this guidance, how many points of headwind is FX?

Yes, we didn't give a specific sort of estimate as to the FX impact coming into the year. We described it as a modest headwind, so you can use your own judgment as to what modest means. I think as we look to the balance of the year, we think it is a more meaningful headwind to the business, and I'll just note that if you look at all the major currencies to which we are exposed, all but one, we have a more negative outlook for those currencies for the balance of the year than we did in the July time frame and I would say, relatively meaningfully more negative outlook. So I think that's really what's driving a lot of what you're seeing from a top line revenue perspective is just that impact of FX.

But you're not quantifying the FX impact in the guidance?

No, we are not quantifying it specifically, no.

All right, last question for me. Just on Russia now, what's in the expectations? I guess, it was short of what you were expecting originally. But how much Russia revenue? What's the baseline to the guidance now?

Yes, as we commented earlier, Russia represents about 3% of our total revenue for the company. So I wouldn't want to characterize performance as dramatically negative relative to our expectations. But it did fall a little bit short. I think we're really pleased with the job our colleagues are doing in Russia given the overall environment there and some of the highlights that I provided earlier as to where the ruble stands and where the overall macroeconomic situation is, particularly where GDP growth is. But again, we have a slightly more tempered view. We came into the year with a tempered view and I'd say, our view is slightly more tempered than it even was in July for that business for the full year. And particularly, when you layer on the impact of the ruble, which has, again, continued to degrade significantly, performance expectations for that business are not particularly great right now.

Our next question comes from Kevin McVeigh with Macquarie.

Just another follow-up. Seems like nice increase to margins despite the FX. What's driving kind of the boost in what's obviously a tougher environment overall?

So I'll start Kevin, and then Cameron will add in too. I think a key thing from our point of view is that we've had very good execution in our direct channel. So if you start with the United States business, I think we are really firing in all cylinders on a direct basis in the U.S. business. Of course, the direct business is at a higher margin, naturally, than some of our third-party businesses anywhere in the world; especially here in the United States. So I think, Kevin, you start with good core direct sales execution, coupled with investments in things like PayPros, and while Fidelity gaming will not tie into fiscal '15 because it really closes at the end of the year, we also have announced there, Kevin, that is a higher-margin business with better-than-industry rates of organic revenue growth, similar to our own business. So I would say, Kevin, good execution and that those things that we're adding into our markets are more direct sales, resources and more businesses with "better than corporate average" corporate operating margins. So I think a conscious effort to have better execution. When we add something, better products and services that drive additional margin.

And then just, Jeff, without getting too granular, any sense of what is the target to come over the course of time for direct versus indirect?

Well, I think, Kevin, as a strategy manner, without giving kind of a more granular answer to your point, what we like to do is just let those businesses grow as much north of the market as we can. Every month here, we look at our rates of organic revenue and transaction growth in all of our markets versus what you see from the networks and what you see from our publicly reporting peers. Those are our bogeys and we try to exceed what we think those market rates of growth are. So if you back to what Cameron had said, if you look at the first quarter with our third-party ISO business growing in the low single digit, as Cameron mentioned, we view the organic rate of the market to be mid-single digits or better in the United States markets, so we're trying to exceed that, Kevin. You can imagine what that might do to that mix over time.

Our next question comes from Dan Perlin with RBC Capital Markets.

I just want to go back and look at Europe a bit. I know you're talking about FX headwinds being meaningful but not quantifying it. So when we look at Spain, historically, that's been more of a market share play, I think. I'm wondering, to the extent, where do you guys stand in terms of that penetration? And do you think that, that could continue even in the face of what is going to be some, I think, much more difficult purchasing power within that region? And then secondly, within the e-commerce channel, I think your major partner had a pretty significant announcement yesterday. I'm wondering, Jeff, if you could just kind of philosophically think about and tell us what you're thinking there. And then the last question I have and then I'll be quiet. Some of the networks have suggested that they're going to put on these digital enable-ment fees, which are fees they're going to charge to you guys. I'm wondering what extent you think you're going to be able to absorb those and/or pass them through in the future.

Dan, it's Jeff. Certainly, those are good questions and certainly, happy to address those. So let me start off first with the Global Solutions business, which as you rightly said, we are very lucky and fortunate to have PayPal as one of our good partners in that business. I think as Cameron had alluded to in his prepared comments, we continue to see consistently very good performance in that business. What I would say is that I've said with other parties -- third parties over time, that we are only as a successful in our businesses as our partners are successful. So if you think about it that way, Dan, presumably, the rationale for eBay and PayPal is to enable additional success at both eBay as well as at PayPal. And of course, you'd have to ask them, but is my sense, having read about it and having lived through this stuff before. As I said a minute ago, the more success that they have, we believe, the more success that we, as a good partner, will have. So from that point of view, Dan, I feel like that's nothing but good news for them but also for our business, and that is certainly my expectation. On the question about -- on the question about Spain, I think we continue to have very good execution and market share gains in that business. I would add that as you've seen around the EU, and certainly from one of the networks, we also believe that we will benefit from continued regulatory change in the European marketplace. Spain was in effect this quarter because it was effective, I believe, September 1. Spain early adopted their equivalent, Dan, of some of the SEPA pricing actions for credit and debit. So we have a lot…

And then, David, just a little follow on to and to the previous question. We have the ability to do tokenization today point-to-point as well and for customers with the right terminals, the ability to do EMV as well. If you go forward over calendar '15 and think of that as the opportunity for bundled solutions for more secured processing, absolutely, that's adding more value to the transactions, which should provide the ability to price appropriately around that as well.

Our next question comes from Steven Kwok of KBW.

I just have one quick follow-up. In terms of -- from an M&A pipeline, I was just wondering what are the -- how is the pipeline going? And then in terms of -- what are the -- some of the areas that you're focused that you feel like can enhance your operations even more?

Thanks, Steven, it's Jeff. So I would say we still have a good pipeline. I think you have to realize that I say that in the context of just having announced 2 acquisitions in the last 2 or 3 weeks. So as with all pipelines, they build and then hopefully, over time, you execute on some of those transactions and then you rebuild them. So I like where our pipeline is today, but of course, 2 of the transactions, Ezidebit and Fidelity, we have now announced, so clearly those 2 are no longer in the pipeline. You have to keep that in perspective. Second, in terms of areas of focus, Ezidebit with Australia and New Zealand was an area of focus that we talked quite a bit about in the last number of conference calls. So we had said key strategic objective for us, Steven, is to expand our business in the Asia-Pacific region. Australia, South Korea and Japan, probably in that order, were 3 markets that we're not in that, really, we really have wanted to be in and now we are very pleased to be in the Australian marketplace with the announcement of the Ezidebit acquisition. So I would say, if we could find additional opportunities in that market, or in South Korea and Japan as new markets, we'd be very interested, and we continue to look at those. Of the markets that we're currently in Asia-Pacific that we've said before that we want to be bigger in, that's still true. So for example, we are looking fairly closely at India, China and the Philippines, 3 markets that we're currently in, that we like, that we'd rather be bigger in if we have a choice. So I think this is still on the horizon. I would say in…

Our next question comes from James Schneider with Goldman Sachs.

One question, one clarification if I could. Relative to the 40 bps of operating margin expansion you're expecting for the year, how much of that is being driven by the pure mix of business with OpenEdge? and Ezidebit? Versus how much is being driven by kind of operational leverage?

Yes, Jim, it's Cameron. I wouldn't give a specific estimate as to how much is being driven by any particular aspect of the business. I think what it reflects overall is just the continuing improvement in the overall margin profile for the aggregate company. Some of that's being driven by initiatives that we have, as Jeff mentioned in his prepared remarks, to move towards a single-operating-company platform. Some of that's driven by the improvements we've made in terms of adding new businesses to the mix that obviously come in at higher than our corporate average margin. And some of it, I think, is just outright execution in a lot of our businesses around the world. So not going to splice it more specifically than that, but I think it's a combination of those factors.

That's helpful. And then just a clarification on the follow-up. With respect to the ISO channel, it sounds like you are saying that in August quarter, the ISO channel didn't decelerate, in fact, maybe it was the same or a little bit better than it was back in the May quarter. Is that accurate?

I think it was probably a little slower than it was in the May quarter. I don't think the deceleration was dramatic. We still view it in the low single digit from a growth perspective. But as I mentioned before, our revenue guidance does contemplate the potential that, that could deteriorate a little bit more as we look to the back 3 quarters of the year. But it was probably a little weaker than we saw in the May quarter, but it wasn't dramatic.

Our next question comes from Tien-tsin Huang with JPMorgan.

Just want to ask about Ezidebit and the revenue opportunity. I don't really know that asset well. Looks like it's a recurring payments business plus a gateway business. So what's the mix and which piece are you more excited about?

Tien-tsin, it's Jeff. I think we're excited about first, the opportunity to get into an additional markets in Asia-Pacific. So we've been looking for quite some time, as I said a minute ago, in reaction -- in response to Steven's question about how we entered additional markets in Asia-Pacific, in particular in Australia, which is the fourth-largest economy in Asia-Pacific and is about the same size -- a little bit bigger than the economy in Spain. So I think the first answer to your question is new markets is an important thing that we're focused on. I would think, second, in terms of your question about the construct of Ezidebit, I would think of it, really, as very similar to what we call OpenEdge, APT and PayPros. So I think you should think about it that way, Tien-tsin, in terms of your understanding of the business. The market in Australia is a little bit different than the market in the United States or a decent number to mean alternative payment schemes outside of the card brands in Australia. So that has a meaningful part of the business over at Ezidebit. So other than that construct, which is local schemes, I think it's very similar, same types of channels. I think there's 60 enterprise software and integrators who they're partnering with to get at the base customer base. So the model you should be thinking about is one that's very similar to OpenEdge, albeit in the Australian market.

Okay, good to know, and I appreciate that. Just for my follow-up for Cameron, I guess, that the quarterly cadence throughout the year for EPS, I think last quarter you said would mirror last year. Any update to that?

No. I think that expectation is still largely consistent based on our current outlook for the full year.

Our next question comes from Andrew Jeffrey with SunTrust.

Cameron, just -- at the risk of beating a dead horse on the ISOs, can you just talk a little bit about causality? What's kind of behind the modest weakness relative to your initial thoughts on that channel. Is that a Global Payments sort of consummated initiative? Or is there something external taking place in the market?

I don't know that there's anything more significant external taking place in the marketplace. I think it's more of a commentary, I think, largely from our perspective as to where our focus has been here over the last few quarters. It's clearly on growing our direct business. It's clearly on growing OpenEdge, our integrated business, and focusing on, again, putting our efforts behind what we view as more the long-term future of our company, which is the direct distribution model, through those businesses that we have. So I don't know that I would read too much further into it than that. I think it's just a fairly consistent commentary with what we've seen over the last few quarters around where our focus is and the result of that as flow through our overall financial performance.

Yes, Andrew, it's Jeff. I would just say it's continuation -- in addition to what Cameron said, financially, at a high level, it's a continuation of the trend that we probably have talked about in the last 8 quarters or so, which is at the end of the day, the third-party business has really come to a period post-Durbin and post the FAM [ph], a period of very high revenue growth in particular, which of course, has an impact on our GAAP-reported revenues. And that is well now annualized. So I think what you're seeing is those unusual onetime events, which caused that channel to grow very, very quickly for a period of a couple of years. This is probably the 8th consecutive quarter where we've seen a continuation of the same trend of lower growth in that channel. So I wouldn't say it's anything other than an extension of what you've been seeing the last 2 years or so.

Got it, all right. That's helpful. And where is the sort of the pro forma operating leverage in the business -- or sorry, financial leverage in the business today? And are you sort of comfortable with long term, recognizing that you generate a lot of free cash?

Yes, Andrew, it's Jeff. So at a high level for me, from a strategy point of view, we expect to see over the cycle, as we laid out in July, continuing operating margin expansion. We've made significant investments in our direct businesses. We believe those are growing at market rates or better. We just got through talking about our third-party business. And while there's not a lot new there over the last 2 years, the truth is that is not growing from a revenue point of view at where rate of market growth is. So the natural mix over time and continued good execution in new products and services and leveraging the technology platform globally as we're doing, generates our expectation that we talked about in July, that we're going to continue to see over the cycle, additional operating margin expansion. That is supplemented by some of that deals that we've announced. So we're very focused on adding products, services, companies, distribution and technologies that are additive to our margins. So the last 2 transactions we've announced, Ezidebit and now Fidelity gaming, are not only growing better than the rates of organic market growth which we described, but have come in, as David mentioned, at margins that are better than our corporate margin. So I think from a strategy point of view, Andrew, going back to the July-cycle-based guidance, it's a combination of good consistent direct execution in all of our direct channels globally, augmented by -- when we do, do partnerships and acquisitions, those are assets that have good technologies, products and services, good distribution, that without us doing a lot initially, have better margins in the first place. And I think, you add all that stuff together and you should continue to see -- our expectations is continued expansion over the cycle on our operating margins.

Our last question comes from Jason Deleeuw with Piper Jaffray.

I wanted to dig into the integrated payments channel still more. I want to get a feel for the channel partners that you're working with. What percentage of their merchants already have integrated payments? I'm just trying to get a sense for like kind of the long-term growth opportunity there. And then also, if you could just give us some color on -- now that we -- you guys have been in this channel for some time now, especially with APT, what's kind of going on from a competitive front, from a pricing front? Are there any changes in the dynamics in that channel that you guys have noticed over the last year, 1.5 years?

Yes, Jason, it's David. I'll start and then let the other guys chime in as well. We have over 2,000 partners across our integrated channel, servicing numerous verticals, with meaningful presence in probably 50 or 60 verticals -- channels. When you think about the pieces of that solution, it's proprietary payment, technology, and highly secure solution as well. So if you look at the pieces of that, we've been very successful with the mid-teens kind of growth that Cameron is describing. And then when you roll sort of the rest of your question and thinking about pricing pressure, we have seen very little incremental pricing pressure. Obviously, merchant acquiring is highly competitive, to link your first 2 questions together. But for us, fortunately, from a growth perspective, we have not quoted this number in some time. When we first announced these transactions, we told you these channels were maybe 25% penetrated. In other words, the merchant solutions being integrated with our software and our technology and the vendors' software and technology, maybe 25% of those merchants actually were processing through an integrated solution. So we think we've got a long runway ahead for growth, particularly given that pricing trends are quite stable across the industry.

Just last, if you think EMV helps accelerate the penetration rate or to get more merchants to integrate the payments?

Yes, there's no question. In fact, if you link it to Apple Pay and the marriage of tokenization, point-to-point encryption and EMV, we think we will drive faster adoption and get the merchant -- the end merchant as well as the ISV, the software vendor, more excited about driving these integrated solutions throughout the base.

Well, thank you very much for joining us this morning.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.