PRINCETON, N.J.--(BUSINESS WIRE)--Heartland Payment Systems, Inc. (NYSE: HPY), one of the nation’s largest payments processors, today announced a quarterly GAAP net loss of $9.6 million, or ($0.26) per share for the three months ended December 31, 2009 compared to net income of $8.0 million, or $0.21 per fully diluted share, for the same period of 2008. Results for the quarter are after $23.7 million (pre-tax), or $0.42 per share, of various expenses, accruals and reserves, all of which are attributable to the processing system intrusion, including charges related to settlement offers made by the Company in attempts to resolve certain processing system intrusion related claims and settlements of certain claims deemed to be likely to be agreed upon in the near future based upon discussions between the Company and the claimants. Excluding these expenses, accruals and reserves, Adjusted Net Income and Earnings per Share were $5.9 million and $0.16, respectively. Fourth quarter Adjusted Net Income and Earnings per Share are non-GAAP measures that exclude certain items detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.” “Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure”Highlights for the fourth quarter of 2009 include:
- Small and Mid-Sized merchant (SME) transaction processing volume of $14.8 billion, up 5.0% from a year ago
- Quarterly Net Revenue of $105.1 million, also up 5.0% from a year ago
- 93.1% of new merchants installed were on HPS Exchange compared to 91% in the fourth quarter of 2008
- Operating margin on net revenue of 10.0% as a result of continued investment in the Company’s growth platforms, compared to an operating margin of 13.9% in the fourth quarter of 2008
- Same store sales, while down 5.2% for the fourth quarter, reflect a 340 basis point sequential improvement from the third quarter of 2009 and the second consecutive quarterly improvement
- SFAS 123R stock compensation expense of $1.7 million, or $0.03 per share
Robert Carr, Chairman and CEO, said, “Adjusted earnings for the quarter, which is net of $0.03 per share of stock compensation expense, was consistent with our guidance. In the fourth quarter, results reflected encouraging progress on two important measures, year-over-year growth in SME transaction processing volume and same store sales, both of which also improved on a sequential basis from the third quarter. These are modest, but encouraging, signs our small and mid-sized merchants may be starting to recover from the most challenging year since Heartland’s formation. During the quarter, we also made progress on resolving some of the claims relating to the processing system intrusion, which should free an increasing proportion of our resources for more productive pursuits heading into the new year. The sense of both an underlying shift in market direction as well as the increased focus on our growth opportunities we believe provide a solid foundation from which to pursue our long term objectives in 2010. We are proud of the many accomplishments achieved over the past year by our dedicated employees who have battled very difficult conditions, and are thankful for the loyal merchants who continue to value Heartland’s “Fair Deal.”
Net revenues in the fourth quarter were $105.1 million, an increase of 5.0% compared to $100.1 million in the fourth quarter of 2008, with gross revenues up in all major categories: processing, payroll and equipment-related. Card processing volume for the three months ended December 31, 2009 increased 5.0% to $14.8 billion compared to the fourth quarter of 2008. Though same store sales were down 5.2% in the quarter, they improved by 340 basis points sequentially from the third quarter of 2009 and have now improved for two sequential quarters, in part due to weak year ago comparables. New margin installed was down 23.3% in the fourth quarter as economic conditions continue to force merchants to postpone an evaluation of their processing solution. The operating margin on net revenue was 10.0% in the fourth quarter, primarily due to an increase in general and administrative expenses, especially stock compensation, legal costs, and salary, and fringe benefits. The various expenses, accruals, and reserves incurred in the fourth quarter, all of which are attributable to the processing systems intrusion, were $23.7 million pre-tax, or $0.42 per share. The majority of these charges relate to settlement offers made by the Company in attempts to resolve certain of the claims asserted against it relating to the processing system intrusion, and settlement of certain claims asserted against the Company that are deemed likely to be agreed upon in the near term based upon discussions between the Company and the claimants. The charge also includes significant legal fees. These various expense and accruals are shown separately in the Company’s Statement of Operations.
Mr. Carr continued, “During the economic slowdown we have continued to invest in developing a broader portfolio of products and services, including our industry-leading end-to-end encryption technology, to strengthen our value proposition. We are also launching innovative new sales and marketing strategies, such as industry-focused saturation sales efforts, to leverage our proprietary sales force and reinvigorate the growth in our relationship manager team. Through these investments, Heartland is now more aggressively in the market with a broader, more comprehensive value proposition for a wider variety of merchants. We expect this will enable us to gain share this year, as well as to experience significant growth as the economy recovers and more merchants seek a competitive solution.”
FULL YEAR 2009 RESULTS:
For the full year of 2009, GAAP net loss was ($51.8) million or ($1.38) per diluted share. Net revenues for 2009 were $420.2 million up 9.5% compared to 2008. Excluding various expenses, accruals and reserves, all of which are attributable to the processing system intrusion, Adjusted Net Income and Earnings per Share for fiscal 2009 were $29.3 million or $0.78 per share, compared to GAAP earnings of $41.9 million, or $1.08 per share in 2008. Stock compensation expenses have reduced earnings by $4.5 million or $0.07 per share in 2009 compared to $1.5 million or approximately $0.02 per share for 2008.
Use of Non-GAAP Financial Measures
To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company provides additional measures of it operating results, net income and earnings per share, which exclude certain costs and expenses related to the processing system intrusion. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its historical performance as well as prospects for its future performance.
This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Pursuant to Regulation G, a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP for the respective periods ended December 31, 2009 follows:
(In thousands, except per share): | ||||||||
Three Months Ended December 31, 2009 | Full Year Ended December 31, 2009 | |||||||
Net income (loss) attributable to Heartland | ||||||||
| Non-GAAP - Adjusted net income attributable to Heartland | $ | 5,924 | $ | 29,256 | ||||
| Less adjustments: | ||||||||
| Provision for processing system intrusion | 23,651 | 128,943 | ||||||
| Income tax benefit of provision for processing system | ||||||||
| Intrusion | (8,097 | ) | (47,891 | ) | ||||
| After-tax provision for processing system intrusion | 15,554 | 81,052 | ||||||
| GAAP - Net income (loss) attributable to Heartland | $ | (9,630 | ) | $ | (51,796 | ) | ||
Earnings(loss) per share | ||||||||
| Non-GAAP - Adjusted net income per share | $ | 0.16 | $ | 0.78 | ||||
| Less: provision for processing system intrusion | $ | (0.42 | ) | $ | (2.16 | ) | ||
| GAAP - Net income (loss) per hare | $ | (0.26 | ) | $ | (1.38 | ) | ||
| Shares used in computing GAAP net income (loss) per share | 37,480 | 37,483 | ||||||
FULL YEAR 2010 GUIDANCE:
Current economic conditions are likely to continue to influence same store sales growth and new merchant signings in 2010. For the full year 2010, we expect net revenue (total revenues less interchange, fees, dues and assessments) to grow by 10 – 13%, to between $460 and $475 million. For full year 2010, we expect fully diluted EPS to be between $0.95 and $1.00, excluding $0.09 per share of 123R stock compensation expense. The Company’s guidance for 2010 does not include any estimates for potential losses, costs and expenses arising from the previously announced processing system intrusion, including exposure to credit and debit card companies and banks, exposure to various legal proceedings that are pending, or may arise, and related fees and expenses, and other potential liabilities, costs and expenses, including the interest expense on debt incurred to finance any settlements. Except to the extent previously accrued, neither the costs nor the potential liability are estimable at this point, and further the liability is not currently deemed probable.
DIVIDEND:
The Company also announced the Board of Directors today declared a quarterly dividend of $0.01 per common share, which is payable March 15, 2010 to shareholders of record on March 5, 2010.
Conference Call:
Heartland Payment Systems, Inc. will host a conference call on February 18, 2010 at 8:30 a.m. Eastern Time to discuss financial results and business highlights. Heartland Payment Systems invites all interested parties to listen to its conference call, broadcast through a webcast on the Company’s website. To access the call, please visit the Investor Relations portion of the Company’s website at: www.heartlandpaymentsystems.com. The conference call may be accessed by calling
866-431-2040
. Please provide the operator with PIN number 9173947. The webcast will be archived on the Company’s website within two hours of the live call.
About Heartland Payment Systems:
Heartland Payment Systems, Inc. (NYSE: HPY), the 5th largest payments processor in the United States, delivers credit/debit/prepaid card processing, payroll, check management and payments solutions to more than 250,000 business locations nationwide. Heartland is the founding supporter of The Merchant Bill of Rights, a public advocacy initiative that educates merchants about fair credit and debit card processing practices. For more information, please visit HeartlandPaymentSystems.com, MerchantBillOfRights.org, CostOfABurger.com and E3secure.com.
