Image via CrunchBaseMay 04, 2011 07:30 AM Eastern Daylight Time
Heartland Payment Systems Reports First Quarter ResultsPRINCETON, N.J.--(BUSINESS WIRE)--Heartland Payment Systems, Inc. (NYSE: HPY), one of the nation’s largest payments processors, today announced first quarter GAAP net income of $7.8 million, or $0.20 per diluted share. Results are net of $303,000 (pre-tax), or less than one cent per diluted share, of processing system intrusion costs. Excluding such costs, first quarter Adjusted Net Income was $8.0 million or $0.20 per diluted share. First quarter 2010 GAAP net income was $14.2 million, or $0.36 per diluted share, which included $20.4 million (pre-tax), or $0.32 per diluted share, of insurance recoveries associated with the processing system intrusion, net of expenses related to the processing system intrusion. Excluding such net recoveries, first quarter 2010 Adjusted Net Income was $1.5 million or $0.04 per diluted share.
Highlights for the First Quarter include:
- Small and Mid-Sized merchant (SME) transaction processing volume of $15.4 billion, up 7.1% compared with the first quarter of 2010
- Transactions processed for Network Services Merchants of 747 million, up 9.0% compared with the first quarter of 2010, contributing to a 2.7% year-over-year increase in Network Services net revenue for the quarter
- Recorded quarterly net revenue of $112.7 million, up 8.5% compared with the first quarter of 2010
- An operating margin on net revenue of 12.9%, reflecting both strong net revenue growth and a 7.8% decrease in processing and servicing costs compared to the first quarter of 2010
- Same store sales up 3.2% and New Margin Installed up 13.2% relative to the comparable year ago quarter
- Stock-based compensation expense of $2.0 million, or $0.03 per share in the first quarter, compared to $0.02 in the first quarter of 2010
Robert Carr, Chairman and CEO, said, “Results for the first quarter reflect the success of our strategic initiatives to both improve the productivity of our sales organization and achieve processing efficiencies. Net revenue growth was the strongest in six quarters, with all of our card and non-card businesses registering gains in the quarter. For the second consecutive quarter, new margin installed increased on the strength of record relationship manager sales productivity. Transaction processing volumes benefitted from more stable economic conditions in the small and mid-sized merchant market and our fourth consecutive quarter of same store sales growth, while recent strategic investments and increased petroleum transactions helped Network Services achieve net revenue growth this quarter. Through ongoing platform consolidations and efficiency initiatives, we enhanced overall productivity, resulting in a 7.8% decrease in processing and servicing costs in the quarter compared to the first quarter of 2010. This is a significant strategic accomplishment that we believe is a key to enabling us to continually introduce new products while simultaneously lowering the relative cost of operations. The new year is off to a strong start. Our goal is to sustain our existing momentum while continuing to invest in the various growth opportunities we believe will create value for our shareholders.”
Net revenue in the first quarter of 2011 was up 8.5% compared to the first quarter of 2010, due primarily to strong SME card processing volumes, increased Network Services and CPOS net revenue, and continued strong growth in non-card operations, including a double-digit increase in payroll revenue. SME card processing volume for the three months ended March 31, 2011 was $15.4 billion, an increase of 7.1% compared to the three months ended March 31, 2010, as a result of another sequential quarter of positive same store sales and improved merchant installs. In the first quarter of 2011, operating income as a percentage of net revenue was 12.9% compared to 2.5% in the first quarter of 2010. The operating margin benefitted from a 7.8% year-over-year decrease in processing and servicing costs attributable to consolidations and efficiencies gained on our processing platforms, lower residual commissions from last year’s buyouts, lower merchant losses and the effect of a reduction in sales support personnel. General and administrative expenses were up 10.9% from the first quarter of 2010, but declined to 6.4% of total revenues from 6.6% in the first quarter a year-ago quarter. In the first quarter, the Company incurred approximately $303,000 in costs attributable to the processing system intrusion. All of the various expenses, accruals and recoveries related to the processing system intrusion for all periods are shown separately in the Company’s Statement of Income.
Mr. Carr continued, “In the first quarter, relationship manager productivity reached record levels, sustaining the momentum achieved in the last quarter of 2010. By developing a portfolio of Best Practices culled from throughout the organization, we are developing a wealth of tools that are proving effective in improving the efficiency of our entire sales organization. These new tools, processes and systems also provide us with the resources to more effectively expand our sales organization, generate a more immediate and meaningful contribution from new relationship managers joining the Heartland team, and meet our new business growth objectives. At the same time, we are continuing to leverage our technology to develop and introduce exciting and complementary new products. Our K-12 school services platform, SmartLink, our comprehensive petroleum and c-store networking technology, and our new FreshTxt solution, are just some of our recent innovations designed to further strengthen our merchant franchise and create value for our shareholders.”
