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| Bob Carr |
October 27, 2011 07:30 AM Eastern Daylight Time
Heartland Payment Systems Reports 55% Increase in Third Quarter Adjusted Earnings per Share
Board Authorizes $50 Million Share Repurchase Program
PRINCETON, N.J.--(
BUSINESS WIRE)--Heartland Payment Systems, Inc. (NYSE: HPY), one of the nation’s largest payment processors, today announced GAAP net earnings of $12.6 million, or $0.31 per share, for the three months ended September 30, 2011. Adjusted Net Income and Earnings per Share were $12.7 million and $0.31, respectively, for the quarter ended September 30, 2011 compared to Adjusted Net Income and Earnings per Share of $8.0 million and $0.20, respectively, for the quarter ended September 30, 2010. Adjusted Net Income and Earnings per Share are non-GAAP measures that exclude expenses attributable to the processing system intrusion detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.”
“Share repurchases represent an excellent vehicle to create shareholder value, especially given the significant excess cash being generated by our operations”
Highlights for the third quarter include:
- Record Small and Mid-Sized Merchant (SME) quarterly transaction processing volume of $17.8 billion, up 6.9% from the comparable period in 2010
- Quarterly Net Revenue of $122.2 million, up 5.9% from the third quarter of 2010
- Same store sales rose 2.3% for the third quarter, our sixth consecutive quarter of same store sales growth
- New margin installed of $13.0 million, up 3.5% from third quarter of 2010, with September representing the best month in 2011 for both total installed margin and Relationship Manager productivity
- Operating margin on net revenue of 17.7% compared to 12.3% for the same quarter in 2010
- Stock compensation expense of $1.3 million pre-tax, or $0.02 per share, compared to $1.7 million, or $0.03, in the third quarter 2010
Robert Carr, Chairman and CEO, said, “Transaction processing volume again reached record levels this quarter, reflecting steady improvement in same store sales, volume attrition and new margin installed. Operating margins also continued to widen, putting our 20% near-term goal squarely in our sights. As a result, we have not only significantly increased earnings, but also generated even greater free cash flow, providing us with the financial strength to implement our various growth initiatives. As a result of the success we’ve enjoyed this year, and our confidence that we will benefit from our strategy to pass all of the savings of new, lower debit interchange fees to our merchants, we are both raising our guidance for the remainder of 2011 and announcing a share repurchase program to create even more value for our shareholders.”
SME card processing volume for the three months ended September 30, 2011 was a record $17.8 billion, a 6.9% improvement compared to the year-ago period. For the quarter, new margin installed was up 3.5% from the third quarter of 2010, while same store sales were up 2.3% for the third quarter, and we are now likely to exceed the 1% - 2% same store sales growth rate we had anticipated for 2011. Volume attrition in the quarter declined from the year ago period to 13.6%. For the three months ended September 30, 2011, Network Services processed a quarterly record 873 million transactions, a 5.8% year-over-year increase. Efficiency improvements reduced processing and servicing expenses to a record-low 43.6% of net revenue. Net revenue growth and productivity enhancements drove operating income to 17.7% of net revenue in the third quarter of 2011, up almost 540 basis points from the comparable 2010 period, while absorbing a 27% increase in general and administrative expense. The expenses attributable to the processing system intrusion in the third quarter of 2011 were $115,000 pre-tax and are shown separately in the Company’s Statement of Operations.
Mr. Carr continued, “Both our sales organization and our strategic partners have been energized by the tremendous growth prospects created by the implementation of the Durbin Amendment. The incredible publicity surrounding the decrease in debit interchange rates and the market positions adopted throughout our industry are underscoring Heartland’s leadership position in passing 100% of any savings to our merchants. Already, our Durbin Dollars campaign has saved our merchants more than $12 million by passing through all, not some, of the new, lower debit interchange rates. Over the next several months, as merchants view the Durbin Dollar savings on their Heartland statements, our value proposition will become increasingly evident. Our non-card businesses represent equally attractive growth platforms. In particular, with the recent acquisition of School-Link Technologies we now enjoy an industry-leading 20% share of the K-12 school nutrition and point-of-sale solutions market and a channel to the parents of the millions of children in the schools we serve.”
NINE MONTH RESULTS:
For the first nine months of 2011, GAAP net income was $32.7 million or $0.82 per share, compared to net income of $27.9 million or $0.71 per share for the first nine months of 2010. Net revenue for the first nine months of 2011 was $357.1 million, up 6.8% compared to the first nine months of 2010. Excluding expenses attributable to the processing system intrusion, Adjusted Net Income and Earnings per Share for the first nine months of fiscal 2011 were $33.2 million or $0.83 per share, compared to $18.8 million, or $0.48 per share, in the prior year nine months. Year-to-date 2011, stock compensation expense has reduced earnings by $5.0 million pre-tax, or $0.08 per diluted share, compared to $4.5 million or $0.07 per diluted share for the same nine-month period in 2010.
