EXHIBIT 99.1
FOR IMMEDIATE RELEASE
HEARTLAND PAYMENT SYSTEMS REPORTS RECORD FIRST QUARTER EARNINGS
EARNINGS PER SHARE UP 35% TO $0.23
Processing Volume Grows over 18%, Operating Income Up 36%
Princeton, NJ – May 1, 2008 – Heartland Payment Systems, Inc. (NYSE: HPY), a leading provider of credit/debit/prepaid card processing, payroll, check management and payment services, today announced record first quarter net income of $9.0 million and fully diluted earnings per share of $0.23.
Highlights for the First Quarter include:
• | Net income up 31% from the first quarter of 2007 |
• | Transaction processing volume of $13.2 billion, up 18.3% |
• | New margin installed increased by 17.4% |
• | Net Revenue up 19.9%, with payroll revenues advancing 41% |
• | Total period end merchants up 15.1% to 165,900 |
• | Operating margin on net revenue of 17.7%, an improvement of 210 basis points from the first quarter of last year |
Robert Carr, Chairman and CEO, said, “Our record first quarter is a reflection of the momentum in our core business built on our strong value proposition, our focus on improving efficiency through technology investments, and solid progress from our new growth initiatives. The key to our success is the sustained growth and increasing success of our team of relationship managers, which this quarter grew to 1,191. We are clearly facing a difficult economy, which limited same store sales growth in the quarter to only 0.6%, with our restaurant segment declining by 0.4%. Notwithstanding this environment, our relationship managers increased new margin installed by 17.4% over the first quarter of last year. At the same time, we continue to exploit the advantages of our own platform; in the first quarter, 84.7% of new merchants installed and 81% of total transactions were on HPS Exchange. By driving an increasing proportion of transactions onto our proprietary platforms, our operating margin on net revenue increased by 210 basis points from the first quarter of 2007. Our “Fair Deal” philosophy, competitive products, superior technology and dedicated sales organization are sustaining our growth while delivering value to our expanding international base of merchants.”
-more-
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Total revenues in the first quarter were $340 million, an increase of 19.5% compared to $284 million in the first quarter of 2007. Card processing volume for the three months ended March 31, 2008 increased 18.3% to $13.2 billion from $11.2 billion during the same period in 2007. The Company’s active bank card merchant count rose to 158,900 at March 31, 2008, a 14.2% increase over the past twelve months. Transaction processing volume and net revenue growth continue to benefit from the installation of larger and more profitable merchants onto our platform.
Mr. Carr continued, “We are making good progress on many of this year’s exciting new growth initiatives. Our Collective POS acquisition for the first time expands our sales and processing capabilities across borders, into the Canadian market. We are pleased to announce that we have just signed an acquiring agreement with Discover, so that our merchants’ Discover card processing will be consolidated with Visa and MasterCard. Development work to integrate Discover and American Express on our card transaction processing platform remains on schedule. Also, our payroll, remote deposit, and campus card programs are all showing the market opportunity we believe offers significant growth potential. To build value for our shareholders, we are making strategic investments which broaden our functionality, capabilities, and applications to expand the Heartland brand throughout the merchant processing market.”
FULL YEAR 2008 GUIDANCE:
The Company is affirming guidance for fiscal 2008. For the year, we expect net revenue (total revenues less interchange, dues and assessments) to grow by 16% - 18%; operating income as a percentage of net revenue to be 20% - 21%; and earnings per share of $1.13 - $1.17.
DIVIDEND:
The Company also announced that the Board of Directors has declared a second quarter dividend of $0.09 per common share. The dividend is payable to shareholders of record on May 23, 2008 and will be paid on June 15, 2008.
Conference Call:
Heartland Payment Systems, Inc. will host a conference call on May 1, 2008 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. You may also participate by calling 610-228-2110 to request the dial-in information for the conference call.
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The webcast will be archived on the Company’s website within two hours of the live call and will remain available through Friday, May 30, 2008.
About Heartland Payment Systems
Heartland Payment Systems, Inc., a NYSE company trading under the symbol HPY, delivers credit/debit/prepaid card processing, payroll, check management and payment solutions to more than 165,000 small and mid-sized businesses 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, visitwww.heartlandpaymentsystems.com andwww.MerchantBillOfRights.com.
Forward-looking Statements
This press release may contain statements of a forward-looking nature which represent our management’s beliefs and assumptions concerning future events. Forward-looking statements involve risks, uncertainties and assumptions and are based on information currently available to us. Actual results may differ materially from those expressed in the forward-looking statements due to many factors. Information concerning these factors is contained in the Company’s Securities and Exchange Commission filings, including but not limited to, the Company’s annual report on Form 10- K for the year ended December 31, 2007. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this release.
CONTACT:
Joe Hassett
Gregory FCA Communications
27 West Athens Ave.
Ardmore, PA 19003
Tel: 610-642-8253
Email:Heartland_ir@gregoryfca.com
TABLES FOLLOW
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Heartland Payment Systems, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
(unaudited)
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
Total Revenues | $ | 339,619 | $ | 284,212 | ||||
Costs of Services: | ||||||||
Interchange | 245,277 | 205,337 | ||||||
Dues and assessments | 12,342 | 10,459 | ||||||
Processing and servicing | 36,929 | 31,330 | ||||||
Customer acquisition costs | 11,450 | 10,391 | ||||||
Depreciation and amortization | 1,910 | 1,724 | ||||||
Total costs of services | 307,908 | 259,241 | ||||||
General and administrative | 17,174 | 14,299 | ||||||
Total expenses | 325,082 | 273,540 | ||||||
Income from operations | 14,537 | 10,672 | ||||||
Other income (expense): | ||||||||
Interest income | 300 | 459 | ||||||
Interest expense | (346 | ) | (112 | ) | ||||
Loss on investment | (103 | ) | — | |||||
Other, net | 23 | (95 | ) | |||||
Total other income (expense) | (126 | ) | 252 | |||||
Income before income taxes | 14,411 | 10,924 | ||||||
Provision for income taxes | 5,434 | 4,072 | ||||||
Net income | $ | 8,977 | $ | 6,852 | ||||
Net income | $ | 8,977 | $ | 6,852 | ||||
Other comprehensive income, net of tax: | ||||||||
Unrealized gains on investments | 21 | 3 | ||||||
Foreign currency translation adjustment | (259 | ) | — | |||||
Comprehensive income | $ | 8,739 | $ | 6,855 | ||||
Earnings per common share: | ||||||||
Basic | $ | 0.24 | $ | 0.18 | ||||
Diluted | $ | 0.23 | $ | 0.17 | ||||
Weighted average number of common shares outstanding: | ||||||||
Basic | 37,542 | 37,507 | ||||||
Diluted | 38,863 | 39,971 |
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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)
March 31, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 32,501 | $ | 35,508 | ||||
Funds held for payroll customers | 26,761 | 24,201 | ||||||
Receivables, net | 124,044 | 122,613 | ||||||
Investments | 1,132 | 1,119 | ||||||
Inventory | 4,923 | 5,383 | ||||||
Prepaid expenses | 3,431 | 3,478 | ||||||
Current tax asset | 692 | 5,449 | ||||||
Current deferred tax assets, net | 831 | 690 | ||||||
Total current assets | 194,315 | 198,441 | ||||||
Capitalized customer acquisition costs, net | 73,143 | 70,498 | ||||||
Deferred tax assets, net | 3,187 | 3,878 | ||||||
Property and equipment, net | 51,231 | 50,248 | ||||||
Goodwill | 14,542 | 5,489 | ||||||
Deposits and other assets | 1,619 | 635 | ||||||
Total assets | $ | 338,037 | $ | 329,189 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Due to sponsor banks | $ | 68,042 | $ | 49,798 | ||||
Accounts payable | 18,655 | 20,495 | ||||||
Deposits held for payroll customers | 26,761 | 24,201 | ||||||
Current portion of accrued buyout liability | 11,023 | 11,521 | ||||||
Merchant deposits and loss reserves | 15,783 | 14,757 | ||||||
Accrued expenses and other liabilities | 14,111 | 15,266 | ||||||
Total current liabilities | 154,375 | 136,038 | ||||||
Reserve for unrecognized tax benefits | 1,188 | 1,230 | ||||||
Long-term portion of accrued buyout liability | 28,203 | 26,252 | ||||||
Total liabilities | 183,766 | 163,520 | ||||||
Commitments and contingencies | — | — | ||||||
Stockholders’ equity | ||||||||
Common Stock, $0.001 par value, 100,000,000 shares authorized, 37,311,009 and 39,804,322 shares issued at March 31, 2008 and December 31, 2007; 37,311,009 and 37,989,622 shares outstanding at March 31, 2008 and December 31, 2007 | 38 | 40 | ||||||
Additional paid-in capital | 163,249 | 173,346 | ||||||
Accumulated other comprehensive loss | (300 | ) | (62 | ) | ||||
Retained earnings | (8,716 | ) | 36,729 | |||||
Treasury stock, at cost (1,814,700 shares at December 31, 2007) | — | (44,384 | ) | |||||
Total stockholders’ equity | $ | 154,271 | 165,669 | |||||
Total liabilities and stockholders’ equity | $ | 338,037 | $ | 329,189 | ||||
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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flow
(In thousands)
(unaudited)
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 8,977 | $ | 6,852 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Amortization of capitalized customer acquisition costs | 12,522 | 10,062 | ||||||
Other depreciation and amortization | 2,673 | 2,131 | ||||||
Addition to loss reserves | 1,829 | 527 | ||||||
Provision for doubtful receivables | 260 | 80 | ||||||
Stock-based compensation | 404 | 389 | ||||||
Deferred taxes | 498 | (263 | ) | |||||
Loss on investment | 103 | — | ||||||
Other | 2 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Increase in receivables | (1,240 | ) | (4,723 | ) | ||||
Decrease in inventory | 591 | 188 | ||||||
Payment of signing bonuses, net | (11,433 | ) | (9,488 | ) | ||||
Increase in capitalized customer acquisition costs | (3,734 | ) | (3,055 | ) | ||||
Decrease (increase) in prepaid expenses | 55 | (173 | ) | |||||
Decrease in current tax asset | 4,775 | 4,380 | ||||||
(Increase) decrease in deposits and other assets | (11 | ) | 41 | |||||
Excess tax benefits on options exercised under SFAS No. 123R | (254 | ) | (1,951 | ) | ||||
(Decrease) increase in reserve for unrecognized tax benefits | (43 | ) | 276 | |||||
Increase in due to sponsor bank | 18,244 | 4,755 | ||||||
(Decrease) increase in accounts payable | (2,108 | ) | 948 | |||||
(Decrease) increase in accrued expenses and other liabilities | (1,650 | ) | 1,574 | |||||
Decrease in merchant deposits and loss reserves | (807 | ) | (1,051 | ) | ||||
Payouts of accrued buyout liability | (1,209 | ) | (2,229 | ) | ||||
Increase in accrued buyout liability | 2,663 | 3,384 | ||||||
Net cash provided by operating activities | 31,107 | 12,654 | ||||||
Cash flows from investing activities | ||||||||
Purchase of investments | (25 | ) | (32 | ) | ||||
Maturities of investments | — | 13 | ||||||
Increase in funds held for payroll customers | (2,617 | ) | (6,233 | ) | ||||
Increase in deposits held for payroll customers | 2,560 | 6,251 | ||||||
Acquisition of business, net of cash acquired | (9,988 | ) | — | |||||
Purchases of property and equipment | (3,438 | ) | (5,708 | ) | ||||
Net cash used in investing activities | (13,508 | ) | (5,709 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from borrowings | 20,000 | — | ||||||
Principal payments on borrowings and financing arrangements | (20,000 | ) | (77 | ) | ||||
Proceeds from exercise of stock options | 806 | 2,385 | ||||||
Excess tax benefits on options exercised under SFAS No. 123R | 254 | 1,951 | ||||||
Repurchase of common stock | (17,995 | ) | (625 | ) | ||||
Dividends paid on common stock | (3,356 | ) | (1,874 | ) | ||||
Net cash (used in) provided by financing activities | (20,291 | ) | 1,760 | |||||
Net (decrease) increase in cash and cash equivalents | (2,692 | ) | 8,705 | |||||
Effect of exchange rates on cash | (315 | ) | — | |||||
Cash and cash equivalents at beginning of year | 35,508 | 16,054 | ||||||
Cash and cash equivalents at end of period | $ | 32,501 | $ | 24,759 | ||||
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