EXHIBIT 99.1
FOR IMMEDIATE RELEASE
HEARTLAND PAYMENT SYSTEMS REPORTS RECORD SECOND QUARTER
EARNINGS PER SHARE of $0.30
Network Services Acquisition helps increase Total Revenue by 18.3%, and
Net Revenues by 29.3%
Princeton, NJ – August 5, 2008 – Heartland Payment Systems, Inc. (NYSE: HPY), a leading provider of credit/debit/prepaid card processing, payroll, check management and payments services, today announced record second quarter net income of $11.5 million and fully diluted earnings per share of $0.30.
Highlights for the second quarter, which included the results of the acquisition of the Network Services (NWS) business of Alliance Data for one month, include:
• | Total transaction processing volume of $17.1 billion, up 29%, $15.2 billion organic volume, up 14% |
• | Net Revenue up 29.3%, and excluding NWS increased by 17.7% |
• | Earnings per share up 15% and net income up 10.3% from the second quarter of 2007 |
• | New margin installed increased by 12.2% |
• | Operating margin on net revenue of 19.4% |
Robert Carr, Chairman and CEO, said, “Our record second quarter is a reflection of our ability to achieve solid current results while investing for the future, even in a challenging environment. In the near term we are clearly facing a difficult economy, which resulted in same store sales in the quarter declining 0.1%, the first such decline in our history. Nevertheless, this quarter we continued our string of double-digit growth in new margin installed while increasing our processing volume 14%, excluding NWS, as we continue to increase our market share. Although we are only two months into the process today, the integration of NWS is proceeding nicely, and we are enthusiastic about the long-term benefits the transaction will offer to Heartland’s growth and profitability. Through our organic growth, acquisitions, and investments in new verticals, products, and markets, Heartland’s “Fair Deal” is rapidly becoming the premier brand in the payment processing industry.”
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Total revenues in the second quarter were $395 million, an increase of 18.3% compared to $333 million in the second quarter of 2007. Card processing volume for the three months ended June 30, 2008 increased 29.0% to $17.1 billion, including $2.0 billion of volume from acquisitions. 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, “In the quarter we accomplished many strategic objectives, achieving greater penetration of the broad payments space and setting the stage for our next growth phase. Our card business is very strong, growing faster than the industry, and is preparing to add incremental volume, processing Discover and American Express transactions along with the NWS volume already added. In addition, we are also making solid progress in the payroll, remote deposit, and campus card markets. The second half of the year should be an exciting time as we begin to realize the benefits of both the NWS integration and our various investments.”
SIX MONTH RESULTS:
For the first six months of 2008, net income was $20.4 million or $0.53 per fully diluted share, increases of 19% and 23%, respectively, from the first six months of 2007. Revenues for the first half of 2008 were $734 million, up 19% compared to the first half of 2007.
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% organically, and in excess of 35% including NWS; and earnings per share to be $1.13 - $1.17.
DIVIDEND:
The Company also announced that the Board of Directors has declared a third quarter dividend of $0.09 per common share. The dividend is payable to shareholders of record on August 22, 2008 and will be paid on September 15, 2008.
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Conference Call:
Heartland Payment Systems, Inc. will host a conference call on August 5, 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.
The webcast will be archived on the Company’s website within two hours of the live call and will remain available through Friday, August 29, 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 250,000 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: 610-228-2110
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Total Revenues | $ | 394,554 | $ | 333,445 | $ | 734,173 | $ | 617,657 | ||||||||
Costs of Services: | ||||||||||||||||
Interchange | 282,377 | 245,225 | 527,654 | 450,562 | ||||||||||||
Dues and assessments | 14,152 | 12,398 | 26,494 | 22,857 | ||||||||||||
Processing and servicing | 45,953 | 32,764 | 82,882 | 64,094 | ||||||||||||
Customer acquisition costs | 12,274 | 11,383 | 23,724 | 21,774 | ||||||||||||
Depreciation and amortization | 2,465 | 1,661 | 4,375 | 3,385 | ||||||||||||
Total costs of services | 357,221 | 303,431 | 665,129 | 562,672 | ||||||||||||
General and administrative | 18,289 | 13,735 | 35,463 | 28,034 | ||||||||||||
Total expenses | 375,510 | 317,166 | 700,592 | 590,706 | ||||||||||||
Income from operations | 19,044 | 16,279 | 33,581 | 26,951 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 169 | 517 | 469 | 976 | ||||||||||||
Interest expense | (751 | ) | (233 | ) | (1,097 | ) | (345 | ) | ||||||||
Loss on investment | — | — | (103 | ) | — | |||||||||||
Other, net | 1 | 5 | 24 | (90 | ) | |||||||||||
Total other income (expense) | (581 | ) | 289 | (707 | ) | 541 | ||||||||||
Income before income taxes | 18,463 | 16,568 | 32,874 | 27,492 | ||||||||||||
Provision for income taxes | 6,994 | 6,166 | 12,428 | 10,238 | ||||||||||||
Net income | $ | 11,469 | $ | 10,402 | $ | 20,446 | $ | 17,254 | ||||||||
Net income | $ | 11,469 | $ | 10,402 | $ | 20,446 | $ | 17,254 | ||||||||
Other comprehensive income: Unrealized gains on investments, net of income tax of $(3), $(4), $9 and $(2) | (6 | ) | (7 | ) | 15 | (4 | ) | |||||||||
Foreign currency translation adjustment, net of income tax of $37 and $(124) | 54 | — | (205 | ) | — | |||||||||||
Comprehensive income | $ | 11,517 | $ | 10,395 | $ | 20,256 | $ | 17,250 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.28 | $ | 0.55 | $ | 0.46 | ||||||||
Diluted | $ | 0.30 | $ | 0.26 | $ | 0.53 | $ | 0.43 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 37,387 | 37,653 | 37,464 | 37,580 | ||||||||||||
Diluted | 38,688 | 39,863 | 38,755 | 39,919 |
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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)
June 30, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 40,142 | $ | 35,508 | ||||
Funds held for payroll customers | 22,651 | 24,201 | ||||||
Receivables, net | 156,276 | 122,613 | ||||||
Investments held to maturity | 1,141 | 1,119 | ||||||
Inventory | 7,721 | 5,383 | ||||||
Prepaid expenses | 4,653 | 3,478 | ||||||
Current tax asset | 4,739 | 5,449 | ||||||
Current deferred tax assets, net | 835 | 690 | ||||||
Total current assets | 238,158 | 198,441 | ||||||
Capitalized customer acquisition costs, net | 76,376 | 70,498 | ||||||
Deferred tax assets, net | 1,517 | 3,878 | ||||||
Property and equipment, net | 59,403 | 50,248 | ||||||
Goodwill | 58,774 | 5,489 | ||||||
Intangible assets, net | 34,352 | 481 | ||||||
Deposits and other assets, net | 202 | 154 | ||||||
Total assets | $ | 468,782 | $ | 329,189 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Due to sponsor banks | $ | 98,182 | $ | 49,798 | ||||
Accounts payable | 26,138 | 20,495 | ||||||
Deposits held for payroll customers | 22,651 | 24,201 | ||||||
Current portion of borrowings | 56,250 | — | ||||||
Current portion of accrued buyout liability | 11,006 | 11,521 | ||||||
Merchant deposits and loss reserves | 19,028 | 14,757 | ||||||
Accrued expenses and other liabilities | 22,045 | 15,266 | ||||||
Total current liabilities | 255,300 | 136,038 | ||||||
Reserve for unrecognized tax benefits | 1,391 | 1,230 | ||||||
Long-term portion of borrowings | 18,750 | — | ||||||
Long-term portion of accrued buyout liability | 29,015 | 26,252 | ||||||
Total liabilities | 304,456 | 163,520 | ||||||
Commitments and contingencies | — | — | ||||||
Stockholders’ equity | ||||||||
Common Stock, $0.001 par value, 100,000,000 shares authorized, 37,448,752 and 39,804,322 shares issued at June 30, 2008 and December 31, 2007; 37,448,752 and 37,989,622 shares outstanding at June 30, 2008 and December 31, 2007 | 38 | 40 | ||||||
Additional paid-in capital | 165,155 | 173,346 | ||||||
Accumulated other comprehensive loss | (252 | ) | (62 | ) | ||||
(Accumulated deficit) Retained earnings | (615 | ) | 36,729 | |||||
Treasury stock, at cost (1,814,700 shares at December 31, 2007) | — | (44,384 | ) | |||||
Total stockholders’ equity | 164,326 | 165,669 | ||||||
Total liabilities and stockholders’ equity | $ | 468,782 | $ | 329,189 | ||||
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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flow
(In thousands)
(unaudited)
Six Months Ended June 30, | ||||||||
2008 | 2007 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 20,446 | $ | 17,254 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Amortization of capitalized customer acquisition costs | 25,822 | 21,253 | ||||||
Other depreciation and amortization | 5,882 | 4,254 | ||||||
Addition to loss reserves | 3,262 | 1,122 | ||||||
Provision for doubtful receivables | 1,395 | 216 | ||||||
Stock-based compensation | 775 | 801 | ||||||
Deferred taxes | 2,292 | 90 | ||||||
Loss on investment | 103 | — | ||||||
Other | 4 | 172 | ||||||
Changes in operating assets and liabilities: | ||||||||
Increase in receivables | (15,686 | ) | (11,558 | ) | ||||
Decrease (increase) in inventory | 899 | (625 | ) | |||||
Payment of signing bonuses, net | (24,053 | ) | (21,639 | ) | ||||
Increase in capitalized customer acquisition costs | (7,647 | ) | (6,729 | ) | ||||
Increase in prepaid expenses | (600 | ) | (711 | ) | ||||
Decrease in current tax asset | 1,286 | 5,284 | ||||||
Increase in deposits and other assets | (43 | ) | (9 | ) | ||||
Excess tax benefits on options exercised under SFAS No. 123R | (811 | ) | (3,820 | ) | ||||
Increase in reserve for unrecognized tax benefits | 160 | 476 | ||||||
Increase in due to sponsor bank | 48,383 | 25,284 | ||||||
Increase in accounts payable | 4,697 | 3,165 | ||||||
(Decrease) increase in accrued expenses and other liabilities | (824 | ) | 1,917 | |||||
Decrease in merchant deposits and loss reserves | (1,201 | ) | (1,161 | ) | ||||
Payouts of accrued buyout liability | (3,250 | ) | (4,746 | ) | ||||
Increase in accrued buyout liability | 5,498 | 7,250 | ||||||
Net cash provided by operating activities | 66,789 | 37,540 | ||||||
Cash flows from investing activities | ||||||||
Purchase of investments held to maturity | (46 | ) | (1,330 | ) | ||||
Maturities of investments held to maturity | 250 | 265 | ||||||
Decrease (increase) in funds held for payroll customers | 1,245 | (3,930 | ) | |||||
(Decrease) increase in deposits held for payroll customers | (1,549 | ) | 3,828 | |||||
Acquisition of business, net of cash acquired | (102,544 | ) | (300 | ) | ||||
Purchases of property and equipment | (12,375 | ) | (13,993 | ) | ||||
Net cash used in investing activities | (115,019 | ) | (15,460 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from borrowings | 95,000 | — | ||||||
Principal payments on borrowings and financing arrangements | (20,000 | ) | (146 | ) | ||||
Proceeds from exercise of stock options | 1,783 | 4,546 | ||||||
Excess tax benefits on options exercised under SFAS No. 123R | 811 | 3,820 | ||||||
Repurchase of common stock | (17,995 | ) | (15,307 | ) | ||||
Dividends paid on common stock | (6,724 | ) | (3,757 | ) | ||||
Net cash provided by (used in) financing activities | 52,875 | (10,844 | ) | |||||
Net increase in cash and cash equivalents | 4,645 | 11,236 | ||||||
Effect of exchange rates on cash | (11 | ) | — | |||||
Cash and cash equivalents at beginning of year | 35,508 | 16,054 | ||||||
Cash and cash equivalents at end of period | $ | 40,142 | $ | 27,290 | ||||
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