Exhibit 99.1
FOR IMMEDIATE RELEASE
HEARTLAND PAYMENT SYSTEMS REPORTS RECORD
QUARTERLY EARNINGS OF $0.35 PER SHARE
Third Quarter Net Income Up 14%, Fully Diluted EPS up 17%
Net Revenue up 48% on Strong Card Processing Volume Growth and
Network Services Acquisition
Princeton, NJ – November 4, 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 quarterly net income of $13.4 million and fully diluted earnings per share of $0.35 for the three months ended September 30, 2008.
Highlights for the third quarter, which include a full quarter’s results from the Network Services (NWS) business acquired in the second quarter, include:
| • | Record quarterly earnings per share, up 17%, and record quarterly net income, up 14% from the third quarter of 2007 |
| • | Total transaction processing volume of $20.0 billion, up 42%; organic volume of $15.6 billion, up 11% |
| • | Record quarterly Net Revenue of $119.3 million up 48%, and excluding NWS, up 14% |
| • | New margin installed increased 11% |
| • | Operating margin on net revenue of 19.4% |
Robert Carr, Chairman and CEO, said, “I am pleased to report Heartland’s most profitable quarter behind record quarterly processing volume, another double-digit increase in new business, and strong operating margins. Our dedicated sales force is finding new and creative strategies to gain market share to sustain our overall growth at a time when a slowing economy is reducing the processing volume of our existing merchants. The Network Services acquisition and the continued success of our payroll and other products are also making a meaningful contribution to the improvement in both our top and bottom line. Operating
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efficiencies benefited from an increase in merchants processing on our proprietary platforms as a record 89.2% of new merchants installed this quarter were on HPS Exchange, helping sustain a healthy operating margin. Our performance in what has been a challenging quarter for the economy clearly illustrates that merchants value their Heartland relationship as they increasingly recognize our ‘Fair Deal’ as a promise they can trust.”
Net revenues in the third quarter were $119.3 million, an increase of 47.9% compared to $80.7 million in the third quarter of 2007. Excluding Network Services, net revenue was up 14.3% to $92.2 million. Card processing volume for the three months ended September 30, 2008 increased 42.4% to $20.0 billion, including $4.4 billion of volume from acquisitions. Transaction processing volume and net revenue growth reflect a solid increase in the size and profitability of new merchants added, offset by a 2% decline in same store sales.
Mr. Carr continued, “The overall integration of NWS during the quarter was consistent with our expectations. Some immediate cost synergies and healthy transaction volumes made NWS modestly accretive to earnings for the quarter. We are now enrolling certain merchants for American Express on our platform, and we are very excited that our sales force will be in the field with this more robust product very soon. In an environment that is creating challenges for weaker competitors, we have both the consistent cash flow and strong balance sheet to invest in these and our many other exciting growth initiatives. The steady growth of our existing business and the significant opportunities of our new product initiatives give us confidence that we can achieve both the top and bottom line goals envisioned in our long term plan.”
NINE MONTH RESULTS:
For the first nine months of 2008, net income was $33.9 million or $0.87 per fully diluted share, increases of 17% and 19%, respectively, from the first nine months of 2007. Net Revenues for the first nine months of 2008 were $299.3 million, up 33.1% compared to the first nine months of 2007. Excluding Network Services, net revenue was up 17.1% to $263.4 million.
FULL YEAR 2008 GUIDANCE:
In light of the challenging economic conditions we face, the Company is adjusting its guidance for fiscal 2008. For the year, we expect net revenue (total revenues less interchange, dues and assessments) to grow by 15% - 16% organically, to between $349 and $352 million and, including NWS, net revenue is expected to grow in excess of 35% to over $410 million. For the year, earnings per share are expected to be $1.12 - $1.15.
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DIVIDEND:
The Company also announced that the Board of Directors today declared a fourth quarter dividend of $0.09 per common share. The dividend is payable to shareholders of record on November 24, 2008 and will be paid on December 15, 2008.
Conference Call:
Heartland Payment Systems, Inc. will host a conference call on November 4, 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, December 5, 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 September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
Total Revenues | $ | 424,800 | $ | 354,615 | $ | 1,158,973 | $ | 972,272 | ||||||||
Costs of Services: | ||||||||||||||||
Interchange | 290,910 | 260,876 | 818,564 | 711,438 | ||||||||||||
Dues and assessments | 14,595 | 13,061 | 41,089 | 35,918 | ||||||||||||
Processing and servicing | 58,468 | 35,638 | 141,350 | 99,732 | ||||||||||||
Customer acquisition costs | 12,758 | 11,557 | 36,482 | 33,331 | ||||||||||||
Depreciation and amortization | 3,101 | 1,642 | 7,476 | 5,027 | ||||||||||||
Total costs of services | 379,832 | 322,774 | 1,044,961 | 885,446 | ||||||||||||
General and administrative | 21,866 | 12,493 | 57,329 | 40,527 | ||||||||||||
Total expenses | 401,698 | 335,267 | 1,102,290 | 925,973 | ||||||||||||
Income from operations | 23,102 | 19,348 | 56,683 | 46,299 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 185 | 474 | 654 | 1,450 | ||||||||||||
Interest expense | (1,199 | ) | (242 | ) | (2,296 | ) | (587 | ) | ||||||||
Loss on investment | (137 | ) | — | (240 | ) | — | ||||||||||
Other, net | 1 | (781 | ) | 25 | (871 | ) | ||||||||||
Total other income (expense) | (1,150 | ) | (549 | ) | (1,857 | ) | (8 | ) | ||||||||
Income before income taxes | 21,952 | 18,799 | 54,826 | 46,291 | ||||||||||||
Provision for income taxes | 8,539 | 7,014 | 20,967 | 17,252 | ||||||||||||
Net income | $ | 13,413 | $ | 11,785 | $ | 33,859 | $ | 29,039 | ||||||||
Net income | $ | 13,413 | $ | 11,785 | $ | 33,859 | $ | 29,039 | ||||||||
Other comprehensive income: | ||||||||||||||||
Unrealized gains (losses) on investments, net of income tax of $(19), $(9), $(10) and $(11) | (31 | ) | (14 | ) | (16 | ) | (18 | ) | ||||||||
Foreign currency translation adjustment, net of income tax of $(157) and $(281) | (260 | ) | — | (465 | ) | — | ||||||||||
Comprehensive income | $ | 13,122 | $ | 11,771 | $ | 33,378 | $ | 29,021 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.36 | $ | 0.31 | $ | 0.90 | $ | 0.77 | ||||||||
Diluted | $ | 0.35 | $ | 0.30 | $ | 0.87 | $ | 0.73 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 37,522 | 37,615 | 37,484 | 37,592 | ||||||||||||
Diluted | 38,700 | 39,714 | 38,746 | 39,837 | ||||||||||||
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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)
| September 30, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 47,074 | $ | 35,508 | ||||
Funds held for payroll customers | 20,023 | 24,201 | ||||||
Receivables, net | 154,713 | 122,613 | ||||||
Investments held to maturity | 1,149 | 1,119 | ||||||
Inventory | 7,072 | 5,383 | ||||||
Prepaid expenses | 4,842 | 3,478 | ||||||
Current tax asset | 5,089 | 5,449 | ||||||
Current deferred tax assets, net | 1,064 | 690 | ||||||
Total current assets | 241,026 | 198,441 | ||||||
Capitalized customer acquisition costs, net | 78,142 | 70,498 | ||||||
Deferred tax assets, net | — | 3,878 | ||||||
Property and equipment, net | 66,238 | 50,248 | ||||||
Goodwill | 58,204 | 5,489 | ||||||
Intangible assets, net | 35,336 | 481 | ||||||
Deposits and other assets, net | 254 | 154 | ||||||
Total assets | $ | 479,200 | $ | 329,189 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Due to sponsor banks | $ | 92,145 | $ | 49,798 | ||||
Accounts payable | 26,206 | 20,495 | ||||||
Deposits held for payroll customers | 20,023 | 24,201 | ||||||
Current portion of borrowings | 56,250 | — | ||||||
Current portion of accrued buyout liability | 11,011 | 11,521 | ||||||
Merchant deposits and loss reserves | 14,992 | 14,757 | ||||||
Accrued expenses and other liabilities | 30,717 | 15,266 | ||||||
Total current liabilities | 251,344 | 136,038 | ||||||
Deferred tax liabilities, net | 1,083 | — | ||||||
Reserve for unrecognized tax benefits | 2,141 | 1,230 | ||||||
Long-term portion of borrowings | 18,750 | — | ||||||
Long-term portion of accrued buyout liability | 29,923 | 26,252 | ||||||
Total liabilities | 303,241 | 163,520 | ||||||
Commitments and contingencies | — | — | ||||||
Stockholders’ equity | ||||||||
Common Stock, $0.001 par value, 100,000,000 shares authorized, 37,595,000 and 39,804,322 shares issued at September 30, 2008 and December 31, 2007; 37,595,000 and 37,989,622 shares outstanding at September 30, 2008 and December 31, 2007 | 38 | 40 | ||||||
Additional paid-in capital | 167,043 | 173,346 | ||||||
Accumulated other comprehensive loss | (543 | ) | (62 | ) | ||||
Retained earnings | 9,421 | 36,729 | ||||||
Treasury stock, at cost (1,814,700 shares at December 31, 2007) | — | (44,384 | ) | |||||
Total stockholders’ equity | 175,959 | 165,669 | ||||||
Total liabilities and stockholders’ equity | $ | 479,200 | $ | 329,189 | ||||
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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flow
(In thousands)
(unaudited)
| Nine Months Ended September 30, | ||||||||
| 2008 | 2007 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 33,859 | $ | 29,039 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Amortization of capitalized customer acquisition costs | 39,722 | 33,128 | ||||||
Other depreciation and amortization | 9,753 | 6,322 | ||||||
Addition to loss reserves | 4,529 | 1,833 | ||||||
Provision for doubtful receivables | 1,645 | 317 | ||||||
Stock-based compensation | 1,067 | 1,282 | ||||||
Deferred taxes | 4,177 | (300 | ) | |||||
Loss on investments | 240 | — | ||||||
Other | 159 | 172 | ||||||
Changes in operating assets and liabilities: | ||||||||
Increase in receivables | (15,130 | ) | (6,772 | ) | ||||
Decrease (increase) in inventory | 1,539 | (680 | ) | |||||
Payment of signing bonuses, net | (35,677 | ) | (32,943 | ) | ||||
Increase in capitalized customer acquisition costs | (11,689 | ) | (10,682 | ) | ||||
Increase in prepaid expenses | (798 | ) | (784 | ) | ||||
Decrease in current tax asset | 1,627 | 18,151 | ||||||
Increase in deposits and other assets | (95 | ) | (4 | ) | ||||
Excess tax benefits on options exercised under SFAS No. 123R | (1,498 | ) | (6,729 | ) | ||||
Increase in reserve for unrecognized tax benefits | 911 | 628 | ||||||
Increase in due to sponsor bank | 42,347 | 12,595 | ||||||
Increase in accounts payable | 4,770 | 3,201 | ||||||
Increase in accrued expenses and other liabilities | 7,904 | 3,993 | ||||||
(Decrease) increase in merchant deposits and loss reserves | (6,504 | ) | 1,666 | |||||
Payouts of accrued buyout liability | (5,288 | ) | (6,234 | ) | ||||
Increase in accrued buyout liability | 8,449 | 10,886 | ||||||
Net cash provided by operating activities | 86,019 | 58,085 | ||||||
Cash flows from investing activities | ||||||||
Purchase of investments held to maturity | (65 | ) | (1,871 | ) | ||||
Maturities of investments held to maturity | 284 | 290 | ||||||
Decrease (increase) in funds held for payroll customers | 3,663 | (1,954 | ) | |||||
(Decrease) increase in deposits held for payroll customers | (4,177 | ) | 1,843 | |||||
Acquisition of business, net of cash acquired | (102,849 | ) | (300 | ) | ||||
Purchases of property and equipment | (22,383 | ) | (25,637 | ) | ||||
Net cash used in investing activities | (125,527 | ) | (27,629 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from borrowings | 95,000 | — | ||||||
Principal payments on borrowings and financing arrangements | (20,000 | ) | (174 | ) | ||||
Proceeds from exercise of stock options | 2,692 | 8,025 | ||||||
Excess tax benefits on options exercised under SFAS No. 123R | 1,498 | 6,729 | ||||||
Repurchase of common stock | (17,995 | ) | (16,794 | ) | ||||
Net proceeds from sale of common stock | — | 25 | ||||||
Dividends paid on common stock | (10,101 | ) | (6,582 | ) | ||||
Net cash provided by (used in) financing activities | 51,094 | (8,771 | ) | |||||
Net increase in cash and cash equivalents | 11,586 | 21,685 | ||||||
Effect of exchange rates on cash | (20 | ) | — | |||||
Cash and cash equivalents at beginning of year | 35,508 | 16,054 | ||||||
Cash and cash equivalents at end of period | $ | 47,074 | $ | 37,739 | ||||
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