EXHIBIT 99.1
Heartland Payment Systems Announces Record Fourth Quarter Results
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Net Income Up 143%, Operating Income Up 119%, Earnings per Share Up 100%
Strong Fourth Quarter Completes Record Year
Princeton, N.J., February 16, 2006 -- Heartland Payment Systems, Inc. (NYSE:
HPY), one of the nation's largest providers of merchant acquiring services,
today announced record financial results for the quarter ended December 31,
2005. For the fourth quarter, total revenues were $227 million, up 35% compared
to $168 million in the fourth quarter of 2004. The operating margin expanded by
730 basis points from the fourth quarter of 2004 to 18.3% of net revenues
(defined as total revenues less interchange and dues and assessments), driving
operating income up 119% to $9.3 million from $4.2 million in the year earlier
period. Net income for the three months was $5.5 million, or $0.14 per fully
diluted share, increases of 143% and 100%, respectively, compared to net income
of $2.3 million, or $0.07 per fully diluted share, in the fourth quarter of
2004. Earnings per share in the fourth quarter of 2005 are based on a 18% higher
average diluted share count than in the same period in 2004.
Robert Carr, Chairman and CEO, said, "We are very pleased to once again report
earnings that more than doubled compared to a year ago. Our success this quarter
reflects effective execution of our strategy on all fronts, including superior
organic growth and improved operating efficiencies. By concentrating on
successful independent businesses, our direct sales strategy not only continues
to add new merchants, but also establishes a base of businesses that enhance
growth through consistent increases in year-over-year same store sales.
Operating efficiency showed further improvements primarily due to the increasing
penetration of merchants on HPS Exchange, our internally developed front-end
processing system. Over 69% of new merchants installed and 58% of total
transactions this quarter were on HPS Exchange, helping reduce processing and
servicing expense in the quarter to 10.0% of revenues from 12.1% a year ago.
With merchants in an increasing variety of industries choosing Heartland, we are
demonstrating that we have a compelling value proposition for both our customers
and our shareholders."
Processing volume for the three months ended December 31, 2005 increased 32% to
$9.1 billion from $6.9 billion during the same period in 2004. The Company's
active merchants count rose to 110,500 at December 31, 2005, a 24% increase over
the past twelve months. Same store sales at our installed base rose 7.0% during
the quarter and 7.5% for the year and continue to make a meaningful contribution
to the Company's record processing volumes.
FULL YEAR RESULTS
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For the full year 2005, total revenues were a record $835 million, up 39%
compared to $603 million in fiscal 2004. For 2005, the operating margin was up
530 basis points to 16.8% of net revenues, and operating income was up 100% to
$32.2 million from $16.1 million in 2004. Net income in 2005 was $19.1 million,
or $0.50 per fully diluted share, increases of 116% and 92%, respectively,
compared to net income of $8.9 million, or $0.26 per fully diluted share in
2004. Earnings per share in 2005 are based on a 12% higher average share count
than 2004.
Mr. Carr continued, "Our goal is to achieve outstanding organic growth and
increase shareholder value over the long term. We have built the value of our
franchise on our culture of fully-disclosed pricing, customer service and
implementation of new technologies. We will continue to invest in our
infrastructure to improve efficiency and enhance our relationships for the
benefit of our franchise and long-term shareholder value."
Conference Call:
Heartland Payment Systems, Inc. will host a conference call on February 16, 2006
at 8:30 a.m. Eastern Time to discuss financial results and business highlights.
The conference call may be accessed by calling 866-802-4322 at 8:25 AM Eastern
time on February 16, 2006. Please provide the operator with PIN number 851153.
The conference call will also be Web cast where it can be accessed on the
investor relations portion of Heartland's website at
www.heartlandpaymentsystems.com.
A digital replay of the conference call will be available within two hours of
the conclusion of the call and will remain available through Thursday, March 16,
2006. The number to call for the taped replay is 888-266-2081 and the conference
PIN number is 851153. The webcast will also be archived within two hours of the
live call on the investor relations portion of the Company's website and will
remain available through Thursday, March 16, 2006.
About Heartland:
Heartland Payment Systems, Inc. (HPS), a NYSE company trading under the symbol
HPY, delivers credit/debit card processing and payroll solutions to over 110,000
small to medium-sized merchants throughout the United States. HPS also provides
additional services to its merchants such as gift and loyalty card programs,
paper check authorization, and sells and rents point-of-sale devices and
supplies.
With over 1,000 sales professionals nationwide, HPS builds long-term business
relationships in local sales territories providing merchants with enhanced
technology tools that assist them in more effectively operating their
businesses.
Heartland processed its first transaction in July 1997, and since 2000 has grown
at a compound annual rate of more than 30% to become the seventh largest
merchant processor in the United States and fifteenth largest merchant processor
in the world.
www.heartlandpaymentsystems.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 registration statement on Form S-1, as amended, and its Quarterly
Reports on Form 10-Q. 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:
Joseph Crivelli/Joe Hassett/Paul Johnson
Gregory FCA
27 West Athens Ave.
Ardmore, PA 19003
Tel: 610-642-8253, extension 115
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Heartland Payment Systems, Inc. and Subsidiary
Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------------
2005 2004 2005 2004
------------- ------- ---------- ------------
Total revenues .............................. $ 226,929 $ 167,582 $ 834,577 $ 602,749
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Costs of Services:
Interchange ............................. 167,636 122,639 611,736 438,738
Dues and assessments .................... 8,553 6,417 31,491 23,348
Processing and servicing ................ 22,749 20,279 87,668 70,232
Customer acquisition costs .............. 7,747 4,408 28,025 18,908
Depreciation and amortization ........... 1,629 1,043 5,685 3,912
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Total costs of services ............... 208,314 154,786 764,605 555,138
General and administrative .................. 9,313 8,547 37,761 31,501
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Total expenses ........................ 217,627 163,333 802,366 586,639
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Income from operations ...................... 9,302 4,249 32,211 16,110
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Other income (expense):
Interest income ......................... 264 52 724 182
Interest expense ........................ (162) (420) (1,553) (1,385)
Fair value adjustment for warrants with
mandatory redemption provisions ....... -- -- (2,912) (509)
Gain on settlement of financing
arrangement ........................... -- -- 5,140 --
Other, net .............................. 225 -- 198 833
--------- --------- --------- ---------
Total other income (expense) .......... 327 (368) 1,597 (879)
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Income before income taxes .................. 9,629 3,881 33,808 15,231
Provision for income taxes .................. 4,147 1,623 14,715 6,376
--------- --------- --------- ---------
Net income .................................. 5,482 2,258 19,093 8,855
Income allocated to Series A Senior
Convertible Participating Preferred Stock -- (1,085) (4,728) (4,263)
--------- --------- --------- ---------
Net income attributable to Common Stock ..... 5,482 1,173 14,365 4,592
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Earnings per common share:
Basic .................................... $ 0.16 $ 0.07 $0.62 $ 0.28
Diluted .................................. $ 0.14 $ 0.07 $0.50 $ 0.26
Weighted average number of common shares
outstanding:
Basic .................................... 34,160 16,424 23,069 16,408
Diluted .................................. 39,815 33,801 37,879 33,786
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Heartland Payment Systems, Inc. and Subsidiary
Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)
December 31, December 31,
Assets 2005 2004
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Current assets:
Cash and cash equivalents $ 17,747 $ 13,237
Receivables 93,756 64,325
Investments 2,141 1,100
Inventory 714 818
Prepaid expenses 1,979 2,151
Current deferred tax assets, net 1,492 2,129
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Total current assets 117,829 83,760
Capitalized customer acquisition costs, net 42,930 34,247
Deferred tax assets, net 3,477 4,651
Property and equipment, net 17,661 10,944
Deposits and other assets 186 324
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Total assets $ 182,083 $ 133,926
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Liabilities and stockholders' equity
Current liabilities:
Due to sponsor bank $ 34,530 $ 45,153
Accounts payable 25,339 27,103
Current portion of accrued buyout liability 10,478 9,327
Merchant deposits and loss reserves 7,450 7,175
Accrued expenses and other liabilities 5,805 6,701
Current portion of borrowings and financing arrangement 261 5,286
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Total current liabilities 83,863 100,745
Long-term portion of borrowings and financing arrangements 173 7,808
Long-term portion of accrued buyout liability 17,996 17,708
Warrants with mandatory redemption provisions -- 1,566
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Total liabilities 102,032 127,827
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Stockholders' equity
Series A Senior Convertible Participating Preferred Stock, $80 million
liquidation preference, $.001 par value, 10,000,000 shares authorized,
7,619,048 shares issued and outstanding at December 31, 2004 -- 8
Common Stock, $.001 par value, 100,000,000 shares authorized, 34,222,114 and
16,437,760 issued at December 31, 2005 and 2004, respectively (including
Treasury shares of 22,000 in 2005) 34 8
Additional paid-in capital 96,417 41,065
Accumulated other comprehensive loss (26) (10)
Accumulated deficit (15,879) (34,972)
Treasury stock, at cost (495) --
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Total stockholders' equity 80,051 6,099
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Total liabilities and stockholders' equity $ 182,083 $ 133,926
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Heartland Payment Systems, Inc. and Subsidiary
Consolidated Statements of Cash Flow
(In thousands)
(unaudited)
Year Ended December 31,
---------------------------------
2005 2004
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Cash flows from operating activities
Net income $ 19,093 $ 8,855
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of capitalized customer acquisition costs 24,636 18,811
Other depreciation and amortization 5,695 3,927
Fair value adjustment for warrants with mandatory
redemption provisions 2,912 509
Gain on settlement of financing arrangement (5,140) --
Payment of signing bonuses, net (21,788) (20,137)
Payouts of accrued buyout liability (13,481) (2,213)
Deferred taxes 1,811 4,687
Other 33 68
Changes in operating assets and liabilities:
Increase in receivables (29,431) (19,391)
Decrease in inventory 104 147
Decrease (increase) in prepaid expenses 172 (1,796)
Increase in capitalized customer acquisition costs (11,531) (10,600)
Decrease in deposits and other asset 1 262
(Decrease) increase in due to sponsor bank (10,623) 10,928
(Decrease) increase in accounts payable (1,764) 9,180
(Decrease) increase in accrued expenses and other liabilities (667) 1,013
Increase in merchant deposits and loss reserves 275 2,414
Increase in accrued buyout liability 14,920 11,263
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Net cash (used in) provided by operating activities (24,773) 17,927
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Cash flows from investing activities
Purchase of investments (1,544) (120)
Maturities of investments 487 362
Purchases of property and equipment (12,337) (9,115)
Proceeds from disposal of property and equipment 27 --
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Net cash used in investing activities (13,367) (8,873)
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Cash flows from financing activities
Redemption of warrants issued in connection with debt financing -- (1,055)
Redemption of warrants issued in connection with Series A Senior
Convertible Participating Preferred Stock -- (5,250)
Principal payments on borrowings and financing arrangements (7,520) (2,869)
Proceeds from exercise of stock options 8,953 1,584
Repurchase of common (495) (1,231)
stock
Net proceeds from sale of common stock 41,712 --
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Net cash provided by (used in) financing activities 42,650 (8,821)
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Net increase in cash and cash equivalents 4,510 233
Cash and cash equivalents at beginning of year 13,237 13,004
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Cash and cash equivalents at end of year $ 17,747 $ 13,237
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Supplemental cash flow information:
Cash paid during the period for:
Interest $ 1,581 $ 1,387
Income taxes 11,742 851
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