EXHIBIT 99.1
NEWS RELEASE
HEARTLAND PAYMENT SYSTEMS SECOND QUARTER NET INCOME UP 70%,
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DILUTED EPS UP 58%, OPERATING INCOME UP 50%
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COMPANY INITIATES QUARTERLY DIVIDEND
PRINCETON, N.J., AUGUST 3, 2006 -- Heartland Payment Systems, Inc. (NYSE: HPY),
the nation's sixth largest provider of merchant acquiring services, today
announced record revenues of $278.1 million for the quarter ended June 30, 2006,
up 33% compared to $209.7 million in the second quarter of 2005. The company's
operating margin expanded by 250 basis points to 19.2% of net revenues (defined
as total revenues less interchange and dues and assessments), driving operating
income up 50% to $12.1 million from $8.1 million in the year earlier period. Net
income for the three months was $7.4 million, or $0.19 per fully diluted share,
increases of 70% and 58%, respectively, compared to net income of $4.4 million,
or $0.12 per fully diluted share, in the second quarter of 2005. Earnings per
share in the second quarter of 2006 are based on a 12% higher average diluted
share count than in the same period in 2005.
Robert Carr, Chairman and CEO, said, "Results this quarter were driven by record
merchant processing volumes, which grew 29% over the year ago period and reached
almost $11 billion in the second quarter. In addition, our continued use of
technology to improve efficiency throughout the organization helped drive our
operating margin to a quarterly best 19.2%. On the front end, 78% of new
merchants installed and 62% of total transactions processed this quarter were on
HPS Exchange. During the second quarter we also completed the conversion to our
Passport back end processing platform. Passport provides us with a powerful and
versatile tool not only to improve processing and servicing efficiency, but also
to create and introduce new products and services that respond to the evolving
needs of the market. In addition to our transparent pricing and skilled sales
force, small and mid-sized merchants are increasingly choosing Heartland for our
innovative solutions that save them time and money."
Processing volume for the three months ended June 30, 2006 increased 29% to
$11.0 billion from $8.5 billion during the same period in 2005. The Company's
active card processing merchant count rose to 124,800 at June 30, 2006, a 23%
increase over the past twelve months. Same store sales at our installed base
rose 4.8%, below the level of growth the company has experienced in recent
years.
COMPANY INITIATES QUARTERLY DIVIDEND; SHARE BUYBACK AUTHORIZATION INCREASED
The Company also declared an initial quarterly dividend of $0.025 per common
share. The dividend is payable to shareholders of record on August 25, 2006 and
will be paid on September 15, 2006. It was also announced that the Board of
Directors has increased the Company's common stock repurchase authorization by
1,000,000 shares. This authorization is in addition to the 1,000,000 common
share buyback the Board authorized on January 17, 2006, of which 873,900 shares
have been repurchased.
Commenting on the new dividend and increased repurchase authorization, Mr. Carr
said, "I am pleased to announce two programs that will enhance returns to our
shareholders. We are initiating a dividend in order to start sharing a portion
of our growing free cash flows with our shareholders. With a business model
based on generating organic growth, we are capable of both funding continuing
market share gains and returning excess cash to shareholders through dividends.
At the same time, by doubling our buyback authority, the Board has endorsed the
continuation of our existing program to reinvest essentially all of the proceeds
of option exercises in Company stock, thus reducing the dilution from such
exercises. For the first half of this year, this has meant that over $20 million
of proceeds from option exercises has been invested in Heartland stock."
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SIX MONTH RESULTS
For the first six months of 2006, revenues were $514.9 million, up 36% compared
to $379.6 million for the first six months of fiscal 2005. Net income in the
first half of 2006 was $11.8 million or $0.30 per fully diluted share, increases
of 67% and 50%, respectively, compared to net income of $7.1 million, or $0.20
per fully diluted share in the first half of 2005. Earnings per share in the
2006 period are based on a 13% higher average diluted share count than in the
same period in 2005.
Mr. Carr continued, "This was another outstanding quarter as growth remained
robust, and we made significant strides toward our objective of a better than
20% operating margin. At the same time, we are investing across the organization
to strengthen our resources, people, products and infrastructure, to support our
existing merchants as well as sustain our momentum."
FULL YEAR 2006 GUIDANCE
For the year, the Company is raising its guidance, and now expects net revenue
(total revenue less interchange, dues and assessments) to grow by 28% - 30%;
operating income as a percentage of net revenue to be 20% - 22% on a pro forma
basis, which excludes the $2 million interchange estimate change in the first
quarter; and earnings per share of $0.74 - $0.78, which only excludes $0.04 per
share of after-tax 123R expense currently anticipated for fiscal 2006.
CONFERENCE CALL:
Heartland Payment Systems, Inc. will host a conference call on August 3, 2006 at
8:30 a.m. Eastern Time to discuss financial results and business highlights. The
conference call may be accessed by calling 973-935-2981 at 8:25 AM Eastern time
on August 3, 2006. Please provide the operator with PIN number 7644866. 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 September 7, 2006.
The number to call for the taped replay is 973-341-3080 and the conference PIN
7644866. The webcast will also be archived within two hours of the live call on
the investor relations portion of the Company's website.
ABOUT HEARTLAND
Heartland Payment Systems, Inc. (HPS), a NYSE company trading under the symbol
HPY, delivers credit/debit card processing and payroll solutions to nearly
128,000 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 national sales professionals, 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 1997, and, since 2000, has grown at
a compound annual rate of more than 30% to become the sixth largest merchant
processor in the United States and fifteenth largest merchant processor in the
world.
http://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. We undertake no obligation to update
any forward-looking statements to reflect events or circumstances that may arise
after the date of this release.
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CONTACT:
Joe Hassett or Paul Johnson
Gregory FCA
27 West Athens Ave.
Ardmore, PA 19003
Tel: 610-642-8253
Email: Heartland_ir@gregoryfca.com
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HEARTLAND PAYMENT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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2006 2005 2006 2005
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TOTAL REVENUES $ 278,059 $ 209,691 $ 514,855 $ 379,557
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COSTS OF SERVICES:
Interchange 204,541 153,134 376,770 275,550
Dues and assessments 10,226 7,899 18,812 14,314
Processing and servicing 29,611 22,532 57,762 42,353
Customer acquisition costs 8,323 7,400 16,495 13,241
Depreciation and amortization 1,438 1,326 2,801 2,609
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Total costs of services 254,139 192,291 472,640 348,067
General and administrative 11,781 9,290 23,790 18,279
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Total expenses 265,920 201,581 496,430 366,346
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INCOME FROM OPERATIONS 12,139 8,110 18,425 13,211
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OTHER INCOME (EXPENSE):
Interest income 453 111 830 183
Interest expense (224) (538) (344) (973)
Fair value adjustment for warrants with
mandatory redemption provisions -- (202) -- (292)
Other, net 17 (28) 831 7
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Total other income (expense) 246 (657) 1,317 (1,075)
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Income before income taxes 12,385 7,453 19,742 12,136
Provision for income taxes 4,940 3,072 7,909 5,061
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NET INCOME 7,445 4,381 11,833 7,075
Income allocated to Series A Senior Convertible
Preferred Stock -- 2,107 -- 3,402
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NET INCOME ATTRIBUTABLE TO COMMON STOCK $ 7,445 $ 2,274 $ 11,833 $ 3,673
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Net income $ 7,445 $ 4,381 $ 11,833 $ 7,075
Other comprehensive income, net of tax:
Unrealized gains (losses) on investments 1 5 (2) (4)
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COMPREHENSIVE INCOME $ 7,446 $ 4,386 $ 11,831 $ 7,071
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EARNINGS PER COMMON SHARE:
Basic $ 0.21 $ 0.13 $ 0.33 $ 0.22
Diluted $ 0.19 $ 0.12 $ 0.30 $ 0.20
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING:
Basic 36,201 16,454 35,667 16,453
Diluted 39,932 35,616 39,898 35,344
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HEARTLAND PAYMENT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(unaudited)
JUNE 30, DECEMBER 31,
2006 2005
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ASSETS
Current assets:
Cash and cash equivalents $ 20,892 $ 17,747
Receivables, net 100,859 93,756
Investments 2,552 2,141
Inventory 2,487 714
Prepaid expenses 1,546 1,979
Current tax asset 25,304 1,602
Current deferred tax assets, net 811 1,492
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Total current assets 154,451 119,431
Capitalized customer acquisition costs, net 50,473 42,930
Deferred tax assets, net 4,259 3,477
Property and equipment, net 20,880 17,661
Goodwill and intangible assets 1,777 --
Deposits and other assets 138 186
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Total assets $ 231,978 $ 183,685
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to sponsor bank $ 37,383 $ 34,530
Accounts payable 28,060 25,339
Current portion of accrued buyout liability 10,949 10,478
Merchant deposits and loss reserves 6,650 7,450
Accrued expenses and other liabilities 11,175 7,407
Current portion of borrowings and financing arrangements 242 261
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Total current liabilities 94,459 85,465
Long-term portion of borrowings and financing arrangements 81 173
Long-term portion of accrued buyout liability 19,464 17,996
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Total liabilities 114,004 103,634
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Commitments and contingencies -- --
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value, 100,000,000 shares authorized;
37,327,327 and 34,222,114 shares issued at June 30, 2006 and
December 31, 2005; 36,431,427 and 34,200,114 shares
outstanding at June 30, 2006 and December 31, 2005 37 34
Additional paid-in capital 142,683 96,417
Accumulated other comprehensive loss (29) (26)
Accumulated deficit (4,046) (15,879)
Treasury stock, at cost (895,900 and 22,000 shares at June 30, 2006 and
December 31, 2005) (20,671) (495)
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Total stockholders' equity 117,974 80,051
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Total liabilities and stockholders' equity $ 231,978 $ 183,685
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HEARTLAND PAYMENT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(unaudited)
SIX MONTHS ENDED JUNE 30,
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2006 2005
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 11,833 $ 7,075
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of capitalized customer acquisition costs 16,804 11,526
Other depreciation and amortization 3,563 2,609
Stock-based compensation 461 --
Deferred taxes (101) (638)
Fair value adjustment for warrants with mandatory redemption
provisions -- 292
Loss on disposal of property and equipment -- 33
Changes in operating assets and liabilities:
Increase in receivables (6,095) (10,766)
(Increase) decrease in inventory (673) 158
Payment of signing bonuses, net (15,955) (9,742)
Increase in capitalized customer acquisition costs (8,392) (5,956)
Decrease (increase) in prepaid expenses 425 (238)
Decrease in deposits and other assets 1,502 1
Excess tax benefits on options exercised under SFAS No. 123R (25,204) --
Increase in due to sponsor bank 2,853 8,888
Increase in accounts payable 1,846 481
Increase in accrued expenses and other liabilities 3,738 1,374
(Decrease) increase in merchant deposits and loss reserves (799) 383
Payouts of accrued buyout liability (6,144) (4,982)
Increase in accrued buyout liability 8,083 7,672
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Net cash (used in) provided by operating activities (12,255) 8,170
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (976) (410)
Maturities of investments 563 120
Acquisition of business, net of cash acquired (3,453) --
Proceeds from disposal of property and equipment -- 27
Purchases of property and equipment (6,254) (5,689)
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Net cash used in investing activities (10,120) (5,952)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on borrowings and financing arrangements (112) (1,170)
Proceeds from exercise of stock options 20,604 108
Excess tax benefits on options exercised under SFAS No. 123R 25,204 --
Repurchase of common stock (20,176) --
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Net cash provided by (used in) financing activities 25,520 (1,062)
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Net increase in cash and cash equivalents 3,145 1,156
Cash and cash equivalents at beginning of year 17,747 13,237
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Cash and cash equivalents at end of period $ 20,892 $ 14,393
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SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 340 $ 918
Income taxes 6,503 7,179
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