Heartland Q2 net income rises

Source: Heartland Payment Systems

Heartland Payment Systems (NYSE:HPY), a leading provider of credit/debit/prepaid card processing, payroll and payment services, today announced that net income for the quarter ended June 30, 2007 increased 40% to a record $10.4 million from $7.4 million in the second quarter of 2006.

For the second quarter of 2007, the Company reported record earnings of $0.26 per fully diluted share, an increase of 37% from $0.19 per fully diluted share in the year earlier period. Results were driven by an increase in the operating margin to a record 21.5%, a 210 basis point improvement from the comparable year earlier period. For the quarter, operating income rose 33% to $16.3 million from $12.3 million a year ago.

Robert Carr, Chairman and CEO, said, "Our strong financial performance this quarter was led by record operating margins as we are starting to see the results that are possible by leveraging our increasingly fixed cost processing and servicing platform across our growing transaction volume. For the quarter, 84% of new merchants installed and 73% of total transactions were on HPS Exchange, while our Passport back end processing system continues to provide consistent, reliable and cost effective performance. Refinements throughout our sales organization are yielding similar productivity and efficiency gains as both total and new card merchant installs were at record levels for the second consecutive quarter. Our payroll business also turned in another outstanding quarter with revenues increasing 63% from last year's second quarter as the number of payroll merchants at June quarter end is up 57% from twelve months ago. We believe that our unique business model, a dedicated direct salesforce supported by advanced technology, can sustain industry-leading growth with outstanding financial performance."

Total revenues in the second quarter of 2007 were $333.4 million, up 20% compared to $278.2 million in the second quarter of 2006. Processing volume for the three months ended June 30, 2007 increased 21% to $13.3 billion from $11.0 billion during the same period in 2006. The Company's active total merchant count rose to 152,400 at June 30, 2007, a 19% increase over the past twelve months. Same store sales at our installed base rose 3.3% during the quarter and continue to make a meaningful contribution to the Company's growing processing volumes.

Mr. Carr continued, "Heartland's 'Fair Deal' philosophy remains the foundation on which the Company is built. As we continue to grow and strengthen that foundation, we are selectively investing in new capabilities that leverage our numerous competitive advantages to enhance our growth. This ability to carefully balance current performance with investments for the future is an important characteristic of Heartland that has enabled us to consistently create long-term shareholder value."

Six month results:

For the first six months of 2007, net income was $17.3 million or $0.43 per fully diluted share, increases of 46% and 43%, respectively, compared to net income of $11.8 million, or $0.30 per fully diluted share in the first half of 2006. Revenues for the first half of 2007 were $617.7 million, up 20% compared to $515.1 million for the first half of 2006.

Full year 2007 guidance:

The Company is reaffirming 2007 full year guidance. We expect net revenue (total revenues less interchange, dues and assessments) to grow by 21% - 23%; operating income as a percentage of net revenue to be 19% - 21%; a tax rate of approximately 37%; and earnings per share of $0.96 - $1.01.

Board declares quarterly dividend:

The Company also declared a quarterly dividend of $0.075 per common share, an increase of 50% over the previous quarterly dividend. The dividend is payable to shareholders of record on August 24, 2007 and will be paid on September 15, 2007.

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