Heartland Q1 income surges 31%

Source: Heartland Payment Systems

Heartland Payment Systems (NYSE:HPY), a leading provider of credit/debit/prepaid card processing, payroll, check management and payment services, today announced record first quarter net income of $9.0 million and fully diluted earnings per share of $0.23.

Highlights for the First Quarter include:
  • Net income up 31% from the first quarter of 2007
  • Transaction processing volume of $13.2 billion, up 18.3%
  • New margin installed increased by 17.4%
  • Net Revenue up 19.9%, with payroll revenues advancing 41%
  • Total period end merchants up 15.1% to 165,900
  • Operating margin on net revenue of 17.7%, an improvement of 210 basis points from the first quarter of last year

Robert Carr, Chairman and CEO, said, "Our record first quarter is a reflection of the momentum in our core business built on our strong value proposition, our focus on improving efficiency through technology investments, and solid progress from our new growth initiatives. The key to our success is the sustained growth and increasing success of our team of relationship managers, which this quarter grew to 1,191. We are clearly facing a difficult economy, which limited same store sales growth in the quarter to only 0.6%, with our restaurant segment declining by 0.4%. Notwithstanding this environment, our relationship managers increased new margin installed by 17.4% over the first quarter of last year. At the same time, we continue to exploit the advantages of our own platform; in the first quarter, 84.7% of new merchants installed and 81% of total transactions were on HPS Exchange. By driving an increasing proportion of transactions onto our proprietary platforms, our operating margin on net revenue increased by 210 basis points from the first quarter of 2007. Our "Fair Deal" philosophy, competitive products, superior technology and dedicated sales organization are sustaining our growth while delivering value to our expanding international base of merchants."

Total revenues in the first quarter were $340 million, an increase of 19.5% compared to $284 million in the first quarter of 2007. Card processing volume for the three months ended March 31, 2008 increased 18.3% to $13.2 billion from $11.2 billion during the same period in 2007. The Company's active bank card merchant count rose to 158,900 at March 31, 2008, a 14.2% increase over the past twelve months. 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, "We are making good progress on many of this year's exciting new growth initiatives. Our Collective POS acquisition for the first time expands our sales and processing capabilities across borders, into the Canadian market. We are pleased to announce that we have just signed an acquiring agreement with Discover, so that our merchants' Discover card processing will be consolidated with Visa and MasterCard. Development work to integrate Discover and American Express on our card transaction processing platform remains on schedule. Also, our payroll, remote deposit, and campus card programs are all showing the market opportunity we believe offers significant growth potential. To build value for our shareholders, we are making strategic investments which broaden our functionality, capabilities, and applications to expand the Heartland brand throughout the merchant processing market."


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%; operating income as a percentage of net revenue to be 20% - 21%; and earnings per share of $1.13 - $1.17.


The Company also announced that the Board of Directors has declared a second quarter dividend of $0.09 per common share. The dividend is payable to shareholders of record on May 23, 2008 and will be paid on June 15, 2008.

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