Heartland Payment Systems (NYSE: HPY), one of the nation's largest payment processors, today announced GAAP net income of $13.8 million, or $0.34 per share, for the three months ended March 31, 2012.
Adjusted Net Income and Adjusted Earnings per Share were $15.7 million and $0.39, respectively, for the quarter ended March 31, 2012, compared to Adjusted Net Income and Adjusted Earnings per Share of $9.2 million and $0.23, respectively, for the quarter ended March 31, 2011. Adjusted Net Income and Adjusted Earnings per Share are non-GAAP measures that are detailed later in this press release in the section "Reconciliation of Non-GAAP Financial Measures."
Highlights for the first quarter of 2012 include:
- Small and Mid-Sized Enterprise (SME) quarterly transaction processing volume of $16.7 billion, up 8.3% from the first quarter of 2011
- Quarterly Net Revenue of $128.7 million, up 14.2% from the first quarter of 2011
- Operating Margin on Net Revenue of 18.1% compared to 12.9% for the same quarter in 2011
- Same store sales rose 3.4% in the first quarter and volume attrition of 12.2% in the first quarter was the lowest quarterly volume attrition since the third quarter of 2007
- New margin installed of $14.5 million, up 15% from the first quarter of 2011
- Share-based compensation reduced earnings by $2.9 million pre-tax, or approximately $0.05 per share, compared to $2.0 million, or $0.03 per share in the first quarter of 2011
Robert Carr, Chairman and CEO, said, "We achieved record operating income in the quarter driven by steady improvement across virtually all of our key growth and productivity metrics and by broader participation of our small and mid-sized merchants in the economic recovery. Both our card and non-card businesses posted healthy net revenue growth rates, which we were able to leverage into a 60% increase in operating income through ongoing efficiency enhancements. Cash flow once again significantly exceeded earnings, which supported our programs to reward shareholders through dividends and share repurchases. Our new sales initiatives have generated strong business momentum, and our commitment to expanding margins has produced excellent results. This has provided a solid foundation to grow our franchise and create value for shareholders."
SME card processing volume for the three months ended March 31, 2012 was $16.7 billion, an 8.3% improvement compared to the year-ago period. The first quarter growth in card transaction processing volume benefitted from both improving same store sales, which increased 3.4%, and decreased volume attrition, which fell to 12.2% in the quarter, the lowest quarterly volume attrition since September 2007. Growth in both card and non-card net revenue, notably the $4.6 million increase in K-12 School Solutions revenues, drove a $16.0 million, or 14.2%, increase in first quarter net revenue. Operating income in the quarter was up 60% to $23.2 million, or 18.1% of net revenue, as the increase in both processing and servicing and general and administrative expenses were held below the rate of net revenue growth through ongoing productivity improvements. General and administrative expenses in the quarter included over $1 million for the company's sales and servicing Summit. The first quarter of 2011 did not include any comparable expenses. Share-based compensation in the quarter was substantially higher than in the first quarter of 2011 and is expected to remain higher than comparable 2011 costs over the course of 2012, consistent with the improvement in corporate financial performance that is triggering the recognition of certain performance-based Restricted Stock Units that are likely to vest in coming years.
Mr. Carr continued, "Through relationship manager productivity gains and the outstanding success of our new hires, we are growing our new business generation. Every day our relationship managers go into the market confident we are the only merchant processor passing back to our merchants 100% of the Durbin mandated lower debit interchange rates. While card processing remains our core, the value of our franchise has come to increasingly reflect our ability to bring innovative new products and services to small and mid-sized merchants. Our growing non-card offerings, such as K-12 School Solutions, Loyalty, equipment, and Payroll, not only improve their businesses, but build a stronger, more enduring relationship with the many small and mid-sized merchants who have come to rely on Heartland Payment Systems for a Fair Deal."
FULL YEAR 2012 GUIDANCE:
For full year 2012, we expect Net Revenue to be between $530 million and $540 million, and fully diluted Adjusted EPS to be between $1.59 and $1.63, before deducting $0.19 per share of after-tax stock compensation expense.
BOARD DECLARES QUARTERLY DIVIDEND; SHARE REPURCHASE PROGRAM UPDATE
The Company also announced that the Board of Directors declared a quarterly dividend of $0.06 per common share payable June 15, 2012 to shareholders of record on May 24, 2012. In the first quarter, the Company repurchased approximately 419,000 shares at an average cost of $27.16 per share under our Board approved share repurchase plan.