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Issue Date: Vol. 54, No. 3, March 2014, Posted On: 2/28/2014


Heartland Payment Systems Reports 22% Increase in Fourth Quarter and Full Year Adjusted Earnings Per Share


Heartland Press Release
TAGS: cashless vending, Heartland Payment Systems Inc., Heartland Adjusted Net Income and Adjusted Earnings

PRESS RELEASE

Source: Heartland Payment Systems | Released Feb. 5, 2014


Full Year GAAP Earnings a Record $1.96 Per Share

PRINCETON, N.J.--(BUSINESS WIRE)-- Heartland Payment Systems, Inc. (NYSE: HPY), one of the nation's largest payment processors, today announced Adjusted Net Income and Adjusted Earnings per share from continuing operations of $20.5 million and $0.55 per share, respectively, for the quarter ended December 31, 2013. Adjusted Net Income and Adjusted Earnings per share from continuing operations were $17.7 million and $0.45, respectively, for the quarter ended December 31, 2012. GAAP net income was $17.4 million, or $0.46 per share, for the three months ended December 31, 2013. Adjusted Net Income and Adjusted Earnings per share from continuing operations are non-GAAP measures that are detailed later in this press release in the section "Reconciliation of Non-GAAP Financial Measures."

Highlights for the fourth quarter of 2013 include:

» Same store sales rose 2.4%, the highest growth in seven quarters, while volume attrition fell to 12.9% in the fourth quarter, a 20 basis point sequential improvement from the preceding quarter

» Record quarterly and full year new margin installed of $19.2 million and $71.1 million, respectively, up 33% for the fourth quarter and 22% for the year

» Small and Mid-Sized Enterprise (SME) quarterly transaction processing volume of $18.3 billion, up 4.0% from the fourth quarter of 2012

» Quarterly Net Revenue of $149.2 million, up 12.8% from the fourth quarter of 2012

» Operating Margin on Net Revenue of 20.9% compared to 19.1% for the fourth quarter in 2012

» The combination of share-based compensation and acquisition-related amortization reduced earnings by $5.4 million pre-tax, or approximately $0.09 per share, compared with $5.3 million pre-tax, or $0.08 per share in the fourth quarter of 2012

» Charges associated with our investment in Leaf reduced earnings by $0.03 per share in the fourth quarter

Robert O. Carr, Chairman and CEO, said, "For the second consecutive year, Heartland Payment Systems reported record earnings and net revenue. We achieved strong performance in both our card and non-card businesses as well as strong momentum in new business activity, particularly new margin installed, which has been steadily increasing since the third quarter of 2012 and is a leading indicator of future growth. New Margin Installed reached record levels in the fourth quarter as well as for the full year. This growth is attributable to successfully adding new relationship managers and providing them with innovative new tools and products that continue to enhance productivity across our sales organization. Non-card business growth remains strong, with both Payroll and Campus Solutions revenues more than doubling in 2013 from 2012 levels reflecting both organic growth and strategic acquisitions. Our expansion is being managed prudently, and we continue to make productivity enhancements a priority, which contributed to an expansion in operating margins for both the fourth quarter and for the full year. Cash flow also remains strong. Reflecting our confidence in the future, the Board authorized a 21% increase in the quarterly dividend, and continues to support the repurchase of shares to reward shareholders. Over the past several years, our performance has been very consistent. The business has been growing and margins have been expanding, providing the resources to invest for the future. This has enabled us to strengthen our market presence and enhance our value proposition, all of which build value for our shareholders."

SME card processing volume for the three months ended December 31, 2013 increased 4.0% from the year-ago quarter to $18.3 billion, benefitting from a 2.4% increase in same store sales and 30% increase in new margin installed, while volume attrition was held to 12.9%. Led by Payroll and Campus Solutions, non-card businesses continued their strong growth, helping drive a 12.8% increase in total net revenue for the quarter. The fourth quarter 2013 operating margin expanded to 20.9% of net revenue from 19.1% in the year ago quarter, as general and administrative expenses rose just 5.5% in the quarter. Reflecting continued productivity and efficiency enhancements, we were able to increase the fourth quarter operating margin despite funding $1.8 million of operating losses attributable to Leaf in the quarter.

Mr. Carr continued, "Heartland continues to successfully penetrate the SME market. We are increasingly seen as a resource that merchants can trust when considering card, payroll and gift/loyalty solutions. This is a position of respect we have earned over the years through our investment in the industry's largest employee sales organization and their efforts to understand the challenges facing small and mid-sized merchants. At the same time, we continue to achieve success by providing outsourcing solutions, including payments, for K-12 and higher education clients, and in emerging micropayments opportunities. For these reasons, we continue to invest heavily in our organization and selectively add to our capabilities through strategic acquisitions and partnerships. Our commitment to innovation has consistently provided merchants with tools that are ideally suited to their unique needs, and builds value for shareholders."

FULL YEAR 2013 RESULTS:

For the full year of 2013, net revenue was $599.0 million, up 13.0% from $530.0 million in 2012, and Adjusted Net Income from continuing operations and related earnings was $88.1 million or $2.32 per share, compared to $76.2 million, or $1.90 per share, in the prior year. GAAP net income from continuing operations was $74.7 million, or $1.96 per share, compared to $64.4 million or $1.60 per share, for 2012. Full year 2013 share-based compensation expense and acquisition-related amortization expense reduced pre-tax earnings by $22.0 million, or $0.36 per share in 2013, compared to $19.4 million, or $0.30 per share, in 2012. Both full year GAAP and adjusted per share earnings from continuing operations were reduced by $0.04 in 2013 from our investment in Leaf.

FULL YEAR 2014 GUIDANCE:

For full year 2014, we expect Net Revenue to grow 8% to 10% to be between approximately $645 million and $660 million, and adjusted EPS to be in the range of $2.37- $2.41. Guidance assumes after-tax share-based compensation and acquisition-related amortization expenses reduce earnings per share by $0.41 for the year and an approximately 40% tax rate, due to the non-deductibility of the company's proportionate share of Leaf's operating losses. The earnings reduction from our investment in Leaf, which is reflected in this guidance, is expected to be $0.14 in 2014.

BOARD RAISES DIVIDEND 21%, SETS RECORD AND PAYMENT DATE; SHARE REPURCHASE PROGRAM UPDATE:

The Company also announced that the Board of Directors voted to raise the quarterly dividend by 21% to $0.085 per common share. The new, higher dividend is payable March 14, 2014 to shareholders of record on March 3, 2014. In the fourth quarter, the Company utilized approximately $10.1 million in cash to repurchase approximately 237,000 shares at an average cost of $42.54 per share, raising the amount of cash used to repurchase shares to over $50 million in 2013. At the end of the quarter, approximately $54 million remained outstanding on the Company's existing repurchase authorization.

Click here to see full release and condensed consolidated statements of income.

About: Heartland Payment Systems, Inc. (NYSE: HPY), the sixth largest payments processor in the United States, delivers credit/debit/prepaid card processing, school solutions, loyalty marketing services, campus solutions, payroll and related business solutions and services to more than 250,000 business and education locations nationwide. A FORTUNE 1000 company, Heartland is the founding supporter of The Merchant Bill of Rights, (www.merchantbillofrights.org), a public advocacy initiative that educates merchants about fair credit and debit card processing practices. The company is also a leader in the development of end-to-end encryption technology designed to protect cardholder data, rendering it useless to cybercriminals. For more detailed information, visit www.HeartlandPaymentSystems.com or follow the company on Twitter @HeartlandHPY and Facebook at facebook.com/HeartlandHPY.


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