rlebherz wrote: Alf,
Interesting article. I think the Cloud services and cloud infrastructure lines are a bit blurred, but I agree with most of what you are saying.
Dont underestimate the SLA's role in accountability. For companies that have dynamic requirements and no down time can be afforded, make sure you have very tight SLAs. For example, OpSource provides a 100% SLA in the cloud and 100%SLA around production application environments. Now 100% is ideally perfect, it comes down to accountability, yo...
Heartland Payment Systems, Inc. (NYSE:HPY), a leading provider of
credit/debit/prepaid card processing, payroll, check management and
payment services, today announced record quarterly net income of $13.4
million and fully diluted earnings per share of $0.35 for the three
months ended September 30, 2008.
Highlights for the third quarter, which include a full quarter’s
results from the Network Services (NWS) business acquired in the second
quarter, include:
Record quarterly earnings per share, up 17%, and record quarterly net
income, up 14% from the third quarter of 2007
Total transaction processing volume of $20.0 billion, up 42%; organic
volume of $15.6 billion, up 11%
Record quarterly Net Revenue of $119.3 million, up 48%, and excluding
NWS, up 14%
New margin installed increased 11%
Operating margin on net revenue of 19.4%
Robert Carr, Chairman and CEO, said, “I am
pleased to report Heartland’s most profitable
quarter behind record quarterly processing volume, another double-digit
increase in new business, and strong operating margins. Our dedicated
sales force is finding new and creative strategies to gain market share
to sustain our overall growth at a time when a slowing economy is
reducing the processing volume of our existing merchants. The Network
Services acquisition and the continued success of our payroll and other
products are also making a meaningful contribution to the improvement in
both our top and bottom line. Operating efficiencies benefited from an
increase in merchants processing on our proprietary platforms as a
record 89.2% of new merchants installed this quarter were on HPS
Exchange, helping sustain a healthy operating margin. Our performance in
what has been a challenging quarter for the economy clearly illustrates
that merchants value their Heartland relationship as they increasingly
recognize our ‘Fair Deal’
as a promise they can trust.”
Net revenues in the third quarter were $119.3 million, an increase of
47.9% compared to $80.7 million in the third quarter of 2007. Excluding
Network Services, net revenue was up 14.3% to $92.2 million. Card
processing volume for the three months ended September 30, 2008
increased 42.4% to $20.0 billion, including $4.4 billion of volume from
acquisitions. Transaction processing volume and net revenue growth
reflect a solid increase in the size and profitability of new merchants
added, offset by a 2% decline in same store sales.
Mr. Carr continued, “The overall integration
of NWS during the quarter was consistent with our expectations. Some
immediate cost synergies and healthy transaction volumes made NWS
modestly accretive to earnings for the quarter. We are now enrolling
certain merchants for American Express on our platform, and we are very
excited that our sales force will be in the field with this more robust
product very soon. In an environment that is creating challenges for
weaker competitors, we have both the consistent cash flow and strong
balance sheet to invest in these and our many other exciting growth
initiatives. The steady growth of our existing business and the
significant opportunities of our new product initiatives give us the
confidence that we can achieve both the top and bottom line goals
envisioned in our long term plan.”
NINE MONTH RESULTS:
For the first nine months of 2008, net income was $33.9 million or $0.87
per fully diluted share, increases of 17% and 19%, respectively, from
the first nine months of 2007. Net Revenues for the first nine months of
2008 were $299.3 million, up 33.1% compared to the first nine months of
2007. Excluding Network Services, net revenue was up 17.1% to $263.4
million.
FULL YEAR 2008 GUIDANCE:
In light of the challenging economic conditions we face, the Company is
adjusting its guidance for fiscal 2008. For the year, we expect net
revenue (total revenues less interchange, dues and assessments) to grow
by 15 - 16% organically, to between $349 and $352 million and, including
NWS, net revenue is expected to grow approximately 35% to around $410
million. For the year, earnings per share are expected to be $1.12 -
$1.15.
DIVIDEND:
The Company also announced that the Board of Directors today declared a
fourth quarter dividend of $0.09 per common share. The dividend is
payable to shareholders of record on November 24, 2008 and will be paid
on December 15, 2008.
Conference Call:
Heartland Payment Systems, Inc. will host a conference call on November
4, 2008 at 8:30 a.m. Eastern Time to discuss financial results and
business highlights. Heartland Payment Systems invites all interested
parties to listen to its conference call, broadcast through a webcast on
the Company’s website. To access the call,
please visit the Investor Relations portion of the Company’s
website at: www.heartlandpaymentsystems.com.
You may also participate by calling 610-228-2110 to request the dial-in
information for the conference call.
The webcast will be archived on the Company’s
website within two hours of the live call and will remain available
through Friday, December 5, 2008.
About Heartland Payment Systems
Heartland Payment Systems, Inc., a NYSE company trading under the symbol
HPY, delivers credit/debit/prepaid card processing, payroll, check
management and payment solutions to more than 250,000 businesses
nationwide.
Heartland is the founding supporter of The Merchant Bill of Rights, a
public advocacy initiative that educates merchants about fair credit and
debit card processing practices. For more information, visit www.heartlandpaymentsystems.com
and www.MerchantBillOfRights.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, including but not limited to, the Company's annual
report on Form 10-K for the year ended December 31, 2007. We undertake
no obligation to update any forward-looking statements to reflect events
or circumstances that may arise after the date of this release.
Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive
Income
(In thousands, except per share data)
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2008
2007
2008
2007
Total Revenues
$
424,800
$
354,615
$
1,158,973
$
972,272
Costs of Services:
Interchange
290,910
260,876
818,564
711,438
Dues and assessments
14,595
13,061
41,089
35,918
Processing and servicing
58,468
35,638
141,350
99,732
Customer acquisition costs
12,758
11,557
36,482
33,331
Depreciation and amortization
3,101
1,642
7,476
5,027
Total costs of services
379,832
322,774
1,044,961
885,446
General and administrative
21,866
12,493
57,329
40,527
Total expenses
401,698
335,267
1,102,290
925,973
Income from operations
23,102
19,348
56,683
46,299
Other income (expense):
Interest income
185
474
654
1,450
Interest expense
(1,199
)
(242
)
(2,296
)
(587
)
Loss on investment
(137
)
─
(240
)
─
Other, net
1
(781
)
25
(871
)
Total other income (expense)
(1,150
)
(549
)
(1,857
)
(8
)
Income before income taxes
21,952
18,799
54,826
46,291
Provision for income taxes
8,539
7,014
20,967
17,252
Net income
$
13,413
$
11,785
$
33,859
$
29,039
Net income
$
13,413
$
11,785
$
33,859
$
29,039
Other comprehensive income:
Unrealized gains (losses) on investments, net of income tax of
$(19), $(9), $(10) and $(11)
(31
)
(14
)
(16
)
(18
)
Foreign currency translation adjustment, net of income tax of
$(157) and $(281)
(260
)
─
(465
)
─
Comprehensive income
$
13,122
$
11,771
$
33,378
$
29,021
Earnings per common share:
Basic
$
0.36
$
0.31
$
0.90
$
0.77
Diluted
$
0.35
$
0.30
$
0.87
$
0.73
Weighted average number of common shares outstanding:
Basic
37,522
37,615
37,484
37,592
Diluted
38,700
39,714
38,746
39,837
Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)
September 30, 2008
December 31, 2007
Assets
Current assets:
Cash and cash equivalents
$
47,074
$
35,508
Funds held for payroll customers
20,023
24,201
Receivables, net
154,713
122,613
Investments held to maturity
1,149
1,119
Inventory
7,072
5,383
Prepaid expenses
4,842
3,478
Current tax asset
5,089
5,449
Current deferred tax assets, net
1,064
690
Total current assets
241,026
198,441
Capitalized customer acquisition costs, net
78,142
70,498
Deferred tax assets, net
—
3,878
Property and equipment, net
66,238
50,248
Goodwill
58,204
5,489
Intangible assets, net
35,336
481
Deposits and other assets, net
254
154
Total assets
$
479,200
$
329,189
Liabilities and stockholders’ equity
Current liabilities:
Due to sponsor banks
$
92,145
$
49,798
Accounts payable
26,206
20,495
Deposits held for payroll customers
20,023
24,201
Current portion of borrowings
56,250
─
Current portion of accrued buyout liability
11,011
11,521
Merchant deposits and loss reserves
14,992
14,757
Accrued expenses and other liabilities
30,717
15,266
Total current liabilities
251,344
136,038
Deferred tax liabilities, net
1,083
─
Reserve for unrecognized tax benefits
2,141
1,230
Long-term portion of borrowings
18,750
─
Long-term portion of accrued buyout liability
29,923
26,252
Total liabilities
303,241
163,520
Commitments and contingencies
—
—
Stockholders’ equity
Common Stock, $0.001 par value, 100,000,000 shares authorized,
37,595,000 and 39,804,322 shares issued at September 30, 2008 and
December 31, 2007; 37,595,000 and 37,989,622 shares outstanding at
September 30, 2008 and December 31, 2007
38
40
Additional paid-in capital
167,043
173,346
Accumulated other comprehensive loss
(543
)
(62
)
Retained earnings
9,421
36,729
Treasury stock, at cost (1,814,700 shares at December 31, 2007)
—
(44,384
)
Total stockholders’ equity
175,959
165,669
Total liabilities and stockholders’ equity
$
479,200
$
329,189
Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flow
(In thousands)
(unaudited)
Nine Months Ended September 30,
2008
2007
Cash flows from operating activities
Net income
$
33,859
$
29,039
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of capitalized customer acquisition costs
39,722
33,128
Other depreciation and amortization
9,753
6,322
Addition to loss reserves
4,529
1,833
Provision for doubtful receivables
1,645
317
Stock-based compensation
1,067
1,282
Deferred taxes
4,177
(300
)
Loss on investments
240
―
Other
159
172
Changes in operating assets and liabilities:
Increase in receivables
(15,130
)
(6,772
)
Decrease (increase) in inventory
1,539
(680
)
Payment of signing bonuses, net
(35,677
)
(32,943
)
Increase in capitalized customer acquisition costs
(11,689
)
(10,682
)
Increase in prepaid expenses
(798
)
(784
)
Decrease in current tax asset
1,627
18,151
Increase in deposits and other assets
(95
)
(4
)
Excess tax benefits on options exercised under SFAS No. 123R
(1,498
)
(6,729
)
Increase in reserve for unrecognized tax benefits
911
628
Increase in due to sponsor bank
42,347
12,595
Increase in accounts payable
4,770
3,201
Increase in accrued expenses and other liabilities
7,904
3,993
(Decrease) increase in merchant deposits and loss reserves
(6,504
)
1,666
Payouts of accrued buyout liability
(5,288
)
(6,234
)
Increase in accrued buyout liability
8,449
10,886
Net cash provided by operating activities
86,019
58,085
Cash flows from investing activities
Purchase of investments held to maturity
(65
)
(1,871
)
Maturities of investments held to maturity
284
290
Decrease (increase) in funds held for payroll customers
3,663
(1,954
)
(Decrease) increase in deposits held for payroll customers
(4,177
)
1,843
Acquisition of business, net of cash acquired
(102,849
)
(300
)
Purchases of property and equipment
(22,383
)
(25,637
)
Net cash used in investing activities
(125,527
)
(27,629
)
Cash flows from financing activities
Proceeds from borrowings
95,000
―
Principal payments on borrowings and financing arrangements
(20,000
)
(174
)
Proceeds from exercise of stock options
2,692
8,025
Excess tax benefits on options exercised under SFAS No. 123R
1,498
6,729
Repurchase of common stock
(17,995
)
(16,794
)
Net proceeds from sale of common stock
─
25
Dividends paid on common stock
(10,101
)
(6,582
)
Net cash provided by (used in) financing activities
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