HEARTLAND PAYMENT SYSTEMS INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 1, 2015

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Exhibit 99.1
Heartland Payment Systems 90 Nassau Street
Princeton, NJ 08542 888.798.3131
HeartlandPaymentSystems.com

HEARTLAND PAYMENT SYSTEMS REPORTS $0.62 ADJUSTED EARNINGS PER SHARE, A FIRST QUARTER RECORD

Princeton, NJ - May 1, 2015 - Heartland Payment Systems, Inc. (NYSE: HPY), one of the nation's largest payment processors, today announced record first quarter Adjusted Net Income and Adjusted Earnings per Share of $23.1 million and $0.62, respectively, for the quarter ended March 31, 2015. Adjusted Net Income and Adjusted Earnings per Share were $19.4 million and $0.52, respectively, for the quarter ended March 31, 2014. For the first quarter of 2015, Heartland reported GAAP Net Income of $17.2 million, or $0.46 per share. 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 2015 include:

•
New margin installed was an all-time record $21.7 million, a 9.6% increase from the first quarter of 2014

•
Same store sales were up 4.4%, contributing to a reduction of net volume attrition to 9.6%, both the best performance in over five years

•
Small and Mid-Sized Enterprise (SME) quarterly transaction processing volume was $20.8 billion, up 15.6% from $18.0 billion in the first quarter of 2014

•
Quarterly Net Revenue was $190.3 million, up 22.4% from the first quarter of 2014

•
Adjusted Operating Margin for the first quarter of 2015 was 20.7%, compared with 20.9% for the first quarter of 2014

Operating results for the first quarter of 2015 include:

•
Incremental general and administrative expenses of $2.9 million for the Heartland Summit, $0.9 million for Leaf ($3.2 million total for the first quarter) and $1.0 million for costs associated with acquisitions consummated in the period. All impacted first quarter Operating Margin.

•
Stock compensation expense of $4.6 million, an $0.8 million increase

•
Depreciation and amortization expense of $5.0 million for acquired intangibles amortization, a $2.7 million increase

•
A lower effective tax rate due to partial recognition of benefits of past accumulated losses of Leaf; it is expected the tax rate will return to historical levels in the remaining three quarters of this year


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Robert O. Carr, Chairman and CEO, said, "For the fifth consecutive quarter, we increased the rate of growth in our processing volume, driving outstanding growth on both the top and bottom line. With another quarter of record new margin installed and growing momentum across all of our business drivers, the investments we have committed to our people and processes are clearly strengthening the Heartland franchise in the market, laying a solid foundation for sustained growth. We're generating the same success in our non-card businesses, where revenue is up nearly 50 percent from both organic growth as well as the rapid integration of acquisitions, including Payroll 1, which we are pleased to welcome to the Heartland team this quarter. The payments and related industries are increasingly recognizing and rewarding innovation, and Heartland remains committed to investing in our technology to continue to improve the utility and security of our products so that our merchants can enhance the productivity and efficiency of their businesses.”

SME card processing volume for the three months ended March 31, 2015 was $20.8 billion, a 15.6% improvement compared to the year-ago period and the fifth consecutive quarter in which the rate of year-over-year card transaction processing growth has accelerated. Core Visa and MasterCard volume processed in the quarter was up 11.4% compared to the year-ago period. Non-card revenue growth in the quarter was 49% compared to the first quarter of 2014, with strong organic growth supplemented by contributions from recent acquisitions. The operating margin in the quarter reflected the Heartland Summit and costs for acquisitions closed in the quarter, as well as a full quarter of operating expenses for Leaf. The expense from the Heartland Summit will not recur over the remainder of this year and Leaf is winding down. In addition, total expenses reflected a 49% increase in total depreciation and amortization, which, including amounts classified as processing and servicing costs, rose to $14.7 million in the quarter from $9.9 million in the first quarter of last year, primarily due to an increase in the amortization of both system development and acquired intangibles.

Mr. Carr continued, “Heartland Commerce is a focal point of our strategy to offer the industry's most compelling integrated electronic payments processing platform with the highest level of security. We are delighted by the enthusiasm the market - including both dealers and merchants - is showing for our offering, and we are making significant progress integrating operations to leverage our resources and market relationships to extend our technological leadership. Through Heartland Commerce, we are bringing the same best-of-both-worlds integration and security enjoyed by larger merchants to the small to mid-sized merchant community through integrated POS technology incorporating our proprietary out-of-scope solution that eliminates risks inherent in integrated POS in the market. Our goal is to build Heartland Commerce into the leading provider of electronic payments solutions that offers not only the most comprehensive functionality, but an uncompromised level of security."

FULL YEAR 2015 GUIDANCE:
For full year 2015, we expect Net Revenue to grow 17% to 19%, to between approximately $790 million and $800 million, and adjusted EPS to be in the range of $2.78- $2.85. Guidance assumes after-tax share-based compensation and acquisition-related amortization expenses reduce earnings per share by $0.66 for the year and an approximate 39% tax rate.




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BOARD DECLARES QUARTERLY DIVIDEND
The Company also announced that the Board of Directors declared a quarterly dividend of $0.10 per common share payable June 15, 2015 to shareholders of record on May 28, 2015.

CONFERENCE CALL

Heartland Payment Systems, Inc. will host a conference call on May 1, 2015 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/about/investor-relations. The conference call may be accessed by calling (888)-317-6003. Please provide the operator with PIN number 0530331. The webcast will be archived on the Company's website within two hours of the live call.

ABOUT HEARTLAND
Heartland Payment Systems, Inc. (NYSE: HPY), one of the largest payment processors in the United States, delivers credit/debit/prepaid card processing and security technology through Heartland Secure™ and its comprehensive Heartland breach warranty. Heartland also offers point of sale, mobile commerce, e-Commerce, marketing solutions, payroll solutions, and related business solutions and services to more than 300,000 business and educational locations nationwide.

A FORTUNE 1000 company, 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. Heartland also established the Sales Professional Bill of Rights to advocate for the rights of sales professionals everywhere.


Forward-looking Statements

This press release contains 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, including risks and additional factors that are described 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, 2014. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this release.

Contact

Joe Hassett
Gregory FCA Communications
27 West Athens Ave.
Ardmore, PA 19003
Tel: 610-228-2110
Email: Heartland_ir@gregoryfca.com


TABLES FOLLOW


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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(unaudited)
 
Three Months Ended
March 31,
 
2015
 
2014
Total revenues
$
602,459

 
$
523,283

Costs of services:
 
 
 
Interchange
359,340

 
318,096

Dues, assessments and fees
52,775

 
49,668

Processing and servicing
77,737

 
68,609

Customer acquisition costs
14,048

 
10,250

Depreciation and amortization
10,673

 
5,812

Total costs of services
514,573

 
452,435

General and administrative
58,124

 
44,486

Total expenses
572,697

 
496,921

Income from operations
29,762

 
26,362

Other income (expense):
 
 
 
Interest income
25

 
32

Interest expense
(3,647
)
 
(1,050
)
Other, net
26

 
(132
)
Total other expense
(3,596
)
 
(1,150
)
Income before income taxes
26,166

 
25,212

Provision for income taxes
8,928

 
10,300

Net income
17,238

 
14,912

Less: Net loss attributable to noncontrolling interests
—

 
(828
)
Net income attributable to Heartland
$
17,238

 
$
15,740

 
 
 
 
Earnings per common share:
 
 
 
      Basic
$
0.47

 
$
0.43

      Diluted
$
0.46

 
$
0.42

 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
Basic
36,432

 
36,731

Diluted
37,110

 
37,735


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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
 
Three Months Ended March 31,
 
2015
 
2014
Net income
$
17,238

 
$
14,912

Other comprehensive income:
 
 
 
Unrealized gains on investments, net of income tax of $12 and $9
32

 
12

Unrealized gains on derivative financial instruments, net of income tax of $19 and $28
32

 
47

Comprehensive income
17,302

 
14,971

Less: Comprehensive loss attributable to noncontrolling interests
—

 
(828
)
Comprehensive income attributable to Heartland
$
17,302

 
$
15,799


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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)
 
March 31,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
44,851

 
$
70,793

Funds held for customers
210,122

 
176,492

Receivables, net
239,252

 
234,104

Investments
110

 
106

Inventory
11,272

 
12,048

Prepaid expenses
23,886

 
22,658

Current tax assets
16,888

 
15,082

Current deferred tax assets, net
7,019

 
9,308

Total current assets
553,400

 
540,591

Capitalized customer acquisition costs, net
75,096

 
73,107

Property and equipment, net
164,792

 
154,303

Goodwill
475,580

 
425,712

Intangible assets, net
204,256

 
192,553

Deposits and other assets, net
1,837

 
1,507

Total assets
$
1,474,961

 
$
1,387,773

 
 
 
 
Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Due to sponsor banks
$
46,777

 
$
31,165

Accounts payable
53,664

 
58,460

Customer fund deposits
210,122

 
176,492

Processing liabilities
108,649

 
119,398

Current portion of accrued buyout liability
16,159

 
15,023

Current portion of borrowings
41,781

 
36,792

Current portion of unearned revenue
39,016

 
46,601

Accrued expenses and other liabilities
46,834

 
41,517

Total current liabilities
563,002

 
525,448

Deferred tax liabilities, net
56,499

 
45,804

Reserve for unrecognized tax benefits
7,706

 
7,315

Long-term borrowings
547,435

 
523,122

Long-term portion of accrued buyout liability
30,323

 
32,970

Long-term portion of unearned revenue
2,366

 
2,354

Total liabilities
1,207,331

 
1,137,013

Commitments and contingencies
—

 
—

 
 
 
 
Equity
 
 
 
Common stock, $0.001 par value, 100,000,000 shares authorized, 36,562,755 and 36,344,921 shares issued and outstanding at March 31, 2015 and December 31, 2014
37

 
36

Additional paid-in capital
259,144

 
255,921

Accumulated other comprehensive loss
(66
)
 
(130
)
Retained earnings (accumulated deficit)
8,515

 
(5,067
)
Total equity
267,630

 
250,760

Total liabilities and equity
$
1,474,961

 
$
1,387,773


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Heartland Payment Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 
Three Months Ended March 31,
 
2015
 
2014
Cash flows from operating activities
 
 
 
Net income
$
17,238

 
$
14,912

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Amortization of capitalized customer acquisition costs
14,155

 
11,985

Other depreciation and amortization
14,652

 
9,864

Addition to loss reserves
869

 
866

Provision for doubtful receivables
655

 
337

Deferred taxes
7,019

 
4,205

Share-based compensation
4,649

 
3,838

Write off of fixed assets and other
431

 
225

Changes in operating assets and liabilities:
 
 
 
Increase in receivables
(3,606
)
 
(1,959
)
Decrease in inventory
926

 
163

Payment of signing bonuses, net
(10,041
)
 
(8,055
)
Increase in capitalized customer acquisition costs
(6,103
)
 
(5,531
)
Decrease in current tax assets
1,627

 
5,737

Increase in prepaid expenses, deposits and other assets
(1,088
)
 
(1,314
)
Excess tax benefits on employee share-based compensation
(3,481
)
 
(2,174
)
Increase in reserve for unrecognized tax benefits
391

 
390

Increase in due to sponsor banks
15,612

 
30,335

Decrease in accounts payable
(5,535
)
 
(6,871
)
Decrease in unearned revenue
(10,148
)
 
(9,390
)
Decrease in accrued expenses and other liabilities
(4,107
)
 
(3,681
)
Decrease in processing liabilities
(11,653
)
 
(30,597
)
Payouts of accrued buyout liability
(7,507
)
 
(1,875
)
Increase in accrued buyout liability
5,996

 
3,796

Net cash provided by operating activities
20,951

 
15,206

 
 
 
 
Cash flows from investing activities
 
 
 
Decrease (increase) in funds held for customers
12,645

 
(28,160
)
(Decrease) increase in customer fund deposits
(12,645
)
 
28,182

Acquisitions of businesses, net of cash acquired
(60,890
)
 
(3,250
)
Capital expenditures
(15,909
)
 
(12,846
)
Net cash used in investing activities
(76,799
)
 
(16,074
)
 
 
 
 
Cash flows from financing activities
 
 
 
Proceeds from borrowings
108,000

 
30,000

Principal payments on borrowings
(78,687
)
 
—

Proceeds from exercise of stock options
768

 
246

Excess tax benefits on employee share-based compensation
3,481

 
2,174

Repurchases of common stock
—

 
(27,237
)
Dividends paid on common stock
(3,656
)
 
(3,102
)
Net cash provided by financing activities
29,906

 
2,081

 
 
 
 
Net (decrease) increase in cash
(25,942
)
 
1,213

Cash at beginning of year
70,793

 
71,932

Cash at end of period
$
44,851

 
$
73,145


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Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure
To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company provides additional measures of its operating results on a continuing operations basis, namely income from operations, operating margin, net income and earnings per share, which exclude acquisition-related amortization expense and share-based compensation expense. These measures meet the definition of a non-GAAP financial measure within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The Company believes that application of these non-GAAP financial measures is appropriate to enhance understanding of its historical performance, its performance relative to its competitors, as well as prospects for its future performance.

This press release contains non-GAAP financial measures. Pursuant to Regulation G, a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP for the three months ended March 31, 2015 and 2014 follows (in thousands except per share data):
Three Months Ended March 31, 2015
 
 
 
 
 
 
 
GAAP
 
Acquisition-related Amortization
 
Share-based Compensation
 
Adjusted Non-GAAP
Income from operations
$
29,762

 
$
4,962

 
$
4,649

 
$
39,373

Operating margin (a)
15.6
%
 
 
 
 
 
20.7
%
 
 
 
 
 
 
 
 
Net income attributable to Heartland
$
17,238

 
$
3,034

 
$
2,842

 
$
23,114

 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.46

 
$
0.08

 
$
0.08

 
$
0.62

Diluted shares used in computing earnings per share
37,110

 
 
 
 
 
37,110

Three Months Ended March 31, 2014
 
 
 
 
 
 
 
GAAP
 
Acquisition-related Amortization
 
Share-based Compensation
 
Adjusted Non-GAAP
Income from operations
$
26,362

 
$
2,310

 
$
3,838

 
$
32,510

Operating margin (a)
17.0
%
 
 
 
 
 
20.9
%
 
 
 
 
 
 
 
 
Net income attributable to Heartland
$
15,740

 
$
1,366

 
$
2,270

 
$
19,376

 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.42

 
$
0.04

 
$
0.06

 
$
0.52

Diluted shares used in computing earnings per share
37,735

 
 
 
 
 
37,735

 
 
 
 
 
 
 
 
(a) Operating margin is measured as Income from operations divided by Net revenue. Net revenue is defined as total revenues less interchange fees and dues, assessments and fees.





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HEARTLAND PAYMENT SYSTEMS INC Reports