Heartland Payment Systems Reports Record Quarterly Earnings

Heartland Payment Systems, Inc. (NYSE: HPY), one of the nation's largest payment processors, today announced GAAP net income of $19.4 million, or $0.48 per share, for the three months ended September 30, 2012. Adjusted Net Income and Adjusted Earnings per Share were $21.7 million and $0.53, respectively, for the quarter ended September 30, 2012, compared to Adjusted Net Income and Adjusted Earnings per Share of $13.5 million and $0.33, respectively, for the quarter ended September 30, 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 third quarter of 2012 include:

• Small and Mid-Sized Enterprise (SME) quarterly transaction processing volume of $18.8 billion, up 5.8% from the third quarter of 2011, and a quarterly record
• Quarterly Net Revenue of $143.4 million, up 17.3% from the third quarter of 2011, and a quarterly record
• Operating Margin on Net Revenue of 23.5% compared to 17.7% for the same quarter in 2011 and the best quarterly operating margin in five years
• Same store sales rose 1.8% and volume attrition was 12.9% in the third quarter
• New margin installed of $14.4 million, up 11.2% from the third quarter of 2011
• Share-based compensation reduced earnings by $3.5 million pre-tax, or approximately $0.05 per share, compared to $1.3 million pre-tax, or $0.02 per share in the third quarter of 2011

Robert Carr, Chairman and CEO, said, “We are pleased to report the most profitable quarter in the Company's history, with net revenue growing 17% and the operating margin expanding to 23.5% to drive a 56% increase in quarterly operating income. Returning over $275 million of Durbin Dollars to our merchants has significantly increased merchants' awareness of processing costs, which has enabled us to sustain double-digit new business growth and achieve record quarterly transaction processing volumes. The success of our productivity and efficiency initiatives has led to a significant improvement in our operating margin, which will exceed 20% this year, ahead of previous expectations. We continue to use our strong cash flow to reward our shareholders, and have repurchased $100 million of our stock over the past 12 months. As electronic payments continue to evolve, our strong merchant relationships, leading technology and solid financial position provide us with the resources to create innovative solutions for our merchants and to increase value for our shareholders.”

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