Heartland Payment Systems CEO Discusses Q3 2010 Results - Earnings Call Transcript
Heartland Payment Systems (
)
Q3 2010 Earnings Call
November 3, 2010 8:30 a.m. ET
Executives
Bob Baldwin – President and CFO
Bob Carr – Chairman and CEO
Analysts
Tien-Tsin Huang – JP Morgan
Dave Koning – Robert W. Baird
Sanjay Sakhrani – KBW
Bob Napoli – Piper Jaffray
Tom McCrohan - Janney Capital Markets
Chris Shutler – William Blair & Company
John Williams – Goldman Sachs
Presentation
Operator
Good day and welcome to the Heartland Payment Systems Third Quarter 2010 Earnings Conference Call. Today's conference is being recorded.
At this time, I would like to turn the conference over to President and CFO Robert Baldwin. Please go ahead, sir.
Bob Baldwin
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Heartland Payment Systems Inc. Q3 2009 Earnings Call Transcript
Thank you, and good morning everyone. I'd like to welcome you to our Third Quarter 2010 Earnings call. Joining me this morning is Bob Carr, Chairman and CEO. Today, Bob will begin our discussion with an overview of the quarter, and then I'll return to go through some of the financials in detail before taking your questions.
Before we begin, I'd like to remind you that some of our discussions may contain statements of a forward-looking nature which represent management's beliefs and assumptions concerning future events. Forward-looking statements involve risks, uncertainties, and assumptions that 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 those factors is contained in the report of our financial results we released early this morning and in the company's SEC filings. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may arise after this call.
I'd like to turn the call over to Bob Carr, Chairman and CEO.
Bob Carr
Thanks Bob and good morning everybody. I'd like to thank you all for joining us today and for your interest in Heartland. By now you should have seen our financial results for the third quarter that we released this morning.
For the quarter, we reported adjusted net income of $8 million, or $0.20 per fully diluted share, which excludes expenses associated with the breach. Bob will go through the detailed results in a minute.
I believe the third quarter may represent an important inflection point where we have finally reached the point where more of our resources are being focused on growing the business and improving operations than are being used to fight economic headwinds and breach-related battles.
Our settlement with Discover concluded our dealings with the brands, and most legal claims have been dismissed, so that while we are still engaged with some regulators and the issuer class action, we can devote most of our energies to achieving greater success in a still-challenging marketplace.
The numbers tell the story. Both transaction processing volume and transactions processed were quarterly records, up 6% and 9% respectively. By all accounts, our small and mid-sized merchants are not growing nearly as fast as this, meaning we are still gaining market share.
Same-store sales were up for the second consecutive quarter, and new margin install, though down relative to a year ago, was still the best since the fourth quarter of last year. New margin installed has been growing nicely, with September the best month of 2010 and October close to the best month since 2008.
Merchant volume attrition in the quarter was also at the best level it has been over the last two years. Similarly, performance in our payroll, loyalty, campus solutions, and other ancillary products has improved. Combined with our strong volume, the result was record quarterly net revenues.
Our success is rooted in our fair deal transparent pricing strategy. Over the past few months we've made significant progress penetrating like-minded organizations to plant the seeds of growth with their membership. Recently, we have been selected as the exclusive endorsed provider of payroll services and endorsed provider of card processing services by the 900-member independent organization of Little Caesar's franchises and the exclusive endorsed provider of credit and debit card processing services by the U.S. Hispanic Chamber of Commerce.
We also are the exclusive endorsed provider for electronic payment solutions for the National Restaurant Associations, more than 40 state restaurant associations, as well as the American Hotel and Lodging Association, and more than 200 trade associations and member-based organizations.
Since its launch on May 24, more than 7,000 small and mid-sized business owners across the country have purchased and deployed Heartland's E3 terminals to protect their businesses and their consumers. We now have the largest number of merchants in the United States actively using truly effective end-to-end encryption technology to secure their transactions and momentum is building. September was our best month. We sold more than 1,700 E3 terminals, over half of them to new merchants.
The widespread adoption of E3 by business owners in the first few months demonstrates that merchants of all sizes, not just the big merchants, want to protect card owner data and lower their risk of payment card industry data security standard fines and fees.
And in October we expanded our product line and entered additional markets by launching our new E3 magnetic stripe reader wedge, or PC-based, payment applications. Working with multiple P.O.S. developers, this allows us to offer and add security to those larger merchants using P.O.S. systems that are increasingly the target of criminal attacks.
Throughout our history, we have invested in a strong sales organization as the main vehicle to carry our message to the market, and over the past two years we have been focused on dealing with the slowing economy and other distractions that caused us to be less intensive in the management of our sales organization than we would otherwise have been.
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