Better economic conditions helped retail sales and that helped the transaction processor Heartland Payment Systems Inc. swing to a first-quarter profit.

"Clearly, the overall processing environment is improving as it appears the economy is on the mend and consumers are returning to the stores and that's certainly a welcome relief," Robert Carr, Heartland's chairman and chief executive officer, said during a conference call with analysts Thursday.

He said that improving results for same-store sales was encouraging, and noted that the March figures were the the first monthly increase in nearly two years.

The Princeton, N.J., company reported net income of $14.2 million, compared with a $2.5 million net loss for last year's first quarter. Revenue rose 5.4%, to $103.8 million.

Heartland's processing volume for small and midsize merchants rose 7.2%, to $14.4 billion. The increase was partly a result of higher volume on Discover Financial Services and American Express Co. cards, Heartland said.

Same-store sales fell 1.5% from a year earlier, versus a 5.2% slide in the fourth quarter.

Carr said that Heartland had received May 1 the first shipment of its E3 terminals with encryption capabilities, and will offer them to merchants this month.

The terminals are part of Heartland's push to promote wider use of data encryption in the payments networks, following a major data breach it disclosed last year.

Carr also said that Heartland is aggressively trying to expand its sales force. Total salesforce headcount was close to an all-time high at the end of April. That included 1,200 relationship managers, and Carr said he wants to double that number over the next two years, in part to increase sales at restaurants, hotels and healthcare providers.

Heartland reiterated its guidance for 2010, predicting full-year revenue of $460 million to $475 million, up 10% to 13% over last year. Earnings are expected to be between 95 cents and $1.

Analysts were pleased with the results.

"The improvement in same-store sales is a step in the right direction," said Meghna Ladha, an associate analyst with Susquehanna Financial Group LLP.

While same-store sales remained negative for the quarter overall, Heartland reported positive same-store sales in March after negative sales in January and February, Ladha said. "They are improving," she said.

As the economy "recovers and consumers gain confidence, we expect processing volume to benefit from both increasing activity, as well as the secular growth of card transactions," Carr said.

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