Economic improvements are helping Heartland Payment Systems Inc., which reported on Feb. 16 that higher spending led to a small jump in fourth-quarter net revenue.
The Princeton, N.J., company, which processes card transactions for merchants, said it processed $18.8 billion in transactions during the quarter ended Dec. 31, up 8.5% from a year earlier.
The higher volume helped Heartland’s revenue grow to $110.5 million, up 5.1% from a year earlier, though analysts had expected net revenue of $111.7 million. Heartland’s net revenue excludes interchange, dues, assessments and fees, which it collects but passes along to issuing banks and payment networks. Its total revenue rose 14%, to $478.2 million from $420 million a year earlier.
Net income was $6.7 million, or 17 cents per diluted share, compared with a net loss of $9.6 million, or a loss of 26 cents per diluted share, a year earlier. Analysts had estimated the company would earn 20 cents per share in the quarter.
“Our major revenue categories–payment processing, payroll and equipment sales –all registered double-digit growth,” Bob Carr, Heartland’s chairman and chief executive, said during a Feb. 16 conference call with analysts to discuss earnings.
Same-store sales grew 3.8% year over year, with its petroleum, utilities, electronic and furniture, and automotive clients posting the biggest increases, the company said.
On Feb. 15, the U.S. Census Bureau reported that retail and food services sales grew $381.6 billion in January, up 7.8% from a year earlier, based on advance estimates.
Carr said he expects the company to benefit from the Federal Reserve Board’s proposed caps on debit card interchange.
The last time a major reduction in debit interchange occurred following a class-action settlement in a lawsuit led by Wal-Mart Stores Inc. against Visa Inc. and MasterCard Inc., in 2003, Heartland saw a 40% increase in market share because it passed along the price decrease to its clients, Carr said.
However, any gain it sees following the implementation of the Fed’s rules this year will not be as big, Carr said. “We are expecting to get a nice bump in our growth by gaining market share, but it’s not going to be anywhere in that range,” he said.
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