Source: Heartland Payment Systems.
Many people don't realize the number of steps involved in making a purchase using a credit or debit card. In particular, there's a long chain of events that occurs between when you buy something and when it hits your monthly credit card bill, and merchant services provider Heartland Payment Systems (HPY +0.00%) is one of the key players to bridge the gap between retailers and card-issuing banks to ensure quick and reliable payments. Coming into Friday morning's second-quarter financial report, Heartland looked stronger than ever, and investors wanted to see continued gains in its stock price. In its results, Heartland reported more good news that should give shareholders confidence in the company's future prospects. Let's take a closer look at how Heartland Payment Systems did during the quarter and what's ahead for the rest of 2015 and beyond.
Heartland keeps reaching new records
As we've seen in several past quarters, Heartland Payment Systems posted some record results in the second quarter. Revenue hit a new all-time high of $203.9 million, rising 28% from year-ago levels and easily topping the 22% growth rate that most investors had expected from the company. Heartland also hit a new record for adjusted net income, which jumped 29% to $27.1 million and produced adjusted earnings of $0.72 per share, beating the consensus forecast by $0.02.
Several positive factors contributed to Heartland's solid results. New margin installed also hit a new record of $23.9 million, climbing 15% from 2014's second quarter as new business growth has accelerated just in the past few months. Same-store sales growth of 3.4% was a bit slower than we've seen in recent quarters, but net volume attrition fell almost 3 percentage points from the year-ago quarter to 9.8%. Transaction processing volume from small and mid-sized businesses jumped 16% from the year-ago quarter to a record $23.8 billion, showing how the economic recovery has finally started helping smaller companies.
CEO Robert Carr was excited about the results, noting that "This was the most profitable quarter in Heartland's history, with major improvements in a number of our key operating metrics." Carr called out Heartland's hiring of new relationship managers to drive new sales and retain more existing customers. Non-card revenue also grew at a healthy pace, as the company's acquisition strategy has built up its presence in that area. Carr said Heartland will keep spending to enhance security and build up its marketing presence, and he's optimistic about its future.
Another guidance boost from Heartland
Once again, Heartland's success led the company to raise its guidance for the full 2015 year. The payment processor boosted its sales growth estimate by a percentage point, now expecting growth of 18% to 20% that would translate to roughly $795 million to $805 million in annual revenue. Heartland also raised its expected earnings range by about $0.03 per share, with guidance for between $2.82 and $2.87 in adjusted earnings per share.
Moreover, Heartland is optimistic about its presence within the payment-processing market. As Carr put it, "With our momentum building, we are well-positioned to capitalize on the dynamic changes in our markets and create value for our shareholders."
Heartland still believes that its Heartland Commerce unit will play a critical role in the company's overall future. Carr noted that the unit "is at the heart of our strategy to help small-to-mid-size merchants use integrated point-of-sale technology to enhance their business operations," and he believes that Heartland has "achieved meaningful progress" in its plans to implement that strategy. By offering smaller businesses the same access to security and other technology that other payment-processors give only to their larger clients, Heartland thinks it can demonstrate a competitive advantage that will bring in more business.
Heartland Payment Systems has already garnered the loyalty of investors, with the stock having risen almost 20% just since late March. If it can keep moving forward with its successful strategy of building up its business, then even further gains for Heartland certainly aren't out of the question.
