Improving same-store sales and a stabilizing economy appear to be helping Heartland Payment Systems Inc. turn itself around financially.

The Princeton, N.J.-based transaction processor, whose operations were adversely affected by a 2008 data breach (see story), on Aug. 4 reported a $6.1 million profit for the second quarter ended June 30, reversing a $2.6 million loss during the same period last year. Revenue totaled $475.9 million, up 14% from $417.4 million.

Economic conditions appear to have “settled down,” but consumer spending at small and midsize merchants remains below levels from a few years ago, Robert Carr, Heartland chairman and CEO, told analysts during a conference call today.

Heartland says its same-store sales were up 1.1% from this year’s first quarter.

“While we were anticipating improvement in same-store sales this year after the sustained weakness of the last couple of years, it is nice to finally get a little lift from the economy, with the improvement coming a little sooner than we had foreseen,” Carr said.

Overall, the quarter was “pretty solid” for Heartland, David J. Koning, a senior research analyst at Milwaukee-based Robert W. Baird & Co., tells PaymentsSource. “They’re growing pretty well considering it remains a difficult economic environment.”

Heartland’s same-store performance was good, adds analyst Robert Dodd of Memphis, Tenn.-based Morgan Keegan & Co. But other factors, such as the number of merchants using Heartland and the company’s new sales approach, are helping, too, he says.

Before late last year, Heartland’s sales approach enabled any of its salespeople to sell virtually all of the company’s products, Dodd says. Now Heartland’s salespeople sell to specific vertical markets, such as health care or campus products.

“There is still a lot of work to generate sales from this new sales structure,” Dodd tells PaymentsSource. “We’ll see if it pays off.”

Dodd also is monitoring Heartland’s installed base of new merchants, which is “sharply” down from the same period a year ago, he says. Heartland says during the quarter it had $12.1 million in new margin installed—which measures the projected 12-month profitability of new merchants—a 20.4% decrease from $15.2 million during the second quarter of 2009.

Although new merchant installations were up from the first quarter, “new business is a challenge,” Carr said, predicting the new sales structure will help reverse that trend.

“We have a great opportunity to increase our growth rate with all the initiatives that we have and are looking forward to training these new reps and getting them up to speed,” Carr said.

Dodd similarly is optimistic that Heartland’s performance will improve in the second half the year.

“The big question now is, how do these new products ramp up and how does the performance from the news sales channel improve?” Dodd says. “Does that performance accelerate in the back half of this year? I’m optimistic. They are, too.”

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