Heartland Payment Systems’ first quarter earnings benefited from an economic recovery boost that helped improve same-store sales among its small and midsize customers.
The Princeton, N.J.-based merchant processor reported total revenues of $470.5 million for the quarter ended March 31, up 0.6% from $467.6 million during the same period last year. Net income attributable to Heartland rose 76.9%, to $13.8 million from $7.8 million.
Same store sales rose 3.4%, and volume attrition of 12.2% was the lowest quarterly volume attrition since the third quarter of 2007, Heartland noted in its earnings release.
During a May 1 conference call with analysts, Maria Rueda, Heartland’s chief financial officer, described how economic conditions can make same-store sales volatile.
“Consequently, we remain cautious in our expectations for both same-store sales and volume attrition for the year,” she said.
Growth in both card and noncard net revenue, notably the $4.6 million increase in K-12 School Solutions revenues, drove a $16 million, or 14.2%, increase in first quarter net revenue, the processor said in its release.
Bob Carr, Heartland chairman and CEO, noted during the call that the processor recently added a mobile application that enables merchants to take credit, debit and gift cards using Apple Inc. iPhones, iPods and iPod Touches (see story).
“Merchants simply download the free retail app from Apple's App Store, purchase a mobile encrypting card reader from Heartland, and plug the reader into an Apple mobile device audio jack, and begin swiping cards and processing fully encrypted transactions from anywhere in the U.S.,” he said.
Discussing Square Inc.’s efforts to provide small merchants with mobile terminals to accept cards, Carr said he is unaware of any business Square is taking away from Heartland.
Carr also suggested a lack of due diligence on Square’s part.
“We just don't see how you can take on merchants and open up the payments world to every criminal on the planet without doing significant underwriting and not have high losses, so we will see how sustainable it is,” he said of Square. “Square is bringing to the marketplace a new concept of opening up the marketplace to people who can enroll online, and we welcome (that), and the industry is just waiting to be educated on how they are so much smarter than the rest of us in their underwriting methodologies.”
Square representatives were not immediately available to comment.
Square is no stranger to complaints from others in the acquiring industry. VeriFone Systems Inc. CEO Douglas Bergeron early last year called for Square to recall its devices because of security concerns (see story). It came under fire again because of security concerns in August (see story).
Despite such criticisms, Square says it continues to attract new merchant business, prompting existing players to draw up new strategies to compete (see story).
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