Heartland Payment Systems Reports Quarterly Loss
Breach Expenses Mount; CEO Optimistic About Encryption Solution
The company is close to returning to normalized operations, said Robert Carr, the company's chairman and CEO, in Heartland's most recent quarterly earnings call. The payments processor reported a net loss of $9.6 million in the fourth quarter, largely due to expenses from its data breach -- the largest-ever reported loss of credit card data, estimated at 130 million cards. Revenue grew by 5 percent to $105.1 million, up from 1 percent growth in the third quarter.
Expenses from the 2008 network data breach totaled $23.7 million, including charges tied to recent settlement charges.
Heartland reached a settlement with Visa in January and agreed to pay $60 million to issuers of Visa cards for expenses caused by the breach.
Earlier, Heartland settled with American Express for $3.6 million.
Even with the press coverage and subsequent negative publicity from the intrusion, the number of Heartland clients that did not renew contracts grew just 0.1% in 2009, Carr notes.
Security will continue to be of interest, Carr says, with the company's E3 encryption offering being run by a "number of merchants." Carr says the company is waiting for delivery of several thousand units of the encryption device sometime in the second quarter.
He says Heartland will recover the costs of the devices and add more merchants to protect card data. By using the same technology as pin debit, the data will stay secure. "There is no known loss from this technology for a merchant," says Carr. "It will be a great solution until the U.S. moves to chip and pin in five-to-10 years," he adds "The E3 product represents a catch-up game for the rest of the industry."
