2 0 0 7 A N N U A L R E P O R TH E A R T L A N D P A Y M E N T S Y S T E M S9 0 N A S S A U S T R E E T | P R i N c E T O N , N J 0 8 5 4 2 | T : ( 8 8 8 ) 7 9 8 - 3 1 3 1 | w w w . H E A R T L A N D P A Y M E N T S Y S T E M S . c O M

10 YEARS OF SOLID REVENUE GROWTH IN MILLIONS

20032002

20012000

19991998

$341$283

$203$112

$48

20072006

20052004

$1,097$1,314

“ Net income was $35.9 million, or $0.90 per diluted share, a 26% and 27% increase, respectively, from 2006.”

$835$603

$422

REVENUESin millions

PROCESSINGVOLUMEin billions

HPS EXCHANGETRANSACTIONS% of total processingtransactions

TOTAL MERCHANTCOUNT

CARDMERCHANTCOUNT

SALESPROFESSIONALS

OPERATINGINCOMEin millions

STOCKHOLDERSEQUITYin millions

$835

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CORpORATE INFORmATION

Company Officers

Robert O. carrChairman & Chief Executive Officer

Robert H. B. Baldwin, Jr.President & Chief Financial Officer Sanford c. BrownChief Sales Officer charles KallenbachGeneral Counsel & Chief Legal Officer Martin A. Moretti Chief Service Officer

Thomas M. SheridanChief Portfolio Officer

Alan J. SimsChief Technology Officer Joseph E. white Chief Accounting Officer

Board of Directors

Scott L. BokCo-Chief Executive Officer Greenhill & Co., Inc.

Robert O. carrChairman & Chief Executive OfficerHeartland Payment Systems

Mitchell L. HollinPartner LLR Partners

Robert H. NiehausChairman Greenhill Capital Partners

Marc J. Ostro, Ph.D.General PartnerDevon Park Bioventures

Jonathan J. PalmerPresident & CEOFSV Payment Systems

George F. RaymondPresident Buckland Corporation Richard w. VagueChairman & Chief Executive OfficerEnergy Plus Holdings LLC

Office Locations

The following are the major Heart-land operational and administrative offices throughout the country.

corporate Headquarters, Finance, Sales & Marketing90 Nassau StreetPrinceton, NJ 08542 T: (888) 798-3131

Payroll & Human Resources 25115 Country Club BoulevardNorth Olmsted, OH 44070 T: (877) 729-2968

information Technology 2595 Dallas Parkway, Suite 310Frisco, TX 75034 T: (877) 798-9656

Heartland Service center 1 Heartland WayJeffersonville, IN 47103T: (888) 963-3600

Regulatory Certifications

Heartland Payment Systems, Inc. filed Section 302 CEO and CFO certifications with the U.S. Securities and Exchange Commission as exhibits to its Annual Report on the Form 10-K for the year ended December 31, 2007.

Independent Registered Public Accounting Firm

Deloitte & Touche, LLP750 College Road East, 3rd Floor Princeton, NJ 08540

Annual Shareholders MeetingHeartland Payment Systems Annual Shareholders Meeting will be held onFriday, May 2, 2008 at 11:00 AM (ET) at:

Nassau Inn Ten Palmer Square Princeton, NJ 08542T: (609) 921-7500F: (609) 921-9385

Transfer Agent & Registrar

Registrar and Transfer company10 Commerce DriveCranford, NJ 07016T: (800) 866-1340F: (908) 497-2310

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u n d e r c o n s t r u c t i o n

2007 2006 2005Total revenues $ 1,313,846 $ 1,097,041 $ 834,824

Costs of services $ 1,196,673 $ 1,004,436 $ 764,605

General and administrative expenses $ 57,404 $ 47,787 $ 37,761

Total expenses $ 1,254,077 $ 1,052,223 $ 802,366

Income from operations $ 59,769 $ 44,818 $ 32,458

Net income $ 35,870 $ 28,544 $ 19,093

Earnings per common share:Basic $ 0.95 $ 0.78 $ 0.62Diluted $ 0.90 $ 0.71 $ 0.50

Weighted average number of common shares outstanding:

Basic 37,686 36,394 23,069Diluted 39,980 39,943 37,879

2007 Financial Results

2007 Financial HigHligHts

n Processing volume rose 20% to $51.9 billion.

n Total revenues increased 20% to $1.3 billion.

n Operating income was $59.8 million for the year, a 33% increase from 2006.

n Net income was $35.9 million, or $0.90 per diluted share, a 26% and 27% increase, respectively, from 2006.

n Operating margins expanded nearly 200 basis points to 19.7%.

n Active card and payroll merchants increased 17% to 161,000.

n Payroll customers now total 6,200, an increase of 47% from last year.

(in thousands, except per share data)

1

2007 was a solid year for Heartland Payment Systems.TM The company celebrated its 10th anniversary by setting new records for net income, earnings per share and operating cash flow. We introduced exciting new products that we expect will energize our future growth, identified promising new markets and continued to invest in the cutting-edge technology that strengthens our differentiated business model. And we opened our brand-new 96,000-square-foot operations and customer service center, the first phase of a planned 221,000-square-foot campus and home to what is expected to be 650 Heartland professionals by the end of 2008.

I could not be prouder of the team that has made this happen. The entire Heartland organization is committed to advancing our mission every day, making Heartland and its employees the leading force for industry change.

Our financial and operating results in 2007 highlight our success:

n Net income rose 26% to a record $35.9 million, while diluted earnings per share were up 27% to a record $0.90 from 2006.

n Operating income for the year rose 33% to $59.8 million, while operating margins expanded to nearly 20%—both new milestones.

n Our strong operating cash flow of $72.6 million indicates the business has matured, and working capital requirements have moderated. Heartland has the potential to be a powerful cash-generating machine.

From a simple idea formulated just over 10 years ago, Heartland has grown into one of the largest merchant processors in the world, processing over $55 billion of transactions a year. Our initial idea was to build a new business model that would equip merchants with the tools and knowledge to take control of their merchant processing costs.

Today, through our Merchant Bill of Rights (www.MerchantBillofRights.com), we are widely recognized as an unrelenting advocate for small and mid-sized merchants and the industry’s leading proponent of transparency, equality and clarity in pricing and strong merchant relationships.

ROBERT O. CaRR

cHaiRman & cHieF executive oFFiceR

to ouR sHaReHoldeRs,

Heartland launched its Campus Solutions division in 2007 by kicking off a major initiative with Pennsylvania’s Slippery Rock University. At Slippery Rock, students can now use their cell phones and campus ID cards to make contactless card payments on campus as well as at merchants in the surrounding community. At the same time, the Slippery Rock program taps into Heartland’s Give Something Back Network to encourage charitable giving.

Through this innovative program, 0.5% of every purchase is automatically donated to the school. The cardholder has the option to automatically donate an additional 1% to the charity of his or her choice or receive 1% cash back on purchases.

By tapping into students’ willingness to serve as early technology adopters, Heartland is ushering in a new era of campus payment solutions, once again expediting adoption of contactless payments for a range of purchases.

Campus Solutions

Heartland Payment Systems 2007 Annual Report2

n We raised our quarterly dividend 50% to $0.075 per share, another sign of our strong cash flow and commitment to using it to reward shareholders.

n Processing volume increased 20% to $51.9 billion.

n Our direct sales force of 1,362 sales professionals and 240 service managers (at year end) is the envy of the industry. In 2007, this team grew our active merchant count 17% to 161,000.

n We continue to augment our core merchant processing offerings with value-added services such as Heartland Payroll Services,TM Heartland Express Funds,SM Heartland Campus Solutions and Heartland MicroPayments Solutions. Our payroll business continued to grow substantially as we launched the industry’s first and only three-year guaranteed cost contract. Express Funds, Campus Solutions and MicroPayments are being developed to build on our core processing capability. Each has the same attractive recurring revenue and margin characteristics as our processing business.

n Our internal processing platforms are performing well. We authorized 99.998% of all

transactions attempted on Exchange, and Passport is now delivering the cost savings and processing efficiencies we anticipated.

We have achieved significant progress in virtually every facet of our business. And, we still have the ability to grow our market share among merchants we serve, and our industry continues to expand faster than the GDP overall. This indicates we still have a great deal of runway to expand and grow our business.

In 2007, we set the stage for future growth with a number of new products, services and offerings to capitalize on our growth opportunities. Let me touch on a few of them.

With debit, credit, and prepaid cards increasingly displacing cash and checks, transaction processing is exploding. Due to advances in technology, applications once considered inconceivable for card payments—such as buying a soda at the vending machine or doing laundry—are starting to emerge as opportunities for card payments.

Heartland has already established a beachhead in the micropayments market (transactions under $5)

with our groundbreaking installation at Slippery Rock University. By outfitting campus vending machines, laundry facilities, photocopiers and similar equipment with dual-technology readers that accept contactless payments, students can pay for a variety of services on campus using their campus ID cards and cell phones. And, these ID cards can also be used for all kinds of purchases at local off-campus merchants. For Heartland, this means we are able to not only generate income from on-campus transactions, but we can also leverage the fact that we offer unique access to students’ funds to sell our full range of card processing services to merchants in the community.

This initiative has energized the entire Slippery Rock community and moved payments from cash to cashless, serving as a vital proof case for the power of our micropayments model. There are countless opportunities to port this model to other communities and create a captive market for our technology.

P A Y M E N T S Y S T E M SThe Highest Standards | The Most Trusted Transactions

TM

Historically, consumer payments under $5 for services like parking, laundry, vending, printing and gaming were only completed with cash and coin. No more. With new technological advances and changes in card association fee structures, this large new market is fast moving to cashless payments.

Heartland is leading the charge. In 2007, we launched the Heartland MicroPayments division to penetrate and expand our business in this arena. At the same time, our leadership role in the card processing industry enables us to advocate widespread adoption of cashless micropayments and accelerate the drive to a cashless society.

Micropayments

3

The development of this exciting technology has its roots in companies we’ve acquired. We will continue to evaluate other opportunities in this space that can accelerate our growth or provide access to other rapidly expanding markets.

We also began to broaden beyond the traditional merchant processing business to look for additional products and services that leverage our customer relationships and technology. Our payroll initiative has been a success. Today we process payroll for over 6,200 clients, some of whom are existing Heartland card processing customers, but many who are not.

This year, we also unveiled Heartland Express Funds, a unique remote deposit capture product that enables business owners to electronically deposit their checks into their checking accounts without ever leaving the office. Express Funds moved Heartland further up the continuum from a pure merchant processor into a more comprehensive integrated payments solutions provider.

Importantly, Express Funds is not a card-dependent relationship, so it opens the door to the huge and rapidly growing markets of lawyers, accountants and similar businesses that typically do not have a card processing need.

Heartland continues to garner its share of awards and recognition from the business community and industry authorities. In 2007, Heartland was named among InfoWorld’s 50 most innovative technology companies alongside the likes of Microsoft, IBM and Eli Lilly.

Early on, we recognized the importance of technology in driving a differentiated, low-cost business model, and our commitment to cutting-edge technology has been one of the pillars on which we have built our business. Our multi-year initiatives to build Passport (our internally developed, back-end processing system) and Exchange (our front-end system) have paid significant dividends, driving down our costs and enhancing our operating margins while enabling us to introduce a host of new products and services.

The Merchant Bill of Rights, introduced last year, continues to gain traction and support. Today, 145 state trade organizations, merchants, and business partners formally endorse the initiative. The Merchant Bill of Rights codifies what Heartland has advocated since its inception: transparency and honesty in card processing, cutting-edge security to prevent identity theft and fraud—and a level playing field for all merchants.

From modest beginnings to a billion-dollar market capitalization company traded on the New York Stock Exchange, it’s hard to believe we’ve come this far this fast. Looking ahead, our goal is to continue to maintain our strong growth over the long term by increasing market share, adding new clients, improving client retention, broadening our product introductions and leveraging technology to improve efficiencies.

2007 was a very good year for Heartland, and we are positioned to continue our growth trajectory and reward our loyal shareholders through dividends and even better future performance. We thank all of our shareholders for their continued support and look forward to delivering on the promise of our business model.

Sincerely,

RobeRt o. CaRR

CHAirMAn & CHief exeCuTive OffiCer

Awards of ExcellenceHeartland’s differentiated business model, cutting-edge technology and strong management team were recognized with a wide array of industry awards in 2007.

For the second time, Bob Carr was named Ernst & Young’s “New Jersey Entrepreneur of the Year.” He was also presented with the “Technology CEO of the Year” award by the Eastern Technology Council.

Heartland was named “Best Run Sales Organization,” and Irina Haydon, an executive director of sales and service, was named “Sales Director of the Year” by Selling Power’s Sales Excellence AwardsTM.

Heartland was also recognized as one of the world’s top 50 most innovative technology companies by InfoWorld magazine.

4 Heartland Payment Systems 2007 Annual Report