Hypercom Announces Fourth Quarter and Year-End Results.PHOENIX--(BUSINESS WIRE)--July 21, 1999--
Highlights
-- Fourth quarter net revenues total $68.6 million.
-- Fourth quarter net income is $480,000, or $0.01 per share, up
dramatically versus the fourth quarter 1998.
-- Full-year net income totals $9.2 million, or $0.28 and $0.27 per
basic and diluted share, respectively, versus $14.0 million, or
$0.46 and $0.44 in 1998.
-- Company generates dramatic increase in market share, to 16%
worldwide.
-- Investment in technology and talent puts company on path to
generate 18% annual growth in revenues.
Hypercom Hypercom Corporation Hypercom is a global payment technology innovator. It provides complete, end-to-end high security payment solutions, from countertop and mobile credit/debit payment terminals to the network devices and services that quickly expedite the fast and secure Corporation (NYSE NYSE See: New York Stock Exchange :HYC HYC Houston Yacht Club (Texas) ), a global provider of electronic payment solutions, today reported results for the fourth quarter and fiscal year ended June June: see month. 30, 1999. Fourth quarter net revenues totaled $68.6 million, up 22% from $56.3 million reported in the 1999 third quarter and 30% from $52.7 million in the fiscal 1998 fourth quarter. Net income was $480,000, or $0.01 per basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, respectively, a substantial improvement over the net loss of $996,000 or ($0.03) per share, reported in the year-ago fourth quarter. For the fiscal year ended June 30, 1999, net revenues were $261.5 million, compared with $257.2 million a year ago. Full-year net income totaled $9.2 million, or $0.28 and $0.27 per basic and diluted share, respectively, versus $14.0 million, or $0.46 and $0.44 per basic and diluted share, respectively, a year ago. "1999 was a year of transition for Hypercom, during which we laid a stable foundation for revenue and earnings growth," said Hypercom President and Chief Executive Officer George Wallner. "In the last half of the year we stepped up our efforts to penetrate new markets, both geographically and strategically; to develop products that set new standards for the industry while adding value to our customers; and to strengthen Hypercom's management team and efficiently allocate To reserve a resource such as memory or disk. See memory allocation. our resources as we work to expand Hypercom's share of the global electronic payments market." "Our diligent dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d focus on these goals has already produced tangible results," Wallner said. "Hypercom is rapidly growing its market share among providers of point-of-sale terminals and systems. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the Nilson Report, a respected payments industry newsletter, worldwide in 1996 'Verifone shipped one of every three ... terminals... while second place Hypercom shipped one of every 12.' "Writing about worldwide shipments in 1998, Nilson noted that 'Verifone lost share, falling to 20.7% ... while Hypercom grew to 15.9%.' That translates into one of every six terminals for Hypercom versus one of every five for Verifone. And given the early demand for our next-generation ICE 5000 family of terminals and the in-roads we are now making in the multi-lane market, we believe Hypercom will continue to increase its market share." Expenses and Balance Sheet Items Gross margin for the fourth quarter was 40.3%, compared with 43% in the third quarter 1999 and 49% in the year-ago fourth quarter. Gross margin for the full year was 46% in 1999, compared with 49% in 1998. "At the beginning of the fourth quarter, we implemented a price reduction on certain legacy products, particularly the popular T7P terminals," said Hypercom Executive Vice President, Chief Financial Officer and Chief Administrative Officer A chief administrative officer (CAO) is responsible for administrative management of private, public or governmental corporations. The CAO is one of the highest ranking members of an organization, managing daily operations and usually reporting directly to the chief executive Jonathon Killmer. "That aggressive pricing strategy worked, and the results are reflected in our strong revenue numbers. While this strategy is impacting Hypercom's margin, gross margin is expected to rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective to higher levels as our new ICE 5000 terminals represent a growing proportion of sales." Research and development expense for the fourth quarter 1999 was $7.5 million or 11% of net revenues, an increase in dollar terms versus $6.5 million in the year-ago fourth quarter but a slight decline as a percentage of revenues. For the full year, R&D expense was $30.2 million or 12% of net revenues, compared with $23.5 million or 9% of net revenues in 1998. The increase is attributable to increased investment in software and new products to address the multi-lane market following the company's acquisition of JTS JTS - A simple dialect of JOVIAL. [Sammet 1969, p. 528]. ChequeOut Solutions Inc. in the third quarter. R&D expense is expected to be approximately 11% of net revenues over the next six months as the company invests in products to address the multi-lane market and electronic commerce as well as continues to develop additional products for the ICE family. Selling, general and administrative expense was $20.4 million or 30% of net revenues for the fourth quarter, versus 40% of revenues a year ago due to cost reductions and the increased level of revenues. SG&A expense for the year ended June 30, 1999, was $74.8 million or 29% of net revenues, compared with $72.5 million or 28% of net revenues in 1998. SG&A expense is expected to run at approximately 25% of net revenues over the next six months, the stub A small software routine placed into a program that provides a common function. Stubs are used for a variety of purposes. For example, a stub might be installed in a client machine, and a counterpart installed in a server, where both are required to resolve some protocol, remote procedure period prior to Hypercom's new fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. on Dec. 31. The company will continue to fill out its global sales organization during this period. As of June 30, 1999, cash and cash equivalents were $63.5 million. Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. was $142 million reflecting continuing strong demand for the company's ICE 5000 terminals. "Early signs indicate that the strategies we have implemented recently are positively impacting sales and revenue growth," Killmer said. "For the quarter ending Sept. 30, 1999, we anticipate diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of between $0.11 and $0.13 on revenues of approximately $73 million. For the six months ending Dec. 31, 1999, we expect to generate approximately $150 million in revenues and diluted earnings per share in the range of $0.26 to $0.30." Hypercom Well Positioned to Gain Market Share, Expand Revenues "Hypercom's technology continues to set the standard in the payments industry," Wallner said. "Our ICE family of terminals, FastPOS(tm) communications technology Noun 1. communications technology - the activity of designing and constructing and maintaining communication systems engineering, technology - the practical application of science to commerce or industry and Ascendent(tm) software offer our customers a system-level solution A system-level solution is a set of integrated circuits that work together to power an application such as a mobile telephone or digital media player. A special case of a system-level solution is a system-on-a-chip, where the entire functionality of the system is integrated into a single chip. that allows the support of new value-added applications at short times to market. And our products continue to garner the acclaim of our peers." "In May, our e-Telephony service provider solution, which unites the technology and business components Internet service providers Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. and communications carriers need in order to offer IP telephony The two-way transmission of voice over a packet-switched IP network, which is part of the TCP/IP protocol suite. The terms "IP telephony" and "voice over IP" (VoIP) are synonymous. services, was selected Best of Show at CTI (Computer Telephone Integration) Combining data with voice systems in order to enhance telephone services. For example, automatic number identification (ANI) allows a caller's records to be retrieved from the database while the call is routed to the appropriate party. Expo among more than 300 top telecommunications companies See telecom company. ," Wallner said. "Moreover, the voice-over IP test results published in the July 1999 issue of Computer Telephony See CTI, VoIP and IP telephony. Computer Telephony - Computer Telephone Integration magazine show Hypercom's IP.tel(tm) 4000 to rank No. 1 overall, ahead of Nuera and Inter-Tel. "In order to build upon our impressive record, we will continue to invest both internally and externally," Wallner said. "We plan to bring new talent into the organization to support our sales efforts, particularly in Asia where we see early indications of a rebound in demand for our products. We anticipate devoting substantial resources to continued R&D of new technology, including enhancements to our popular and successful Ascendent transaction software and an expanded family of ICE terminals. And we will continue to pursue acquisitions that help us grow geographically and strategically, like those of multi-lane provider JTS ChequeOut in the third quarter and distributor Horizon in the second quarter." "We sense that a significant increase in the market's receptiveness re·cep·tive adj. 1. Capable of or qualified for receiving. 2. Ready or willing to receive favorably: receptive to their proposals. 3. for advanced POS (1) See point of sale and packet over SONET. (2) "Parent over shoulder." See digispeak. POS - point of sale products is now being driven by demand for faster transmission speeds, the trend toward 'paperless' transactions and therefore the ability to capture customer signatures electronically, and our clients' desire to develop and manage card-based loyalty programs. By Internet-enabling these applications, Hypercom has created a new paradigm New Paradigm In the investing world, a totally new way of doing things that has a huge effect on business. Notes: The word "paradigm" is defined as a pattern or model, and it has been used in science to refer to a theoretical framework. in accessibility and cost -- and for the first time made these powerful tools accessible to small and medium-size merchants. As a result, we believe the time to act is now. "Our investments in human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. as well as in new products including e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. are critical to Hypercom's strategy to aggressively extend our global reach, and they will have an impact on the bottom line," Wallner said. "But we believe the expenditures to be essential, as Hypercom continues to set the de facto standard Hardware or software that is widely used, but not endorsed by a standards organization. Contrast with de jure standard. de facto standard - A widespread consensus on a particular product or protocol which has not been ratified by any official standards body, such as ISO, for POS systems and to generate impressive market share gains, which will ultimately put the company on a path to generate revenue growth in excess of 30% in the years to come. "I believe Hypercom is in an excellent position to capture a substantial share of the growth in our industry," Wallner said. "Our technology is second to none, our management is more capable and our sales organization more aggressive than ever before, and we are sharply focused on one overriding (programming) overriding - Redefining in a child class a method or function member defined in a parent class. Not to be confused with "overloading". goal: to generate revenue and earnings growth by securing our position as the world's leading provider of POS solutions POS Solutions, is an Australian company. The company provides software and services to small and medium businesses, where the company has enjoyed steady growth so making it particularly well-known in Australian Newsagencies where its software has taken hold as the market leader. ." About Hypercom Corporation Hypercom Corporation (NYSE:HYC) is a global provider of electronic payment solutions, including multi-functional point-of-sale terminals, peripherals, network products, Ascendent payment and transaction software and Internet-based and electronic commerce payment solutions. On a global basis Hypercom delivers the services and technology infrastructure required to quickly integrate and deploy new payment applications. These applications provide competitive value-add programs, improved business performance and low total cost of ownership. Headquartered in Phoenix, Ariz., Hypercom markets its products in more than 70 countries through a global network of offices and affiliates in Argentina, Australia, Brazil, Chile, China, Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. , Hungary, Japan, Mexico, Russia, Singapore, Sweden, the United Kingdom and Venezuela. Hypercom's Internet address There are two kinds of addresses that are widely used on the Internet. One is a person's e-mail address, and the other is the address of a Web site, which is known as a URL. Following is an explanation of Internet e-mail addresses only. For more on URLs, see URL and Internet domain name. is www.hypercom.com. Certain statements in this press release may be forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the federal securities laws. These statements include, among others, anticipated future financial results and growth in the market and our market share, expected rebound in Asia's economy, market receptiveness for our advanced POS products, the development of new or enhanced products and the timely hiring of qualified research and development and sales personnel. Forward-looking statements are inherently subject to risk and uncertainties, some of which cannot be predicated or quantified. You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, some of which are beyond our control. Factors that could affect our results and cause them to differ from those contained in the forward-looking statements include: industry and competitive factors and product delays that may impact sales growth, unanticipated expenses, slower than anticipated economic recovery in Asia, market reluctance to advanced POS products, and inability to hire or integrate productive personnel. You should also consider carefully statements contained in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended June 30, 1998, and our Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended March 31, 1999, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements found in this press release. Financial Tables Follow -0-
HYPERCOM CORPORATION
CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, JUNE 30,
(thousands, except per share data)
1999 1998 1999 1998
----------------------------------------
Net revenue $ 68,634 $ 52,742 $ 261,515 $ 257,227
Costs & expenses:
Cost of revenue $ 40,970 $ 26,909 $ 141,831 $ 130,475
Research & development $ 7,464 $ 6,480 $ 30,249 $ 23,495
Selling, general and
administrative $ 20,383 $ 21,288 $ 74,772 $ 72,506
Non-cash compensation
expense $ -- $ -- $ -- $ 10,963
----------------------------------------
Total costs & expenses $ 68,817 $ 54,677 $ 246,852 $ 237,439
Income from operations $ (183) $ (1,935) $ 14,663 $ 19,788
Interest income $ 1,351 $ 1,802 $ 5,888 $ 4,435
Interest expense $ (443) $ (569) $ (1,228)$ (2,601)
Foreign currency gain (loss) $ (758) $ (712) $ (6,757)$ (1,760)
----------------------------------------
Income before income taxes $ (33) $ (1,414) $ 12,566 $ 19,862
Income taxes $ 513 $ 418 $ (3,393)$ (5,873)
----------------------------------------
Net income $ 480 $ (996) $ 9,173 $ 13,989
Earnings per share:
Basic shares outstanding 33,191 30,215 33,148 30,215
Basic earnings per share $ 0.01 $ (0.03) $ 0.28 $ 0.46
Diluted shares outstanding 34,194 31,830 34,431 31,830
Diluted earnings per share $ 0.01 $ (0.03) $ 0.27 $ 0.44
========================================
Net income excluding non-cash
compensation expense $ 480 $ (996) $ 9,173 $ 22,714
Earnings per share excluding
non-cash compensation
expense:
Basic shares outstanding 33,191 30,215 33,148 30,215
Basic earnings per share $ 0.01 $ (0.03) $ 0.28 $ 0.75
Diluted shares outstanding 34,194 31,830 34,431 31,830
Diluted earnings per share $ 0.01 $ (0.03) $ 0.27 $ 0.71
========================================
BALANCE SHEETS
JUNE 30, 1999 JUNE 30, 1998
-----------------------------------
Current Assets:
Cash and cash equivalents $ 63,458 $ 98,300
Accounts receivable $ 55,343 $ 43,989
Inventories $ 57,482 $ 60,539
Prepaid expenses $ 30,470 $ 21,057
-----------------------------------
Total current assets $ 206,753 $ 223,885
Property, plant and
equipment, net $ 30,756 $ 23,570
Other assets $ 43,763 $ 12,122
-----------------------------------
Total assets $ 281,272 $ 259,577
===================================
Current liabilities:
Bank notes payable $ 0 $ 0
Accounts payable $ 21,034 $ 17,134
Accrued liabilities $ 14,496 $ 16,537
Deferred revenue $ 3,824 $ 608
Income taxes payable $ 2,234 $ 2,209
Current portion long-term debt $ 526 $ 598
------------------------------------
Total current liabilities $ 42,114 $ 37,086
Long-term liabilities $ 13,033 $ 2,060
Stockholders' equity $ 226,125 $ 220,431
------------------------------------
Total liabilities and
stockholders' equity $ 281,272 $ 259,577
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