HYC up 20% today - Reports Second Quarter Results
PHOENIX--(BUSINESS WIRE)--Jan. 19, 1999--
Highlights
-- Large revenues increase in United States and Europe offset
decline in Asia
-- Earnings benefit from decrease in SG&A expenses
-- U.S. POS revenues set another quarterly record
-- Backlog increases
Hypercom Corporation (NYSE:HYC - news) today reported revenues and earnings for its second fiscal quarter ended Dec. 31, 1998.
Revenues for the quarter ended Dec. 31, 1998, were $70.6 million. Net income for the quarter was $6.6 million, or $0.19 per share on 34.5 million
diluted shares outstanding. Revenues for the year-ago quarter ended Dec. 31, 1997, were $71.2 million. Net income for the prior-year period was
$1.8 million, or $0.06 per share on 30.8 million diluted shares outstanding.
Net income in the fiscal 1998 second quarter included a non-cash compensation charge associated with the company's initial public offering,
which reduced earnings that quarter by $0.19 per share.
For the six months ended Dec. 31, 1998, revenues totaled $136.6 million. Net income for the period was $12.4 million, or $0.36 per diluted share.
For the six months ended Dec. 31, 1997, revenues were $150.1 million. Net income for the year-ago six months was $11.0 million, or $0.38 per
diluted share. Net income in fiscal 1998 included a charge totaling $0.25 per share related to the IPO non-cash compensation charge.
''Hypercom continues to make great strides in the global electronic payment markets,'' said Al Irato, chief executive officer of Hypercom. ''We
continue to see strong demand for our terminals, peripherals and transaction software. In addition, our acquisition of The Horizon Group, a
national provider of point-of-sale equipment and services, is building our distribution channels, is providing a strong recurring revenue stream,
and has been immediately accretive to earnings.
''This acquisition, as well as the strong introduction of our Interactive Consumer Environment (ICE) 5000 terminals and their deployment to more
than 1,000 casinos around the country, are major milestones in the implementation of our business plan to become the global leader in developing,
manufacturing and marketing electronic payment applications.
''Higher second quarter revenues in the United States, which were up 42% over last year, and in Europe, where revenues increased $3.9 million,
have nearly offset the large decline in Hypercom's revenues from Asia. In the second quarter, Asian revenues declined 56% from the same period
last year and declined 52% for the six months,'' Mr. Irato said.
''Hypercom is successfully cutting expenses and reducing our dependence on certain weak international markets,'' Mr. Irato said. ''In this regard, we
believe that Hypercom has very limited exposure to the problems in Brazil. The devaluation in Brazil's currency may result in a charge to earnings
of $0.03 to $0.04 in the quarter ended March 31, 1999.
''However, this charge will be offset by lower costs in our manufacturing facility in Brazil. Moreover, the problems in Brazil are not expected to
affect Hypercom's business in other Latin American markets, where our transactions are conducted in dollars.''
The company reported that backlog as of Dec. 31, 1998, was $118 million, up 47% over Dec. 31, 1997. Consolidated book to bill ratio was 1.28 for
the quarter and 1.26 for the six months.
Expense Control
''SG&A expenses for the second fiscal quarter of 1999 were lower than during the same period a year ago,'' Mr. Irato said. ''In fact, SG&A
expenses were 11% below the average incurred in our March and June quarters of fiscal 1998. We maintained our focus on research and
development, but the rate of increase in R&D expense slowed considerably and actually declined as a percent of revenues from the first quarter
ended in September 1998.
''The Network Systems business also benefited from tight expense controls, continuing to break-even in spite of revenues being below first quarter
levels.''
Acquisition of National POS Provider
On Nov. 3, 1998, the company reported the acquisition of the assets and business of The Horizon Group, Inc., one of the leading national providers
of value-added, point-of-sale support services. Based in St. Louis, Mo., The Horizon Group is recognized as one of the industry's largest
point-of-sale terminal suppliers and service providers.
The Horizon Group brings a variety of services to Hypercom, including sales of new equipment, refurbishing equipment, help desk, PIN pad key
loading, terminal deployment and other custom programs. The acquisition will allow Hypercom to meet the needs of a segment of its customer base
that requires direct-from-manufacturer terminal services.
The company has approximately 66 employees and had annual sales of approximately $24 million in the year ended Dec. 31, 1997, including $5
million in sales of Hypercom products.
Deployment of ICE 5000 Terminals
Hypercom announced in December the deployment of the ICE 5000 terminals to more than 1,000 casinos around the country by the Global Cash
Access consortium, the largest cash access provider to casinos. ICE 5000 terminals will be used in conjunction with Hypercom's T7E terminal to
form a complete point-of-service cash solution for casino players.
The ICE 5000 terminals are delivered with touch screen and smart card functionality and are equipped with Hypercom FastPOS 9600 baud
modems built in.
Expansion of Focus to Multi-Lane Products
On Jan. 7, 1999, Hypercom announced the appointment of Roger Hitchcock as Vice President and General Manager of the Hypercom® POS
Multi-Lane Division. Mr. Hitchcock is responsible for furthering Hypercom's efforts in the multi-lane market, targeting large national retailers,
chain drug stores, and supermarkets.
The company is bringing an innovative solution to the multi-lane environment, which is at the forefront of developments of new payment schemes
and technologies such as smart cards and loyalty programs.
Strong Balance Sheet
Hypercom reported that accounts receivable declined in the second fiscal quarter from the first fiscal quarter even though revenues increased 7%
over the first quarter. Days of sales outstanding declined from 78 days in the first quarter to 72 days at Dec. 31, 1998. Inventories also declined for
the second consecutive quarter.
At Dec. 31, 1998, cash balances and short-term investments totaled $73.6 million. Total cash invested at Dec. 31, 1998, was $90.7 million,
including $17.1 million of cash investments maturing after more than one year. This is down slightly from Sept. 30, 1998, due to the reduction in
accounts payable and the acquisition of Horizon.
Bright Outlook
''The third fiscal quarter ending in March is seasonally our slowest quarter. However, as of March 1999, it will be a full year since the Asian
slowdown, and therefore year to year comparison going forward will better reflect our growth in the United States and Europe,'' Mr. Irato said.
''We have begun ICE 5000 terminal production and are experiencing strong customer acceptance of this new product. Vigorous demand for our
products and services and our sizable backlog, combined with expense reductions, provide us with a strong positive outlook for the second half of our
fiscal year and beyond.''
Headquartered in Phoenix, Ariz., Hypercom markets its products in more than 60 countries through a global network of offices and affiliates in
Argentina, Australia, Brazil, Chile, China, France, Hong Kong, Hungary, Japan, Mexico, Russia, Singapore, the United Kingdom and Venezuela.
Hypercom's Internet address is www.hypercom.com.
Certain matters discussed within this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Although management of Hypercom believes the expectations reflected in such forward-looking statements are based on reasonable
assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from
expectations include industry, competitive and technological changes; risks associated with international operations and foreign currency
fluctuations; the composition, timing and size of orders from and shipments to major customers; inventory obsolescence; market acceptance of new
products and other risks detailed from time to time in Hypercom's SEC reports, including the company's 10-K dated September 28, 1998.
HYPERCOM CORPORATION
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
12/31/98 12/31/97 12/31/98 12/31/97
Net revenue $ 70,594 $ 71,209 $136,577 $150,146
Costs & Expenses:
Cost of revenue $ 36,256 $ 34,290 $ 68,884 $ 75,121
Selling, general and
administrative $ 16,854 $ 17,462 $ 35,253 $ 34,581
Research & development $ 8,218 $ 6,399 $ 15,850 $ 10,918
Non-cash compensation
expense -- $ 9,193 -- $ 10,963
Total costs & expense $ 61,328 $ 67,344 $119,987 $131,583
Income from operations $ 9,266 $ 3,865 $ 16,590 $ 18,563
Interest income $ 1,369 $ 1,044 $ 2,814 $ 1,273
Interest expense $ (312) $ (1,169) $ (493) $ (1,742)
Foreign currency
gain/(loss) $ (751) $ (907) $ (999) $ (1,246)
Income before
income taxes $ 9,572 $ 2,833 $ 17,912 $ 16,848
Income taxes $ (2,968) $ (992) $ (5,553) $ (5,897)
Net income $ 6,604 $ 1,841 $ 12,359 $ 10,951
Earnings per share:
Basic shares
outstanding 33,033 29,518 33,151 27,850
Basic earnings
per share $ 0.20 $ 0.06 $ 0.37 $ 0.39
Diluted shares
outstanding 34,502 30,768 34,549 28,826
Diluted earnings
per share $ 0.19 $ 0.06 $ 0.36 $ 0.38
Net income excluding
non-cash compensation
expense $ 6,604 $ 7,815 $ 12,359 $ 18,077
Earnings per share
excluding non-cash
compensation expense:
Basic shares
outstanding 33,033 29,518 33,151 27,850
Basic earnings
per share $ 0.20 $ 0.26 $ 0.37 $ 0.65
Diluted shares
outstanding 34,502 30,768 34,549 28,826
Diluted earnings
per share $ 0.19 $ 0.25 $ 0.36 $ 0.63
BALANCE SHEETS
12/31/98 6/30/98
(unaudited) (audited)
Current Assets:
Cash and cash equivalents $ 73,603 $ 98,300
Accounts receivable $ 56,567 $ 43,989
Inventories $ 58,214 $ 60,539
Prepaid expenses $ 27,797 $ 21,057
Total current assets $216,181 $223,885
Property, plant and equipment, net $ 26,527 $ 23,570
Other assets $ 27,702 $ 12,122
Total assets $270,410 $259,577
Current liabilities:
Bank notes payable $ 1,000 --
Accounts payable $ 11,578 $ 17,134
Accrued liabilities $ 17,448 $ 16,537
Deferred revenue $ 1,378 $ 608
Income taxes payable $ 6,629 $ 2,209
Current portion long-term debt $ 269 $ 598
Total current liabilities $ 38,302 $ 37,086
Long-term liabilities $ 3,785 $ 2,060
Stockholders' equity $228,323 $220,431
$270,410 $259,577
Contact:
Hypercom Corp., Phoenix
Thomas E. Linnen, 602/504-5049
or
The Financial Relations Board Inc., 310/442-0599
Virginia St. John-Needham (general information)
Stephen Moore (media inquiries)
Eileen Morcos (investor contact) |
