Hypercom Corporation Announces Record Revenues for First Fiscal Quarter of 1999 Stub Period - Company Financial Information

Edge: Work-Group Computing Report, Oct 25, 1999

Hypercom Corporation (NYSE:HYC): Highlights -- All time record revenues in quarter lead by U.S. revenues -- European revenues up 120%; Asia continues to show strong recovery -- Earnings per share in line with consensus estimates -- Customers enthusiastically accept Hypercom's new ICE system -- VoIP business moves into new jointly owned company

Hypercom Corporation (NYSE:HYC) Tuesday announced revenue and earnings results for the period ended September 30, 1999.

Net revenues for the first quarter of the 1999 stub period were $73.3 million, an 11 percent increase over $65.9 million recorded in the year-ago period. Net income was $3.4 million compared to $5.7 million earned in the same period last year. Basic and diluted earnings per share were $0.10 and $0.10, respectively, compared to $0.17 and $0.17, respectively, for the year-ago period.

"We are pleased with the progress we continue to make to insure that Hypercom remains at the leading edge of delivering value-added payment solutions," said George Wallner, president and CEO of Hypercom Corporation. "Record revenues in the quarter were led by business in the U.S., including our Horizon group, which is our national distributor for POS equipment. European revenues grew dramatically and the Asian recovery that began in the last quarter has accelerated. Revenues in Latin America remain healthy."

Research and development expense was up 22 percent over the year-ago period. This reflects an intense effort by the Company to take advantage of several large market opportunities that are emerging.

One of these initiatives is the highly successful Hypercom Interactive Customer Environment (ICE)-based, value-added e-commerce and web contents delivery system. "The initial enthusiastic acceptance of our new Internet-enabled, value-added applications and enabling technologies is very gratifying," said Wallner. "Merchants, acquirers and processors recognize the new revenue opportunities and cost savings that are possible with our new solutions. They are especially excited about our ICE terminal and its iMerchant hosting software which enables merchants of any size to support e-commerce and sell products over the World Wide Web using their in-store payment terminal. These and other new application capabilities of the ICE family are creating a compelling business case for merchants and processors to upgrade terminals."

Hypercom has also announced the creation of Cirilium Corporation, a newly formed company that combines the substantial amounts of products, resources, experience and technology of Hypercom Network Systems and Inter-Tel, Incorporated (Nasdaq/NM:INTL), a Phoenix-based voice system and IP (Internet Protocol) Telephony provider. "Cirilium, which will be jointly owned between Hypercom and Inter-Tel, will use the combined technologies of its parent companies to leapfrog its competitors and to take advantage of the emerging IP Telephony marketplace," said Wallner. "Cirilium's solutions will integrate carrier-class hardware platforms, call-processing software and a service creation suite that helps competitive carriers offer profitable services and reduces time and capital investments associated with deployment."

Additional one-time R&D spending increases were incurred to ready VoIP (Voice over Internet Protocol) technology to be contributed by Hypercom to Cirilium. Moving the VoIP business to Cirilium will allow Hypercom to focus its resources on its core business, especially on the ICE-based, Internet-enabled, value-added applications and enabling technologies.

Increased software development and new products for the Multi-Lane POS terminal market also contributed to the increase in R&D expense. The multi-lane retail industry primarily comprises the top 100 U.S. retailers, including department stores, drug store chains, supermarkets, and mass merchandisers. Hypercom entered the Multi-Lane market in fiscal 1999 with its acquisition of JTS ChequeOut Solutions. The Company's announcement this week that it has acquired the assets of MicroTrax, a Windows NT-based provider of electronic payment systems for the retail market, further strengthens the product offering delivered by the Multi-Lane POS terminal group and supports the Company's commitment to major retailers for a total system solution.

Hypercom Corporation (NYSE:HYC) is the single-source global provider of end-to-end electronic payment solutions, including card payment systems, peripherals, network products, software and e-commerce payment solutions that add value at the point-of-sale for consumers, merchants and acquirers.

Headquartered in Phoenix, Arizona, Hypercom markets its products in more than 70 countries through a global network of affiliates and offices in Argentina, Australia, Brazil, Chile, China, Germany, Hong Kong, Hungary, Japan, Mexico, Russia, Singapore, Sweden, the United Kingdom and Venezuela. Hypercom's Internet address is www.hypercom.com.

                     HYPERCOM CORPORATION
                CONSOLIDATED INCOME STATEMENTS

(thousands except per share data)        THREE MONTHS ENDED
                                   9/30/99                9/30/98

Net revenue                        $73,302                $65,983
Costs & Expenses:
   Cost of revenue                  39,969                 32,628
   Research & development            9,345                  7,632
   Selling, general and
administrative                      19,948                 18,399

   Total costs & expenses           69,262                 58,659

Income from operations               4,040                  7,324
Interest income                      1,152                  1,445
Interest expense                      (465)                  (181)
Foreign currency (loss)               (165)                  (248)

Income before income taxes           4,562                  8,340
Income taxes                        (1,140)                (2,585)

Net income                          $3,422                 $5,755

Earnings per share:
Basic shares outstanding            33,231                 33,229
Basic earnings per share             $0.10                  $0.17
Diluted shares outstanding          34,415                 34,412
Diluted earnings per share           $0.10                  $0.17

Backlog:                          $108,496                $92,200

                        BALANCE SHEETS

                                   9/30/99                6/30/99
Current Assets:
Cash and cash equivalents          $59,634                $63,458
Accounts receivable                 55,954                 50,676
Inventories                         60,116                 57,482
Prepaid expenses                    30,870                 29,999

   Total current assets            206,574                201,615
Property, plant and equipment, net  34,448                 30,756
Other assets                        44,327                 43,909

Total assets                      $285,349               $276,280

Current liabilities:
Accounts payable                   $16,968                $18,316
Accrued liabilities                 14,628                 14,599
Deferred revenue                     9,173                  3,824
Income taxes payable                 3,523                  2,234
Current portion long-term debt         448                    490

Total current liabilities           44,740                 39,463
Long-term liabilities               10,868                 10,794
Stockholders' equity               229,741                226,023

                                  $285,349               $276,280