PHOENIX, Dec. 20 /PRNewswire-FirstCall/ -- Hypercom Corporation
(NYSE: HYC), a leading global provider of electronic payment solutions, today
announced revised annual guidance for the year ending December 31, 2004.
The Company announced that it is confirming previous guidance for full
year 2004 revenues of $254-260 million but reducing its expectation of full
year income from continuing operations from $21.0-22.4 million to $13.4-16.5
million, exclusive of reserves for a former contract with the Brazilian Health
Ministry. The Company attributed the lower 2004 income from continuing
operations forecast to shortfalls in anticipated fourth quarter performance
including the following:
-- Lower than anticipated gross margin percentage resulting in a
$1.7-1.9 million decrease in gross profit at the high end of the
revenue range; a $4.1-4.3 million decrease at the lower end. The lower
gross margin percentage is primarily attributed to:
-- A change in anticipated product mix. The impact of lower gross
margins related to high volume processor contracts and quick service
restaurant (QSR) contracts is now expected to be more significant in
the fourth quarter than previously forecast,
-- Increased global price competition and a regional shift in revenue
to those regions with lower average gross margins,
-- The adverse impact of foreign currency translation on Swedish Krona
denominated manufacturing expenses included in consolidated cost of
sales.
-- Additional operating expenses of approximately $2.8-3.3 million of
which:
-- $1.0 million of additional cost for work relating to Sarbanes-Oxley
404 compliance,
-- $0.4-0.6 million related to the adverse impact that the devaluation
of the U.S. dollar has had on the translation of foreign currency
denominated operating expenses,
-- $0.4 million related to additional research and development expenses
required in support of new security standards for unattended
(outdoor) terminals and new market certifications,
-- $1.0-1.3 million of additional selling expense principally related
to accelerating expansion into certain markets in response to 2005
market opportunities, as well as pre-selling costs related to longer
sales cycle multi-lane contracts.
"The change in 2004 guidance reflects an anticipated change in the
Company's fourth quarter product mix to reflect a lower average gross profit
percentage as a result of increased revenues related to volume/price driven
contracts within the processor, QSR, and multi-lane industry segments" stated
CEO Chris Alexander. "The change in operating income guidance also reflects
recent additional and unanticipated operating expenses related to
Sarbanes-Oxley compliance, selling costs in response to future market
opportunities, and the adverse impact that the devaluation of the U.S. dollar
has had on the translation of foreign currency denominated expenses."
The Company also has revised its 2004 adjusted EBITDA from continuing
operations guidance from $29.5-30.9 million to a range of $21.9-25.0 million
reflecting the issues noted above.
2004 Guidance
Reflecting a longer-term perspective, the Company only provides guidance
on a full year basis. Current guidance for net revenue, income from continuing
operations, and adjusted EBITDA from continuing operations, is presented with,
and without the 2004 reserve adjustments for the Brazilian Health Ministry
contract for comparative purposes, and is as follows:
Revised Revised
2004 Guidance 2004 Guidance
Including Brazil Excluding Brazil
Reserves Reserves 2003
Net Revenue $ 254.0 - 260.0 mm $254.0 - 260.0 mm $231.5 mm
Income from
Continuing Ops $ 1.4 - 4.5 mm $ 13.4 - 16.5 mm $ 13.0 mm
Depreciation &
Amortization $ 8.5 - 8.5 mm $ 8.5 - 8.5 mm $ 8.8 mm
Adjusted EBITDA
from
Continuing Ops* $ 9.9 - 13.0 mm $ 21.9 - 25.0 mm $ 21.8 mm
* See disclosure regarding non-GAAP financial measures in attached Note A.
Forward guidance is predicated on a stable worldwide economy.
We provide the non-GAAP financial information in order to provide
meaningful supplemental information regarding our operational performance and
to enhance our investors' overall understanding of our core financial
performance. We believe that our investors benefit from seeing our results
"through the eyes" of management in addition to the GAAP presentation.
Management measures enterprise performance using non-GAAP financial measures
such as adjusted EBITDA from continuing operations that is disclosed in this
press release. This information facilitates management's internal comparisons
to the Company's historical operating results and comparisons to competitors'
operating results. Management believes that this non-GAAP information allows
for additional transparency and management in its financial and operational
decisions uses such information. Historically, we have reported similar
non-GAAP information to our investors and believe that the inclusion of
comparative numbers provides consistency in our financial reporting. This
information is not in accordance with, or an alternative for, information
prepared using generally accepted accounting principles in the United States.
It excludes items, such as special charges that may have a material effect on
the company's net income (loss) and net income (loss) per share calculated in
accordance with GAAP. The non-GAAP information we provide is specific to
Hypercom Corporation and is not designed to have any relationship to the
non-GAAP information provided by other companies.
Hypercom's conference call to discuss the revised estimates for the year
ending December 31, 2004 will be held Monday, December 20, 2004 at 8:30 a.m.
EST (6:30 a.m. Phoenix time). The dial-in number is 1-888-550-9982 for North
American callers and +1-484-630-2626 for international callers. For access to
this call, participants will be required to identify the call host, Scott
Tsujita, and the access code, "Earnings." A replay of the conference call will
be available approximately one hour after the conclusion of the live call. The
replay number for North America is 1-888-566-0435. The number for
international callers is +1-402-998-0605. No access code is required.
The quarterly conference call to discuss the full financial results for
the period ended December 31, 2004, is to be held on Wednesday, February 23,
2004, at 6 p.m. EST (4 p.m. Phoenix time). The conference call will be
simultaneously webcast at Hypercom's Web site, http://www.hypercom.com and
will also be available after the call has concluded in the investor relations
section under "audio.archive."
About Hypercom (http://www.hypercom.com)
Celebrating 26 years of technological excellence, innovation, and
leadership, Hypercom is a leading global provider of electronic payment
solutions that add value at point-of-sale transactions for consumers,
merchants, and acquirers, and yield increased profitability for its customers.
Widely recognized as the payment technology innovator, Hypercom delivers
comprehensive card payment terminal, network and server solutions that help
merchants and financial institutions generate revenues and increased profits.
Headquartered in Phoenix, Arizona, Hypercom's card payment terminal,
network, and server solutions are leading the transformation of electronic
payments in more than 100 countries.
Forward-Looking Statements
This press release includes statements that may constitute forward-looking
statements that are subject to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include, among other things, statements regarding Hypercom's anticipated
financial performance, projections regarding future revenue, operating
profits, net income, cash flows, losses from discontinued operations and the
performance and market acceptance of new products. Readers are cautioned that
these forward-looking statements are only predictions and may differ
materially from actual future events or results. Readers are referred to
documents filed by Hypercom with the Securities and Exchange Commission,
specifically the most recent reports on Forms 10-K, 10-Q, and 8-K, each as it
may be amended from time to time, which identify important risk factors that
could cause actual results to differ from those contained in the forward-
looking statements.
Among the important factors or risks that could cause actual results to
differ from those contained in the forward-looking statements in this press
release are: the state of the competition in the payments processing industry
in general; the commercial feasibility of new products, services, and market
development initiatives; risks relating to the introduction of new products;
projections regarding specific demand for our products and services;
projections regarding future revenues, cost of sales, operating expenses,
margins, cash flows, earnings, working capital and liquidity; the adequacy of
our current facilities and management systems infrastructure to meet our
operational needs; the status of our relationship with and condition of third
parties upon whom we rely in the conduct of our business; the challenges
presented by conducting business on an international basis; the sufficiency of
our reserves for assets and obligations exposed to revaluation; our ability to
identify and complete acquisitions and strategic investments and successfully
integrate them into our business; our ability to effectively hedge our
exposure to foreign currency exchange rate fluctuations; risks related to our
indebtedness and compliance with restrictions and financial covenants in our
loan agreements; risks associated with utilization of contract manufacturers
of our products; industry and general economic conditions; risks related to
compliance with the internal controls requirements of the Sarbanes-Oxley Act;
and future access to capital on terms that are acceptable, as well as
assumptions related to the foregoing.
The financial information contained in this press release should be read
in conjunction with the consolidated financial statements and notes thereto
included in Hypercom's most recent reports on Form 10-K and 10-Q, each as it
may be amended from time to time. Any projections in this press release are
based on limited information currently available to Hypercom, which is subject
to change. Although any such projections and the factors influencing them
will likely change, Hypercom will not necessarily update the information,
since Hypercom will only provide guidance at certain points during the year.
Such information speaks only as of the date of this release.
The Company does not endorse any projections regarding future performance
that may be made by third parties.
Hypercom is a registered trademark of Hypercom Corporation.
NOTE A.
Non-GAAP Financial Measures:
This earnings release contains non-GAAP financial measures. For purposes
of Regulation G, a non-GAAP financial measure is a numerical measure of a
registrant's historical or future financial performance, financial position or
cash flows that excludes amounts, or is subject to adjustments that have the
effect of excluding amounts, that are included in the most directly comparable
measure calculated and presented in accordance with GAAP in the statement of
income, balance sheet, or statement of cash flows (or equivalent statements)
of the issuer; or includes amounts, or is subject to adjustments that have the
effect of including amounts, that are excluded from the most directly
comparable measure so calculated and presented. In this regard, GAAP refers to
generally accepted accounting principles in the United States. Pursuant to the
requirements of Regulation G, the Company has provided a reconciliation of the
non-GAAP financial measures to the most directly comparable GAAP financial
measures.
Adjusted EBITDA from continuing operations is presented in the earnings
release because management believes that it is a commonly used financial
measure that is of interest to investors. The Company defines adjusted EBITDA
from continuing operations as income from continuing operations adjusted to
exclude depreciation and amortization. Adjusted EBITDA from continuing
operations does not represent cash flow from operations, as defined by
generally accepted accounting principles in the United States. Adjusted
EBITDA from continuing operations should not be considered as a substitute for
net income or loss, or as an indicator of operating performance or whether
cash flows will be sufficient to fund cash needs.
Contacts:
John W. Smolak
EVP, CFO & Chief Administrative Officer
Hypercom Corporation
Phone: 602-504-4750
Email: jsmolak@hypercom.com
Scott M. Tsujita
SVP Finance, Treasury & Investor Relations
Hypercom Corporation
Phone: 602-504-5161
Email: stsujita@hypercom.com
SOURCE Hypercom Corporation
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Related links:
http://www.hypercom.com
CONTACT:
John W. Smolak, EVP, CFO & Chief
Administrative Officer, +1-602-504-4750, jsmolak@hypercom.com, or
Scott M. Tsujita, SVP Finance, Treasury & Investor Relations,
+1-602-504-5161, or stsujita@hypercom.com, both of Hypercom
Corporation
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