Hypercom names Goff president & MD, Americas; posts FY loss

She will join the Company on February 25, 2008, with responsibility for directing and driving Hypercom's sales, service and support throughout North America, South America, Mexico, the Caribbean and Central America. Ms. Goff will report to Philippe Tartavull, Chief Executive Officer and President.

Ms. Goff served for 11 years with MasterCard International in leadership roles including Senior Vice President, Global Merchant Services, and Senior Vice President and General Manager, Merchant Services. She was a founding executive and Executive Vice President of Global Payment Systems, Executive Vice President and General Manager of Transaction Network Services' North America division, and President and Chief Operating Officer of U.S. Wireless Data.

"We have re-established substantial product demand in North America in the multi-and single-lane countertop business with growth across all channels; significantly increased our market share in Mexico, the Caribbean and Central America; and restored profitability in Brazil. We are re-energized with new products and customer commitments, and Heidi Goff brings the skill, market-specific expertise and pivotal focus on customers to help us continue our upward momentum," said Philippe Tartavull, Chief Executive Officer and President, Hypercom Corporation. "Heidi is a highly experienced and highly regarded executive with an in-depth knowledge of the electronic transaction business in the Americas."

About Heidi R. Goff

Ms. Goff brings more than 30 years of experience in the electronic payment, transaction transport and ATM industries to Hypercom. As Executive Vice President and General Manger, North America at Transaction Network Services (TNS) from 2004 to 2006, her responsibilities included the company's largest division for transaction transport while expanding sales to the convenience store and petroleum, supermarket, large pharmacy, ATM and vending and kiosk sectors.

Ms. Goff is currently a member of the Board of Directors of the Electronic Transaction Association, a highly regarded industry trade organization.

From 2001 to 2004, Ms. Goff served as President and Chief Operating Officer of U.S. Wireless Data, where she directed all facets of the operation including strategic planning, sales, product pricing, quality and control, and asset management.

Ms. Goff was President and Chief Executive Officer of ExchangePath LLC from 1999 to 2001. There, she was instrumental in launching the company's Internet payment service for C2C, B2C and auction services, creating a platform and plan for universal value exchange online, and growing the customer base to more than 100,000 account holders.

Ms. Goff served as Executive Vice President, Strategy and Market Development of Global Payment Systems from 1996 to 1999. She was responsible for overseeing the development and delivery of payment and cash management services to the U.S. and Canada. She also led the creation of Internet-based international cash management services in the U.S., England and Japan.

Prior to that, Ms. Goff was Senior Vice President, Global Merchant Services for MasterCard International from 1995 to 1996. She served as Senior Vice President and General Manager, Merchant Services for MasterCard's Automated Point-of-Sale Program (MAPP) from 1988 to 1994, and Vice President, Debit Services, MasterCard from 1984 to 1988.

Ms. Goff also held positions with Automatic Data Processing, California Credit Union League Services Corporation, and Service Bureau Company, a division of IBM.

Ms. Goff holds a Business Administration Degree in Marketing from Spencerian College. She has served on the Board of Directors of PayLinx Corporation. She has testified before the U.S. House of Representatives Banking Committee during Congressional hearings on the future of money, co-authored the American Bankers Association Guidelines for Debit Cards at the Point-of-Sale, and co-authored Business Requirements for Private Sector ACH.

Hypercom results
Separately, Hypercom Corporation (NYSE: HYC), the high security electronic transaction solutions provider, today announced financial results for the fourth quarter and full year ended December 31, 2007.

The Company recorded fourth quarter net income of $0.3 million, or $0.00 per share, versus a loss of $2.7 million, or $0.05 per share, in the same quarter of 2006, and a net loss of $7.5 million, or $0.14 per share, for full year 2007 versus net income of $7.0 million, or $0.13 per share, in the prior year.

Fourth quarter revenue was $90.7 million, up $25.9 million or 40%, compared to $64.8 million in the same quarter of 2006, and up $19.9 million, or 28.1%, compared to the third quarter of 2007.

Product revenue was $62.2 million versus $49.9 million in the same period a year ago, up $12.3 million, or 24.7%. The year over year increase primarily reflects $8.5 million and $3.4 million of incremental multi-lane and mobile product revenue, respectively. Service revenue in the fourth quarter was $28.5 million versus $14.9 million, up $13.6 million, or 91.3%. Service revenue included $4.6 million related to a collection of funds from the Brazilian Health Ministry, and $5.3 million of incremental revenue from HPS (Hypercom Payment Solutions, formerly TPI) which was acquired in December 2006 and ACG Group which was acquired in January 2007. Growth across most operating regions accounted for the additional year over year service revenue growth of $3.7 million.

For the full year, revenue was up $45.2 million, or 18.2%, versus 2006. Product revenue was up $15.1 million, or 7.9%. Service revenue was up $30.2 million, or 52.7%. Full year product revenue includes $11.9 million of product sales in Brazil initiated to protect future service revenue and $7.2 million of L4150 multilane product. The increase in service revenue includes $18.8 million of incremental revenue from HPS and ACG, and $4.6 million of non-recurring revenue from the Brazil Health Ministry.

Fourth quarter gross profit was $24.8 million, or 27.3% of revenue, compared to fourth quarter 2006 gross profit of $19.2 million, or 29.6% of revenue. The gross margin is a blend of 25.0% product gross margin and 32.4% service gross margin versus margins of 32.9% and 18.8% in fourth quarter 2006.

Product gross margin is lower than the same quarter in the prior year due to lower margin multi-lane terminal sales, and approximately $1.8 million of transition costs related to the switch to contract manufacturing. Transition costs include the expense of continuing to run internal manufacturing while simultaneously moving to contract manufacturing, severance costs for manufacturing related personnel, accelerated depreciation on factory assets, and higher than normal freight costs. Service gross margin is higher than in the same quarter in the prior year primarily due to the realization of $4.6 million of revenue from the Brazil Health Ministry that did not have any associated cost of sales.

Full year gross profit was $75.4 million, or 25.7% of revenue, compared to $89.0 million, or 35.8%, in the prior year. The full year gross profit was reduced by the net impact of various non-recurring benefits and expenses including inventory reserves, severance, a capitalized software write-off, the collection from the Brazil Health Ministry totaling $6.2 million, $0.5 million of negative gross profit on Brazil countertop revenue, and $2.3 million of transition costs related to outsourced manufacturing.

Fourth quarter operating expenses were $25.8 million, up $2.2 million versus $23.6 million in the prior year, and sequentially up $5.1 million compared to third quarter expense of $20.7 million. Operating expenses for fourth quarter included $2.3 million of non-recurring charges including; commissions on the Brazil Health Ministry collection, non-capitalized due diligence costs, and executive recruiting consulting fees. Excluding the $2.3 million of non-recurring charges, operating expenses increased $2.8 million sequentially due to increased variable selling costs related to higher revenues, an additional bad debt reserve related to a single customer in Latin America, and increased personnel related, networking product development, and certification costs.

For the full year, operating expenses were $85.7 million versus $85.9 million a year ago. The 2007 operating expenses were reduced by a net $1.5 million of non-recurring benefits and expenses such as; a gain on the sale of the building and land in Phoenix, the reversal of prior year stock based compensation expense, and due diligence costs related to the Thales e-Transaction acquisition. The 2006 operating expenses were reduced by a net $2.0 million of non-recurring benefits and expenses including a gain on the sale of property in Hong Kong offset by the write-off of in-process R&D related to the acquisition of TPI.

Balance Sheet and Cash-flow

As of December 31, 2007 Hypercom had $82.2 million of cash and short term investments on hand, down slightly from the third quarter. Cash and short term investments were reduced by $10.0 million that was deposited as a prepayment against the purchase price of the Thale's e-Transactions business line. Cash flow from operations was $8.0 million, primarily due to a reduction in inventories.

New Initiatives

Hypercom has recently announced several new initiatives including:

• Signing of a share purchase agreement with Thales SA to acquire that company's e-Transactions business line for $120 million in cash. The e-Transactions business line is a leading provider of secure card payment solutions in France, Germany, the United Kingdom, and Spain and currently is a profitable business line of Thales Group's Security Solutions & Services Division. The combined company would result in the third largest global provider of electronic payment solutions and services. The agreement provides for a potential earn out of up to an additional $30 million based upon the combined companies' performance in 2008.
• The introduction of the Optimum L4150, a new top-of-the-line global payment terminal for multi-lane retailers. The PCI PED-approved unit features a new 64K color glass capacitive touch screen providing the market's brightest and most legible interface for effective interactive advertising at the point of sale. The L4150's video-capable 200 MHz processor ensures the terminal can support bandwidth-intensive graphics and animations as well as high-speed transaction handling without compromising performance. Other Hypercom-exclusive engineering advantages include an advanced security architecture that simplifies hardware and application authentication, several PCI-PED-compliant privacy options that eliminate the need for add-on physical privacy shields that interfere with terminal usage by the consumer, and a depot-upgradeable capability that allows contactless and EMV smart card readers to be integrated into the L4150 either before or after delivery without increasing the footprint of the device.
• A strategic agreement with Keycorp Limited (ASX: KYC) under which Keycorp will distribute Hypercom's new countertop, mobile and multi-lane Optimum payment solutions throughout Canada as part of Keycorp's Managed Payment Services Program. Both companies will cooperate closely on joint sales and marketing opportunities. The agreement follows Interac Association Device Certification of the Optimum T4200.