Hypercom Corporation (NYSE: HYC), the high security electronic payment and digital transactions solutions provider, today announced financial results for the three months and full year ended December 31, 2010.
Net revenue for the three months ended December 31, 2010 was a record $140.7 million, representing a 20% increase compared to $117.4 million for the fourth quarter of 2009. The increase was driven by strong year-over-year revenue growth in Asia-Pacific (63%), Southern EMEA (24%) and the Americas (15%). Fourth quarter 2010 revenue was up 12% sequentially over $125.1 million in the third quarter, driven by growth in Northern EMEA (25%), Asia-Pacific (16%) and Southern EMEA (13%). On a constant currency basis, revenue increased 23% over the prior-year period and 9% over the third quarter of 2010.
"Our second consecutive record quarter shows that demand for Hypercom products and services has continued to increase," said Philippe Tartavull, Chief Executive Officer and President. "We continued to capture significant market share in Asia-Pacific, Europe and Canada, driven by increased demand for mobile and IP products. For full year 2010, we increased revenue by 18% on a constant currency basis and this increase resulted in more than doubling our full year non-GAAP diluted EPS and allowed us to achieve a 12.5% adjusted EBITDA margin in the fourth quarter. These strong results demonstrate the fundamental strength of our suite of products and services and I want to thank all our customers for their continuing confidence in Hypercom, as well as our talented associates for the dedication that made this growth possible."
Gross profit for the three months ended December 31, 2010 increased to $48.1 million or 34.2% of revenue from $36.8 million or 31.3% of revenue in the fourth quarter of 2009, and $40.1 million or 32.1% of revenue in the third quarter of 2010. Gross profit percentages for the three months ended December 31, 2010 for product gross profit and service gross profit were 36.6% and 26.4%, respectively, compared to 34.1% and 24.7% in the fourth quarter of 2009 and 34.0% and 25.4% in the third quarter of 2010. Product gross margins increased due to higher volume and more favorable product mix.
Non-GAAP gross profit for the three months ended December 31, 2010 was $48.8 million or 34.7% of revenue, compared to $38.1 million or 32.4% of revenue in the fourth quarter 2009, and $40.7 million or 32.5% of revenue in the prior quarter. Non-GAAP gross profit excludes the effect of items such as restructuring costs, amortization of purchased intangibles and stock-based compensation. Non-GAAP gross profit percentages for the three months ended December 31, 2010 for product and service gross profit were 36.7% and 27.7%, respectively, versus 34.1% and 26.6% in the prior-year period and 34.1% and 26.7% in the third quarter of 2010.
Operating expenses for the three months ended December 31, 2010 were $40.4 million or 28.7% of net revenue, compared to $33.8 million or 28.8% of net revenue in the prior-year quarter, and $33.1 million or 26.4% of net revenue in the third quarter of 2010. The year-over-year and sequential quarterly increase in operating expenses were primarily related to increased R&D expenditures for new product and software development, as well as increased selling expense related to increased revenue. In addition, the Company incurred costs related to the pending merger with VeriFone Systems, Inc. (NYSE: PAY) during the period.
Non-GAAP operating expenses for the three months ended December 31, 2010 were $33.9 million or 24.1% of revenue, compared to $31.7 million or 27.0% of revenue in the prior-year period, and $30.3 million or 24.2% of revenue in the third quarter of 2010. Non-GAAP operating expense excludes the effect of items such as restructuring costs, stock-based compensation, costs related to the pending merger with VeriFone Systems, Inc., certain legal settlements, amortization of purchased intangibles, and gains or losses from the sale of assets.
Operating income for the three months ended December 31, 2010 was $7.7 million, compared to operating income of $2.9 million in the prior-year period and $7.1 million in the third quarter of 2010.
Non-GAAP operating income for the three months ended December 31, 2010 was $14.9 million, compared to non-GAAP operating income of $6.3 million in the prior-year period and $10.4 million in the third quarter of 2010.
Net income for the three months ended December 31, 2010 was $3.1 million or $0.05 per diluted share, versus $0.6 million or $0.01 per diluted share in the prior-year period, and $4.5 million or $0.08 per diluted share in the third quarter of 2010. Non-GAAP net income before discontinued operations for the three months ended December 31, 2010 was $11.8 million or $0.20 per diluted share, compared to $6.0 million or $0.11 per diluted share in the prior-year period, and $9.1 million, or $0.16 per diluted share in the third quarter of 2010. Non-GAAP net income excludes the effect of items such as restructuring costs, stock-based compensation, costs related to the pending merger with VeriFone Systems, Inc., certain legal settlements, amortization of purchased intangibles, gains or losses from the sale of assets, non-cash interest expense related to the amortization of discount on warrants issued for long-term debt and any applicable tax effects of such transactions.
For the full year, net revenues increased 15% or $61.5 million from $406.9 million in 2009 to $468.4 million in 2010. On a non-GAAP constant currency basis, revenue increased 18% compared to 2009. Non-GAAP gross profit increased $25.2 million to $158.1 million, or 33.7% of revenue in 2010, from $132.9 million, or 32.7% of revenue, in 2009. Non-GAAP operating income in 2010 increased to $36.7 million from $17.3 million in 2009 and non-GAAP net income before discontinued operations increased from $11.8 million or $0.22 per diluted share in 2009, to $27.2 million, or $0.49 per diluted share, in 2010.
Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock-based compensation, restructuring charges, costs related to the pending merger with VeriFone Systems, Inc., certain legal settlements, and gains or losses from the sale of assets) for the three months ended December 31, 2010 was $17.6 million, compared to $9.2 million in the prior-year period and $13.0 million in the third quarter of 2010. Full year 2010 adjusted EBITDA increased to $47.0 million from $27.5 million in 2009.
Cash increased to $56.9 million at December 31, 2010 from $38.5 million at September 30, 2010 driven primarily by positive cash flow from operations. Cash flow from operating activities for the fourth quarter of 2010 was $24.2 million and $20.0 million for the full year 2010.
As previously announced, Hypercom has entered into a definitive merger agreement under which VeriFone Systems, Inc. will acquire Hypercom in an all-stock transaction. The transaction, which was approved by Hypercom stockholders on February 24, 2011, is anticipated to close in the second half of 2011 subject to the satisfaction of applicable regulatory approvals and other customary closing conditions.
Due to the pending merger with VeriFone, Hypercom will not hold a conference call to discuss its fourth quarter and full year 2010 financial results.