The financial information presented includes comparative third quarter year over year figures and sequential third quarter vs. second quarter 2005 GAAP results. In addition, where appropriate, the financial information also includes comparative adjusted non-GAAP financial results.

Revenue

Third quarter revenue was $69.8 million for 2005 versus $62.8 million in the same quarter last year, an 11.2% year-over-year increase and a 9.1% increase over the 2005 second quarter revenues of $64.0 million. The year-over-year and sequential quarter revenue increases werprimarily due to strong U.S. sales growth attributable to the new Optimum L4100 multi-lane terminal.

Gross Profit

Gross profit for the 2005 third quarter was $26.5 million or 38.0% of revenue versus $24.3 million or 38.7% of revenue in the same quarter of 2004.

On a sequential quarter basis, third quarter gross profit increased by $16.7 million compared to second quarter gross profit of $9.8 million. Second quarter gross profit included $13.7 million of non-recurring charges related to the Company's ongoing business review. Gross profit increased by $3.0 million over second quarter 2005 adjusted non-GAAP gross profit of $23.5 million.

Gross profit as a percentage of revenue can vary significantly depending upon the specific quarterly revenue mix of customers, products, and services; relative revenue contribution by geographic region; variation in manufacturing costs; and other factors. Third quarter gross margin was higher than the previous quarter primarily due to increased revenues from higher margin network products and a higher gross margin point-of-sale terminal product mix.

Operating Expenses

Operating expenses for the 2005 third quarter were $21.7 million, a decrease of $0.4 million from $22.1 million in the same quarter of 2004.

On a sequential quarter basis, third quarter operating expenses decreased by $3.8 million compared to 2005 second quarter operating expenses of $25.5 million. Second quarter operating expenses included $2.5 million of non-recurring charges related to the Company's ongoing business review. Operating expenses decreased by $1.3 million compared to second quarter 2005 adjusted non GAAP operating expense of $23.0 million. The reduction in operating expenses is primarily attributable to a reduction in workforce, and relocation of certain software development activities to the Company's development centers outside the U.S.

Operating Income

Operating income for the 2005 third quarter was $4.8 million, an increase of $2.6 million compared to $2.2 million in the same quarter of 2004.

Third quarter operating income increased by $20.5 million compared to the 2005 second quarter operating loss of $15.7 million. Second quarter operating income included $16.2 million of non-recurring charges related to the Company's ongoing business review. Operating income increased by $4.3 million compared to the second quarter adjusted non-GAAP operating income of $0.5 million.

Net Income

Third quarter 2005 net income was $3.5 million, or $0.07 per diluted share, compared to $0.3 million, or $0.01 per diluted share in the same quarter of 2004.

Third quarter net income increased by $20.2 million compared to the 2005 second quarter net loss of $16.7 million. Second quarter net income included a loss of $16.2 million related to non-recurring charges associated with the Company's ongoing business review. Net income increased by $4.0 million compared to the second quarter adjusted non-GAAP loss of $0.5 million.

"We have restored profitability while undertaking a major transformation of the business," stated Hypercom CEO William Keiper. "The growth in sales over 2004 has been principally based on the market's reception to our 32-bit Optimum product line, especially the L4100 model. This product has been strongly embraced by large U.S. multi-lane retailers. We have also taken significant actions to make the organization more responsive to market requirements, and have implemented a leaner cost structure. The decisions made and the actions taken have resulted in substantive improvements in the Company's financial results. Although there is more work to be done, I am confident that we now have in place the senior management team required to drive this business to be both more competitive and fiscally responsible."Download the document now 48.8 kb (Adobe Acrobat Document)