Hypercom Corporation a leading global provider of electronic payment transaction solutions, today announced financial results for the three months ended March 31, 2006.
Revenue for the 2006 first quarter was $61.0 million, a 20.5% increase compared to $50.6 million of adjusted non-GAAP revenue in the same quarter last year. Revenue growth was primarily attributable to solid performance in our Mercosul and Latino product and service businesses, as well as moderate revenue improvement in the North America, EMEA, and Asia-Pacific markets.
Gross profit for the quarter was $23.5 million or 38.6% of revenue compared to adjusted non-GAAP gross profit of $19.5 million or 38.6% during the same quarter of 2005. 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.
Operating expenses for the first quarter of 2006 were $20.6 million compared to adjusted non-GAAP expenses of $25.3 million in the same prior year period. Excluding non-cash stock-based compensation expense in both comparative quarters, operating expenses were $19.8 million in the first quarter of 2006 compared to adjusted non-GAAP operating expenses of $25.1 million in the same quarter of 2005. The expense reduction of $4.7 million on a year-over-year basis is principally a result of management-driven 2005 business review actions, including management restructuring, headcount reduction, the off-shoring of select software research and development, and the elimination of redundant facilities and infrastructure, among other cost management activities.
Operating profit for the first quarter 2006, net of a charge of $0.9 million for non-cash stock-based compensation, was $2.9 million and represented an operating margin of 4.8%, compared to an adjusted non-GAAP operating loss of $5.8 million in the same quarter last year. Income before discontinued operations for the first quarter of 2006 was $2.8 million or $0.05 per diluted share, compared to an adjusted non-GAAP operating loss of $6.6 million, or a loss of $0.13 per diluted share in the same quarter of 2005.
Hypercom classifies operating results related to its UK-based leasing business as discontinued operations as a result of management's decision to sell the business to a third party. In the first quarter of 2006, Hypercom reported net income of $0.3 million from the UK-based leasing business. It is anticipated that this asset will be disposed of during the second quarter of 2006.
"The results of the first quarter reflect the efforts of the new Hypercom management team, driving a performance and market-focused strategy," said Hypercom CEO William Keiper. "Our commitment to revenue growth and profitability, supported by five market-leading new product introductions thus far this year, has been clearly demonstrated. The year-over-year financial improvement is a direct result of the commitment and competitiveness of our dedicated global Hypercom team, and the continuing loyalty and confidence of our many industry partners."
First quarter highlights included the introduction of the 32-bit, 7.1 ounce wireless Optimum M4100 Blade, universal contactless P4100 PIN Pad and Optimum L4200 and L4250 for multi-lane retail and financial markets. These recent additions to the Hypercom Optimum family of products significantly broaden the global market for Hypercom, represent a significant advance over the competition, and embody the high performance and high security of the Company's Optimum product set.
The portable, handheld wireless M4100 Blade delivers high security payment and other transactions, features GPRS, Wi-Fi and Bluetooth communications, a top-of-the-line high-contrast full-color signature capture touch screen and other state-of-the-art features for restaurants, delivery services and other businesses worldwide. Equally noteworthy is the handheld Optimum P4100 PIN Pad, the only universal contactless multi-application PIN entry device designed to meet the rigorous new PCI (Payment Card Industry) security standards and enable retailers to quickly and economically convert existing payment systems to benefit from the increase in PIN and contactless card transactions.
In addition, the Company introduced the first plug-and-play value-added POS application platform. The new Telco-grade network server appliance enables plug-and-play deployment of value-added applications for point-of-sale/point-of-service systems. The new appliance will come pre-loaded with application software and tools that allow remote configuration, eliminating the need for end-users or independent sales organizations (ISOs) to install, test, integrate, and configure software for their network.
Hypercom announced several new relationships during the quarter including:
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- Catuity, a leading gift and loyalty card provider, has integrated its product with Hypercom's multi-application Optimum T4100, giving merchants the ability to use a single device to support payment, gift, and loyalty cards
- EVO Merchant Services, the nation's sixth largest non-bank credit card processor, has Class A certified the Optimum T4100, will market the multi-application device to its merchant base, and provide full support for the promotion of this high-speed IP-enabled terminal
- U.S Bankcard Services Inc., a leading merchant service provider for credit card processing, has entered into an exclusive software agreement to offer U.S. retailers the first multi-language card payment terminal featuring Chinese and English graphics and text
- Communications Intelligence Corp., the leader in biometric signature verification and a leading supplier of signature solutions, licensed its SignatureOne suite of biometric and signature capture products to Hypercom, initially for incorporation into the 32-bit Optimum L4100 and L4250 products