Hypercom Sees a Hit from the Recession, Exchange Rates

Hypercom Corp. anticipates that the drop in its first-quarter revenues may be larger than in the past due to volatile currency exchange rates, the deteriorating economy, and a tightening credit market, said Philippe Tartavull, chief executive and president. “It is quite clear that our industry as a whole will contract this year,” Tartavull said this week during Hypercom's fourth quarter 2008 conference call with analysts. “Typically, our revenue in the first quarter is at least 10% to 20% lower than in Q4. We expect that this year, that effect will be amplified by foreign exchange and the current economic environment.” For 2008's fourth quarter, Hypercom reported net revenue of $121.6 million, a 35.8% increase from $89.5 million in the same period in 2007. The increase was primarily due to a $47.5 million increase in net revenues in Southern and Northern Europe because of Hypercom's 2008 acquisition of Thales e-Transactions. However, net revenue for the U.S. declined $5.7 million. “Our business in North America started to be affected by the economic condition,” Tartavull said. “Despite good performance in the North America business, countertop product revenue decreased by $600,000 or 4.9%.” Mexico and Asia-Pacific also saw revenues drop by $1.8 million and $2.8 million, respectively, due to the global economic downturn. A major hit to Hypercom's bottom line was a one-time $67.8 million impairment charge, triggered by a decline in the company's share price during the fourth quarter. Including the impairment charge, the loss from continuing operations for the fourth quarter totaled $69.8 million, compared with a $1.2 million loss for 2007's fourth quarter. The net loss for the quarter was $74.8 million, compared with net income of $300,000 a year earlier. For the full year, net revenue increased 51% to $437.3 million from $289.5 million at year-end 2007. “2008 was a significant year for Hypercom,” Tartavull says. “We are successfully integrating the Thales e-Transactions business line, have significantly strengthened our position in Europe, particularly in Germany and France, and also gained market share in the unattended, e-health, and integrated payment solution sectors.” During the fourth quarter, Hypercom introduced the HyperSafe Secure solution that encrypts cardholder data at the point of sale; entered into an agreement with TASQ Technology under which TASQ will have exclusive rights to distribute Hypercom's new 32-bit Optimum T4205 payment terminal in Canada for one year; and won accreditation from the United Kingdom's Association of Payments and Clearing Services for its T4200 and M4200 countertop and mobile payment terminals.