Stronger demand for its payment terminals in certain emerging markets helped Hypercom Corp. produce higher-than-expected first-quarter revenues, according to analysts, as the company draws closer to its planned acquisition later this year by VeriFone Systems Inc.
Although one analyst remains concerned that the deal might not go through, other observers expect no hitches to the acquisition.
Increased demand for mobile-payment products and payment terminals in the Asia Pacific and the Americas played a key role in driving higher revenues during the quarter ended March 31, Robert J. Dodd, an analyst with the equity firm of Morgan Keegan & Co., Inc., said in a May 9 note to investors. The company also faced challenges in eking out revenues in certain markets because of competition from rivals, he suggested.
“We believe the company is selling products in some emerging markets (specifically Brazil and Indonesia) at near 0% gross margin in order to benefit from the longer term service agreement contracted,” he wrote.
Gil Luria, an analyst with Wedbush Securities, said in a May 9 note to investors he believes there continues to be “some risk” to completion of the VeriFone deal, noting Hypercom faces strong competition from larger competitors and challenges in getting marketplace acceptance for its new products.
Luria in February said in a separate note to investors that the proposed deal might cause merchants to stop buying terminals from Hypercom and instead switch to terminals made by VeriFone or Ingenico (
Another analyst dismissed suggestions that the acquisition might collapse.
“I don’t think there is any reason to believe the deal won’t go through,” Vincent Colicchio, a senior research analyst with Noble Financial Group, tells PaymentsSource. “We’re seeing strong revenues, and the management team has done a better job than I thought they would do in improving their product line in recent months.”
Hypercom on May 9 reported a first-quarter loss of $3.5 million, partly caused by higher operating expenses (
Net revenue for the quarter ended March 31 rose 20.8%, to $119.3 million from $98.8 million, aided by stronger sales in the Asia-Pacific and North America regions, Hypercom said.
The company did not hold an analyst conference call to discuss the quarter’s earnings because of its pending acquisition by VeriFone. Hypercom said in a press release it expects the deal to close during the second half of this year.
Ingenico SA earlier this year announced plans to purchase Hypercom’s U.S. payments systems business for $54 million (
Hypercom’s revenue from products during the quarter rose 23.1%, to $91.2 million from $74.1 million a year earlier, the company reported in a May 9 Securities and Exchange Commission filing. Revenue from services rose 14.2%, to $28.1 million from $24.6 million, the company said.
Operating expenses rose 20.8%, to $37.8 million from $31.3 million, partly because of reorganizations of Hypercom’s service businesses in Australia and Brazil, its Asia-Pacific operations, and of its North American management team, Hypercom noted.
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