Q Comm International Reports Fourth Quarter and Full Year 2004 Results

Highlights for the fourth quarter of 2004 relative to the same quarter last year were as follows: -- Total revenues increased 72% to $12.5 million -- Loss from operations of $3.2 million, including $2.2 million of one time expenses. Highlights for fiscal 2004 compared to fiscal 2003 were as follows: -- Total revenues increased approximately 59% to $40.1 million -- Gross profit increased 66% to $10.6 million -- Active terminals increased 104% to 2,325 units -- Revenue per active terminal increased 17% to $68 -- Net loss increased to $6.5 million or $1.51 per share, from $5.7 million, or $2.12 per share Fourth Quarter Financial Results Revenue for the fourth quarter was $12.5 million, an increase of 72%, compared to $7.2 million in the fourth quarter of 2003. Loss from operations was $3.2 million, compared to a loss from operations of $1.3 million in the prior year period. The loss from operations in the fourth quarter of 2004 includes approximately $2.2 million of costs related to carrying value adjustments of certain assets, including accounts receivable and terminals from a broker that ceased operations during 2004, expired PIN inventory for a previously utilized payment platform, and an asset impairment charge related to the purchase of Point de Vente (PDV) in July 2004. Included in the $2.2 million is a $1.0 million reserve for loss on a receivable from a supplier due to deactivated PINs received in the fourth quarter of 2004. The supplier has accepted responsibility for the deactivated product and is making good faith efforts to reimburse the company. However, there is no assurance of repayment, and management has decided to record a reserve against the amount. The Company’s net loss increased to $3.4 million, or $0.72 per share, compared to $2.2 million, or $0.56 per share, in the prior year period. Fiscal 2004 Financial Results Revenue for fiscal 2004 was $40.1 million, an increase of 59% compared to $25.7 million in fiscal 2003. Higher transaction volume due to increased activated terminals, as well as higher average revenue per activated terminal, drove revenue performance in 2004. Gross profit increased 66% to $10.6 million from $6.4 million in 2003, with gross margins increasing 110 basis points to 25.9% from 24.8% a year ago. Margins after accounting for commissions and fees paid to the brokers and retailers increased 110 basis points to 3.5% in 2004 from 2.4% for the comparable period in 2003. The Company’s operating loss in 2004 was $5.9 million compared to $3.1 million in 2003. This reflects a 75% increase in operating expenses due to higher SG&A, depreciation costs associated with an increased number of terminals in service, and higher amortization of software development costs during the year. Also adding to the increased operating expenses were the $2.2 million of one time expenses in the fourth quarter, as described above. Other expense decreased substantially to $0.5 million from $2.6 million in 2003, reflecting less interest expense in 2004 versus 2003. In 2003, $2.4 million of other expense was in the form of amortization of discount on debt instruments and therefore does not represent an amount paid in cash. Net loss for 2004 increased to $6.5 million, or $1.51 per share, from $5.7 million, or $2.12 per share, in 2003. Balance Sheet As of December 31, 2004, the Company had cash of $1.7 million and working capital of approximately $2.6 million. Current cash balances and operating cash flow are expected to provide the Company with sufficient resources to meet its existing obligations, currently planned capital expenditure requirements, and funding for internal growth initiatives. Recent Announcements During the first quarter of 2005, Q Comm: - Announced a contract with Leap Wireless Inte