Global | Change

Verifone Reports Second Quarter Fiscal 2005 Results

Revenues Grew 32%, Driving Significant Increase in Net Income June 02, 2005 San Jose, CA

In its first earnings report as a public company, Verifone Holdings, Inc. (NYSE: PAY), a leading global provider of technology that enables electronic payment transactions, today announced financial results for the three months ended April 30, 2005.

Net revenues, for the three months ended April 30, 2005, were $117.9 million, an increase of 32% over net revenues of $89.5 million for the comparable period of 2004. The increase was driven by a 68% increase in net revenues from Verifone’s international business and a 16% increase in net revenues from its North America business. Verifone’s acquisition of GO Software, which closed on March 1, 2005, contributed 1% of net revenues for the three months ended April 30, 2005. Systems Solutions net revenues rose 34% versus the prior year while Services net revenues rose 14%.

Net income, under generally accepted accounting principles (GAAP), for the three months ended April 30, 2005 was $8.8 million, or $0.15 per diluted share, compared to $1.1 million, or $0.02 per diluted share, for the second quarter of 2004. Net Income as Adjusted, which excludes non-cash amortization of purchased intangibles and debt issuance costs, as well as the interest on debt retired out of Verifone’s IPO proceeds, for the three months ended April 30, 2005 was $12.3 million, or $0.22 per diluted share, compared to $6.2 million, or $0.11 per diluted share, for the comparable period of 2004. A reconciliation of GAAP net income to Net Income as Adjusted, is set forth at the end of this press release.

Douglas G. Bergeron, Chairman and Chief Executive Officer stated, “Our business continued to exhibit strong growth in the fiscal 2005 second quarter. In North America, the ongoing upgrade cycle has been driven by the migration from dial-up to IP and the expanding need for PIN-based debit solutions. In Western Europe, growth continued to be fueled by enhanced EMV security standards and IP and wireless communications. Emerging markets demand was strong across the board.”

“Verifone’s industry leading certification and product portfolio, brand, global scale and substantial investment in research and development has enabled us to fully participate in industry growth,” continued Bergeron. “We are extremely pleased with our second quarter results.”

Second Quarter Highlights

- Verifone completed its initial public offering on the New York Stock Exchange, raising gross proceeds of $177 million; Verifone’s portion of the proceeds was $77 million net of expenses and underwriting discounts. Trading commenced on April 29, 2005 and settlement took place on May 4, 2005.
- Verifone retired the $72 million Second Lien Loan on May 4, 2005. Based on current rates,the annualized interest savings on the Second Lien Loan would be approximately $6.6 million.
- Verifone repriced its Term B Loan effective on May 4, 2005. Verifone’s estimated annual interest savings from the 50 basis point rate reduction is approximately $0.95 million on the $189 million outstanding on the Term B Loan as of April 30, 2005.
- Verifone’s new Vx platform gained traction and amounted to over 20% of international revenue in the second quarter. This has been the fastest rollout in Verifone’s history as international banks and processors rapidly certified this platform.
- Verifone’s Value Added Partner Program showed continued momentum, and now includes 31 Partners, an increase of 10 Partners in the last 12 months, providing applications such as Gift and Loyalty, Telephone Prepaid, Stored Value, Age Verification, Employment Background Checks, Time and Attendance, Health Care Eligibility, Check Authorization and Verification, Return Authorization Services, Money Transfer and Bill Payment. The adoption of applications such as these continue to drive merchants to endorse Verix based multi-application system solutions.

Financial Measures
Reconciliations for both of the non-GAAP measures presented in this press release, Net Income as Adjusted and EBITDA as Adjusted, are provided at the end of this press release. Management uses Net Income as Adjusted and EBITDA as Adjusted, to help them evaluate Verifone’s performance and to compare Verifone’s current results with those for prior periods as well as with the results of other companies in our industry, but cautions investors that these non-GAAP measures should not be considered as substitutes for disclosure in accordance with GAAP.

Conference Call
The management of Verifone will host a conference call on June 2, 2005 at 1:30 p.m. (PDT) to discuss Verifone’s second quarter results, which will be simultaneously webcast. Management may provide forward looking guidance on this conference call.

To access the live conference call, the dial-in numbers are as follows:

Domestic callers: 800-299-7928
International callers: 617-614-3926
Passcode: 70079334

To access the audio webcast, please go to Verifone’s website (a href=""> at least ten minutes prior to the call to register. The recorded audio webcast will be available on Verifone’s website until June 16th, 2005.

A replay of the conference call, which can be accessed by dialing toll-free 888-286-8010, and outside the U.S. 617-801-6888, will be available until June 9th, 2005. The access code for the replay is 73091695.

About Verifone Holdings, Inc.
Verifone Holdings, Inc. (“Verifone”) (NYSE: PAY), a global leader in secure electronic payment technologies, provides expertise, solutions and services for today with a migration strategy for tomorrow. Verifone delivers solutions that add value to the point of sale, resulting in improved merchant retention and the generation of new sources of revenue for its partners and customers. Verifone solutions are specifically designed to meet the needs of vertical markets including financial, retail, petroleum, government and healthcare.


This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive, technological and/or regulatory factors, and other risks and uncertainties affecting the operation of the business of Verifone Holdings, Inc. These risks and uncertainties include: the status of our relationship with and condition of third parties upon whom we rely in the conduct of our business, our dependence on a limited number of customers, uncertainties related to the conduct of our business internationally, our ability to effectively hedge our exposure to foreign currency exchange rate fluctuations. our dependence on a limited number of key employees, short product cycles, rapidly changing technologies and maintaining competitive leadership position with respect to our payment solution offerings, our ability to identify and complete acquisitions and strategic investments and successfully integrate them into our business, and our ability to protect against fraud. For a further list and description of such risks and uncertainties, see our filings with the Securities and Exchange Commission, including our Form S-1 registration statement for our IPO. Verifone is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

The above pro forma balance sheet, reflects the sale of 8,500,000 shares of common stock by us in our initial public offering at an offering price of $10.00 per share, after deducting the underwriting discounts and commissions, and estimated offering expenses paid or payable by us totaling $9.2 million, $1.25 million of which will be settled in shares of common stock, and the application of such proceeds to repay outstanding principal of $72.0 million owed on the second lien loan under our secured credit facility and the after-tax effect of the prepayment premium of $2.2 million and the non-cash write-off of unamortized debt issuance costs of $2.8 million.

In addition, the pro forma balance sheet reflects the effectiveness of our amended and restated certificate of incorporation and our amended and restated bylaws concurrently with the completion of our initial public offering, which, among other things, converted our nonvoting common stock into our voting common stock on a share-for-share basis, with a corresponding effective conversion of all outstanding options and shares reserved for issuance under our New Founders' Stock Option Plan, resulting in recognition of related deferred stock-based compensation of $6.1 million and stock compensation expense of $2.2 million. The Company is contemplating early adoption of Statement 123(R) but has not yet quantified the impact on our consolidated statement of operations.