Global | Change

Verifone Reports Third Quarter Fiscal 2005 Results

Revenues Grew 21%, Driving Significant Increase in Net Income August 25, 2005 San Jose, CA

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 July 31, 2005.

Net revenues, for the three months ended July 31, 2005, were $125.7 million, an increase of 21% over net revenues of $104.0 million for the comparable period of 2004. The increase was driven by a 36% increase in net revenues from Verifone’s international business and an 11% increase in net revenues in North America. Systems Solutions net revenues rose 20% versus the comparable period of 2004 while Services net revenues rose 27%.

Net income, under generally accepted accounting principles (GAAP), for the three months ended July 31, 2005 was $6.5 million, or $0.10 per diluted share, compared to a loss of ($2.9) million, or ($0.08) per diluted share, for the comparable period of 2004. Net Income as Adjusted, which excludes non-cash amortization of purchased intangibles and debt issuance costs, as well as non-cash stock compensation expense, for the three months ended July 31, 2005 was $13.1 million, or $0.20 per diluted share, compared to $6.0 million, or $0.12 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.

“Verifone delivered another outstanding quarter. We enjoyed strong revenue growth, as well as year over year and sequential improvement in domestic, international and corporate wide gross margins, as well as EBITDA as Adjusted margins and Net Income as Adjusted margins,” said Douglas G. Bergeron, Chairman and Chief Executive Officer. “The market acceptance of our innovative product offerings combined with our ability to exploit favorable industry trends resulted in solid revenue increases in all of our regions worldwide”

Third Quarter Operational Highlights

- Verifone’s new Vx Solutions continued to gain traction and amounted to over 40% of international revenue in the third quarter, double the penetration achieved in the second quarter.

- In the third quarter we obtained additional Class “A” product certifications with multiple U.S. processors. The products certified represented important milestones for the introduction of Vx Solutions into the U.S.

- Verifone’s multi-lane MX870 system, announced in the third quarter, incorporates PIN pad technology and merges full-motion video, a color display, digital quality sound and highly secure payment capabilities into a single, easy-to-use networking system. With this market leading product, multi-lane retailers have a new way to broadcast advertising and corporate messaging directly to their customers.

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 disclosures made in accordance with GAAP.

Conference Call
The management of Verifone will host a conference call on August 25, 2005 at 1:30 p.m. (PDT) to discuss Verifone’s third 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: 866-761-0749
International callers: 617-614-2707
Passcode: 56469513

To access the audio webcast, please go to Verifone’s website ( http://ir.verifone.com) at least ten minutes prior to the call to register. The recorded audio webcast will be available on Verifone’s website until September 1, 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 September 1, 2005. The access code for the replay is 56053454.

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.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

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, our quarterly report on Form 10 Q for the quarter ended April 30, 2005, and, when filed, our quarterly report on Form 10 Q for the quarter ended July 31, 2005. 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.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)

 

(1) “nm” means not meaningful

(2) The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” effective May 1, 2005 using the modified-prospective transition method. For periods prior to May 1, 2005, the Company followed the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.”

(3) Management uses gross profit without amortization of purchased core and developed technology assets and stock-based compensation, a non-GAAP measure, to evaluate the Company’s gross profit and to compare the Company’s current results with those of prior periods, but cautions that it should not be considered as a substitute for disclosures made in accordance with GAAP.

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CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)

VERIFONE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

SUPPLEMENTAL DATA
VERIFONE HOLDINGS, INC.
GEOGRAPHIC INFORMATION (IN THOUSANDS, EXCEPT PERCENTAGES)

SUPPLEMENTAL DATA
VERIFONE HOLDINGS, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)

(1)“nm” means not meaningful.

(2) The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” effective May 1, 2005 using the modified-prospective transition method. For periods prior to May 1, 2005, the Company followed the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.”

(3) Management uses EBITDA as Adjusted and Net Income as Adjusted, both non-GAAP measures to evaluate the Company’s operating performance and compare the Company’s current results with those for prior periods, but cautions that they should not be considered as substitutes for disclosures made in accordance with GAAP

(4) Tax effect rate excludes discrete items.