Global | Change

Verifone Reports Third Quarter Fiscal 2006 Results

Record Third Quarter Revenues of $148 Million; EBITDA Margins, as Adjusted, Increased to 22.6% for the Quarter; Third Quarter GAAP Net Income Increased 156% August 31, 2006 San Jose, CA

SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 31, 2006--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, 2006. Net revenues for the three months ended July 31, 2006, were $147.6 million, an increase of 17% over net revenues of $125.7 million for the comparable period of fiscal 2005. The increase was driven by a 19% increase in net revenues from Verifone's North America business and a 16% increase in net revenues in Verifone's International business.

Gross margins, under generally accepted accounting principles (GAAP), for the three months ended July 31, 2006, were 45.0%, compared to 40.7% for the three months ended July 31, 2005. Gross margins, excluding non-cash amortization of purchased intangibles and stock-based compensation expense, expanded for the seventh consecutive quarter and reached 45.9% compared to 42.0% for the three months ended July 31, 2005.

Net income for the three months ended July 31, 2006, was $16.8 million, or $0.24 per diluted share, compared to $6.5 million, or $0.10 per diluted share, for the comparable period of fiscal 2005. Net income, as adjusted, which excludes non-cash amortization of purchased intangibles and debt issuance costs, as well as non-cash stock-based compensation expense, for the three months ended July 31, 2006, was $19.7 million, or $0.28 per diluted share, compared to $13.1 million, or $0.20 per diluted share, for the comparable period of fiscal 2005.

EBITDA, as adjusted, which excludes non-cash amortization of purchased intangibles and debt issuance costs, as well as non-cash stock-based compensation expense, expanded for the eighth consecutive quarter and reached a record level of $33.4 million, a 49% increase over the $22.4 million recorded in the three months ended July 31, 2005. As a percent of net revenues, EBITDA, as adjusted, for the three months ended July 31, 2006, reached 22.6%, substantially higher than the 17.8% recorded in the three months ended July 31, 2005.

"We are once again extremely pleased with the consistency of our quarterly results, demonstrated by our tenth consecutive quarter with double digit revenue growth and our eighth consecutive quarter of expanded EBITDA as adjusted margins, which reached a record level of 22.6% in the quarter," said Douglas G. Bergeron, Chairman and Chief Executive Officer. "We are expecting to close the acquisition of Lipman Electronic Engineering Ltd. by November 1, 2006, and remain confident that we will receive clearance by the United States Department of Justice very shortly. We remain on track to deliver another year of outstanding results and we remain confident in our long-term model, which calls for annual revenue growth of 10 to 15% and annual adjusted net income per share growth of 20% or more."

"Based on our confidence with our near term and long term outlook, we are raising our FY06 year end guidance to $1.07 to $1.08 of adjusted net income per share. We are also raising our FY07 guidance to $1.40 to $1.42 of adjusted net income per share, assuming a November 1, 2006, completion of the Lipman acquisition," continued Bergeron.

Third Quarter Highlights

  • Verifone's MX870 system is establishing itself as the clear leader among full size color touch screen multimedia payment systems. In addition to its compelling features and functionality, another key differentiating factor is that it remains the only PCI compliant touch screen device on the market. The head start that the MX870 enjoys over competitive solutions has enabled the MX870 to win the vast majority of the large national multi-lane retail deals decided since mid-2005, and all of the new large multi-media terminal decisions made by retailers in 2006. The EMV compliant version of the MX870 is under development for planned release during the fourth quarter.
  • Verifone and MICROS Systems Inc.,(NASDAQ: MCRS) have continued to work together to integrate Verifone's pay-at-the-table solution with next generation MICROS enterprise software. This initiative has created a significant opportunity for the MICROS direct sales channel and over eighty MICROS distributors to take this solution to market in September. Verifone is also working on agreements with several other hospitality system vendors, continuing to build momentum in creating technology partnerships and expanding its distribution channel in this market.
  • On August 14, 2006, Verifone announced its acquisition of Trintech's payment systems business. Their unattended and outdoor payment systems will enhance Verifone's solutions in the growing markets for self-service payment, vending and pay-at-the-pump applications and will extend Verifone's existing offerings for merchants and financial institutions. This acquisition is expected to close September 1, 2006.

Financial Measures

Reconciliations for all of the non-GAAP measures presented in this press release are provided at the end of this press release. Management uses the non-GAAP measures presented in this release 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, which will be simultaneously webcast, on August 31, 2006, at 1:30 p.m. (PST) to discuss Verifone's third quarter results. 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: 800-599-9795
International callers: 617-786-2905
Passcode: 77490147

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 7, 2006.

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 7, 2006. The access code for the replay is 36068310.

About Verifone Holdings, Inc. (www.verifone.com) 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 complete successfully, and realize the benefits we expect from, our pending acquisition of Lipman, our ability to identify and complete other 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 periodic filings with the Securities and Exchange Commission. 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.