- Revenues of $217 Million Grew 53% Due to Lipman Acquisition and Resurgent North American Growth
- Record EBITDA, as Adjusted, Margins of 26.3%
- EPS, as Adjusted, Increases 50% to 39 Cents
Verifone Holdings, Inc. (NYSE: PAY), the global leader in secure electronic payment solutions, today announced financial results for the three months ended April 30, 2007.
Net revenues, for the three months ended April 30, 2007, were $217.2 million, 53% higher than the net revenues of $142.2 million for the comparable period of 2006. Verifone's International business increased 97% and Verifone's North America business increased 19%. The significant increase in sales was driven largely by the acquisition of Lipman, which closed November 1, 2006.
Subsequent to the end of the quarter, management determined that booked orders of approximately $4 million could not be recognized as revenue due to incomplete sales administration requirements in our international operations. These orders were largely sourced from Verifone's new Israeli and Turkish facilities and all were headed to high growth markets in Asia, Eastern Europe and Africa. The Company is confident that the shortcomings in applying these field processes have now been remedied. All of this revenue has now been fully recognized and is reflected in guidance for the third quarter.
Gross margins, excluding non-cash acquisition related charges and stock-based compensation expense, expanded to a record 48.1%, for the three months ended April 30, 2007, compared to 45.7% for the comparable period of 2006. GAAP gross margins for the three months ended April 30, 2007, were 41.5%, compared to 44.6% for the three months ended April 30, 2006, as a result of increased amortization of purchased technology assets, the step-up in inventory and stock-based compensation.
GAAP operating expenses for the three months ended April 30, 2007, were $72.9 million compared to $37.8 million for the comparable period of 2006. In addition to the effect of the Lipman acquisition and related integration expenses, the Company incurred higher non-cash stock compensation expenses and amortization of purchased intangible assets. Stock based compensation for the three months ended April 30, 2007 was $9.8 million compared to $1.0 million for the comparable period of 2006. This increase was primarily due to the acceleration of the vesting of options of Lipman executives, the increase in the number of option holders following the Lipman acquisition and the grant of performance-based restricted stock units to the Company's Chief Executive Officer. Amortization of purchased intangible assets for the three months ended April 30, 2007 was $6.1 million compared to $1.2 million for the comparable period of 2006, primarily due to the Lipman acquisition.
EBITDA, as adjusted, margins for the three months ended April 30, 2007, expanded for the eleventh consecutive quarter and reached a record level of 26.3%, compared to the 21.6% recorded in the three months ended April 30, 2006.
GAAP EPS for the three months ended April 30, 2007, was $0.06 per diluted share, compared to $0.22 per diluted share, for the comparable period of fiscal 2006, due to acquisition related non-cash charges, higher stock-based compensation expense primarily related to the Lipman acquisition and to a significantly higher GAAP tax rate driven by an increase in the valuation allowance related to Lipman. Net income, as adjusted, which excludes non-cash acquisition related charges and debt issuance costs, as well as non-cash stock-based compensation expense and Lipman integration costs, for the three months ended April 30, 2007, increased 50% to $0.39 per diluted share, compared to $0.26 per diluted share, for the three months ended April 30, 2006.
"I am pleased to report on another very successful quarter for Verifone as we once again achieved record profitability," said Douglas G. Bergeron, Chairman and Chief Executive Officer. "During the quarter, our record margins drove our robust EPS growth, and also resulted in strong cash flow," continued Bergeron. "We were especially pleased with our continuing success of our wireless products and were delighted with the resurgence of our North American business which grew sequentially 8 percent from the previous quarter."
"Based on these results and the $4 million of revenue which has been recognized in the third quarter, we are increasing our third quarter internal expectations for net revenue to $225 - $227 million and increasing our guidance for net income, as adjusted, per share to a range of $0.39 - $0.40. We remain confident of our prospects for the remainder of fiscal 2007."
Second Quarter Highlights
- In the UK, Verifone had continued success with the Tesco contract, where the Verifone Secura outdoor payment system is enabling easy integration with ECRs, pumps and a range of unattended devices in a Wincor Nixdorf-led project.
- In Mexico, Verifone completed a successful pilot with American Express for its Vx 670 Pay at the Table solution and looks forward to demand creation from the related American Express advertising campaign.
- Verifone announced wins at Ahold Group members Stop & Shop and Giant-Landover food stores. These organizations have embraced a strategy to install MX870's in all new and remodeled stores as well as to replace legacy products over time. In addition, Verifone also announced other significant wins including Wegman's Food Markets, a high end supermarket in the northeast US region, which began its rollout of the MX870 with RFID to replace a competitive product; and Brookshires Grocery, a Texas based supermarket chain, which passed the Texas WIC certification and began a chain wide rollout with the MX870.
Note: The Company's second quarter results reflect the November 1, 2006 acquisition of Lipman and, because of the integration of Lipman's products and distribution channels as well as the lack of comparable quarter ends of Verifone and Lipman, are compared to pre-acquisition results of prior fiscal periods.
Reconciliations for 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.
The management of Verifone will host a conference call, which will be simultaneously webcast, on May 29, 2007, at 1:30 p.m. (PST) to discuss Verifone's second quarter results. Management may also provide forward looking guidance on this call. To access the live conference call, the dial-in numbers are as follows:
Domestic callers: (800-510-9661)
International callers: (617-614-3452)
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 June 5, 2007.
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 5, 2007. The access code for the replay is (34567432).
About Verifone Holdings, Inc. (www.verifone.com) Verifone Holdings, Inc. ("Verifone") (NYSE: PAY) is the global leader in secure electronic payment solutions. Verifone provides expertise, solutions and services that add value to the point of sale with merchant-operated, consumer-facing and self-service payment systems for the financial, retail, hospitality, petroleum, government and healthcare vertical markets. Verifone solutions are designed to meet the needs of merchants, processors and acquirers in developed and emerging economies worldwide.
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: our ability to identify and complete acquisitions and strategic investments and successfully integrate them into our business, our ability to protect against fraud; 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. For a further list and description of such risks and uncertainties, see our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. 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.