VeriFone Reports Third Quarter Fiscal 2008 Results
VeriFone Holdings, Inc. (NYSE: PAY), the global leader in secure electronic payment solutions, today announced financial results for the three months ended July 31, 2008.
SAN JOSE, CA, - September 9, 2008 – VeriFone Holdings, Inc. (NYSE: PAY), the global leader in secure electronic payment solutions,
today announced financial results for the three months ended July 31, 2008.
Net revenues for the three months ended July 31, 2008, were $258.7
million, 12% higher than the net revenues of $231.7 million for the
comparable period of 2007. Net revenues from VeriFone's International
business increased 26% while net revenues from VeriFone's North
America business decreased 6%.
Non-GAAP Gross margins were 37.6%, for the three months ended July
31, 2008, compared to 41.4% for the comparable period of 2007. GAAP
gross margins for the three months ended July 31, 2008, were 34.2%
compared to 36.9% for the three months ended July 31, 2007.
Operating expenses for the three months ended July 31, 2008, were
$83.1 million compared to $63.8 million for the comparable period of
2007. This increase was primarily due to external professional and
consultancy expenses of approximately $15.4 million related to the
restatement of our fiscal 2007 interim financial statements and
completion of financial statements for fiscal 2007 and subsequent
interim periods as well as tax consultancy expenses.
GAAP Net loss per share for the three months ended July 31, 2008,
was $(0.09) per diluted share, compared to $(0.51) per diluted share,
for the comparable period of fiscal 2007.
Non-GAAP Net income, for the three months ended July 31, 2008, was
$0.32 per diluted share, compared to $0.34 per diluted share, for the
comparable period in 2007. We are now reporting Non-GAAP Net
income after deducting depreciation and amortization of PP&E and
capitalized software and other charges; therefore, our Non-GAAP Net
income per share is consistent with the guidance given on our August
19th, 2008 conference call.
"I am pleased to report the results for our third quarter," said
Douglas G. Bergeron, Chief Executive Officer. "Our international
business continued to grow nicely as we enjoyed very favorable
conditions in our emerging markets. While macro-economic trends slowed
our North American business during the quarter, we had robust sales of
our wireless solutions and strong performance in our multi-lane
vertical," continued Bergeron.
Guidance – Fourth Quarter 2008 & Fiscal Year 2009 Outlook
For the fourth quarter ending October 31, 2008, VeriFone expects
to record net revenues of between $260 and $268 million, compared to
$238 million in the comparable period of 2007. Non-GAAP net income,
per share is projected to be in the range of $0.33 to $0.36.
For fiscal 2009, VeriFone expects to achieve annual net revenue
growth in the 10 to 15% range, consistent with its long-term growth
targets. VeriFone is projecting continued improvements to gross
margins as the year progresses as a result of product cost reduction
initiatives and improved pricing strategies.
For fiscal 2009, VeriFone expects Non-GAAP net income, per share,
to be in the range of $1.23 to $1.43.
Third Quarter Highlights
- VeriFone was awarded a multi-year contract to provide the U.S.
Postal Service with electronic payment solutions for use
across the U.S. VeriFone will provide the Vx 570 countertop
payment solution with dual communications capabilities to
provide both traditional dial-up and IP connectivity for
18,000-20,000 customer windows. VeriFone's payment platforms
provide the USPS with PCI PED (Payment Card Industry PIN Entry
Device) support and conform to the most stringent security
standards around the world.
- VeriFone announced that it has developed an EMV certified
integrated transportation payment system in conjunction with
Bank Asya (ISE: ASYAB) of Turkey. The transportation payment
system was designed to enable municipalities to transition
their bus systems from cash to bank cards and credit cards.
- Canada Post selected VeriFone to install more than 7,000
VeriFone MX870 multimedia payment systems over the next two
years. Approximately 2,200 systems are expected to be
installed this calendar year, with the balance to be deployed
during 2009. VeriFone's PCI PED approved MX870 meets the most
stringent security requirements for the payment industry while
enabling the display of multimedia content to customers at the
point-of-sale.
- Cabcharge Australia Limited (ASX: CAB) awarded VeriFone a
multimillion dollar contract to supply 20,000 units of the
VeriFone Vx 810 full-function PIN entry system with
contactless payment module. The Cabcharge non-cash fare
management system is offered in approximately 96 percent of
all taxis in Australia, as well as in other transport systems
such as limousines and water taxis. About 400 taxi companies
accept Cabcharge facilities across Australia, representing
around 18,000 taxis.
-ends-
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 forward-looking 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.
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.
Additional Resources:
Investor Contact:
William Nettles - Vice President, Corporate Development & IR
Tel: 408-232-7979
Email: ir@verifone.com
http://ir.verifone.com/
Editorial Contact:
Pete Bartolik
VeriFone Media Relations
Tel: 508-283-4112
Email: pete_bartolik@verifone.com
FINANCIAL MEASURES
This press release and its attachments include several non-GAAP
financial measures, including non-GAAP Net Revenues; non-GAAP Cost of
Net Revenues; non-GAAP Gross profit; non-GAAP Operating Expenses;
non-GAAP Operating Income; non-GAAP Income before Income Taxes;
non-GAAP Provision for Income Taxes, non-GAAP Net Income; non-GAAP Net
Income per share as well as these non-GAAP financial measures as a
percentage of net revenue. In order to assist investors, this press
release provides consolidated statement of operations information on a
non-GAAP basis, reflecting the adjustments made in the non-GAAP
measures listed above.
Reconciliations for the non-GAAP financial measures presented in
this press release are provided at the end of this press release.
Management uses non-GAAP financial measures only in addition to
and in conjunction with results presented in accordance with GAAP.
Management believes that these non-GAAP financial measures help it to
evaluate VeriFone's performance and to compare VeriFone's current
results with those for prior periods as well as with the results of
peer companies. VeriFone's competitors may, due to differences in
capital structure and investment history, record certain income and
expense items, including interest, tax, depreciation, amortization,
and other non-cash expenses ,that differ significantly from
VeriFone's, in a manner that VeriFone's management believes does not
reflect underlying operating performance in a manner that is
comparable to VeriFone's. Management also intends to use these
non-GAAP financial measures in VeriFone's budget and planning process.
Management also believes that the presentation of these non-GAAP
financial measures is useful to investors in comparing VeriFone's
operating performance in any period with its performance in other
periods and with the performance of other companies that represent
alternative investment opportunities. These non-GAAP financial
measures contain limitations and should be considered as a supplement
to, and not as a substitute for, or superior to, disclosures made in
accordance with GAAP.
These non-GAAP financial measures are not based on any
comprehensive set of accounting rules or principles and may therefore
differ from non-GAAP financial measures used by other companies. In
addition, these non-GAAP financial measures do not reflect all amounts
and costs, such as employee stock-based compensation costs, cash that
may be expended for future capital expenditures or contractual
commitments, working capital needs, cash used to service interest or
principal payments on VeriFone's debt, income taxes and the related
cash requirements, and restructuring charges, associated with
VeriFone's results of operations as determined in accordance with
GAAP.
Furthermore, VeriFone expects to continue to incur income and
expense items that are similar to those that are eliminated in the
non-GAAP adjustments described herein. Management compensates for
these limitations by also relying on the comparable GAAP financial
measures.
Note A: Acquisition related expenses.
VeriFone exclude certain
expenses that are the result of acquisitions. These expenses include
the amortization of purchased intangible assets, inventory step-up,
and deferred revenue step-down associated with our acquisitions, which
result in VeriFone recording expenses or contra-revenue in VeriFone's
GAAP financial statements that were either reflected in the historical
financial statements of the acquired company for periods prior to the
acquisition or relate to purchase accounting fair value adjustments
and for which there is no cash impact on VeriFone as well as
acquisition related integration and restructuring charges.
Furthermore, in the case of acquired product lines, had VeriFone
internally developed the products acquired, the amortization of
intangible assets and the expenses of uncompleted research and
development would have been expensed in prior periods. Acquisition
related charges result from events which arise from unforeseen
circumstances which often occur outside of the ordinary course of
business. Accordingly, VeriFone analyzes the performance of its
operations without regard to such expenses and contra revenue.
Note B: Other Charges.
VeriFone excludes certain expense that are
the result of either unique or unplanned events including the
following: (i) impairment charges; (ii) post-restatement incremental
professional services fees; (iii) legal fees for significant
litigation and similar matters and gain or loss on legal settlements,
net of related costs; (iv) restructuring charges; (v) foreign currency
translation gains or losses related to income or expenses which are
excluded in the non-GAAP financial measures and (vi) the income tax
effect on our financial statements of excluding items related to our
non-GAAP financial measures and changes in the valuation allowance of
deferred tax assets. It is difficult to estimate the amount or timing
of these items in advance. Although these events are reflected in our
GAAP financials, these expenses may limit the comparability of our
on-going operations with prior and future periods. Post-restatement
incremental professional services fees include those fees that are
incurred for incremental procedures for preparation, review and audit
of financial information prior to remediation of any deficiencies,
including material weaknesses, in our internal control over financial
reporting, and to assist in remediation. These incremental fees enable
management to conclude that our consolidated financial statements are
in accordance with GAAP. In the case of legal fees for significant
litigation and gain or loss on legal settlements, these fees and gains
or losses are typically recorded in or around the period in which the
matter is concluded or resolved even if the subject matter of the
underlying dispute may relate to multiple or different periods. As
such, we believe that including these expenses would not necessarily
reflect the underlying performance of our continuing operations for
the periods in which they are incurred. Restructuring charges, which
result from unforeseen circumstances and typically occur outside of
the ordinary course of continuing operations, are excluded from cost
of net revenues and operating expenses. Although these events are
reflected in our GAAP financials, excluding the effect of these
transactions promotes comparability of our non-GAAP financial results
with prior and future periods and best reflects our on-going
operations. Foreign currency translation gains or losses related to
income or expenses which are excluded in the non-GAAP financial
measures are excluded from other income (expense). We believe that it
is appropriate to be consistent in the treatment of the underlying
transaction and related currency gains or losses. VeriFone also
believes providing financial information with and without the income
tax effect of excluding items related to our non-GAAP financial
measures, provides our management and users of the financial
statements with better clarity regarding the on-going performance and
future liquidity of our business. Because of these factors, we assess
our operating performance with these amounts included and excluded,
and by providing this information, we believe that users of our
financial statements are better able to understand the financial
results of what we consider to be our continuing operations.
Note C: Restatement Expense.
Our Non-GAAP financial measures
eliminate the impact of restatement expenses. On December 3, 2007, we
announced that our management had identified errors in accounting
related to the valuation of in-transit inventory and allocation of
manufacturing and distribution overhead to inventory for our fiscal
year ended October 31, 2007. Restatement expenses include the cost of
the Audit Committee's independent investigation and professional
services expenses incurred to prepare, review and audit restated
financial statements for our fiscal year ended October 31, 2007.
VeriFone believes excluding these expenses in our Non-GAAP measures
promotes comparability of our non-GAAP financial results with prior
and future periods and best reflects our on-going operations.
Note D: Stock Based Compensation Related Items.
Our non-GAAP
financial measures eliminate the effect of expense for stock-based
compensation because they are non-cash expenses that management
believes are not reflective of ongoing operating results. In
particular, because of varying available valuation methodologies,
subjective assumptions and the variety of award types which effect the
calculations of stock-based compensation, we believe that the
exclusion of stock-based compensation allows for more accurate
comparisons of our operating results to our peer companies.
Stock-based compensation is very different from other forms of
compensation. A cash salary or bonus has a fixed and unvarying cash
cost. In contrast the expense association with an award of an option
is unrelated to the amount of compensation ultimately received by the
employee; and the cost to the company is based on valuation
methodology and underlying assumptions that may vary over time and
does not reflect any cash expenditure by the company. Furthermore, the
expense associated with granting an employee an option is spread over
multiple years and may be reversed based on forfeitures which may
differ from our original assumptions unlike cash compensation expense
which is typically recorded contemporaneously with the time of award
or payment.
Note E: Non-GAAP Net Income per Share Items.
VeriFone provides
basic non-GAAP net income per share and diluted non-GAAP net income
per share. The basic non-GAAP net income per share amount was
calculated based on our non-GAAP net income and the weighted average
number of shares outstanding during the reporting period. The diluted
non-GAAP income per share included additional dilution from potential
issuance of common stock, except when such issuances would be
anti-dilutive.
