VeriFone settles SEC accounting probe; posts Q3 profit

Source: VeriFone

VeriFone Holdings, Inc. (NYSE: PAY) announced that it has entered into a settlement with the Securities and Exchange Commission in connection with the previously disclosed investigation into the Company's 2007 restatement of certain of its quarterly financial results.

The SEC's complaint recognizes that the Company's restatement resulted principally from incorrect inventory accounting adjustments made by a former employee, but does not accuse the Company of intending to misstate its financial results or to mislead anyone. Without admitting or denying the SEC's allegations, VeriFone has agreed to a permanent injunction against future violations of certain reporting, books and records and internal accounting control provisions of the federal securities laws. No other charge or monetary penalty was assessed against VeriFone, which cooperated fully with the Commission's investigation. This settlement is subject to court approval and concludes the SEC's investigation of this matter with respect to VeriFone.

"VeriFone is pleased to have resolved this matter with the SEC. We will continue to focus on serving our customers, growing our businesses, and creating a more secure electronic payment environment," said Douglas G. Bergeron, VeriFone's Chief Executive Officer. "Over the past 18 months, the Company has substantially improved its governance and internal controls in order to prevent a recurrence of this type of event."

Separately, VeriFone Holdings (NYSE: PAY), the global leader in secure electronic payment solutions, today announced financial results for the three months ended July 31, 2009.

Net revenues for the three months ended July 31, 2009, were $211.2 million, compared to $201.6 million of net revenues in the previous quarter, and $258.7 million for the comparable period of 2008.

Non-GAAP gross margins were 36.8%, for the three months ended July 31, 2009, compared to 33.8% in the prior quarter and 37.6% for the comparable period of 2008. GAAP gross margins for the three months ended July 31, 2009, were 34.1% compared to 32.2% in the prior quarter and 34.2% for the three months ended July 31, 2008.

Non-GAAP net income, for the three months ended July 31, 2009, was $0.26 per diluted share, compared to $0.17 in the prior quarter and $0.32 per diluted share, for the comparable period in 2008.

GAAP net income per share for the three months ended July 31, 2009, was $0.26 per diluted share, compared to $0.22 in the prior quarter and a loss of ($0.09) per diluted share, for the comparable period of fiscal 2008.

"We believe that our business has begun to recover and we are seeing mildly improving market conditions in both our domestic and international markets. Our sequential non-GAAP EPS growth of 53% was driven by a solid revenue performance and a sequential expansion of gross margins," said Douglas G. Bergeron, Chief Executive Officer. "We had another excellent quarter of balance sheet strengthening and we grew cash balances by over $50 million through strong earnings and continued inventory reductions."

Third Quarter Highlights
VeriFone and RBS WorldPay agreed to work jointly towards marketing VeriFone's VeriShield Protect end-to-end solution for encrypting payment card data. By encrypting the card number on swipe, right at the point of sale, RBS WorldPay merchants who choose the VeriShield Protect solution will be able to dramatically reduce both their own risk and that of their customers as well. With end-to-end encryption, even in the event of a breach of the retailer's system, any stolen data would be unusable.

VeriFone Transportation Systems (VTS) announced that it has expanded its leadership position in the taxi industry by installing more than 1,000 state-of-the-art payment and passenger information monitors in Boston-area taxis. Under regulations that went into effect January 1, 2009, all taxis licensed by the City of Boston are required to provide credit card payment systems for use by passengers. VTS provides next generation solutions that deliver wireless payment, navigation, dispatch, text messaging and real time information to the transit, vehicle for hire, dispatch and cargo transportation industries.

Guidance - Fourth Quarter 2009 and Full Year
For the fourth quarter ending October 31, 2009, VeriFone now expects to report net revenues in the range of $208 million to $215 million. Non-GAAP net income per share is now projected to be in the range of $0.23 to $0.25.

For the full year of fiscal 2009, VeriFone expects net revenues to be in the range of $835 million to $842 million. Non-GAAP net income per share is expected to be in the range of $0.83 to $0.85, for the same time period.

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