VeriFone reports rising revenues and profits for Q1

Net revenues, for the three months ended January 31, 2006, were $134.6 million, an increase of 21% over net revenues of $111.3 million for the comparable period of fiscal 2005. The increase was driven by a 24% increase in net revenues from VeriFone's International business and a 19% increase in net revenues in VeriFone's North America business.

Gross margins, under generally accepted accounting principles (GAAP), for the three months ended January 31, 2006 were 44.3%, compared with 38.3% for the first quarter of fiscal 2005. Gross margins, excluding non-cash amortization of purchased intangibles and stock-based compensation expense, expanded for the fifth consecutive quarter and reached a record level of 45.6% compared with 40.1% for the first quarter of fiscal 2005.

Net income, for the three months ended January 31, 2006, was $13.8 million, or $0.20 per diluted share, compared to $5.8 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 January 31, 2006 was $16.6 million, or $0.24 per diluted share, compared to $9.4 million, or $0.16 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 sixth consecutive quarter and reached a record level of $28.3 million, a 63% increase over the $17.3 million recorded in the three months ended January 31, 2005. As a percent of net revenues, EBITDA, as adjusted, for the three months ended January 31, 2006, reached a record level of 21%, compared to the 15.6% recorded in the three months ended January 31, 2005.

"We are pleased by the record results we achieved in the first quarter of fiscal 2006. Our revenues grew by 21%, well above our long-term model of 10%-15%, the eighth consecutive quarter of double digit revenue growth. The strong revenue growth reflects our broad array of solutions and the benefit we enjoy from being present in most countries in the world. We were able to convert this revenue increase into continued operating margin expansion and strong earnings per share growth as a result of our ability to execute several high value product launches over the last several quarters," said Douglas G. Bergeron, Chairman and Chief Executive Officer.

First Quarter Highlights

VeriFone signed its first major contract with FIMPE, the association of Mexican banks that is managing this multi-year national terminalization initiative, for approximately $11 million for systems and services to be deployed over the next approximately six months.

As previously announced, in December we received one of the largest Indian orders in VeriFone's history, winning a 50,000 unit order from ICICI, the country's largest private bank for Vx 510 systems. The Indian market for point-of-sales systems is growing rapidly and has vast potential given the size and increasing prosperity of the middle class and increasing participation of foreign banks.

In China, we recently announced that our Vx Solutions have been certified to meet the People's Bank of China's standard for chip card payment acceptance, indicating our close alliance with this major bank. The bank's PBOC V2 standard is a localized version of EMV for domestic bank cards. We will now be able to support EMV cards and China UnionPay branded chip cards, inside and outside of China. VeriFone has a strong presence in all markets that China UnionPay has penetrated in Asia, Europe and the USA.

VeriFone recently announced a major multi-year, multi-million dollar contract award from General Electric's Retail Sales Finance Unit, one of the leading providers of private label credit card programs. GE's Retail Sales Finance has relationships with over 200 retail partners and 60,000 independent dealers in the US alone.

VeriFone's MX870 received PCI PED Security approval from the bankcard associations making it the only PCI certified quarter-inch VGA screen solution in the market. In addition, VeriFone's Vx 570 recently received PCI PED Security approval and began shipping during the quarter.

VeriFone announced the VisualPayments Suite, a set of secure, server-based applications for retailers to easily manage data flow to and from consumer-facing solutions in the checkout lane. The Suite streamlines the set-up and configuration of payment devices, providing remote diagnostics, troubleshooting and downloads. It also provides electronic signature capture, archival and retrieval. In addition, it provides the first practical and economical way to deliver branding, promotion and advertising content directly to the point-of-sale. This unique and innovative software suite is a browser-based, highly flexible, scalable and secure solution and is easily customizable to retailers' unique requirements.