VeriFone Reports In Line

VeriFone Systems Inc (PAY - Analyst Report) reported revenues of $317 million in the third quarter of fiscal 2011, up 21% year over year and up 8.5% sequentially.

Based in San Jose, California, VeriFone designs, markets and services a transaction automation system that facilitates electronic payments between consumers, merchants and financial institutions.

On a segment basis, System Solutions generated revenues of $253.6 million, up 19.0% year over year. Services revenues grew 30.9% year over year to $63.2 million.

North America delivered a 23% year-over-year growth. Revenue from international markets grew 41% year over year. Latin America grew 23%, Europe grew by 57% and Asia increased by 42%.

Management stated that advertising and taxi revenue were strong as the summer tourist season kicked in and sales continued to be strong to small business and ISO channels.

Margins

Gross margin (excluding stock-based compensation and one-time items) came in at 42.6%, compared to 43.4% in the previous quarter and 38.6% in the year-ago quarter. Including these items, gross margins came in at 41.5% compared to 41.9% in the previous quarter and 36.5% in the year-ago quarter.

Operating margin came in at 19.1% compared to 19.2% in the previous quarter and 16.3% in the year-ago quarter. Net income came in at $26.3 million or $0.29 per diluted share compared to net income of $25.2 million or $0.27 in the second quarter and net income of $18.6 million or $0.21 in the year-ago quarter.

Excluding one-time charges but including stock-based compensation expense, net income was $0.40 per share, in line with the Zacks Consensus Estimate.

VeriFone exited the quarter with cash and equivalents of $584.million, up from $531.5 million at the end of the previous quarter.

Outlook

Management expects revenues between $395 million and $400 million in the fourth quarter of 2011. Earnings per share are projected at 49 cents- 50 cents.

VeriFone upgraded its guidance for fiscal 2011.  For fiscal 2011, VeriFone projects revenues between $1.289 billion and $1.294 billion, up from the previous estimate of $1.170 billion and $1.180 billion. Earnings per share (excluding stock based compensation and one-time charges) are projected at $1.88 – $1.89, up from the previous estimate of $1.80 – $1.83. This excludes any impact from the Hypercom acquisition.

Earlier, VeriFone acquired Hypercom Corporation for approximately $7.32 per share or $485 million in an effort to accelerate expansion in key international markets such as Europe. Management expects that the acquisition of Hypercom will enable tremendous geographical and product and services diversification. Hypercom's presence in a number of important markets should propel VeriFone to grow outside the U.S.

The strong results and upgrade in guidance impressed investors as shares jumped 2.99% in after-hours trading to close at $36.12.

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