VeriFone Systems Inc (PAY) reported revenues of $284 million in the first quarter of fiscal 2011, up 3.0% sequentially and up 27% year over year, beating the Zacks Consensus Estimate of $268 million.
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 $225.7 million, up 20.0% year over year. Revenues from the petroleum markets increased 30% year over year as demand continued to be strong in the direct channel to major oil companies and large independent marketers. Services revenues grew 64.1% year over year to $58.0 million.
Latin America and Europe were the growth engines recording year over year growth rates of 23% and 14%, respectively. Asia recorded a 12% year-over-year growth.
Gross margin (excluding stock-based compensation and one-time items) came in at 41%, up from 40% in the previous quarter and 39% in the year-ago quarter. Including these items, gross margins came in at 39% compared to 38% in the previous quarter and 37% in the year-ago quarter.
The growth in gross margin was driven by strong margins in the services business and continued improvement in system solutions due to cost savings and product mix.
Operating margin of 18.6% was up from 16.0% in the year-ago quarter and 17.6% in the previous quarter.
Net income came in at $32.0 million or 35 cents per share in the quarter compared to a net income of $10.6 million or 12 cents per share in the year-ago quarter and a net income of $49.4 million or 55 cents in the prior quarter.
Excluding one-time charges but including stock-based compensation expense, net income was 35 cents per share, easily beating the Zacks Consensus Estimate of 33 cents.
VeriFone exited the quarter with cash and equivalents of $479.2 million, up from $445.1 million from the previous quarter. Days Sales Outstanding (DSO) came in at 54, up from 46 days at the end of the previous quarter.
Outlook Ahead
Management expects revenues between $280 million and $284 million in the second quarter of 2011. Earnings per share are projected around 42 cents- 43 cents.
VeriFone upgraded its guidance for fiscal 2011. For fiscal 2011, VeriFone projects revenues between $1.150 billion and $1.160 billion, up from the previous estimate of $1.130 billion and $1.150 billion. Earnings per share (excluding stock based compensation and one-time charges) are projected around $1.75 – $1.80, up from the previous estimate of $1.60 – $1.70.
Earlier, VeriFone announced that it will acquire Hypercom Corporation (HYC) for approximately $7.32 per share or $485 million in an effort to accelerate expansion in key international markets such as Europe. The acquisition is expected to close in the second half of 2011.
Strong results and positive guidance impressed investors. Shares were up 4.24% to $46.50 in after-hours trading. In regular trading, shares lost 1.83% to close at $44.61.
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