VeriFone's (PAY) Q1 Earnings Match Estimates, Revenues Top

VeriFone Systems Inc.PAY reported first-quarter fiscal 2018 non-GAAP earnings of 23 cents, which matched the Zacks Consensus Estimate. The figure jumped 9.5% from the year-ago quarter.

Non-GAAP revenues of $436.8 million beat the Zacks Consensus Estimate of $419.5 million, but declined 4.3% year over year. In the year-ago quarter, the company benefitted largely from sudden robust demand in India, courtesy of demonetization which led to a tough year-over-year comparison. Besides, divestitures of the China business, Petro Media and the Taxi businesses also negatively impacted results.

Notably, VeriFone's shares have lost 11.3% in the past year against the industry 's growth of 36.6%.

Quarter Details

System revenues (57.3% of total revenues) declined 8.4% year over year to $243.1 million, owing to the headwinds arising from the U.S. petro business and Indian markets. However, revenues from Latin America, EMEA and North America SMB vertical contributed amply.

Services (45.6% of total revenues) increased 2.8% year over year to $193.7 million. Excluding the results of Petro Media and the Taxi business in both periods, adjusted services growth was approximately 11% year over year.

Non-GAAP revenues from North America and Asia Pacific fell 25.4% and 35.5% from the year-ago quarter to $123.8 million and $40.6 million, respectively. However, EMEA and Latin America revenues increased 9.5% and 54.9% to $184.1 million and $88.3 million, respectively. Growth in Latin America was fueled by Brazil, Argentina and Mexico.

Connected device footprint totaled approximately 1.9 million terminals. The increasing adoption is evident from the 13% recurring services revenues generated in the quarter.

In the quarter, new product sales accounted for 7% of total system sales. VeriFone's global mPOS revenues continue to be a strong double-digit growth driver, which increased significantly in the quarter. The company's e280 mPOS device is also gaining traction.

Operating Details

Non-GAAP gross margin was 41.2%, which expanded 230 basis points (bps) from the year-ago quarter.

Systems margin of 36.8% was lower sequentially as well as on a year-over-year basis, affected by unfavorable geographical mix. Services margins were 48%, up 280 bps driven by favorable service mix in North America.

Non-GAAP operating margin expanded 70 bps from the prior-year quarter to 10.3%.

Balance Sheet

As of Jan 31 2018, VeriFone had $152.8 million in cash & cash equivalents compared with $131 million as of Oct 31 2017. Long-term debt totaled $775.4 million compared with $762 million at the end of the previous quarter.

Cash flow from operations was $51.6 million compared with $26 million in the previous quarter. Meanwhile, free cash outflow was $38 million in the quarter.

The company repurchased 2.8 million shares in the quarter.

Verifone Systems, Inc. Price, Consensus and EPS Surprise

Verifone Systems, Inc. Price, Consensus and EPS Surprise | Verifone Systems, Inc. Quote


For second-quarter fiscal 2018, VeriFone projects non-GAAP revenues of $435 million. The company expects earnings between 27 and 28 cents per share.

The company reiterated guidance for fiscal 2018. Non-GAAP revenues are expected to between $1.775 billion and $1.800 billion, adjusted to exclude divested business. Earnings are projected to be in the range of $1.47-$1.50.

Zacks Rank & Key Picks

VeriFone carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include NVIDIA Corporation NVDA , Lam Research Corporation LRCX and Paycom Software PAYC , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Long-term earnings growth for NVIDIA, Lam Research and Paycom is projected to be 10.3%, 14.9% and 23.8%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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