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Shares of the payment terminal maker VeriFone Holdings Inc. soared after it issued restated earnings for fiscal 2007 and provided guidance through the end of fiscal 2009, though some analysts voiced concern about its revenue growth.
The San Jose company, whose fiscal year ends Oct. 31, also said it had named as its interim chief financial officer Clinton Knowles, a partner with the executive services firm Tatum LLC. He succeeded Barry Zwarenstein, who said in April that he would step down once VeriFone restated its earnings.
VeriFone, which made the announcements Tuesday, said in December that it had discovered errors in its financial reports dating to the first quarter of fiscal 2007. It eventually fired the manager responsible for the errors, which had stemmed from bad inventory record keeping by its Sacramento supply chain accounting team.
VeriFone also issued earnings reports for the first two quarters of fiscal 2008 and provided guidance that analysts called ambitious.
On a conference call Tuesday with analysts, VeriFone chief executive Douglas Bergeron expressed relief that this chapter of the company's history is over. "This day has been a long time coming and I'm grateful to everyone ... for their patience," he said.
For the third quarter of fiscal 2008, VeriFone expects net revenue to rise 10% to 11% from a year earlier, to a range of $256 million to $258 million. It expects a net loss of $3.8 million to $4.5 million. VeriFone plans to announce its third-quarter earnings next month. For the fourth quarter it expects revenue of $260 million to $268 million and net income of $8.3 million to $9.8 million.
For fiscal 2009 it expects revenue to rise 10% to 15%, to a range of $1.03 billion to $1.09 billion, and net income of $40.2 million to $52.7 million.
VeriFone's payment terminals for taxi cabs are selling well, Mr. Bergeron said. "If you are in or around New York City, you'll see our systems in more than half of the cabs out there," he said. VeriFone gets a share of the transactions paid electronically and generates additional revenue by selling advertising space on the terminal's screens. Its terminals are also in use in Philadelphia and Mexico City, and it announced a deal last week to place the systems in cabs in Australia.
Sales of terminals for restaurants and gas stations have been affected by the weak economy, because both industries have largely stopped spending on technology. Things may pick up for gas stations, Mr. Bergeron said, because of a mandate from the card companies, set to take effect in 2010, to increase security on pay-at-the pump transactions. So far few stations have done so.
In the first half of fiscal 2008 in North America, VeriFone "began to feel the first headwinds of slower economic growth" and faced challenges in Europe, Mr. Bergeron said. However, business in Asia, Latin America, and the Middle East was more promising.
For fiscal 2007, VeriFone swung to a net loss of $34 million, from a profit of $59.5 million the prior year. For the first quarter of fiscal 2008 net revenue dipped 14%, to $185.5 million, and the net loss widened 488%, to $33.5 million.
In the second quarter VeriFone's net revenue rose 7%, to $233 million, and its net loss increased 275%, to $18 million.
The earnings restatement and associated tax consultancy costs alone cost VeriFone $18.1 million in the first half of fiscal 2008, Mr. Bergeron said. In that period, VeriFone also incurred $4.4 million of expenses for a restructuring it began in January to reduce costs.
At midday Wednesday, VeriFone's shares were trading at $18.75, up 27% from Tuesday's closing price.
Tien-tsin Huang, an analyst at JPMorgan Securities Inc., wrote in a research note published Wednesday that "we expect a relief rally from yesterday's close but wouldn't be surprised if shares give back some of the after-hour gains as investors digest new guidance."
Though he characterized VeriFone's 2008 revenue so far as weak, he said its 2009 projections are "solid and achievable," and that the third-quarter guidance already shows some revenue growth.
Gil Luria, an analyst at Wedbush Morgan Securities, said in an interview Wednesday that VeriFone's 2009 guidance targets may be difficult to meet.
"They may be able to grow 10%, but that's ambitious," he said. "It's going to require a lot of stars aligning for them for that to happen" but "it's not impossible."
