[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / September 8, 2016 / Active Wall St. announces its post-earnings coverage on VeriFone Systems, Inc. (NYSE: PAY). The company reported its third quarter fiscal 2016 earnings on September 1, 2016. One of the world's largest makers of credit card and electronic-payment hardware reduced its full-year earnings and sales forecasts for a second consecutive quarter on weakening demand. Register with us now for your free membership at: http://www.activewallst.com/register/.
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Earnings Reviewed
For the third quarter ended July 31, 2016, VeriFone reported net loss of $31.1 million, or $(0.28) per share, compared to net income of $9.5 million, or $0.08 per share, in the year ago period. On an adjusted basis, the company posted net income of $0.42 per diluted share that topped the $0.40 per share forecasted by analysts. Net revenues for Q3 FY16 was $493 million, a 3% decline compared to the year ago period and came in below guidance of $515 million. The shortfall in revenue was attributed to a decline in Turkey and Latin America.
Revenue Details
For Q3 FY16, VeriFone's System revenues, which accounts for 59.8% of total revenue, fell 12.3% on y-o-y basis to $292.1 million. This was attributed to Turkey's political challenges; Latin America's escalating economic challenges; and lower multilane revenues in North America; partially offset by higher petro revenues. The company's Services division reported revenue of $196 million, up 10.8% on y-o-y basis. The increase in revenue was partly due to the benefit of recent acquisitions, higher sales, as the company on-board more clients on to its Payment as a Service solution in North America and additional petro and media revenue.
On geographical basis, revenues from North America declined 6% on y-o-y basis to $196 million, while Latin America revenue in Q3 FY16 tumbled 25.2% to $55.1 million. Asia Pacific revenues decreased 6.4% on y-o-y basis to $51.5 million. However, revenues from EMEA (Europe, Middle East and Africa); however revenues rose 10% from the year earlier quarter to $190 million.
Gross Margin
For Q3 FY16, VeriFone's non-GAAP gross margin improved 50 basis points (bps) on y-o-y basis to 42.2%. Operating expenses, as a percentage of revenues, increased to 43.6% from 36.5% in Q3 FY15. The company reported operating loss of $22.3 million in contrast to operating income of $20.3 million in the year ago quarter.
Balance Sheet
As of July 31, 2016, VeriFone had approximately $156.6 million in cash compared to $208.9 million as of Oct 31, 2015. The company ended the quarter with gross debt of $974 million and net debt of $817 million; this was a $19 million increase. Overall, cash conversion cycle was 60 days in Q3, this increased by 14 days from Q2 FY16.Verifone's days of inventory increased by 10 days due to a number of factors including a build-up of product to support its prior forecast for both Q3 and Q4 and a decision to ship more product by ocean versus air to reduce operational costs. For Q3 FY16, cash flow from operations was $13 million, and free cash flow was minus $11 million, reflecting both the higher inventory levels as well as restructuring related costs.
Outlook
For Q4 FY16, VeriFone is forecast non-GAAP revenues of approximately $460 million and non-GAAP earnings per share in the band of $0.28 per share to $0.29 per share. Analysts were expecting earnings of $0.50 per share on revenue of $536 million. For FY 2016, the company is projecting for earnings in the range of $1.64 per share to $1.65 per share, excluding some items, down from a June forecast of $1.85 per share. Sales are expected to be approximately $2 billion compared to its June outlook of $2.1 billion.
Stock Performance
At the close of yesterday's markets in the US, VeriFone Systems' stock was up 0.36%, finishing the day at $16.88. A total volume of 4.9 million shares were traded by the end of the session, which was higher than the 3 months average volume of 3.78 million. The stock has a PE ratio of 25.93.
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