VeriFone Holdings, Inc. (PAY) yesterday reported revenues of $217.8 million in its fiscal fourth quarter, up 11% from a year ago level and beating management’s expectations of $208 million to $215 million. International business decreased 14% while net revenues North America business decreased 6%. In particular, Asia grew 9%, and Europe increased 2%.

Gross margin came in at 37.9% compared to 34.7% in the year-ago quarter. This was mainly due to a lower inventory charge compared to the year-ago quarter.

Net income came in at 26 cents per share easily beating the Zacks Consensus Estimate of 20 cents. During the quarter, the company generated $75 million of cash from operations. Inventory declined by $2.6 million in the fourth quarter to $96 million, compared to $168 million at the end of fiscal 2008. The company ended the quarter with cash and equivalents of $325 million.

For full fiscal year 2009, revenues came in at $844.7 million, down 8% from a year ago. Gross margin came in at 36% compared to 35.8% in the year-ago quarter. Net income per share came in at 85 cents per share easily beating the Zacks Consensus Estimate of 65 cents.

Management stated that it saw a recovery in all international markets and some signs of improvement in the domestic marketplace. Management believes that the growth in American markets is driven by recovery pushed by the stimulus and environment should become challenging once the stimulus finishes.

In the past few quarters, VeriFone experienced lower-than-expected revenue levels and softer demand globally due to weakened markets and adverse economic conditions. However, business started showing signs of improvement from the third quarter onwards. Management is now eyeing emerging markets for growth as there is little scope for expansion in developed countries.

Going forward, management expects revenues between $215 million and $218 million in the first quarter of fiscal 2010. Earnings per share is projected around 22 cents – 23 cents.
For the full year of fiscal 2010, VeriFone expects net revenues to be between $900 million and $915 million. Earnings per share is estimated between 97 cents and 107 cents.

Our long-term recommendation for VeriFone is Neutral, which means the stock will perform in line with the broader market.

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

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