Revenues and Earnings per Share Exceed Guidance
VeriFone Systems, Inc. (NYSE: PAY):
Second Quarter Financial Highlights
- GAAP and Non-GAAP net revenues of $490
million
- GAAP net income per diluted share of
$0.15
- Non-GAAP net income per diluted share
of $0.44
- Operating cash flow of $56 million
VeriFone Systems, Inc. (NYSE: PAY), the global leader in secure
electronic payment solutions, today announced financial results for
the three months ended April 30, 2015. GAAP net revenues for the
quarter were $490 million, compared to $466 million a year ago, a
5% increase. Non-GAAP net revenues were $490 million, compared to
$467 million a year ago, a 5% increase on a reported basis, and a
14% increase on a constant currency basis. GAAP net income per
diluted share for the quarter was $0.15, compared to a net loss of
$0.22 a year ago. Non-GAAP net income per diluted share was $0.44,
compared to $0.37 a year ago, a 19% increase.
“Q2 was an important quarter for Verifone. The team performed
extremely well across a number of key areas as we achieved record
North America results while also gaining share across several key
European markets,” said Paul Galant, Chief Executive Officer of
Verifone. “The progress we are making in our Year of Product with
more certified solutions and offerings is beginning to yield
benefits. Our clients are taking notice and we are earning both
their first call and their business.”
The table below provides additional summary GAAP and non-GAAP
financial information and comparisons.
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGES)
Three Months Ended April 30, 2015 2014
Change (2)
GAAP: Net revenues $ 490 $ 466 5 % Gross margin as a
% of net revenues 41.6 % 37.6 %
4.0pts
Net income (loss) per diluted share $ 0.15 $ (0.22 ) nm
Non-GAAP (1): Net revenues $ 490 $ 467 5 % Gross margin as a
% of net revenues 42.8 % 41.4 %
1.4pts
Net income per diluted share $ 0.44 $ 0.37 19 %
(1) Reconciliations for the non-GAAP
measures are provided at the end of this press release
(2) "nm" means not meaningful
Additional Financial and Business Highlights
- Achieved record North America net
revenues for the 2nd consecutive quarter driven by security and EMV
migration, and momentum for mobility solutions
- Secured 28 large U.S. retail client
wins for EMV-capable devices including 13 clients rolling out
terminals for the first time
- Continued to grow U.S. SMB market share
through processing partners and the ISO channel, propelled by
additional certified products and EMV and NFC demand
- Increased Petrol revenues more than 60%
year-over-year as demand continued for our next-generation site
controllers and point of sale (POS) systems
- Signed a substantial deal with one of
the world’s largest convenience store retailers to install
LiftRetail in-store marketing solution in more than 4,500
locations
- Completed certifications for our new
VX685 portable terminal in Brazil and secured orders from two large
processors
- Increased market share from a year ago
in key European countries, including France, Germany, Spain,
Portugal, Italy, and the U.K.
- Signed 31 U.S. merchants for Secure
Commerce Architecture to help remove consumer payment data from
their integrated POS
- Continued rollout of Payment as a
Service solutions to large banking clients in Australia and New
Zealand
Guidance
Third fiscal quarter of 2015:
- Non-GAAP net revenues of $495 million
to $500 million
- Non-GAAP net income per diluted share
of $0.44 to $0.46
Full fiscal year 2015:
- Non-GAAP net revenues of $1.995 billion
to $2.0 billion
- Non-GAAP net income per diluted share
of $1.81 to $1.84
Conference Call
Verifone will hold its earnings conference call today, June 4th,
at 1:30 pm (PT). To listen to the call and view the slides, visit
Verifone’s website http://ir.verifone.com. The recorded audio
webcast will be available on Verifone's website until June 11,
2015.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on management's current
expectations or beliefs and on currently available competitive,
financial and economic data and are subject to uncertainty and
changes in circumstances. Actual results may vary materially from
those expressed or implied by the forward-looking statements herein
due to changes in economic, business, competitive, technological,
and/or regulatory factors, and other risks and uncertainties
affecting the operation of the business of VeriFone Systems, Inc.,
including many factors beyond our control. These risks and
uncertainties include, but are not limited to, those associated
with: execution of our strategic plan and business and operational
initiatives, including whether the expected benefits of our plan
and initiatives are achieved within expected timeframes or at all,
short product cycles and rapidly changing technologies and customer
preferences, our ability to maintain competitive leadership
position with respect to our payment solution offerings, our
dependence on a limited number of customers, the conduct of our
business and operations internationally, our ability to protect our
computer systems and networks from fraud, cyber-attacks or security
breaches, our assumptions, judgments and estimates regarding the
impact on our business of political instability in markets where we
conduct business, uncertainty in the global economic environment
and financial markets, the status of our relationships with and
condition of third parties such as our contract manufacturers, key
customers, distributors and key suppliers and service providers
upon whom we rely in the conduct of our business, the impact of
foreign currency exchange rate fluctuations on our business and
results and our ability to effectively hedge our exposure to
foreign currency exchange rate fluctuations, and our dependence on
a limited number of key employees. For a further list and
description of the risks and uncertainties affecting the operations
of our business, see our filings with the Securities and Exchange
Commission, including our annual report on Form 10-K and our
quarterly reports on Form 10-Q. The forward-looking statements
speak only as of the date such statements are made. Verifone is
under no obligation to, and expressly disclaims any obligation to,
update or alter its forward-looking statements, whether as a result
of new information, future events, changes in assumptions or
otherwise.
About Verifone
Verifone is transforming everyday transactions into
opportunities for connected commerce. We’re connecting more than 27
million payment devices to the cloud—merging the online and
in-store shopping experience and creating the next generation of
digital engagement between merchants and consumers. We are built on
a 30-year history of uncompromised security. Our people are known
as trusted experts that work with our clients and partners, helping
to solve their most complex payments challenges. We have clients
and partners in more than 150 countries, including the world’s
best-known retail brands, financial institutions and payment
providers.
Verifone.com | (NYSE: PAY) | @verifone
Additional Resources:
http://ir.verifone.com
VERIFONE SYSTEMS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED, IN MILLIONS, EXCEPT PER
SHARE DATA AND PERCENTAGES)
Three Months Ended April 30, Six Months Ended
April 30, 2015 2014 % Change
(1) 2015 2014 % Change (1) Net
revenues: System solutions $ 324.3 $ 290.7 11.6 % $ 637.7 $
551.9 15.5 % Services 165.8 175.7
(5.6
)
%
338.7 350.6
(3.4
)
%
Total net revenues 490.1 466.4 5.1 % 976.4
902.5
8.2
%
Cost of net revenues: System solutions 189.0 187.5
0.8 % 374.6 355.1 5.5 % Services 97.2 103.6
(6.2
)
%
198.7 201.9
(1.6
)
%
Total cost of net revenues 286.2 291.1
(1.7
)
%
573.3 557.0
2.9
%
Total gross margin 203.9 175.3 16.3 %
403.1 345.5 16.7 %
Operating expenses:
Research and development 47.6 50.0
(4.8
)
%
96.5 100.5
(4.0
)
%
Sales and marketing 55.3 56.4
(2.0
)
%
112.8 107.0 5.4 % General and administrative 49.5 48.7
1.6
% 96.8 99.7
(2.9
)
%
Litigation settlement and loss contingency expense 1.2 9.0
(86.7
)
%
1.2 9.0
(86.7
)
%
Amortization of purchased intangible assets 20.6 24.7
(16.6
)
%
42.9 49.3
(13.0
)
%
Total operating expenses 174.2 188.8
(7.7
)
%
350.2 365.5
(4.2
)
%
Operating income (loss) 29.7 (13.5 ) nm 52.9 (20.0 ) nm
Interest, net (7.4 ) (9.5 )
(22.1
)
%
(15.3 ) (20.9 )
(26.8
)
%
Other income (expense), net (3.2 ) (1.2 ) nm (3.0 ) (6.3 ) nm
Income (loss) before income taxes 19.1 (24.2 ) nm 34.6 (47.2 ) nm
Income tax provision (benefit) 1.4 (0.7 ) nm 2.8 (7.6
) nm
Consolidated net income (loss) 17.7 (23.5 ) nm 31.8
(39.6 ) nm
Net income attributable to noncontrolling
interests
(0.1 ) (0.4 ) nm (0.4 ) (0.5 ) nm
Net income (loss) attributable to
VeriFone Systems, Inc. stockholders
$ 17.6 $ (23.9 ) nm $ 31.4 $ (40.1 ) nm
Net income (loss) per share
attributable to VeriFone Systems, Inc. stockholders:
Basic $ 0.15 $ (0.22 ) $ 0.28 $ (0.36 ) Diluted $
0.15 $ (0.22 ) $ 0.27 $ (0.36 )
Weighted average number of shares used
in computing net income (loss) per share:
Basic 113.9 111.1 113.7 110.7 Diluted
115.9 111.1 115.7 110.7 (1) "nm"
means not meaningful
VERIFONE SYSTEMS, INC. NET
REVENUES INFORMATION (UNAUDITED, IN MILLIONS, EXCEPT
PERCENTAGES) Three Months
Ended Six Months Ended Note
April 30,2015
January 31,2015
April 30,2014
% Change(1) SEQ
% Change(1) YoY
April 30,2015
April 30,2014
% Change(1)
GAAP net revenues: North America $ 193.0 $ 160.3 $ 125.3
20.4 % 54.0 % $ 353.3 $ 247.4 42.8 % LAC 68.1 71.1 83.3
(4.2
)
%
(18.2
)
%
139.1 151.7
(8.3
)
%
EMEA 179.4 180.0 190.2
(0.3
)
%
(5.7
)
%
359.6 375.5
(4.2
)
%
Asia-Pacific 49.6 74.8 67.6
(33.7
)
%
(26.6
)
%
124.4 127.9
(2.7
)
%
Total $ 490.1 $ 486.2 $ 466.4 0.8 % 5.1 % $
976.4 $ 902.5 8.2 %
Non-GAAP net revenues:
(2) North America A $ 193.0 $ 160.4 $ 125.3 20.3 % 54.0 % $
353.4 $ 247.4 42.8 % LAC 68.1 71.1 83.3
(4.2
)
%
(18.2
)
%
139.1 151.7
(8.3
)
%
EMEA A 179.6 180.5 190.6
(0.5
)
%
(5.8
)
%
360.2 376.9
(4.4
)
%
Asia-Pacific A 49.6 74.9 67.6
(33.8
)
%
(26.6
)
%
124.5 127.9
(2.7
)
%
Total $ 490.3 $ 486.9 $ 466.8 0.7 % 5.0 % $
977.2 $ 903.9 8.1 %
GAAP net revenues
$ 490.1 $ 486.2 $ 466.4
0.8 % 5.1 % $ 976.4
$ 902.5 8.2 % Plus: Non-GAAP net
revenues adjustments A 0.2 0.7 0.4 nm nm 0.8
1.4 nm
Non-GAAP net revenues (2) $
490.3 $ 486.9 $
466.8 0.7 % 5.0 %
$ 977.2 $ 903.9
8.1 %
(1) "nm" means not meaningful.
(2) Reconciliations for the non-GAAP
measures are provided at the end of this press release.
For three months ended April 30, 2015
compared withthree months ended April 30, 2014
For six months ended April 30, 2015
compared with sixmonths ended April 30, 2014
Netrevenuesgrowth
Impact dueto Non-GAAP
netrevenuesadjustments(A)
Non-GAAP
netrevenuesgrowth
Impact dueto foreigncurrency(B)
Non-GAAP
netrevenuesat
constantcurrencygrowth
Netrevenuesgrowth
Impact dueto Non-GAAP
netrevenuesadjustments(A)
Non-GAAP
netrevenuesgrowth
Impact dueto foreigncurrency(B)
Non-GAAP
netrevenuesat
constantcurrencygrowth
North America 54.0 % 0.0 pts 54.0 %
(0.4
)
pts
54.4 % 42.8 % 0.0 pts 42.8 %
(0.3
)
pts
43.1 % LAC
(18.2
)
%
0.0 pts
(18.2
)
%
(12.1
)
pts
(6.1
)
%
(8.3
)
%
0.0 pts
(8.3
)
%
(11.7
)
pts
3.4 % EMEA
(5.7
)
%
0.1 pts
(5.8
)
%
(13.4
)
pts
7.6 %
(4.2
)
%
0.2 pts
(4.4
)
%
(10.2
)
pts
5.8 % Asia-Pacific
(26.6
)
%
0.0 pts
(26.6
)
%
(5.3
)
pts
(21.3
)
%
(2.7
)
%
0.0 pts
(2.7
)
%
(4.4
)
pts
1.7 % Total
5.1
% 0.1 pts 5.0 %
(8.6
)
pts
13.6 % 8.2 % 0.1 pts 8.1 %
(7.0
)
pts
15.1 %
VERIFONE SYSTEMS, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN MILLIONS)
April 30, 2015 October 31,
2014 ASSETS Current assets: Cash and cash equivalents $
234.2 $ 250.2 Accounts receivable, net of allowances of $9.0 and
$9.9 328.4 305.5 Inventories 129.4 124.3 Prepaid expenses and other
current assets 112.8 105.6
Total current
assets 804.8 785.6 Fixed assets, net 178.4 177.7 Purchased
intangible assets, net 360.8 457.6 Goodwill 1,087.1 1,185.9
Deferred tax assets, net 13.2 30.4 Other long-term assets 68.6
65.0
Total assets $ 2,512.9 $ 2,702.2
LIABILITIES AND EQUITY Current liabilities:
Accounts payable $ 170.9 $ 161.2 Accruals and other current
liabilities 199.1 207.0 Deferred revenue, net 92.4 92.1 Short-term
debt 32.0 32.1
Total current liabilities 494.4
492.4 Long-term deferred revenue, net 53.1 51.0 Long-term debt
811.4 851.0 Long-term deferred tax liabilities, net 121.4 136.1
Other long-term liabilities 70.2 101.0
Total
liabilities 1,550.5 1,631.5 Redeemable noncontrolling
interest in subsidiary — 0.8 Stockholders’ equity: Common
stock 1.1 1.1 Additional paid-in capital 1,705.4 1,675.7
Accumulated deficit (506.8 ) (538.2 ) Accumulated other
comprehensive loss (271.8 ) (104.8 )
Total VeriFone Systems,
Inc. stockholders’ equity 927.9 1,033.8 Noncontrolling interest
in subsidiaries 34.5 36.1
Total equity
962.4
1069.9
Total liabilities and equity $ 2,512.9
$ 2,702.2
VERIFONE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN MILLIONS)
Six Months Ended April 30, 2015 2014
Cash flows from operating activities Consolidated net income
(loss) $ 31.8 $ (39.6 )
Adjustments to reconcile consolidated net
income (loss) to net cash provided by operating activities:
Depreciation and amortization, net 86.3 106.1 Stock-based
compensation expense 21.0 27.6 Deferred income taxes, net (7.2 )
(14.4 ) Other 10.0 6.4 Net cash provided by operating
activities before changes in operating assets and liabilities 141.9
86.1 Changes in operating assets and liabilities:
Accounts receivable, net (35.2 ) (16.7 ) Inventories (11.7 ) 24.9
Prepaid expenses and other assets (19.3 ) 4.5 Accounts payable 17.3
29.8 Deferred revenue, net 12.7 18.8 Other current and long-term
liabilities (8.3 ) (59.0 ) Net change in operating assets and
liabilities (44.5 ) 2.3 Net cash provided by operating
activities 97.4 88.4
Cash flows from
investing activities Capital expenditures (48.9 ) (41.9 )
Acquisition of businesses, net of cash and cash equivalents
acquired (11.0 ) — Other investing activities, net 0.1 2.6
Net cash used in investing activities (59.8 ) (39.3 )
Cash flows from financing activities Proceeds from debt, net
of issuance costs 30.0 86.9 Repayments of debt (70.2 ) (182.6 )
Proceeds from issuance of common stock through employee equity
incentive plans 9.5 10.4 Other financing activities, net (2.2 )
(2.0 ) Net cash used in financing activities (32.9 ) (87.3 )
Effect of foreign currency exchange rate changes on cash and cash
equivalents (20.7 ) (0.2 ) Net decrease in cash and cash
equivalents (16.0 ) (38.4 ) Cash and cash equivalents, beginning of
period 250.2 268.2 Cash and cash equivalents, end of
period $ 234.2 $ 229.8
VERIFONE SYSTEMS,
INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND
PERCENTAGES) Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome
Incometaxprovision
Net incomeattributableto
VeriFoneSystems, Inc.stockholders
Three Months Ended April 30, 2015
GAAP $ 490.1 $ 203.9 41.6
% $ 29.7 $ 1.4 $
17.6 Adjustments:
Amortization of step-down in deferred
servicesnet revenues at acquisition
A 0.2 0.2 0.2 — 0.2 Amortization of purchased intangible assets C —
4.6 25.2 — 25.2 Other merger and acquisition related expenses C —
0.4 0.5 — 1.5 Stock based compensation D — 0.4 8.9 — 8.9
Restructuring charges E — — 0.2 — 0.2 Other charges and income E —
0.2 4.6 — 4.6
Income tax effect of non-GAAP exclusions
andadjustment to cash basis tax rate
E — — — 7.3 (7.3 ) Non-GAAP $ 490.3
$ 209.7 42.8 % $ 69.3 $ 8.7 $ 50.9
Weighted average number of
shares used in computing net income
pershare:
Net income per shareattributable
to VeriFone Systems, Inc. stockholders (1)
Basic Diluted Basic Diluted GAAP
113.9 115.9
$ 0.15 $
0.15 Non-GAAP 113.9 115.9 $ 0.45
$ 0.44
(1) Net income per share is calculated by
dividing the Net income attributable to VeriFone Systems, Inc.
stockholders by the Weighted average number of shares.
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (UNAUDITED, IN MILLIONS, EXCEPT PER SHARE
AMOUNTS AND PERCENTAGES) Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome
Incometaxprovision
Net incomeattributableto
VeriFoneSystems, Inc.stockholders
Three Months Ended January 31, 2015 GAAP $
486.2 $ 199.2 41.0 %
$ 23.2
$ 1.4 $ 13.8 Adjustments:
Amortization of step-down in deferred
servicesnet revenues at acquisition
A 0.7 0.7 0.7 — 0.7 Amortization of purchased intangible assets C —
4.7 27.0 — 27.0 Other merger and acquisition related expenses C —
0.3 0.7 — (1.9 ) Stock based compensation D — 0.7 12.2 — 12.2
Restructuring charges E — — 1.4 — 1.4 Other charges and income E —
0.8 4.9 — 4.9
Income tax effect of non-GAAP exclusions
andadjustment to cash basis tax rate
E — — — 7.3 (7.3 ) Non-GAAP $ 486.9
$ 206.4 42.4 % $ 70.1 $ 8.7 $ 50.8
Weighted averagenumber of
sharesused in computing net income pershare:
Net income per shareattributable
to VeriFoneSystems, Inc. stockholders(1)
Basic Diluted Basic Diluted GAAP
113.4 115.5 $ 0.12
$ 0.12 Non-GAAP 113.4 115.5 $
0.45 $ 0.44
(1) Net income per share is calculated by
dividing the Net income attributable to VeriFone Systems, Inc.
stockholders by the Weighted average number of shares.
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (UNAUDITED, IN MILLIONS, EXCEPT PER SHARE
AMOUNTS AND PERCENTAGES) Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome(loss)
Incometaxprovision(benefit)
Net
income(loss)attributable
toVeriFoneSystems, Inc.stockholders
Three Months Ended April 30, 2014 GAAP $
466.4 $ 175.3 37.6 % $
(13.5 ) $ (0.7 ) $
(23.9 ) Adjustments:
Amortization of step-down in deferred
servicesnet revenues at acquisition
A 0.4 0.4 0.4 — 0.4 Amortization of purchased intangible assets C —
11.1 35.7 — 35.7 Other merger and acquisition related expenses C —
1.7 2.9 — 2.5 Stock based compensation D — 0.2 11.9 — 11.9
Restructuring charges E — 0.9 5.7 — 5.7 Other charges and income E
— 3.7 16.9 — 17.0
Income tax effect of non-GAAP exclusions
andadjustment to cash basis tax rate
E — — — 7.7 (7.7 ) Non-GAAP $ 466.8
$ 193.3 41.4 % $ 60.0 $ 7.0 $ 41.6
Weighted averagenumber of
sharesused in computingnet income (loss)per
share:
Net income (loss) per
shareattributable to VeriFone Systems, Inc.
stockholders (1)
Basic Diluted Basic Diluted GAAP
111.1 111.1 $ (0.22 ) $
(0.22 ) Adjustment for diluted shares F — 2.4
Non-GAAP 111.1 113.5 $ 0.37 $ 0.37
(1) Net income (loss) per share is
calculated by dividing the Net income (loss) attributable to
VeriFone Systems, Inc. stockholders by the Weighted average number
of shares.
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (UNAUDITED, IN MILLIONS, EXCEPT PER SHARE
AMOUNTS AND PERCENTAGES)
Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome
Incometaxprovision
Net incomeattributableto
VeriFoneSystems, Inc.stockholders
Six Months Ended April 30, 2015 GAAP $
976.4 $ 403.1 41.3 % $
52.9 $ 2.8 $ 31.4 Adjustments:
Amortization of step-down in deferred
servicesnet revenues at acquisition
A 0.8 0.8 0.8 — 0.8 Amortization of purchased intangible assets C —
9.3 52.2 — 52.2 Other merger and acquisition related expenses C —
0.7 1.4 — (0.3 ) Stock based compensation D — 1.1 21.0 — 21.0
Restructure charges E — — 1.5 — 1.5 Other charges and income E —
1.0 9.6 — 9.6
Income tax effect of non-GAAP exclusions
andadjustment to cash basis tax rate
E — — — 14.6 (14.6 ) Non-GAAP $ 977.2
$ 416.0 42.6 % $ 139.4 $ 17.4 $ 101.6
Weighted averagenumber of
sharesused in computingnet income
pershare:
Net income per shareattributable
to VeriFoneSystems, Inc. stockholders(1)
Basic Diluted Basic Diluted GAAP
113.7 115.7
$ 0.28 $
0.27 Non-GAAP 113.7 115.7 $ 0.89
$ 0.88
(1) Net income per share is calculated by
dividing the Net income attributable to VeriFone Systems, Inc.
stockholders by the Weighted average number of shares.
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (UNAUDITED, IN MILLIONS, EXCEPT PER SHARE
AMOUNTS AND PERCENTAGES) Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome
(loss)
Incometaxprovision(benefit)
Net
income(loss)attributable to
VeriFoneSystems, Inc.stockholders
Six Months Ended April 30, 2014 GAAP $
902.5 $ 345.5 38.3 % $
(20.0 ) $ (7.6 ) $
(40.1 ) Adjustments:
Amortization of step-down in deferred
netrevenues at acquisition
A 1.4 1.4 1.4 — 1.4 Amortization of purchased intangible assets C —
22.5 71.9 — 71.9 Other merger and acquisition related expenses C —
3.8 6.2 — 8.2 Stock based compensation D — 0.8 27.6 — 27.6
Restructuring charges E — 0.9 5.7 — 5.7 Other charges and income E
— 3.7 20.4 — 22.2
Income tax effect of non-GAAP exclusions
andadjustment to cash basis tax rate
E — — — 20.5 (20.5 ) Non-GAAP $ 903.9
$ 378.6 41.9 % $ 113.2 $ 12.9 $ 76.4
Weighted averagenumber of
sharesused in computingnet income (loss)per
share:
Net income (loss) pershare
attributable toVeriFone Systems, Inc.stockholders
(1)
Basic Diluted Basic Diluted GAAP
110.7 110.7 $ (0.36 ) $
(0.36 ) Adjustment for diluted shares F — 2.2
Non-GAAP 110.7 112.9 $ 0.69 $ 0.68
(1) Net income (loss) per share is
calculated by dividing the Net income (loss) attributable to
VeriFone Systems, Inc. stockholders by the Weighted average number
of shares
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (UNAUDITED, IN MILLIONS)
GAAP netrevenues
Amortization of step-down
indeferred revenue at acquisition
Non-GAAP netrevenues
Constantcurrencyadjustment
Non-GAAP netrevenues
atconstantcurrency
Note (A) (A) (B) (B)
Three Months Ended April 30, 2015 North America $ 193.0 $ —
$ 193.0 $
0.4
$ 193.4 LAC 68.1 — 68.1 10.2 78.3 EMEA 179.4 0.2 179.6 25.5 205.1
Asia-Pacific 49.6 — 49.6 3.6
53.2 Total $ 490.1 $ 0.2 $ 490.3 $ 39.7
$ 530.0 System Solutions $ 324.3 $ — $ 324.3 Services
165.8 0.2 166.0 Total $ 490.1 $ 0.2
$ 490.3
Three Months Ended January 31,
2015 North America $ 160.3 $ 0.1 $ 160.4 LAC 71.1 — 71.1 EMEA
180.0 0.5 180.5 Asia-Pacific 74.8 0.1 74.9
Total $ 486.2 $ 0.7 $ 486.9 System
Solutions $ 313.4 $ — $ 313.4 Services 172.8 0.7
173.5 Total $ 486.2 $ 0.7 $ 486.9
Three Months Ended April 30, 2014 North America $
125.3 $ — $ 125.3 LAC 83.3 — 83.3 EMEA 190.2 0.4 190.6 Asia-Pacific
67.6 — 67.6 Total $ 466.4 $ 0.4
$ 466.8 System Solutions $ 290.7 $ — $ 290.7 Services
175.7 0.4 176.1 Total $ 466.4 $ 0.4
$ 466.8
VERIFONE SYSTEMS, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN MILLIONS)
GAAP netrevenues
Amortization of step-down
indeferred revenue at acquisition
Non-GAAP net revenues
Constantcurrencyadjustment
Non-GAAP netrevenues
atconstantcurrency
Note (A) (A) (B) (B)
Six Months Ended April 30, 2015 North America $ 353.3 $ 0.1
$ 353.4 $ 0.7 $ 354.1 LAC 139.1 — 139.1
17.8
156.9 EMEA 359.6 0.6 360.2
38.7 398.9 Asia-Pacific 124.4 0.1 124.5 5.6
130.1 Total $ 976.4 $ 0.8 $ 977.2 $
62.8 $ 1,040.0 System Solutions $ 637.7 $ — $ 637.7
Services 338.7 0.8 339.5 Total $ 976.4
$ 0.8 $ 977.2
Six Months Ended April 30,
2014 North America $ 247.4 $ — $ 247.4 LAC 151.7 — 151.7 EMEA
375.5 1.4 376.9 Asia-Pacific 127.9 — 127.9
Total $ 902.5 $ 1.4 $ 903.9
System Solutions $ 551.9 $ — $ 551.9 Services
350.6 1.4 352.0 Total $ 902.5
$ 1.4 $ 903.9
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURES (UNAUDITED, IN MILLIONS)
Three Months Ended Years Ended Note
April30, 2015
January31, 2015
April30, 2014
%ChangeSEQ
% ChangeYoY
April30, 2015
April30, 2014
%Change
Free Cash Flow GAAP net cash provided by operating
activities G $ 56.3 $ 41.1 $ 56.5 37.0 %
(0.4
)
%
$ 97.4 $ 88.4 10.2 % Less: GAAP capital expenditures G (29.3 )
(19.6 ) (21.0 ) 49.5 % 39.5 % (48.9 ) (41.9 ) 16.7 % Free cash flow
G $ 27.0 $ 21.5 $ 35.5 25.6 %
(23.9
)
%
$ 48.5 $ 46.5 4.3 %
Three MonthsEnding July
31,2015
Year EndingOctober 31,
2015
Guidance Range of Guidance Range of Guidance
GAAP net revenues $ 495 $ 500 $ 1,994 $ 1,999 Adjustments to
net revenues A — — 1 1 Non-GAAP net
revenues $ 495 $ 500 $ 1,995 $ 2,000
NON-GAAP FINANCIAL MEASURES
This press release and its attachments include several non-GAAP
financial measures, including non-GAAP net revenues; non-GAAP
Services net revenues; non-GAAP net revenues at constant currency;
non-GAAP gross margin as a percentage of non-GAAP net revenues;
non-GAAP net income (loss) per diluted share, and free cash flow.
This press release also includes certain forward-looking non-GAAP
financial measures, specifically projected non-GAAP net revenues
and non-GAAP net income per diluted share for the third fiscal
quarter and full fiscal year 2015. The corresponding
reconciliations of these non-GAAP financial measures to the most
comparable GAAP financial measures, to the extent available without
unreasonable effort, are included in this press release.
Management uses non-GAAP financial measures only in addition to
and in conjunction with results presented in accordance with GAAP.
Management believes that these non-GAAP financial measures help it
to evaluate Verifone's performance and operations and to compare
Verifone's current results with those for prior periods as well as
with the results of peer companies. Verifone incurs, due to
differences in debt, capital structure and investment history,
certain income and expense items, such as stock based compensation,
amortization of acquired intangibles and other non-cash expenses,
that differ significantly from Verifone's competitors. The non-GAAP
financial measures reflect Verifone's reported operating
performance without such items. Management also uses these non-GAAP
financial measures in Verifone's budget and planning process.
Management believes that the presentation of these non-GAAP
financial measures is useful to investors in comparing Verifone's
operating performance in any period with its performance in other
periods and with the performance of other companies that represent
alternative investment opportunities. These non-GAAP financial
measures contain limitations and should be considered as a
supplement to, and not as a substitute for, or superior to,
disclosures made in accordance with GAAP.
These non-GAAP financial measures are not based on any
comprehensive set of accounting rules or principles and may
therefore differ from non-GAAP financial measures used by other
companies. In addition, these non-GAAP financial measures do not
reflect all amounts and costs, such as acquisition related costs,
employee stock-based compensation costs, cash that may be expended
for future capital expenditures or contractual commitments, working
capital needs, cash used to service interest or principal payments
on Verifone's debt, income taxes and the related cash requirements,
and restructuring charges, associated with Verifone's results of
operations as determined in accordance with GAAP.
Furthermore, Verifone expects to continue to incur income and
expense items that are similar to those that are excluded by the
non-GAAP adjustments described herein. Management compensates for
these limitations by also relying on the comparable GAAP financial
measures.
Our GAAP and non-GAAP net revenues are presented for our
geographic regions: North America, LAC, EMEA and Asia-Pacific.
North America includes the US and Canada. LAC includes South
America, Central America, and the Caribbean. EMEA includes Europe,
Russia, the Middle East, and Africa. Asia-Pacific includes
Australia, New Zealand, China, India and throughout the rest of
Greater Asia, including other Asia-Pacific Rim countries.
Note A: Non-GAAP net revenues. Non-GAAP net revenues
exclude the fair value decrease (step-down) in deferred revenue at
acquisition. Although the step-down of deferred revenue fair value
at acquisition is reflected in our GAAP financial statements, it
results in net revenues immediately post-acquisition that are lower
than net revenues that would be recognized in accordance with GAAP
on those same services if they were sold under contracts entered
into post-acquisition. We adjust the step-down to achieve
comparability to net revenues of the acquired entity earned
pre-acquisition and to our GAAP net revenues to be earned on
contracts sold in future periods. These non-GAAP net revenues
amounts are not intended to be a substitute for our GAAP
disclosures of net revenues, and should be read together with our
GAAP disclosures.
Note B: Non-GAAP net revenues at constant
currency. Verifone determines non-GAAP net revenues at constant
currency by recomputing non-GAAP net revenues denominated in
currencies other than U.S. Dollars in the current fiscal period
using average exchange rates for that particular currency during
the corresponding financial period of the prior year. Verifone uses
this non-GAAP measure to evaluate performance on a comparable basis
excluding the impact of foreign currency fluctuations.
Note C: Merger and Acquisition Related. Verifone
adjusts certain revenues and expenses for items that are the result
of merger and acquisitions.
Acquisition related adjustments include the amortization of
intangible assets, fixed asset fair value adjustments, contingent
consideration adjustments, incremental costs associated with
acquisitions (such as legal fees related to litigation assumed as
part of acquisitions) and acquisition integration expenses (such as
costs of personnel required to assist with integration
transitions). In addition, we adjust for changes in estimate and
final resolution of contingencies that existed at the time of
acquisition. Acquisition related expenses also result from events
which arise from unforeseen circumstances which often occur outside
the ordinary course of business.
Verifone analyzes the performance of its operations without
regard to these adjustments. In determining whether any merger or
acquisition related adjustment is appropriate, Verifone takes into
consideration, among other things, how such adjustments would or
would not aid the understanding of the performance of its
operations.
Note D: Stock-Based Compensation. Our non-GAAP
financial measures eliminate the effect of expense for stock-based
compensation because they are non-cash expenses that management
believes are not reflective of ongoing operating results. In
particular, because of varying available valuation methodologies,
subjective assumptions and the variety of award types which affect
the calculations of stock-based compensation, we believe that the
exclusion of stock-based compensation allows for more accurate
comparisons of our operating results to our peer companies.
Stock-based compensation is very different from other forms of
compensation. A cash salary or bonus has a fixed and unvarying cash
cost. In contrast the expense associated with an award of an option
or other stock based award is unrelated to the amount of
compensation ultimately received by the employee; and the cost to
the company is based on valuation methodology and underlying
assumptions that may vary over time and does not reflect any cash
expenditure by the company. Furthermore, the expense associated
with granting an employee an option or other stock based award can
be spread over multiple years and may be reversed based on
forfeitures which may differ from our original assumptions unlike
cash compensation expense which is typically recorded
contemporaneously with the time of award or payment.
Note E: Other Charges and Income. Verifone
excludes certain revenue, expenses and other income (expense) that
we have determined is not reflective of ongoing operating results.
It is difficult to estimate the amount or timing of these items in
advance. Although these events are reflected in our GAAP financial
statements, we exclude them in our non-GAAP financial measures
because we believe these items may limit the comparability of our
ongoing operations with prior and future periods. These adjustments
for other charges and income include:
- Litigation settlement and loss
contingency expense.
- Certain costs incurred in connection
with senior executive management changes, such as separation
payments, non-compete arrangement fees, legal fees, recruiter fees
and sign on bonuses.
- Certain expenses, such as professional
services and certain personnel costs, incurred on initiatives to
transform, streamline and centralize our global operations.
- Restructure and impairment charges
related to certain exit activities initiated as part of our global
transformation initiatives.
We assess our operating performance with these amounts included
and excluded, and by providing this information, we believe that
users of our financial statements are better able to understand the
financial results of what we consider to be our continuing
operations.
Income taxes are adjusted for the tax effect of the adjusting
items related to our non-GAAP financial measures and to reflect our
estimate of cash taxes on a non-GAAP basis, in order to provide our
management and users of the financial statements with better
clarity regarding the on-going comparable performance and future
liquidity of our business. Under GAAP our Income tax provision
(benefit) as a percentage of Income (loss) before income taxes was
7.6% for the fiscal quarter ended April 30, 2015, 9.0% for the
fiscal quarter ended January 31, 2015, 2.7% for the fiscal quarter
ended April 30, 2014, 8.2% for the six months ended April 30,
2015 and 15.9% for the six months ended April 30, 2014. For
non-GAAP purposes, we used a 14.5% rate for the fiscal quarters
ended April 30, 2015, January 31, 2015 and April 30, 2014
and the six months ended April 30, 2015 and 2014.
Note F: Non-GAAP diluted shares. Diluted non-GAAP
weighted average shares include additional shares that are dilutive
for non-GAAP computations of earnings per share in periods when we
have a non-GAAP net income and a GAAP basis net loss.
Note G: Free Cash Flow. Free cash flow is not
defined under GAAP. Therefore, it should not be considered a
substitute for income or cash flow data prepared in accordance with
GAAP and may not be comparable to similarly titled measures used by
other companies. Verifone determines free cash flow as net cash
provided by operating activities less capital expenditures. We use
this non-GAAP measure to evaluate our operating cash spend
including the impact of our investments in long-term operating
assets, such as property, equipment and capitalized software.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150604006204/en/
VeriFone Systems, Inc.Investor Relations:Douglas D. Reed,
408-232-7979SVP, Treasury & Investor Relationsir@verifone.comorMedia Relations:Andy Payment,
770-754-3541andy.payment@verifone.com
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