Revenues and Earnings per Share Exceed Guidance
VeriFone Systems, Inc. (NYSE: PAY):
Third Quarter Financial Highlights
- GAAP and non-GAAP net revenues of $510
million
- GAAP net income per diluted share of
$0.08
- Non-GAAP net income per diluted share
of $0.47
- Operating cash flow of $71 million
VeriFone Systems, Inc., the global leader in secure electronic
payment solutions, today announced financial results for the three
months ended July 31, 2015. GAAP and non-GAAP net revenues for the
quarter were $510 million, compared to $476 million a year ago, a
7% increase, and an 18% increase on a constant currency basis. GAAP
net income per diluted share for the quarter was $0.08, compared to
a net loss of $0.26 a year ago. Non-GAAP net income per diluted
share was $0.47, compared to $0.40 a year ago, a 18% increase.
“Q3 was a record quarter for Verifone,” said Paul Galant, Chief
Executive Officer of Verifone. “We saw the first
half-billion-dollar revenue quarter in the company’s history; grew
our non-GAAP earnings per share by 18 percent over last year; and
outpaced both market expectations and the industry. In addition, we
will begin to launch our next generation solutions at the end of
this year. As we continue to make the turn from mostly shipping
terminals to delivering fully integrated solutions, our
next-generation of connected devices, services, and digital
commerce applications will drive unprecedented value for our
clients, and long-term growth for Verifone.”
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 July 31, 2015
2014 Change (2) GAAP: Net
revenues $ 510 $ 476 7 % Gross margin as a % of net revenues 40.5 %
38.4 % 2.1pts Net income (loss) per diluted share $ 0.08 $ (0.26 )
nm
Non-GAAP (1): Net revenues $ 510 $ 476 7 % Gross
margin as a % of net revenues 41.7 % 41.6 % 0.1pts Net income per
diluted share $ 0.47 $ 0.40 18 %
(1) Reconciliations for the non-GAAP
measures are provided at the end of this press release
(2) "nm" means not meaningful
Financial and Business Highlights
- Achieved record North America net
revenues for the third consecutive quarter driven by security needs
and EMV migration, and increased demand for Petroleum, Media, and
our Payment as a Service offerings
- Grew share in Europe, with six European
markets achieving double-digit revenue gains on a year-over-year
constant currency basis
- Grew Asia Pacific business by 11
percent sequentially; appointed accomplished leaders for the Asia
Pacific region; and achieved important NCCA certification for our
China subsidiary
- Improved net revenues in Latin America
8 percent sequentially and launched next-generation global gateway
offering in Mexico
- Expanded footprint of connected devices
to build an integrated network for delivering payment services and
digital commerce applications, including targeted media, loyalty,
and offers
- Awarded mobile POS business of a top
four U.S. wireless carrier to deploy the O/S agnostic e355 in all
of its retail stores
- Signed more than 25 U.S. merchants for
Secure Commerce Architecture, expanding EMV compliance and device
connectivity
- Increased media revenues and grew
global installed base of our taxi and fuel dispenser
consumer-facing media screens
Guidance
Fourth fiscal quarter of 2015:
- Non-GAAP net revenues of $510 million
to $513 million
- Non-GAAP net income per diluted share
of $0.47 to $0.48
Full fiscal year 2015:
- Non-GAAP net revenues of $1.997 billion
to $2.0 billion
- Non-GAAP net income per diluted share
of $1.82 to $1.83
Conference Call
Verifone will hold its earnings conference call today, September
3rd, at 1:30 pm (PT) / 4.30pm (ET). 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 September 10, 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 July 31, Nine Months Ended July
31, 2015 2014 % Change (1)
2015 2014 % Change (1) Net revenues:
System solutions $ 333.0 $ 299.4 11.2 % $ 970.7 $ 851.3 14.0 %
Services 176.9 176.5 0.2 % 515.6 527.1
(2.2 )% Total net revenues 509.9 475.9 7.1 % 1,486.3
1,378.4 7.8 %
Cost of net revenues:
System solutions 201.2 186.8 7.7 % 575.9 541.9 6.3 % Services 102.2
106.3 (3.9 )% 300.8 308.2 (2.4 )% Total
cost of net revenues 303.4 293.1 3.5 % 876.7
850.1 3.1 %
Total gross margin 206.5
182.8 13.0 % 609.6 528.3 15.4 %
Operating expenses: Research and development 54.2 53.2 1.9 %
150.7 153.7 (2.0 )% Sales and marketing 56.6 54.1 4.6 % 169.4 161.2
5.1 % General and administrative 55.4 58.5 (5.3 )% 152.2 158.1 (3.7
)% Litigation settlement and loss contingency expense — —
nm
1.2 9.0 (86.7
)%
Amortization of purchased intangible assets 20.0 24.5
(18.4 )% 62.9 73.9 (14.9
)%
Total operating expenses 186.2 190.3 (2.2 )% 536.4
555.9 (3.5 )%
Operating income (loss) 20.3
(7.5 )
nm
73.2 (27.6 )
nm
Interest expense, net (8.2 ) (14.4 ) (43.1 )% (23.5 ) (35.3 ) (33.4
)% Other income (expense), net (0.6 ) (0.4 )
nm
(3.5 ) (6.7 )
nm
Income (loss) before income taxes 11.5 (22.3 )
nm
46.2 (69.6 )
nm
Income tax provision (benefit) 1.4 5.8
nm
4.3 (1.8 )
nm
Consolidated net income (loss) 10.1 (28.1 )
nm
41.9 (67.8 )
nm
Net income attributable to noncontrolling interests (0.6 ) (0.9 )
nm
(1.0 ) (1.4 )
nm
Net income (loss) attributable to VeriFone Systems, Inc.
stockholders $ 9.5 $ (29.0 )
nm
$ 40.9 $ (69.2 )
nm
Net income (loss) per share attributable to VeriFone
Systems, Inc. stockholders: Basic $ 0.08 $ (0.26 ) $
0.36 $ (0.62 ) Diluted $ 0.08 $ (0.26 ) $ 0.35
$ (0.62 )
Weighted average number of shares used in
computing net income (loss) per share: Basic 114.4 112.0
113.9 111.2 Diluted 116.4 112.0
116.0 111.2 (1) "nm" means not meaningful
VERIFONE SYSTEMS, INC. NET REVENUES
INFORMATION (UNAUDITED, IN MILLIONS, EXCEPT PERCENTAGES)
Three Months Ended
Nine Months Ended July 31, April
30, July 31, % Change %
Change July 31, July 31, Note
2015
2015 2014 (1) SEQ (1) YoY 2015
2014 % Change (1) GAAP net revenues: North
America $ 208.6 $ 193.0 $ 129.8 8.1 % 60.7 % $ 561.8 $ 377.1 49.0 %
Latin America 73.7 68.1 89.2 8.2 % (17.4 )% 212.9 241.0 (11.7 )%
EMEA 172.6 179.4 190.0 (3.8 )% (9.2 )% 532.2 565.4 (5.9 )%
Asia-Pacific 55.0 49.6 66.9 10.9 % (17.8 )%
179.4 194.9 (8.0 )% Total $ 509.9 $ 490.1
$ 475.9 4.0 % 7.1 % $ 1,486.3 $ 1,378.4
7.8 %
Non-GAAP net revenues: (2) North America A $
208.6 $ 193.0 $ 129.8 8.1 % 60.7 % $ 561.9 $ 377.1 49.0 % Latin
America 73.7 68.1 89.2 8.2 % (17.4 )% 212.9 241.0 (11.7 )% EMEA A
172.7 179.6 190.2 (3.8 )% (9.2 )% 532.9 567.0 (6.0 )% Asia-Pacific
A 55.0 49.6 67.2 10.9 % (18.2 )% 179.5
195.2 (8.0 )% Total $ 510.0 $ 490.3 $ 476.4
4.0 % 7.1 % $ 1,487.2 $ 1,380.3 7.7 %
GAAP net revenues $ 509.9 $
490.1 $ 475.9 4.0 % 7.1
% $ 1,486.3 $ 1,378.4 7.8
% Plus: Non-GAAP net revenues adjustments A 0.1 0.2
0.5
nm
nm
0.9 1.9
nm
Non-GAAP net revenues (2) $ 510.0
$ 490.3 $ 476.4
4.0 % 7.1 % $ 1,487.2
$ 1,380.3 7.7 %
(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 July 31, 2015
compared with three
For nine months ended July 31, 2015 compared with nine
months ended July 31, 2014
months ended July 31, 2014
Impact due
Non-GAAP
Impact due
Non-GAAP
to Non-GAAP
net
to Non-GAAP
net
net
Non-GAAP
Impact due
revenues
net
Non-GAAP
Impact due
revenues
Net revenues
net
to foreign
at constant
Net revenues
net
to foreign
at constant
revenues adjustments
revenues currency
currency revenues adjustments
revenues
currency
currency growth (A)
growth (B)
growth growth (A)
growth (B)
growth
North America 60.7 % 0.0 pts 60.7 % (0.4 )pts 61.1 % 49.0 % 0.0 pts
49.0 pts (0.3 )pts 49.3 % Latin America (17.4 )% 0.0 pts (17.4 )%
(17.0 )pts (0.4 )% (11.7 )% 0.0 pts (11.7 )pts (13.7 )pts 2.0 %
EMEA (9.2 )% 0.0 pts (9.2 )% (14.3 )pts 5.1 % (5.9 )% 0.1 pts (6.0
)pts (11.6 )pts 5.6 % Asia-Pacific (17.8 )% 0.4 pts (18.2 )% (10.7
)pts (7.5 )% (8.0 )% 0.0 pts (8.0 )pts (6.6 )pts (1.4 )% Total 7.1
% 0.0 pts 7.1 % (10.5 )pts 17.6 % 7.8 % 0.1 pts 7.7 pts (8.2 )pts
15.9 %
VERIFONE SYSTEMS, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN MILLIONS)
July 31, 2015 October 31, 2014
ASSETS Current assets: Cash and cash equivalents $ 242.1 $
250.2 Accounts receivable, net of allowances of $9.4 and $9.9 322.4
305.5 Inventories 121.8 124.3 Prepaid expenses and other current
assets 111.7 105.6
Total current assets 798.0
785.6 Fixed assets, net 183.1 177.7 Purchased intangible assets,
net 335.9 457.6 Goodwill 1,083.8 1,185.9 Deferred tax assets, net
12.0 30.4 Other long-term assets 74.2 65.0
Total
assets $ 2,487.0 $ 2,702.2
LIABILITIES
AND EQUITY Current liabilities: Accounts payable $ 150.1 $
161.2 Accruals and other current liabilities 213.9 207.0 Deferred
revenue, net 85.8 92.1 Short-term debt 32.0 32.1
Total current liabilities 481.8 492.4 Long-term deferred
revenue, net 53.6 51.0 Long-term debt 781.6 851.0 Long-term
deferred tax liabilities, net 121.4 136.1 Other long-term
liabilities 73.8 101.0
Total liabilities
1,512.2 1,631.5 Redeemable noncontrolling interest in
subsidiary — 0.8 Stockholders’ equity: Common stock 1.1 1.1
Additional paid-in capital 1,718.4 1,675.7 Accumulated deficit
(497.3 ) (538.2 ) Accumulated other comprehensive loss (282.3 )
(104.8 )
Total VeriFone Systems, Inc. stockholders’ equity
939.9 1,033.8 Noncontrolling interest in subsidiaries 34.9
36.1
Total equity 974.8 1069.9
Total
liabilities and equity $ 2,487.0 $ 2,702.2
VERIFONE SYSTEMS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED, IN MILLIONS)
Nine Months Ended July 31, 2015
2014 Cash flows from operating activities
Consolidated net income (loss) $ 41.9 $ (67.8 ) Adjustments to
reconcile consolidated net income (loss) to net cash provided by
operating activities: Depreciation and amortization, net 127.7
161.0 Stock-based compensation expense 32.2 40.9 Deferred income
taxes, net (8.7 ) (20.6 ) Write-off of debt issuance cost upon
extinguishment — 7.2 Other 14.5 11.0 Net cash
provided by operating activities before changes in operating assets
and liabilities 207.6 131.7 Changes in operating
assets and liabilities: Accounts receivable, net (33.4 ) (17.2 )
Inventories (6.7 ) 24.6 Prepaid expenses and other assets (20.8 )
12.5 Accounts payable (0.2 ) 24.3 Deferred revenue, net 10.1 20.7
Other current and long-term liabilities 12.2 (49.2 ) Net
change in operating assets and liabilities (38.8 ) 15.7 Net
cash provided by operating activities 168.8 147.4
Cash flows from investing activities Capital
expenditures (78.5 ) (62.8 ) Acquisition of businesses, net of cash
and cash equivalents acquired (13.6 ) — Other investing activities,
net 0.1 2.4 Net cash used in investing activities
(92.0 ) (60.4 )
Cash flows from financing activities
Proceeds from debt, net of issuance costs 60.0 1,081.1 Repayments
of debt (130.3 ) (1,199.7 ) Proceeds from issuance of common stock
through employee equity incentive plans 12.7 31.6 Other financing
activities, net (2.5 ) (2.1 ) Net cash used in financing activities
(60.1 ) (89.1 ) Effect of foreign currency exchange rate
changes on cash and cash equivalents (24.8 ) (2.3 ) Net
decrease in cash and cash equivalents (8.1 ) (4.4 ) Cash and cash
equivalents, beginning of period 250.2 268.2 Cash and
cash equivalents, end of period $ 242.1 $ 263.8
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF
NON-GAAP FINANCIAL MEASURES (UNAUDITED, IN MILLIONS, EXCEPT
PER SHARE AMOUNTS AND PERCENTAGES)
Net income attributable
Gross to VeriFone Net Gross
margin Operating Income tax Systems,
Inc.
Note
revenues margin percentage income
provision stockholders Three Months Ended July 31,
2015 GAAP $ 509.9 $ 206.5
40.5 % $ 20.3 $ 1.4
$ 9.5 Adjustments: Amortization of step-down in
deferred services net revenues at acquisition A 0.1 0.1 0.1 — 0.1
Amortization of purchased intangible assets C — 4.5 24.5 — 24.5
Other merger and acquisition related expenses C — 0.5 1.7 — 3.2
Stock based compensation D — 0.4 11.2 — 11.2 Restructuring charges
E — 0.2 6.0 — 6.0 Other charges and income E — 0.5 7.7 — 7.7 Income
tax effect of non-GAAP exclusions and adjustment to cash basis tax
rate E — — — 7.9 (7.9
)
Non-GAAP $ 510.0 $ 212.7 41.7 % $ 71.5 $ 9.3
$ 54.3
Weighted average number of
shares Net income per share used in computing
attributable to VeriFone net income per Systems,
Inc. stockholders share:
(1)
Basic Diluted Basic Diluted GAAP
114.4 116.4
$ 0.08 $
0.08 Non-GAAP 114.4 116.4 $ 0.47
$ 0.47
(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)
Net income attributable
Gross Income to VeriFone Net
Gross margin Operating tax Systems,
Inc.
Note
revenues margin percentage income
provision 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 services net 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 and adjustment 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
Net income per share used in computing
attributable to VeriFone net income per Systems,
Inc. stockholders share: (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)
Net income (loss)
attributable to Gross Operating
VeriFone Net Gross margin income
Income tax Systems, Inc.
Note
revenues margin percentage (loss)
provision stockholders Three Months Ended July 31,
2014 GAAP $ 475.9 $ 182.8
38.4 % $ (7.5 ) $
5.8 $ (29.0 ) Adjustments: Amortization
of step-down in deferred services net revenues at acquisition A 0.5
0.5 0.5 — 0.5 Amortization of purchased intangible assets C — 10.1
34.6 — 34.6 Other merger, acquisition and divestiture related
expenses C — 0.6 1.2 — 1.9 Stock based compensation D — 0.5 13.2 —
13.2 Restructuring charges E — 1.8 10.9 — 10.9 Cost of debt
refinancing E — — 4.1 — 9.3 Other charges and income E — 1.9 5.9 —
5.9 Income tax effect of non-GAAP exclusions and adjustment to cash
basis tax rate E — — — 2.0 (2.0 )
Non-GAAP $ 476.4 $ 198.2 41.6 % $ 62.9 $ 7.8
$ 45.3
Weighted average number of
shares used in Net income (loss) per share
computing net attributable to VeriFone income
(loss) Systems, Inc. stockholders per share:
(1) Basic Diluted Basic Diluted
GAAP 112.0 112.0 $ (0.26
) $ (0.26 ) Adjustment for diluted
shares F — 2.3 Non-GAAP 112.0 114.3 $
0.40 $ 0.40
(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)
Net income attributable
Gross to VeriFone Net Gross
margin Operating Income tax Systems,
Inc.
Note
revenues margin percentage income
provision stockholders Nine Months Ended July 31,
2015 GAAP $ 1,486.3 $ 609.6
41.0 % $ 73.2 $ 4.3
$ 40.9 Adjustments: Amortization of step-down in
deferred services net revenues at acquisition A 0.9 0.9 0.9 — 0.9
Amortization of purchased intangible assets C — 13.8 76.7 — 76.7
Other merger and acquisition related expenses C — 1.1 3.2 — 2.9
Stock based compensation D — 1.6 32.2 — 32.2 Restructure charges E
— 0.3 7.5 — 7.5 Other charges and income E — 1.4 17.3 — 17.3 Income
tax effect of non-GAAP exclusions and adjustment to cash basis tax
rate E — — — 22.5 (22.5 ) Non-GAAP $
1,487.2 $ 628.7 42.3 % $ 211.0 $ 26.8 $
155.9
Weighted average number of shares
Net income per share used in computing
attributable to VeriFone net income per Systems,
Inc. stockholders share: (1) Basic
Diluted Basic Diluted GAAP 113.9
116.0
$ 0.36 $ 0.35
Non-GAAP 113.9 116.0 $ 1.37 $ 1.34
(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)
Net income (loss)
attributable Gross Operating Income tax
to VeriFone Net Gross margin
income provision Systems, Inc.
Note
revenues margin percentage (loss)
(benefit) stockholders Nine Months Ended July 31,
2014 GAAP $ 1,378.4 $ 528.3
38.3 % $ (27.6 ) $
(1.8 ) $ (69.2 ) Adjustments:
Amortization of step-down in deferred net revenues at acquisition A
1.9 1.9 1.9 — 1.9 Amortization of purchased intangible assets C —
32.7 106.5 — 106.5 Other merger and acquisition related expenses C
— 4.3 7.3 — 10.1 Stock based compensation D — 1.3 40.9 — 40.9
Restructuring charges E — 2.7 16.6 — 16.6 Cost of debt refinancing
E — — 4.1 — 11.2 Other charges and income E — 5.6 26.4 — 26.2
Income tax effect of non-GAAP exclusions and adjustment to cash
basis tax rate E — — — 22.5 (22.5 )
Non-GAAP $ 1,380.3 $ 576.8 41.8 % $ 176.1 $
20.7 $ 121.7
Weighted average number
of shares Net income (loss) per used in share
attributable to computing net VeriFone Systems,
Inc. income (loss) stockholders per share:
(1) Basic Diluted Basic Diluted
GAAP 111.2 111.2 $ (0.62
) $ (0.62 ) Adjustment for diluted
shares F — 2.2 Non-GAAP 111.2 113.4 $
1.09 $ 1.07
(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)
Amortization of
Non-GAAP net
step-down in
Constant revenues at GAAP net
deferred revenue
Non-GAAP net currency constant revenues
at acquisition
revenues adjustment currency
Note (A) (A) (B) (B)
Three Months Ended July 31, 2015 North America $ 208.6 $ — $
208.6 $ 0.5 $ 209.1 Latin America 73.7 — 73.7 15.1 88.8 EMEA 172.6
0.1 172.7 27.2 199.9 Asia-Pacific 55.0 — 55.0 7.2 62.2 Total
$ 509.9 $ 0.1 $ 510.0 $ 50.0 $ 560.0 System Solutions
$ 333.0 $ — $ 333.0 Services 176.9 0.1 177.0 Total $ 509.9 $ 0.1 $
510.0
Three Months Ended April 30, 2015 North America $
193.0 $ — $ 193.0 Latin America 68.1 — 68.1 EMEA 179.4 0.2 179.6
Asia-Pacific 49.6 — 49.6 Total $ 490.1 $ 0.2 $ 490.3 System
Solutions $ 324.3 $ — $ 324.3 Services 165.8 0.2 166.0 Total $
490.1 $ 0.2 $ 490.3
Three Months Ended July 31, 2014 North
America $ 129.8 $ — $ 129.8 Latin America 89.2 — 89.2 EMEA 190.0
0.2 190.2 Asia-Pacific 66.9 0.3 67.2 Total $ 475.9 $ 0.5 $ 476.4
System Solutions $ 299.4 $ — $ 299.4 Services 176.5 0.5
177.0 Total $ 475.9 $ 0.5 $ 476.4
VERIFONE
SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES (UNAUDITED, IN MILLIONS)
Amortization of
Non-GAAP net
step-down in
Constant revenues at GAAP net
deferred revenue
Non-GAAP net currency constant revenues
at acquisition
revenues adjustment currency
Note (A) (A) (B) (B)
Nine Months Ended July 31, 2015
North America $ 561.8 $ 0.1 $ 561.9 $ 1.3 $ 563.2 Latin America
212.9 — 212.9 32.9 245.8 EMEA 532.2 0.7 532.9 65.9 598.8
Asia-Pacific 179.4 0.1 179.5 12.8 192.3 Total $ 1,486.3 $ 0.9 $
1,487.2 $ 112.9 $ 1,600.1 System Solutions $ 970.7 $ — $
970.7 Services 515.6 0.9 516.5 Total $ 1,486.3 $ 0.9 $ 1,487.2
Nine Months Ended July 31, 2014 North America $ 377.1
$ — $ 377.1 Latin America 241.0 — 241.0 EMEA 565.4 1.6 567.0
Asia-Pacific 194.9 0.3 195.2 Total $ 1,378.4 $ 1.9 $ 1,380.3
System Solutions $ 851.3 $ — $ 851.3 Services 527.1 1.9 529.0 Total
$ 1,378.4 $ 1.9 $ 1,380.3
VERIFONE
SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES (UNAUDITED, IN MILLIONS)
Three Months Ended Years Ended
%
% July 31,
April 30,
July 31,
Change
Change July 31, July 31,
%
Note
2015 2015 2014 SEQ YoY
2015 2014
Change
Free Cash Flow GAAP net cash provided by operating
activities G $ 71.4 $ 56.3 $ 58.9 26.8 % 21.2 % $ 168.8 $ 147.4
14.5 % Less: GAAP capital expenditures G (29.6 ) (29.3 ) (20.9 )
1.0 % 41.6 % (78.5 ) (62.8 ) 25.0 % Free cash flow G $ 41.8
$ 27.0 $ 38.0 54.8 % 10.0 % $ 90.3 $ 84.6
6.7 %
Three Months
Ending October 31,
Year Ending
2015
October 31, 2015 Guidance Range of Guidance
Range of Guidance GAAP net revenues $ 510 $ 513 $
1,996 $ 1,999 Adjustments to net revenues A — — 1
1 Non-GAAP net revenues $ 510 $ 513 $
1,997 $ 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 fourth 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, Latin America, EMEA and
Asia-Pacific. North America includes the US and Canada. Latin
America includes South America, Central America, Mexico 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.
- Gain or loss on financial transactions,
such as the accelerated amortization of capitalized debt issuance
costs due to the early repayment of debt and costs incurred to
refinance our debt.
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
medium to long term 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 12.6% for the fiscal quarter ended
July 31, 2015, 7.6% for the fiscal quarter ended April 30,
2015, (25.5)% for the fiscal quarter ended July 31, 2014, 9.3%
for the nine months ended July 31, 2015 and 2.7% for the nine
months ended July 31, 2014. For non-GAAP purposes, we used a 14.5%
rate for the fiscal quarters ended July 31, 2015, April 30,
2015 and July 31, 2014 and the nine months ended July 31, 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/20150903006314/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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