Record Annual Revenue of $2 billion as Q4 Revenue and EPS
Exceed Guidance
VeriFone Systems, Inc. (NYSE: PAY), the global leader in secure
electronic payment solutions, today announced financial results for
the fourth quarter and fiscal year ended October 31, 2015.
“We had a strong quarter closing out an important year for
Verifone,” said Paul Galant, Chief Executive Officer of Verifone.
“In 2015, we accelerated our revenue growth to 16% on a constant
currency basis and improved our profitability. We also generated
improved cash flow and completed the first half of our $200 million
stock repurchase authorization. Most significantly, we continued to
strengthen our foundation and began the rollout of our next
generation of products and services. This positions Verifone to
delight our clients and deliver greater value for our shareholders
in 2016 and beyond.”
Fourth Quarter Financial Highlights
- GAAP and Non-GAAP net revenues of $514
million, growth of 5% reported and 15% on a constant currency
basis
- GAAP net income per share of $0.33
- Non-GAAP net income per diluted share
of $0.49
- Operating cash flow of $81 million
Fiscal Year Financial Highlights
- GAAP net revenues of $2.000 billion and
Non-GAAP net revenues of $2.001 billion, growth of 7% reported and
16% on a constant currency basis
- GAAP net income per share of $0.68
- Non-GAAP net income per diluted share
of $1.83
- Operating cash flow of $249
million
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 October 31, Years Ended October
31, 2015 2014 Change (2)
2015 2014 Change (2) GAAP: Net revenues
$ 514 $ 491 5 % $ 2,000 $ 1,869 7 % Gross margin as a % of net
revenues 42.1 % 40.1 % 2.0 pts 41.3 % 38.8 % 2.5 pts Net income
(loss) per diluted share $ 0.33 $ 0.27 nm $ 0.68 $ (0.34 ) nm
Non-GAAP (1): Net revenues $ 514 $ 491 5 % $ 2,001 $
1,871 7 % Gross margin as a % of net revenues 43.4 % 42.3 % 1.1 pts
42.6 % 41.9 % 0.7 pts Net income per diluted share $ 0.49 $ 0.44 11
% $ 1.83 $ 1.51 21 % (1) Reconciliations for the non-GAAP
measures are provided at the end of this press release (2) "nm"
means not meaningful
Fiscal 2016 and First Quarter 2016 Outlook
“For fiscal 2016, the company expects non-GAAP net revenues of
$2.090 billion to $2.110 billion, which at the mid-point is 5%
annual growth or 9% annual growth on a constant currency basis,”
said Marc Rothman, Executive Vice President and Chief Financial
Officer. “The company also expects fiscal 2016 non-GAAP net income
per diluted share of $2.15 to $2.17, representing growth of 18% at
the mid-point over fiscal 2015 results, reflecting revenue growth,
higher gross margins, and improved operating leverage. This
guidance also reflects North America revenue growth of 5% and does
not reflect revenue from pending acquisitions. The impact of
acquisitions will be included in guidance provided on earnings
calls after the acquisitions have closed.”
Guidance for the full fiscal year 2016 is as follows:
- Non-GAAP net revenues of $2,090 million
to $2,110 million
- Non-GAAP net income per diluted share
of $2.15 to $2.17
Guidance for the first fiscal quarter of 2016 is as follows:
- Non-GAAP net revenues of $500
million
- Non-GAAP net income per diluted share
of $0.45
Conference Call
Verifone will hold its earnings conference call today, December
14th, 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 January 14, 2016.
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, 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 upon whom we rely in the
conduct of our business, 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 October 31,
Years Ended October 31, 2015
2014 % Change (1) 2015
2014 % Change (1) Net revenues: System
solutions $ 338.9 $ 310.9 9.0 % $ 1,309.6 $ 1,162.2 12.7 % Services
175.2 179.6 (2.4 )% 690.9 706.7 (2.2 )%
Total net revenues 514.1 490.5 4.8 % 2,000.5
1,868.9 7.0 %
Cost of net revenues: System
solutions 197.9 191.1 3.6 % 773.8 733.0 5.6 % Services 99.8
102.9 (3.0 )% 400.7 411.2 (2.6 )% Total cost
of net revenues 297.7 294.0 1.3 % 1,174.5
1,144.2 2.6 %
Total gross margin 216.4
196.5 10.1 % 826.0 724.7 14.0 %
Operating expenses: Research and development 51.0 50.0 2.0 %
201.6 203.7 (1.0 )% Sales and marketing 58.1 56.3 3.2 % 227.5 217.4
4.6 % General and administrative 53.9 50.6 6.5 % 206.2 208.7 (1.2
)% Litigation settlement and loss contingency expense (benefit) —
(17.6 ) nm 1.2 (8.6 ) nm Amortization of purchased intangible
assets 19.6 23.7 (17.3 )% 82.5 97.6
(15.5 )% Total operating expenses 182.6 163.0 12.0 %
719.0 718.8 — %
Operating income 33.8 33.5 nm
107.0 5.9 nm Interest expense, net (7.9 ) (7.2 ) 9.7 % (31.5 )
(42.5 ) (25.9 )% Other income (expense), net 0.9 3.4
nm (2.6 ) (3.3 ) nm Income (loss) before income taxes 26.8 29.7 nm
72.9 (39.9 ) nm Income tax benefit (11.7 ) (1.6 ) nm (7.5 ) (3.5 )
nm
Consolidated net income (loss) 38.5 31.3 nm 80.4 (36.4 )
nm Net income attributable to noncontrolling interests (0.3 ) (0.2
) nm (1.3 ) (1.7 ) nm
Net income (loss) attributable to VeriFone
Systems, Inc. stockholders $ 38.2 $ 31.1 nm $
79.1 $ (38.1 ) nm
Net income (loss) per share
attributable to VeriFone Systems, Inc. stockholders: Basic $
0.33 $ 0.27 $ 0.69 $ (0.34 ) Diluted $ 0.33
$ 0.27 $ 0.68 $ (0.34 )
Weighted
average number of shares used in computing net income (loss) per
share attributable to VeriFone Systems, Inc. stockholders:
Basic 114.4 113.1 114.0 111.6 Diluted
115.6 115.1 115.9 111.6 (1) "nm"
means not meaningful
VERIFONE SYSTEMS, INC.
NET REVENUES INFORMATION (UNAUDITED, IN MILLIONS, EXCEPT
PERCENTAGES)
Three Months Ended Years Ended
Note
October 31,
2015
July 31,2015
October 31,2014
% Change (1)SEQ
% Change (1)YoY
October 31,2015
October 31,2014
% Change (1) GAAP net revenues: North America $ 229.9
$ 208.6 $ 149.1 10.2 % 54.2 % $ 791.7 $ 526.3 50.4 % Latin America
62.8 73.7 82.1 (14.8 )% (23.5 )% 275.7 323.0 (14.6 )% EMEA 164.1
172.6 189.2 (4.9 )% (13.3 )% 696.4 754.6 (7.7 )% Asia-Pacific 57.3
55.0 70.1 4.2 % (18.3 )% 236.7 265.0 (10.7 )% Total $ 514.1 $ 509.9
$ 490.5 0.8 % 4.8 % $ 2,000.5 $ 1,868.9 7.0 %
Non-GAAP
net revenues: (2) North America A $ 229.9 $ 208.6 $ 149.0 10.2
% 54.3 % $ 791.8 $ 526.2 50.5 % Latin America A 62.8 73.7 82.1
(14.8 )% (23.5 )% 275.7 323.0 (14.6 )% EMEA A 164.2 172.7 189.4
(4.9 )% (13.3 )% 697.2 756.5 (7.8 )% Asia-Pacific A 57.3 55.0 70.2
4.2 % (18.4 )% 236.8 265.3 (10.7 )% Total $ 514.2 $ 510.0 $ 490.7
0.8 % 4.8 % $ 2,001.5 $ 1,871.0 7.0 %
GAAP net
revenues $ 514.1 $ 509.9 $
490.5 0.8 % 4.8 % $
2,000.5 $ 1,868.9 7.0 % Plus:
Non-GAAP net revenues adjustments A 0.1 0.1 0.2 nm nm 1.0 2.1 nm
Non-GAAP net revenues (2) $ 514.2 $
510.0 $ 490.7 0.8 % 4.8
% $ 2,001.5 $ 1,871.0 7.0
% (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 October 31, 2015
compared withthree months ended October 31, 2014
For year ended October 31, 2015
compared with yearended October 31, 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 54.2 % (0.1 )pts 54.3 % (0.9 )pts 55.2 % 50.4 % (0.1
)pts 50.5 % (0.5 )pts 51.0 % Latin America (23.5 )% 0.0 pts (23.5
)% (18.6 )pts (4.9 )% (14.6 )% 0.0 pts (14.6 )% (14.8 )pts 0.2 %
EMEA (13.3 )% 0.0 pts (13.3 )% (11.3 )pts (2.0 )% (7.7 )% 0.1 pts
(7.8 )% (11.5 )pts 3.7 % Asia-Pacific (18.3 )% 0.1 pts (18.4 )%
(15.2 )pts (3.2 )% (10.7 )% 0.0 pts (10.7 )% (8.8 )pts (1.9 )%
Total 4.8 % 0.0 pts 4.8 % (9.9 )pts 14.7 % 7.0 % 0.0 pts 7.0 % (8.6
)pts 15.6 %
VERIFONE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN
MILLIONS) October 31, 2015
October 31, 2014 ASSETS Current assets:
Cash and cash equivalents $ 208.9 $ 250.2 Accounts receivable, net
of allowances of $8.8 and $9.9 362.0 305.5 Inventories 129.7 124.3
Prepaid expenses and other current assets 81.7 78.4
Total current assets 782.3 758.4 Fixed assets, net 191.0
177.7 Purchased intangible assets, net 317.5 457.6 Goodwill 1,084.0
1,185.9 Long-term deferred tax assets, net 35.9 51.3 Other
long-term assets 62.4 50.6
Total assets $
2,473.1 $ 2,681.5
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 189.4 $ 161.2
Accruals and other current liabilities 229.9 206.6 Deferred
revenue, net 82.9 92.1 Short-term debt 39.1 31.8
Total current liabilities 541.3 491.7 Long-term deferred
revenue, net 55.3 51.0 Long-term debt 760.2 836.6 Long-term
deferred tax liabilities, net 102.9 130.5 Other long-term
liabilities 78.9 101.0
Total liabilities
1,538.6 1,610.8 Redeemable noncontrolling interest in
subsidiary — 0.8 Stockholders’ equity: Common stock 1.1 1.1
Additional paid-in capital 1,726.5 1,675.7 Accumulated deficit
(535.7 ) (538.2 ) Accumulated other comprehensive loss (292.3 )
(104.8 )
Total VeriFone Systems, Inc. stockholders’ equity
899.6 1,033.8 Noncontrolling interests in subsidiaries 34.9
36.1
Total equity
934.5
1069.9
Total liabilities and equity $ 2,473.1
$ 2,681.5
VERIFONE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN MILLIONS)
Years Ended October 31, 2015
2014 Cash flows from operating activities
Consolidated net income (loss) $ 80.4 $ (36.4 ) Adjustments to
reconcile consolidated net income (loss) to net cash provided by
operating activities: Depreciation and amortization, net 169.4
213.6 Stock-based compensation expense 42.3 53.9 Deferred income
taxes, net (31.6 ) (38.0 ) Write-off of debt issuance cost upon
extinguishment — 7.2 Other 13.0 16.8 Net cash
provided by operating activities before changes in operating assets
and liabilities 273.5 217.1 Changes in operating
assets and liabilities: Accounts receivable, net (75.4 ) (29.5 )
Inventories (16.4 ) 9.5 Prepaid expenses and other assets (16.9 )
10.2 Accounts payable 41.2 47.4 Deferred revenue, net 12.7 20.0
Other current and long-term liabilities 30.6 (75.6 ) Net
change in operating assets and liabilities (24.2 ) (18.0 ) Net cash
provided by operating activities 249.3 199.1
Cash flows from investing activities Capital expenditures
(106.4 ) (85.0 ) Acquisition of businesses, net of cash and cash
equivalents acquired (22.1 ) — Other investing activities, net 0.1
7.1 Net cash used in investing activities (128.4 )
(77.9 )
Cash flows from financing activities Proceeds
from debt, net of issuance costs 125.0 1,099.4 Repayments of debt
(198.3 ) (1,260.8 ) Proceeds from issuance of common stock through
employee equity incentive plans 13.2 35.4 Stock repurchases (70.1 )
— Other financing activities, net (3.4 ) (2.1 ) Net cash used in
financing activities (133.6 ) (128.1 ) Effect of foreign
currency exchange rate changes on cash and cash equivalents (28.6 )
(11.1 ) Net decrease in cash and cash equivalents (41.3 )
(18.0 ) Cash and cash equivalents, beginning of period 250.2
268.2 Cash and cash equivalents, end of period $ 208.9
$ 250.2
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 October 31, 2015 GAAP $
514.1 $ 216.4 42.1 % $
33.8 $ (11.7 ) $ 38.2
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 24.1 — 24.1 Other merger and
acquisition related expenses C — 0.3 1.1 — (1.8 ) Stock based
compensation D — 1.0 10.0 — 10.0 Restructuring charges E — 0.1 1.2
— 1.2 Other charges and income E — 0.8 5.7 — 5.7 Income tax effect
of non-GAAP exclusions and adjustment to cash basis tax rate E —
— — 21.3 (21.3 ) Non-GAAP $ 514.2
$ 223.2 43.4 % $ 76.0 $ 9.6 $ 56.2
Weighted averagenumber of
sharesused in computingnet incomeper
share:
Net income per shareattributable
toVeriFone Systems, Inc.stockholders (1)
Basic Diluted Basic Diluted GAAP
114.4 115.6
$ 0.33 $
0.33 Non-GAAP 114.4 115.6 $ 0.49
$ 0.49
(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 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 averagenumber of
sharesused in computingnet incomeper
share:
Net income per shareattributable
toVeriFone Systems, Inc.stockholders (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) Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome
Incometaxprovision(benefit)
Net incomeattributable
toVeriFoneSystems, Inc.stockholders
Three Months Ended October 31, 2014 GAAP $
490.5 $ 196.5 40.1 % $
33.5 $ (1.6 ) $ 31.1
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 — 10.0 33.8 — 33.8 Other merger,
acquisition and divestiture related expenses C — 0.6 1.0 — (3.5 )
Stock based compensation D — 0.7 13.0 — 13.0 Restructuring charges
E — 0.2 1.5 — 1.5 Other charges and income E — (0.8 ) (14.9 ) —
(15.9 ) Income tax effect of non-GAAP exclusions and adjustment to
cash basis tax rate E — — — 10.1 (10.1
) Non-GAAP $ 490.7 $ 207.4 42.3 % $ 68.1 $ 8.5
$ 50.1
Weighted averagenumber of
sharesused in computingnet incomeper
share:
Net income per shareattributable
toVeriFone Systems, Inc.stockholders (1)
Basic Diluted Basic Diluted GAAP
113.1 115.1 $ 0.27
$ 0.27 Non-GAAP 113.1 115.1 $
0.44 $ 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 incomeattributable
toVeriFoneSystems, Inc.stockholders
Year Ended October 31, 2015 GAAP $
2,000.5 $ 826.0 41.3 % $
107.0 $ (7.5 ) $ 79.1
Adjustments: Amortization of step-down in deferred services net
revenues at acquisition A 1.0 1.0 1.0 — 1.0 Amortization of
purchased intangible assets C — 18.3 100.8 — 100.8 Other merger and
acquisition related expenses C — 1.5 4.3 — 1.2 Stock based
compensation D — 2.6 42.3 — 42.3 Restructure charges E — 0.3 8.7 —
8.7 Other charges and income E — 2.2 22.9 — 22.9 Income tax effect
of non-GAAP exclusions and adjustment to cash basis tax rate E —
— — 43.9 (43.9 ) Non-GAAP $ 2,001.5
$ 851.9 42.6 % $ 287.0 $ 36.4 $ 212.1
Weighted averagenumber of
sharesused in computingnet incomeper
share:
Net income per shareattributable
toVeriFone Systems, Inc.stockholders (1)
Basic Diluted Basic Diluted GAAP
114.0 115.9
$ 0.69 $
0.68 Non-GAAP 114.0 115.9 $ 1.86
$ 1.83
(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(benefit)
Net
income(loss)attributableto
VeriFoneSystems, Inc.stockholders
Year Ended October 31, 2014 GAAP $
1,868.9 $ 724.7 38.8 % $
5.9 $ (3.5 ) $ (38.1
) Adjustments: Amortization of step-down in deferred net
revenues at acquisition A 2.1 2.1 2.1 — 2.1 Amortization of
purchased intangible assets C — 42.7 140.3 — 140.3 Other merger and
acquisition related expenses C — 4.9 8.2 — 6.6 Stock based
compensation D — 2.0 53.9 — 53.9 Restructuring charges E — 2.9 18.1
— 18.1 Cost of debt refinancing E — — 4.1 — 11.2 Other charges and
income E — 4.9 11.7 — 10.3 Income tax effect of non-GAAP exclusions
and adjustment to cash basis tax rate E — — —
32.6 (32.6 ) Non-GAAP $ 1,871.0 $ 784.2 41.9 %
$ 244.3 $ 29.1 $ 171.8
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
111.6 111.6 $ (0.34 ) $
(0.34 ) Adjustment for diluted shares F — 2.2
Non-GAAP 111.6 113.8 $ 1.54 $ 1.51
(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 ofstep-down
indeferred revenueat acquisition
Non-GAAP netrevenues
Constantcurrencyadjustment
Non-GAAP netrevenues
atconstantcurrency
Note (A) (A) (B) (B)
Three Months Ended October 31, 2015 North America $ 229.9 $
— $ 229.9 $ 1.3 $ 231.2 Latin America 62.8 — 62.8 15.2 78.0 EMEA
164.1 0.1 164.2 21.6 185.8 Asia-Pacific 57.3 — 57.3
10.6 67.9 Total $ 514.1 $ 0.1 $
514.2 $ 48.7 $ 562.9 System Solutions $
338.9 $ — $ 338.9 Services 175.2 0.1 175.3
Total $ 514.1 $ 0.1 $ 514.2
Three
Months Ended July 31, 2015 North America $ 208.6 $ — $ 208.6
Latin America 73.7 — 73.7 EMEA 172.6 0.1 172.7 Asia-Pacific 55.0
— 55.0 Total $ 509.9 $ 0.1 $
510.0 System Solutions $ 333.0 $ — $ 333.0 Services
176.9 0.1 177.0 Total $ 509.9 $ 0.1
$ 510.0
Three Months Ended October 31,
2014 North America $ 149.1 $ (0.1 ) $ 149.0 Latin America 82.1
— 82.1 EMEA 189.2 0.2 189.4 Asia-Pacific 70.1 0.1
70.2 Total $ 490.5 $ 0.2 $ 490.7
System Solutions $ 310.9 $ — $ 310.9 Services 179.6 0.2
179.8 Total $ 490.5 $ 0.2 $ 490.7
VERIFONE SYSTEMS, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN MILLIONS)
GAAP netrevenues
Amortization ofstep-down
indeferred revenueat acquisition
Non-GAAP netrevenues
Constantcurrencyadjustment
Non-GAAP netrevenues
atconstantcurrency
Note (A) (A) (B) (B)
Year Ended October 31, 2015 North America $ 791.7 $ 0.1 $
791.8 $ 2.6 $ 794.4 Latin America 275.7 — 275.7 48.1 323.8 EMEA
696.4 0.8 697.2 87.4 784.6 Asia-Pacific 236.7 0.1
236.8 23.4 260.2 Total $ 2,000.5 $ 1.0
$ 2,001.5 $ 161.5 $ 2,163.0 System Solutions $
1,309.6 $ — $ 1,309.6 Services 690.9 1.0 691.9
Total $ 2,000.5 $ 1.0 $ 2,001.5
Year
Ended October 31, 2014 North America $ 526.3 $ (0.1 )
$
526.2
Latin America 323.0 — 323.0 EMEA 754.6 1.9 756.5 Asia-Pacific 265.0
0.3 265.3 Total $ 1,868.9 $ 2.1
$
1,871.0
System Solutions $ 1,162.2 $ —
$
1,162.2
Services 706.7 2.1 708.8 Total $
1,868.9 $ 2.1
$
1,871.0
VERIFONE
SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES (UNAUDITED, IN MILLIONS)
Three Months Ended Years Ended Note
October 31,2015
July 31,2015
October 31,2014
%ChangeSEQ
%ChangeYoY
October 31,2015
October 31,2014
%Change
Free Cash Flow GAAP net cash provided by operating
activities G $ 80.5 $ 71.4 $ 51.6 12.7 % 56.0 % $ 249.3 $ 199.1
25.2 % Less: GAAP capital expenditures G (28.0 ) (29.6 ) (22.2 )
(5.4 )% 26.1 % (106.4 ) (85.0 ) 25.2 % Free cash flow G $ 52.5
$ 41.8 $ 29.4 25.6 % 78.6 % $ 142.9 $
114.1 25.2 %
Three Months EndingJanuary 31,
2016
Year EndingOctober 31,
2016
Guidance Range of Guidance Range of Guidance
GAAP net revenues $ 500 $ 500 $ 2,089 $ 2,109 Adjustments to
net revenues A — — 1 1 Non-GAAP net
revenues $ 500 $ 500 $ 2,090 $ 2,110
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 first fiscal
quarter and full fiscal year 2016. 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 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 (43.7)% for the fiscal quarter ended
October 31, 2015, 12.6% for the fiscal quarter ended July 31,
2015, (5.3)% for the fiscal quarter ended October 31,
2014,(10.2)% for the year ended October 31, 2015 and 8.6% for
the year ended October 31, 2014. For non-GAAP purposes, we used a
14.5% rate for all periods presented.
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/20151214005664/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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