UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8‑K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 14, 2015
VERIFONE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Commission File Number: 001-32465
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
04-3692546
(IRS Employer Identification No.)
88 West Plumeria Drive
San Jose, CA 95134
(Address of principal executive offices, including zip code)
408-232-7800
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On December 14, 2015, VeriFone Systems, Inc. (the "Company") announced its financial results for the fiscal quarter and year ended October 31, 2015. A copy of the Company's press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
During the Company's conference call and webcast to report these financial results on December 14, 2015, the Company will present certain supplemental financial information regarding its financial results for the fiscal quarter and year ended October 31, 2015. A copy of this supplemental financial information is attached hereto as Exhibit 99.2 and is incorporated herein by reference. This information is also available on the Company's investor relations website at http://ir.verifone.com.
The information in this Form 8-K provided under Item 2.02 and Exhibits 99.1 and 99.2 attached hereto are furnished to, but shall not be deemed filed with, the Securities and Exchange Commission or incorporated by reference into the Company's filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
99.1 Press release, dated December 14, 2015, titled "Verifone Reports Results for the Fourth Quarter and Full Year Fiscal 2015"
99.2 Financial Results for the Fourth Quarter and Full Year Ended October 31, 2015 – Supplemental Financial Information
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| VERIFONE SYSTEMS, INC. |
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Date: December 14, 2015 | By: /s/ Albert Liu Name: Albert Liu Title: Executive Vice President, Corporate Development and General Counsel |
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EXHIBIT INDEX
Exhibit No. Description
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99.1 | Press release, dated December 14, 2015, titled "Verifone Reports Results for the Fourth Quarter and Full Year Fiscal 2015" |
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99.2 | Financial Results for the Fourth Quarter and Full Year Ended October 31, 2015 – Supplemental Financial Information |
Exhibit 99.1
Verifone Reports Results for the Fourth Quarter and Full Year Fiscal 2015
Record Annual Revenue of $2 billion as Q4 Revenue and EPS Exceed Guidance
SAN JOSE, Calif. - (BUSINESS WIRE) - 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
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• | GAAP and Non-GAAP net revenues of $514 million, growth of 5% reported and 15% on a constant currency basis |
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• | GAAP net income per share of $0.33 |
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• | Non-GAAP net income per diluted share of $0.49 |
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• | Operating cash flow of $81 million |
Fiscal Year Financial Highlights
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• | 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 |
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• | GAAP net income per share of $0.68 |
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• | Non-GAAP net income per diluted share of $1.83 |
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• | Operating cash flow of $249 million |
The table below provides additional summary GAAP and non-GAAP financial information and comparisons.
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| | | | | | | | | | | | | | | | | | | | | |
(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 |
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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:
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• | Non-GAAP net revenues of $2,090 million to $2,110 million |
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• | Non-GAAP net income per diluted share of $2.15 to $2.17 |
Guidance for the first fiscal quarter of 2016 is as follows:
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• | Non-GAAP net revenues of $500 million |
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• | 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
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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 | % |
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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 |
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| | | | | | | | | | | | |
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 |
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| | | | | | | | | | | | | | |
| | (1) "nm" means not meaningful | | | | | | | | |
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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.
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| For three months ended October 31, 2015 compared with three months ended October 31, 2014 | For year ended October 31, 2015 compared with year ended October 31, 2014 |
| Net revenues growth | | Impact due to Non-GAAP net revenues adjustments (A) | | Non-GAAP net revenues growth | | Impact due to foreign currency (B) | | Non-GAAP net revenues at constant currency growth | Net revenues growth | | Impact due to Non-GAAP net revenues adjustments (A) | | Non-GAAP net revenues growth | | Impact due to foreign currency (B) | | Non-GAAP net revenues at constant currency growth |
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 | )% | | 0.0pts |
| | (23.5 | )% | | (18.6)pts |
| | (4.9 | )% | (14.6 | )% | | 0.0pts |
| | (14.6 | )% | | (14.8)pts |
| | 0.2 | % |
EMEA | (13.3 | )% | | 0.0pts |
| | (13.3 | )% | | (11.3)pts |
| | (2.0 | )% | (7.7 | )% | | 0.1pts |
| | (7.8 | )% | | (11.5)pts |
| | 3.7 | % |
Asia-Pacific | (18.3 | )% | | 0.1pts |
| | (18.4 | )% | | (15.2)pts |
| | (3.2 | )% | (10.7 | )% | | 0.0pts |
| | (10.7 | )% | | (8.8)pts |
| | (1.9 | )% |
Total | 4.8 | % | | 0.0pts |
| | 4.8 | % | | (9.9)pts |
| | 14.7 | % | 7.0 | % | | 0.0pts |
| | 7.0 | % | | (8.6)pts |
| | 15.6 | % |
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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 |
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| | | |
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 |
|
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| | | | | | | | | |
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 | Net revenues | | Gross margin | | Gross margin percentage | | Operating income | | Income tax provision | | Net income attributable to VeriFone Systems, 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 average number of shares used in computing net income per share: | | | | | | Net income per share attributable to VeriFone 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 | Net revenues | | Gross margin | | Gross margin percentage | | Operating income | | Income tax provision | | Net income attributable to VeriFone Systems, 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 average number of shares used in computing net income per share: | | | | | | Net income per share attributable to VeriFone 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 | Net revenues | | Gross margin | | Gross margin percentage | | Operating income | | Income tax provision (benefit) | | Net income attributable to VeriFone Systems, 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 average number of shares used in computing net income per share: | | | | | | Net income per share attributable to VeriFone 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 | Net revenues | | Gross margin | | Gross margin percentage | | Operating income | | Income tax provision | | Net income attributable to VeriFone Systems, 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 average number of shares used in computing net income per share: | | | | | | Net income per share attributable to VeriFone 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 | Net revenues | | Gross margin | | Gross margin percentage | | Operating income | | Income tax provision (benefit) | | Net income (loss) attributable to VeriFone Systems, 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 average number of shares used in computing net income (loss) per share: | | | | | | Net income (loss) per share attributable to VeriFone 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 net revenues | | Amortization of step-down in deferred revenue at acquisition | | Non-GAAP net revenues | | Constant currency adjustment | | Non-GAAP net revenues at constant currency |
| | 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 net revenues | | Amortization of step-down in deferred revenue at acquisition | | Non-GAAP net revenues | | Constant currency adjustment | | Non-GAAP net revenues at constant currency |
| | 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 | | % Change SEQ | | % Change YoY | | 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 Ending January 31, 2016 | | Year Ending October 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:
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• | Litigation settlement and loss contingency expense. |
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• | 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. |
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• | Certain expenses, such as professional services and certain personnel costs, incurred on initiatives to transform, streamline and centralize our global operations. |
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• | Restructure and impairment charges related to certain exit activities initiated as part of our global transformation initiatives. |
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• | 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.
Contacts
VeriFone Systems, Inc.
Investor Relations:
Douglas D. Reed, 408-232-7979
SVP, Treasury & Investor Relations
ir@verifone.com
or
Media Relations:
Andy Payment, 770-754-3541
andy.payment@verifone.com
Source: VeriFone Systems, Inc.
FINANCIAL RESULTS For the Fourth Quarter and Fiscal Year Ended October 31, 2015 Exhibit 99.2
Today’s discussion may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Verifone’s actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of the specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to Verifone’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q. 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. FORWARD-LOOKING STATEMENTS 2
NON-GAAP FINANCIAL MEASURES 3 With respect to any non-GAAP financial measures presented in the information, reconciliations of non-GAAP to GAAP financial measures may be found in Verifone’s quarterly earnings release as filed with the Securities and Exchange Commission as well as the Appendix to these slides. 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 to compare Verifone’s current results with those for prior periods as well as with the results of peer companies. 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.
INTRODUCTION Paul Galant Chief Executive Officer
FY15 HIGHLIGHTS 5 Q4 Performance FY15 Accomplishments Product Revenue $514M 5% reported growth, 15% constant currency EPS $0.49 11% growth Operating Margin 14.8% Increase of 90bps Revenue $2.001B 7% reported growth, 16% constant currency Operating Margin 14.3% Increase of 120bps $200M Share Buyback $100M repurchased to date Services PaaS in 17 countries; 8% constant currency growth Verifone Engage Launched in Q4 Mobility Deployed e-Series mPOS
TRANSFORMATION AND “YEAR OF PRODUCT” RESULTS 6 Reduced SKUs by ~60% Divested non-core businesses Reduced active platforms by ~60% Products Established global infrastructure Created centers of excellence Implemented planning system R&D Engineering 100 cost-saving programs Re-financed debt $1.3B Closed ~75% facilities Costs BUSINESS IMPLICATIONS >$40M run-rate savings 75% reinvested for growth 25% driving margin/EPS Over 15 product releases Improving margins Lower OpEx as % of revenue Share buyback
TRENDS DRIVING FY16 OUTLOOK 7 5% North America growth in FY16 8M device opportunity SMB, Hospitality, Petroleum EMV Momentum Accelerated international growth Investments/improvements in regional franchises Cash to cashless migration Global Payments Growth Connected devices App Marketplace; digital media; security; omni-commerce ~8% Services growth in FY16 Payments & Commerce Convergence
Q4 FINANCIAL RESULTS AND GUIDANCE Marc Rothman Chief Financial Officer
NON-GAAP KEY METRICS* 9 * Net Income = Net Income attributable to VeriFone Systems, Inc. stockholders * Operating Cash Flow = GAAP net cash provided by operating activities * A reconciliation of our GAAP to Non-GAAP financial measures, including Free Cash Flow, can be found in the appendix section Q415 Q414 Q315 Q415 % SEQ Inc(Dec) % YoY Inc(Dec) Net Revenues 491 510 514 1% 5% Gross Margin 207 213 223 5% 8% % of Revenue 42.3% 41.7% 43.4% 1.7pts 1.1pts Operating Income 68 72 76 6% 12% % of Revenue 13.9% 14.0% 14.8% 0.8pts 0.9pts Net Income* 50 54 56 4% 12% EPS 0.44 0.47 0.49 4% 11% Operating Cash Flow* 52 71 81 13% 56% Free Cash Flow* 29 42 52 25% 78% $ in millions, except EPS
NON-GAAP NET REVENUES AND GROSS MARGIN* $ in millions Q414 Q315 Q415 System Solutions 311 333 339 Services 180 177 175 Total Net Revenues 491 510 514 Services % of Total Net Revenues 37% 35% 34% $ in millions % of Revenue Q414 Q315 Q415 System Solutions 41.5% 41.1% 43.2% Services 43.6% 42.9% 43.9% Total Gross Margin % 42.3% 41.7% 43.4% 10 * A reconciliation of our GAAP to Non-GAAP Net revenues and gross margin can be found in the appendix section
Q414 Q315 Q415 Research and Development 47 49 50 % of Revenue 10% 10% 10% Sales and Marketing 50 50 53 % of Revenue 10% 10% 10% General and Administrative 42 42 44 % of Revenue 9% 8% 9% Total Operating Expenses 139 141 147 % of Revenue 28.3% 27.7% 28.6% NON-GAAP OPERATING EXPENSES* 11 * A reconciliation of our GAAP to Non-GAAP operating expenses can be found in the appendix section $ in millions
$ in millions NON-GAAP REVENUES BY GEOGRAPHY* Q415 Q414 Q315 Q415 % SEQ Inc(Dec) % YoY Inc(Dec) YoY Constant Currency Growth North America 149 209 230 10% 54% 55% Latin America 82 74 63 (15)% (23)% (5)% EMEA 189 173 164 (5)% (13)% (2)% Asia 70 55 57 4% (18)% (3)% TOTAL 491 510 514 1% 5% 15% Q315 Q415 Q414 North America 30% Asia 14% LAC 17% EMEA 39% North America 41% Asia 11% LAC 14% EMEA 34% North America 45% Asia 11% LAC 12% EMEA 32% 12 * A reconciliation of our GAAP to Non-GAAP total net revenues can be found in the appendix section
1001 940 924 883 863 843 814 799 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 TOTAL CASH, GROSS DEBT* AND NET DEBT* $ in millions Total Cash 249 230 264 250 241 234 242 209 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Gross Debt 799 Debt Statistics – October 31, 2015 $799M Outstanding Debt – Short-term: $39M – Long-term: $760M Credit Ratings – S&P: BB – Moody’s: Ba3 Net Debt 752 710 660 633 622 609 572 590 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 13 * Debt issuance costs are reflected as a reduction of gross debt due to newly issued accounting principles.
Q414 Q315 Q415 $ Days $ Days $ Days Accounts Receivables, net 306 56 322 57 362 63 Inventories 124 38 122 38 130 39 Accounts Payable 161 51 150 45 189 59 Cash Conversion Cycle 42 49 44 $ in millions Notes: Accounts Receivable Days is calculated as Accounts Receivable, net divided by Non-GAAP Total Net Revenues multiplied by 90 days Inventory Days is calculated as Average Inventory divided by Non-GAAP Total Cost of Net Revenues multiplied by 90 days Accounts Payable Days is calculated as Accounts Payable divided by Non-GAAP Total Cost of Net Revenues multiplied by 90 days Cash Conversion Cycle is calculated as Accounts Receivable Days plus Inventory Days less Accounts Payable Days A reconciliation of our GAAP to Non-GAAP total net revenues and GAAP to Non-GAAP total cost of net revenues can be found in the appendix section Working Capital Performance, as % of Non-GAAP Total Net Revenues = working capital / quarterly non-GAAP Total Net Revenues annualized • Working Capital = AR + Inventory – AP • A reconciliation of our GAAP to Non-GAAP total net revenues can be found in the appendix section BALANCE SHEET SELECT DATA & WORKING CAPITAL TREND 14 15.7% 14.3% 14.1% 13.7% 14.3% 14.6% 14.4% 14.7% 13.0% 13.5% 14.0% 14.5% 15.0% 15.5% 16.0% Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 P er c e n t o f S a le s Working Capital Performance*
32 57 59 52 41 56 71 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 CASH FLOW 81 11 36 38 29 22 27 42 52 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Free Cash Flow* 52 Operating Cash Flow: $81M Free Cash Flow: $52M CapEx: $28M Operating Cash Flow* 15 * Operating Cash Flow = GAAP net cash provided by operating activities. Free Cash Flow is a non-GAAP financial measure * A reconciliation of our GAAP net cash provided by operating activities to Free Cash Flow can be found in the appendix section $ in millions
16 Guidance Q116 Full Year FY16 Non-GAAP Net Revenues $500M $2.090B - $2.110B Non-GAAP EPS $0.45 $2.15 - 2.17 Non-GAAP Effective Tax Rate 14.5% 14.5% Non-GAAP Fully Diluted Shares 113.5M 112.5M Other Items Full Year FY16 Non-GAAP Operating Margins 15.3% Free Cash Flow $175M Capital Expenditures $100M - $110M * Reconciliations to GAAP of these forward-looking Non-GAAP financial measures, to the extent available without unreasonable effort, can be found in the appendix section. GUIDANCE*
Q&A SESSION
APPENDIX
RECONCILIATION OF GAAP TO NON-GAAP KEY METRICS Q415 19 (1) Net income per share is calculated by dividing the Net income attributable to VeriFone Systems, Inc. stockholders by the Weighted average number of shares. See explanatory notes for A, C-E at the end of the appendix. ($ in millions, except per share data and percentages) Note Net revenues Gross margin Gross margin percentage Operating income Income tax provision Net income attributable to VeriFone Systems, 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 average number of shares used in computing net income per share: Net income per share attributable to VeriFone 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
RECONCILIATION OF GAAP TO NON-GAAP KEY METRICS Q315 20 (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. See explanatory notes for A, C-E at the end of the appendix. ($ in millions, except per share data and percentages) Note Net revenues Gross margin Gross margin percentage Operating income Income tax provision Net income attributable to VeriFone Systems, 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 average number of shares used in computing net income per share: Net income per share attributable to VeriFone 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
RECONCILIATION OF GAAP TO NON-GAAP KEY METRICS Q414 20 (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. See explanatory notes for A, C-E at the end of the appendix. ($ in millions, except per share data and percentages) Note Net revenues Gross margin Gross margin percentage Operating income Income tax provision (benefit) Net income attributable to VeriFone Systems, 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 average number of shares used in computing net income per share: Net income per share attributable to VeriFone 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
RECONCILIATION OF GAAP TO NON-GAAP GROSS MARGIN 22 See explanatory notes for A, C-E at the end of the appendix ($ in millions, except percentages) Note System solutions net revenues Services net revenues Total net revenues Total cost of net revenues System solutions gross margin Services gross margin Total gross margin Three Months Ended October 31, 2015 GAAP $ 338.9 $ 175.2 $ 514.1 $ 297.7 $ 141.0 $ 75.4 $ 216.4 Other acquisition and restructure related, net C — 0.1 0.1 (4.9 ) 4.0 1.0 5.0 Stock based compensation D — — — (1.0 ) 0.5 0.5 1.0 Other charges and income E — — — (0.8 ) 0.8 — 0.8 Non-GAAP $ 338.9 $ 175.3 $ 514.2 $ 291.0 $ 146.3 $ 76.9 $ 223.2 % of Non-GAAP gross margin to net revenues 43.2 % 43.9 % 43.4 % Three Months Ended July 31, 2015 GAAP $ 333.0 $ 176.9 $ 509.9 $ 303.4 $ 131.8 $ 74.7 $ 206.5 Amortization of step-down in deferred services net revenues at acquisition A — 0.1 0.1 — — 0.1 0.1 Other acquisition and restructure related, net C — — — (5.2 ) 4.4 0.8 5.2 Stock based compensation D — — — (0.4 ) 0.3 0.1 0.4 Other charges and income E — — — (0.5 ) 0.2 0.3 0.5 Non-GAAP $ 333.0 $ 177.0 $ 510.0 $ 297.3 $ 136.7 $ 76.0 $ 212.7 % of Non-GAAP gross margin to net revenues 41.1 % 42.9 % 41.7 % Three Months Ended October 31, 2014 GAAP $ 310.9 $ 179.6 $ 490.5 $ 294.0 $ 119.8 $ 76.7 $ 196.5 Amortization of step-down in deferred services net revenues at acquisition A — 0.2 0.2 — — 0.2 0.2 Other acquisition and restructure related, net C — — — (10.8 ) 9.5 1.3 10.8 Stock based compensation D — — — (0.7 ) 0.5 0.2 0.7 Other charges and income E — — — 0.8 (0.8 ) — (0.8 ) Non-GAAP $ 310.9 $ 179.8 $ 490.7 $ 283.3 $ 129.0 $ 78.4 $ 207.4 % of Non-GAAP gross margin to net revenues 41.5 % 43.6 % 42.3 %
RECONCILIATION OF GAAP TO NON-GAAP OPERATING EXPENSES 23 See explanatory notes for C-E at the end of the appendix ($ in millions, except percentages) Note Research and development Sales and marketing General and administrative Total Three Months Ended October 31, 2015 GAAP $ 51.0 $ 58.1 $ 53.9 $ 163.0 Other acquisition and restructure related, net C, E — (0.8 ) (1.1 ) (1.9 ) Stock based compensation D (1.1 ) (4.0 ) (4.0 ) (9.1 ) Other charges and income E — — (4.8 ) (4.8 ) Non-GAAP $ 49.9 $ 53.3 $ 44.0 $ 147.2 % of Non-GAAP operating expenses to net revenues 10 % 10 % 9 % 29 % Three Months Ended July 31, 2015 GAAP $ 54.2 $ 56.6 $ 55.4 $ 166.2 Other acquisition and restructure related, net C, E (3.4 ) (1.1 ) (2.6 ) (7.1 ) Stock based compensation D (1.7 ) (4.7 ) (4.4 ) (10.8 ) Other charges and income E — (0.9 ) (6.3 ) (7.2 ) Non-GAAP $ 49.1 $ 49.9 $ 42.1 $ 141.1 % of Non-GAAP operating expenses to net revenues 10 % 10 % 8 % 28 % Three Months Ended October 31, 2014 GAAP $ 50.0 $ 56.3 $ 50.6 $ 156.9 Other acquisition and restructure related, net C, E (0.3 ) (0.2 ) (1.3 ) (1.8 ) Stock based compensation D (2.8 ) (4.9 ) (4.6 ) (12.3 ) Other charges and income E — (0.8 ) (2.8 ) (3.6 ) Non-GAAP $ 46.9 $ 50.4 $ 41.9 $ 139.2 % of Non-GAAP operating expenses to net revenues 10 % 10 % 9 % 28 %
RECONCILIATION OF GAAP TO NON-GAAP NET REVENUES 24 See explanatory notes for A-B at the end of the appendix. $ in millions GAAP net revenues Amortization of step-down in deferred revenue at acquisition Non-GAAP net revenues Constant currency adjustment Non-GAAP net revenues at constant currency 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 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 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
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW 25 See explanatory notes for G at the end of the appendix. Three Months Ended $ in millions Note October 31, 2015 July 31, 2015 April 30, 2015 January 31, 2015 GAAP net cash provided by operating activities G $ 80.5 $ 71.4 $ 56.3 $ 41.1 Less: GAAP capital expenditures G (28.0 ) (29.6 ) (29.3 ) (19.6 ) Free cash flow G $ 52.5 $ 41.8 $ 27.0 $ 21.5 Three Months Ended October 31, 2014 July 31, 2014 April 30, 2014 January 31, 2014 GAAP net cash provided by operating activities G $ 51.6 $ 58.9 $ 56.5 $ 31.9 Less: GAAP capital expenditures G (22.2 ) (20.9 ) (21.0 ) (20.9 ) Free cash flow G $ 29.4 $ 38.0 $ 35.5 $ 11.0
RECONCILIATION OF NET REVENUES GUIDANCE 26 See explanatory notes for A at the end of the appendix. Three Months Ending January 31, 2016 Year Ending October 31, 2016 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
EXPLANATORY NOTES TO RECONCILIATIONS OF GAAP TO NON-GAAP ITEMS 27 Note A: Non-GAAP net revenues. Non-GAAP net revenues exclude the fair value decrease (step-down) in deferred revenue at acquisition. 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, acquisition integration expenses and changes in estimate on contingencies that existed at the time of acquisition. Note D: Stock-Based Compensation. Our non-GAAP financial measures eliminate the effect of expense for stock-based compensation. Note E: Other Charges and Income. Verifone excludes certain expenses and other income (expense) that are the result of unique or unplanned events, such as litigation settlement and loss contingency expense, certain costs incurred in connection with senior executive management changes, certain personnel and outside professional service fees incurred on initiatives to transform, streamline and centralize our global operations, and restructure and impairment charges related to certain exit activities initiated as part of our global transformation initiatives and gain or loss on financial transactions, such as the accelerated amortization of capitalized debt issuance costs due to the early repayment of debt. In addition, 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. 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. Verifone determines free cash flow as net cash provided by operating activities less capital expenditures.
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