Q4 Revenue and EPS Exceeded Guidance
Verifone (NYSE:PAY), a world leader in payments and commerce
solutions, today announced financial results for the three months
and fiscal year ended October 31, 2016.
Fiscal Year Financial Highlights
- GAAP net revenues of $1.992 billion and
Non-GAAP net revenues of $2.006 billion
- GAAP net loss per diluted share of
$0.08
- Non-GAAP net income per diluted share
of $1.66
- Operating cash flow of $194
million
Fourth Quarter Financial Highlights
- GAAP net revenues of $464 million and
Non-GAAP net revenues of $468 million
- GAAP net loss per diluted share of
$0.04
- Non-GAAP net income per diluted share
of $0.30
- Operating cash flow of $67 million
“Our fourth quarter results were better than our outlook on both
the top and bottom line. Total revenues were consistent with our
expectations of EMV-related demand in the U.S., we reported 16%
growth in Services revenues from both acquisitions and organic
business, and we saw good growth in EMEA and Latin America as a
result of several important competitive wins," said Paul Galant,
Chief Executive Officer of Verifone. “There is significant
opportunity ahead for our business as we move through the many cash
to cashless migrations that are happening across the globe, and I
am looking forward to addressing our customers’ evolving needs with
our newest device platform as we launch pilots, obtain
certifications and begin generating more meaningful sales volumes
in 2017.”
(UNAUDITED, IN MILLIONS,
EXCEPT PER SHARE AND PERCENTAGES)
Three Months Ended
October 31, Years Ended October 31, 2016
2015 Change (1) 2016 2015 Change
(1) GAAP: Net revenues $ 464
$ 514 (9.7 )% $ 1,992
$ 2,000 (0.4 )% Gross margin as a %
of net revenues 38.2 % 42.1 %
(3.9
) pts
39.9 % 41.3 %
(1.4
) pts
Net income (loss) per diluted share $ (0.04
) $ 0.33 nm $ (0.08
) $ 0.68 nm
Non-GAAP (2): Net revenues $ 468 $ 514 (9.1 )% $ 2,006 $ 2,001 0.2
% Gross margin as a % of net revenues 39.5 % 43.4 %
(3.9
) pts
41.8 % 42.6 %
(0.8
) pts
Net income per diluted share $ 0.30 $ 0.49 (38.8 )% $ 1.66 $ 1.83
(9.3 )% (1) "nm" means not meaningful. (2) Reconciliations
for the Non-GAAP measures are provided at the end of this press
release.
Fiscal 2017 and First Quarter 2017 Outlook
Guidance for the full fiscal year 2017 is as follows:
- GAAP net revenues of approximately
$1.895 billion to $1.910 billion
- Non-GAAP net revenues of approximately
$1.900 billion to $1.915 billion
- GAAP net income per diluted share of
approximately $0.37 to $0.41
- Non-GAAP net income per diluted share
of $1.35 to $1.39
Guidance for the first fiscal quarter of 2017 is as follows:
- GAAP net revenues of approximately $446
million
- Non-GAAP net revenues of approximately
$450 million
- GAAP net loss per diluted share of
approximately $0.08
- Non-GAAP net income per diluted share
of $0.20
Conference Call
Verifone will hold its earnings conference call today, December
12, 2016, at 1:30 p.m. (PT) / 4:30 p.m. (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 12, 2017.
About Verifone
Verifone is transforming everyday transactions into
opportunities for connected commerce. We’re connecting 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 with approximately 29 million devices and
terminals deployed worldwide. 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
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 pace of EMV adoption in the United States, the
conduct of our business and operations internationally, including
the complexity of compliance with international laws and
regulations and risks related to adverse regulatory actions,
including tax-related audits and assessments, 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 integrate the businesses we acquire and to
achieve the expected benefits of such acquisitions, our ability to
effectively hedge our exposure to foreign currency exchange rate
fluctuations, successful execution of our restructuring plans,
including whether the expected benefits of restructuring plans are
achieved within expected timeframes or at all, 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.
VERIFONE SYSTEMS,
INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE DATA AND
PERCENTAGES) Three Months Ended October 31,
Fiscal Years Ended October 31, 2016 2015 %
Change (1) 2016 2015 % Change (1) Net
revenues: Systems $ 264.3 $ 338.9 (22.0 )% $ 1,236.3 $ 1,309.6
(5.6 )% Services 199.9 175.2 14.1 %
755.8 690.9 9.4 % Total net revenues
464.2 514.1 (9.7 )% 1,992.1
2,000.5 (0.4 )%
Cost of net
revenues: Systems 173.3 197.9 (12.4 )% 744.3 773.8 (3.8 )%
Services 113.4 99.8 13.6 % 453.5
400.7 13.2 % Total cost of net revenues
286.7 297.7 (3.7 )% 1,197.8
1,174.5 2.0 %
Total gross margin
177.5 216.4 (18.0 )% 794.3
826.0 (3.8 )%
Operating expenses:
Research and development 49.4 51.0 (3.1 )% 207.5 198.2 4.7 % Sales
and marketing 49.8 57.2 (12.9 )% 217.0 224.7 (3.4 )% General and
administrative 47.5 53.6 (11.4 )% 204.6 204.0 0.3 % Restructuring
and related charges 7.1 1.2 nm 41.2 8.4 nm Litigation settlement
and loss contingency expense — — nm 0.7 1.2 nm Amortization of
purchased intangible assets 24.6 19.6
25.5 % 90.5 82.5 9.7 % Total operating
expenses 178.4 182.6 (2.3 )%
761.5 719.0 5.9 %
Operating income
(loss) (0.9 ) 33.8 nm 32.8 107.0 nm Interest expense, net (8.7
) (7.9 ) 10.1 % (34.6 ) (31.5 ) 9.8 % Other income (expense), net
10.5 0.9 nm 3.6
(2.6 ) nm Income before income taxes 0.9 26.8 nm 1.8 72.9 nm Income
tax provision (benefit) 6.2 (11.7 ) nm
11.5 (7.5 ) nm
Consolidated net income (loss)
(5.3 ) 38.5 nm (9.7 ) 80.4 nm Net income (loss) attributable to
noncontrolling interests 0.8 (0.3 ) nm
0.4 (1.3 ) nm
Net income (loss) attributable to
VeriFone Systems, Inc. stockholders $ (4.5 ) $ 38.2 nm $
(9.3 ) $ 79.1 nm
Net income (loss) per share
attributable to VeriFone Systems, Inc. stockholders: Basic $
(0.04 ) $ 0.33 $ (0.08 ) $ 0.69 Diluted $ (0.04 ) $
0.33 $ (0.08 ) $ 0.68
Weighted average
number of shares used in computing net income (loss) per share
attributable to VeriFone Systems, Inc. stockholders: Basic
111.1 114.4 110.8
114.0 Diluted 111.1 115.6
110.8 115.9 (1) "nm" means not
meaningful
VERIFONE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN
MILLIONS) October 31, 2016 2015
ASSETS Current assets: Cash and cash equivalents $ 148.4 $
208.9 Accounts receivable, net of allowances of $14.6 and $8.8,
respectively 323.4 362.0 Inventories 175.2 129.7 Prepaid expenses
and other current assets 110.4 81.7
Total current assets 757.4 782.3 Property and equipment, net
202.3 191.0 Purchased intangible assets, net 306.3 317.5 Goodwill
1,110.5 1,084.0 Deferred tax assets, net 37.0 35.9 Other long-term
assets 81.3 62.4
Total assets $
2,494.8 $ 2,473.1
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 154.6 $ 189.4
Accruals and other current liabilities 213.4 229.9 Deferred
revenue, net 104.8 82.9 Short-term debt 66.0
39.1
Total current liabilities 538.8 541.3 Long-term
deferred revenue, net 66.5 55.3 Deferred tax liabilities, net 99.4
102.9 Long-term debt 859.9 760.2 Other long-term liabilities
76.8 78.9
Total liabilities 1,641.4
1,538.6 Redeemable noncontrolling interest in subsidiary 5.0
— Stockholders’ equity: Common stock 1.1 1.1 Additional
paid-in capital 1,771.9 1,726.5 Accumulated deficit (618.3 ) (535.7
) Accumulated other comprehensive loss (341.0 )
(292.3 )
Total VeriFone Systems, Inc. stockholders’ equity
813.7 899.6 Noncontrolling interests in subsidiaries 34.7
34.9
Total equity 848.4
934.5
Total liabilities, redeemable noncontrolling
interest in subsidiary and equity $ 2,494.8 $ 2,473.1
VERIFONE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN MILLIONS) Years Ended October
31, 2016 2015 Cash flows from operating
activities Consolidated net income (loss) $ (9.7 ) $ 80.4
Adjustments to reconcile consolidated net income (loss) to net cash
provided by operating activities: Depreciation and amortization,
net 179.2 169.4 Stock-based compensation expense 42.3 42.3 Deferred
income taxes, net (14.0 ) (31.6 ) Non-cash restructuring and
related charges 31.2 — Other (6.2 ) 13.0 Net
cash provided by operating activities before changes in operating
assets and liabilities 222.8 273.5
Changes in operating assets and liabilities: Accounts receivable,
net 59.6 (75.4 ) Inventories (45.7 ) (16.4 ) Prepaid expenses and
other assets 0.8 (16.9 ) Accounts payable (39.6 ) 41.2 Deferred
revenue, net 28.7 12.7 Other current and long-term liabilities
(32.9 ) 30.6 Net change in operating assets
and liabilities (29.1 ) (24.2 ) Net cash provided by
operating activities 193.7 249.3
Cash flows from investing activities Capital expenditures
(105.3 ) (106.4 ) Acquisition of businesses, net of cash and cash
equivalents acquired (172.2 ) (22.1 ) Other investing activities,
net 2.3 0.1 Net cash used in investing
activities (275.2 ) (128.4 )
Cash flows
from financing activities Proceeds from debt, net of issuance
costs 560.4 125.0 Repayments of debt (453.0 ) (198.3 ) Proceeds
from issuance of common stock through employee equity incentive
plans 5.1 13.2 Stock repurchases (79.9 ) (70.1 ) Other financing
activities, net (8.2 ) (3.4 ) Net cash provided by
(used in) financing activities 24.4 (133.6 )
Effect of foreign currency exchange rate changes on cash and
cash equivalents (3.4 ) (28.6 ) Net decrease
in cash and cash equivalents (60.5 ) (41.3 ) Cash and cash
equivalents, beginning of period 208.9 250.2
Cash and cash equivalents, end of period $ 148.4 $
208.9
VERIFONE SYSTEMS, INC. NET REVENUES
INFORMATION (UNAUDITED, IN MILLIONS, EXCEPT PERCENTAGES)
Three Months Ended Fiscal Years Ended
October 31, July 31, October 31, %
Change % Change October 31, October 31,
% Change
Note
2016 2016 2015 (1) SEQ (1)
YoY 2016 2015
(1)
GAAP net revenues: North America
$ 167.1
$ 191.5 $ 229.9 (12.7 )%
(27.3 )% $ 803.6 $ 791.7
1.5 % Latin America
68.3 55.1
62.8 24.0 % 8.8 % 247.9
275.7 (10.1 )% EMEA
180.8 190.0
164.1 (4.8 )% 10.2 %
738.3 696.4 6.0 % Asia-Pacific
48.0 51.5 57.3
(6.8 )% (16.2 )%
202.3 236.7 (14.5
)% Total
$ 464.2 $ 488.1
$ 514.1 (4.9 )%
(9.7 )% $ 1,992.1 $
2,000.5 (0.4 )% Systems
$
264.3 $ 292.1 $ 338.9
(9.5 )% (22.0 )% $
1,236.3 $ 1,309.6 (5.6 )%
Services
199.9 196.0
175.2 2.0 % 14.1 %
755.8 690.9 9.4
% Total
$ 464.2 $ 488.1
$ 514.1 (4.9 )%
(9.7 )% $ 1,992.1 $
2,000.5 (0.4 )% Non-GAAP net
revenues: (2) North America A $ 170.5 $ 196.0 $ 229.9 (13.0 )%
(25.8 )% $ 817.6 $ 791.8 3.3 % Latin America A 68.3 55.1 62.8 24.0
% 8.8 % 247.9 275.7 (10.1 )% EMEA A 180.8 190.0 164.2 (4.8 )% 10.1
% 738.3 697.2 5.9 % Asia-Pacific A 48.0 51.5
57.3 (6.8 )% (16.2 )% 202.3
236.8 (14.6 )% Total $ 467.6 $ 492.6 $
514.2 (5.1 )% (9.1 )% $ 2,006.1 $ 2,001.5 0.2
% Systems A $ 264.3 $ 292.1 $ 338.9 (9.5 )% (22.0 )% $
1,236.3 $ 1,309.6 (5.6 )% Services A 203.3
200.5 175.3 1.4 % 16.0 % 769.8
691.9 11.3 % Total $ 467.6 $ 492.6 $
514.2 (5.1 )% (9.1 )% $ 2,006.1 $ 2,001.5 0.2
%
GAAP net revenues $ 464.2 $
488.1 $ 514.1 (4.9 )%
(9.7 )% $ 1,992.1 $
2,000.5 (0.4 )% Plus: Non-GAAP net revenues
adjustments A 3.4 4.5 0.1
nm nm 14.0 1.0 nm
Non-GAAP net
revenues (2) 467.6 492.6 $ 514.2 (5.1 )% (9.1 )% 2,006.1 $
2,001.5 0.2 % Net revenues from businesses acquired in the past 12
months B (20.9 ) (22.8 ) (0.9 ) nm nm
(73.5 ) (1.2 ) nm
Non-GAAP organic net revenues (2) $
446.7 $ 469.8 $ 513.3 (4.9 )% (13.0 )% $
1,932.6 $ 2,000.3 (3.4 )% (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,
2016, compared with three months ended October 31, 2015
For fiscal year ended October 31, 2016,
compared with fiscal year ended October 31, 2015
Net revenues growth (decline) Impact due to acquired
businesses (A) (B)
Non-GAAP organic net revenues growth
(decline) Impact due to foreign currency (C)
Non-GAAP
organic net revenues at constant currency growth (decline)
Net revenues growth (decline) Impact due to acquired
businesses (A) (B)
Non-GAAP organic net revenues growth
(decline) Impact due to foreign currency (C)
Non-GAAP
organic net revenues at constant currency growth (decline)
North America
(27.3 )% 1.3 pts (28.6 )% 0.0 pts (28.6
)%
1.5 % 1.0 pts 0.5 % (0.1 )pts 0.6 % Latin America
8.8 % 0.1 pts 8.7 % 1.4 pts 7.3 %
(10.1
)% 0.0 pts (10.1 )% (12.6 )pts 2.5 % EMEA
10.2
% 8.4 pts 1.8 % (2.4 )pts 4.2 %
6.0 % 7.3 pts
(1.3 )% (4.6 )pts 3.3 % Asia-Pacific
(16.2 )% 0.1 pts
(16.3 )% 2.2 pts (18.5 )%
(14.5 )% 0.1 pts (14.6 )%
(4.3 )pts (10.3 )% Total
(9.7 )% 3.3 pts (13.0 )%
(0.4 )pts (12.6 )%
(0.4 )% 3.0 pts (3.4 )% (3.9 )pts
0.5 %
Non-GAAP Reconciliations
VERIFONE
SYSTEMS, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES (UNAUDITED, IN MILLIONS, EXCEPT PER SHARE
AMOUNTS) GAAP net revenues Amortization of
step-down in deferred revenue at acquisition Non-GAAP net
revenues Net revenues from businesses acquired in the past
12 months Non-GAAP organic net revenues Constant
currency adjustment Non-GAAP organic net revenues at
constant currency Note (A) (A) (B)
(B) (C) (C) Three Months Ended
October 31, 2016 North America
$ 167.1 $ 3.4 $
170.5 $ (6.6 ) $ 163.9 $ — $ 163.9 Latin America
68.3 — 68.3
— 68.3 (0.9 ) 67.4 EMEA
180.8 — 180.8 (14.3 ) 166.5 4.0
170.5 Asia-Pacific
48.0 — 48.0 —
48.0 (1.3 ) 46.7 Total
$
464.2 $ 3.4 $ 467.6 $ (20.9 ) $ 446.7 $ 1.8 $ 448.5
Systems
$ 264.3 $ — $ 264.3 $ (0.9 ) $ 263.4 $
1.8 $ 265.2 Services
199.9 3.4 203.3
(20.0 ) 183.3 — 183.3 Total
$ 464.2 $ 3.4 $ 467.6 $ (20.9 ) $ 446.7 $ 1.8
$ 448.5
Three Months Ended July 31, 2016 North
America
$ 191.5 $ 4.5 $ 196.0 $ (7.1 ) $ 188.9 Latin
America
55.1 — 55.1 — 55.1 EMEA
190.0 — 190.0 (15.7 )
174.3 Asia-Pacific
51.5 — 51.5 —
51.5 Total
$ 488.1 $ 4.5 $ 492.6 $
(22.8 ) $ 469.8 Systems
$ 292.1 $ — $ 292.1 $
(2.3 ) $ 289.8 Services
196.0 4.5 200.5
(20.5 ) 180.0 Total
$ 488.1 $ 4.5 $
492.6 $ (22.8 ) $ 469.8
Three Months Ended October 31,
2015 North America
$ 229.9 $ — $ 229.9 $ (0.3 ) $
229.6 Latin America
62.8 — 62.8 — 62.8 EMEA
164.1 0.1
164.2 (0.6 ) 163.6 Asia-Pacific
57.3 —
57.3 — 57.3 Total
$ 514.1 $ 0.1
$ 514.2 $ (0.9 ) $ 513.3 Systems
$ 338.9 $ — $
338.9 $ — $ 338.9 Services
175.2 0.1
175.3 (0.9 ) 174.4 Total
$ 514.1 $ 0.1
$ 514.2 $ (0.9 ) $ 513.3
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
Net revenues from businesses acquired in the past 12 months
Non-GAAP organic net revenues Constant currency
adjustment Non-GAAP organic net revenues at constant
currency Note (A) (A) (B)
(B) (C) (C) Fiscal Year Ended
October 31, 2016 North America
$ 803.6 $ 14.0 $
817.6 $ (22.3 ) $ 795.3 $ 1.0 $ 796.3 Latin America
247.9 —
247.9 — 247.9 34.8 282.7 EMEA
738.3 — 738.3 (51.2 ) 687.1
31.8 718.9 Asia-Pacific
202.3 — 202.3
— 202.3 10.2 212.5 Total
$ 1,992.1 $ 14.0 $ 2,006.1 $ (73.5 ) $ 1,932.6 $ 77.8
$ 2,010.4 Systems
$ 1,236.3 $ — $ 1,236.3 $
(8.0 ) $ 1,228.3 $ 46.8 $ 1,275.1 Services
755.8
14.0 769.8 (65.5 ) 704.3 31.0
735.3 Total
$ 1,992.1 $ 14.0 $ 2,006.1 $ (73.5
) $ 1,932.6 $ 77.8 $ 2,010.4
Fiscal Year Ended October
31, 2015 North America
$ 791.7 $ 0.1 $ 791.8 $
(0.3 ) $ 791.5 Latin America
275.7 — 275.7 — 275.7 EMEA
696.4 0.8 697.2 (0.9 ) 696.3 Asia-Pacific
236.7 0.1 236.8 — 236.8
Total
$ 2,000.5 $ 1.0 $ 2,001.5 $ (1.2 ) $ 2,000.3
Systems
$ 1,309.6 $ — $ 1,309.6 $ — $ 1,309.6
Services
690.9 1.0 691.9 (1.2 )
690.7 Total
$ 2,000.5 $ 1.0 $ 2,001.5 $ (1.2 )
$ 2,000.3
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 (loss) Income tax
provision Net income (loss) attributable to VeriFone
Systems, Inc. stockholders Three Months Ended October
31, 2016 GAAP $ 464.2 $
177.5 38.2 % $ (0.9 )
$ 6.2 $ (4.5 ) Adjustments:
Amortization of step-down deferred services net revenues at
acquisition and associated costs of goods sold A 3.4 2.4 2.4 2.4
Amortization of purchased intangible assets D — 3.4 28.0 — 28.0
Other merger and acquisition related expenses D — — 0.8 — (11.7 )
Stock based compensation E — 0.8 9.4 — 9.4 Restructuring and
related charges F — — 7.1 — 7.1 Other charges and income F — 0.6
1.9 — 1.9 Income tax effect of non-GAAP exclusions G —
— — (0.5 ) 0.5 Non-GAAP $
467.6 $ 184.7 39.5 % $ 48.7 $ 5.7 $ 33.1
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
111.1 111.1 $ (0.04 ) $
(0.04 ) Adjustment for diluted shares H —
0.3 Non-GAAP 111.1 111.4 $ 0.30 $ 0.30
Note
Net revenues Gross margin
Gross margin percentage Operating income
(loss) Income tax provision Net income
(loss) attributable to VeriFone Systems, Inc. stockholders
Three Months Ended July 31, 2016 GAAP $
488.1 $ 191.1 39.2 % $
(22.3 ) $ 0.3 $ (31.1
) Adjustments: Amortization of step-down deferred services
net revenues at acquisition and associated costs of goods sold A
4.5 3.1 3.1 — 3.1 Amortization of purchased intangible assets D —
3.9 28.2 — 28.2 Other merger and acquisition related expenses D — —
1.0 — (1.1 ) Stock based compensation E — 0.9 10.8 — 10.8
Restructuring and related charges F — 5.2 38.9 — 38.9 Other charges
and income F — 3.8 5.2 — 5.2 Income tax effect of non-GAAP
exclusions G — — — 7.7
(7.7 ) Non-GAAP $ 492.6 $ 208.0 42.2 % $ 64.9 $ 8.0
$ 46.3
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 110.7
110.7 $ (0.28 ) $ (0.28
) Adjustment for diluted shares H — 0.7
Non-GAAP 110.7 111.4 $ 0.42 $ 0.42
(1) Diluted 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 used in computing net income (loss) per share
attributable to VeriFone Systems, Inc. stockholders.
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, 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 D — 4.5 24.1 — 24.1
Other merger and acquisition related expenses D — 0.3 1.1 — (1.8 )
Stock based compensation E — 1.0 10.0 — 10.0 Restructuring and
related charges F — 0.1 1.2 — 1.2 Other charges and income F — 0.8
5.7 — 5.7 Income tax effect of non-GAAP exclusions G —
— — 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) Diluted 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 used in computing net income (loss) per share
attributable to VeriFone Systems, Inc. stockholders.
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 (loss) attributable to VeriFone Systems, Inc.
stockholder Fiscal Year Ended October 31, 2016
GAAP $ 1,992.1 $ 794.3
39.9 % $ 32.8 $ 11.5
$ (9.3 ) Adjustments: Amortization of
step-down in deferred services net revenues at acquisition and
associated costs of goods sold A 14.0 9.9 9.9 — 9.9 Amortization of
purchased intangible assets D — 15.1 105.7 — 105.7 Other merger and
acquisition related expenses D — — 5.7 —
(9.0
) Stock based compensation E — 3.3 42.3 — 42.3 Restructuring and
related charges F — 5.1 46.3 — 46.3 Other charges and income F —
11.0 15.4 — 19.4 Income tax effect of non-GAAP exclusions G
— — — 20.3 (20.3 ) Non-GAAP $
2,006.1 $ 838.7 41.8 % $ 258.1 $ 31.8 $ 185.0
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 110.8
110.8 $ (0.08 ) $ (0.08
) Adjustment for diluted shares H — 0.8
Non-GAAP 110.8 111.6 $ 1.67 $ 1.66
Note
Net revenues Gross margin Gross margin
percentage Operating income Income tax provision
Net income attributable to VeriFone Systems, Inc.
stockholder Fiscal 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 D — 18.3
100.8 — 100.8 Other merger and acquisition related expenses D — 1.5
4.3 — 1.2 Stock based compensation E — 2.6 42.3 — 42.3
Restructuring and related charges F — 0.3 8.7 — 8.7 Other charges
and income F — 2.2 22.9 — 22.9 Income tax effect of non-GAAP
exclusions G — — — 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) Diluted 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 used in computing net income (loss) per share
attributable to VeriFone Systems, Inc. stockholders.
VERIFONE SYSTEMS, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Three Months
Ending
Year Ending January 31, October 31,
Guidance 2017 2017 GAAP net revenues
$ 446 $ 1,895-$1,910 Adjustments to net
revenues: A 4 5 Non-GAAP net revenues $
450 $ 1,900-$1,915
Diluted GAAP
earnings per share (1) $ (0.08 ) $
0.37-0.41 Adjustments: (2) Amortization of step-down in
deferred services net revenues at acquisition A $ 0.02 $ 0.02
Amortization of purchased intangible assets D $ 0.20 $ 0.70 Stock
based compensation E $ 0.10 $ 0.40 Income tax effect of non-GAAP
exclusions (3) $ (0.04 ) $ (0.14 ) Diluted Non-GAAP earnings per
share (1) $ 0.20 $ 1.35-1.39
(1) Diluted GAAP and non-GAAP earnings per
share are determined using the most dilutive weighted average
number of shares, which includes outstanding RSU and RSA shares in
the calculation of the weighted average diluted shares outstanding
for periods in which we expect net income.
(2) Except for the adjustments noted
herein, this guidance does not include the effects of any future
acquisition or divestiture related costs, restructuring activities,
significant legal matters, and non-recurring income tax
adjustments, which are difficult to predict and may or may not be
significant.
(3) Assuming a GAAP effective tax rate of 12.5% applied to the
above non-GAAP exclusions.
NON-GAAP FINANCIAL MEASURES
This press release and its attachments include several non-GAAP
financial measures, including non-GAAP net revenues; non-GAAP
Systems net revenues; non-GAAP Services net revenues; net revenues
from businesses acquired in the past 12 months; non-GAAP organic
net revenues; non-GAAP organic net revenues at constant currency;
non-GAAP gross margin; non-GAAP gross margin as a percentage of
non-GAAP net revenues; non-GAAP operating income; non-GAAP income
tax provision; non-GAAP net income attributable to VeriFone
Systems, Inc. shareholders; non-GAAP weighted average diluted
shares; and non-GAAP net income (loss) per diluted share. 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 2017. 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,
geographic presence and associated currency impacts, 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 four
main 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, costs of goods sold and gross
margin. Non-GAAP net revenues exclude the fair value decrease
(step-down) in deferred revenue at acquisition. Non-GAAP costs of
goods sold exclude the costs of goods associated with the fair
value decrease (step-down) in deferred revenue at acquisition.
Although the step-down of deferred revenue fair value at
acquisition and associated costs of goods sold are reflected in our
GAAP financial statements, they result in net revenues and gross
margins immediately post-acquisition that are lower than net
revenues and gross margins that would be recognized in accordance
with GAAP on those same services if they were sold under contracts
entered into post-acquisition. Accordingly, we adjust the step-down
to achieve comparability to net revenues and gross margins of the
acquired entity earned pre-acquisition and to our GAAP net revenues
and gross margins to be earned on contracts sold in future periods.
These adjustments, which relate principally to our acquisition of
AJB during February 2016, enhance the ability of our management and
our investors to assess our financial performance and trends. These
non-GAAP net revenues, costs of goods sold and gross margin amounts
are not intended to be a substitute for our GAAP disclosures of net
revenues, costs of goods sold and gross margin, and should be read
together with our GAAP disclosures.
Note B: Non-GAAP organic net revenues. "Non-GAAP organic
net revenues" is a non-GAAP financial measure of net revenues
excluding "net revenues from businesses acquired in the past 12
months" (as defined below). Verifone determines non-GAAP organic
net revenues by deducting net revenues from businesses acquired in
the past 12 months from non-GAAP net revenues. This non-GAAP
measure is used to evaluate Verifone net revenues without the
impact of net revenues from acquired businesses. Because Verifone's
business has grown through both organic growth and strategic
acquisitions, Verifone analyzes performance both with and without
the impact of our recent acquisitions. Accordingly, Verifone
believes that both non-GAAP net revenues and non-GAAP organic net
revenues provide useful information to investors.
Net revenues from businesses acquired in the past 12
months consists of net revenues derived from the sales channels
of acquired resellers and distributors, and net revenues from
Systems and Services attributable to businesses acquired in the 12
months preceding the respective financial quarter(s), such as
Intercard and AJB. For acquisitions of small businesses that are
integrated within a relatively short time after the close of the
acquisition, we assume quarterly net revenues attributable to such
acquired businesses during the 12 months following acquisition
remain at the same level as in the first full quarter after the
acquisition closed. During periods prior to our acquisition of
former customers, net revenues from businesses acquired in the past
12 months consists of sales by Verifone to that former customer for
that period.
Note C: Non-GAAP organic net revenues at constant
currency. Verifone determines non-GAAP organic net revenues at
constant currency by recomputing non-GAAP organic 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 business
performance and trends on a comparable basis excluding the impact
of foreign currency fluctuations.
Note D: Merger and Acquisition Related. Verifone adjusts
certain revenues and expenses for items that are the result of
mergers and acquisitions. Merger and acquisition related
adjustments include the amortization of intangible assets,
contingent consideration fair market value adjustments, interest on
contingent consideration, transaction expenses associated with
acquisitions, and acquisition integration expenses.
Amortization of intangible assets: Verifone incurs amortization
of intangible assets in connection with its acquisitions, such as
amortization of finite lived customer relationships intangibles. We
are required to allocate a portion of the purchase price of each
business acquisition to the intangible assets acquired and to
amortize this amount over the estimated useful lives of those
acquired intangible assets. Because these amounts have no direct
correlation to Verifone’s underlying business operations, we
eliminate these amortization charges and any associated minority
interest impact from our non-GAAP operating results to provide
better comparability of pre-acquisition and post-acquisition
operating results.
Contingent consideration fair market value adjustments and
interest on contingent consideration: In connection with its
acquisitions, Verifone owes contingent consideration payments based
upon the post-acquisition performance of and other factors related
to acquired businesses. These contingent consideration liabilities
are reported at fair market value and incur non-cash imputed
interest. Changes in the fair market value of contingent
consideration and imputed interest expense vary independent of our
ongoing operating results and have no direct correlation to our
underlying business operations. Accordingly, Verifone excludes
these amounts from our non-GAAP operating results to provide better
comparability of pre-acquisition and post-acquisition operating
results.
Transaction expenses associated with acquisitions: Verifone
incurs transaction expenses in connection with its acquisitions,
which include legal and other professional fees such as advisory,
accounting, valuation and consulting fees. These transaction
expenses are related to acquisitions and have no direct correlation
with the ongoing operation of Verifone’s business. Accordingly,
Verifone excludes these amounts from our non-GAAP operating results
to provide better comparability of pre-acquisition and
post-acquisition operating results.
Acquisition integration expenses: In connection with its
acquisitions, Verifone incurs costs relating to the integration of
the acquired business with Verifone’s ongoing business, which
includes expenses relating to the integration of facilities and
other infrastructure, information technology systems and
employee-related costs such as costs of personnel required to
assist with integration transitions. These acquisition integration
expenses are related to acquisitions and have no direct correlation
with the ongoing operation of Verifone’s business. Accordingly,
Verifone excludes these amounts from our non-GAAP operating results
to provide better comparability of pre-acquisition and
post-acquisition operating results.
Note E: 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 a 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 a 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. Accordingly,
we believe that excluding stock-based compensation expense from our
non-GAAP operating results facilitates better understanding of our
long-term business performance and enhances period-to-period
comparability.
Note F: Other Charges and Income. Verifone excludes
certain expenses, other income (expense) and gains (losses) that we
have determined are not reflective of ongoing operating results or
that vary independent of business performance. 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 limit the comparability of our ongoing operations with
prior and future periods. These adjustments for other charges and
income include:
Transformation and restructuring: Over the past several years,
we have incurred certain expenses, such as professional services,
contract cancellation fees and certain personnel and personnel
related costs incurred on initiatives to transform, streamline,
centralize and restructure our global operations. These charges
include involuntary termination costs, costs to cancel facility
leases, write down of assets held for sale, charges for costs to
terminate a contract related to a service we will no longer offer
in Turkey, associated legal and other advisory fees, as well as
operating income and losses of businesses identified to exit as
part of our strategic review of under-performing businesses and
global transformation initiatives. Each of these charges has been
incurred in connection with discrete activities in furtherance of
specific business objectives in light of prevailing circumstances,
and each charge and the associated activity or activities have had
differing impacts on our business operations. We do not incur these
costs in the ordinary course of business. While certain of these
items have recurred in recent years and may continue to recur in
the near future, the amount of these items has varied significantly
from period to period. Accordingly, management assesses our
operating performance with these amounts included and excluded, and
we believe that by providing this information, users of our
financial statements are better able to understand the financial
results of what we consider to be our continuing operations and
compare our current operating performance to our past operating
performance.
Foreign exchange losses related to obligations denominated in
currencies of highly inflationary economies: Our non-GAAP operating
results do not include foreign exchange losses related to
obligations denominated in highly inflationary economies, such as
the devaluation of the Argentina Peso during the first and second
quarter of fiscal year 2016. We believe that excluding such losses
provides a better indication of our business performance in the
current period, as the existence of high inflation in these
economies varies independent of our business performance, and
enhances the comparability of our business performance during
periods before and after such inflation occurred.
Costs associated with litigation and other loss contingencies,
penalties and settlements: Our non-GAAP operating results do not
include costs associated with litigation and other loss
contingencies, penalties and settlements. These costs and loss
contingencies relate to events that occurred in prior periods and
their ultimate amount and resolution are uncorrelated with our
operating performance during the current period. Accordingly, we
believe that excluding such amounts provides a better indication of
our business performance in the current period and enhances the
comparability of our business performance across periods.
Other charge: During the first quarter of 2015 we incurred $2.0
million of personnel related costs related to a senior executive
management change. While these types of costs may recur, this
particular cost was significantly larger than ordinary hiring
costs. Accordingly, management assesses our operating performance
with this amount included and excluded, and we believe that by
providing this information, users of our financial statements are
better able to understand the financial results of what we consider
to be our continuing operations and compare our current operating
performance to our past operating performance.
Note G: Income Tax Effect of Non-GAAP exclusions. 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 as a percentage of Income before income taxes
was 701.2% for the fiscal quarter ended October 31, 2016,
(43.7)% for the fiscal quarter ended October 31, 2015, 631.9%
for the fiscal year ended October 31, 2016, and (10.2)% for
the fiscal year ended October 31, 2015. For the purpose of
computing non-GAAP actual results, we used a 14.5% rate for all
periods presented.
Note H: Non-GAAP diluted shares. Diluted GAAP and
non-GAAP weighted-average shares outstanding are the same in all
periods except where there is a GAAP net loss. In accordance with
GAAP, we do not consider dilutive shares in periods that there is a
net loss. However, in periods when we have a non-GAAP net income
and a GAAP basis net loss, diluted non-GAAP weighted average shares
include additional shares that are dilutive for non-GAAP
computations of earnings per share.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161212006116/en/
VerifoneInvestor Relations:Chris Mammone,
408-232-7230ir@verifone.comorMedia Relations:Andy Payment,
770-754-3541andy.payment@verifone.com
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