Verifone (NYSE: PAY), a world leader in payments and commerce
solutions, today announced financial results for the three months
ended April 30, 2017.
Second Quarter Highlights
- GAAP and Non-GAAP net revenues of $474
million, up 4% sequentially
- GAAP net loss per diluted share of
$0.80, reflecting restructuring and divestiture charges
- Non-GAAP net income per diluted share
of $0.30, up 43% sequentially
- Operating cash flow of $36 million
- Growing sales pipeline in all regions
for next generation solutions
- Divesting three non-strategic
businesses to reallocate resources and capital to core payments and
commerce platform
“The Verifone team delivered second quarter results at the
high-end of our revenue forecast and above our earnings guidance.
Revenue momentum was driven by double-digit sequential growth in
our North America Retail and SMB verticals, and by strong demand
for devices in India. We are excited about the level of client
enthusiasm globally for our next generation platform-based
solutions,” said Paul Galant, Chief Executive Officer of Verifone.
“We are divesting non-strategic businesses and allocating our
resources and capital to ensure the timely delivery of our new
products, returning Verifone to growth in 2018.”
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGES)
Three Months Ended April 30, Six
Months Ended April 30, 2017 2016
Change (1) 2017 2016 Change
(1) GAAP: Net revenues $ 474
$ 526 (10.0 )% $ 928
$ 1,040 (10.8 )% Gross margin as a %
of net revenues 36.5 % 40.0 %
(3.5) pts 37.1 % 40.9 % (3.8)
pts Net income (loss) per diluted share $
(0.80 ) $ 0.03 nm $
(0.95 ) $ 0.24 nm
Non-GAAP (2): Net revenues $ 474 $ 532 (11.0 )% $ 931 $ 1,046 (11.0
)% Gross margin as a % of net revenues 39.5 % 42.4 % (2.9) pts 39.2
% 42.6 % (3.4) pts Net income per diluted share $ 0.30 $ 0.47 (36.2
)% $ 0.50 $ 0.94 (46.8 )%
(1) "nm" means not meaningful.
(2) Reconciliations for the Non-GAAP
measures are provided at the end of this press release.
Guidance Impact from Divestiture Initiatives
To further operational improvement and strategic focus, Verifone
has targeted three businesses for financial restructuring /
divestiture:
(1) Petro Media: As previously
announced during the second quarter, Verifone formed a 50/50 joint
venture by combining its Petro Media advertising business with Gas
Station TV. As of the disposition date, Petro Media results are no
longer consolidated.
(2) China: Verifone intends to divest
its China business into a locally-owned and operated company in
which Verifone will continue to hold a minority interest. This
transaction is expected to be completed during the third quarter.
Accordingly, full-year guidance now reflects the deconsolidation of
financial expectations attributable to China in the second half of
2017 to reflect this change in ownership structure.
(3) Taxi Solutions: Verifone has
completed the previously discussed strategic review of its Taxi
transaction and media business and is now actively engaged in a
process to divest these operations. Verifone will continue to
report operating results for Taxi within its consolidated
financials until an actual disposition occurs, which the Company
expects in the next several quarters. Accordingly, full-year
guidance continues to include expectations related to Taxi.
Fiscal 2017 and Third Quarter 2017 Outlook (Includes Impact
of Divestiture Initiatives)
Verifone’s financial guidance excludes its stand-alone Petro
Media and China businesses, but includes the Taxi operations until
disposition.
Guidance for the full fiscal year 2017 is as follows:
- GAAP net revenues of approximately
$1.861 billion to $1.866 billion
- GAAP net loss per diluted share of
approximately $0.51 to $0.53
- Non-GAAP net revenues of approximately
$1.865 billion to $1.870 billion
- Non-GAAP net income per diluted share
of $1.32 to $1.34
Guidance for the third fiscal quarter of 2017 is as follows:
- GAAP and Non-GAAP net revenues of
approximately $463 million to $465 million
- GAAP net income per diluted share of
approximately $0.14 to $0.15
- Non-GAAP net income per diluted share
of $0.35 to $0.36
Conference Call
Verifone will hold its earnings conference call today, June 8,
2017, at 4.30 p.m. (ET)/1:30 p.m. (PT). To listen to the call and
view the slides, visit Verifone’s website http://ir.verifone.com.
The recorded audio webcast will be available on Verifone's website
for the next 30 days.
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 35-year history
of uncompromised security with approximately 30 million devices and
terminals deployed worldwide. Our people are 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, downturns in the retail sector, 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 deliver new products to the market on time and in
sufficient quantities to meet demand, 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 and divestiture 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 April 30, Six Months Ended
April 30, 2017 2016 % Change (1)
2017 2016 % Change (1) Net revenues:
Systems $ 285.7 $ 342.5 (16.6 )% $ 551.1 $ 680.0 (19.0 )% Services
188.0 183.8 2.3 % 376.5
359.8 4.6 % Total net revenues 473.7
526.3 (10.0 )% 927.6 1,039.8 (10.8 )%
Cost of net revenues: Systems 176.2 200.5 (12.1 )%
342.6 395.3 (13.3 )% Services 124.7 115.4 8.1
% 240.8 218.8 10.1 % Total cost of net
revenues 300.9 315.9 (4.7 )% 583.4
614.1 (5.0 )%
Gross margin
172.8 210.4 (17.9 )% 344.2
425.7 (19.1 )%
Operating expenses:
Research and development 51.8 54.1 (4.3 )% 107.7 105.8 1.8 % Sales
and marketing 50.9 59.0 (13.7 )% 100.1 114.5 (12.6 )% General and
administrative 46.8 54.9 (14.8 )% 97.6 107.2 (9.0 )% Restructuring
and related charges 68.9 0.6 nm 70.0 0.6 nm Goodwill impairment
17.4 — nm 17.4 — nm Amortization of purchased intangible assets
18.4 22.0 (16.4 )% 37.2
41.6 (10.6 )% Total operating expenses 254.2
190.6 33.4 % 430.0 369.7 16.3 %
Operating income (loss) (81.4 ) 19.8 (511.1 )% (85.8 ) 56.0
(253.2 )% Interest expense, net (8.2 ) (8.6) (4.7 )% (16.4 ) (16.8
) (2.4 )% Other income (expense), net 8.8
(4.8) (283.3 )% 6.6 (7.0 ) (194.3 )% Income
(loss) before income taxes (80.8 ) 6.4 nm (95.6 ) 32.2 (396.9 )%
Income tax provision 8.9 3.1 187.1 %
11.8 5.1 131.4 %
Consolidated net income
(loss) (89.7 ) 3.3 nm (107.4 ) 27.1 (496.3 )% Net income (loss)
attributable to noncontrolling interests (0.4 ) 0.4
(200.0 )% (1.5 ) 0.7 (314.3 )%
Net income
(loss) attributable to VeriFone Systems, Inc. stockholders $
(89.3 ) $ 2.9 nm $ (105.9 ) $ 26.4 (501.1 )%
Net
income (loss) per share attributable to VeriFone Systems, Inc.
stockholders: Basic $ (0.80 ) $ 0.03 $ (0.95 ) $ 0.24
Diluted $ (0.80 ) $ 0.03 $ (0.95 ) $ 0.24
Weighted
average number of shares used in computing net income (loss) per
share attributable to VeriFone Systems, Inc. stockholders:
Basic 111.7 110.3 111.5
110.8 Diluted 111.7 111.3 111.5
111.9 (1) "nm" means not meaningful
VERIFONE SYSTEMS, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN MILLIONS)
April 30, 2017 October 31, 2016
ASSETS Current assets: Cash and cash equivalents $
134.5 $ 148.4 Accounts receivable, net of allowances of $13.8 and
$14.1, respectively 335.2 323.4 Inventories 141.7 175.2 Prepaid
expenses and other current assets 195.2 110.4
Total current assets 806.6 757.4 Property and
equipment, net 130.5 202.3 Purchased intangible assets, net 261.4
306.3 Goodwill 1,069.9 1,110.5 Deferred tax assets, net 35.4 37.0
Other long-term assets 100.3 81.3
Total assets $ 2,404.1 $ 2,494.8
LIABILITIES AND EQUITY Current liabilities: Accounts
payable $ 154.9 $ 154.6 Accruals and other current liabilities
246.0 213.4 Deferred revenue, net 109.2 104.8 Short-term debt
74.6 66.0
Total current
liabilities 584.7 538.8 Long-term deferred revenue, net 69.7
66.5 Deferred tax liabilities, net 100.9 99.4 Long-term debt 803.4
859.9 Other long-term liabilities 68.6 76.8
Total liabilities 1,627.3 1,641.4 Redeemable
noncontrolling interest in subsidiary 1.6 5.0
Stockholders’ equity: Common stock 1.1 1.1 Additional
paid-in capital 1,792.2 1,771.9 Accumulated deficit (724.2 ) (618.3
) Accumulated other comprehensive loss (319.0 )
(341.0 )
Total VeriFone Systems, Inc. stockholders’ equity
750.1 813.7 Noncontrolling interests in subsidiaries 25.1
34.7
Total equity 775.2
848.4
Total liabilities, redeemable noncontrolling
interest in subsidiary and equity $ 2,404.1 $ 2,494.8
VERIFONE SYSTEMS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN
MILLIONS) Six Months Ended April 30,
2017 2016 Cash flows from operating activities
Consolidated net income (loss) $ (107.4 ) $ 27.1 Adjustments to
reconcile consolidated net income (loss) to net cash provided by
operating activities: Depreciation and amortization, net 76.2 85.6
Stock-based compensation expense 20.7 22.0 Deferred income taxes,
net 0.3 (5.1 ) Non-cash restructuring and related charges 39.6 —
Goodwill impairment 17.4 — Other 5.6 6.2
Net cash provided by operating activities before changes in
operating assets and liabilities 52.4 135.8
Changes in operating assets and liabilities: Accounts
receivable, net (21.5 ) (12.6 ) Inventories 23.8 (23.4 ) Prepaid
expenses and other assets (10.0 ) (21.1 ) Accounts payable (0.6 )
26.0 Deferred revenue, net 9.1 30.9 Other current and long-term
liabilities 27.1 (18.4 ) Net change in
operating assets and liabilities 27.9 (18.6 )
Net cash provided by operating activities 80.3
117.2
Cash flows from investing activities
Capital expenditures (36.4 ) (58.4 ) Acquisition of businesses, net
of cash and cash equivalents acquired (4.9 ) (169.7 ) Divestiture
of businesses 6.5 — Other investing activities, net 0.3
0.1 Net cash used in investing activities
(34.5 ) (228.0 )
Cash flows from financing
activities Proceeds from debt, net of issuance costs 118.7
380.4 Repayments of debt (173.5 ) (238.6 ) Proceeds from issuance
of common stock through employee equity incentive plans 0.8 2.5
Stock repurchases — (79.9 ) Other financing activities, net
(3.5 ) (3.4 ) Net cash provided by (used in) financing
activities (57.5 ) 61.0 Effect of
foreign currency exchange rate changes on cash, cash equivalents
and restricted cash 1.1 1.1 Net
decrease in cash, cash equivalents and restricted cash (10.6 )
(48.7 ) Cash, cash equivalents and restricted cash, beginning of
period 159.2 215.9 Cash, cash
equivalents and restricted cash, end of period $ 148.6 $
167.2 Cash and cash equivalents, end of period 134.5
156.6 Restricted cash, end of period 14.1 10.6
Cash, cash equivalents and restricted cash, end of period $
148.6 $ 167.2
VERIFONE SYSTEMS,
INC. NET REVENUES INFORMATION (UNAUDITED, IN
MILLIONS, EXCEPT PERCENTAGES)
Three Months Ended Six Months
Ended Note
April 30,2017
January 31,2017
April 30,2016
% Change (1) SEQ
% Change (1) YoY
April 30,2017
April 30,2016
% Change (1) GAAP net revenues: North America
$ 157.4 $ 165.9 $ 209.3
(5.1 )% (24.8 )% $ 323.3
$ 445.0 (27.3 )% Latin America
62.5 57.0 69.8 9.6 %
(10.5 )% 119.5 124.6 (4.1
)% EMEA
177.8 168.1 197.0 5.8
% (9.7 )% 345.8 367.4
(5.9 )% Asia-Pacific
76.0
62.9 50.2 20.8 % 51.4
% 139.0 102.8 35.2
% Total
$ 473.7 $ 453.9
$ 526.3 4.4 % (10.0 )%
$ 927.6 $ 1,039.8 (10.8
)% Systems
$ 285.7 $
265.4 $ 342.5 7.6 % (16.6
)% $ 551.1 $ 680.0 (19.0
)% Services
188.0 188.5
183.8 (0.3 )% 2.3 %
376.5 359.8 4.6 %
Total
$ 473.7 $ 453.9 $
526.3 4.4 % (10.0 )% $
927.6 $ 1,039.8 (10.8 )%
Non-GAAP net revenues: (2) North America A $ 157.6 $
168.6 $ 215.4 (6.5 )% (26.8 )% $ 326.3 $ 451.1 (27.7 )% Latin
America A 62.5 57.0 69.8 9.6 % (10.5 )% 119.5 124.6 (4.1 )% EMEA A
177.8 168.1 197.0 5.8 % (9.7 )% 345.8 367.4 (5.9 )% Asia-Pacific A
76.0 62.9 50.2 20.8 % 51.4 %
139.0 102.8 35.2 % Total $ 473.9 $ 456.6 $
532.4 3.8 % (11.0 )% $ 930.6 $ 1,045.9 (11.0 )%
Systems A $ 285.7 $ 265.4 $ 342.5 7.6 % (16.6 )% $ 551.1 $ 680.0
(19.0 )% Services A 188.2 191.2 189.9
(1.6 )% (0.9 )% 379.5 365.9 3.7 % Total $
473.9 $ 456.6 $ 532.4 3.8 % (11.0 )% $ 930.6 $
1,045.9 (11.0 )%
GAAP net revenues $
473.7 $ 453.9 $ 526.3 4.4
% (10.0 )% $ 927.6 $
1,039.8 (10.8 )% Plus: Non-GAAP net revenues
adjustments A 0.2 2.7 6.1 nm nm
3.0 6.1 nm
Non-GAAP net revenues (2) $ 473.9 $
456.6 $ 532.4 3.8 % (11.0 )% 930.6 $ 1,045.9 (11.0 )% Net revenues
from businesses acquired in the past 12 months B (0.8 )
— nm nm (17.3 ) — nm
Non-GAAP organic net
revenues (2) $ 473.1 $ 532.4 nm (11.1 )% $ 913.3
$ 1,045.9 (12.7 )%
(1) "nm" means not meaningful.
(2) Reconciliations for the non-GAAP
measures are provided at the end of this press release.
For three months ended April 30, 2017
compared with three months ended April 30, 2016 For six
months ended April 30, 2017 compared with six months ended April
30, 2016 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
(24.8 )% 2.0
% (26.8 )% — % (26.8
)% (27.3 )% 1.6 % (28.9
)% — % (28.9 )% Latin America
(10.5 )% (0.1 )% (10.4 )%
8.6 % (19.0 )% (4.1 )%
(0.1 )% (4.0 )% 6.9 %
(10.9 )% EMEA
(9.7 )% 0.5
% (10.2 )% (2.0 )% (8.2
)% (5.9 )% 3.2 % (9.1
)% (2.9 )% (6.2 )% Asia-Pacific
51.4 % (0.1 )% 51.5 %
3.5 % 48.0 % 35.2 %
0.1 % 35.1 % 1.1 %
34.0 % Total
(10.0 )% 1.1
% (11.1 )% 0.8 % (11.9
)% (10.8 )% 1.9 % (12.7
)% (0.1 )% (12.6 )%
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 April
30, 2017 North America
$ 157.4 $ 0.2 $ 157.6 $— $
157.6 $ — $ 157.6 Latin America
62.5 — 62.5 — 62.5 (5.9 )
56.6 EMEA
177.8 — 177.8
(0.8
)
177.0
3.8 180.8 Asia-Pacific
76.0 — 76.0 —
76.0 (1.7 ) 74.3 Total
$
473.7 $ 0.2 $ 473.9 $(0.8 ) $ 473.1 $ (3.8 ) $ 469.3
Systems
$ 285.7 $ — $ 285.7 $(0.6 ) $ 285.1 $ (2.8 )
$ 282.3 Services
188.0 0.2 188.2 (0.2 )
188.0 (1.0 ) 187.0 Total
$ 473.7
$ 0.2 $ 473.9 $(0.8 ) $ 473.1 $ (3.8 ) $ 469.3
Three
Months Ended January 31, 2017 North America
$
165.9 $ 2.7 $ 168.6 $(5.4 ) $ 163.2 Latin America
57.0 — 57.0 — 57.0 EMEA
168.1 — 168.1
(11.1 ) 157.0 Asia-Pacific
62.9
— 62.9 — 62.9
Total
$ 453.9 $ 2.7 $ 456.6 $(16.5 )
$ 440.1 Systems
$ 265.4 $ — $
265.4 $(0.7 ) $ 264.7 Services
188.5
2.7 191.2 (15.8 ) 175.4 Total
$ 453.9 $ 2.7 $ 456.6 $(16.5 ) $
440.1
Three Months Ended April 30, 2016 North
America
$ 209.3 $ 6.1 $ 215.4 $ — $ 215.4
Latin America
69.8 — 69.8 — 69.8 EMEA
197.0 — 197.0 —
197.0 Asia-Pacific
50.2 —
50.2 — 50.2 Total
$ 526.3 $ 6.1 $ 532.4 $ —
$ 532.4 Systems
$ 342.5 $
— $ 342.5 $ — $ 342.5 Services
183.8
6.1 189.9 — 189.9
Total
$ 526.3 $ 6.1 $ 532.4
$ — $ 532.4
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)
Six Months Ended April 30, 2017 North America
$ 323.3 $ 3.0 $ 326.3 $ (5.4 ) $ 320.9 $ (0.1 ) $
320.8 Latin America
119.5 — 119.5 — 119.5 (8.5 ) 111.0 EMEA
345.8 — 345.8 (11.9 ) 333.9 10.7 344.6 Asia-Pacific
139.0 — 139.0 — 139.0
(1.1 ) 137.9 Total
$ 927.6 $ 3.0 $
930.6 $ (17.3 ) $ 913.3 $ 1.0 $ 914.3 Systems
$ 551.1 $ — $ 551.1 $ (1.3 ) $ 549.8 $ (0.2 ) $ 549.6
Services
376.5 3.0 379.5 (16.0 )
363.5 1.2 364.7 Total
$
927.6 $ 3.0 $ 930.6 $ (17.3 ) $ 913.3 $ 1.0 $ 914.3
Six Months Ended April 30, 2016 North America
$ 445.0 $ 6.1 $ 451.1 $ — $ 451.1 Latin America
124.6 — 124.6 — 124.6 EMEA
367.4 — 367.4 — 367.4
Asia-Pacific
102.8 — 102.8
— 102.8 Total
$ 1,039.8 $
6.1 $ 1,045.9 $ — $ 1,045.9 Systems
$ 680.0 $ — $ 680.0 $ — $ 680.0 Services
359.8 6.1 365.9 —
365.9 Total
$ 1,039.8 $ 6.1 $ 1,045.9
$ — $ 1,045.9
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 April 30, 2017 GAAP $
473.7 $ 172.8 36.5 % $
(81.4 ) $ 8.9 $ (89.3
) Adjustments: Amortization of step-down deferred services
net revenues at acquisition and associated costs of goods sold A
0.2 0.2 0.2 — 0.2 Amortization of purchased intangible assets D —
1.6 20.0 — 20.0 Other merger and acquisition related expenses D — —
0.7 — (0.5 ) Stock based compensation E — 1.1 11.2 — 11.2 Goodwill
impairment F — — 17.4 — 17.4 Restructuring and related charges F —
11.6 80.8 — 80.8 Other charges and income F — — — — (9.6 ) Income
tax effect of non-GAAP exclusions G — — —
(3.1 ) 3.1 Non-GAAP $ 473.9 $ 187.3
39.5 % $ 48.9 $ 5.8 $ 33.3
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 111.7 111.7
$ (0.80 ) $ (0.80 )
Adjustment for diluted shares H — 0.6 Non-GAAP
111.7 112.3 $ 0.30 $ 0.30
(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
(loss) Income tax provision Net income
(loss) attributable to VeriFone Systems, Inc. stockholders
Three Months Ended January 31, 2017 GAAP $
453.9 $ 171.4 37.8 % (4.4 )
$ 2.9 $ (16.6 ) Adjustments:
Amortization of step-down in deferred services net revenues at
acquisition and associated costs of goods sold A 2.7 2.2 2.2 — 2.2
Amortization of purchased intangible assets D — 2.5 21.2 — 21.2
Other merger and acquisition related expenses D — — — — (1.6 )
Stock based compensation E — 0.9 9.6 — 9.6 Restructuring and
related charges F — 0.8 9.5 — 9.5 Income tax effect of non-GAAP
exclusions G — — — 1.1
(1.1 ) Non-GAAP $ 456.6 $ 177.8 38.9 % $38.1 $ 4.0 $
23.2
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
111.4 111.4 $ (0.15 ) $
(0.15 ) Adjustment for diluted shares H —
0.3 Non-GAAP 111.4 111.7 $ 0.21 $ 0.21
Note
Net revenues Gross margin Gross margin
percentage Operating income Income tax provision
Net income attributable to VeriFone Systems, Inc.
stockholders Three Months Ended April 30, 2016
GAAP $ 526.3 $ 210.4 40.0
% $ 19.8 $ 3.1 $
2.9 Adjustments: Amortization of step-down in deferred
services net revenues at acquisition and associated cost of goods
sold A 6.1 4.4 4.4 — 4.4 Amortization of purchased intangible
assets D — 3.8 25.8 — 25.8 Merger and acquisition related D — — 1.6
— 2.9 Stock based compensation E — 0.8 11.6 — 11.6 Restructuring
and related charges F — — 0.6 — 0.6 Other charges and income F —
6.6 8.4 — 9.5 Income tax effect of non-GAAP exclusions G —
— — 5.8 (5.8 )
Non-GAAP $ 532.4 $ 226.0 42.4 % $ 72.2 $ 8.9 $
51.9
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
110.3 111.3 $ 0.03
$ 0.03 Non-GAAP 110.3 111.3 $
0.47 $ 0.47
(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. stockholders Six
Months Ended April 30, 2017 GAAP $ 927.6
$ 344.2 37.1 % $ (85.8
) $ 11.8 $ (105.9 )
Adjustments: Amortization of step-down in deferred services net
revenues at acquisition and associated costs of goods sold A 2.9
2.4 2.4 — 2.4 Amortization of purchased intangible assets D — 4.1
41.3 — 41.3 Other merger and acquisition related expenses D — — 0.7
— (2.1 ) Stock based compensation E — 2.1 20.7 — 20.7 Goodwill
impairment F — — 17.4 — 17.4 Restructuring and related charges F —
12.3 90.3 — 90.3 Other charges and income F — — — — (9.6 ) Income
tax effect of non-GAAP exclusions G — — —
(2.0 ) 2.0 Non-GAAP $ 930.5 $ 365.1
39.2 % $ 87.0 $ 9.8 $ 56.5
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 111.5 111.5
$ (0.95 ) $ (0.95 )
Adjustment for diluted shares H — 0.5 Non-GAAP
111.5 112.0 $ 0.51 $ 0.50
Note
Net revenues Gross margin Gross margin
percentage Operating income Income tax provision
Net income attributable to VeriFone Systems, Inc.
stockholders Six Months Ended April 30, 2016 GAAP
$ 1,039.8 $ 425.7 40.9 %
$ 56.0 $ 5.1 $ 26.4
Adjustments: Amortization of step-down in deferred services net
revenues at acquisition and associated cost of good sold A 6.1 4.4
4.4 — 4.4 Other merger and acquisition related expenses D — 7.8
53.1 — 53.2 Stock based compensation E — 1.7 22.0 — 22.0 Other
charges and income F — 6.4 9.0 — 12.7 Income tax effect of non-GAAP
exclusions G — — — 13.1
(13.1 ) Non-GAAP $ 1,045.9 $ 446.0 42.6 % $ 144.5 $
18.2 $ 105.6
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 110.8 111.9 $ 0.24
$ 0.24 Non-GAAP 110.8 111.9 $
0.95 $ 0.94
(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) Guidance
Three Months Ending July 31, 2017 Year Ending October 31,
2017 GAAP net revenues $ 463-465 $
1,861-1,866 Adjustments to net revenues: A —
4 Non-GAAP net revenues $ 463-465 $
1,865-1,870
Diluted GAAP earnings (loss)
per share (1) $ 0.14 - 0.15 $
(0.51) - (0.53
)
Adjustments: (2) Amortization of step-down in deferred services net
revenues at acquisition A $ — $ 0.03 Amortization of purchased
intangible assets D 0.16 0.67 Stock based compensation E 0.09 0.36
Restructuring and related charges F — 0.69 Goodwill impairment F —
0.15 Income tax effect of non-GAAP exclusions (3) G (0.04 )
(0.05 ) Diluted Non-GAAP earnings per share (1) $ 0.35 -
0.36 $ 1.32 - 1.34
(1) Diluted GAAP and non-GAAP earnings
(loss) 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
14.5% 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 third 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, income taxes 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 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). 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 and, 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 had gains and incurred expenses, such as professional
services, contract cancellation fees and certain personnel and
personnel costs related to initiatives to transform, streamline,
centralize and restructure our global operations. The
transformation gain relates to the contribution of certain business
assets and associated equity ownership in Gas Media. Charges
include involuntary termination costs, costs to cancel facility
leases, write down of assets held for sale, and associated legal
and other advisory fees. Each of these items has been incurred in
connection with discrete activities in furtherance of specific
business objectives in light of prevailing circumstances, and each
item and the associated activity or activities have had differing
impacts on our business operations. We do not recognize gains or
incur costs of this nature 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 quarter of
fiscal year 2016. We believe that excluding such losses provides a
better indication of our business performance, 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.
Goodwill impairment: Our non-GAAP results exclude any goodwill
impairment. We believe that excluding goodwill impairments provides
a better indication of our business performance and enhances the
comparability of our business performance during periods before and
after we recorded the impairment.
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 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.
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/20170608006242/en/
VerifoneInvestor Relations:Chris Mammone,
408-232-7230ir@verifone.comorMedia
Relations:Andy Payment, 770-754-3541andy.payment@verifone.com
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