Verifone (NYSE: PAY), a world leader in payments and commerce
solutions, today announced financial results for the three months
ended July 31, 2017.
Third Quarter Highlights
- GAAP and Non-GAAP net revenues of $467
million, with 7% sequential growth in Services
- GAAP net loss per diluted share of
$0.63, reflecting restructuring and divestiture charges
- Non-GAAP net income per diluted share
of $0.36, up 20% sequentially
- Operating cash flow of $60 million and
free cash flow of $44 million
- Completed divestiture of China
operation into minority holding
- Growing sales pipeline of next
generation products across all regions
“In the third quarter, the Verifone team delivered solid
financial results, made progress on divesting non-core businesses,
and achieved our launch objectives for next generation products. We
continue to grow Verifone’s annuity services business by partnering
with our clients to connect more of their device footprint to our
payments and commerce services platform," said Paul Galant, Chief
Executive Officer of Verifone, “We expect to return Verifone to
annual growth in fiscal 2018.”
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGES)
Three Months Ended July 31,
Nine Months Ended July 31, 2017
2016 Change
(1 ) 2017 2016
Change (1 ) GAAP:
Net revenues $ 467 $ 488
(4.3 )% $ 1,395 $ 1,528
(8.7 )% Gross margin as a % of net revenues
37.4 % 39.2 % (1.8) pts
37.2 % 40.4 % (3.2) pts Net
loss per diluted share $ (0.63 ) $
(0.28 ) nm $ (1.58 )
$ (0.04 ) nm Non-GAAP (2): Net
revenues $ 467 $ 493 (5.2 )% $ 1,398 $ 1,539 (9.2 )% Gross margin
as a % of net revenues 40.7 % 42.2 % (1.5) pts 39.7 % 42.5 % (2.8)
pts Net income per diluted share $ 0.36 $ 0.42 (14.3 )% $ 0.86 $
1.36 (36.8 )% (1) "nm" means not meaningful. (2)
Reconciliations for the Non-GAAP measures are provided at the end
of this press release.
Fourth Quarter 2017 and Fiscal 2017 Outlook
Guidance for the fourth fiscal quarter of 2017 is as
follows:
- GAAP and Non-GAAP net revenues of
approximately $470 million to $473 million
- GAAP net income per diluted share of
approximately $0.22
- Non-GAAP net income per diluted share
of $0.43 (reflects a reduction from prior guidance entirely
attributable to the Taxi business, which is in the process of being
divested)
Guidance for the full fiscal year 2017 is as follows:
- GAAP net revenues of approximately
$1.864 billion to $1.867 billion
- GAAP net loss per diluted share of
approximately $1.36
- Non-GAAP net revenues of approximately
$1.867 billion to $1.870 billion
- Non-GAAP net income per diluted share
of $1.30
Conference Call
Verifone will hold its earnings conference call today, September
7, 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 a global leader in payments and commerce solutions,
powered by a growing footprint of more than 30 million devices in
over 150 countries at the last inch of consumer payments. We
are connecting our devices to our integrated solutions platform to
better serve the evolving needs of our clients. We are built
on a 35-year history of uncompromised security and our people are
trusted experts who work with our clients and partners, helping to
solve their most complex payments challenges.
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,
timely product introductions, 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 July 31, Nine Months Ended July 31,
2017 2016 % Change (1) 2017 2016
% Change (1) Net revenues: Systems $ 266.0 $ 292.1
(8.9 )% $ 817.1 $ 972.1 (15.9 )% Services 200.9 196.0
2.5 % 577.4 555.8 3.9 % Total
net revenues 466.9 488.1 (4.3 )%
1,394.5 1,527.9 (8.7 )%
Cost of net
revenues: Systems 177.8 175.7 1.2 % 520.4 571.0 (8.9 )%
Services 114.6 121.3 (5.5 )% 355.4
340.1 4.5 % Total cost of net revenues
292.4 297.0 (1.5 )% 875.8 911.1
(3.9 )%
Gross margin 174.5 191.1
(8.7 )% 518.7 616.8 (15.9 )%
Operating expenses: Research and development 50.7
52.4 (3.2 )% 158.5 158.1 0.3 % Sales and marketing 46.7 52.8 (11.6
)% 146.8 167.3 (12.3 )% General and administrative 44.9 49.7 (9.7
)% 142.4 157.0 (9.3 )% Restructuring and related charges 65.7 33.6
95.5 % 135.7 34.2 296.8 % Litigation settlement and loss
contingency expense — 0.6
nm
— 0.6
nm
Goodwill impairment — —
nm
17.4 —
nm
Amortization of purchased intangible assets 16.7 24.3
(31.3 )% 53.9 65.9 (18.2 )%
Total operating expenses 224.7 213.4 5.3 %
654.7 583.1 12.3 %
Operating income
(loss) (50.2 ) (22.3 ) 125.1 % (136.0 ) 33.7 (503.6 )% Interest
expense, net (8.4 ) (9.0 ) (6.7 )% (24.8 ) (25.9 ) (4.2 )% Other
income (expense), net (1.9 ) 0.1
nm
4.7 (6.8 ) (169.1 )% Net income (loss) before
income taxes (60.5 ) (31.2 ) 93.9 % (156.1 ) 1.0
nm
Income tax provision 10.3 0.3
nm
22.1 5.4 309.3 %
Consolidated net
loss (70.8 ) (31.5 ) 124.8 % (178.2 ) (4.4 )
nm
Net income (loss) attributable to noncontrolling interests
0.2 (0.4 ) (150.0 )% (1.3 ) 0.3 (533.3
)%
Net loss attributable to VeriFone Systems, Inc.
stockholders $ (71.0 ) $ (31.1 ) 128.3 % $ (176.9 ) $ (4.7 )
nm
Net loss per share attributable to VeriFone Systems, Inc.
stockholders: Basic $ (0.63 ) $ (0.28 ) $ (1.58 ) $ (0.04 )
Diluted $ (0.63 ) $ (0.28 ) $ (1.58 ) $ (0.04 )
Weighted
average number of shares used in computing net loss per share
attributable to VeriFone Systems, Inc. stockholders: Basic
112.0 110.7 111.7 110.8
Diluted 112.0 110.7 111.7
110.8 (1) "nm" means not meaningful
VERIFONE SYSTEMS, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (UNAUDITED, IN MILLIONS)
July 31, 2017 October 31, 2016
ASSETS Current assets: Cash and cash equivalents $
158.8 $ 148.4 Accounts receivable, net of allowances of $14.3 and
$14.1, respectively 326.3 323.4 Inventories 127.5 175.2 Prepaid
expenses and other current assets 165.9 110.4
Total current assets 778.5 757.4 Property and equipment, net
130.5 202.3 Purchased intangible assets, net 257.5 306.3 Goodwill
1,116.8
1,110.5 Deferred tax assets, net 36.1 37.0 Other long-term assets
99.8 81.3
Total assets $ 2,419.2
$ 2,494.8
LIABILITIES AND EQUITY Current
liabilities: Accounts payable $ 157.1 $ 154.6 Accruals and
other current liabilities
253.3
213.4 Deferred revenue, net 110.6 104.8 Short-term debt 68.2
66.0
Total current liabilities
589.2
538.8 Long-term deferred revenue, net 66.8 66.5 Deferred tax
liabilities, net 102.4 99.4 Long-term debt 809.9 859.9 Other
long-term liabilities 70.0 76.8
Total
liabilities 1,638.3 1,641.4 Redeemable noncontrolling
interest in subsidiary 1.1 5.0
Stockholders’ equity:
Common stock 1.1 1.1 Additional paid-in capital 1,802.2 1,771.9
Accumulated deficit (795.2 ) (618.3 ) Accumulated other
comprehensive loss (256.0 ) (341.0 )
Total VeriFone
Systems, Inc. stockholders’ equity 752.1 813.7 Noncontrolling
interests in subsidiaries 27.7 34.7
Total
equity 779.8 848.4
Total liabilities,
redeemable noncontrolling interest in subsidiary and equity $
2,419.2 $ 2,494.8
VERIFONE SYSTEMS,
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN MILLIONS)
Nine Months Ended July 31, 2017
2016 Cash flows from operating activities
Consolidated net loss $ (178.2 ) $ (4.4 ) Adjustments to reconcile
consolidated net loss to net cash provided by operating activities:
Depreciation and amortization, net 116.8 133.8 Stock-based
compensation expense 30.1 32.9 Deferred income taxes, net (1.2 )
(7.2 ) Non-cash restructuring and related charges 107.5 29.1
Goodwill impairment 17.4 — Other 11.5 5.0
Net cash provided by operating activities before changes in
operating assets and liabilities 103.9 189.2
Changes in operating assets and liabilities: Accounts
receivable, net (15.0 ) 13.5 Inventories 30.9 (53.3 ) Prepaid
expenses and other assets (11.7 ) (23.2 ) Accounts payable 3.0 (2.3
) Deferred revenue, net 5.8 28.4 Other current and long-term
liabilities 23.2 (21.8 ) Net change in
operating assets and liabilities 36.2 (58.7 )
Net cash provided by operating activities 140.1
130.5
Cash flows from investing
activities Capital expenditures (52.8 ) (82.2 ) Acquisition of
businesses, net of cash and cash equivalents acquired (5.0 ) (172.2
) Divestiture of businesses 1.5 — Other investing activities, net
0.3 1.9 Net cash used in investing
activities (56.0 ) (252.5 )
Cash flows from
financing activities Proceeds from debt, net of issuance costs
215.4 490.4 Repayments of debt (277.7 ) (333.9 ) Proceeds from
issuance of common stock through employee equity incentive plans
0.8 3.3 Stock repurchases — (79.9 ) Other financing activities, net
(3.7 ) (4.1 ) Net cash provided by (used in)
financing activities (65.2 ) 75.8
Effect of foreign currency exchange rate changes on cash, cash
equivalents and restricted cash 6.3 (2.1 )
Net increase (decrease) in cash, cash equivalents and
restricted cash 25.2 (48.3 ) Cash, cash equivalents and restricted
cash, beginning of period 159.2 215.9
Cash, cash equivalents and restricted cash, end of period $ 184.4
$ 167.6 Cash and cash equivalents, end of
period 158.8 156.6 Restricted cash, end of period 25.6
11.0 Cash, cash equivalents and restricted
cash, end of period $ 184.4 $ 167.6
VERIFONE SYSTEMS, INC. NET REVENUES
INFORMATION (UNAUDITED, IN MILLIONS, EXCEPT PERCENTAGES)
Three Months Ended Nine
Months Ended Note
July 31,2017
April 30,2017
July 31,2016
%Change(1) SEQ
%Change(1) YoY
July 31,2017
July 31,2016
%Change(1)
GAAP net revenues: North America
$ 152.8
$ 157.4 $ 191.5 (2.9 )%
(20.2 )% $ 476.1 $ 636.5
(25.2 )% Latin America
71.3 62.5
55.1 14.1 % 29.4 % 190.8
179.6 6.2 % EMEA
193.5 177.8
190.0 8.8 % 1.8 % 539.4
557.4 (3.2 )% Asia-Pacific
49.3
76.0 51.5 (35.1 )%
(4.3 )% 188.2
154.4 21.9 % Total
$ 466.9
$ 473.7 $ 488.1 (1.4
)% (4.3 )% $ 1,394.5
$ 1,527.9 (8.7 )% Systems
$ 266.0 $ 285.7 $ 292.1
(6.9 )% (8.9 )% $ 817.1
$ 972.1 (15.9 )% Services
200.9 188.0 196.0
6.9 % 2.5 % 577.4
555.8 3.9 % Total
$ 466.9
$ 473.7 $ 488.1 (1.4
)% (4.3 )% $ 1,394.5
$ 1,527.9 (8.7 )% Non-GAAP
net revenues: (2) North America A $ 152.8 $ 157.6 $ 196.0 (3.0
)% (22.0 )% $ 479.1 $ 647.1 (26.0 )% Latin America A 71.3 62.5 55.1
14.1 % 29.4 % 190.8 179.6 6.2 % EMEA A 193.5 177.8 190.0 8.8 % 1.8
% 539.4 557.4 (3.2 )% Asia-Pacific A 49.3 76.0
51.5 (35.1 )% (4.3 )% 188.2 154.4 21.9
% Total $ 466.9 $ 473.9 $ 492.6 (1.5 )% (5.2 )% $ 1,397.5
$ 1,538.5 (9.2 )% Systems A $ 266.0 $ 285.7 $ 292.1
(6.9 )% (8.9 )% $ 817.1 $ 972.1 (15.9 )% Services A 200.9
188.2 200.5 6.7 % 0.2 % 580.4
566.4 2.5 % Total $ 466.9 $ 473.9 $ 492.6 (1.5 )%
(5.2 )% $ 1,397.5 $ 1,538.5 (9.2 )%
GAAP net
revenues $ 466.9 $ 473.7 $
488.1 (1.4 )% (4.3 )% $
1,394.5 $ 1,527.9 (8.7 )% Plus:
Non-GAAP net revenues adjustments A — 0.2
4.5 nm nm 3.0 10.6 nm
Non-GAAP net
revenues (2) $ 466.9 $ 473.9 $ 492.6 (1.5 )% (5.2 )% 1,397.5 $
1,538.5 (9.2 )% Net revenues from businesses acquired in the past
12 months B (0.5 ) — nm nm (17.9 ) — nm
Non-GAAP organic net revenues (2) $ 466.4 $ 492.6 nm
(5.3 )% $ 1,379.6 $ 1,538.5 (10.3 )% (1) "nm" means
not meaningful. (2) Reconciliations for the non-GAAP measures are
provided at the end of this press release.
For three months ended July 31, 2017
compared withthree months ended July 31, 2016
For nine months ended July 31, 2017
compared with ninemonths ended July 31, 2016
Netrevenuesgrowth(decline)
Impactdue
toacquiredbusinesses(A) (B)
Non-GAAPorganicnetrevenuesgrowth(decline)
Impactdue
toforeigncurrency(C)
Non-GAAPorganicnetrevenuesatconstantcurrencygrowth(decline)
Netrevenuesgrowth(decline)
Impactdue
toacquiredbusinesses(A) (B)
Non-GAAPorganicnetrevenuesgrowth(decline)
Impactdue
toforeigncurrency(C)
Non-GAAPorganicnetrevenuesatconstantcurrencygrowth(decline)
North America
(20.2 )% 1.8 % (22.0 )% — % (22.0 )%
(25.2 )% 1.6 % (26.8 )% — % (26.8 )% Latin America
29.4 % — % 29.4 % 4.0 % 25.4 %
6.2 % —
% 6.2 % 6.0 % 0.2 % EMEA
1.8 % 0.3 % 1.5 % (0.5 )%
2.0 %
(3.2 )% 2.3 % (5.5 )% (2.1 )% (3.4 )%
Asia-Pacific
(4.3 )% — % (4.3 )% 1.7 % (6.0 )%
21.9 % — % 21.9 % 1.2 % 20.7 % Total
(4.3
)% 1.0 % (5.3 )% 0.5 % (5.8 )%
(8.7 )% 1.6 %
(10.3 )% 0.1 % (10.4 )%
Non-GAAP Reconciliations
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF
NON-GAAP FINANCIAL MEASURES (UNAUDITED, IN MILLIONS)
GAAP netrevenues
Amortizationof
step-downin deferredrevenue
atacquisition
Non-GAAPnet revenues
Net
revenuesfrombusinessesacquired inthe
past 12months
Non-GAAPorganic
netrevenues
Constantcurrencyadjustment
Non-GAAPorganic
netrevenues atconstantcurrency
Note (A) (A) (B) (B) (C)
(C) Three Months Ended July 31, 2017 North
America
$ 152.8 $ — $ 152.8 $ — $ 152.8 $ 0.1 $ 152.9
Latin America
71.3 — 71.3 — 71.3 (2.3 ) 69.0 EMEA
193.5 — 193.5 (0.5 ) 193.0 0.9 193.9 Asia-Pacific
49.3 — 49.3 — 49.3
(0.9 ) 48.4 Total
$ 466.9 $ — $ 466.9 $ (0.5 )
$ 466.4 $ (2.2 ) $ 464.2 Systems
$ 266.0 $ — $
266.0 $ — $ 266.0 $ (1.7 ) $ 264.3 Services
200.9
— 200.9 (0.5 ) 200.4 (0.5
) 199.9 Total
$ 466.9 $ — $ 466.9 $
(0.5 ) $ 466.4 $ (2.2 ) $ 464.2
Three Months Ended April
30, 2017 North America
$ 157.4 $ 0.2 $ 157.6 $ —
$ 157.6 Latin America
62.5 — 62.5 — 62.5 EMEA
177.8 — 177.8 (0.2 ) 177.6 Asia-Pacific
76.0 — 76.0 — 76.0
Total
$ 473.7 $ 0.2 $ 473.9 $ (0.2 ) $ 473.7
Systems
$ 285.7 $ — $ 285.7 $ — $ 285.7 Services
188.0 0.2 188.2 (0.2 )
188.0 Total
$ 473.7 $ 0.2 $ 473.9 $ (0.2 ) $ 473.7
Three Months Ended July 31, 2016 North America
$ 191.5 $ 4.5 $ 196.0 $ — $ 196.0 Latin America
55.1 — 55.1 — 55.1 EMEA
190.0 — 190.0 — 190.0
Asia-Pacific
51.5 — 51.5 —
51.5 Total
$ 488.1 $ 4.5 $ 492.6 $ —
$ 492.6 Systems
$ 292.1 $ — $ 292.1 $ —
$ 292.1 Services
196.0 4.5 200.5
— 200.5 Total
$ 488.1 $ 4.5 $ 492.6 $ —
$ 492.6
VERIFONE SYSTEMS, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN MILLIONS)
GAAP netrevenues
Amortizationof
step-downin deferredrevenue
atacquisition
Non-GAAPnet revenues
Net
revenuesfrombusinessesacquired inthe
past 12months
Non-GAAPorganic
netrevenues
Constantcurrencyadjustment
Non-GAAPorganic
netrevenues atconstantcurrency
Note (A) (A) (B) (B) (C)
(C) Nine Months Ended July 31, 2017 North
America
$ 476.1 $ 3.0 $ 479.1 $ (5.4 ) $ 473.7 $ — $
473.7 Latin America
190.8 — 190.8 — 190.8 (10.7 ) 180.1 EMEA
539.4 — 539.4 (12.5 ) 526.9 11.6 538.5 Asia-Pacific
188.2 — 188.2 — 188.2
(2.0 ) 186.2 Total
$ 1,394.5 $ 3.0 $
1,397.5 $ (17.9 ) $ 1,379.6 $ (1.1 ) $ 1,378.5 Systems
$ 817.1 $ — $ 817.1 $ (1.3 ) $ 815.8 $ (1.9 ) $ 813.9
Services
577.4 3.0 580.4 (16.6 )
563.8 0.8 564.6 Total
$ 1,394.5 $ 3.0 $ 1,397.5 $ (17.9 ) $ 1,379.6 $ (1.1
) $ 1,378.5
Nine Months Ended July 31, 2016 North
America
$ 636.5 $ 10.6 $ 647.1 $ — $ 647.1 Latin
America
179.6 — 179.6 — 179.6 EMEA
557.4 — 557.4 —
557.4 Asia-Pacific
154.4 — 154.4
— 154.4 Total
$ 1,527.9 $ 10.6 $
1,538.5 $ — $ 1,538.5 Systems
$ 972.1 $
— $ 972.1 $ — $ 972.1 Services
555.8 10.6
566.4 — 566.4 Total
$ 1,527.9 $ 10.6 $ 1,538.5 $ — $ 1,538.5
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF
NON-GAAP FINANCIAL MEASURES (UNAUDITED, IN MILLIONS, EXCEPT
PER SHARE AMOUNTS AND PERCENTAGES) Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome(loss)
Incometaxprovision
Net
income(loss)attributableto
VeriFoneSystems,Inc.stockholders
Three Months Ended July 31, 2017 GAAP
$ 466.9 $ 174.5 37.4 %
$ (50.2 ) $ 10.3 $
(71.0 ) Adjustments: Amortization of purchased
intangible assets D — 1.4 18.1 — 19.4 Other merger and acquisition
related expenses D — — 0.4 — 0.4 Stock based compensation E — 1.2
9.3 — 9.3 Restructuring and related charges F — 12.9 78.6 — 78.6
Other charges and income F — — 2.1 — 0.4 Income tax effect of
non-GAAP exclusions G — — — (3.3
) 3.3 Non-GAAP $ 466.9 $ 190.0 40.7 % $ 58.3 $
7.0 $ 40.4
Weighted averagenumber of shares
usedin computing netincome (loss) per share:
Net income (loss) pershare
attributable toVeriFone Systems, Inc.stockholders
(1)
Basic Diluted Basic Diluted GAAP
112.0 112.0 $ (0.63 ) $
(0.63 ) Adjustment for diluted shares H —
0.6 Non-GAAP 112.0 112.6 $ 0.36 $ 0.36
(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
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome(loss)
Incometaxprovision
Net
income(loss)attributableto
VeriFoneSystems,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 in 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 averagenumber of shares
usedin computing netincome (loss) per share:
Net income (loss) pershare
attributable toVeriFone 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
Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome(loss)
Incometaxprovision
Net
income(loss)attributableto
VeriFoneSystems,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 in deferred services net
revenues at acquisition and associated cost 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 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 averagenumber of shares
usedin computing netincome (loss) per share:
Net income (loss) pershare
attributable toVeriFone 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
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome(loss)
Incometaxprovision
Net
income(loss)attributableto
VeriFoneSystems,Inc. stockholders
Nine Months Ended July 31, 2017 GAAP $
1,394.5 $ 518.7 37.2 % $
(136.0 ) $ 22.1 $ (176.9
) Adjustments: Amortization of step-down in deferred
services net revenues at acquisition and associated costs of goods
sold A 3.0 2.4 2.4 — 2.4 Amortization of purchased intangible
assets D — 5.5 59.3 — 57.9 Other merger and acquisition related
expenses D — — 1.1 — 1.0 Stock based compensation E — 3.2 30.1 —
30.1 Goodwill impairment F — — 17.4 — 17.4 Restructuring and
related charges F — 25.3 161.4 — 161.4 Other charges and income F —
— 9.6 — (1.7 ) Income tax effect of non-GAAP exclusions G —
— — (5.3 ) 5.3 Non-GAAP $
1,397.5 $ 555.1 39.7 % $ 145.3 $ 16.8 $ 96.9
Weighted averagenumber of shares
usedin computing netincome (loss) per share:
Net income (loss) pershare
attributable toVeriFone Systems, Inc.stockholders
(1)
Basic Diluted Basic Diluted GAAP
111.7 111.7 $ (1.58 ) $
(1.58 ) Adjustment for diluted shares H — 0.5
Non-GAAP 111.7 112.2 $ 0.87 $ 0.86
Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome
Incometaxprovision
Net
income(loss)attributableto
VeriFoneSystems,Inc.stockholders
Nine Months Ended July 31, 2016 GAAP $
1,527.9 $ 616.8 40.4 % $
33.7 $ 5.4 $ (4.7 )
Adjustments: Amortization of step-down in deferred services net
revenues at acquisition and associated cost of goods sold A 10.6
7.5 7.5 — 7.5 Amortization of purchased intangible assets D — 11.8
77.6 — 77.6 Other merger and acquisition related D — — 4.6 — 2.7
Stock based compensation E — 2.5 32.9 — 32.9 Restructuring and
related charges F — 5.1 39.3 — 39.3 Other charges and income F —
10.4 13.6 — 17.3 Income tax effect of non-GAAP exclusions G
— — — 20.8 (20.8 ) Non-GAAP $
1,538.5 $ 654.0 42.5 % $ 209.2 $ 26.2 $ 151.9
Weighted averagenumber of shares
usedin computing netincome (loss) per share:
Net income (loss) pershare
attributable toVeriFone Systems, Inc.stockholders
(1)
Basic Diluted Basic Diluted GAAP
110.8 110.8 $ (0.04 ) $
(0.04 ) Adjustment for diluted shares H — 0.9
Non-GAAP 110.8 111.7 $ 1.37 $ 1.36 (1)
Diluted net loss per share is calculated by dividing the Net loss
attributable to VeriFone Systems, Inc. stockholders by the weighted
average number of shares used in computing net 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 Ended
Note July 31, 2017 July 31, 2016
Free Cash Flow GAAP net cash provided by operating
activities
I $ 60.1 $ 140.1 Less: GAAP capital expenditures
I (16.3 ) (52.8 ) Free cash flow
I $
43.8 $ 87.3
Guidance
Three MonthsEndingOctober
31,2017
Year EndingOctober
31,2017
GAAP net revenues $ 470-473 $
1,864-1,867 Adjustments to net revenues: A —
3 Non-GAAP net revenues $ 470-473 $
1,867-1,870
Diluted GAAP earnings (loss)
per share (1) $ 0.22 $ (1.36
) 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 Other merger and
acquisition related expenses D — 0.01 Stock based compensation E
0.09 0.36 Restructuring and related charges F — 1.44 Goodwill
impairment F — 0.15 Other charges and income F — (0.01 ) Income tax
effect of non-GAAP exclusions (3) G (0.04 ) 0.01
Diluted Non-GAAP earnings per share (1) $ 0.43 $ 1.30
(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 forecasted 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 fourth 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 these non-GAAP financial measures 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. These 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 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.
Note I: Free Cash Flow. Verifone determines free
cash flow as net cash provided by operating activities less capital
expenditures. The free cash flow conversion ratio is free cash flow
divided by non-GAAP Net income attributable to VeriFone Systems,
Inc. stockholders.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170907006594/en/
VerifoneInvestor Relations:Chris Mammone,
408-232-7230ir@verifone.comorMedia
Relations:Kwiyoung Baumgarten, 770-754-3460press@verifone.com
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