Verifone (NYSE: PAY):
- Provides Growth Outlook for the Full
Year Fiscal 2018
- Completes Divestiture of Taxi
Business
- Authorizes New $100 Million Share
Repurchase Program
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, 2017.
The following financial results for the fourth quarter and full
year fiscal 2017 include results from the recently divested Taxi
business.
Fiscal Year 2017 Financial Highlights
- GAAP net revenues of $1.871 billion and
Non-GAAP net revenues of $1.874 billion
- GAAP net loss per diluted share of
$1.55
- Non-GAAP net income per diluted share
of $1.31
- Operating cash flow of $166
million
- Services comprise 42% of Non-GAAP net
revenues
Fourth Quarter 2017 Financial Highlights
- GAAP and Non-GAAP net revenues of $477
million
- GAAP net income per diluted share of
$0.03
- Non-GAAP net income per diluted share
of $0.44
- Record services revenue of $208
million
- First year-over-year and sequential
revenue growth in both Systems and Services since mid-2016
“The Verifone team continues to make meaningful progress
executing our strategy to transform Verifone from a terminal sales
company to a platform services company delivering payment and
commerce solutions that help our clients grow sales and reduce
operating costs while enabling Verifone to grow our base of
recurring services revenue,” said Paul Galant, Chief Executive
Officer of Verifone, “Our focus now shifts from launching our next
generation devices and solutions to scaling them across the
globe.”
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGES)
Three Months Ended October 31,
Years Ended October 31, 2017
2016 Change (1) 2017
2016 Change (1) GAAP:
Net revenues $ 477 $ 464
2.6 % $ 1,871 $ 1,992
(6.1 )% Gross margin as a % of net revenues
40.8 % 38.2 %
2.6 pts
38.1 % 39.9 % (1.8) pts Net
income (loss) per diluted share
$
0.03 $ (0.04 ) nm
$
(1.55 ) $ (0.08 ) nm
Non-GAAP (2): Net revenues $ 477 $ 468 1.9 % $ 1,874 $ 2,006
(6.6 )% Gross margin as a % of net revenues 41.4 % 39.5 %
1.9 pts
40.2 % 41.8 % (1.6) pts Net income per diluted share $ 0.44 $ 0.30
46.7 % $ 1.31 $ 1.66 (21.1 )% (1) “nm” means not meaningful.
(2) Reconciliations for the Non-GAAP measures are provided at the
end of this press release.
Divestiture of Taxi Business / Share Repurchase
On December 11, 2017, Verifone sold its Taxi business for $30
million in cash consideration. In connection with the transaction,
Verifone also retained a minority equity interest in the divested
business.
Verifone expects to use the net proceeds from the Taxi
divestiture, plus available cash, to complete the remaining $50
million authorized under its previously-announced $200 million
stock buyback program. Furthermore, the Company’s Board of
Directors has authorized an additional $100 million stock
repurchase program, which Verifone intends to execute over the
coming 12 to 18 months, subject to market conditions and other
factors, delivering to shareholders a meaningful percentage of free
cash flow generated by the Company during this period.
Fiscal 2018 and First Quarter 2018 Outlook
“For fiscal 2018, the Company expects non-GAAP net revenues of
$1.775 billion to $1.8 billion, which reflects low single digit
growth on an adjusted basis excluding the divested China and Taxi
businesses from the prior year. This outlook also demonstrates a
return to growth in our core North America Retail and Small and
Medium Business verticals, and more than offsets approximately $70
million in prior year headwinds within our North American Petro and
India businesses. The Company also expects fiscal 2018 non-GAAP net
income per diluted share of $1.47 to $1.50, reflecting core revenue
growth, higher gross margins based on a greater mix of next
generation products, and accretion from share repurchases, offset
partially by additional investments in next generation solutions,
and changes in our non-GAAP effective tax rate,” said Marc Rothman,
Executive Vice President and Chief Financial Officer.
Verifone’s outlook for fiscal year 2018 and first quarter is
presented as follows:
Guidance for full fiscal year 2018:
- GAAP net revenues of approximately
$1.788 to $1.813 billion
- Non-GAAP net revenues of approximately
$1.775 to $1.800 billion, adjusted to exclude divested
businesses
- GAAP net income per diluted share of
approximately $0.66 to $0.69
- Non-GAAP net income per diluted share
of $1.47 to $1.50
Guidance for first fiscal quarter of 2018:
- GAAP net revenues of approximately $431
to $433 million
- Non-GAAP net revenues of approximately
$418 to $420 million, adjusted to exclude divested businesses
- GAAP net income per diluted share of
approximately $0.02
- Non-GAAP net income per diluted share
of $0.22
A reconciliation of adjusted revenues for historical comparative
periods is provided in the attached financial tables.
Conference Call
Verifone will hold its earnings conference call today, December
12, 2017, 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, 2018.
About Verifone
Verifone is transforming every day transactions into new and
engaging opportunities for merchants and consumers at the last inch
of payments and commerce. Powered by a growing footprint of more
than 30 million devices in more than 150 countries, our people are
trusted experts working with the world’s best-known retail brands,
financial institutions, and payment providers. Verifone is
connecting more products to an integrated solutions platform to
better meet the evolving needs of our clients and partners. Built
on a 35-year history of uncompromised security, we are committed to
consistently solving the most complex payment 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 October 31, Fiscal Years Ended October 31,
2017 2016
%Change(1)
2017 2016
%Change(1)
Net revenues: Systems $ 268.4 $ 264.3 1.6 % $ 1,085.5 $
1,236.3 (12.2 )% Services 208.1 199.9
4.1 % 785.5 755.8 3.9 % Total net
revenues 476.5 464.2 2.6 %
1,871.0 1,992.1 (6.1 )%
Cost of net
revenues: Systems 168.1 173.3 (3.0 )% 688.5 744.3 (7.5 )%
Services 114.0 113.4 0.5 % 469.4
453.5 3.5 % Total cost of net revenues
282.1 286.7 (1.6 )% 1,157.9
1,197.8 (3.3 )%
Gross margin
194.4 177.5 9.5 % 713.1
794.3 (10.2 )%
Operating expenses: Research
and development 53.1 49.4 7.5 % 211.6 207.5 2.0 % Sales and
marketing 47.2 49.8 (5.2 )% 194.0 217.0 (10.6 )% General and
administrative 47.2 47.5 (0.6 )% 189.7 204.6 (7.3 )% Restructuring
and related charges 7.5 7.1 5.6 % 143.2 41.2 247.6 % Litigation
settlement and loss contingency expense — — nm — 0.7 nm Goodwill
impairment — — nm 17.4 — nm Amortization of purchased intangible
assets 15.7 24.6 (36.2 )% 69.6
90.5 (23.1 )% Total operating expenses
170.7 178.4 (4.3 )% 825.5
761.5 8.4 %
Operating income (loss) 23.7 (0.9 ) nm
(112.4 ) 32.8 (442.7 )% Interest expense, net (8.5 ) (8.7 ) (2.3 )%
(33.2 ) (34.6 ) (4.0 )% Other income (expense), net (1.9 )
10.5 nm 2.7 3.6 (25.0 )%
Income (loss) before income taxes 13.3 0.9 nm (142.9 ) 1.8 nm
Income tax provision 10.4 6.2 67.7 %
32.5 11.5 182.6 %
Consolidated net
income (loss) 2.9 (5.3 ) nm (175.4 ) (9.7 ) nm Net income
(loss) attributable to noncontrolling interests (0.2 )
(0.8 ) (75.0 )% (1.5 ) (0.4 ) 275.0 %
Net
income (loss) attributable to VeriFone Systems, Inc.
stockholders $ 3.1 $ (4.5 ) nm $ (173.9 ) $ (9.3 ) nm
Net income (loss) per share attributable to VeriFone
Systems, Inc. stockholders: Basic $ 0.03 $ (0.04 ) $
(1.55 ) $ (0.08 ) Diluted $ 0.03 $ (0.04 ) $ (1.55 ) $ (0.08
)
Weighted average number of shares used in computing net
income (loss) per share attributable to VeriFone Systems, Inc.
stockholders: Basic 112.3 111.1
111.8 110.8 Diluted 113.1
111.1 111.8 110.8
(1) “nm” means not meaningful
VERIFONE SYSTEMS, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN MILLIONS)
October 31, 2017
2016 ASSETS Current assets: Cash and cash
equivalents $ 131.0 $ 148.4 Accounts receivable, net 322.7 323.4
Inventories 126.6 175.2 Prepaid expenses and other current assets
138.4 110.4
Total current assets
718.7 757.4 Property and equipment, net 127.9 202.3 Purchased
intangible assets, net 236.4 306.3 Goodwill 1,104.4 1,110.5
Deferred tax assets, net 33.1 37.0 Other long-term assets
101.7 81.3
Total assets $ 2,322.2
$ 2,494.8
LIABILITIES AND EQUITY
Current liabilities: Accounts payable $ 144.8 $ 154.6
Accruals and other current liabilities 227.3 213.4 Deferred
revenue, net 101.4 104.8 Short-term debt 68.8
66.0
Total current liabilities 542.3 538.8 Long-term
deferred revenue, net 61.8 66.5 Deferred tax liabilities, net 97.5
99.4 Long-term debt 762.0 859.9 Other long-term liabilities
76.2 76.8
Total liabilities 1,539.8
1,641.4 Redeemable noncontrolling interest in subsidiary 0.3
5.0
Stockholders’ equity: Common stock 1.1 1.1
Additional paid-in capital 1,812.2 1,771.9 Accumulated deficit
(792.2 ) (618.3 ) Accumulated other comprehensive loss
(266.6 ) (341.0 )
Total VeriFone Systems, Inc.
stockholders’ equity 754.5 813.7 Noncontrolling interests in
subsidiaries 27.6 34.7
Total
equity 782.1 848.4
Total
liabilities, redeemable noncontrolling interest in subsidiary and
equity $ 2,322.2 $ 2,494.8
VERIFONE SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (UNAUDITED, IN MILLIONS)
Years Ended October 31, 2017
2016 Cash flows from operating activities
Consolidated net loss $ (175.4 ) $ (9.7 ) Adjustments to reconcile
consolidated net loss to net cash provided by operating activities:
Depreciation and amortization, net 140.7 179.2 Stock-based
compensation expense 40.0 42.3 Deferred income taxes, net 0.8 (14.0
) Non-cash restructuring and related charges 114.5 31.2 Goodwill
and other long lived asset impairments 33.5 — Other 5.6
(6.2 ) Net cash provided by operating activities
before changes in operating assets and liabilities 159.7
222.8 Changes in operating assets and
liabilities: Accounts receivable, net (11.6 ) 59.6 Inventories 30.4
(45.7 ) Prepaid expenses and other assets (8.6 ) 4.5 Accounts
payable (7.5 ) (39.6 ) Deferred revenue, net (7.0 ) 28.7 Other
current and long-term liabilities 10.5 (32.9 )
Net change in operating assets and liabilities 6.2
(25.4 ) Net cash provided by operating activities
165.9 197.4
Cash flows from
investing activities Capital expenditures (67.3 ) (105.3 )
Acquisitions of businesses, net of cash and cash equivalents
acquired (5.0 ) (172.2 ) Divestiture of businesses 1.5 — Other
investing activities, net (1.9 ) 2.3 Net cash
used in investing activities (72.7 ) (275.2 )
Cash flows from financing activities Proceeds from debt, net
of issuance costs 276.1 560.4 Repayments of debt (385.7 ) (453.0 )
Stock repurchases — (79.9 ) Other financing activities, net
(2.8 ) (3.1 ) Net cash provided by (used in) financing
activities (112.4 ) 24.4 Effect of
foreign currency exchange rate changes on cash, cash equivalents
and restricted cash 3.7 (3.3 ) Net
decrease in cash, cash equivalents and restricted cash (15.5 )
(56.7 ) Cash, cash equivalents and restricted cash, beginning of
period 159.2 215.9 Cash, cash
equivalents and restricted cash, end of period $ 143.7 $
159.2 Cash and cash equivalents, end of period 131.0
156.6 Restricted cash, end of period 12.7 2.6
Cash, cash equivalents and restricted cash, end of period $
143.7 $ 159.2
VERIFONE
SYSTEMS, INC. NET REVENUES INFORMATION (UNAUDITED, IN
MILLIONS, EXCEPT PERCENTAGES)
Three Months Ended
Fiscal Years Ended Note
October31, 2017
July 31,2017
October31, 2016
%Change(1) SEQ
%Change(1) YoY
October31, 2017
October31, 2016
%Change(1)
GAAP net revenues: North America
$ 154.1
$ 152.8 $ 167.1 0.9 %
(7.8 )% $ 630.2 $ 803.6
(21.6 )% Latin America
80.2 71.3
68.3 12.5 % 17.4 % 271.0
247.9 9.3 % EMEA
196.0 193.5
180.8 1.3 % 8.4 % 735.4
738.3 (0.4 )% Asia-Pacific
46.2
49.3 48.0 (6.3 )%
(3.8 )% 234.4
202.3 15.9 % Total
$ 476.5
$ 466.9 $ 464.2 2.1
% 2.6 % $ 1,871.0
$ 1,992.1 (6.1 )% Systems
$ 268.4 $ 266.0 $ 264.3
0.9 % 1.6 % $ 1,085.5
$ 1,236.3 (12.2 )% Services
208.1 200.9 199.9
3.6 % 4.1 % 785.5
755.8 3.9 % Total
$ 476.5
$ 466.9 $ 464.2 2.1
% 2.6 % $ 1,871.0
$ 1,992.1 (6.1 )% Non-GAAP
net revenues: (2) North America A $ 154.1 $ 152.8 $ 170.5 0.9 %
(9.6 )% $ 633.2 $ 817.6 (22.6 )% Latin America A 80.2 71.3 68.3
12.5 % 17.4 % 271.0 247.9 9.3 % EMEA A 196.0 193.5 180.8 1.3 % 8.4
% 735.4 738.3 (0.4 )% Asia-Pacific A 46.2 49.3
48.0 (6.3 )% (3.8 )% 234.4 202.3 15.9 %
Total $ 476.5 $ 466.9 $ 467.6 2.1 % 1.9 % $ 1,874.0 $
2,006.1 (6.6 )% Systems A $ 268.4 $ 266.0 $ 264.3 0.9 % 1.6
% $ 1,085.5 $ 1,236.3 (12.2 )% Services A 208.1
200.9 203.3 3.6 % 2.4 % 788.5
769.8 2.4 % Total $ 476.5 $ 466.9 $ 467.6 2.1 % 1.9 % $
1,874.0 $ 2,006.1 (6.6 )%
GAAP net revenues
$ 476.5 $ 466.9 $ 464.2
2.1 % 2.6 % $ 1,871.0
$ 1,992.1 (6.1 )% Plus: Non-GAAP net
revenues adjustments A — — 3.4 nm nm
3.0 14.0 nm
Non-GAAP net revenues (2) $
476.5 $ 466.9 $ 467.6 2.1 % 1.9 % $ 1,874.0 $ 2,006.1 (6.6 )% Net
revenues from businesses acquired in the past 12 months B
(0.5 ) — nm nm (18.4 ) — nm
Non-GAAP
organic net revenues (2) $ 476.0 $ 467.6 nm 1.8 % $
1,855.6 $ 2,006.1 (7.5 )% (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, 2017
compared withthree months ended October 31, 2016
For fiscal year ended October 31, 2017
compared withfiscal year ended October 31, 2016
Netrevenuesgrowth(decline)
Impactdue
toacquiredbusinesses(A) (B)
Non-GAAPorganicnet
revenuesgrowth(decline)
Impactdue
toforeigncurrency(C)
Non-GAAPorganicnet
revenuesat
constantcurrencygrowth(decline)
Netrevenuesgrowth(decline)
Impactdue
toacquiredbusinesses(A) (B)
Non-GAAPorganicnet
revenuesgrowth(decline)
Impactdue
toforeigncurrency(C)
Non-GAAPorganicnet
revenuesat
constantcurrencygrowth(decline)
North America
(7.8 )% 1.8 % (9.6 )% 0.1 % (9.7 )%
(21.6 )% 1.6 % (23.2 )% 0.1 % (23.3 )% Latin America
17.4 % — % 17.4 % 1.5 % 15.9 %
9.3 % —
% 9.3 % 4.7 % 4.6 % EMEA
8.4 % 0.3 % 8.1 % 3.8 % 4.3
%
(0.4 )% 1.8 % (2.2 )% (0.7 )% (1.5 )% Asia-Pacific
(3.8 )% (0.1 )% (3.7 )% 2.4 % (6.1 )%
15.9
% 0.1 % 15.8 % 1.5 % 14.3 % Total
2.6 % 0.8 %
1.8 % 2.0 % (0.2 )%
(6.1 )% 1.4 % (7.5 )% 0.5 % (8.0
)%
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 October 31, 2017 North
America
$ 154.1 $ — $ 154.1 $ — $ 154.1 $ (0.2 ) $
153.9 Latin America
80.2 — 80.2 — 80.2 (1.0 ) 79.2 EMEA
196.0 — 196.0 (0.5 ) 195.5 (6.9 ) 188.6 Asia-Pacific
46.2 — 46.2 — 46.2
(1.2 ) 45.0 Total
$ 476.5 $ — $ 476.5 $ (0.5 )
$ 476.0 $ (9.3 ) $ 466.7 Systems
$ 268.4 $ — $
268.4 $ — $ 268.4 $ (3.7 ) $ 264.7 Services
208.1
— 208.1 (0.5 ) 207.6 (5.6 )
202.0 Total
$ 476.5 $ — $ 476.5 $ (0.5 ) $
476.0 $ (9.3 ) $ 466.7
Three Months Ended July 31,
2017 North America
$ 152.8 $ — $ 152.8 $ — $
152.8 Latin America
71.3 — 71.3 — 71.3 EMEA
193.5 — 193.5 (0.5 ) 193.0 Asia-Pacific
49.3 — 49.3 — 49.3
Total
$ 466.9 $ — $ 466.9 $ (0.5 ) $ 466.4
Systems
$ 266.0 $ — $ 266.0 $ — $ 266.0 Services
200.9 — 200.9 (0.5 )
200.4 Total
$ 466.9 $ — $ 466.9 $ (0.5 ) $ 466.4
Three Months Ended October 31, 2016 North America
$ 167.1 $ 3.4 $ 170.5 $ — $ 170.5 Latin America
68.3 — 68.3 — 68.3 EMEA
180.8 — 180.8 — 180.8
Asia-Pacific
48.0 — 48.0 —
48.0 Total
$ 464.2 $ 3.4 $ 467.6 $ —
$ 467.6 Systems
$ 264.3 $ — $ 264.3 $ —
$ 264.3 Services
199.9 3.4 203.3
— 203.3 Total
$ 464.2 $ 3.4 $ 467.6 $ —
$ 467.6
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) Fiscal Year Ended October 31, 2017 North
America
$ 630.2 $ 3.0 $ 633.2 $ (5.4 ) $ 627.8 $ (0.6
) $ 627.2 Latin America
271.0 — 271.0 — 271.0 (11.8 ) 259.2
EMEA
735.4 — 735.4 (13.0 ) 722.4 5.1 727.5 Asia-Pacific
234.4 — 234.4 —
234.4 (3.1 ) 231.3 Total
$ 1,871.0 $
3.0 $ 1,874.0 $ (18.4 ) $ 1,855.6 $ (10.4 ) $ 1,845.2
Systems
$ 1,085.5 $ — $ 1,085.5 $ (1.3 ) $ 1,084.2 $
(5.6 ) $ 1,078.6 Services
785.5 3.0
788.5 (17.1 ) 771.4 (4.8 ) 766.6 Total
$ 1,871.0 $ 3.0 $ 1,874.0 $ (18.4 ) $ 1,855.6 $ (10.4
) $ 1,845.2
Fiscal Year Ended October 31, 2016 North
America
$ 803.6 $ 14.0 $ 817.6 $ — $ 817.6 Latin
America
247.9 — 247.9 — 247.9 EMEA
738.3 — 738.3 —
738.3 Asia-Pacific
202.3 — 202.3
— 202.3 Total
$ 1,992.1 $ 14.0 $
2,006.1 $ — $ 2,006.1 Systems
$ 1,236.3
$ — $ 1,236.3 $ — $ 1,236.3 Services
755.8
14.0 769.8 — 769.8 Total
$
1,992.1 $ 14.0 $ 2,006.1 $ — $ 2,006.1
VERIFONE SYSTEMS, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND
PERCENTAGES)
Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome
Incometaxprovision
Net incomeattributableto
VeriFoneSystems, Inc.stockholders
Three Months Ended October 31, 2017 GAAP $
476.5 $ 194.4 40.8 % $
23.7 $ 10.4 $ 3.1 Adjustments:
Amortization of purchased intangible assets E — 1.2 16.9 — 19.6
Other merger and acquisition related expenses E — — 0.3 — 0.3 Stock
based compensation F — 1.4 9.8 — 9.8 Restructuring and related
charges G — 0.4 7.9 — 7.9 Other charges and income G — — 7.7 — 7.7
Income tax effect of non-GAAP exclusions (2) H — —
— (1.8 ) 1.8 Non-GAAP $
476.5 $ 197.4 41.4 % $ 66.3 $ 8.6 $ 50.2
Weighted averagenumber of shares
usedin computing netincome per share:
Net income per shareattributable
to VeriFoneSystems, Inc.stockholders (1)
Basic Diluted Basic Diluted GAAP
112.3 113.1 0.03
0.03 Non-GAAP 112.3 113.1 $ 0.45
$ 0.44
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 E
— 1.4 18.1 — 19.4 Other merger and acquisition related expenses E —
— 0.4 — 0.4 Stock based compensation F — 1.2 9.3 — 9.3
Restructuring and related charges G — 12.9 78.6 — 78.6 Other
charges and income G — — 2.1 — 0.4 Income tax effect of non-GAAP
exclusions (2) H — — — (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) per
shareattributable to VeriFoneSystems,
Inc.stockholders (1)
Basic Diluted Basic Diluted GAAP
112.0 112.0 $ (0.63 ) $
(0.63 ) Adjustment for diluted shares I —
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. (2) For the purpose of computing the
income tax effect of non-GAAP exclusions, we used a 14.5% rate.
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 October 31, 2016 GAAP $
464.2 $ 177.5 38.2 % $
(0.9 ) $ 6.2 $ (4.5
) Adjustments: Amortization of step-down in deferred
services net revenues at acquisition and associated cost of goods
sold A 3.4 2.4 2.4 — 2.4 Amortization of purchased intangible
assets E — 3.4 28.0 — 28.0 Other merger and acquisition related E —
— 0.8 — (11.7 ) Stock based compensation F — 0.8 9.4 — 9.4
Restructuring and related charges G — — 7.1 — 7.1 Other charges and
income G — 0.6 1.9 — 1.9 Income tax effect of non-GAAP exclusions
(2) H — — — (0.5 ) 0.5
Non-GAAP $ 467.6 $ 184.7 39.5 % $ 48.7 $ 5.7 $
33.1
Weighted averagenumber of shares
usedin computing netincome (loss) per share:
Net income (loss) per
shareattributable to VeriFoneSystems,
Inc.stockholders (1)
Basic Diluted Basic Diluted GAAP
111.1 111.1 $ (0.04 ) $
(0.04 ) Adjustment for diluted shares I —
0.3 Non-GAAP 111.1 111.4 $ 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.
(2) For the purpose of computing the income tax effect of non-GAAP
exclusions, we used a 14.5% rate.
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
Fiscal Year Ended October 31, 2017 GAAP $
1,871.0 $ 713.1 38.1 % $
(112.4 ) $ 32.5 $ (173.9
) 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 E — 6.7 76.3 — 77.6 Other merger and acquisition related
expenses E — — 1.4 — 1.3 Stock based compensation F — 4.6 39.9 —
39.9 Goodwill impairment G — — 17.4 — 17.4 Restructuring and
related charges G — 25.7 168.9 — 168.9 Other charges and income G —
— 17.7 — 6.5 Income tax effect of non-GAAP exclusions (2) H
— — — (7.1 ) 7.1 Non-GAAP
$ 1,874.0 $ 752.5 40.2 % $ 211.6 $ 25.4 $ 147.2
Weighted averagenumber of shares
usedin computing netincome (loss) per share:
Net income (loss) per
shareattributable to VeriFoneSystems,
Inc.stockholders (1)
Basic Diluted Basic Diluted GAAP
111.8 111.8
$ (1.55 ) $ (1.55
) Adjustment for diluted shares I — 0.7
Non-GAAP 111.8 112.5 $ 1.32 $ 1.31
Note
Netrevenues
Grossmargin
Grossmarginpercentage
Operatingincome
Incometaxprovision
Net
income(loss)attributableto
VeriFoneSystems, Inc.stockholders
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 cost of goods sold A 14.0
9.9 9.9 — 9.9 Amortization of purchased intangible assets E — 15.1
105.7 — 105.7 Other merger and acquisition related E — — 5.7 — (9.0
) Stock based compensation F — 3.3 42.3 — 42.3 Restructuring and
related charges G — 5.1 46.3 — 46.3 Other charges and income G —
11.0 15.4 — 19.4 Income tax effect of non-GAAP exclusions (2) H
— — — 20.3 (20.3 )
Non-GAAP $ 2,006.1 $ 838.7 41.8 % $ 258.1 $ 31.8 $
185.0
Weighted averagenumber of shares
usedin computing netincome (loss) per share:
Net income (loss) per
shareattributable to VeriFoneSystems,
Inc.stockholders (1)
Basic Diluted Basic Diluted GAAP
110.8 110.8 $ (0.08 ) $
(0.08 ) Adjustment for diluted shares I —
0.8 Non-GAAP 110.8 111.6 $ 1.67 $ 1.66
(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. (2) For the purpose of computing the
income tax effect of non-GAAP exclusions, we used a 14.5% rate.
VERIFONE SYSTEMS, INC. RECONCILIATIONS OF
NON-GAAP FINANCIAL MEASURES (UNAUDITED, IN MILLIONS, EXCEPTS
PER PERCENTAGES AND SHARE AMOUNTS)
Adjusted Historical
Guidance Year Ended Three Months
Ended Note
Three MonthsEndingJanuary
31,2018
Year EndingOctober
31,2018
October 31,2017
October 31,2016
October 31,2017
January 31,2017
GAAP net revenues $ 431-$433 $
1,788-1,813 $ 1,871.0 $ 1,992.1
$ 476.5 $ 453.9 Amortization of
step-down in deferred revenue at acquisition A —
— 3.0 14.0 — 2.7 Non-GAAP
net revenues A $ 431-433 $ 1,788-1,813 $ 1,874.0 $ 2,006.1 $ 476.5
$ 456.6
Non-GAAP revenue
from divested businesses
China Business D — — 11.2 16.4 — 4.3 Taxi Business D 13.0
13.0 106.5 123.3 26.4
27.1 Non-GAAP net revenues, excluding revenues from divested
businesses $ 418-420 $ 1,775-1,800 $ 1,756.3 $
1,866.4 $ 450.1 $ 425.2 Note
Three MonthsEndingJanuary
31,2018
Year EndingOctober
31,2018
Diluted GAAP earnings (loss) per share (1) $
0.02 $ 0.66-$0.69 Adjustments: (2)
Amortization of purchased intangible assets E 0.16 0.65 Stock based
compensation F 0.09 0.36 Income tax effect of non-GAAP exclusions
(3) H (0.05 ) (0.20 ) Diluted Non-GAAP earnings per
share (1) $ 0.22 $ 1.47-$1.50 (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) For the
purpose of computing the income tax effect of non-GAAP exclusions
we used a 20.0% rate.
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 2018. 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). 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: Non-GAAP revenues from divested businesses.
Verifone determines non-GAAP revenues from divested businesses as
the non-GAAP net revenues in the reporting period that are derived
from significant businesses that have either been divested or are
held for sale.
Note E: 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 F: 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 G: 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 H: 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 best
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.
Note I: 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/20171212006338/en/
VerifoneInvestor Relations:Chris Mammone,
408-232-7230ir@verifone.comorMedia Relations:Kwiyoung Baumgarten,
770-754-3460press@verifone.com
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