VeriFone Reports Results for the Fourth Quarter and Fiscal 2012

  VeriFone Reports Results for the Fourth Quarter and Fiscal 2012

Business Wire

SAN JOSE, Calif. -- December 13, 2012

VeriFone Systems, Inc. (NYSE: PAY), the global leader in secure electronic
payment solutions, today announced financial results for the three months (“Q4
FY12”) and fiscal year ended October 31, 2012.

Non-GAAP net income per diluted share for Q4 FY12 was $0.76, compared to $0.75
in the prior quarter and $0.53 for the three months ended October 31, 2011
(“Q4 FY11”), a 43% year-over-year increase. Non-GAAP net income per diluted
share for the full year ended October 31, 2012 (“FY12”) was $2.74, a 43%
year-over-year increase over the $1.92 figure for the full year ended October
31, 2011 (“FY11”). GAAP net income per diluted share for the latest quarter
was $0.24, compared to $0.34 in the prior quarter and $1.84 in Q4 FY11. GAAP
net income per diluted share was $0.59 for FY12 and $2.92 for FY11.

Non-GAAP net revenues for Q4 FY12 were $489 million, compared to $493 million
in the previous quarter and $416 million for Q4 FY11, an 18% year-over-year
increase. Non-GAAP net revenues for FY12 were $1.886 billion, a 44% increase
over the $1.310 billion result for FY11. GAAP net revenues were $485 million
for the latest quarter, $489 million for the prior quarter and $411 million
for Q4 FY11. For FY12, GAAP net revenues totaled $1.866 billion, a 43%
increase over the $1.304 billion total for FY11.

In Q4 FY12, Organic non-GAAP net revenues, which exclude net revenues from
businesses acquired in the past 12 months, increased 4% from the year-ago
quarter and 8% at constant currency, which assumes currency exchange rates
remained the same from a year ago. North America Organic non-GAAP net revenues
grew 22% both unadjusted and at constant currency, while international Organic
non-GAAP net revenues declined 3% from the year-ago quarter but increased 2%
at constant currency. Organic non-GAAP net revenues increased 11% in FY12
compared to FY11 and 14% at constant currency. For FY12, North America Organic
non-GAAP net revenues grew 4% from FY11 both unadjusted and at constant
currency, while international Organic non-GAAP net revenues grew 15% from FY11
and 20% at constant currency.

Non-GAAP gross margins were 44% for Q4 FY12, compared to 45% in the prior
quarter and 40% in Q4 FY11. Non-GAAP gross margins were 44% for FY12 and 42%
for FY11. GAAP gross margins were 41% for the latest quarter, 42% for the
prior quarter and 31% for Q4 FY11. GAAP gross margins were 41% for FY12,
compared to 38% for FY11.

Net cash provided by operating activities was $73 million in Q4 FY12 as the
total cash balance grew by $44 million in the quarter.

“We are very pleased with our earnings leverage in 2012, with non-GAAP
earnings per share growing over 40% for the third consecutive year,” said
Douglas G. Bergeron, Chief Executive Officer. “Our investments in the next
generation of payment services and systems are paying off in North America,
which grew organically by 22% in Q4. Our plans for 2013 are to replicate these
investments in our international markets in order to enjoy accelerated
international growth later in 2013 and into 2014.”

Highlights Since Last Earnings Release

VeriFone has announced several significant in-store mobility wins in recent
months. On November 7, VeriFone announced that it has entered a partnership
agreement to offer retailers sophisticated mobile retailing solutions powered
by VeriFone GlobalBay and integrated with the Fujitsu GlobalSTORE® solution,
or as a standalone mobile point of sale. The co-branded solutions provide
Fujitsu retail customers with a sophisticated mobile POS, enabling them to
serve consumers from anywhere in the store and include acceptance of digital
wallets and alternative payments. On September 25, VeriFone announced that The
Finish Line, Inc., is enhancing the consumer buying experience with the
deployment of VeriFone’s latest mobile checkout and multimedia-driven
countertop payment solutions. Following a successful trial, the premium
retailer of athletic shoes, apparel and accessories is in the process of
deploying VeriFone systems – including 1,600 countertop multimedia MX 915
systems and 3,200 PAYware Mobile Enterprise secure mobile card acceptance
devices for the iPod touch® – chain-wide with the goal of equipping all 638
locations for the holiday buying season. On September 19, VeriFone announced
that Oracle’s Retail Mobile Point-of-Service was developed using the PAYware
Mobile Enterprise solution and software development kit. PAYware Mobile
Enterprise provided Oracle with support for the most forms of payment
acceptance – including regular magnetic stripe credit and debit cards,
chip-and-PIN (EMV) and contactless/NFC-enabled cards and phones – and also
includes a barcode scanner for product-scanning, couponing and inventory.

VeriFone is also moving forward with its gas station media business.
VeriFone’s media-enabled payment systems and services provide a
state-of-the-art solution for secure payments, targeted advertising, coupons
and special offers, and delivering real-time, relevant information such as
weather and safety warnings. PAYMEDIA content is managed by VeriFone Media and
broadcast via the VeriFone Digital Network (VNET). On October 8, VeriFone
announced an agreement with Valero Retail Holdings, Inc. to implement PAYMEDIA
for Secure PumpPAY in an initial pilot at corporate-operated sites in the
Austin, Texas area. Secure PumpPAY solutions enable gasoline retailers and
distributors to retrofit gasoline dispensers with EMV-capable, PCI-compliant
payment systems that meet the latest payment security standards. The VeriFone
modules incorporate full-color digital display and audio that improves the
fueling experience. On October 1, VNET unveiled the next evolution of media at
gas stations, providing advertisers and marketers with new promotional
capabilities including on-demand coupons at the pump and transaction-specific
promotions at the convenience store checkout counter. After a successful
12-month pilot, where coupon redemption rates in excess of 10% far exceeded
industry norms for freestanding inserts, VeriFone is rolling out couponing to
its PAYMEDIA customers.

Guidance for First Quarter 2013 and Fiscal Year 2013

For the first fiscal quarter ending January 31, 2013, VeriFone expects to
report total non-GAAP net revenues in the range of $490 million to $500
million and non-GAAP net income per diluted share in the range of $0.70 to
$0.73.

For the full year of fiscal 2013, the company continues to expect to report
total non-GAAP net revenues in the range of $2.05 billion to $2.10 billion and
non-GAAP net income per diluted share in the range of $3.25 to $3.30. Free
cash flow, defined as cash flow from operations as presented under GAAP less
capital expenditures, is expected in the range of $285 million to $315
million.

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. These risks and uncertainties
include, but are not limited to: our assumptions, judgments and estimates
regarding the impact on our business of the continued uncertainty in the
global economic environment and financial markets, our ability to identify and
complete acquisitions and strategic investments and successfully integrate
them into our business, whether the expected benefits of our business
initiatives are achieved, our ability to protect against fraud, the status of
our relationship with and condition of third parties such as our contract
manufacturers, distributors and key suppliers upon whom we rely in the conduct
of our business, our dependence on a limited number of customers, risks and
uncertainties related to the conduct of our business and operations
internationally, our ability to effectively hedge our exposure to foreign
currency exchange rate fluctuations, our dependence on a limited number of key
employees, short product cycles, rapidly changing technologies and maintaining
competitive leadership position with respect to our payment solution
offerings. The forward-looking statements in this press release do not include
the potential impact of any acquisitions or divestitures that may be announced
and/or completed after the date hereof. 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. VeriFone is under
no obligation to, and expressly disclaims any obligation to, update or alter
its forward-looking statements, whether as a result of new information, future
events, changes in assumptions or otherwise.

About VeriFone Systems, Inc. (www.verifone.com)

VeriFone Systems, Inc. (“VeriFone”) (NYSE: PAY) is the global leader in secure
electronic payment solutions. VeriFone provides expertise, solutions and
services that add value to the point of sale with merchant-operated,
consumer-facing and self-service payment systems for the financial, retail,
hospitality, petroleum, government and healthcare vertical markets. VeriFone
solutions are designed to meet the needs of merchants, processors and
acquirers in developed and emerging economies worldwide.

Additional Resources:

http://ir.verifone.com

FINANCIAL MEASURES

This press release and its attachments include several non-GAAP financial
measures, including non-GAAP net revenues; net revenues from businesses
acquired in the past 12 months; organic non-GAAP net revenues; North America
organic non-GAAP net revenues; international organic non-GAAP net revenues;
organic non-GAAP net revenues at constant currency; non-GAAP cost of net
revenues; non-GAAP gross margin; non-GAAP research and development expense;
non-GAAP sales and marketing expense; non-GAAP general and administrative
expense; non-GAAP operating expenses; non-GAAP operating income; non-GAAP
interest expense; non-GAAP interest income; non-GAAP other income (expense);
non-GAAP income before income taxes; non-GAAP provision for income taxes;
non-GAAP income tax rate; non-GAAP consolidated net income; non-GAAP net
income attributable to noncontrolling interests; non-GAAP net income
attributable to VeriFone Systems, Inc. stockholders; non-GAAP diluted shares;
non-GAAP net income per share; non-GAAP net income per diluted share, as well
as some of these non-GAAP financial measures as a percentage of non-GAAP net
revenues. In order to assist investors, this press release provides
consolidated statement of operations information on a non-GAAP basis,
reflecting the adjustments made in the non-GAAP measures listed above.

Reconciliations for the non-GAAP financial measures presented in this press
release to the most directly comparable GAAP measures are provided at the end
of this press release.

Management uses non-GAAP financial measures only in addition to and in
conjunction with results presented in accordance with GAAP. Management
believes that these non-GAAP financial measures help it to evaluate VeriFone's
performance and operations and to compare VeriFone's current results with
those for prior periods as well as with the results of peer companies.
VeriFone incurs, due to differences in debt, capital structure and investment
history, certain income and expense items, such as stock based compensation,
amortization of acquired intangibles and other non-cash expenses, that differ
significantly from VeriFone's competitors. The non-GAAP financial measures
reflect VeriFone's reported operating performance without such items.
Management also uses these non-GAAP financial measures in VeriFone's budget
and planning process. Management believes that the presentation of these
non-GAAP financial measures is useful to investors in comparing VeriFone's
operating performance in any period with its performance in other periods and
with the performance of other companies that represent alternative investment
opportunities. These non-GAAP financial measures contain limitations and
should be considered as a supplement to, and not as a substitute for, or
superior to, disclosures made in accordance with GAAP.

These non-GAAP financial measures are not based on any comprehensive set of
accounting rules or principles and may therefore differ from non-GAAP
financial measures used by other companies. In addition, these non-GAAP
financial measures do not reflect all amounts and costs, such as acquisition
related costs, employee stock-based compensation costs, cash that may be
expended for future capital expenditures or contractual commitments, working
capital needs, cash used to service interest or principal payments on
VeriFone's debt, income taxes and the related cash requirements, and
restructuring charges, associated with VeriFone's results of operations as
determined in accordance with GAAP.

Furthermore, VeriFone expects to continue to incur income and expense items
that are similar to those that are excluded by the non-GAAP adjustments
described herein. Management compensates for these limitations by also relying
on the comparable GAAP financial measures.

Note A: Non-GAAP net revenues. Non-GAAP net revenues exclude the fair value
decrease (step-down) in deferred revenue at acquisition. Although the
step-down of deferred revenue fair value at acquisition is reflected in our
GAAP financial statements, it results in net revenues immediately
post-acquisition that are lower than net revenues that would be recognized in
accordance with GAAP on those same services if they were sold under contracts
entered into post-acquisition. We adjust the step-down to achieve
comparability to net revenues of the acquired entity earned pre-acquisition
and to our GAAP net revenues to be earned on contracts sold in future periods.
These non-GAAP net revenues and non-GAAP cost of net revenues amounts are not
intended to be a substitute for our GAAP disclosures of net revenues and cost
of net revenues, and should be read together with our GAAP disclosures.

Note B: Organic non-GAAP net revenues. "Organic non-GAAP net revenues" is a
non-GAAP financial measure of net revenues excluding "net revenues from
businesses acquired in the past 12 months" (as defined below). VeriFone
determines organic non-GAAP net revenues by deducting net revenues from
businesses acquired in the past 12 months from non-GAAP net revenues. Where
Organic non-GAAP net revenues is presented for a period longer than one fiscal
quarter, it is computed as the sum of the Organic non-GAAP net revenues for
each quarter during that period. This non-GAAP measure is used to evaluate
VeriFone net revenues without the impact of net revenues from acquired
businesses, as VeriFone analyzes performance both with and without the impact
of our recent acquisitions.

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 system solutions 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 Point
(a former distributor of our products), net revenues from businesses acquired
in the past 12 months consists of sales by VeriFone to Point for that period.

Note C: Organic non-GAAP net revenues at constant currency. VeriFone
determines organic non-GAAP net revenues at constant currency by recomputing
organic non-GAAP net revenues denominated in currencies other than U.S.
Dollars in the current fiscal period using average exchange rates for that
particular currency during the corresponding financial period of the prior
year. VeriFone uses this non-GAAP measure to evaluate performance on a
comparable basis excluding the impact of foreign currency fluctuations. Where
Organic non-GAAP net revenues at a constant currency is presented for a period
longer than one fiscal quarter, it is computed as the sum of the Organic
non-GAAP net revenues at constant currency for each quarter during that
period.

Note D: Acquisition, Divestiture and Restructuring Related. VeriFone adjusts
certain revenues and expenses that are the result of acquisitions,
divestitures and restructurings.

Acquisition related adjustments include the amortization of purchased
intangible assets and fixed asset fair value adjustments, incremental costs
associated with acquisitions (such as professional fees, legal fees related to
litigation assumed as part of acquisitions, and one-time charges related to
acquired balances), acquisition integration expenses (such as costs of
personnel required to assist with integration transitions), loss on financial
instruments entered into to fix the acquisition purchase price in U.S. dollars
when it is payable in foreign currencies and fair value increase (step-up) of
inventory on acquisition. These adjustments do not include the fair value
adjustments relating to certain contracts acquired as part of an acquisition
whereby third parties have yet to fulfill their contractual obligations. In
addition, we adjust for changes in estimate or final resolution of
contingencies that existed at the time of acquisition. Acquisition related
expenses also result from events which arise from unforeseen circumstances
which often occur outside the ordinary course of business.

In the fourth fiscal quarter of 2012 we entered into a non-binding letter of
intent to divest certain assets and business operations related to one of our
product offerings. The net revenues, cost of net revenues and operating
expenses for the fiscal quarter ended October 31, 2012 that are attributable
to the business to be divested have been excluded from non-GAAP net revenues,
non-GAAP cost of net revenues and non-GAAP operating expenses, respectively,
for the fiscal quarter and year ended October 31, 2012.

Restructure related adjustments include all restructure charges as defined in
accordance with US GAAP.

VeriFone analyzes the performance of its operations without regard to these
adjusted revenues and expenses. In determining whether any acquisition,
divestiture or restructure related adjustment is appropriate, VeriFone takes
into consideration, among other things, how such adjustments would or would
not aid the understanding of the performance of its operations.

Note E: Stock-Based Compensation. Our non-GAAP financial measures eliminate
the effect of expense for stock-based compensation because they are non-cash
expenses that management believes are not reflective of ongoing operating
results. In particular, because of varying available valuation methodologies,
subjective assumptions and the variety of award types which affect the
calculations of stock-based compensation, we believe that the exclusion of
stock-based compensation allows for more accurate comparisons of our operating
results to our peer companies. Stock-based compensation is very different from
other forms of compensation. A cash salary or bonus has a fixed and unvarying
cash cost. In contrast the expense associated with an award of an option or
other stock based award is unrelated to the amount of compensation ultimately
received by the employee; and the cost to the company is based on valuation
methodology and underlying assumptions that may vary over time and does not
reflect any cash expenditure by the company. Furthermore, the expense
associated with granting an employee an option or other stock based award is
spread over multiple years and may be reversed based on forfeitures which may
differ from our original assumptions unlike cash compensation expense which is
typically recorded contemporaneously with the time of award or payment.

Note F: Other Charges and Income. VeriFone excludes certain expenses and
income that are the result of unique or unplanned events that are noted below.
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
expenses may limit the comparability of our ongoing operations with prior and
future periods. Examples of adjustments for other charges and income are:

  *Patent litigation loss contingency expense recorded upon a jury verdict
    related to periods prior to the jury verdict. These costs were not
    anticipated and were recorded when they became probable and estimable.
    They are excluded from non-GAAP operating expenses to enable comparability
    between periods.
  *Gains or losses on financial transactions, such as the accelerated
    amortization of capitalized debt issuance costs due to the early repayment
    of debt. These accelerated costs are excluded from non-GAAP Other income
    (expense), net to enable comparability between periods.
  *Certain personnel expenses that we have identified will continue to be
    incurred only for a fixed short period of time in connection with
    scheduled operational changes as we streamline and centralize some of our
    global operations, including international distribution and repair
    facilities. These expenses are referred to as "Costs of efficiency
    initiatives" and we excluded these expenses from non-GAAP operating
    expenses to enable comparability of our ongoing operations.
  *Accrued loss related to litigation initiated by several former contractors
    of one of our Brazilian subsidiaries following termination of their
    services. These costs were not anticipated and relate to certain claims
    for which we have determined loss is probable and estimable primarily
    because of a partially unfavorable court ruling in one of the underlying
    proceedings. The costs are excluded from non-GAAP operating expenses to
    enable comparability between periods.

  *Non-cash interest expense recorded relating to the adoption of ASC 470-20
    Debt with conversion and other options. This expense is excluded from
    non-GAAP interest expense to promote comparability of our non-GAAP
    financial results with prior and future periods and best reflects our
    on-going operations.
  *Income taxes are adjusted for the tax effect of excluding items related to
    our non-GAAP financial measures, in order to provide our management and
    users of the financial statements with better clarity regarding the
    on-going comparable performance and future liquidity of our business. Our
    non-GAAP tax rates were 14% for the period May 1, 2012 through October 31,
    2012, 18% for the period December 31, 2011 through April 30, 2012, and 20%
    for the period November 1, 2010 through December 30, 2011.

Because of these factors, we assess our operating performance with these
amounts included and excluded, and by providing this information we believe
that users of our financial statements are better able to understand the
financial results of what we consider to be our continuing operations.

Note G: Non-GAAP diluted shares. In connection with our 1.375% Senior
Convertible Notes we had entered into certain note hedge transactions. We
repaid these Notes in cash upon maturity on June 15, 2012, and the then
outstanding note hedge transactions expired unused on June 15, 2012. Non-GAAP
diluted shares reflect the offset of shares that would have been deliverable
in the periods presented prior to the maturity of the Notes pursuant to note
hedge transactions. Under GAAP, shares delivered in hedge transactions are not
considered offsetting shares in the fully diluted share calculation until they
are actually delivered.


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
(UNAUDITED)
                                                                                         
                     Three Months Ended October 31,                Years Ended October 31,
                     2012            2011            % Change      2012              2011              % Change
                                                     (1)                                               (1)
Net revenues:
  System             $ 335,710       $ 319,211       5.2    %      $ 1,339,024       $ 1,033,911       29.5   %
  solutions
  Services           149,669        91,493         63.6   %      526,947          269,955          95.2   %
       Total net     485,379        410,704        18.2   %      1,865,971        1,303,866        43.1   %
       revenues
                                                                                                       
Cost of net
revenues:
  System             204,403         227,154         (10.0  )%     811,641           655,511           23.8   %
  solutions
  Services           81,439         57,488         41.7   %      298,489          156,605          90.6   %
       Total
       cost of       285,842        284,642        0.4    %      1,110,130        812,116          36.7   %
       net
       revenues
                                                                                                       
Gross profit         199,537        126,062        58.3   %      755,841          491,750          53.7   %
                                                                                                       
Operating
expenses:
  Research and       40,416          34,654          16.6   %      152,001           109,155           39.3   %
  development
  Sales and          47,385          46,052          2.9    %      179,694           138,267           30.0   %
  marketing
  General and        37,026          44,073          (16.0  )%     175,174           123,789           41.5   %
  administrative
  Patent
  litigation
  loss               —               —               nm            17,632            —                 nm
  contingency
  expense
  Amortization
  of purchased       23,246         8,871          162.0  %      83,795           14,829           nm
  intangible
  assets
       Total
       operating     148,073        133,650        10.8   %      608,296          386,040          57.6   %
       expenses
Operating income     51,464          (7,588    )     nm            147,545           105,710           39.6   %
Interest expense     (13,186   )     (5,952    )     121.5  %      (62,830     )     (28,950     )     117.0  %
Interest income      1,139           1,546           (26.3  )%     4,399             2,595             69.5   %
Other income         2,589          5,777          (55.2  )%     (20,761     )     11,929           nm
(expense), net
Income (loss)
before income        42,006          (6,217    )     nm            68,353            91,284            (25.1  )%
taxes
Provision for
(benefit from)       14,117         (205,114  )     (106.9 )%     2,050            (191,412    )     (101.1 )%
income taxes
Consolidated net     27,889          198,897         (86.0  )%     66,303            282,696           (76.5  )%
income
Net income
attributable to      (904      )     (71       )     nm            (1,270      )     (292        )     nm
noncontrolling
interests
Net income
attributable to
VeriFone             $ 26,985       $ 198,826      (86.4  )%     $ 65,033         $ 282,404        (77.0  )%
Systems, Inc.
stockholders
                                                                                                       
Net income per
share
attributable to
VeriFone
Systems, Inc.
stockholders:
  Basic              $ 0.25         $ 1.90                       $ 0.61           $ 3.06      
  Diluted            $ 0.24         $ 1.84                       $ 0.59           $ 2.92      
                                                                                                       
Weighted average
shares used in
computing
earnings per
share:
  Basic              107,718         104,497                       107,006           92,414
  Diluted            110,342         108,339                       110,315           96,616
                                                                                                       
  (1)  "nm" means not meaningful

                                                                                                                                            
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
NET REVENUE INFORMATION
(IN THOUSANDS, EXCEPT PERCENTAGES, UNAUDITED)
                      Three Months Ended                            % Change (1)           Years Ended                       % YoY

                         October 31,     July 31,        October 31,                               October 31,       October 31,       Change
                  Note                                               % SEQ      % YoY                                      
                         2012            2012            2011                                      2012              2011              (1)
GAAP net
revenues:
International
EMEA                     $ 201,347       $ 199,992       $ 148,613       0.7   %      35.5  %      $ 755,187         $ 417,615         80.8 %
LAC                      79,971          94,378          104,621         (15.3 )%     (23.6 )%     370,843           275,930           34.4 %
ASPAC                    58,802         56,518         41,815         4.0   %      40.6  %      207,983          123,821          68.0 %
Total                    340,120         350,888         295,049         (3.1  )%     15.3  %      1,334,013         817,366           63.2 %
International
North America            145,259        138,162        115,655        5.1   %      25.6  %      531,958          486,500          9.3  %
Total                    $ 485,379      $ 489,050      $ 410,704      (0.8  )%     18.2  %      $ 1,865,971      $ 1,303,866      43.1 %
                                                                                                                                       
Non-GAAP net revenues: (Note A) (2)
International
EMEA              A      $ 203,980       $ 203,413       $ 149,977       0.3   %      36.0  %      $ 771,469         $ 419,587         83.9 %
LAC               A      79,971          94,378          104,965         (15.3 )%     (23.8 )%     370,843           276,274           34.2 %
ASPAC             A      59,288         56,995         44,937         4.0   %      31.9  %      211,107          126,946          66.3 %
Total                    343,239         354,786         299,879         (3.3  )%     14.5  %      1,353,419         822,807           64.5 %
International
North America     A      145,318        138,433        115,761        5.0   %      25.5  %      532,921          486,703          9.5  %
Total                    $ 488,557      $ 493,219      $ 415,640      (0.9  )%     17.5  %      $ 1,886,340      $ 1,309,510      44.0 %
                                                                                                                                       
GAAP net                 $ 485,379       $ 489,050       $ 410,704       (0.8  )%     18.2  %      $ 1,865,971       $ 1,303,866       43.1 %
revenues:
Plus:
Non-GAAP net      A, D   $ 3,178        $ 4,169        $ 4,936        nm           nm           $ 20,369         $ 5,644          nm
revenues
adjustments
Non-GAAP net
revenues:                488,557         493,219         415,640         (0.9  )%     17.5  %      1,886,340        1,309,510        44.0 %
(Note A)
Less: net revenues from businesses acquired in the past 12 months
Hypercom          B      —               (68,510   )     —               nm           nm           (222,960    )     —                 nm
Point             B      (58,232   )     (55,893   )     (6,942    )     nm           nm           (189,527    )     (21,632     )     nm
Other             B      (6,108    )     (9,343    )     —              nm           nm           (47,521     )     (1,425      )     nm
Total                    (64,340   )     (133,746  )     (6,942    )     nm           nm           (460,008    )     (23,057     )     nm
Organic non-GAAP net     424,217        359,473        408,698        nm           3.8   %      1,426,332        1,286,453        10.9 %
revenues: (Note B)
                                                                                                                                            
(1) "nm" means not meaningful
(2) Reconciliations for the non-GAAP measures presented in this press release are provided at the end of this press release.
                                                                                                                                            

                                                                                
                  For the three months ended October 31, 2012                        For the years ended October 31, 2012
                                                                                                                                                
                  compared to October 31, 2011                                       compared to October 31, 2011
                                                                        Organic                                                            Organic

                               Impact due     Organic      Impact       non-GAAP                  Impact         Organic      Impact       non-GAAP
                                                                        net                                                                net
                  Net          to             non-GAAP     due to                    Net          due to         non-GAAP     due to
                               acquired       net                       revenues                                 net                       revenues
                  revenues                           foreign    at           revenues   acquired                foreign    at
                               businesses     revenues                                                           revenues
                  growth                                   currency     constant     growth       businesses                  currency     constant
                               (A) (B)        growth                                                             growth
                                                           (C)          currency                  (A) (B)                     (C)          currency

                                                                        growth                                                             growth
International                                                    
EMEA              35.5  %      35.1pts        0.4   %      5.2pts       5.6   %      80.8  %      70.9pts        9.9   %      5.0pts       14.9  %
LAC               (23.6 )%     0.2pts         (23.8 )%     6.8pts       (17.0 )%     34.4  %      15.3pts        19.1  %      6.4pts       25.5  %
ASPAC             40.6  %      8.7pts         31.9  %      2.8pts       34.7  %      68.0  %      47.1pts        20.9  %      2.5pts       23.4  %
Total             15.3  %      18.7pts        (3.4  )%     5.4pts       2.0   %      63.2  %      48.3pts        14.9  %      5.0pts       19.9  %
International
North America     25.6  %      3.5pts         22.1  %      0.1pts       22.2  %      9.3   %      5.0pts         4.3   %      0.1pts       4.4   %
Total             18.2  %      14.4pts        3.8   %      3.9pts       7.7   %      43.1  %      32.2pts        10.9  %      3.1pts       14.0  %


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
                                                        
                                         October 31, 2012     October 31, 2011
                                         (UNAUDITED)
Assets
Current assets:
    Cash and cash equivalents            $  454,072           $  594,562
    Accounts receivable, net of          366,887              294,440
    allowances of $8,491 and $5,658
    Inventories                          178,274              144,316
    Prepaid expenses and other           136,210             127,130       
    current assets
Total current assets                     1,135,443            1,160,448
Fixed assets, net                        146,803              83,634
Purchased intangible assets, net         734,808              263,767
Goodwill                                 1,179,381            561,414
Deferred tax assets                      215,139              205,496
Other assets                             79,033              38,802        
Total assets                             $  3,490,607        $  2,313,561  
                                                              
Liabilities and Equity
Current liabilities:
    Accounts payable                     $  193,062           $  144,278
    Accruals and other current           230,867              218,123
    liabilities
    Deferred revenue, net                91,545               68,824
    Senior convertible notes             —                    266,981
    Short-term debt                      54,916              5,074         
Total current liabilities                570,390              703,280
Deferred revenue, net                    37,062               31,467
Long term debt                           1,252,701            211,756
Deferred tax liabilities                 214,537              92,594
Other long-term liabilities              70,440              78,971        
Total liabilities                        2,145,130            1,118,068
                                                              
Redeemable noncontrolling interest       861                  855
in subsidiary
                                                              
Stockholders' equity:
Common stock                             1,081                1,058
Additional paid-in-capital               1,543,127            1,468,862
Accumulated deficit                      (204,023      )      (269,056      )
Accumulated other comprehensive loss     (32,390       )      (6,671        )
Total stockholders' equity               1,307,795            1,194,193
Noncontrolling interest in               36,821              445           
subsidiaries
Total liabilities and equity             $  3,490,607        $  2,313,561  


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
                                                Years Ended October 31,
                                                  2012           2011
Cash flows from operating activities
Consolidated net income                           $  66,303        $ 282,696
Adjustments to reconcile consolidated net
income to net cash provided by operating
activities:
Depreciation and amortization, net                177,832          48,318
Stock-based compensation expense                  44,554           34,144
Non-cash interest expense                         10,290           15,695
Deferred income taxes                             (22,030    )     (227,034  )
Write-off of debt issue costs upon debt           5,268            —
extinguishment
Other                                             (11,064    )     4,869     
Net cash provided by operating activities
before changes in operating assets and            271,153         158,688   
liabilities
Changes in operating assets and liabilities,
net of effects of business acquisitions:
Accounts receivable, net                          (53,945    )     (72,386   )
Inventories, net                                  (19,274    )     23,224
Prepaid expenses and other assets                 (19,854    )     (1,824    )
Accounts payable                                  31,802           29,461
Deferred revenue, net                             27,316           14,801
Other current and long term liabilities           (19,235    )     22,609    
Net change in operating assets and                (53,190    )     15,885    
liabilities
Net cash provided by operating activities         217,963         174,573   
                                                                   
Cash flows from investing activities
Capital expenditures                              (63,181    )     (14,811   )
Acquisitions of businesses, net of cash and       (1,069,412 )     (49,231   )
cash equivalents acquired
Collection of other notes receivable              13,376           —
Other investing activities, net                   1,183           873       
Net cash used in investing activities             (1,118,034 )     (63,169   )
                                                                   
Cash flows from financing activities
Proceeds from debt, net of issue costs            1,660,577        73
Repayments of debt                                (619,336   )     (10,233   )
Repayment of senior convertible notes,            (279,159   )     —
including interest
Proceeds from issuance of common stock            30,308           48,534
through employee equity incentive plans
Payments of acquisition related contingent        (24,605    )     —
consideration
Distribution to noncontrolling interest           (1,673     )     (418      )
stockholders
Tax benefit from stock-based compensation         2,034           718       
Net cash provided by financing activities         768,146         38,674    
                                                                   
Effect of foreign currency exchange rate          (8,565     )     (653      )
changes on cash and cash equivalents
                                                                   
Net increase (decrease) in cash and cash          (140,490   )     149,425
equivalents
Cash and cash equivalents, beginning of           594,562         445,137   
period
Cash and cash equivalents, end of period          $  454,072      $ 594,562 


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
                      Three Months Ended                            Years Ended
                  Note   October 31,   July 31,      October 31,     October 31,     October 31,
                         2012            2012            2011            2012              2011
                                                                                           
GAAP Net
revenues -               $ 335,710       $ 350,230       $ 319,211       $ 1,339,024       $ 1,033,911
System
solutions
Amortization
of step-down
in deferred       A      514            729            2,780          6,581            2,780       
revenue at
acquisition
Non-GAAP Net
revenues -               $ 336,224      $ 350,959      $ 321,991      $ 1,345,605      $ 1,036,691 
System
solutions
                                                                                           
GAAP Net
revenues -               $ 149,669       $ 138,820       $ 91,493        $ 526,947         $ 269,955
Services
Amortization
of step-down
in deferred       A      2,773           3,440           2,156           13,897            2,864
revenue at
acquisition
Divestiture
related           D      (109      )     —              —              (109        )     —           
revenues
Non-GAAP Net
revenues -               $ 152,333      $ 142,260      $ 93,649       $ 540,735        $ 272,819   
Services
                                                                                           
GAAP Net                 $ 485,379       $ 489,050       $ 410,704       $ 1,865,971       $ 1,303,866
revenues
Amortization
of step-down
in deferred       A      3,287           4,169           4,936           20,478            5,644
revenue at
acquisition
Divestiture
related           D      (109      )     —              —              (109        )     —           
revenues
Non-GAAP Net             $ 488,557      $ 493,219      $ 415,640      $ 1,886,340      $ 1,309,510 
revenues
                                                                                           
GAAP Cost of
net revenues             $ 204,403       $ 206,213       $ 227,154       $ 811,641         $ 655,511
- System
solutions
Stock-based       E      (325      )     (442      )     (457      )     (1,598      )     (1,539      )
compensation
Acquisition,
divestiture
and               D      (734      )     (1,403    )     (25,086   )     (14,225     )     (25,832     )
restructuring
related costs
Amortization
of purchased      D      (9,815    )     (9,630    )     (8,112    )     (37,045     )     (18,167     )
intangible
assets
Costs of
efficiency        F      (10       )     —              —              (10         )     —           
initiatives
Non-GAAP Cost
of net
revenues -               $ 193,519      $ 194,738      $ 193,499      $ 758,763        $ 609,973   
System
solutions
                                                                                           
GAAP Cost of
net revenues             $ 81,439        $ 75,330        $ 57,488        $ 298,489         $ 156,605
- Services
Stock-based       E      (276      )     (118      )     (44       )     (505        )     (185        )
compensation
Acquisition,
divestiture
and               D      (1,222    )     220             (881      )     (3,504      )     (976        )
restructuring
related costs
Amortization
of purchased      D      (870      )     (952      )     (334      )     (3,423      )     (991        )
intangible
assets
Costs of
efficiency        F      (95       )     —              —              (95         )     —           
initiatives
Non-GAAP Cost
of net                   $ 78,976       $ 74,480       $ 56,229       $ 290,962        $ 154,453   
revenues -
Services
                                                                                           
GAAP Gross
margin -                 $ 131,307       $ 144,017       $ 92,057        $ 527,383         $ 378,400
System
solutions
Amortization
of step-down
in deferred       A      514             729             2,780           6,581             2,780
revenue at
acquisition
Stock-based       E      325             442             457             1,598             1,539
compensation
Acquisition,
divestiture
and               D      734             1,403           25,086          14,225            25,832
restructuring
related costs
Amortization
of purchased      D      9,815           9,630           8,112           37,045            18,167
intangible
assets
Costs of
efficiency        F      10             —              —              10               —           
initiatives
Non-GAAP
Gross margin             $ 142,705      $ 156,221      $ 128,492      $ 586,842        $ 426,718   
- System
solutions
                                                                                           
GAAP System
solutions
gross margin
as a % of                39.1      %     41.1      %     28.8      %     39.4        %     36.6        %
System
solutions net
revenues
Amortization
of step-down
in deferred
revenue at
acquisition              0.2       %     0.2       %     0.9       %     0.5         %     0.3         %
as a % of
System
solutions net
revenues
Stock-based
compensation
as a % of                0.1       %     0.1       %     0.1       %     0.1         %     0.1         %
System
solutions net
revenues
Acquisition,
divestiture
and
restructure
related costs            0.2       %     0.4       %     7.9       %     1.1         %     2.5         %
as a % of
System
solutions net
revenues
Amortization
of purchased
intangible
assets as a %            2.9       %     2.7       %     2.5       %     2.8         %     1.8         %
of System
solutions net
revenues
Costs of
efficiency
initiatives
as a % of                0.0       %     0.0       %     0.0       %     0.0         %     0.0         %
System
solutions net
revenues
Non-GAAP
System
solutions
gross margin
as a % of                42.4      %     44.5      %     39.9      %     43.6        %     41.2        %
System
solutions
non-GAAP net
revenues


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
                     Three Months Ended                             Years Ended
                 Note   October 31,   July 31,       October 31,     October 31,   October 31,
                        2012            2012             2011            2012            2011
                                                                                         
GAAP Gross
margin -                $ 68,230        $ 63,490         $ 34,005        $ 228,458       $ 113,350
Services
Amortization
of step-down
in deferred      A      2,773           3,440            2,156           13,897          2,864
revenue at
acquisition
Stock-based      E      276             118              44              505             185
compensation
Acquisition,
divestiture
and              D      1,113           (220      )      881             3,395           976
restructure
related
adjustments
Amortization
of purchased     D      870             952              334             3,423           991
intangible
assets
Costs of
efficiency       F      95             —               —              95             —         
initiatives
Non-GAAP
Gross margin            $ 73,357       $ 67,780        $ 37,420       $ 249,773      $ 118,366 
- Services
                                                                                         
GAAP
Services
gross margin            45.6      %     45.7      %      37.2      %     43.4      %     42.0      %
as a % of
Services net
revenues
Amortization
of step-down
in deferred
revenue at              1.9       %     2.5       %      2.4       %     2.6       %     1.1       %
acquisition
as a % of
Services net
revenues
Stock-based
compensation
as a % of               0.2       %     0.1       %      0.0       %     0.1       %     0.1       %
Services net
revenues
Acquisition,
divestiture
and
restructure
related                 0.7       %     (0.2      )%     1.0       %     0.6       %     0.4       %
adjustments
as a % of
Services net
revenues
Amortization
of purchased
intangible
assets as a             0.6       %     0.7       %      0.4       %     0.6       %     0.4       %
% of
Services net
revenues
Costs of
efficiency
initiatives             0.1       %     0.0       %      0.0       %     0.0       %     0.0       %
as a % of
Services net
revenues
Non-GAAP
Services
gross margin
as a % of               48.2      %     47.6      %      40.0      %     46.2      %     43.4      %
Services
non-GAAP net
revenues
                                                                                         
GAAP Gross              $ 199,537       $ 207,507        $ 126,062       $ 755,841       $ 491,750
margin
Amortization
of step-down
in deferred      A      3,287           4,169            4,936           20,478          5,644
revenue at
acquisition
Stock-based      E      601             560              501             2,103           1,724
compensation
Acquisition,
divestiture
and              D      1,847           1,183            25,967          17,620          26,808
restructure
related
adjustments
Amortization
of purchased     D      10,685          10,582           8,446           40,468          19,158
intangible
assets
Costs of
efficiency       F      105            —               —              105            —         
initiatives
Non-GAAP                $ 216,062      $ 224,001       $ 165,912      $ 836,615      $ 545,084 
Gross margin
                                                                                         
GAAP Gross
margin as a             41.1      %     42.4      %      30.7      %     40.5      %     37.7      %
% of net
revenues
Amortization
of step-down
in deferred
revenue at              0.7       %     0.9       %      1.2       %     1.1       %     0.4       %
acquisition
as a % of
net revenues
Stock-based
compensation            0.1       %     0.1       %      0.1       %     0.1       %     0.1       %
as a % of
net revenues
Acquisition,
divestiture
and
restructure             0.4       %     0.2       %      6.3       %     0.9       %     2.1       %
related
adjustments
as a % of
net revenues
Amortization
of purchased
intangible              2.2       %     2.2       %      2.1       %     2.2       %     1.5       %
assets as a
% of net
revenues
Costs of
efficiency
initiatives             0.0       %     0.0       %      0.0       %     0.0       %     0.0       %
as a % of
net revenues
Non-GAAP
Gross margin
as a % of               44.2      %     45.4      %      39.9      %     44.4      %     41.6      %
non-GAAP net
revenues
                                                                                         
GAAP
Research and            $ 40,416        $ 38,657         $ 34,654        $ 152,001       $ 109,155
development
expense
Stock-based      E      (2,189    )     (1,497    )      (1,199    )     (6,140    )     (4,015    )
compensation
Acquisition,
divestiture
and              D      (2,018    )     (1,099    )      (959      )     (6,019    )     (982      )
restructure
related
costs
Costs of
efficiency       F      $ (701    )     $ —             $ —            $ (701    )     $ —       
initiatives
Non-GAAP
Research and            $ 35,508       $ 36,061        $ 32,496       $ 139,141      $ 104,158 
development
expense
Non-GAAP
Research and
development
expense as a            7.3       %     7.3       %      7.8       %     7.4       %     8.0       %
% of
non-GAAP net
revenues


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
                       Three Months Ended                            Years Ended
                   Note   October 31,   July 31,      October 31,     October 31,   October 31,
                          2012            2012            2011            2012            2011
                                                                                          
GAAP Sales and
marketing                 $ 47,385        $ 46,182        $ 46,052        $ 179,694       $ 138,267
expense
Stock-based        E      (1,937    )     (5,177    )     (3,090    )     (15,781   )     (13,000   )
compensation
Acquisition,
divestiture
and                D      (1,457    )     (707      )     (7,079    )     (3,262    )     (8,435    )
restructure
related costs
Non-operating      F      (1,606    )     —               —               (1,606    )     —
gains (losses)
Costs of
efficiency         F      (639      )     —              —              (639      )     —         
initiatives
Non-GAAP Sales
and marketing             $ 41,746       $ 40,298       $ 35,883       $ 158,406      $ 116,832 
expense
Non-GAAP Sales
and marketing
expense as a %            8.5       %     8.2       %     8.6       %     8.4       %     8.9       %
of non-GAAP
net revenues
                                                                                          
GAAP General
and                       $ 37,026        $ 43,414        $ 44,073        $ 175,174       $ 123,789
administrative
expense
Stock-based        E      (5,655    )     (5,211    )     (4,246    )     (20,530   )     (15,405   )
compensation
Acquisition,
divestiture
and                D      (3,392    )     (2,844    )     (16,457   )     (28,035   )     (28,277   )
restructure
related costs
Costs of
efficiency         F      (107      )     —              —              (107      )     —         
initiatives
Non-GAAP
General and               $ 27,872       $ 35,359       $ 23,370       $ 126,502      $ 80,107  
administrative
expense
Non-GAAP
General and
administrative            5.7       %     7.2       %     5.6       %     6.7       %     6.1       %
expense as a %
of non-GAAP
net revenues
GAAP Patent
litigation
loss                      $ —             $ —             $ —             $ 17,632        $ —
contingency
expense
Patent
litigation
loss               F      —              —              —              (17,632   )     —         
contingency
expense
Non-GAAP
Patent
litigation                $ —            $ —            $ —            $ —            $ —       
loss
contingency
expense
Non-GAAP
Patent
litigation
loss                      0.0       %     0.0       %     0.0       %     0.0       %     0.0       %
contingency
expense as a %
of non-GAAP
net revenues
                                                                                          
GAAP
Amortization
of purchased              23,246          $ 23,177        $ 8,871         $ 83,795        $ 14,829
intangible
assets
Amortization
of purchased       D      (23,246   )     (23,177   )     (8,871    )     (83,795   )     (14,829   )
intangible
assets
Non-GAAP
Amortization
of purchased              $ —            $ —            $ —            $ —            $ —       
intangible
assets
Non-GAAP
Amortization
of purchased
intangible                0.0       %     0.0       %     0.0       %     0.0       %     0.0       %
assets as a %
of non-GAAP
net revenues
                                                                                          
GAAP Operating            $ 148,073       $ 151,430       $ 133,650       $ 608,296       $ 386,040
expenses
Stock-based        E      (9,781    )     (11,885   )     (8,535    )     (42,451   )     (32,420   )
compensation
Acquisition,
divestiture
and                D      (6,867    )     (4,650    )     (24,495   )     (37,316   )     (37,694   )
restructure
related costs
Amortization
of purchased       D      (23,246   )     (23,177   )     (8,871    )     (83,795   )     (14,829   )
intangible
assets
Non-operating      F      (1,606    )     —               —               (1,606    )     —
gains (losses)
Costs of
efficiency         F      (1,447    )     —               —               (1,447    )     —
initiatives
Patent
litigation
loss               F      —              —              —              (17,632   )     —         
contingency
expense
Non-GAAP
Operating                 $ 105,126      $ 111,718      $ 91,749       $ 424,049      $ 301,097 
expenses
Non-GAAP
Operating
expenses as a             21.5      %     22.7      %     22.1      %     22.5      %     23.0      %
% of non-GAAP
net revenues
                                                                                          
GAAP Operating            $ 51,464        $ 56,077        $ (7,588  )     $ 147,545       $ 105,710
income
Amortization
of step-down
in deferred        A      3,287           4,169           4,936           20,478          5,644
revenue at
acquisition
Stock-based        E      10,382          12,445          9,036           44,554          34,144
compensation
Acquisition,
divestiture
and                D      8,714           5,833           50,462          54,936          64,502
restructure
related
adjustments
Amortization
of purchased       D      33,931          33,759          17,317          124,263         33,987
intangible
assets
Costs of
efficiency         F      1,552           —               —               1,552           —
initiatives
Non-operating      F      1,606           —               —               1,606           —
gains (losses)
Patent
litigation
loss               F      —              —              —              17,632         —         
contingency
expense
Non-GAAP
Operating                 $ 110,936      $ 112,283      $ 74,163       $ 412,566      $ 243,987 
income


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
                       Three Months Ended                              Years Ended
                   Note   October 31,   July 31,      October 31,       October 31,   October 31,
                          2012            2012            2011              2012            2011
                                                                                            
GAAP Operating
income as a %             10.6      %     11.5      %     (1.8       )%     7.9       %     8.1        %
of net
revenues
Amortization
of step-down
in deferred
revenue at                0.7       %     0.9       %     1.2        %      1.1       %     0.4        %
acquisition as
a % of net
revenues
Stock-based
compensation              2.1       %     2.5       %     2.2        %      2.4       %     2.6        %
as a % of net
revenues
Acquisition,
divestiture
and
restructure               1.8       %     1.2       %     12.3       %      2.9       %     4.9        %
related
adjustments as
a % of net
revenues
Amortization
of purchased
intangible                7.0       %     6.9       %     4.2        %      6.7       %     2.6        %
assets as a %
of net
revenues
Costs of
efficiency
initiatives as            0.3       %     0.0       %     0.0        %      0.1       %     0.0        %
a % of net
revenues
Non-operating
gains (losses)            0.3       %     0.0       %     0.0        %      0.1       %     0.0        %
as a % of net
revenues
Patent
litigation
loss
contingency               0.0       %     0.0       %     0.0        %      0.9       %     0.0        %
expense as a %
of net
revenues
Non-GAAP
Operating
income as a %             22.7      %     22.8      %     17.8       %      21.9      %     18.6       %
of non-GAAP
net revenues
                                                                                            
GAAP Interest             $ (13,186 )     $ (16,374 )     $ (5,952   )      $ (62,830 )     $ (28,950  )
expense
Acquisition,
divestiture
and                D      (2,627    )     467             (1,571     )      (1,255    )     40
restructure
related costs
Non-cash
interest           F      3,151          2,087          4,034            15,559         15,576     
expense
Non-GAAP
Interest                  $ (12,662 )     $ (13,820 )     $ (3,489   )      $ (48,526 )     $ (13,334  )
expense
                                                                                            
GAAP Interest             $ 1,139         $ 1,110         $ 1,546           $ 4,399         $ 2,595
income
Acquisition,
divestiture
and                D      102            128            —                949            —          
restructure
related
adjustments
Non-GAAP
Interest                  $ 1,241         $ 1,238         $ 1,546           $ 5,348         $ 2,595
income
                                                                                            
GAAP Other
income                    $ 2,589         $ (721    )     $ 5,777           $ (20,761 )     $ 11,929
(expense), net
Acquisition,
divestiture
and                D      (5,452    )     (1,966    )     (6,735     )      11,800          (7,868     )
restructure
related costs
Non-operating      F      1,996          393            —                2,535          (5,196     )
(gains) losses
Non-GAAP Other
income                    $ (867    )     $ (2,294  )     $ (958     )      $ (6,426  )     $ (1,135   )
(expense), net
                                                                                            
Non-GAAP
Income before             $ 98,648       $ 97,407       $ 71,262         $ 362,962      $ 232,113  
income taxes
                                                                                            
GAAP Provision
for (benefit              $ 14,117        $ 2,313         $ (205,114 )      $ 2,050         $ (191,412 )
from) income
taxes
Income tax
effect of          F      (525      )     11,233         219,352          55,458         237,776    
non-GAAP
exclusions
Non-GAAP
Provision for             $ 13,592       $ 13,546       $ 14,238         $ 57,508       $ 46,364   
income taxes
Non-GAAP
Income tax                13.8      %     13.9      %     20.0       %      15.8      %     20.0       %
rate
                                                                                            
GAAP Net
(income) loss
attributable              $ (904    )     $ (84     )     $ (71      )      $ (1,270  )     $ (292     )
to
noncontrolling
interests
Acquisition,
divestiture
and                D      (666      )     (563      )     —                (2,003    )     —          
restructure
related costs
Non-GAAP Net
income
attributable              $ (1,570  )     $ (647    )     $ (71      )      $ (3,273  )     $ (292     )
to
noncontrolling
interests
                                                                                            
GAAP Net
income
attributable              $ 26,985        $ 37,695        $ 198,826         $ 65,033        $ 282,404
to VeriFone
Systems, Inc.
stockholders
Amortization
of step-down
in deferred        A      3,287           4,169           4,936             20,478          5,644
revenue at
acquisition
Stock-based        E      10,382          12,445          9,036             44,554          34,144
compensation
Acquisition,
divestiture
and                D      71              3,899           42,156            64,427          56,674
restructure
related
adjustments
Amortization
of purchased       D      33,931          33,759          17,317            124,263         33,987
intangible
assets
Costs of
efficiency         F      1,552           —               —                 1,552           —
initiatives
Patent
litigation
loss               F      —               —               —                 17,632          —
contingency
expense
Non-cash
interest           F      3,151           2,087           4,034             15,559          15,576
expense
Non-operating      F      3,602           393             —                 4,141           (5,196     )
(gains) losses
Income tax
effect of          F      525            (11,233   )     (219,352   )      (55,458   )     (237,776   )
non-GAAP
exclusions
Non-GAAP Net
income
attributable              $ 83,486        $ 83,214        $ 56,953          $ 302,181       $ 185,457
to VeriFone
Systems, Inc.
stockholders


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
                      Three Months Ended                        Years Ended
                  Note   October     July 31,     October        October      October
                         31, 2012      2012           31, 2011       31, 2012       31, 2011
Non-GAAP Net
income per
share
attributable
to VeriFone
Systems, Inc.
stockholders:
Basic                    $  0.78      $  0.77       $  0.55       $  2.82       $ 2.01 
Diluted           G      $  0.76      $  0.75       $  0.53       $  2.74       $ 1.92 
                                                                                    
Weighted
average
shares used
in computing
earnings per
share:
GAAP Basic               107,718       107,568        104,497        107,006        92,414
shares
GAAP Diluted             110,342       110,384        108,339        110,315        96,616
shares
Additional
shares            G      —            —             —             (93     )      (104   )
dilutive for
non-GAAP
Non-GAAP
Diluted           G      110,342       110,384        108,339        110,222        96,512
shares
                                                                                    
Net income
attributable
to VeriFone
Systems, Inc.            5.6     %     7.7     %      48.4    %      3.5     %      21.7   %
stockholders
as a % of net
revenues
Amortization
of step-down
in deferred
revenue at               0.7     %     0.9     %      1.2     %      1.1     %      0.4    %
acquisition
as a % of net
revenues
Stock-based
compensation             2.1     %     2.5     %      2.2     %      2.4     %      2.6    %
as a % of net
revenues
Acquisition,
divestiture
and
restructure              0.0     %     0.8     %      10.3    %      3.5     %      4.3    %
related
adjustments
as a % of net
revenues
Amortization
of purchased
intangible               7.0     %     6.9     %      4.2     %      6.7     %      2.6    %
assets as a %
of net
revenues
Costs of
efficiency
initiatives              0.3     %     0.0     %      0.0     %      0.1     %      0.0    %
as a % of net
revenues
Patent
litigation
loss
contingency              0.0     %     0.0     %      0.0     %      0.9     %      0.0    %
expense as a
% of net
revenues
Non-cash
interest
expense as a             0.6     %     0.4     %      1.0     %      0.8     %      1.2    %
% of net
revenues
Non-operating
(gains)
losses as a %            0.7     %     0.1     %      0.0     %      0.2     %      (0.4   )%
of net
revenues
Income tax
effect of
non-GAAP                 0.1     %     (2.3    )%     (53.4   )%     (3.0    )%     (18.2  )%
exclusions as
a % of net
revenues
Non-GAAP Net
income
attributable
to VeriFone
Systems, Inc.            17.1    %     16.9    %      13.7    %      16.0    %      14.2   %
stockholders
as a % of
non-GAAP net
revenues

<td class="bwsinglebottom"*Story too large*

VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
(UNAUDITED)
                                                                                
                           Three Months Ended                              Years Ended
                  Note     October 31,     July 31,        October 31,     October 31,       October 31,
                           2012            2012            2011            2012              2011
GAAP net
revenues:
International
EMEA                       $ 201,347       $ 199,992       $ 148,613       $ 755,187         $ 417,615
LAC                        79,971          94,378          104,621         370,843           275,930
ASPAC                      58,802         56,518         41,815         207,983          123,821     
Total                      340,120         350,888         295,049         1,334,013         817,366
International
North America              145,259        138,162        115,655        531,958          486,500     
Total                      $ 485,379      $ 489,050      $ 410,704      $ 1,865,971      $ 1,303,866 
                                                                                             
Plus:
non-GAAP net
revenues
adjustments
International
EMEA              A        $ 2,633         $ 3,421         $ 1,364         $ 16,282          $ 1,972
LAC               A        —               —               344             —                 344
ASPAC             A        486            477            3,122          3,124            3,125       
Total                      3,119           3,898           4,830           19,406            5,441
International
North America     A, D     59             271            106            963              203         
Total                      $ 3,178        $ 4,169        $ 4,936        $ 20,369         $ 5,644     
                                                                                             
Non-GAAP net
revenues:
International
EMEA              A        $ 203,980       $ 203,413       $ 149,977       $ 771,469         $ 419,587
LAC               A        79,971          94,378          104,965         370,843           276,274
ASPAC             A        59,288         56,995         44,937         211,107          126,946     
Total                      343,239         354,786         299,879         1,353,419         822,807
International
North America     A        145,318        138,433        115,761        532,921          486,703     
Total                      $ 488,557      $ 493,219      $ 415,640      $ 1,886,340      $ 1,309,510 
                                                                                             
Less: net
revenues from
businesses
acquired in
the past 12
months
International
EMEA              B        $ (60,381 )     $ (98,360 )     $ (6,942  )     $ (335,521  )     $ (23,057   )
LAC               B        —               (9,923    )     —               (41,761     )     —
ASPAC             B        —              (19,476   )     —

[TRUNCATED]