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]
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