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VeriFone Announces Preliminary Financial Results for the First Fiscal Quarter of 2013

  VeriFone Announces Preliminary Financial Results for the First Fiscal
  Quarter of 2013

Business Wire

SAN JOSE, Calif. -- February 20, 2013

VeriFone Systems, Inc. (NYSE: PAY) today announced certain preliminary
financial results for its first quarter ended January 31, 2013.

VeriFone expects to report Q1 non-GAAP net revenues in the range of $425
million to $430 million and Q1 GAAP net revenues in the range of $424 million
to $428 million. VeriFone expects to report non-GAAP net income per share
between $0.47 and $0.50 and GAAP net income per share between $0.07 and $0.10.

The lower than expected results for the first quarter were driven primarily
by:

  *Continued weak macro-economic conditions in Europe;
  *Increased focus and investments throughout 2012 on longer-term service
    initiatives in multiple jurisdictions at the expense of near-term hardware
    and software features and customization projects that were reduced or
    delayed, which resulted in missed revenue opportunities;
  *An increase in deferred revenue related to volume shipments made during
    the quarter to a new mix of customers in the Middle East and Africa. These
    shipments did not meet first quarter revenue recognition requirements;
  *Lower than anticipated revenue from large Brazilian customers, as well as
    political and economic uncertainty in Venezuela, typically a strong market
    for VeriFone; and
  *Several customers electing to delay major projects beyond the first
    quarter, as well as the cancelled Washington, D.C. taxi project.

“During the first quarter we faced a number of external headwinds and internal
challenges, which impacted our results,” said Douglas G. Bergeron, Chief
Executive Officer. “While we are disappointed with our performance and
execution, we have a firm grasp on the challenges we faced and are taking
aggressive steps to strengthen our competitiveness over the long-term.
Although the focus on our services efforts impacted some local software and
hardware modifications that were required to be competitive, our product
platform and architecture are consistently recognized by the industry as being
best-in-class. We are confident in our ability and committed to executing
against our strategic priorities to drive shareholder value.”

The company is executing steps to address the current challenges, including:

  *Conducting a comprehensive review of VeriFone’s strategic operating plan
    to ensure near-term product priorities are provided for, even as the
    company continues to increase its services offerings.
  *Increasing management focus and R&D investment on product development and
    certifications to accelerate the release of in-demand products throughout
    fiscal 2013; and
  *Driving cost efficiencies, including streamlining and better integrating
    recently completed acquisitions.

“Our industry remains vibrant and offers tremendous opportunity for growth
especially around complexity at the point of sale and EMV mandates,” continued
Bergeron. “We expect EMV to expand the total addressable market in the U.S.,
and major industry trends such as growth in retail mobility and the increased
need for more sophisticated security systems to create additional
opportunities for our industry. As the trusted and innovative partner of
merchants worldwide, VeriFone is uniquely positioned to capitalize on these
trends.”

Bergeron said, “Over the last few years, we have built a portfolio of
services, which have gained considerable traction in the market. We are
confident this progress will allow us to derive higher overall revenue and
margins, develop deeper relationships with our customers and drive more
predictable financial results. For example, our Point payments-as-a-service
business has enjoyed early success, and we are exporting the model to new
regions including Australia, New Zealand, continental Europe and the U.S.”

Bergeron concluded, “We are encouraged by the performance of our North America
region and payments-as-a-service offerings in the existing Point markets,
which both saw quarterly net revenue grow by double-digit percentage points
year-over-year. We remain optimistic about our business prospects with
upcoming growth drivers such as the U.S. EMV mandate, and we continue to build
on our taxi, gas pump and national retailer customer base. We are moving
forward and remain committed to expanding our payments-as-a-service business,
while continuing to accelerate our product development and certifications.
Based upon this, we expect to resume year-over-year net revenue growth in the
mid- to high-single digits beginning in fiscal 2014.”

The company’s updated outlook for the second quarter includes:

  *Non-GAAP net revenues in the range of $435 million to $450 million;
  *Non-GAAP net income per share in the range of $0.45 to $0.50;
  *The company expects that non-GAAP net revenues and non-GAAP net income per
    share will grow sequentially in the third and fourth quarters of fiscal
    2013.

The company intends to provide updated full fiscal 2013 guidance when it
reports financial results for the first quarter 2013 on March 5, 2013 after
the market close.

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 non-GAAP financial measures,
such as estimated non-GAAP net revenues and estimated non-GAAP net income per
diluted share. 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: Estimated Non-GAAP net revenues. Estimated non-GAAP net revenues
exclude the estimated 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 amounts are not intended
to be a substitute for our GAAP disclosures of net revenues, and should be
read together with our GAAP disclosures.

Note B: Estimated 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 can be spread over multiple years and may be reversed
based on forfeitures which may differ from our original assumptions unlike
cash compensation expense which is typically recorded contemporaneously with
the time of award or payment.

Note C: Estimated Acquisition, Divestiture and Restructuring Related
Adjustments. VeriFone adjusts net income for certain charges that are the
result of acquisitions, divestitures and restructuring programs.

Estimated 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) and
fair value increase (step-up) of inventory on acquisition. In addition, we
adjust for changes in estimate or final resolution of contingencies that
existed at the time of 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 January 2013 we divested of certain assets and business operations related
to one of our product offerings. The estimated gain on the divestiture, as
well as the estimated net losses attributable to the divested business, have
been excluded from estimated non-GAAP net income.

VeriFone analyzes the performance of its operations without regard to these
adjustments. 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 D: Estimated Income Tax Effect of Non-GAAP Exclusions. Income taxes are
adjusted for our estimated non-GAAP tax rate of 14% 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. In
addition, the adjustment includes the estimated income tax effect of our
non-GAAP exclusions.

VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
                                                   
                                                         Three Months Ended
                                                Note   January 31, 2013    
                                                                             
Estimated GAAP net revenues                              $424 - $428 million
Estimated amortization of step-down in          A        $1 - $2 million     
deferred revenue at acquisition
Estimated non-GAAP net revenues                          $425 - $430 million 
                                                                             
Estimated GAAP net income per diluted                    $0.07 - $0.10
share
Estimated amortization of step-down in          A        $0.01 - $0.01
deferred revenue at acquisition
Estimated stock-based compensation              B        $0.11 - $0.11
Estimated acquisition, divestiture and          C        $0.02 - $0.03
restructure related adjustments
Estimated amortization of purchased             C        $0.32 - $0.32
intangible assets
Estimated income tax effect of non-GAAP         D        ($0.06) - ($0.07    )
exclusions
Estimated non-GAAP net income per diluted                $0.47 - $0.50       
share

Contact:

VeriFone Systems, Inc.
Investor Relations:
Doug Reed, 408-232-7979
SVP, Treasury & Investor Relations
ir@verifone.com
or
Media Relations:
Leah Roscoe, 770-754-3442
VeriFone Media Relations
Leah_R1@verifone.com
 
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