VeriFone Reports Results for the First Quarter of Fiscal 2013

  VeriFone Reports Results for the First Quarter of Fiscal 2013

First Quarter Financial Highlights

  *Non-GAAP net revenues of $430 million, up 1% year-over-year
  *GAAP net revenues of $429 million, up 2% year-over-year
  *Non-GAAP net income per diluted share of $0.51, down 12% year-over-year
  *GAAP net income per diluted share of $0.11, versus $0.03 loss a year ago
  *Operating cash flow of $53 million

Business Wire

SAN JOSE, Calif. -- March 5, 2013

VeriFone Systems, Inc. (NYSE: PAY), the global leader in secure electronic
payment solutions, today announced financial results for the three months
ended January 31, 2013 (“Q1 FY13”). Non-GAAP net revenues for Q1 FY13 were
$430 million, compared to $425 million a year ago, a 1% increase. GAAP net
revenues were $429 million, compared to $420 million a year ago, a 2%
increase. Non-GAAP net income per diluted share was $0.51, compared to $0.58 a
year ago, a 12% decrease. GAAP net income per diluted share was $0.11,
compared to a loss of $0.03 a year ago. The table below provides additional
summary non-GAAP and GAAP financial information and comparisons.


(IN MILLIONS, EXCEPT PER SHARE AND PERCENTAGES, UNAUDITED)

                                    Three Months Ended            %Change
                                      January 31,     January 31,
                                                                    (2)
                                      2013            2012
Non-GAAP (1):
Net revenues (Note A, D)              $  430          $  425          1.0   %
Organic net revenues (Note B)         $  391          $  421          (7.1  )%
Organic net revenues at constant      $  397          nm              (5.6  )%
currency (Note C)
Gross margin as a % of net            43.6     %      42.9      %     0.7 pts
revenues
Net income per diluted share          $  0.51         $  0.58         (12.1 )%
                                                                      
GAAP:
Net revenues                          $  429          $  420          2.2   %
Gross margin as a % of net            40.1     %      37.3      %     2.8 pts
revenues
Net income (loss) per diluted         $  0.11         $  (0.03  )     nm
share
(1) Reconciliations for the non-GAAP measures are provided at the end of this
press release.
(2) "nm" means not meaningful or relevant
                                                                      

“While our first quarter results fell short of our expectations, VeriFone
remains well positioned to take advantage of the secular shift from cash to
cashless transactions and the increasing demand for payment security, which
should continue to drive healthy payment industry growth,” said Douglas G.
Bergeron, Chief Executive Officer. “We are confident that our strategy to
build out our service portfolio is sound, and we will continue to invest in
multiple services infrastructure initiatives to enable us to offer innovative
solutions and build deeper relationships with our customers. We have taken
aggressive steps to address our execution challenges, including centralizing
engineering resources, increasing investment in our world-class product
portfolio and improving sales management of emerging market distributors and
new services initiatives. We are likely to take additional steps as needed,
including senior management changes, to ensure that we have the right
executive team and resources in place to execute our strategic plan going
forward.”

Additional Financial and Business Highlights

  *North America GAAP net revenues increased 11% year-over-year.
  *Multi-Lane Retail GAAP net revenues increased 11% year-over-year driven by
    higher demand for new MX 900 series systems.
  *Petroleum convenience store system Topaz unit sales set a record as gas
    stations continued to migrate from serial keyboard based Ruby systems to
    the IP touch screen based Topaz platform.
  *Services comprised 34% of total non-GAAP net revenues, compared with 31%
    in the prior quarter.
  *Installed base of Point All-in-One payments-as-a-service (“PaaS”) grew 25%
    in the last 12 months.
  *Accelerated rollout of PaaS in the Australia and New Zealand regions by
    signing agreements to acquire the largest electronic point of sale
    provider and the exclusive VeriFone distributor in New Zealand.

“We are continuing to execute our strategy and making the internal changes
necessary to create long-term growth opportunities,” continued Bergeron. “We
are facing a less than perfect macro environment; however, we are encouraged
by a number of positive trends including those around services, mobility,
security and U.S. EMV. Our strategic priorities are aligned to execute against
these opportunities and we are focused on creating value for our customers and
shareholders.”

Outlook for Second Fiscal Quarter 2013

  *Non-GAAP net revenues in the range of $435 million to $450 million
  *Non-GAAP net income per diluted share in the range of $0.45 to $0.50

Outlook for Full Fiscal Year 2013

  *Non-GAAP net revenues in the range of $1.80 billion to $1.83 billion
  *Non-GAAP net income per diluted share in the range of $1.90 to $2.10
  *Cash flow from operations less capital expenditures (free cash flow), in
    the range of $170 million to $190 million

Conference Call

VeriFone will hold its earnings conference call today, March 5, 2013, at 1:30
pm (PT). To listen to the call and view the slides, visit VeriFone’s website
http://ir.verifone.com. To listen to the call over the phone, dial (800)
706-7748 within the U.S., or (617) 614-3473 outside the U.S., and use
conference passcode 4783 6410. The recorded audio webcast will be available on
VeriFone's website until March 12, 2013.

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

                            
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
(UNAUDITED)
                                                          
                                  Three Months Ended January 31,
                                  2013            2012            % Change (1)
Net revenues:
System solutions                  $ 281,708       $ 312,641       (9.9)%
Services                          147,039        106,883        37.6%
Total net revenues                428,747        419,524        2.2%
                                                                  
Cost of net revenues:
System solutions                  174,243         198,752         (12.3)%
Services                          82,542         64,134         28.7%
Total cost of net revenues        256,785        262,886        (2.3)%
                                                                  
Gross margin                      171,962        156,638        9.8%
                                                                  
Operating expenses:
Research and development          39,802          35,079          13.5%
Sales and marketing               45,748          39,986          14.4%
General and administrative        39,981          46,038          (13.2)%
Amortization of purchased         24,696         13,615         81.4%
intangible assets
Total operating expenses          150,227        134,718        11.5%
Operating income                  21,735          21,920          (0.8)%
Interest expense                  (12,590   )     (14,634   )     (14.0)%
Interest income                   1,088           1,007           8.0%
Other income (expense), net       3,940          (20,849   )     nm
Income (loss) before income       14,173          (12,556   )     nm
taxes
Provision for (benefit            2,463          (9,782    )     nm
from) income taxes
Consolidated net income           11,710          (2,774    )     nm
(loss)
Net (income) loss
attributable to                   128            (350      )     nm
noncontrolling interests
Net income (loss)
attributable to VeriFone          $ 11,838       $ (3,124  )     nm
Systems, Inc. stockholders
                                                                  
Net income (loss) per share
attributable to VeriFone
Systems, Inc. stockholders:
Basic                             $ 0.11         $ (0.03   )
Diluted                           $ 0.11         $ (0.03   )
                                                                  
Weighted average number of
shares used in computing
net income per share:
Basic                             107,934         105,833
Diluted                           110,558         105,833
                                                                  
(1)"nm" means not meaningful or relevant


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
NET REVENUE INFORMATION
(IN THOUSANDS, EXCEPT PERCENTAGES, UNAUDITED)
                                                                    
                           Three Months Ended                              % Change (1)
                  Note     January 31,   October 31,   January 31,     % SEQ     % YoY
                           2013            2012 (1)        2012
GAAP net
revenues:
International
EMEA                       $ 171,626       $ 201,347       $ 154,907       (14.8)%     10.8%
LAC                        73,026          79,971          100,289         (8.7)%      (27.2)%
ASPAC                      50,880         58,802         44,698         (13.5)%     13.8%
Total                      295,532         340,120         299,894         (13.1)%     (1.5)%
International
North America              133,215        145,259        119,630        (8.3)%      11.4%
Total                      $ 428,747      $ 485,379      $ 419,524      (11.7)%     2.2%
                                                                                       
Non-GAAP net revenues: (Note A) (2)
International
EMEA              A        $ 172,884       $ 203,980       $ 159,003       (15.2)%     8.7%
LAC               A        73,026          79,971          100,289         (8.7)%      (27.2)%
ASPAC             A        51,017         59,288         45,943         (14.0)%     11.0%
Total                      296,927         343,239         305,235         (13.5)%     (2.7)%
International
North America     A        132,727        145,318        119,965        (8.7)%      10.6%
Total                      $ 429,654      $ 488,557      $ 425,200      (12.1)%     1.0%
                                                                                       
GAAP net                   $ 428,747       $ 485,379       $ 419,524       (11.7)%     2.2%
revenues
Plus:
Non-GAAP net      A, D     907            3,178          5,676          nm          nm
revenues
adjustments
Non-GAAP net revenues      429,654         488,557         425,200         (12.1)%     1.0%
(Note A)
Less: net revenues from businesses acquired in the past 12 months
Point             B        (38,279   )     nm              (4,128    )     nm          nm
Other             B        (340      )     nm              —              nm          nm
Total                      (38,619   )     nm              (4,128    )     nm          nm
Organic non-GAAP net       391,035        nm              421,072        nm          (7.1)%
revenues (Note B)
(1) "nm" means not meaningful or relevant
(2) Reconciliations for the non-GAAP measures are provided at the end of this press release.
                                                                                       

               
                  For three months ended January 31, 2013 compared with three 
                  months ended January 31, 2012
                                                                        Organic
                                                                        non-GAAP
                               Impact due     Organic      Impact
                               to             non-GAAP     due to       net
                  Net                                      foreign      revenues
                  revenues   acquired     net                   at
                  growth       businesses     revenues     currency
                                              growth       (C)          constant
                               (A) (B)                                  currency

                                                                        growth
International                                                  
EMEA              10.8  %      23.9pts        (13.1 )%     (0.6)pts     (12.5 )%
LAC               (27.2 )%     0.0pts         (27.2 )%     (5.9)pts     (21.3 )%
ASPAC             13.8  %      2.8pts         11.0  %      0.7pts       10.3  %
Total             (1.5  )%     12.6pts        (14.1 )%     (2.1)pts     (12.0 )%
International
North America     11.4  %      1.0pts         10.4  %      0.1pts       10.3  %
Total             2.2   %      9.3pts         (7.1  )%     (1.5)pts     (5.6  )%


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
                                                        
                                         January 31, 2013     October 31, 2012
                                         (UNAUDITED)
ASSETS
Current assets:
   Cash and cash equivalents             $  476,668           $  454,072
   Accounts receivable, net of           355,119              366,887
   allowances of $9,424 and $8,491
   Inventories                           188,783              178,274
   Prepaid expenses and other            138,175             136,210       
   current assets
Total current assets                     1,158,745            1,135,443
Fixed assets, net                        152,107              146,803
Purchased intangible assets, net         719,134              734,808
Goodwill                                 1,206,008            1,179,381
Deferred tax assets                      215,963              215,139
Other long-term assets                   82,109              79,033        
Total assets                             $  3,534,066        $  3,490,607  
                                                              
LIABILITIES AND EQUITY
Current liabilities:
   Accounts payable                      $  154,598           $  193,062
   Accruals and other current            221,172              230,867
   liabilities
   Deferred revenue, net                 119,003              91,545
   Short-term debt                       52,585              54,916        
Total current liabilities                547,358              570,390
Long-term deferred revenue, net          39,056               37,062
Long-term debt                           1,238,966            1,252,701
Long-term deferred tax liabilities       216,494              214,537
Other long-term liabilities              71,110              70,440        
Total liabilities                        2,112,984            2,145,130
                                                              
Redeemable noncontrolling interest       817                  861
in subsidiary
                                                              
Stockholders’ equity:
Common stock                             1,084                1,081
Additional paid-in capital               1,557,640            1,543,127
Accumulated deficit                      (192,185      )      (204,023      )
Accumulated other comprehensive          17,123              (32,390       )
income (loss)
Total stockholders’ equity               1,383,662            1,307,795
Noncontrolling interest in               36,603              36,821        
subsidiaries
Total liabilities and equity             $  3,534,066        $  3,490,607  


VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
                                              Three Months Ended January 31,
                                                2013            2012
Cash flows from operating activities
Consolidated net income (loss)                  $  11,710         $  (2,774  )
Adjustments to reconcile consolidated net
income (loss) to net cash provided by
operating activities:
Depreciation and amortization, net              50,932            31,859
Stock-based compensation expense                12,359            10,704
Non-cash interest expense                       —                 4,112
Deferred income taxes                           (3,934      )     (8,490     )
Gain on divestiture of assets                   (4,080      )     —
Write-off of debt issuance costs upon debt      —                 2,115
extinguishment
Other                                           (987        )     (1,804     )
Net cash provided by operating activities
before changes in operating assets and          66,000           35,722     
liabilities
Changes in operating assets and
liabilities, net of effects of business
acquisitions:
Accounts receivable, net                        13,235            17,154
Inventories, net                                (8,072      )     (1,994     )
Prepaid expenses and other assets               (1,832      )     (10,694    )
Accounts payable                                (39,297     )     (10,913    )
Deferred revenue, net                           28,175            28,589
Other current and long term liabilities         (4,778      )     (25,696    )
Net change in operating assets and              (12,569     )     (3,554     )
liabilities
Net cash provided by operating activities       53,431           32,168     
                                                                  
Cash flows from investing activities
Capital expenditures                            (20,789     )     (8,010     )
Acquisition of businesses, net of cash and      (1,000      )     (1,067,517 )
cash equivalents acquired
Proceeds from divestiture of assets             6,000             —
Other investing activities, net                 132              7          
Net cash used in investing activities           (15,657     )     (1,075,520 )
                                                                  
Cash flows from financing activities
Proceeds from debt, net of issuance costs       2,427             1,409,177
Repayments of debt                              (18,506     )     (307,760   )
Repayments of senior convertible notes,         —                 (279,159   )
including interest
Proceeds from issuance of common stock          2,965             8,812
through employee equity incentive plans
Payments of acquisition-related contingent      (4,993      )     —
consideration
Distribution to noncontrolling interest         (134        )     (135       )
stockholders
Net cash provided by (used in) financing        (18,241     )     830,935    
activities
                                                                  
Effect of foreign currency exchange rate        3,063            (2,166     )
changes on cash and cash equivalents
                                                                  
Net increase (decrease) in cash and cash        22,596            (214,583   )
equivalents
Cash and cash equivalents, beginning of         454,072          594,562    
period
Cash and cash equivalents, end of period        $  476,668       $  379,979 

<td class="bwpadl0 bwnowrap bwpadr0 *Broken Story*
                                                                                                                                                              
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
                                                                                                                                
                Three Months Ended January 31, 2013                                                                                                           
                                             Amortization     Acquisition,
                                                                                                                Other
                                             of step-down     divestiture                       Costs of                    Income                     % of
                                % of net                      &                Stock based                      charges     tax                        Non-GAAP
                GAAP                       in deferred                                  efficiency                         Non-GAAP     
                                revenues                      restructure      compensation                     and         effect                     net
                                             revenue at                                         initiatives     income                                 revenues
                                                              related
                                             acquisition
     NOTE:                      (1)          (A)              (D)              (F)              (F)             (F)         (F)                        (1)
Net
revenues:
  System        $ 281,708       65.7   %     $   123          $     —          $    —           $   —           $  —        $  —       $ 281,831       65.6   %
  solutions
  Services      147,039        34.3   %     1,312         (528      )    —             —            —        —         147,823        34.4   %
                428,747        100.0  %     1,435         (528      )    —             —            —        —         429,654        100.0  %
Cost of net
revenues:
  System        174,243         nm           —                (11,617   )      (426     )       —               —           —          162,200         nm
  solutions
  Services      82,542         nm           —             (2,028    )