VeriFone Reports Results for the Second Quarter of Fiscal 2013

  VeriFone Reports Results for the Second Quarter of Fiscal 2013

Business Wire

SAN JOSE, Calif. -- June 5, 2013

VeriFone Systems, Inc. (NYSE: PAY):

Second Quarter Financial Highlights

  *Non-GAAP net revenues of $430 million
  *GAAP net revenues of $426 million
  *Non-GAAP net income per diluted share of $0.42
  *GAAP net loss per share of $0.54, including $0.44 per share for certain
    legal charges
  *Operating cash flow of $79 million

VeriFone Systems, Inc. (NYSE: PAY), the global leader in secure electronic
payment solutions, today announced financial results for the three months
ended April 30, 2013 (“Q2 FY13”). Non-GAAP net revenues for Q2 FY13 were $430
million, compared to $479 million a year ago, a 10% decrease. GAAP net
revenues were $426 million, compared to $472 million a year ago, a 10%
decrease. Non-GAAP net income per diluted share was $0.42, compared to $0.64 a
year ago, a 34% decrease. GAAP net loss per diluted share was $0.54, compared
to net profit 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 April 30,       Six Months Ended April 30,
           2013       2012      % Change    2013       2012      % Change
                                  (2)                                (2)
Non-GAAP
(1):
Net
revenues   $ 430       $ 479      (10.4 )%     859        905      (5.0  )%
(Note A,
D, F)
Gross
margin
as a %      42.2  %    44.6 %   (2.4) pts    42.9  %    43.8 %   (0.9) pts
of net
revenues
Net
income
per        $ 0.42      $ 0.64     (34.4 )%    $ 0.93      $ 1.23     (24.4 )%
diluted
share
                                                                           
GAAP:
Net        $ 426       $ 472      (9.7  )%     855        892      (4.1  )%
revenues
Gross
margin
as a %      36.2  %    40.7 %   (4.5) pts    38.2  %    39.1 %   (0.9) pts
of net
revenues
Net
income
(loss)     $ (0.54 )   $ 0.03     nm          $ (0.43 )   $ —        nm
per
diluted
share
                                                                           
(1) Reconciliations for the non-GAAP measures are provided at the end of this
press release.
(2) "nm" means not meaningful or relevant
                                                                           

Commenting on the results, Richard McGinn, Interim Chief Executive Officer,
said, “We are keenly aware of the significant short-term challenges impacting
our fiscal year 2013 financial results. To regain our momentum, we are
addressing the critical issues head-on. We have empowered a new senior
leadership team. We are substantially increasing our R&D investment to best
serve our customers and regain competitiveness in markets where we have
product gaps. And, we have increased our focus on cash management, as
evidenced by our generation of $79 million of operating cash flow in the
second quarter.

“While we are pleased with many aspects of our business, the next twelve
months will be devoted to investing heavily in our customers, our products,
and our people, to reverse the current trend and reposition ourselves to
resume growth. We believe there is significant upside potential for both the
payment technology business and our company,” concluded McGinn.

Additional Financial and Business Highlights

  *Displaced incumbent competitors at twelve U.S. multi-lane retailers while
    not losing any large U.S. merchant customers.
  *Won a two-year tender with Sberbank, the largest bank in Russia, to
    deliver 450K VX systems.
  *Secured significant orders with major customers in Spain and Italy.
  *Announced a new GlobalBay SMB mobile point of sale application for our
    channel partners.
  *Achieved service revenue record of 35% of total non-GAAP net revenues in
    Q2.
  *Completed the acquisition of EFTPOS New Zealand for approximately $57
    million.

Guidance

Guidance for the third fiscal quarter of 2013 is as follows:

  *Non-GAAP net revenues of approximately $400 million
  *Non-GAAP net income per diluted share of approximately $0.20

The company expects modest sequential increases in non-GAAP net revenues and
non-GAAP net income per diluted share in Q4.

Conference Call

VeriFone will hold its earnings conference call today 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 (877)
280-4958 within the U.S., or (857) 244-7315 outside the U.S., and use
conference passcode 5960 5148. The recorded audio webcast will be available on
VeriFone's website until June 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 April 30,           Six Months Ended April 30,
                 2013          2012          % Change   2013          2012          % Change
                                             (1)                                    (1)
Net revenues:
System           $ 276,560     $ 340,443     (18.8 )%   $ 558,268     $ 653,084     (14.5 )%
solutions
Services          149,727     131,575    13.8  %     296,766     238,458    24.5  %
Total net         426,287     472,018    (9.7  )%    855,034     891,542    (4.1  )%
revenues
                                                                                          
Cost of net
revenues:
System             180,872       202,273     (10.6 )%     355,115       401,025     (11.4 )%
solutions
Services          91,109      77,586     17.4  %     173,651     141,720    22.5  %
Total cost of     271,981     279,859    (2.8  )%    528,766     542,745    (2.6  )%
net revenues
                                                                                          
Total gross       154,306     192,159    (19.7 )%    326,268     348,797    (6.5  )%
margin
                                                                                          
Operating
expenses:
Research and       41,581        37,849      9.9   %      81,383        72,928      11.6  %
development
Sales and          46,496        46,141      0.8   %      92,244        86,127      7.1   %
marketing
General and        43,676        48,696      (10.3 )%     83,657        94,734      (11.7 )%
administrative
Litigation
loss               69,000        17,632      nm           69,000        17,632      nm
contingency
expense
Amortization
of purchased      23,122      23,757     (2.7  )%    47,818      37,372     28.0  %
intangible
assets
Total
operating         223,875     174,075    28.6  %     374,102     308,793    21.1  %
expenses
Operating          (69,569 )     18,084      nm          (47,834 )     40,004      nm    
income (loss)
Interest           (11,979 )     (18,636 )   (35.7 )%     (24,569 )     (33,270 )   (26.2 )%
expense
Interest           730           1,143       (36.1 )%     1,818         2,150       (15.4 )%
income
Other income      2,306       (1,780  )   nm          6,246       (22,629 )   nm
(expense), net
Loss before        (78,512 )     (1,189  )   nm           (64,339 )     (13,745 )   nm
income taxes
Income tax        (21,483 )    (4,598  )   nm          (19,020 )    (14,380 )   nm
benefit
Consolidated
net income         (57,029 )     3,409       nm           (45,319 )     635         nm
(loss)
Net (income)
loss
attributable      (1,347  )    68         nm          (1,219  )    (282    )   nm
to
noncontrolling
interests
Net income
(loss)
attributable     $ (58,376 )   $ 3,477      nm         $ (46,538 )   $ 353        nm
to VeriFone
Systems, Inc.
stockholders
                                                                                          
Net income
(loss) per
share
attributable
to VeriFone
Systems, Inc.
stockholders:
Basic            $ (0.54   )   $ 0.03                  $ (0.43   )   $ —       
Diluted          $ (0.54   )   $ 0.03                  $ (0.43   )   $ —       
                                                                                          
Weighted
average number
of shares used
in computing
net income
(loss) per
share:
Basic              108,314       106,898                  108,122       106,359
Diluted            108,314       111,148                  108,122       110,349
                                                                                          
(1) "nm" means not meaningful or relevant


                                                                                                        
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
NET REVENUE INFORMATION
(IN THOUSANDS, EXCEPT PERCENTAGES, UNAUDITED)
                                                                                                                        
                                                                                                                        
                       Three Months Ended                                             Six Months Ended
                       April 30,     January 31,   April 30,     %         % Change   April 30,     April 30,     % Change
                Note   2013          2013 (1)      2012          Change    (1) YoY    2013          2012          (1)
                                                                 (1) SEQ
GAAP net revenues:
International
EMEA                   $ 171,868     $ 171,626     $ 198,941     0.1  %    (13.6 )%   $ 343,494     $ 353,848     (2.9  )%
LAC                      82,814        73,026        96,205      13.4 %    (13.9 )%     155,840       196,494     (20.7 )%
ASPAC                   49,559      50,880      47,965     (2.6 )%   3.3   %     100,439     92,663     8.4   %
Total                    304,241       295,532       343,111     2.9  %    (11.3 )%     599,773       643,005     (6.7  )%
International
North America           122,046     133,215     128,907    (8.4 )%   (5.3  )%    255,261     248,537    2.7   %
Total                  $ 426,287    $ 428,747    $ 472,018    (0.6 )%   (9.7  )%   $ 855,034    $ 891,542    (4.1  )%
                                                                                                                        
Non-GAAP net revenues: (2) (Notes A, D, F)
International
EMEA            A      $ 172,719     $ 172,884     $ 205,073     (0.1 )%   (15.8 )%   $ 345,603     $ 364,076     (5.1  )%
LAC             A, F     85,314        73,026        96,205      16.8 %    (11.3 )%     158,340       196,494     (19.4 )%
ASPAC           A       49,654      51,017      48,881     (2.7 )%   1.6   %     100,671     94,824     6.2   %
Total                    307,687       296,927       350,159     3.6  %    (12.1 )%     604,614       655,394     (7.7  )%
International
North America   A, D    122,061     132,727     129,205    (8.0 )%   (5.5  )%    254,788     249,170    2.3   %
Total                  $ 429,748    $ 429,654    $ 479,364    —    %    (10.4 )%   $ 859,402    $ 904,564    (5.0  )%
                                                                                                                        
GAAP net               $ 426,287     $ 428,747     $ 472,018     (0.6 )%   (9.7  )%   $ 855,034     $ 891,542     (4.1  )%
revenues
Plus:
Non-GAAP net    A,      3,461       907         7,346      nm        nm          4,368       13,022     nm
revenues        D, F
adjustments
Non-GAAP net
revenues                 429,748       429,654       479,364     —    %    (10.4 )%     859,402       904,564     (5.0  )%
(Notes A, D,
F)
Less: net revenues from businesses acquired in the past 12 months
Point           B        —            nm            —           nm        nm           (38,279 )     (4,128  )   nm
Other           B       (749    )    nm          (348    )   nm        nm          (1,089  )    (348    )   nm
Total                   (749    )    nm          (348    )   nm        nm          (39,368 )    (4,476  )   nm
Organic
non-GAAP net           $ 428,999     nm         $ 479,016    nm        (10.4 )%   $ 820,034    $ 900,088    (8.9  )%
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 April 30, 2013 compared with      For six months ended April 30, 2013 compared with
                three months ended April 30, 2012                        six months ended April 30, 2012
                                                                                                                             
                                                              Organic                                                  Organic
                           Impact due   Organic    Impact     non-GAAP              Impact due   Organic    Impact     non-GAAP
                Net        to           non-GAAP   due to     net        Net        to           non-GAAP   due to     net
                revenues  acquired    net       foreign   revenues   revenues   acquired     net        foreign    revenues
                growth     businesses   revenues   currency   at         growth     businesses   revenues   currency   at
                           (A) (B)      growth     (C)        constant              (A) (B)      growth     (C)        constant
                                                              currency                                                 currency
                                                              growth                                                   growth
International
EMEA            (13.6 )%   2.2pts       (15.8 )%   (1.2)pts   (14.6 )%   (2.9  )%   11.7pts      (14.6 )%   (0.9)pts   (13.7 )%
LAC             (13.9 )%   (2.6)pts     (11.3 )%   (3.5)pts   (7.8  )%   (20.7 )%   (1.3)pts     (19.4 )%   (4.7)pts   (14.7 )%
ASPAC           3.3   %    2.0pts       1.3   %    (0.9)pts   2.2   %    8.4   %    2.4pts       6.0   %    (0.2)pts   6.2   %
Total           (11.3 )%   0.9pts       (12.2 )%   (1.8)pts   (10.4 )%   (6.7  )%   6.4pts       (13.1 )%   (2.0)pts   (11.1 )%
International
North America   (5.3  )%   0.4pts       (5.7  )%   (0.1)pts   (5.6  )%   2.7   %    0.7pts       2.0   %    0.0pts     2.0   %
Total           (9.7  )%   0.7pts       (10.4 )%   (1.3)pts   (9.1  )%   (4.1  )%   4.8pts       (8.9  )%   (1.4)pts   (7.5  )%
                                                                                                                             

                                                           
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
                                                                            
                                                                            
                                             April 30, 2013   October 31, 2012
                                             (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents                    $  505,953       $  454,072
Accounts receivable, net of allowances of       315,908          366,887
$10,934 and $8,491
Inventories                                     181,348          178,274
Prepaid expenses and other current assets      139,514        136,210    
Total current assets                            1,142,723        1,135,443
Fixed assets, net                               147,173          146,803
Purchased intangible assets, net                672,244          734,808
Goodwill                                        1,186,163        1,179,381
Deferred tax assets                             240,135          215,139
Other long-term assets                         78,978         79,033     
Total assets                                 $  3,467,416    $  3,490,607  
                                                                            
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                             $  151,469       $  193,062
Accruals and other current liabilities          288,613          230,867
Deferred revenue, net                           97,965           91,545
Short-term debt                                67,054         54,916     
Total current liabilities                       605,101          570,390
Long-term deferred revenue, net                 41,783           37,062
Long-term debt                                  1,212,213        1,252,701
Long-term deferred tax liabilities              198,597          214,537
Other long-term liabilities                    81,039         70,440     
Total liabilities                               2,138,733        2,145,130
                                                                            
Redeemable noncontrolling interest in           758              861
subsidiary
                                                                            
Stockholders’ equity:
Common stock                                    1,086            1,081
Additional paid-in capital                      1,569,102        1,543,127
Accumulated deficit                             (250,561  )      (204,023   )
Accumulated other comprehensive loss           (28,157   )     (32,390    )
Total stockholders’ equity                      1,291,470        1,307,795
Noncontrolling interest in subsidiaries        36,455         36,821     
Total liabilities and equity                 $  3,467,416    $  3,490,607  
                                                                            

                                                             
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
                                                                             
                                                                             
                                                  Six Months Ended April 30,
                                                  2013          2012
Cash flows from operating activities
Consolidated net income (loss)                    $ (45,319 )   $ 635
Adjustments to reconcile consolidated net
income (loss) to net cash provided by operating
activities:
Depreciation and amortization, net                  101,224       83,525
Stock-based compensation expense                    22,388        21,727
Non-cash interest expense                           —             8,537
Deferred income taxes                               (42,216 )     (13,321    )
Gain on divestiture of assets                       (4,080  )     —
Asset impairment                                    6,763         —
Other                                              (1,683  )    3,158      
Net cash provided by operating activities
before changes in operating assets and             37,077      104,261    
liabilities
Changes in operating assets and liabilities,
net of effects of business acquisitions:
Accounts receivable, net                            50,140        (18,128    )
Inventories, net                                    (1,646  )     8,212
Prepaid expenses and other assets                   (3,294  )     (18,632    )
Accounts payable                                    (41,537 )     (25,098    )
Deferred revenue, net                               12,043        27,343
Other current and long term liabilities            79,798      (15,037    )
Net change in operating assets and liabilities     95,504      (41,340    )
Net cash provided by operating activities          132,581     62,921     
                                                                             
Cash flows from investing activities
Capital expenditures                                (42,213 )     (26,986    )
Acquisition of businesses, net of cash and cash     (11,953 )     (1,069,762 )
equivalents acquired
Proceeds from divestiture of assets                 6,000         —
Other investing activities, net                    1,989       (127       )
Net cash used in investing activities              (46,177 )    (1,096,875 )
                                                                             
Cash flows from financing activities
Proceeds from debt, net of issuance costs           30,053        1,412,028
Repayments of debt                                  (58,402 )     (339,873   )
Repayments of senior convertible notes,             —             (279,159   )
including interest
Proceeds from issuance of common stock through      5,075         27,423
employee equity incentive plans
Payments of acquisition-related contingent          (9,280  )     (14,209    )
consideration
Distribution to noncontrolling interest            (1,689  )    (1,543     )
stockholders
Net cash provided by (used in) financing           (34,243 )    804,667    
activities
                                                                             
Effect of foreign currency exchange rate           (280    )    (4,238     )
changes on cash and cash equivalents
                                                                             
Net increase (decrease) in cash and cash            51,881        (233,525   )
equivalents
Cash and cash equivalents, beginning of period     454,072     594,562    
Cash and cash equivalents, end of period          $ 505,953    $ 361,037    
                                                                             

                                                                                                                      
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
                                                                                                                                      
                                                                                                                                      
                 Three Months Ended April 30, 2013
                                          Amortization   Acquisition,                                                          % of
                               % of net   of step-down   divestiture    Stock based    Other         Income                    Non-GAAP
                 GAAP          revenues   in deferred    &              compensation   charges and   tax         Non-GAAP      net
                                          revenue at     restructure                   income        effect                    revenues
                                          acquisition    related
NOTE:                          (1) (2)    (A)            (D)            (E)            (F)           (G)                       (1) (2)
Net revenues:
System           $ 276,560     64.9  %    $     70       $  —           $  —          $ 2,500       $ —        $ 279,130     65.0   %
solutions
Services          149,727    35.1  %         891        —            —           —           —          150,618    35.0   %
                  426,287    100.0 %         961        —            —           2,500       —          429,748    100.0  %
Cost of net
revenues:
System             180,872     65.4  %          —           (14,122 )      (289    )     (1,175  )     —           165,286     59.2   %
solutions
Services          91,109     60.9  %         —          (1,075  )     (128    )    (6,899  )    —          83,007     55.1   %
                  271,981    63.8  %         —          (15,197 )     (417    )    (8,074  )    —          248,293    57.8   %
Gross margin:
System             95,688      34.6  %          70          14,122         289           3,675         —           113,844     40.8   %
solutions
Services          58,618     39.1  %         891        1,075        128         6,899       —          67,611     44.9   %
                  154,306    36.2  %         961        15,197       417         10,574      —          181,455    42.2   %
Operating
expenses:
Research and       41,581      9.8   %          —           (377    )      (1,390  )     (47     )     —           39,767      9.3    %
development
Sales and          46,496      10.9  %          —           (185    )      (3,769  )     (387    )     —           42,155      9.8    %
marketing
General and        43,676      10.2  %          —           (1,983  )      (4,454  )     (4,143  )     —           33,096      7.7    %
administrative
Litigation
loss               69,000      16.2  %          —           —              —             (69,000 )     —           —           —
contingency
expense
Amortization
of purchased      23,122     5.4   %         —          (23,122 )     —           —           —          —          —
intangible
assets
Total
operating         223,875    52.5  %         —          (25,667 )     (9,613  )    (73,577 )    —          115,018    26.8   %
expenses
Operating          (69,569 )   (16.3 )%         961         40,864         10,030        84,151        —           66,437      15.5   %
income (loss)
Interest           (11,979 )   nm               —           318            —             —             —           (11,661 )   nm
expense
Interest           730         nm               —           52             —             —             —           782         nm
income
Other income      2,306      nm              —          (709    )     —           (2,175  )    —          (578    )   nm
(expense), net
Income (loss)
before income      (78,512 )   (18.4 )%         961         40,525         10,030        81,976        —           54,980      12.8   %
taxes
Provision for
(benefit from)    (21,483 )   nm              —          —            —           —           29,095     7,612      nm
income taxes
Consolidated
net income         (57,029 )   (13.4 )%         961         40,525         10,030        81,976        (29,095 )   47,368      11.0   %
(loss)
Net income
attributable
to                (1,347  )   nm              —          739          —           —           —          (608    )   nm
noncontrolling
interests
Net income
(loss)
attributable     $ (58,376 )   (13.7 )%   $     961      $  41,264     $  10,030     $ 81,976     $ (29,095 ) $ 46,760     10.9   %
to VeriFone
Systems, Inc.
stockholders
                                                                                                                                      
Net income (loss) per share attributable to VeriFone Systems, Inc. stockholders:
Basic            $ (0.54   )                                                                                     $ 0.43    
Diluted          $ (0.54   )                                                                                     $ 0.42    
                                                                                                                                      
                                                                                       Non-GAAP
                                                                                       adjustment
Weighted average number of shares used in computing net income (loss) per share:       for
                                                                                       dilutive
                                                                                       shares (H)
Basic              108,314                                                                                         108,314
Diluted            108,314                                                               2,218                     110,532
                                                                                                                                      
(1) "nm" means not meaningful or relevant.
(2) System solutions and Services cost of net revenues and gross margin as a percentage of net revenues are computed as a percentage of
the corresponding System solutions and Services 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 January 31, 2013
                                          Amortization   Acquisition,                  Other                                 % of
                               % of net   of step-down   divestiture    Stock based    charges    Income tax                 Non-GAAP
                 GAAP          revenues   in deferred    &              compensation   and        effect       Non-GAAP      net
                                          revenue at     restructure                   income                                revenues
                                          acquisition    related
NOTE:                          (1) (2)    (A)            (D)            (E)            (F)        (G)                        (1) (2)
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     61.9   %        —            (11,617 )      (426    )     —          —            162,200     57.6   %
solutions
Services          82,542     56.1   %       —           (2,028  )     (120    )    (73  )    —          80,321     54.3   %
                  256,785    59.9   %       —           (13,645 )     (546    )    (73  )    —          242,521    56.4   %
Gross margin:
System             107,465     38.1   %        123          11,617         426           —          —            119,631     42.4   %
solutions
Services          64,497     43.9   %       1,312       1,500        120         73       —          67,502     45.7   %
                  171,962    40.1   %       1,435       13,117       546         73       —          187,133    43.6   %
Operating
expenses:
Research and       39,802      9.3    %        —            (1,663  )      (1,617  )     30         —            36,552      8.5    %
development
Sales and          45,748      10.7   %        —            (336    )      (4,093  )     (223 )     —            41,096      9.6    %
marketing
General and        39,981      9.3    %        —            (2,783  )      (6,102  )     (109 )     —            30,987      7.2    %
administrative
Amortization
of purchased      24,696     5.8    %       —           (24,696 )     —           —        —          —          —
intangible
assets
Total
operating         150,227    35.0   %       —           (29,478 )     (11,812 )    (302 )    —          108,635    25.3   %
expenses
Operating          21,735      5.1    %        1,435        42,595         12,358        375        —            78,498      18.3   %
income (loss)
Interest           (12,590 )   nm              —            167            —             —          —            (12,423 )   nm
expense
Interest           1,088       nm              —            81             —             —          —            1,169       nm
income
Other income      3,940      nm             —           (5,053  )     —           (261 )    —          (1,374  )   nm
(expense), net
Income before      14,173      3.3    %        1,435        37,790         12,358        114        —            65,870      15.3   %
income taxes
Income tax        2,463      nm             —           —            —           —        6,696      9,159      nm
provision
Consolidated       11,710      2.7    %        1,435        37,790         12,358        114        (6,696 )     56,711      13.2   %
net income
Net income
(loss)
attributable      128        nm             —           (574    )     —           —        —          (446    )   nm
to
noncontrolling
interests
Net income
attributable
to VeriFone      $ 11,838     2.8    %   $    1,435     $  37,216     $  12,358     $ 114     $ (6,696 )   $ 56,265     13.1   %
Systems, Inc.
stockholders
                                                                                                                                    
Net income per share attributable to VeriFone Systems, Inc. stockholders:
Basic            $ 0.11                                                                                       $ 0.52    
Diluted          $ 0.11                                                                                       $ 0.51    
                                                                                                                                    
Weighted average number of shares used in computing net income per share:
Basic              107,934                                                                                       107,934
Diluted            110,558                                                                                       110,558
                                                                                                                                    
(1) "nm" means not meaningful or relevant.
(2) System solutions and Services cost of net revenues and gross margin as a percentage of net revenues are computed as a percentage
of the corresponding System solutions and Services 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 April 30, 2012
                                          Amortization   Acquisition,                                                            % of
                               % of net   of step-down   divestiture    Stock based    Other         Income tax                  Non-GAAP
                 GAAP          revenues   in deferred    &              compensation   charges and   effect        Non-GAAP      net
                                          revenue at     restructure                   income                                    revenues
                                          acquisition    related
NOTE:                          (1) (2)    (A)            (D)            (E)            (F)           (G)                         (1) (2)
Net revenues:
System           $ 340,443     72.1  %    $    3,310     $  —           $  —           $ —           $ —           $ 343,753     71.7   %
solutions
Services          131,575    27.9  %        4,036       —            —           —           —           135,611    28.3   %
                  472,018    100.0 %        7,346       —            —           —           —           479,364    100.0  %
Cost of net
revenues:
System             202,273     59.4  %         —            (11,413 )      (418    )     —             —             190,442     55.4   %
solutions
Services          77,586     59.0  %        —           (2,638  )     (45     )    —           —           74,903     55.2   %
                  279,859    59.3  %        —           (14,051 )     (463    )    —           —           265,345    55.4   %
Gross margin:
System             138,170     40.6  %         3,310        11,413         418           —             —             153,311     44.6   %
solutions
Services          53,989     41.0  %        4,036       2,638        45          —           —           60,708     44.8   %
                  192,159    40.7  %        7,346       14,051       463         —           —           214,019    44.6   %
Operating
expenses:
Research and       37,849      8.0   %         —            (1,043  )      (1,201  )     —             —             35,605      7.4    %
development
Sales and          46,141      9.8   %         —            (278    )      (4,405  )     —             —             41,458      8.6    %
marketing
General and        48,696      10.3  %         —            (8,937  )      (4,954  )     —             —             34,805      7.3    %
administrative
Patent
litigation
loss               17,632      3.7   %         —            —              —             (17,632 )     —             —           —
contingency
expense
Amortization
of purchased      23,757     5.0   %        —           (23,757 )     —           —           —           —          —
intangible
assets
Total
operating         174,075    36.9  %        —           (34,015 )     (10,560 )    (17,632 )    —           111,868    23.3   %
expenses
Operating          18,084      3.8   %         7,346        48,066         11,023        17,632        —             102,151     21.3   %
income (loss)
Interest           (18,636 )   nm              —            470            —             4,094         —             (14,072 )   nm
expense
Interest           1,143       nm              —            180            —             —             —             1,323       nm
income
Other expense,    (1,780  )   nm             —           107          —           98          —           (1,575  )   nm
net
Income (loss)
before income      (1,189  )   (0.3  )%        7,346        48,823         11,023        21,824        —             87,827      18.3   %
taxes
Provision for
(benefit from)    (4,598  )   nm             —           —            —           —           20,281      15,683     nm
income taxes
Consolidated       3,409       0.7   %         7,346        48,823         11,023        21,824        (20,281 )     72,144      15.0   %
net income
Net income
(loss)
attributable      68         nm             —           (774    )     —           —           —           (706    )   nm
to
noncontrolling
interests
Net income
attributable
to VeriFone      $ 3,477      0.7   %    $    7,346     $  48,049     $  11,023     $ 21,824     $ (20,281 )   $ 71,438     14.9   %
Systems, Inc.
stockholders
                                                                                                                                        
Net income per share attributable to VeriFone Systems, Inc. stockholders:
Basic            $ 0.03                                                                                           $ 0.67    
Diluted          $ 0.03                                                                                           $ 0.64    
                                                                                       Non-GAAP
                                                                                       adjustment
Weighted average number of shares used in computing net income per share:              for
                                                                                       dilutive
                                                                                       shares (H)
Basic              106,898                                                                                           106,898
Diluted            111,148                                                               (371    )                   110,777
                                                                                                                                        
(1) "nm" means not meaningful or relevant.
(2) System solutions and Services cost of net revenues and gross margin as a percentage of net revenues are computed as a percentage of
the corresponding System solutions and Services net revenues.
                                                                                                                                        

                                                                                                                       
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
                                                                                                                                        
                                                                                                                                        
                 Six Months Ended April 30, 2013
                                          Amortization   Acquisition,                                                            % of
                               % of net   of step-down   divestiture    Stock based    Other         Income tax                  Non-GAAP
                 GAAP          revenues   in deferred    &              compensation   charges and   effect        Non-GAAP      net
                                          revenue at     restructure                   income                                    revenues
                                          acquisition    related
NOTE:                          (1) (2)    (A)            (D)            (E)            (F)           (G)                         (1) (2)
Net revenues:
System           $ 558,268     65.3  %    $    193       $  —           $  —           $ 2,500       $ —           $ 560,961     65.3   %
solutions
Services          296,766    34.7  %        2,203       (528    )     —           —           —           298,441    34.7   %
                  855,034    100.0 %        2,396       (528    )     —           2,500       —           859,402    100.0  %
Cost of net
revenues:
System             355,115     63.6  %         —            (25,739 )      (715    )     (1,175  )     —             327,486     58.4   %
solutions
Services          173,651    58.5  %        —           (3,103  )     (248    )    (6,972  )    —           163,328    54.7   %
                  528,766    61.8  %        —           (28,842 )     (963    )    (8,147  )    —           490,814    57.1   %
Gross margin:
System             203,153     36.4  %         193          25,739         715           3,675         —             233,475     41.6   %
solutions
Services          123,115    41.5  %        2,203       2,575        248         6,972       —           135,113    45.3   %
                  326,268    38.2  %        2,396       28,314       963         10,647      —           368,588    42.9   %
Operating
expenses:
Research and       81,383      9.5   %         —            (2,040  )      (3,007  )     (17     )     —             76,319      8.9    %
development
Sales and          92,244      10.8  %         —            (521    )      (7,862  )     (610    )     —             83,251      9.7    %
marketing
General and        83,657      9.8   %         —            (4,766  )      (10,556 )     (4,252  )     —             64,083      7.5    %
administrative
Litigation
loss               69,000      8.1   %         —            —              —             (69,000 )     —             —           —
contingency
expense
Amortization
of purchased      47,818     5.6   %        —           (47,818 )     —           —           —           —          —
intangible
assets
Total
operating         374,102    43.8  %        —           (55,145 )     (21,425 )    (73,879 )    —           223,653    26.0   %
expenses
Operating          (47,834 )   (5.6  )%        2,396        83,459         22,388        84,526        —             144,935     16.9   %
income (loss)
Interest           (24,569 )   nm              —            485            —             —             —             (24,084 )   nm
expense
Interest           1,818       nm              —            133            —             —             —             1,951       nm
income
Other income      6,246      nm             —           (5,762  )     —           (2,436  )    —           (1,952  )   nm
(expense), net
Income (loss)
before income      (64,339 )   (7.5  )%        2,396        78,315         22,388        82,090        —             120,850     14.1   %
taxes
Provision for
(benefit from)    (19,020 )   nm             —           —            —           —           35,791      16,771     nm
income taxes
Consolidated
net income         (45,319 )   (5.3  )%        2,396        78,315         22,388        82,090        (35,791 )     104,079     12.1   %
(loss)
Net income
(loss)
attributable      (1,219  )   nm             —           165          —           —           —           (1,054  )   nm
to
noncontrolling
interests
Net income
(loss)
attributable     $ (46,538 )   (5.4  )%   $    2,396     $  78,480     $  22,388     $ 82,090     $ (35,791 )   $ 103,025    12.0   %
to VeriFone
Systems, Inc.
stockholders
                                                                                                                                        
Net income (loss) per share attributable to VeriFone Systems, Inc. stockholders:
Basic            $ (0.43   )                                                                                       $ 0.95    
Diluted          $ (0.43   )                                                                                       $ 0.93    
                                                                                                                                        
                                                                                       Non-GAAP
                                                                                       adjustment
Weighted average number of shares used in computing net income (loss) per share:       for
                                                                                       dilutive
                                                                                       shares (H)
Basic              108,122                                                                                           108,122
Diluted            108,122                                                               2,421                      110,543
                                                                                                                                        
(1) "nm" means not meaningful or relevant.
(2) System solutions and Services cost of net revenues and gross margin as a percentage of net revenues are computed as a percentage of
the corresponding System solutions and Services net revenues.
                                                                                                                                        

<td class="bwpa*Story too large*
                                                                                                           
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
                                                                                                                            
                                                                                                                            
              Six Months Ended April 30, 2012
                                       Amortization   Acquisition,                  Other                            % of
                            % of net   of step-down   divestiture    Stock based    charges   Income                 Non-GAAP
              GAAP          revenues   in deferred    &              compensation   and       tax      Non-GAAP      net
                                       revenue at     restructure                   income    effect                 revenues
                                       acquisition    related
NOTE:                       (1) (2)    (A)            (D)            (E)            (F)       (G)                    (1) (2)
Net
revenues:
System        $ 653,084     73.3   %   $   5,338      $  —           $  —           $  —      $  —     $ 658,422     72.8   %
solutions
Services       238,458    26.7   %      7,684        —            —            —       —     246,142    27.2   %
               891,542    100.0  %      13,022       —            —            —       —     904,564    100.0  %
Cost of net
revenues:
System          401,025     61.4   %       —             (29,688 )      (831    )      —         —       370,506     56.3   %
solutions
Services       141,720    59.4   %      —            (4,103  )     (111    )     —       —     137,506    55.9   %
               542,745    60.9   %      —            (33,791 )     (942    )     —       —     508,012    56.2   %
Gross
margin:
System          252,059     38.6   %       5,338         29,688         831            —         —       287,916     43.7   %
solutions
Services       96,738     40.6   %      7,684        4,103        111          —       —     108,636    44.1   %
               348,797    39.1   %      13,022       33,791       942          —       —     396,552    43.8   %
Operating
expenses:
Research
and             72,928      8.2    %       —             (2,902  )      (2,454  )      —
development

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