Investor Relations

Financial News Release

Printer Friendly Version View printer-friendly version
<< Back
VeriFone Reports Results for the Second Quarter of Fiscal 2013

SAN JOSE, Calif.--(BUSINESS WIRE)--Jun. 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 (2) 2013   2012   % Change (2)
Non-GAAP (1):
Net revenues (Note A, D, F) $ 430 $ 479 (10.4 )%

 

859

 

905

(5.0 )%
Gross margin as a % of net revenues

 

42.2

%

 

44.6

%

(2.4)

pts

 

42.9

%

 

43.8

%

(0.9)

pts

Net income per diluted share $ 0.42 $ 0.64 (34.4 )% $ 0.93 $ 1.23 (24.4 )%
 
GAAP:
Net revenues $ 426 $ 472 (9.7 )%

 

855

 

892

(4.1 )%
Gross margin as a % of net revenues

 

36.2

%

 

40.7

%

(4.5)

pts

 

38.2

%

 

39.1

%

(0.9)

pts

Net income (loss) per diluted share $ (0.54 ) $ 0.03 nm $ (0.43 ) $

nm

 
(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 (1) 2013 2012 % Change (1)
Net revenues:
System solutions

$

276,560

$

340,443

(18.8 )%

$

558,268

$

653,084

(14.5 )%
Services   149,727     131,575   13.8 %   296,766     238,458   24.5 %
Total net revenues   426,287     472,018   (9.7 )%   855,034     891,542   (4.1 )%
 
Cost of net revenues:
System solutions 180,872 202,273 (10.6 )% 355,115 401,025 (11.4 )%
Services   91,109     77,586   17.4 %   173,651     141,720   22.5 %
Total cost of net revenues   271,981     279,859   (2.8 )%   528,766     542,745   (2.6 )%
 
Total gross margin   154,306     192,159   (19.7 )%   326,268     348,797   (6.5 )%
 
Operating expenses:
Research and development 41,581 37,849 9.9 % 81,383 72,928 11.6 %
Sales and marketing 46,496 46,141 0.8 % 92,244 86,127 7.1 %
General and administrative 43,676 48,696 (10.3 )% 83,657 94,734 (11.7 )%
Litigation loss contingency expense 69,000 17,632 nm 69,000 17,632 nm
Amortization of purchased intangible assets   23,122     23,757   (2.7 )%   47,818     37,372   28.0 %
Total operating expenses   223,875     174,075   28.6 %   374,102     308,793   21.1 %
Operating income (loss) (69,569 ) 18,084

nm

 

(47,834 ) 40,004

nm

 

Interest expense (11,979 ) (18,636 ) (35.7 )% (24,569 ) (33,270 ) (26.2 )%
Interest income 730 1,143 (36.1 )% 1,818 2,150 (15.4 )%
Other income (expense), net   2,306     (1,780 ) nm   6,246     (22,629 ) nm
Loss before income taxes (78,512 ) (1,189 ) nm (64,339 ) (13,745 ) nm
Income tax benefit   (21,483 )   (4,598 ) nm   (19,020 )   (14,380 ) nm
Consolidated net income (loss) (57,029 ) 3,409 nm (45,319 ) 635 nm
Net (income) loss attributable to noncontrolling interests   (1,347 )   68   nm   (1,219 )   (282 ) nm
Net income (loss) attributable to VeriFone Systems, Inc. stockholders

$

(58,376

)

$

3,477

  nm

$

(46,538

)

$

353

  nm
 
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
Note

April 30,
2013

January 31,
2013 (1)

April 30,
2012

% Change
(1) SEQ

% Change
(1) YoY

April 30,
2013

April 30,
2012

% Change
(1)

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 International 304,241 295,532 343,111 2.9 % (11.3 )% 599,773 643,005 (6.7 )%
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 International 307,687 296,927 350,159 3.6 % (12.1 )% 604,614 655,394 (7.7 )%
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 revenues

$

426,287

$

428,747

$

472,018

(0.6 )% (9.7 )%

$

855,034

$

891,542

(4.1 )%
Plus: Non-GAAP net revenues adjustments A, D, F   3,461     907     7,346   nm nm   4,368     13,022   nm
Non-GAAP net revenues (Notes A, D, F) 429,748 429,654 479,364 % (10.4 )% 859,402 904,564 (5.0 )%
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 revenues (Note B)

$

428,999

 

 

nm

 

$

479,016

  nm (10.4 )%

$

820,034

 

$

900,088

  (8.9 )%
 
(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
three months ended April 30, 2012

For six months ended April 30, 2013 compared with
six months ended April 30, 2012

 
Net revenues growth   Impact due to acquired businesses (A) (B)   Organic non-GAAP net revenues growth   Impact due to foreign currency (C)   Organic non-GAAP net revenues at constant currency growth Net revenues growth Impact due to acquired businesses (A) (B) Organic non-GAAP net revenues growth Impact due to foreign currency (C) Organic non-GAAP net revenues at constant currency 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 International (11.3 )% 0.9pts (12.2 )% (1.8)pts (10.4 )% (6.7 )% 6.4pts (13.1 )% (2.0)pts (11.1 )%
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 $10,934 and $8,491 315,908 366,887
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 subsidiary 758 861
 
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 liabilities   37,077     104,261  
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 equivalents acquired (11,953 ) (1,069,762 )
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, including interest (279,159 )
Proceeds from issuance of common stock through employee equity incentive plans 5,075 27,423
Payments of acquisition-related contingent consideration (9,280 ) (14,209 )
Distribution to noncontrolling interest stockholders   (1,689 )   (1,543 )
Net cash provided by (used in) financing activities   (34,243 )   804,667  
 
Effect of foreign currency exchange rate changes on cash and cash equivalents   (280 )   (4,238 )
 
Net increase (decrease) in cash and cash equivalents 51,881 (233,525 )
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
GAAP % of net revenues Amortization of step-down in deferred revenue at acquisition Acquisition, divestiture & restructure related Stock based compensation Other charges and income Income tax effect Non-GAAP % of Non-GAAP net revenues
NOTE:

(1) (2)

(A) (D) (E) (F) (G) (1) (2)
Net revenues:
System solutions

$

276,560

64.9 %

$

70

$

$

 

$

2,500

$

 

$

279,130

65.0 %
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 solutions 180,872 65.4 % (14,122 ) (289 ) (1,175 ) 165,286 59.2 %
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 solutions 95,688 34.6 % 70 14,122 289 3,675 113,844 40.8 %
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 development 41,581 9.8 % (377 ) (1,390 ) (47 ) 39,767 9.3 %
Sales and marketing 46,496 10.9 % (185 ) (3,769 ) (387 ) 42,155 9.8 %
General and administrative 43,676 10.2 % (1,983 ) (4,454 ) (4,143 ) 33,096 7.7 %
Litigation loss contingency expense 69,000 16.2 % (69,000 )
Amortization of purchased intangible assets   23,122   5.4 %     (23,122 )              
Total operating expenses   223,875   52.5 %     (25,667 )   (9,613 )   (73,577 )     115,018   26.8 %
Operating income (loss) (69,569 ) (16.3 )% 961 40,864 10,030 84,151 66,437 15.5 %
Interest expense (11,979 ) nm 318 (11,661 ) nm
Interest income 730 nm 52 782 nm
Other income (expense), net   2,306   nm     (709 )       (2,175 )     (578 ) nm
Income (loss) before income taxes (78,512 ) (18.4 )% 961 40,525 10,030 81,976 54,980 12.8 %
Provision for (benefit from) income taxes   (21,483 ) nm                 29,095   7,612   nm
Consolidated net income (loss) (57,029 ) (13.4 )% 961 40,525 10,030 81,976 (29,095 ) 47,368 11.0 %
Net income attributable to noncontrolling interests   (1,347 ) nm     739               (608 ) nm
Net income (loss) attributable to VeriFone Systems, Inc. stockholders

$

(58,376

) (13.7 )%

$

961

$

41,264

 

$

10,030

 

$

81,976

 

$

(29,095

)

$

46,760

  10.9 %
 
Net income (loss) per share attributable to VeriFone Systems, Inc. stockholders:
Basic

$

(0.54

)

$

0.43

 
Diluted

$

(0.54

)

$

0.42

 
 
Weighted average number of shares used in computing net income (loss) per share: Non-GAAP adjustment 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
GAAP % of net revenues Amortization of step-down in deferred revenue at acquisition Acquisition, divestiture & restructure related Stock based compensation Other charges and income Income tax effect Non-GAAP % of Non-GAAP net revenues
NOTE:

(1) (2)

(A) (D) (E) (F) (G)

(1) (2)

Net revenues:
System solutions

$

281,708

65.7 %

$

123

$

$

 

$

 

$

$

281,831

65.6 %
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 solutions 174,243 61.9 % (11,617 ) (426 ) 162,200 57.6 %
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 solutions 107,465 38.1 % 123 11,617 426 119,631 42.4 %
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 development 39,802 9.3 % (1,663 ) (1,617 ) 30 36,552 8.5 %
Sales and marketing 45,748 10.7 % (336 ) (4,093 ) (223 ) 41,096 9.6 %
General and administrative 39,981 9.3 % (2,783 ) (6,102 ) (109 ) 30,987 7.2 %
Amortization of purchased intangible assets   24,696   5.8 %     (24,696 )                
Total operating expenses   150,227   35.0 %     (29,478 )   (11,812 )   (302 )       108,635   25.3 %
Operating income (loss) 21,735 5.1 % 1,435 42,595 12,358 375 78,498 18.3 %
Interest expense (12,590 ) nm 167 (12,423 ) nm
Interest income 1,088 nm 81 1,169 nm
Other income (expense), net   3,940   nm     (5,053 )       (261 )       (1,374 ) nm
Income before income taxes 14,173 3.3 % 1,435 37,790 12,358 114 65,870 15.3 %
Income tax provision   2,463   nm                 6,696     9,159   nm
Consolidated net income 11,710 2.7 % 1,435 37,790 12,358 114 (6,696 ) 56,711 13.2 %
Net income (loss) attributable to noncontrolling interests   128   nm     (574 )               (446 ) nm
Net income attributable to VeriFone Systems, Inc. stockholders

$

11,838

  2.8 %

$

1,435

$

37,216

 

$

12,358

 

$

114

 

$

(6,696

)

$

56,265

  13.1 %
 
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
GAAP % of net revenues Amortization of step-down in deferred revenue at acquisition Acquisition, divestiture & restructure related Stock based compensation Other charges and income Income tax effect Non-GAAP % of Non-GAAP net revenues
NOTE:

(1) (2)

(A) (D) (E) (F) (G)

(1) (2)

Net revenues:
System solutions

$

340,443

72.1 %

$

3,310

$

$

$

$

$

343,753

71.7 %
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 solutions 202,273 59.4 % (11,413 ) (418 ) 190,442 55.4 %
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 solutions 138,170 40.6 % 3,310 11,413 418 153,311 44.6 %
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 development 37,849 8.0 % (1,043 ) (1,201 ) 35,605 7.4 %
Sales and marketing 46,141 9.8 % (278 ) (4,405 ) 41,458 8.6 %
General and administrative 48,696 10.3 % (8,937 ) (4,954 ) 34,805 7.3 %
Patent litigation loss contingency expense 17,632 3.7 % (17,632

)

Amortization of purchased intangible assets   23,757   5.0 %     (23,757 )                
Total operating expenses   174,075   36.9 %     (34,015 )   (10,560 )   (17,632

)

      111,868   23.3 %
Operating income (loss) 18,084 3.8 % 7,346 48,066 11,023 17,632 102,151 21.3 %
Interest expense (18,636 ) nm 470 4,094 (14,072 ) nm
Interest income 1,143 nm 180 1,323 nm
Other expense, net   (1,780 ) nm     107         98         (1,575 ) nm
Income (loss) before income taxes (1,189 ) (0.3 )% 7,346 48,823 11,023 21,824 87,827 18.3 %
Provision for (benefit from) income taxes   (4,598 ) nm                 20,281     15,683   nm
Consolidated net income 3,409 0.7 % 7,346 48,823 11,023 21,824 (20,281 ) 72,144 15.0 %
Net income (loss) attributable to noncontrolling interests   68   nm     (774 )               (706 ) nm
Net income attributable to VeriFone Systems, Inc. stockholders

$

3,477

  0.7 %

$

7,346

$

48,049

 

$

11,023

 

$

21,824

 

$

(20,281

)

$

71,438

  14.9 %
 
Net income per share attributable to VeriFone Systems, Inc. stockholders:
Basic

$

0.03

 

$

0.67

 
Diluted

$

0.03

 

$

0.64

 
Weighted average number of shares used in computing net income per share: Non-GAAP adjustment 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
GAAP % of net revenues Amortization of step-down in deferred revenue at acquisition Acquisition, divestiture & restructure related Stock based compensation Other charges and income Income tax effect Non-GAAP % of Non-GAAP net revenues
NOTE:

(1) (2)

(A) (D) (E) (F) (G)

(1) (2)

Net revenues:
System solutions

$

558,268

65.3 %

$

193

$

$

$

2,500

$

$

560,961

65.3 %
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 solutions 355,115 63.6 % (25,739 ) (715 ) (1,175 ) 327,486 58.4 %
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 solutions 203,153 36.4 % 193 25,739 715 3,675 233,475 41.6 %
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 development 81,383 9.5 % (2,040 ) (3,007 ) (17 ) 76,319 8.9 %
Sales and marketing 92,244 10.8 % (521 ) (7,862 ) (610 ) 83,251 9.7 %
General and administrative 83,657 9.8 % (4,766 ) (10,556 ) (4,252 ) 64,083 7.5 %
Litigation loss contingency expense 69,000 8.1 % (69,000 )
Amortization of purchased intangible assets   47,818   5.6 %     (47,818 )                
Total operating expenses   374,102   43.8 %     (55,145 )   (21,425 )   (73,879 )       223,653   26.0 %
Operating income (loss) (47,834 ) (5.6 )% 2,396 83,459 22,388 84,526 144,935 16.9 %
Interest expense (24,569 ) nm 485 (24,084 ) nm
Interest income 1,818 nm 133 1,951 nm
Other income (expense), net   6,246   nm     (5,762 )       (2,436 )       (1,952 ) nm
Income (loss) before income taxes (64,339 ) (7.5 )% 2,396 78,315 22,388 82,090 120,850 14.1 %
Provision for (benefit from) income taxes   (19,020 ) nm                 35,791     16,771   nm
Consolidated net income (loss) (45,319 ) (5.3 )% 2,396 78,315 22,388 82,090 (35,791 ) 104,079 12.1 %
Net income (loss) attributable to noncontrolling interests   (1,219 ) nm     165                 (1,054 ) nm
Net income (loss) attributable to VeriFone Systems, Inc. stockholders

$

(46,538

) (5.4 )%

$

2,396

$

78,480

 

$

22,388

 

$

82,090

 

$

(35,791

)

$

103,025

  12.0 %
 
Net income (loss) per share attributable to VeriFone Systems, Inc. stockholders:
Basic

$

(0.43

)

$

0.95

 
Diluted

$

(0.43

)

$

0.93

 
 
Weighted average number of shares used in computing net income (loss) per share: Non-GAAP adjustment 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.
 
                 
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
GAAP % of net revenues Amortization of step-down in deferred revenue at acquisition Acquisition, divestiture & restructure related Stock based compensation Other charges and income Income tax effect Non-GAAP % of Non-GAAP net revenues
NOTE:

(1) (2)

(A) (D) (E) (F) (G)

(1) (2)

Net revenues:
System solutions

$

653,084

73.3 %

$

5,338

$

$

$

$

$

658,422

72.8 %
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 solutions 401,025 61.4 % (29,688 ) (831 ) 370,506 56.3 %
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 solutions 252,059 38.6 % 5,338 29,688 831 287,916 43.7 %
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 development 72,928 8.2 % (2,902 ) (2,454 ) 67,572 7.5 %
Sales and marketing 86,127 9.7 % (1,101 ) (8,667 ) 76,359 8.4 %
General and administrative 94,734 10.6 % (21,799 ) (9,664 ) 63,271 7.0 %
Litigation loss contingency expense 17,632 2.0 % (17,632 )
Amortization of purchased intangible assets   37,372   4.2 %     (37,372 )                
Total operating expenses   308,793   34.6 %     (63,174 )   (20,785 )   (17,632 )       207,202   22.9 %
Operating income (loss) 40,004 4.5 % 13,022 96,965 21,727 17,632 189,350 20.9 %
Interest expense (33,270 ) nm 905 10,321 (22,044 ) nm
Interest income 2,150 nm 719 2,869 nm
Other expense, net   (22,629 ) nm     19,218         146         (3,265 ) nm
Income (loss) before income taxes (13,745 ) (1.5 )% 13,022 117,807 21,727 28,099 166,910 18.5 %
Provision for (benefit from) income taxes   (14,380 ) nm                 44,752     30,372   nm
Consolidated net income 635 0.1 % 13,022 117,807 21,727 28,099 (44,752 ) 136,538 15.1 %
Net income attributable to noncontrolling interests   (282 ) nm     (774 )               (1,056 ) nm
Net income attributable to VeriFone Systems, Inc. stockholders

$

353

  %

$

13,022

$

117,033

 

$

21,727

 

$

28,099

 

$

(44,752

)

$

135,482

  15.0 %
 
Net income per share attributable to VeriFone Systems, Inc. stockholders:
Basic

$

 

$

1.27

 
Diluted

$

 

$

1.23

 
Weighted average number of shares used in computing net income per share: Non-GAAP adjustment for dilutive shares (H)
Basic 106,359 106,359
Diluted 110,349 (186

)

110,163
 
(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)
 
 
GAAP net Revenues Amortization of step-down in deferred revenue at acquisition Other adjustments to net revenues Non-GAAP net revenues Net revenues from businesses acquired in the past 12 months Non-GAAP organic net revenues Constant currency adjustment Non-GAAP organic net revenues at constant currency
NOTE: (A)

(D) (F)

(A) (B) (B) (C) (C)

Three Months Ended April 30, 2013

International
EMEA

$

171,868

$

851

$

$

172,719

$

(89

)

$

172,630

$

2,479

$

175,109

LAC 82,814 2,500 85,314 85,314 3,417 88,731
ASPAC   49,559   95       49,654   (471 )   49,183   459   49,642
Total International 304,241 946 2,500 307,687 (560 ) 307,127 6,355 313,482
North America   122,046   15       122,061   (189 )   121,872   65   121,937
Total

$

426,287

$

961

$

2,500

 

$

429,748

$

(749

)

$

428,999

$

6,420

$

435,419

 

Three Months Ended January 31, 2013

International
EMEA

$

171,626

$

1,258

$

$

172,884

LAC 73,026 73,026
ASPAC   50,880   137       51,017
Total International 295,532 1,395 296,927
North America   133,215   40   (528 )   132,727
Total

$

428,747

$

1,435

$

(528

)

$

429,654

 

Three Months Ended April 30, 2012

International
EMEA

$

198,941

$

6,132

$

$

205,073

$

(20

)

$

205,053

LAC 96,205 96,205 96,205
ASPAC   47,965   916       48,881   (328 )   48,553
Total International 343,111 7,048 350,159 (348 ) 349,811
North America   128,907   298       129,205       129,205
Total

$

472,018

$

7,346

$

 

$

479,364

$

(348

)

$

479,016

 
               
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
 
 
GAAP net Revenues Amortization of step-down in deferred revenue at acquisition Other adjustments to net revenues Non-GAAP net revenues Net revenues from businesses acquired in the past 12 months Non-GAAP organic net revenues Constant currency adjustment Non-GAAP organic net revenues at constant currency
NOTE: (A)

(D) (F)

(A) (B) (B) (C) (C)

Six Months Ended April 30, 2013

International
EMEA

$

343,494

$

2,109

$

$

345,603

$

(38,368

)

$

307,235

$ 3,338 $ 310,573
LAC 155,840 2,500 158,340 158,340 9,330 167,670
ASPAC   100,439   232       100,671   (471 )   100,200   128   100,328
Total International 599,773 2,341 2,500 604,614 (38,839 ) 565,775 12,796 578,571
North America   255,261   55   (528 )   254,788   (529 )   254,259   9   254,268
Total

$

855,034

$

2,396

$

1,972

 

$

859,402

$

(39,368

)

$

820,034

$ 12,805 $ 832,839
 

Six Months Ended April 30, 2012

International
EMEA

$

353,848

$

10,228

$

$

364,076

$

(4,148

)

$

359,928

LAC 196,494 196,494 196,494
ASPAC   92,663   2,161       94,824   (328 )   94,496
Total International 643,005 12,389 655,394 (4,476 ) 650,918
North America   248,537   633       249,170       249,170
Total

$

891,542

$

13,022

$

 

$

904,564

$

(4,476

)

$

900,088

 

FINANCIAL MEASURES

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

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

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

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

Note A: Non-GAAP net revenues. Non-GAAP net revenues exclude the fair value decrease (step-down) in deferred revenue at acquisition. Although the step-down of deferred revenue fair value at acquisition is reflected in our GAAP financial statements, it results in net revenues immediately post-acquisition that are lower than net revenues that would be recognized in accordance with GAAP on those same services if they were sold under contracts entered into post-acquisition. We adjust the step-down to achieve comparability to net revenues of the acquired entity earned pre-acquisition and to our GAAP net revenues to be earned on contracts sold in future periods. These non-GAAP net revenues 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: Non-GAAP organic net revenues. "Non-GAAP organic net revenues" is a non-GAAP financial measure of net revenues excluding "net revenues from businesses acquired in the past 12 months" (as defined below). VeriFone determines non-GAAP organic net revenues by deducting net revenues from businesses acquired in the past 12 months from non-GAAP net revenues. Where Organic non-GAAP net revenues is presented for a period longer than one fiscal quarter, it is computed as the sum of the Organic non-GAAP net revenues for each quarter during that period. This non-GAAP measure is used to evaluate VeriFone net revenues without the impact of net revenues from acquired businesses, as VeriFone analyzes performance both with and without the impact of our recent acquisitions.

Net revenues from businesses acquired in the past 12 months consists of net revenues derived from the sales channels of acquired resellers and distributors, and net revenues from system solutions and services attributable to businesses acquired in the 12 months preceding the respective financial quarter(s). For acquisitions of small businesses that are integrated within a relatively short time after the close of the acquisition, we assume quarterly net revenues attributable to such acquired businesses during the 12 months following acquisition remain at the same level as in the first full quarter after the acquisition closed. During periods prior to our acquisition of former customers, net revenues from businesses acquired in the past 12 months consists of sales by VeriFone to that former customer for that period.

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

Note D: Acquisition, Divestiture and Restructure Related. VeriFone adjusts certain revenues and expenses for items that are the result of acquisitions, divestitures and restructuring programs.

Acquisition related adjustments include the amortization of purchased intangible assets and fixed asset fair value adjustments, incremental costs associated with acquisitions (such as professional fees, legal fees related to litigation assumed as part of acquisitions, and one-time charges related to acquired balances), acquisition integration expenses (such as costs of personnel required to assist with integration transitions), loss on financial instruments entered into to fix the acquisition purchase price in U.S. dollars when it is payable in foreign currencies and fair value increase (step-up) of inventory on acquisition. In addition, we adjust for changes in estimate or final resolution of contingencies that existed at the time of acquisition. Acquisition related expenses also result from events which arise from unforeseen circumstances which often occur outside the ordinary course of business. 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 net revenues, cost of net revenues and operating expenses for the three months ended January 31, 2013, that are attributable to the divested assets and business operations have been excluded from our non-GAAP financial measures.

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

VeriFone analyzes the performance of its operations without regard to these 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 E: Stock-Based Compensation. Our non-GAAP financial measures eliminate the effect of expense for stock-based compensation because they are non-cash expenses that management believes are not reflective of ongoing operating results. In particular, because of varying available valuation methodologies, subjective assumptions and the variety of award types which affect the calculations of stock-based compensation, we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Stock-based compensation is very different from other forms of compensation. A cash salary or bonus has a fixed and unvarying cash cost. In contrast the expense associated with an award of an option or other stock based award is unrelated to the amount of compensation ultimately received by the employee; and the cost to the company is based on valuation methodology and underlying assumptions that may vary over time and does not reflect any cash expenditure by the company. Furthermore, the expense associated with granting an employee an option or other stock based award 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 F: Other Charges and Income. VeriFone excludes certain revenue, expenses and other income (expense) that are the result of unique or unplanned events that are noted below. It is difficult to estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, we exclude them in our non-GAAP financial measures because we believe these items may limit the comparability of our ongoing operations with prior and future periods. Examples of adjustments for other charges and income are:

  • Estimated penalties due to customers related to the July 2012 fire that occurred in one of our repair and staging facilities in Brazil. These potential customer penalties are associated with deliveries that were delayed after the fire and are reflected as contra-revenue in accordance with GAAP.
  • The $6.8 million charge to costs of net revenues during the three months ended April 30, 2013 related to revenue generating assets of our UK Taxi business for which the net book value of the assets exceeded their fair value since the UK Taxi business has not met expectations.
  • Litigation loss contingency expense.
  • Costs incurred in connection with senior executive management changes, such as separation payments, legal fees and recruiter fees.
  • Certain personnel expenses that will continue to be incurred only for a fixed short period of time in connection with scheduled operational changes as we streamline and centralize some of our global operations, including international distribution and repair facilities.
  • Gains or losses on financial transactions, such as the accelerated amortization of capitalized debt issuance costs due to the early repayment of debt.
  • Non-cash interest expense recorded relating to the adoption of ASC 470-20 Debt with conversion and other options.
  • The foreign currency loss during December 2011 related to the difference between the forward rate on contracts purchased to fix the U.S. dollar equivalent of the purchase price for our Point acquisition, and the actual rate on the date of derivative settlement.

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

Note G: Income taxes Income taxes are adjusted for the tax effect of the adjusting items related to our non-GAAP financial measures and to reflect our estimate of cash taxes on a non-GAAP basis, in order to provide our management and users of the financial statements with better clarity regarding the on-going comparable performance and future liquidity of our business. Our non-GAAP tax rates were 14% for the period August 1, 2012, through April 30, 2013, 18% for the period December 31, 2011, through January 31, 2012, and 20% for the period November 1, 2011, through December 30, 2011.

Note H: Non-GAAP diluted shares. During the three and six months ended April 30, 2013, the diluted non-GAAP weighted average shares include additional shares that are dilutive for non-GAAP purposes, because we have a non-GAAP net income and GAAP basis net loss.

During the three and six months ended April 30, 2012, the diluted non-GAAP weighted average shares exclude shares that are dilutive for GAAP purposes related to our Senior Convertible Notes that matured on June 15, 2012. In connection with our 1.375% Senior Convertible Notes we had entered into certain note hedge transactions. We repaid these Notes in cash upon maturity on June 15, 2012, and the then outstanding note hedge transactions expired unused on June 15, 2012. Non-GAAP diluted shares reflect the offset of shares that would have been deliverable in the periods presented prior to the maturity of the Notes pursuant to note hedge transactions. Under GAAP, shares delivered in hedge transactions are not considered offsetting shares in the fully diluted share calculation until they are actually delivered.

Source: VeriFone Systems, Inc.

VeriFone Systems, Inc.
Investor Relations:
Doug Reed, 408-232-7979
SVP, Treasury & Investor Relations
ir@verifone.com
or
Media Relations:
Andy Payment, 770-754-3541
andy.payment@verifone.com