2. 2
Non-GAAP Financial Measures
With respect to any non-GAAP financial measures
presented, reconciliations of non-GAAP to GAAP
financial measures may be found in Verifone’s quarterly
earnings release as filed with the Securities and
Exchange Commission as well as the Appendix to these
slides. 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 to compare Verifone’s current results with those for
prior periods as well as with the results of peer
companies. 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
Forward Looking Statements
Today’s discussion may include “forward-looking
statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements relate to
future events and expectations and involve known and
unknown risks and uncertainties. Verifone’s actual
results or actions may differ materially from those
projected in the forward-looking statements. For a
summary of the specific risk factors that could cause
results to differ materially from those expressed in the
forward-looking statements, please refer to Verifone’s
filings with the Securities and Exchange Commission,
including its annual report on Form 10-K and 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
3. 3
Agenda
3
Business Update
Paul Galant, CEO
Financial Update
Marc Rothman, CFO
Q&A
Paul Galant, CEO
Marc Rothman, CFO
Vin D’Agostino, Strategy
Chris Mammone, IR
4. 4
Q1 Results Better Than Guidance / Reaffirming FY18 Growth
Q1 18 Results FY18 Guidance
Non-GAAP
Revenues
$425M $1.775 - 1.800B
Non-GAAP EPS $0.23 $1.47 - $1.50
Services grew 11% YoY; Generated 48% margin; Comprised 43% of total revenue
Reaffirming FY18 Guidance for 1-3% revenue growth; 5-7% EPS growth
Systems grew double-digits YoY, excluding US Petro & India
5. 5
FY18 Strategic Priorities – Returning Verifone to Growth
DEPLOY CONNECT ENABLE
• Scale Engage, Carbon,
mPOS device families
across the globe
• FY18 Goal: Generate >15%
of total Systems sales
from new devices
• Grow base of devices
connected through Verifone
gateways and estate
management systems
• FY18 Goal: Surpass 2 million
connected devices globally
• Go-to-market with Verifone
Connect
• Leverage device footprint to
offer omni-channel services
that improve merchant
productivity and consumer
experiences at the POS
6. 6
#1: DEPLOY & Scale New Devices
• 7% of total Systems sales in Q1 from new
devices; on track to achieve year-end ramp
targets
• New products now selling in more than
half of top 20 revenue-producing
Systems markets
• Carbon pipeline: completing certifications
with large acquirers and executing directly
with ISOs (i.e., Paysafe)
• mPOS: Growing double-digits and adding
new products (e280 mid-range) to the
device line-up
7. 7
#2: CONNECT More Devices Through Our Gateways and Estate
Management Solutions
• FY18 Goal: Surpass 2 million
connected devices globally
• Focused on generating more high-
margin, subscription-based digital
services revenue
• We have 1.9 million connected devices
as of Q1, led by growth in North
America
8. 8
#3: ENABLE Clients Through Verifone Connect
• Launched Verifone Connect at NRF in January
• Leverages our leading device footprint by
offering omni-channel, value-added services
to enhance experiences at the POS
• Key features include payment services, estate
management, business solutions with
merchant and consumer-facing apps, and
new device on-boarding
• Application Marketplace launching 2H18
• Favorable mix shift to more recurring Payment,
Commerce, and Omni Services
9. 9
To be our clients’ most trusted,
secure, and innovative
technology partner, providing
integrated payments and
commerce solutions globally
Non-GAAP* Financial Results
Q1 18
$ in million, except EPS Q1 17 Q4 17 Q1 18 % QoQ % YoY
Net Revenues 425 450 425 (6)% 0%
Gross Margin 175 191 177 (8)% 1%
% of Revenue 41.1% 42.5% 41.6 % (0.9)pts 0.5pts
Operating Expenses 132 127 131 3% (1)%
Operating Income 43 64 46 (29)% 6%
% of Revenue 10.1% 14.3% 10.8% (3.5)pts 0.7pts
Net Income** 28 48 25 (48)% (8)%
EPS 0.25 0.43 0.23 (47)% (8)%
Operating Cash Flow*** 45 26 52
Free Cash Flow *** 25 11 38
* Reconciliation of GAAP to Non-GAAP financial results may be found in the Appendix. Excluding China and Taxi businesses
in all periods.
**Net Income = Net Income attributable to VeriFone Systems, Inc. stockholders
***Operating Cash Flow = GAAP net cash provided by operating activities. Free Cash Flow is a non-GAAP financial measure
10. 10
Non-GAAP* Revenue and Gross Margin by Business
$ in million Q1 17 Q4 17 Q1 18
Systems 261 268 243
Services 164 182 182
Total Net Revenue 425 450 425
Services / Net Revenue 39% 40% 43%
As a % of Revenue Q1 17 Q4 17 Q1 18
Systems 38.6% 37.8% 36.8%
Services 45.2% 49.5% 48.0%
Gross Margin 41.1% 42.5% 41.6%
* Reconciliation of GAAP to Non-GAAP financial results may be found in the Appendix. Excluding China and Taxi
businesses in all periods.
11. 11
Non-GAAP* Operating Expenses
43 44 41 42 43
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18
Total S&M
132 131
126 127 131
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18
Total OPEX
44
39 39 40 41
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18
Total G&A
45 48 46 45 47
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18
Total R&D
$ in million
* Reconciliation of GAAP to Non-GAAP financial results may be found in the Appendix. Excluding China
and Taxi businesses in all periods.
12. 12
Non-GAAP* Revenue by Geography
Q1 18
$ in million Q1 17 Q4 17 Q1 18
% QoQ
Inc (Dec)
% YoY
Inc (Dec)
North America 144 130 113 (13)% (22)%
% of Revenue 34% 29% 27%
Latin America 57 80 88 10% 55%
% of Revenue 13% 18% 21%
EMEA 166 194 183 (5)% 10%
% of Revenue 39% 43% 43%
APAC 59 46 41 (12)% (31)%
% of Revenue 14% 10% 10%
TOTAL 425 450 425 (6)% 0%
* Reconciliation of GAAP to Non-GAAP financial results may be found in the Appendix. Excluding China and Taxi
businesses in all periods.
13. 13
Cash & Debt*
933
955
974
926
904
878 878
831
842
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18
Gross Debt
186
157 157
148 147
134
159
131
153
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18
Total Cash$ in million
747
798
817
778
757
744
719
700
689
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18
Net Debt
Debt Statistics Credit Ratings
As of January 31, 2018
Short Term $67M S&P BB
Long Term $775M Moody’s Ba2
Outstanding $842M
* Including China and Taxi businesses in all periods
14. 14
Balance Sheet & Working Capital Metrics*
$ in million Q1 17 Q4 17 Q1 18
$ Days $ Days $ Days
Accounts Receivable, net 323 64 323 61 295 61
Inventories 156 53 127 41 127 44
Accounts Payable 133 43 145 47 146 51
Cash Conversion Cycle 74 55 54
Accounts Receivable Days is calculated as Accounts Receivable, net divided by Non-GAAP Total Net Revenues multiplied by 90 days
Inventory Days is calculated as Average Inventory divided by Non-GAAP Total Cost of Net Revenues multiplied by 90 days
Accounts Payable Days is calculated as Accounts Payable divided by Non-GAAP Total Cost of Net Revenues multiplied by 90 days
Cash Conversion Cycle is calculated as Accounts Receivable Days plus Inventory Days less Accounts Payable Days
Including China and Taxi businesses in all periods
15. 15
Cash Flow*
66
51
13
67
45
36
60
26
52
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18
Operating cash flow**
36
24
(11)
44
25
19
44
11
38
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18
Free cash flow**
$51.6M
Operating Cash Flow
$13.2M
Cap Ex
$38.4M
Free Cash Flow
*Reconciliation of GAAP to Non-GAAP financial results may be found in the Appendix. Including China and Taxi businesses in all periods.
**Operating Cash Flow = GAAP net cash provided by operating activities. Free Cash Flow is a non-GAAP financial measure.
$ in million
16. 16
Recent Capital Structure-Related Activities
SHARE REPURCHASES
• Completed prior $200M share repurchase program
• Announced additional $100M share repurchase
authorization in December 2017
DEBT REFINANCING
• Refinanced debt facility under more favorable terms
• $1.4B credit agreement
- $700M in Term Loans
- $700M Revolver
• Increased borrowing capacity by $200M
• Improved pricing by >25 basis points
17. 17
FY18 Non-GAAP* Guidance Bridge – Revenue
In $ million
*Reconciliation of GAAP to Non-GAAP guidance may be found in the Appendix.
Adjusted for divestitures of China and Taxi for comparison. See Appendix for reconciliation.
1,756
Petro
EMV
(35)
FY17
Revenue
Adjusted
India
Surge
(35)
Core
Growth
90-
115
1,775-
1,800
FY18
Guidance
1,756
China/Taxi
Divestitures
FY17
Revenue
Adjusted
(118)
FY17
Revenue
Reported
1,874
China/Taxi
Impact
18. 18
FY18 Non-GAAP* Guidance Bridge – EPS
0.09
FY17 EPS
Adjusted
1.40
China/Taxi
Impact
FY17 EPS
Reported
1.31
*Reconciliation of GAAP to Non-GAAP guidance may be found in the Appendix.
Adjusted for divestitures of China and Taxi for comparison. See Appendix for reconciliation.
(0.10)
Scaling NPI/
efficiencies
1.47-
1.50
0.15-
0.18
FY18
Guidance
Share
Buybacks
0.02
Higher
Tax Rate
FY17 EPS
Adjusted
1.40
Scaling NPI/
Efficiencies
19. 19
Non-GAAP* Guidance
*Reconciliation of GAAP to Non-GAAP guidance may be found in the Appendix
**Adjusted for divestitures of China and Taxi for comparison. See Appendix for reconciliation.
Q2 18 FY18
Net Revenues ~$435M $1.775 - 1.800B
Gross Margin ~42% ~43.5%
Operating Expenses $133 – 134M ~$530 - 535M
Operating Margin ~11.5% ~14%
Effective Tax Rate ~20% ~20%
EPS $0.27 – 0.28 $1.47 – 1.50
Fully Diluted Shares ~111M ~111-112M
Free Cash Flow $125M
Capital Expenditures ~$20M ~$75M
22. 22
Reconciliation of GAAP to Non-GAAP Key Metrics Q118
(In millions, except per share data and percentages)
Note Net revenues Gross margin
Gross margin
percentage
Operating
income
Income tax
provision (benefit)
Net income
attributable to
VeriFone
Systems, Inc.
stockholdersThree Months Ended January 31, 2018
GAAP $ 436.8 $ 178.1 40.8% $ 16.7 $ (0.5) $ 7.3
Adjustments:
Amortization of purchased intangible assets D — 1.1 16.2 — 11.8
Stock-based compensation F — 1.2 9.9 — 9.9
Restructuring and related charges G — (0.5) (0.7) — (0.7)
Other charges and income G — — 4.3 — 4.8
Income tax effect of non-GAAP exclusions (2) H — — — 7.1 (7.1)
Non-GAAP $ 436.8 $ 179.9 41.2% $ 46.4 $ 6.6 $ 26.0
Divested business:
Taxi Solutions business B 12.2 3.3 0.7 0.1 0.6
Non-GAAP, adjusted to exclude divested businesses $ 424.6 $ 176.6 41.6% $ 45.7 $ 6.5 $ 25.4
Weighted average number of shares
used in computing net income per
share:
Net income per share attributable to
VeriFone Systems, Inc. stockholders (1)
Basic Diluted Basic Diluted
GAAP 111.6 112.2 $ 0.06 $ 0.06
Non-GAAP 111.6 112.2 $ 0.23 $ 0.23
Non-GAAP, adjusted to exclude divested businesses 111.6 112.2 $ 0.23 $ 0.23
(1) Net income per share attributable to VeriFone Systems, Inc. stockholders is calculated by dividing the Net income attributable to VeriFone Systems, Inc. stockholders by the weighted average
number of shares used in computing net income per share.
(2) For the purpose of computing the income tax effect of non-GAAP exclusions, we used a 20.0% rate.
23. 23
Reconciliation of GAAP to Non-GAAP Key Metrics Q417
(In millions, except per share data and percentages)
Note Net revenues Gross margin
Gross margin
percentage Operating income
Income tax
provision
Net income
attributable to
VeriFone Systems,
Inc. stockholdersThree Months Ended October 31, 2017
GAAP $ 476.5 $ 194.4 40.8% $ 23.7 $ 10.4 $ 3.1
Adjustments:
Amortization of purchased intangible assets D — 1.2 16.9 — 19.6
Merger and acquisition related expenses E — — 0.3 — 0.3
Stock-based compensation F — 1.4 9.8 — 9.8
Restructuring and related charges G — 0.4 7.9 — 7.9
Other charges and income G — — 7.7 — 7.7
Income tax effect of non-GAAP exclusions (2) H — — — (1.8) 1.8
Non-GAAP $ 476.5 $ 197.4 41.4% $ 66.3 $ 8.6 $ 50.2
Divested business:
Taxi Solutions business B 26.4 6.2 2.0 0.3 1.7
Non-GAAP, adjusted to exclude divested businesses
$ 450.1 $ 191.2 42.5% $ 64.3 $ 8.3 $ 48.5
Weighted average number of shares
used in computing net income per
share:
Net income per share attributable to
VeriFone Systems, Inc. stockholders (1)
Basic Diluted Basic Diluted
GAAP 112.3 113.1 $ 0.03 $ 0.03
Non-GAAP 112.3 113.1 $ 0.45 $ 0.44
Non-GAAP, adjusted to exclude divested businesses 112.3 113.1 $ 0.43 $ 0.43
(1) Net income per share attributable to VeriFone Systems, Inc. stockholders is calculated by dividing the Net income attributable to VeriFone Systems, Inc. stockholders by the weighted average
number of shares used in computing net income per share.
(2) For the purpose of computing the income tax effect of non-GAAP exclusions, we used a 14.5% rate.
24. 24
Reconciliation of GAAP to Non-GAAP Key Metrics Q117(In millions, except per share data and percentages)
Note Net revenues Gross margin
Gross margin
percentage
Operating income
(loss)
Income tax
provision
Net income (loss)
attributable to
VeriFone Systems,
Inc. stockholdersThree Months Ended January 31, 2017
GAAP $ 453.9 $ 171.4 37.8% $ (4.4) $ 2.9 $ (16.6)
Adjustments:
Amortization of step-down deferred services net revenues at
acquisition and associated costs of goods sold A 2.7 2.2 2.2 — 2.2
Amortization of purchased intangible assets D — 2.5 21.3 — 19.8
Merger and acquisition related expenses E — — — — (0.1)
Stock-based compensation F — 0.9 9.6 — 9.6
Restructuring and related charges G — 0.8 2.0 — 2.0
Other charges and income G — — 7.4 — 7.4
Income tax effect of non-GAAP exclusions (2) H — — — 1.1 (1.1)
Non-GAAP $ 456.6 $ 177.8 38.9% $ 38.1 $ 4.0 $ 23.2
Divested business:
China business B 4.3 (0.2) (2.7) (0.4) (2.3)
Taxi Solutions business B 27.1 3.0 (2.3) (0.3) (2.0)
Non-GAAP, adjusted to exclude divested businesses
$ 425.2 $ 175.0 41.1% $ 43.1 $ 4.7 $ 27.5
Weighted average number of shares
used in computing net income (loss)
per share:
Net income (loss) per share
attributable to VeriFone Systems, Inc.
stockholders (1)
Basic Diluted Basic Diluted
GAAP 111.4 111.4 $ (0.15) $ (0.15)
Adjustment for diluted shares I — 0.3
Non-GAAP 111.4 111.7 $ 0.21 $ 0.21
Non-GAAP, adjusted to exclude divested businesses 111.4 111.7 $ 0.25 $ 0.25
(1) Net income (loss) per share attributable to VeriFone Systems, Inc. stockholders is calculated by dividing the Net income (loss) attributable to VeriFone Systems, Inc. stockholders by the
weighted average number of shares used in computing net income (loss) per share.
(2) For the purpose of computing the income tax effect of non-GAAP exclusions, we used a 14.5% rate.
25. 25
Reconciliation of GAAP to Non-GAAP Gross Margin
(In millions, except percentages)
Note
Systems net
revenues
Services net
revenues
Total net
revenues
Total cost of
net revenues
Systems gross
margin
Services gross
margin
Total gross
marginThree Months Ended January 31, 2018
GAAP $ 243.1 $ 193.7 $ 436.8 $ 258.7 $ 88.7 $ 89.4 $ 178.1
Percentage of GAAP net revenues 55.7% 44.3% 59.2% 36.5% 46.2% 40.8%
Amortization of purchased intangible assets D — — — (1.1) — 1.1 1.1
Stock-based compensation F — — — (1.2) 0.8 0.4 1.2
Restructuring and related charges G — — — 0.5 — (0.5) (0.5)
Non-GAAP $ 243.1 $ 193.7 $ 436.8 $ 256.9 $ 89.5 $ 90.4 $ 179.9
Percentage of Non-GAAP net revenues 55.7% 44.3% 58.8% 36.8% 46.7% 41.2%
Net revenues and gross margin from divested businesses B — 12.2 12.2 8.9 — 3.3 3.3
Non-GAAP, adjusted to exclude divested businesses
$ 243.1 $ 181.5 $ 424.6 $ 248.0 $ 89.5 $ 87.1 $ 176.6
Percentage of Non-GAAP net revenues, adjusted to exclude
divested businesses 57.3% 42.7% 58.4% 36.8% 48.0% 41.6%
Three Months Ended October 31, 2017
GAAP $ 268.4 $ 208.1 $ 476.5 $ 282.1 $ 100.3 $ 94.1 $ 194.4
Percentage of GAAP net revenues 56.3% 43.7% 59.2% 37.4% 45.2% 40.8%
Amortization of purchased intangible assets D — — — (1.2) 0.1 1.1 1.2
Stock-based compensation F — — — (1.4) 0.9 0.5 1.4
Restructuring and related charges G — — — (0.4) — 0.4 0.4
Non-GAAP $ 268.4 $ 208.1 $ 476.5 $ 279.1 $ 101.3 $ 96.1 $ 197.4
Percentage of Non-GAAP net revenues 56.3% 43.7% 58.6% 37.7% 46.2% 41.4%
Net revenues and gross margin from divested businesses B — 26.4 26.4 20.2 — 6.2 6.2
Non-GAAP, adjusted to exclude divested businesses
$ 268.4 $ 181.7 $ 450.1 $ 258.9 $ 101.3 $ 89.9 $ 191.2
Percentage of Non-GAAP net revenues, adjusted to exclude
divested businesses 59.6% 40.4% 57.5% 37.7% 49.5% 42.5%
26. 26
Reconciliation of GAAP to Non-GAAP Gross Margin
(In millions, except percentages)
Note
Systems net
revenues
Services net
revenues
Total net
revenues
Total cost of
net revenues
Systems gross
margin
Services gross
margin
Total gross
margin
Three Months Ended January 31, 2017
GAAP $ 265.4 $ 188.5 $ 453.9 $ 282.5 $ 99.0 $ 72.4 $ 171.4
Percentage of GAAP net revenues 58.5% 41.5% 62.2% 37.3% 38.4% 37.8%
Amortization of step-down in deferred services net revenues at
acquisition and associated cost of goods sold A — 2.7 2.7 0.5 — 2.2 2.2
Amortization of purchased intangible assets D — — — (2.5) 1.0 1.5 2.5
Stock-based compensation F — — — (0.9) 0.6 0.3 0.9
Restructuring and related charges G — — — (0.8) — 0.8 0.8
Non-GAAP $ 265.4 $ 191.2 $ 456.6 $ 278.8 $ 100.6 $ 77.2 $ 177.8
Percentage of Non-GAAP net revenues 58.1% 41.9% 61.1% 37.9% 40.4% 38.9%
Net revenues and gross margin from divested businesses B 4.0 27.4 31.4 28.6 (0.3) 3.1 2.8
Non-GAAP, adjusted to exclude divested businesses
$ 261.4 $ 163.8 $ 425.2 $ 250.2 $ 100.9 $ 74.1 $ 175.0
Percentage of Non-GAAP net revenues, adjusted to exclude
divested businesses 61.5% 38.5% 58.8% 38.6% 45.2% 41.2%
27. 27
Reconciliation of GAAP to Non-GAAP Operating Expenses
Note
Research and
development
Sales and
marketing
General and
administrative
Restructuring
and related
charges
Amortization of
purchased
intangible assets Total
(In millions, except percentages)
Three Months Ended January 31, 2018
GAAP $ 48.1 $ 46.9 $ 51.3 $ — $ 15.1 $ 161.4
% of total GAAP net revenues 11.0% 10.7% 11.7% —% 3.5% 37.0%
Amortization of purchased intangible assets D — — — — (15.1) (15.1)
Stock-based compensation F (1.6) (2.6) (4.5) — — (8.7)
Restructuring and related charges G 0.4 (0.5) 0.3 — — 0.2
Other charges and income G — — (4.3) — — (4.3)
Non-GAAP $ 46.9 $ 43.8 $ 42.8 $ — $ — $ 133.5
% of total Non-GAAP net revenues 10.7% 10.0% 9.8% —% —% 30.6%
Operating expenses from divested businesses 0.2 1.1 1.3 — — 2.6
Non-GAAP, adjusted to exclude divested businesses 46.7 42.7 41.5 — — 130.9
Percentage of Non-GAAP net revenues, adjusted to exclude
divested businesses 11.0% 10.1% 9.8% —% —% 30.8%
Three months ended October 31, 2017
GAAP $ 53.1 $ 47.2 $ 47.2 $ 7.5 $ 15.7 $ 170.7
% of total GAAP net revenues 11.1% 9.9% 9.9% 1.6% 3.3% 36.0%
Amortization of purchased intangible assets D — — — — (15.7) (15.7)
Other merger and acquisition related expenses E — — (0.3) — — (0.3)
Stock-based compensation F (1.2) (2.8) (4.4) — — (8.4)
Restructuring and related charges G — — — (7.5) — (7.5)
Other charges and income G (6.7) — (1.0) — — (7.7)
Non-GAAP $ 45.2 $ 44.4 $ 41.5 $ — $ — $ 131.1
% of total Non-GAAP net revenues 9.5% 9.3% 8.7% —% —% 27.5%
Operating expenses from divested businesses 0.6 2.2 1.4 — — 4.2
Non-GAAP, adjusted to exclude divested businesses 44.6 42.2 40.1 — — 126.9
Percentage of Non-GAAP net revenues, adjusted to exclude
divested businesses 9.9% 9.4% 8.9% —% —% 28.2%
28. 28
Reconciliation of GAAP to Non-GAAP Operating Expenses
(In millions, except percentages)
Note
Research and
development
Sales and
marketing
General and
administrative
Amortization of
purchased
intangible assets TotalThree Months Ended January 31, 2017
GAAP $ 56.8 $ 49.4 $ 50.8 $ 18.8 $ 175.8
% of total GAAP net revenues 12.5% 10.9% 11.2% 4.1% 38.7%
Amortization of purchased intangible assets D — — — (18.8) (18.8)
Stock based compensation F (1.5) (2.6) (4.5) — (8.6)
Restructuring and related charges G (8.0) (0.2) (0.5) — (8.7)
Non-GAAP $ 47.3 $ 46.6 $ 45.8 $ — $ 139.7
% of total Non-GAAP net revenues 10.4% 10.2% 10.0% —% 30.6%
Operating expenses from divested businesses 1.9 4.0 1.9 — 7.8
Non-GAAP, adjusted to exclude divested businesses
45.4 42.6 43.9 — 131.9
Percentage of Non-GAAP net revenues, adjusted to exclude
divested businesses 10.7% 10.0% 10.3% —% 31.0%
29. 29
Reconciliation of GAAP to Non-GAAP Net Revenues
$ in millions
GAAP net
revenues
Amortization of
step-down in
deferred revenue
at acquisition
Non-GAAP net
revenues
Non-GAAP net
revenues from
divested
businesses
Non-GAAP net
revenues, adjusted
to exclude
divested
businesses
Constant currency
adjustment
Adjusted Non-
GAAP net
revenues at
constant currency
Note (A) (A) (B) (C) (C)
Three Months Ended January 31, 2018
North America $ 123.8 $ — $ 123.8 $ 11.1 $ 112.7 $ (0.2) $ 112.5
Latin America 88.3 — 88.3 — 88.3 (0.2) 88.1
EMEA 184.1 — 184.1 1.1 183.0 (11.6) 171.4
Asia-Pacific 40.6 — 40.6 — 40.6 (1.0) 39.6
Total $ 436.8 $ — $ 436.8 $ 12.2 $ 424.6 $ (13.0) $ 411.6
Three months ended October 31, 2017
North America $ 154.1 $ — $ 154.1 $ 23.9 $ 130.2
Latin America 80.2 — 80.2 — 80.2
EMEA 196.0 — 196.0 2.5 193.5
Asia-Pacific 46.2 — 46.2 — 46.2
Total $ 476.5 $ — $ 476.5 $ 26.4 $ 450.1
Three Months Ended January 31, 2017
North America $ 165.9 $ 2.7 $ 168.6 $ 24.7 $ 143.9
Latin America 57.0 — 57.0 — 57.0
EMEA 168.1 — 168.1 2.4 165.7
Asia-Pacific 62.9 — 62.9 4.3 58.6
Total $ 453.9 $ 2.7 $ 456.6 $ 31.4 $ 425.2
30. 30
Reconciliation of Net Income (Loss) to EBITDA
Three Months Ended
$ in millions, except percentages Note
January 31,
2018
October 31,
2017
January 31,
2017
Net income (loss) attributable to VeriFone Systems, Inc. stockholders $ 7.3 $ 3.1 $ (16.6)
Net income (loss) attributable to noncontrolling interests 0.1 (0.2) (1.1)
Income tax provision (benefit) (0.5) 10.4 2.9
Interest expense, net 8.9 8.5 8.1
Depreciation and amortization 32.0 30.1 38.9
Stock-based compensation 9.9 9.8 9.6
Restructuring and related charges (0.7) 7.9 2.0
Long lived asset impairments — 7.1 7.1
Earnings before interest, tax, depreciation and amortization (1) K $ 57.0 $ 76.7 $ 50.9
(1) EBITDA is defined as the Net income (loss) attributed to Verifone Systems, Inc stockholders plus net income (loss) attributed to noncontrolling interest, income tax
provision, interest, depreciation and amortization, stock based compensation, restructuring and related charges and non-cash long lived asset impairments.
31. 31
Net Revenues and Operating Margin from Divested Businesses (1)
Three Months Ended
$ in millions
Note
January 31,
2018
October 31,
2017
January 31,
2017
Net revenues from China business B $ — $ — $ 4.3
Net revenues from Taxi Solutions business B 12.2 26.4 27.1
Net revenues from divested businesses B $ 12.2 $ 26.4 $ 31.4
Operating margin from divested businesses B $ 0.7 $ 2.0 $ (5.0)
(1) Divested businesses include significant businesses we have divested, specifically our former China business and Taxi Solutions business.
32. 32
Reconciliation of Operating Cash Flow to Free Cash Flow
Three Months Ended
$ in millions, except percentages
Note
January 31,
2018
October 31,
2017
July 31,
2017
April 30,
2017
GAAP net cash provided by operating activities $ 51.6 $ 25.7 $ 59.9 $ 35.6
Less: GAAP capital expenditures (13.2) (14.5) (16.4) (16.9)
Free cash flow J $ 38.4 $ 11.2 $ 43.5 $ 18.7
Non-GAAP Net income attributable to VeriFone Systems, Inc. stockholders $ 26.0 $ 50.2
Free cash flow conversion ratio, excluding the impact of restricted cash J 147.7% 22.3%
Restricted cash - beginning of period $ 12.7 $ 25.6 $ 14.1 $ 11.1
Restricted cash - end of period 12.7 12.7 25.6 14.1
Change in restricted cash $ — $ (12.9) $ 11.5 $ 3.0
GAAP net cash provided by operating activities, excluding the impact of
restricted cash $ 51.6 $ 38.6 $ 48.4 $ 32.6
Less: GAAP capital expenditures (13.2) (14.5) (16.4) (16.9)
Free cash flow, excluding the impact of restricted cash J $ 38.4 $ 24.1 $ 32.0 $ 15.7
Non-GAAP Net income attributable to VeriFone Systems, Inc. stockholders $ 26.0 $ 50.2
Free cash flow conversion ratio, excluding the impact of restricted cash J 147.7% 48.0%
33. 33
Reconciliation of Operating Cash Flow to Free Cash Flow
Three Months Ended
$ in millions, except percentages
Note
January 31,
2017
October 31,
2016
July 31,
2016
April 30,
2016
GAAP net cash provided by operating activities $ 44.7 $ 66.7 $ 13.0 $ 51.4
Less: GAAP capital expenditures (19.5) (23.1) (23.9) (27.8)
Free cash flow J $ 25.2 $ 43.6 $ (10.9) $ 23.6
Non-GAAP Net income attributable to VeriFone Systems, Inc. stockholders $ 23.2
Free cash flow conversion ratio, excluding the impact of restricted cash J 108.6%
Restricted cash - beginning of period $ 10.8 $ 11.0 $ 10.6 $ 20.1
Restricted cash - end of period 11.1 10.8 11.0 10.6
Change in restricted cash $ 0.3 $ (0.2) $ 0.4 $ (9.5)
Change in restricted cash attributed to operating cash flows 0.3 (0.2) 0.4 0.5
Change in restricted cash attributed to investing cash flows — — — (10.0)
GAAP net cash provided by operating activities, excluding the impact of
restricted cash $ 44.4 $ 66.9 $ 12.6 $ 50.9
Less: GAAP capital expenditures (19.5) (23.1) (23.9) (27.8)
Free cash flow, excluding the impact of restricted cash J $ 24.9 $ 43.8 $ (11.3) $ 23.1
Non-GAAP Net income attributable to VeriFone Systems, Inc. stockholders $ 23.2
Free cash flow conversion ratio, excluding the impact of restricted cash J 107.3%
34. 34
Reconciliation of Net Revenues Guidance
Guidance
Three Months Ending
April 30, 2018
Year Ended October 31,
2018$ in millions, except percentages Note
GAAP net revenues $ 435.0 $ 1,787-1,812
Adjustments:
Acquisition of step-down in deferred revenue at acquisition A — —
Non-GAAP net revenues $ 435.0 $ 1,787-1,812
Net revenues from divested businesses B — (12)
Non-GAAP net revenues, excluding revenues from divested businesses $ 435.0 $ 1,775-1,800
35. 35
Reconciliation of Gross Margin, Operating Expenses and Operating Margin Guidance
Three Months Ending
April 30, 2018
Year Ending October 31,
2018$ in millions, except percentages Note
GAAP Gross Margin Percentage 41.4% 43.0%
Adjustments: (1)
Amortization of purchased intangible assets D 0.3% 0.2%
Stock based compensation F 0.3% 0.3%
Non-GAAP Gross Margin Percentage 42.0% 43.5%
GAAP Operating Expenses $155.3-$156.3 $626.3-$631.3
Adjustments: (1)
Amortization of purchased intangible assets D 15.1 57.0
Stock based compensation F 7.2 35.2
Restructuring and related charges G — (0.2)
Other charges and income G — 4.3
Non-GAAP Operating Expenses $133.0-$134.0 $530.0-$535.0
GAAP Operating Margin 5.9% 8.1%
Adjustments: (1)
Amortization of purchased intangible assets D 3.7% 3.6%
Stock based compensation F 1.9% 2.1%
Restructuring and related charges G —% —%
Other charges and income G —% 0.2%
Non-GAAP Operating Margin 11.5% 14.0%
(1) Except for the adjustments noted herein, this guidance does not include the effects of any future acquisitions/divestitures, restructuring activities, significant legal matters, and non-recurring income tax
adjustments, which are difficult to predict and which may or may not be significant.
THIS FOOTNOTE MAINTAINED BY WHITNEY ON HER VERSION. PLEASE REVIEW THERE.
36. 36
Reconciliation of EPS Guidance
Guidance
Three Months Ending
April 30, 2018
Year Ended October 31,
2018Note
Diluted GAAP earnings (loss) per share (1) $0.08-$0.09 $0.66-$0.69
Adjustments: (2)
Amortization of step-down in deferred net revenues at acquisition and associated cost of goods sold A — —
Amortization of purchased intangible assets D 0.16 0.59
Stock based compensation F 0.08 0.34
Restructuring and related charges (2) G — (0.01)
Other charges and income (2) G — 0.07
Goodwill impairment (2) G — —
Income tax effect of non-GAAP exclusions (3) H (0.05) (0.18)
Diluted Non-GAAP earnings per share (1) $0.27-$0.28 $1.47-$1.50
Diluted earnings per share from divested businesses (4) B — —
Diluted Non-GAAP earnings per share, excluding divested businesses (1) $0.27-$0.28 $1.47-$1.50
(1) GAAP and non-GAAP diluted earnings (loss) per share are determined using the most dilutive measure, which includes outstanding RSU and RSA shares in the calculation of the weighted average diluted
shares outstanding in periods in which we expect net income.
(2) Except for the adjustments noted herein, this guidance does not include the effects of any future acquisitions/divestitures, restructuring activities, significant legal matters, and non-recurring income tax
adjustments, which are difficult to predict and which may or may not be significant.
(3) For the purpose of computing the income tax effect of non-GAAP exclusions, we used a 20% rate.
THIS FOOTNOTE MAINTAINED BY WHITNEY ON HER VERSION. PLEASE REVIEW THERE.
37. 37
Explanatory Notes to Reconciliations of GAAP to Non-GAAP items
Note A: Non-GAAP net revenues, costs of goods sold and gross margin. Non-GAAP net revenues exclude the fair value decrease (step-down) in deferred revenue at acquisition. Non-GAAP
costs of goods sold exclude the costs of goods associated with the fair value decrease (step-down) in deferred revenue at acquisition. Although the step-down of deferred revenue fair value at
acquisition and associated costs of goods sold are reflected in our GAAP financial statements, they result in net revenues and gross margins immediately post-acquisition that are lower than net
revenues and gross margins that would be recognized in accordance with GAAP on those same services if they were sold under contracts entered into post-acquisition. Accordingly, we adjust the
step-down to achieve comparability to net revenues and gross margins of the acquired entity earned pre-acquisition and to our GAAP net revenues and gross margins to be earned on contracts
sold in future periods. These adjustments, which relate to our acquisition of AJB during February 2016, enhance the ability of our management and our investors to assess our financial
performance and trends. These non-GAAP net revenues, costs of goods sold and gross margin amounts are not intended to be a substitute for our GAAP disclosures of net revenues, costs of
goods sold and gross margin, and should be read together with our GAAP disclosures.
Note B: Non-GAAP net revenues, gross margin, and operating income from divested businesses. Verifone determines non-GAAP net revenues, gross margin, and operating income from
divested businesses as the amounts in the reporting period that are derived from significant businesses that have been divested, such as our China business and taxi solution business, which
were sold in June 2017 and December 2017, respectively.
Note C: Adjusted Non-GAAP net revenues at constant currency. Verifone determines non-GAAP net revenues at constant currency by recomputing non-GAAP net revenues adjusted to
exclude divested businesses 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 business performance and trends on a comparable basis excluding the impact of foreign currency fluctuations.
Note D: Amortization of intangible assets. Verifone incurs amortization of intangible assets in connection with its acquisitions, such as amortization of finite lived customer relationships
intangibles. We are required to allocate a portion of the purchase price of each business acquisition to the intangible assets acquired and to amortize this amount over the estimated useful lives of
those acquired intangible assets. Because these amounts have no direct correlation to Verifone’s underlying business operations, we eliminate these amortization charges and any associated
minority interest impact from our non-GAAP operating results to provide better comparability of pre-acquisition and post-acquisition operating results. In addition, Verifone's equity method investee
companies incur amortization of intangible assets. Because these amounts have no direct correlation to those business' underlying business operations, we also eliminate these amortization
charges, net of tax, from our non-GAAP other income and expense to provide better comparability of operating results
Note E: Merger and Acquisition Related. Verifone adjusts for contingent consideration fair market value adjustments and interest on contingent consideration that are the result of mergers and
acquisitions. In connection with its acquisitions, Verifone owes contingent consideration payments based upon the post-acquisition performance of and other factors related to acquired businesses.
These contingent consideration liabilities are reported at fair market value and incur non-cash imputed interest. Changes in the fair market value of contingent consideration and imputed interest
expense vary independent of our ongoing operating results and have no direct correlation to our underlying business operations. Accordingly, Verifone excludes these amounts from our non-GAAP
operating results to provide better comparability of pre-acquisition and post-acquisition operating results.
38. 38
Explanatory Notes to Reconciliations of GAAP to Non-GAAP items
Note F: Stock-Based Compensation. Our non-GAAP financial measures eliminate the effect of expense for stock-based compensation because they are non-cash expenses and, 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 a 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 a 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. Accordingly, we believe that excluding stock-based compensation expense
from our non-GAAP operating results facilitates better understanding of our long-term business performance and enhances period-to-period comparability.
Note G: Other Charges and Income. Verifone excludes certain expenses, other income (expense) and gains (losses) that we have determined are not reflective of ongoing operating results or
that vary independent of business performance. 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 limit the comparability of our ongoing operations with prior and future periods. These adjustments for other
charges and income include:
Transformation related charges: We have incurred expenses, such as professional services, contract cancellation fees, certain personnel costs and asset impairments related to initiatives to
transform, streamline, centralize and restructure our global operations. Charges include involuntary termination costs, costs to cancel facility leases, asset impairments, write down of net assets
and liabilities held for sale, and associated legal and other advisory fees. Each of these items has been incurred in connection with discrete activities in furtherance of specific business objectives
in light of prevailing circumstances, and each item and the associated activity or activities have had differing impacts on our business operations. We do not incur costs of this nature in the ordinary
course of business. Accordingly, management assesses our operating performance with these amounts included and excluded, and we believe that by providing this information, users of our
financial statements are better able to understand the financial results of what we consider to be our continuing operations and compare our current operating performance to our past operating
performance.
Costs associated with litigation and other loss contingencies: Our non-GAAP operating results do not include costs associated with litigation and other loss contingencies, penalties and
settlements. These costs and loss contingencies relate to events that occurred in prior periods and their ultimate amount and resolution are uncorrelated with our operating performance during the
current period. Accordingly, we believe that excluding such amounts provides a better indication of our business performance in the current period and enhances the comparability of our business
performance across periods.
Note H: Income Tax Effect of Non-GAAP exclusions. Income taxes are adjusted for the tax effect of the adjusting items related to our non-GAAP financial measures and to reflect our best
estimate of 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.
Note I: Non-GAAP diluted shares. Diluted GAAP and non-GAAP weighted-average shares outstanding are the same in all periods except where there is a GAAP net loss. In accordance with
GAAP, we do not consider dilutive shares in periods that there is a net loss. However, in periods when we have a non-GAAP net income and a GAAP basis net loss, diluted non-GAAP weighted
average shares include additional shares that are dilutive for non-GAAP computations of earnings per share.
39. 39
Explanatory Notes to Reconciliations of GAAP to Non-GAAP items
Note J: Free Cash Flow. Verifone determines free cash flow as net cash provided by operating activities less capital expenditures. The free cash flow conversion ratio is free cash flow divided
by non-GAAP Net income attributable to VeriFone Systems, Inc. stockholders.
Note K: EBITDA (Earnings Before Income Tax, Depreciation and Amortization). Verifone defines EBITDA as the Net income (loss) attributed to Verifone Systems, Inc stockholders plus net
income (loss) attributed to noncontrolling interest, income tax provision (benefit), interest, depreciation and amortization, stock-based compensation, restructuring and related charges and non-
cash long lived asset impairments.