FINANCIAL RESULTS F O R T H E Q U A R T E R E N D E D J u l y 3 1 , 2 0 1 3 Exhibit 99.2
F O R WA R D - L O O K I N G S TAT E M E N T S 2 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.
N O N - G A A P F I N A N C I A L M E A S U R E S 3 With respect to any Non-GAAP financial measures presented in the information, 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.
INTRODUCTION Richard McGinn, Interim CEO
Q 3 U P D AT E 5 R&D Capital Structure CEO Search Product Strategy
FINANCIAL RESULTS AND GUIDANCE Marc Rothman, CFO
N O N - G A A P P R O F I T & L O S S O V E R V I E W * 7 * A reconciliation to GAAP of our Non-GAAP financial measures, including free cash flow, can be found in the appendix section ** Net Income (Loss) = Net Income (loss) attributable to VeriFone Systems, Inc. stockholders *** Operating Cash Flow = GAAP net cash provided by operating activities Q313 Q312 Q213 Q313 % SEQ Inc(Dec) % YoY Inc(Dec) Revenue 493 430 418 (3)% (15)% Gross Margin 224 182 170 (7)% (24)% % of Revenue 45.4% 42.2% 40.8% (1.4)pts (4.6)pts Operating Expenses 112 115 127 10% 13% % of Revenue 22.6% 26.8% 30.3% 3.5pts 7.7pts Operating Income 112 67 44 (34)% (61)% % of Revenue 22.7% 15.5% 10.4% (5.1)pts (12.3)pts Net Income (Loss)** 83 47 26 (43)% (68)% Non-GAAP EPS 0.75 0.42 0.24 (43)% (68)% Operating Cash Flow*** 82 79 49 (38)% (40)% Free Cash Flow 65 58 31 (47)% (52)% $ in millions, except EPS
N O N - G A A P R E V E N U E P R O F I L E * 8 * A reconciliation of our GAAP to Non-GAAP revenue can be found in the appendix section Q213 Q213 Q212 Q4112 Q212 % SEQ Inc(DEC) % YoY Inc(DEC) Organic YoY Growth Organic YoY Constant Currency Growth International: EMEA 159.0 204.0 172.9 (15.2)% 8.7% (13.1)% (12.5)% LAC 100.3 80.0 73.0 (8.7)% (27.2)% (27.2)% (21.3)% ASPAC 45.9 59.3 51.0 (14.0)% 11.0% 11.0% 10.3% International 305.2 343.2 296.9 (13.5)% (2.7)% (14.1)% (12.0)% North America 120.0 145.3 132.7 (8.7)% 10.6% 10.4% 10.3% TOTAL 425.2 488.6 429.7 (12.1)% 1.0% (7.1)% (5.6)% Q213 Q313 Q312 NA 28% ASPAC 12% LAC 19% EMEA 41% NA 28% ASPAC 12% LAC 20% EMEA 40% NA 28% ASPAC 12% LAC 17% EMEA 43% 313 313 Q312 Q213 Q313 Inc(Dec) Inc(Dec) r ani r t r sta t rr r t North America 138 122 116 (5)% (16)% (16)% (16)% International: Latin America 94 85 70 (18)% (26)% (26)% (23)% EMEA 204 173 179 3% (12)% (13)% (14)% ASPAC 57 50 53 6 (7) (16) (16) International 355 308 302 (2) (15) (17) (16) $ in millions 493 430 418 (3) (15) (17 (1
N O N - G A A P R E V E N U E A N D G R O S S M A R G I N * 9 * A reconciliation of our GAAP to Non-GAAP gross margin can be found in the appendix section Q312 Q213 Q313 Systems Solutions 44.5% 40.8% 37.0% Services 47.6% 44.9% 46.6% % of Revenue Total GM% 45.4% 42.2% 40.8% Q312 Q213 Q313 Systems Solutions 351 279 251 Services 142 151 167 Total Revenue 493 430 418 Services % Total Revenue 29 35
N O N - G A A P O P E R AT I N G E X P E N S E S * 10 * A reconciliation of our GAAP to Non-GAAP operating expenses can be found in the appendix section Q312 Q213 Q313 Research and Development 36 40 44 % of Revenue 7% 9% 11% Sales and Marketing 40 42 45 % of Revenue 8% 10% 11% General and Administrative 35 33 38 % of Revenue 7% 8% 9% Total Operating Expenses % of Revenue 23% 27% 30% $ in millions 112 115 127
T O TA L C A S H A N D N E T D E B T 11 As of July 31, 2013: $309M Total Cash $1,119M Outstanding Debt: • Short-term of $79M • Long-term of $1,040M $810M Net Debt $293M Undrawn Revolver Credit Ratings: • S&P BB- • Moody’s Ba3 *Total Cash includes cash and cash equivalents. ** Net Debt = Short-term debt and long-term debt less total cash and restricted cash related to convertible debt in Q112 and Q212. 380 361 410 454 477 506 309 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Total Cash* ($ in millions) 979 972 912 854 815 773 810 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Net Debt** ($ in millions) 3 810
B A L A N C E S H E E T S E L E C T D ATA 12 $ in millions, except days Q312 Q213 $ Days $ Days Accounts Receivables, net 371 68 316 66 Inventories, net 165 55 181 67 Accounts Payable 184 61 151 55 Cash Conversion Cycle 62 78 Q313 $ Days 269 58 172 64 112 41 81 Note: Accounts Receivable Days Sales Outstanding is calculated as Net Accounts Receivable divided by Total Non-GAAP Revenue * 90 days Days in Inventory is calculated as Average Net Inventory divided by Total Non-GAAP Cost of Goods Sold * 90 days Days in Accounts Payable is calculated as Accounts Payable divided by Total Non-GAAP Cost of Goods Sold * 90 days Cash Conversion Cycle is calculated as Accounts Receivable Days Sales Outstanding plus Days in Inventory less Days in Accounts Payable
C A S H F L O W 13 32 31 82 73 53 79 49 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Operating Cash Flow ($ in millions) 24 12 65 54 33 58 31 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Free Cash Flow ($ in millions) Operating Cash Flow: $49M Free Cash Flow: $31M CapEx: $18M * Operating cash flow = GAAP net cash provided by operating activities. Free Cash Flow is a non-GAAP financial measure. A reconciliation of our GAAP net cash provided by operating activities to free cash flow can be found in the appendix section.
G U I D A N C E 14 Guidance Non-GAAP Revenue (Q4) $418M - $422M Non-GAAP EPS (Q4) $0.25 Free Cash Flow (Q4) $25M excluding shareholder settlement payment Non-GAAP Revenue (Q1FY14) Modest sequential increase from Q4 guidance Non-GAAP EPS (Q1FY14) Modest sequential increase from Q4 guidance
Q & A SESSION
APPENDIX
R E C O N C I L I AT I O N O F G A A P T O N O N - G A A P P R O F I T & L O S S Q 3 1 3 17 GAAP % of net revenues Acquisition, divestiture & restructure related Stock based compensation Other charges and income Non-GAAP % of Non- GAAP net revenues Net revenues: System Solutions 251 60.3% 0 251 60.1% Services 165 39.7% 2 167 39.9% Net revenues 416 100.0% 2 - - 418 100.0% Cost of net revenues: System Solutions 169 67.3% (10) (1) (0) 158 63.0% Services 92 55.8% (2) (0) (1) 89 53.4% Cost of net revenues 261 62.7% (12) (1) (1) 247 59.2% Gross margin: System Solutions 82 32.7% 10 1 0 93 37.0% Services 73 44.2% 3 0 1 78 46.6% Gross margin 155 37.3% 14 1 1 171 40.8% Operating expenses: Research & development 46 11.1% (0) (2) 44 10.5% Sales & marketing 50 11.9% (1) (3) (0) 46 10.8% General & administration 43 10.4% (1) (4) (1) 37 9.0% Litigation loss contingency expense (5) (1.2)% - 5 - 0.0% Amortization of purchased intangible assets 24 5.7% (24) - 0.0% Total operating expenses 158 37.9% (26) (9) 4 127 30.4% Operating income (3) (0.6)% 40 10 (3) 44 10.4% Net Income Attributable to VF Stockholders (2) (0.5)% 38 10 (20) 26 6.2% Diluted EPS (0.02) 0.24 Non-GAAP Adjustment for dilutive shares Basic hares 108,638 108,638 Diluted Shares 108,638 (2,060) 110,698 * "nm" means not meaningful or relevant * System Solutions and Services cost of net revenues and gross margin as a percentage of net revenues are computed as a percentage of the corresponding System Solutions and Services net revenues. Q313 ($ in millions, except Share Numbers and EPS) Weighted average shares used in computing net income (loss) earnings per share:
R E C O N C I L I AT I O N O F G A A P T O N O N - G A A P P R O F I T & L O S S Q 2 1 3 18 GAAP % of net revenues Acquisition, divestiture & restructure related Stock based compensation Other charges and income Non-GAAP % of Non- GAAP net revenues Net revenues: System Solutions 276 64.9% 0 - 3 279 64.9% Services 150 35.1% 1 - - 151 35.1% Net revenues 426 100.0% 1 - 3 429 100.0% Cost of net revenues: System Solutions 181 65.5% (14) (0) (1) 165 59.3% Services 91 60.9% (1) (0) (7) 83 55.1% Cost of net revenues 272 63.9% (15) (0) (8) 248 57.8% Gross margin: System Solutions 95 34.5% 14 0 4 113 40.7% Services 59 39.1% 2 0 7 68 44.9% Gross margin 154 36.1% 16 0 11 181 42.2% Operating expenses: Research & development 42 9.8% (1) (2) (0) 39 9.0% Sales & marketing 46 10.9% (0) (4) (0) 42 9.8% General & administration 44 10.3% (2) (5) (4) 33 7.7% Litigation loss contingency expense 69 16.2% - - (69) - 0.0% Amortization of purchased intangible assets 23 5.4% (23) - - - 0.0% Total operating expenses 224 52.6% (26) (11) (74) 114 26.5% Operating income (70) (16.5)% 42 11 84 67 15.7% Net Income Attributable to VF Stockholders (59) (13.8)% 42 10 53 46 10.8% Diluted EPS (0.54) 0.42 Non-GAAP Adjustment for dilutive shares Basic Shares 108,314 108,314 Diluted Shares 108,314 (2,218) 110,532 * "nm" means not meaningful or relevant * 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. Q213 ($ in millions, except Share Numbers and EPS) Weighted average shares used in computing net income (loss) earnings per share:
R E C O N C I L I AT I O N O F G A A P T O N O N - G A A P P R O F I T & L O S S Q 3 1 2 19 GAAP % of net revenues Acquisition, divestiture & restructure related Stock based compensation Other charges and income Non-GAAP % of Non- GAAP net revenues Net revenues: System Solutions 350 71.6% 1 351 71.2% Services 139 28.4% 3 142 28.9% Net revenues 489 100.0% 4 - - 493 100.0% Cost of net revenues: System Solutions 206 58.9% (11) (0) 195 55.5% Services 75 54.3% (1) (0) 75 52.4% Cost of net revenues 282 57.6% (12) (1) - 269 54.6% Gross margin: System Solutions 144 41.1% 12 0 - 156 44.5% Services 64 45.7% 4 0 - 68 47.6% Gross margin 208 42.4% 16 1 - 224 45.4% Operating expenses: Research & development 39 7.9% (1) (2) 36 7.3% Sales & marketing 46 9.4% (1) (5) 40 8.2% General & administration 44 8.9% (3) (5) 36 7.3% Amortization of purchased intangible assets 23 4.7% (23) - 0.0% Total operating expenses 152 31.1% (28) (12) - 112 22.8% Operating income 55 11.3% 44 12 - 111 22.6% Net Income Attributable to VF Stockholders 38 7.7% 42 12 (9) 83 16.8% Diluted EPS 0.34 0.75 Basic Shares 107,568 107,568 Diluted Shares 110,384 110,384 * "nm" means not meaningful or relevant * 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. Q312 ($ in millions, except Share Numbers and EPS) Weighted average shares used in computing net income (loss) earnings per share:
R E C O N C I L I AT I O N O F G A A P T O N O N - G A A P R E V E N U E 20 ($ in millions) 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 Q313 North America 116 - - 116 - 116 - 116 International Latin America 70 - - 70 - 70 3 73 EMEA 178 1 - 179 (5) 174 - 174 ASPAC 52 1 - 53 (6) 47 - 47 International 300 2 - 302 (11) 291 3 294 Total 416 2 - 418 (11) 407 3 410 Q213 North America 122 - - 122 International Latin America 82 - 3 85 EMEA 172 1 - 173 ASPAC 50 - - 50 International 304 1 3 308 Total 426 1 3 430 Q312 North America 138 - - 138 - 138 International Latin America 94 - - 94 - 94 EMEA 200 4 - 204 (2) 202 ASPAC 57 - - 57 (1) 56 International 351 4 - 355 (3) 352 Total 489 4 - 493 (3) 490
N O N - G A A P O R G A N I C N E T R E V E N U E 21 ($ in millions) VeriFone Organic Q112 Q212 Q312 Q113 Q213 Q313 Q1 Q2 Q3 International: EMEA 153 203 202 133 171 174 (13)% (16)% (13)% LAC 100 96 94 73 86 70 (27)% (10)% (26)% ASPAC 46 49 56 51 49 47 11% 0% (16)% International 299 348 352 257 306 291 (14)% (12)% (17)% North America 120 129 138 132 122 116 10% (6)% (16)% Total Organic 419 477 490 389 428 407 (7)% (10)% (17)% Acquisition Hypercom (acquired 8/4/2011) - - - - - - Point (acquired 12/30/2011) 4 - - [a] 38 - - Others 2 2 3 [b] 3 2 11 Total Acquisitions 6 2 3 41 2 11 Total VeriFone Total Non-GAAP Revenues 425 479 493 430 430 418 1% (10)% (15)% Deferred Revenue Adj. (6) (7) (4) (1) (1) (2) (84)% (87)% (63)% Other (3) GAAP Net Revenues 420 472 489 429 426 416 2% (10)% (15)% [a] Sales by VeriFone to Point in periods twelve months prior to the acquisition are not included in Organic revenues. Point was a customer of VeriFone prior to the acquisition. This presentation provides consistency and comparability between periods because such sales post acquisition from VeriFone to Point would have been considered intercompany sales and thus would not have been included in consolidated results. [b] Reflects post-acquisition amounts for acquisitions made during the quarter. ($ in millions) Q112 Q212 Q312 Q113 Q213 Q313 Q1 Q2 Q3 International: EMEA 153 203 201 133 174 174 (13)% (15)% (14)% LAC 100 96 94 79 89 73 (21)% (8)% (23)% ASPAC 46 49 56 51 50 47 10% 2% (16)% International 299 348 352 263 312 294 (12)% (10)% (16)% North America 120 129 138 132 122 116 10% (6)% (16)% Total Organic 419 477 490 395 434 410 (6)% (9)% (16)% Growth Year-over-Year ORGANIC CONSTANT CURRENCY GROWTH At Constant Exchange Rates FY13 Constant Currency [a] FY12 Un-Adjusted At Reported Exchange Rates FY13 Un-Adjusted FY12 Un-Adjusted Organic Growth Year-over-Year
R E C O N C I L I AT I O N O F O P E R AT I N G C A S H F L O W T O F R E E C A S H F L O W 22 ($ in millions) Q112 Q212 Q312 Q412 Q113 Q213 GAAP Net Cash Provided by Operating Activities 32 31 82 73 53 79 49 Less: GAAP Capital Expenditures (8) (19) (17) (19) (20) (21) (18) Free Cash Flow 24 12 65 54 33 58 31 * VeriFone determines free cash flow as net cash provided by operating activities less capital expenditures. VeriFone uses this non-GAAP measure to evaluate our operating cash spend including the impact of our investments in long-term operating assets, such as property, equipment and capitalized software. Q313
THANK YOU
