verifone q4 fy17 earnings report

Q4 FY17

Financial Results

December 12, 2017

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

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

Exceeded Q4 Financial Commitments

Q4 YoY

Non-GAAP

Revenues$477M +2%

Non-GAAP EPS $0.44 +47%

Systems and Services grew year-over-year and sequentially

Record Services revenue and multi-year high gross margin percentage

Launched next-generation solutions and grew recurring Services revenue

Generated $1.874B in non-GAAP revenue and $1.31 non-GAAP EPS in FY17

5

• Engage PCI certified

& selling into nearly

half of revenue base

• Carbon Vantiv pilot

and built pipeline

• mPOS grew 25%

• Services grew 8%

adjusted*

• EMEA: Omni-channel

• NA: QSR/Hospitality

• LAC: Device Services

• APAC: Enterprise

• 1.8M connected

devices

• NA PaaS: Grew

double-digits

• >$500M recurring

services revenue

• Divested non-

strategic assets

• Formed Petro Media

JV

• Exited China

• Sold Taxi

FY17 Strategic Accomplishments – Launch Year

*Adjusted for divestitures of China and Taxi, and removal of Petro Media for comparison. See Appendix for reconciliation.

Launched Connected

StreamlinedGrew

6

FY18 Strategic Priorities – From Launch to Scale

DEPLOY CONNECT ENABLE

• Generate meaningful

portion of total Systems

sales from new devices

• Surpass 2 million connected

devices globally

• Grow base of devices

connected to Verifone

gateways and estate

management systems

• Brand and scale Payments

and Commerce Services

Platform

7

Commerce Services

Coupons

Card-based

loyalty

programs

Employee

Management

POS solutions

Advertising

Omni-channel

PaymentServices

POS Devices

mPOS

Engage

Payment

gatewaysCarbon

Security

Services Alternative

payments

InventoryUnattended

Device

services

CRM

Ratings

Accounting

$4B

Commerce

Services>$25B+

Payment

Services

POS

Devices

>$10B+

Total Addressable Market (TAM)

The Verifone Payments and Commerce Services Platform

Charity

8

Verifone Returns to Growth in FY18

Adjusted* Growth at Midpoint

Non-GAAP Revenues +2%

Plans to offset difficult FY17 comps in Petro North America and India

Higher EPS growth from margin expansion and share buyback accretion

*Adjusted for divestitures of China and Taxi for comparison. See Appendix for reconciliation.

Confidence in execution roadmap

9

To be our clients’ most trusted,

secure, and innovative

technology partner, providing

integrated payments and

commerce solutions globally

Non-GAAP* Financial Results

Q4 17

$ in million, except EPS Q4 16 Q3 17 Q4 17 % QoQ % YoY

Net Revenues 468 467 477 2% 2%

Gross Margin 185 190 197 4% 7%

% of Revenue 39.5% 40.7% 41.4% 0.7pts 1.9pts

Operating Expenses 136 132 131 0% (4)%

Operating Income 49 58 66 14% 36%

% of Revenue 10.4% 12.5% 13.9% 1.4pts 3.5pts

Net Income** 33 40 50 22% 50%

EPS 0.30 0.36 0.44 22% 47%

Operating Cash Flow*** 67 60 26

Free Cash Flow *** 44 44 11

*Reconciliation of GAAP to Non-GAAP financial results may be found in the Appendix

**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

Non-GAAP* Revenue and Gross Margin by Business

$ in million Q4 16 Q3 17 Q4 17

Systems 264 266 268

Services 203 201 208

Total Net Revenue 468 467 477

Services / Net Revenue 43% 43% 44%

As a % of Revenue Q4 16 Q3 17 Q4 17

Systems 35.2% 37.9% 37.7%

Services 45.1% 44.4% 46.2%

Gross Margin 39.5% 40.7% 41.4%


11

Non-GAAP* Operating Expenses

46 47 4844 44

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Total S&M

136140 138

132 131

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Total OPEX

4246

41 41 42

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Total G&A

47 47 50 47 45

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Total R&D$ in million


12

Non-GAAP* Revenue by Geography

Q4 17

$ in million Q4 16 Q3 17 Q4 17% QoQ

Inc (Dec)

% YoY

Inc (Dec)

Adjusted

Organic

% YoY**

North America 170 153 154 1% (10)% (8)%

% of Revenue 36% 33% 32%

Latin America 68 71 80 13% 17% 17%

% of Revenue 15% 15% 17%

EMEA 181 194 196 1% 8% 8%

% of Revenue 39% 41% 41%

APAC 48 49 46 (6)% (4)% 3%

% of Revenue 10% 11% 10%

TOTAL 468 467 477 2% 2% 4%


** Organic YoY comparisons exclude results from China in the prior year period

13

Cash & Debt

933955

974

926904

878 878

831

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Gross Debt186

157 157148 147

134

159

131

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Total Cash$ in million

747

798817

778757

744

719700

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Net Debt

Debt Statistics Credit RatingsAs of October 31, 2017

Short Term $69M S&P BB

Long Term $762M Moody’s Ba2

Outstanding $831M

14

Balance Sheet & Working Capital Metrics*

$ in million Q4 16 Q3 17 Q4 17

$ Days $ Days $ Days

Accounts Receivable, net 323 62 326 63 323 61

Inventories 175 57 127 44 127 41

Accounts Payable 155 49 157 51 145 47

Cash Conversion Cycle 70 56 55


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

15

Cash Flow*

66

51

13

67

4536

60

26

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Operating cash flow**

36

24

(11)

44

25

19

44

11

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Free cash flow**

$26M

Operating Cash Flow

$15M

Cap Ex

$11M

Free Cash Flow


**Operating Cash Flow = GAAP net cash provided by operating activities. Free Cash Flow is a non-GAAP financial measure

$ in million

FY17 Cap Ex of

$67M was 35%

lower YoY

16

Taxi Sale and Share Repurchase

Taxi Sale

• Agreement reached December 11, 2017

• Total cash consideration of $30M

• Verifone retains minority interest

• Marks completion of divestiture activity announced in FY17

• Improves operating margins & reduces capital intensive businesses

• Focuses resources and capital on core growth opportunities

Share Repurchases

• Plans to complete remaining $50M under existing $200M buyback

• Additional $100M buyback authorized by Board of Directors

• Consistent with capital allocation strategy, intend to return meaningful

portion of free cash generated over next 12-18 months through buybacks

17

FY18 Non-GAAP* Guidance Bridge - RevenueIn $ 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

China/Taxi

Divestitures

FY17

Revenue

Adjusted

(118)

FY17

Revenue

Reported

1,874

1,756

Petro

EMV

(35)

FY17

Revenue

Adjusted

India

Surge

(35)

Core

Growth

90-

115

1,775-

1,800

FY18

Guidance

18

FY18 Non-GAAP* Guidance Bridge - EPS

0.09

FY17 EPS

Adjusted

1.40

China/Taxi

Impact

FY17 EPS

Reported

1.31

(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

*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.

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.

Q1 18 YoY** FY18 YoY**

Net Revenues $418 - 420M (1-2)% $1.775 - 1.800B 1-3%

Gross Margin ~41% 2.0pts ~43.5% 1.5pts

Operating Expenses Low $130M’s ~$535M

Operating Margin ~10% ~14%

Effective Tax Rate ~20% ~20%

EPS $0.22 (12)% $1.47 - $1.50 5-7%

Fully Diluted Shares ~112-113M ~111-112M

Free Cash Flow (See Annual) $125M

Capital Expenditure ~$20M ~$75M

21

APPENDIX

21

22

Reconciliation of GAAP to Non-GAAP Key Metrics Q417

(In millions, except per share data and percentages)

Note Net revenues Gross marginGross margin

percentageOperating 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 E — 1.2 16.9 — 19.6

Other 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 D,H 26.4 6.2 2.0 0.3 1.7

Adjusted Non-GAAP, excluding 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

Adjusted Non-GAAP, excluding divested businesss 112.3 113.1 $ 0.43 $ 0.43

(1) Diluted net income (loss) per share 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 attributable to VeriFone Systems, Inc. stockholders.

(2) For the purpose of computing the income tax effect of non-GAAP exclusions, we used a 14.5% rate.

23

Reconciliation of GAAP to Non-GAAP Key Metrics Q317(In millions, except per share data and percentages)



(loss)Income tax provision

Net income (loss) attributable to

VeriFone Systems, Inc. stockholdersThree Months Ended July 31, 2017

GAAP $ 466.9 $ 174.5 37.4% $ (50.2) $ 10.3 $ (71.0)

Adjustments:







Non-GAAP $ 466.9 $ 190.0 40.7% $ 58.3 $ 7.0 $ 40.4

Divested business:

China business D,H 3.6 0.1 (1.5) (0.2) (1.3)



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)


GAAP 112.0 112.0 $ (0.63) $ (0.63)

Adjustment for diluted shares I — 0.6

Non-GAAP 112.0 112.6 $ 0.36 $ 0.36





24






VeriFone Systems, Inc. stockholdersThree Months Ended April 30, 2017

GAAP $ 473.7 $ 172.8 36.5% $ (81.4) $ 8.9 $ (89.3)

Adjustments:

Amortization of step-down deferred services net revenues at acquisition and associated costs of goods sold A 0.2 0.2 0.2 — 0.2




Goodwill impairment G — — 17.4 — 17.4


Other charges and income G — — 0.4 — (9.2)


Non-GAAP $ 473.9 $ 187.3 39.5% $ 48.9 $ 5.8 $ 33.3

Divested business:

China business D,H 3.2 (0.4) (3.1) (0.4) (2.7)

Taxi Solutions business D,H 26.2 0.2 (4.6) (0.7) (3.9)



per share:


stockholders (1)


GAAP 111.7 111.7 $ (0.80) $ (0.80)


Non-GAAP 111.7 112.3 $ 0.30 $ 0.30





25






VeriFone Systems, Inc. stockholdersThree Months Ended January 31, 2017

GAAP $ 453.9 $ 171.4 37.8% $ (4.5) $ 2.9 $ (16.7)

Adjustments:



Other merger and acquisition related expenses E — — — — (0.1)




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:





per share:


stockholders (1)


GAAP 111.4 111.4 $ (0.15) $ (0.15)


Non-GAAP 111.4 111.7 $ 0.21 $ 0.21





26

Reconciliation of GAAP to Non-GAAP Key Metrics Q416




(In millions, except per share data and percentages)





VeriFone Systems, Inc. stockholdersThree Months Ended October 31, 2016

GAAP $ 464.2 $ 177.5 38.2% $ (0.9) $ 6.2 $ (4.5)

Adjustments:

Amortization of step-down in deferred services net revenues at acquisition and associated cost of goods sold A 3.4 2.4 2.4 — 2.4


Other merger and acquisition related expenses E — — 0.8 — (11.7)


Restructuring and related charges G — — 7.1 — 7.1

Other charges and income G — 0.6 1.9 — 1.9


Non-GAAP $ 467.6 $ 184.7 39.5% $ 48.7 $ 5.7 $ 33.1

Divested business:





per share:


stockholders (1)


GAAP 111.1 111.1 $ (0.04) $ (0.04)


Non-GAAP 111.1 111.4 $ 0.30 $ 0.30


27

Reconciliation of GAAP to Non-GAAP Key Metrics 2017(In millions, except per share data and percentages)





VeriFone Systems, Inc. stockholdersYear Ended October 31, 2017

GAAP $ 1,871.0 $ 713.1 38.1% $ (112.4) $ 32.5 $ (173.9)

Adjustments:





Goodwill impairment G — — 17.4 — 17.4




Non-GAAP $ 1,874.0 $ 752.5 40.2% $ 211.6 $ 25.4 $ 147.2

Divested business:



Adjusted Non-GAAP, excluding divested businesses $ 1,756.3 $ 738.5 42.0% $ 223.3 $ 27.1 $ 157.2


per share:


stockholders (1)


GAAP 111.8 111.8 $ (1.55) $ (1.55)


Non-GAAP 111.8 112.5 $ 1.32 $ 1.31





28

Reconciliation of GAAP to Non-GAAP Key Metrics 2016(In millions, except per share data and percentages)





VeriFone Systems, Inc. stockholdersYear Ended October 31, 2016

GAAP $ 1,992.1 $ 794.3 39.9% $ 32.8 $ 11.5 $ (9.3)

Adjustments:



Other merger and acquisition related expenses E — — 5.7 — (9.0)



Other charges and income G — 11.0 15.4 — 19.4

Income tax effect of non-GAAP exclusions (2) H — — — 20.3 (20.3)

Non-GAAP $ 2,006.1 $ 838.7 41.8% $ 258.1 $ 31.8 $ 185.0

Divested business:

China business D,H 16.4 1.0 (15.3) (2.2) (6.2)

Taxi Solutions business D,H 123.3 25.7 4.4 0.6 (3.8)

Adjusted Non-GAAP, excluding divested businesses $ 1,866.4 $ 812.0 43.5% $ 269.0 $ 33.4 $ 195.0


per share:


stockholders (1)


GAAP 110.8 110.8 $ (0.08) $ (0.08)


Non-GAAP 110.8 111.6 $ 1.67 $ 1.66





29

Reconciliation of GAAP to Non-GAAP Gross Margin(In millions, except percentages)

NoteSystems net

revenuesServices net

revenuesTotal net

revenuesTotal cost of

net revenuesSystems gross

marginServices gross

marginTotal gross

marginThree 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 E — — — (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

Other charges and income G — — — — — — —

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 D — 26.4 26.4 20.2 — 6.2 6.2

Adjusted Non-GAAP, excluding divested businesses $ 268.4 $ 181.7 $ 450.1 $ 258.9 $ 101.3 $ 89.9 $ 191.2

Three Months Ended July 31, 2017

GAAP $ 266.0 $ 200.9 466.9 $ 292.4 $ 88.2 $ 86.3 $ 174.5




Restructuring and related charges G — — — (12.9) 11.4 1.5 12.9

Non-GAAP $ 266.0 $ 200.9 $ 466.9 $ 276.9 $ 100.7 $ 89.3 $ 190.0


Net revenues and gross margin from divested businesses D 3.5 26.9 30.4 25.2 (0.3) 5.5 5.2


30


NoteSystems net


revenuesTotal net




marginTotal gross

marginThree Months Ended April 30, 2017

GAAP $ 285.7 $ 188.0 $ 473.7 $ 300.9 $ 109.5 $ 63.3 $ 172.8


Amortization of step-down in deferred services net revenues at acquisition and associated cost of goods sold E — 0.2 — — — 0.2 0.2

Amortization of purchased intangible assets F — — — (1.6) 0.3 1.3 1.6

Stock based compensation G — — — (1.1) 0.7 0.4 1.1


Non-GAAP $ 285.7 $ 188.2 $ 473.7 $ 286.6 $ 110.6 $ 76.7 $ 187.3


Net revenues and gross margin from divested businesses D 3.0 26.4 29.4 29.5 (0.2) 0.1 (0.1)


Three Months Ended January 31, 2017

GAAP $ 265.4 $ 188.5 $ 453.9 $ 282.5 $ 99.0 $ 72.4 $ 171.4


Amortization of step-down deferred services net revenues at acquisition and associated costs of goods sold A — 2.7 2.7 0.5 — 2.2 2.2



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




31


NoteSystems net


revenuesTotal net




marginTotal gross

marginThree Months Ended October 31, 2016

GAAP $ 264.3 $ 199.9 $ 464.2 $ 286.7 $ 91.0 $ 86.5 $ 177.5


Amortization of step-down in deferred services net revenues at acquisition and associated cost of goods sold A — 3.4 3.4 1.0 — 2.4 2.4



Restructuring and related charges G — — — — (0.5) 0.5 —

Other charges and income G — — — (0.6) — 0.6 0.6

Non-GAAP $ 264.3 $ 203.3 $ 467.6 $ 282.9 $ 92.9 $ 91.8 $ 184.7




32


NoteSystems net


revenuesTotal net




marginTotal gross

marginFiscal Year Ended October 31, 2017

GAAP $ 1,085.5 $ 785.5 $ 1,871.0 $ 1,157.9 $ 397.0 $ 316.1 $ 713.1


Amortization of step-down in deferred services net revenues at acquisition and associated cost of goods sold E — 3.0 3.0 0.6 — 2.4 2.4

Amortization of purchased intangible assets F — — — (6.7) 1.7 5.0 6.7

Stock based compensation G — — — (4.6) 3.0 1.6 4.6


Non-GAAP $ 1,085.5 $ 788.5 $ 1,874.0 $ 1,121.5 $ 413.2 $ 339.3 $ 752.5



Adjusted Non-GAAP, excluding divested businesses $ 1,075.0 $ 681.4 $ 1,756.4 $ 1,018.0 $ 414.0 $ 324.4 $ 738.4

Fiscal Year Ended October 31, 2016

GAAP $ 1,236.3 $ 755.8 $ 1,992.1 $ 1,197.8 $ 492.0 $ 302.3 $ 794.3


Amortization of step-down deferred services net revenues at acquisition and associated costs of goods sold A — 14.0 14.0 4.1 — 9.9 9.9




Other charges and income G — — — (11.0) 0.8 10.2 11.0

Non-GAAP $ 1,236.3 $ 769.8 $ 2,006.1 $ 1,167.4 $ 505.1 $ 333.6 $ 838.7


Net revenues and gross margin from divested businesses D 14.7 125.0 139.7 113.1 0.8 25.8 26.6

Adjusted Non-GAAP, excluding divested businesses $ 1,221.6 $ 644.8 $ 1,866.4 $ 1,054.3 $ 504.3 $ 307.8 $ 812.1

33

Reconciliation of GAAP to Non-GAAP Operating Expenses

(In millions, except percentages)

NoteResearch and development

Sales and marketing

General and administrative

Restructuring and related

charges

Amortization of purchased

intangible assets TotalThree 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 E — — — — (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%


GAAP $ 50.7 $ 46.7 $ 44.9 $ 65.7 $ 16.7 $ 224.7

% of total GAAP net revenues 10.9% 10.0% 9.6% 13.9% 3.6% 48.1%

Amortization of purchased intangible assets E — — — — (16.7) (16.7)

Other merger and acquisition related expenses E — — (0.4) — — (0.4)

Stock based compensation F (1.8) (2.9) (3.4) — — (8.1)

Restructuring and related charges G — — — (65.7) — (65.7)

Other charges and income G (1.9) — (0.2) — — (2.1)

Non-GAAP $ 47.0 $ 43.8 $ 40.9 $ — $ — $ 131.7

% of total Non-GAAP net revenues 10.1% 9.4% 8.8% —% —% 28.2%

34

Reconciliation of GAAP to Non-GAAP Operating Expenses

(In millions, except percentages)

NoteResearch and development

Sales and marketing

General and administrative

Restructuring and related

chargesGoodwill

impairment

Amortization of purchased

intangible assets TotalThree Months Ended October 31, 2016

GAAP $ 49.4 $ 49.8 $ 47.5 $ 7.1 $ — $ 24.6 $ 178.4

% of total GAAP net revenues 10.6% 10.7% 10.2% 1.5% —% 5.3% 38.4%

Amortization of purchased intangible assets E — — — — — (24.6) (24.6)

Other merger and acquisition related expenses E — — (0.8) — — — (0.8)

Stock based compensation F (1.5) (3.2) (3.9) — — — (8.6)

Restructuring and related charges G — — — (7.1) — — (7.1)

Other charges and income G (0.4) (0.4) (0.5) — — — (1.3)

Non-GAAP $ 47.5 $ 46.2 $ 42.3 $ — $ — $ — $ 136.0

% of total Non-GAAP net revenues 10.2% 9.9% 9.0% —% —% —% 29.1%

35

Reconciliation of GAAP to Non-GAAP Net Revenues

$ in millionsGAAP net revenues

Amortization of step-down in

deferred revenue at acquisition

Non-GAAP net revenues

Net revenues from businesses

acquired in the past 12 months

Non-GAAP organic net revenues

Net revenues from divested

businessesAdjusted organic

net revenues

Note (A) (A) (B) (B) (D)

Three Months Ended October 31, 2017

North America $ 154.1 $ — $ 154.1 $ — $ 154.1 $ 23.9 $ 130.2

Latin America 80.2 — 80.2 — 80.2 — 80.2

EMEA 196.0 — 196.0 (0.5) 195.5 2.5 193.0

Asia-Pacific 46.2 — 46.2 — 46.2 — 46.2

Total $ 476.5 $ — $ 476.5 $ (0.5) $ 476.0 $ 26.4 $ 449.6


North America $ 152.8 $ — $ 152.8 $ — $ 152.8 $ 24.8 $ 128.0

Latin America 71.3 — 71.3 — 71.3 — 71.3

EMEA 193.5 — 193.5 (0.5) 193.0 2.0 191.0

Asia-Pacific 49.3 — 49.3 — 49.3 3.6 45.7

Total $ 466.9 $ — $ 466.9 $ (0.5) $ 466.4 $ 30.4 $ 436.0

Three Months Ended October 31, 2016

North America $ 167.1 $ 3.4 $ 170.5 $ — $ 170.5 $ 29.4 $ 141.1

Latin America 68.3 — 68.3 — 68.3 — 68.3

EMEA 180.8 — 180.8 — 180.8 1.7 179.1

Asia-Pacific 48.0 — 48.0 — 48.0 3.2 44.8

Total $ 464.2 $ 3.4 $ 467.6 $ — $ 467.6 $ 34.3 $ 433.3

36

Reconciliation of Net Income (Loss) to EBITDA Three Months Ended

$ in millions, except percentages NoteOctober 31,

2017July 31,

2017April 30,

2017January 31,

2017 2017

Net income (loss) attributable to VeriFone Systems, Inc. stockholders $ 3.1 $ (71.0) $ (89.3) $ (16.7) $ (173.9)

Net income (loss) attributable to noncontrolling interests (0.2) 0.2 (0.4) (1.1) (1.5)

Income tax provision 10.4 10.3 8.9 2.9 32.5

Interest expense, net 8.5 8.4 8.2 8.1 33.2

Depreciation and amortization 31.1 35.4 34.4 39.9 140.8

Stock based compensation 9.8 9.3 11.2 9.6 39.9

Restructuring and related charges 7.9 78.6 80.4 2.0 168.9

Goodwill impairment — — 17.4 — 17.4

Earnings before interest, tax, depreciation and amortization (1) K $ 70.6 $ 71.2 $ 70.8 $ 44.7 $ 257.3

Three Months Ended

$ in millions, except percentages NoteOctober 31,

2016July 31,

2016April 30,

2016January 31,

2016 2016

Net income (loss) attributable to VeriFone Systems, Inc. stockholders $ (4.5) $ (31.1) $ 2.9 $ 23.5 $ (9.2)

Net income (loss) attributable to noncontrolling interests (0.7) (0.4) 0.4 0.3 (0.4)

Income tax provision 6.2 0.3 3.1 1.9 11.5

Interest expense, net 8.7 9.0 8.6 8.3 34.6

Depreciation and amortization 44.4 47.2 44.1 39.4 175.1

Stock based compensation 9.4 10.8 11.6 10.5 42.3

Restructuring and related charges 7.0 38.9 0.6 (0.1) 46.4

Earnings before interest, tax, depreciation and amortization (1) K $ 70.5 $ 74.7 $ 71.3 $ 83.8 $ 300.3

(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.

37

Net Revenues and Operating Margin from Divested Businesses (1)

Three Months Ended

$ in millions, except percentagesNote

October 31, 2017

July 31, 2017

April 30, 2017

January 31, 2017

Net revenues from China business D $ — $ 3.6 $ 3.3 $ 4.3

Net revenues from Taxi Solutions business D 26.4 26.8 26.1 27.1

Net revenues from divested businesses D $ 26.4 $ 30.4 $ 29.4 $ 31.4

Operating margin from divested businesses L $ 2.0 $ (1.0) $ (7.7) $ (5.0)

Three Months Ended


October 31, 2016

July 31, 2016

April 30, 2016

January 31, 2016

Net revenues from China business D $ 3.2 $ 3.7 $ 3.1 $ 6.4

Net revenues from Taxi Solutions business D 31.1 29.9 29.9 32.4

Net revenues from divested businesses D $ 34.3 $ 33.6 $ 33.0 $ 38.8

Operating Margin from divested businesses L $ (2.0) $ (2.4) $ (4.4) $ (2.0)

(1) Divested businesses include significant businesses we have divested or plan to divest, specifically our former China business and Taxi Solutions business.

38

Reconciliation of Operating Cash Flow to Free Cash Flow

Three Months Ended


October 31, 2017

July 31, 2017

April 30, 2017

January 31, 2017

GAAP net cash provided by operating activities $ 25.7 $ 59.9 $ 35.6 $ 44.7

Less: GAAP capital expenditures (14.5) (16.4) (16.9) (19.5)

Free cash flow J 11.2 43.5 18.7 25.2

Non-GAAP Net income attributable to VeriFone Systems, Inc. stockholders $ 50.2 $ 40.4

Free cash flow conversion ratio, excluding the impact of restricted cash J 22.3% 107.7%

Restricted cash - beginning of period $ 25.6 $ 14.1 $ 11.1 $ 10.8

Restricted cash - end of period 12.7 25.6 14.1 11.1

Change in restricted cash (12.9) 11.5 3.0 0.3

GAAP net cash provided by operating activities, excluding the impact of restricted cash $ 38.6 —$ 48.4 $ 32.6 $ 44.4


Free cash flow, excluding the impact of restricted cash J $ 24.1 $ 32.0 $ 15.7 $ 24.9

Non-GAAP Net income attributable to VeriFone Systems, Inc. stockholders $ 50.2 $ 40.4

Free cash flow conversion ratio, excluding the impact of restricted cash J 48.0% 79.2%

39

Reconciliation of Operating Cash Flow to Free Cash Flow

Three Months Ended


October 31, 2016

July 31, 2016

April 30, 2016

January 31, 2016

GAAP net cash provided by operating activities $ 66.7 $ 13.0 $ 51.4 $ 66.3


Free cash flow J 43.6 (10.9) 23.6 35.7

Non-GAAP Net income attributable to VeriFone Systems, Inc. stockholders $ 33.1

Free cash flow conversion ratio, excluding the impact of restricted cash J 131.7%

Restricted cash - beginning of period $ 11.0 $ 10.6 $ 20.1 $ 7.0

Restricted cash - end of period 10.8 11.0 10.6 20.1

Change in restricted cash (0.2) 0.4 (9.5) 13.1

Change in restricted cash attributed to operating cash flows (0.2) 0.4 0.5 3.1

Change in restricted cash attributed to investing cash flows — (10.0) 10.0

GAAP net cash provided by operating activities, excluding the impact of restricted cash $ 66.9 $ 12.6 $ 50.9 $ 63.2


Free cash flow, excluding the impact of restricted cash J $ 43.8 $ (11.3) $ 23.1 $ 32.6

Non-GAAP Net income attributable to VeriFone Systems, Inc. stockholders $ 33.1

Free cash flow conversion ratio, excluding the impact of restricted cash J 132.3%

40

Reconciliation of Net Revenues Guidance

Guidance Adjusted Historical

Three Months Ending January 31, 2018

Year Ending October 31, 2018

Three Months Ending October 31, 2017


Year Ending October 31, 2017$ in millions, except percentages Note

GAAP net revenues $ 431-433 $ 1,788-1,813 $ 476.5 $ 453.9 $ 1,871.0

Adjustments:

Acquisition of step-down in deferred revenue at acquisition A — — — 2.7 3.0

Non-GAAP net revenues $ 431-433 $ 1,788-1,813 $ 476.5 $ 456.6 $ 1,874.0

Net revenues from divested businesses D 13.0 13.0 26.4 31.4 117.7

Non-GAAP net revenues, excluding revenues from divested businesses $ 418-420 $ 1,775-1,800 $ 450.1 $ 425.2 $ 1,756.3

41

Reconciliation of Gross Margin, Operating Expenses and Operating Margin Guidance


Year Ending October 31, 2018$ in millions, except percentages Note

GAAP Gross Margin Percentage 40.1% 42.9%

Adjustments: (1)

Amortization of purchased intangible assets E 0.4% 0.3%

Stock based compensation F 0.3% 0.3%

Non-GAAP Gross Margin Percentage 40.8% 43.5%

GAAP Operating Expenses $ 154.3 $ 627.2

Adjustments: (1)

Amortization of purchased intangible assets E 14.5 57.0

Stock based compensation F 8.8 35.2

Non-GAAP Operating Expenses $ 131.0 $ 535.0

GAAP Operating Margin 3.7% 8.1%

Adjustments: (1)

Amortization of purchased intangible assets E 3.8% 3.5%

Stock based compensation F 2.4% 2.2%

Non-GAAP Operating Margin 9.9% 13.8%

42

Reconciliation of EPS Guidance

Guidance Historical


Year Ending October 31, 2018

Year Ended October 31, 2017Note

Diluted GAAP earnings (loss) per share (1) $ 0.02 $0.66-$0.69 $ (1.55)

Adjustments: (2)

Amortization of step-down in deferred services net revenues at acquisition and associated cost of goods sold A — — 0.03

Amortization of purchased intangible assets E 0.16 0.65 0.69

Stock based compensation F 0.09 0.36 0.35

Restructuring and related charges (2) G — — 1.50

Other charges and income (2) G — — 0.08

Goodwill impairment (2) G — — 0.15

Income tax effect of non-GAAP exclusions (3) H (0.05) (0.20) 0.06

Diluted Non-GAAP earnings per share (1) $ 0.22 $1.47-$1.50 $ 1.31

Diluted earnings per share from divested businesses (4) D — — (0.09)

Diluted Non-GAAP earnings per share, excluding divested businesses (1) $ 0.22 $1.47-$1.50 $ 1.40

(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.

(4) Assuming Taxi Solutions business is break even in the fiscal year 2018 period prior to the sale of the business.

THIS FOOTNOTE MAINTAINED BY WHITNEY ON HER VERSION. PLEASE REVIEW THERE.

43

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 principally 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 organic net revenues. Non-GAAP organic net revenues is a 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. This non-GAAP

measure is used to evaluate Verifone net revenues without the impact of net revenues from acquired businesses. Because Verifone's business has grown through both organic growth and

strategic acquisitions, Verifone analyzes performance both with and without the impact of our recent acquisitions. Accordingly, Verifone believes that both non-GAAP net revenues and non-GAAP

organic net revenues provide useful information to investors.

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 Systems

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 business performance and trends on a comparable basis excluding the impact of foreign currency fluctuations.

Note D: Non-GAAP net revenues, gross margin, operating income (loss) and net income (loss) from divested businesses. Verifone determines non-GAAP revenues, gross margin,

operating income (loss) and net income (loss) from divested businesses as the amounts in the reporting period that are derived from and/or directly related to significant businesses that have

either been divested or are held for sale.

44

Explanatory Notes to Reconciliations of GAAP to Non-GAAP items

Note E: Merger and Acquisition Related. Verifone adjusts certain revenues and expenses for items that are the result of mergers and acquisitions. Merger and acquisition related adjustments

include the amortization of intangible assets, contingent consideration fair market value adjustments, interest on contingent consideration, transaction expenses associated with acquisitions, and

acquisition integration expenses.

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.

Contingent consideration fair market value adjustments and interest on contingent consideration: 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.

Transaction expenses associated with acquisitions: Verifone incurs transaction expenses in connection with its acquisitions, which include legal and other professional fees such as advisory,

accounting, valuation and consulting fees. These transaction expenses are related to acquisitions and have no direct correlation with the ongoing operation of Verifone’s business. Accordingly,

Verifone excludes these amounts from our non-GAAP operating results to provide better comparability of pre-acquisition and post-acquisition operating results.

Acquisition integration expenses: In connection with its acquisitions, Verifone incurs costs relating to the integration of the acquired business with Verifone’s ongoing business, which includes

expenses relating to the integration of facilities and other infrastructure, information technology systems and employee-related costs such as costs of personnel required to assist with integration

transitions. These acquisition integration expenses are related to acquisitions and have no direct correlation with the ongoing operation of Verifone’s business. Accordingly, Verifone excludes these

amounts from our non-GAAP operating results to provide better comparability of pre-acquisition and post-acquisition operating results.

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.

45

Explanatory Notes to Reconciliations of GAAP to Non-GAAP itemsNote 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 and restructuring: Over the past several years, we have had gains and incurred expenses, such as professional services, contract cancellation fees and certain personnel costs

related to initiatives to transform, streamline, centralize and restructure our global operations. The transformation gain relates to the contribution of certain business assets and associated equity

ownership in Gas Media. Charges include involuntary termination costs, costs to cancel facility leases, write down of assets 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 recognize gains or incur costs of this nature in the ordinary course of business. While certain of these items have

recurred in recent years and may continue to recur in the near future, the amount of these items has varied significantly from period to period. 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.

Foreign exchange losses related to obligations denominated in currencies of highly inflationary economies: Our non-GAAP operating results do not include foreign exchange losses related to

obligations denominated in highly inflationary economies, such as the devaluation of the Argentina Peso during the first quarter of fiscal year 2016. We believe that excluding such losses provides

a better indication of our business performance, as the existence of high inflation in these economies varies independent of our business performance, and enhances the comparability of our

business performance during periods before and after such inflation occurred.

Goodwill impairment: Our non-GAAP results exclude any goodwill impairment. We believe that excluding goodwill impairments provides a better indication of our business performance and

enhances the comparability of our business performance during periods before and after we recorded the impairment.

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 medium

to long term 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.

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, interest, depreciation and amortization, stock based compensation, restructuring and related charges and non-cash long

lived asset impairments.

Note L: Non-GAAP Contribution Margin of Divested Businesses. Verifone defines non-GAAP contribution margin of divested businesses as operating income (loss) of the divested business

less stock based compensation, intangible amortization and restructuring and related charges attributed to the divested businesses.

verifone q4 fy17 earnings report

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