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Airtel and Verifone Partner for Mobile Payments in Ghana

May 11, 2015 by Mobile Payment Magazine

Mobile network operator Airtel has partnered with Verifone Mobile Money to bring NFC contactless mobile payments to Ghana.

Under the deal, Airtel will provid NFC-enabled POS terminals to merchants around the Ghana. The company’s 1.5 million Airtel Money customers can then pay via mobile wallet with an NFC-enabled handsets or through a contactless sticker provided by Airtel. [Read more…]

Filed Under: News Tagged With: Africa, Airtel, Ghana, VeriFone, Veriphone

Digital Money in Pakistan – 2013 Report

March 7, 2013 by Mobile Payment Magazine

Digital Money PakistanThis report by Shift Thought Ltd entitled “Digital Money in Pakistan” has been designed specifically for the use of global players such as banks, operators and technology providers. They fill a gap in the market, and although offered at a report price, this is not a run-of-the-mill paper report.

This Pakistan report is developed to a high specification in order to help experts including development organisations like CGAP, by providing little known information and detailed analysis as a one-stop reference to understand Payments Systems and Innovations in this market. [Read more…]

Filed Under: Research Tagged With: Abu Dhabi Group, Access Group Pakistan, Allied Bank Pakistan (ABL), American Express, Asasah MFI, Askari Bank Pakistan, Bank Afalah Limited, Bill & Melinda Gates Foundation (BMGF), China Mobile, Citibank, Digital Money, Dubai Islamic Bank, Etisalat Group, Faysal Bank Limited, Fundamo, Gemalto, GSMA, Habib Bank, Habibmetro Bank, Khushhali Bank, MasterCard, MCB Bank, Meezan Bank, Mobilink (Orascom), MoneyGram, National Bank of Pakistan, Nokia, Orascom Telecom Group, Pakistan, PayPal, Shift Thought Ltd, Standard Chartered Bank Pakistan, State Bank of Pakistan (SBP), Sybase 365, Tameer, Telenor, Telenor Group, TransferTo, U.S. Agency for International Development (USAID), Ufone, Utiba, VeriFone, Visa, Warid, Waseela Microfinance Bank, Wateen Zong, Western Union, World Bank, Xpress Money Services

Report: Delineating the Mobile Value Chain – A Holistic View of Mobile Payment

September 2, 2012 by Mobile Payment Magazine

As excitement surrounding mobile payments develops, most of the focus has been placed on the wallet apps such as Google Wallet and Isis jockeying for position. However, the success of a mobile payments system will depend on far more than which piece of software will be used on the most devices. A fully functional system will require the integration of a number of different factors, including POS terminals, processing, the devices themselves, and more. [Read more…]

Filed Under: Research Tagged With: ACI, AJB, American Express, Apple, CASSIS International, First Data, Foursquare, Gemalto, google, Groupon, Heartland Payment Systems, Ingenico, Isis, LevelUp, mFoundry, Mobeam, Naratte, Paydiant, PayPal, Research and Markets, RIM, Samsung, SK C&C, Square, Starbucks, VeriFone, Visa, Yelp

Mobile Payment Strategies Report: Opportunities & Markets 2011-2015

July 5, 2012 by Mobile Payment Magazine

Mobile Payment ReportA new study from Juniper Research has determined that the total value of mobile payments for digital and physical goods, money transfers and NFC (Near Field Communications) transactions will reach $670bn by 2015, up from $240bn this year. These forecasts represent the gross merchandise value of all purchases or the value of money being transferred.

The new Mobile Payment Strategies report revealed that all segments will exhibit 2x to 3x growth over the next five years. This growth will be driven by the rapid adoption of mobile ticketing, NFC contactless payments, physical goods purchases and money transfers as people in both developed and developing countries use their devices for everyday transactions. [Read more…]

Filed Under: Research Tagged With: 1-800 Flowers.com, Absa Bank, accells, Access Group, Aepona, Air Kenya, airG, Airtel, AIS, Alloy Ventures, Alternet, Amadeus, Amadeus Capital Partners, Amazon.com, Appium, Apple, Arriva Bus, Aruba Networks, AT&T, ATMU, Avea, Axis, Axis Bank, Babies “R” Us, Badoo, Banco de Oro Universal Bank, bango, Bank of Ceylon, Bank of Commerce and Development, Barclays, Battery Ventures, Bell Canada, Bell ID, Bharti, Bharti Airtel, Bharti Telesoft, BICS, BilltoMobile, bitWallet, BKM, BlackBerry Partners Fund, Bouygues, BPI, Brooks Brothers, BSI, BT, C-Sam, Cabela’s, Cebu Pacific, Celpay, Central Bank, CHARGE Anywhere, Citi, Citibank, Ciudad Mexico, Claro Group, Comviva, Copenhagen Metro, Cosmote, Credit Agricole, Credit Saison, Danal, Daylight Partners, DBS Bank, DeviceFidelity, Digby, Digby Chengdu Technology, Digital China, DN Capital, Draper Fisher Juvertson, DSB, DSB S-trains, Eagle Eye Solutions, EastNets, Easypaisa, eBay, eBay Mobile, EnStream, Equity Bank, Ericsson, Ericsson IPX, eServGlobal, EVN, EZ-Link, Ezuza, Facebook, Faulu Kenya, FINNAIR, First Data Corporation, France Telecom, Fundamo, G&D, Gameloft, Garanti Bank, Gemalto, Giesecke & Devrient, Globe, Globe Telecom, Golfsmith, google, Gtel, HBD Venture Capital, Hutch, Hypercom, IBM, ICC, ICICI, Idea, Indosat, ING, Ingenico, Intuit, IPX, Jamster, Jet Airways, JR East, JR West, Juniper Research, KASIKORNBANK, KDDI, Kenya Airways, KPN, KT, la Caixa, LG, Liberty Mutual, LINK Mobility, LMT, Lufthansa Systems, Luup, Maldives Monetary Authority, Maritz Real-Time, MasterCard, Maxis, MCB Bank, McDonalds, MCell, mChek, Meditel, Metro Company, MFIC, MGL, Minick, Miven, Mobifone, Mobilink, MobiVending, Mocapay, Monitise, MoreMagic, Morpho, Motorola, Movaya Chengdu Technology, Movaya Wireless, Movia, Movincom, Mozido, mService, mSolutions, MTN Group, MTS, MTV, Multiply, Myway, Naivas, NCR, Nearbuy Systems, NETS, Netsize, Neustar, NFO Hold, ngpay, Nokia, Nokia Siemens Network, NRJ Mobile, NTT docomo, NXP Semiconductors, Obopay, OpenMarket, Oracle, Orange, Orange Group, Orascom, Orient Corporation, Orvis, PayForIt, Paymate, PayPal, PayPal Mobile, Paytong, PesaPoint, PETCO, Philippine Airlines, Playphone, PLDT, Polaris, Polaris Ventures, PPC, PROSA, Quest Diagnostics, Rakuten, Reliance, Remgro, RIM, RiskSecure, Rogers Communications, S1 Corporation, S3 Ventures, Safaricom, Safarilink, Samsung, Sanlam, Santander, SAP Ventures, SBB, SEAIR, Sfone, SFR, Skype, SMART, Smart Communications, SmartPay, SoftBank, Softbank Mobile, Sony, Sony Ericsson, Sprint, StarHub, State Bank of India, State Bank of Vietnam, Sulake, Sumitomo Mitsui Card Co., Sun Oracle, Sybase 365, T+, TATA, Tata AIG Insurance, TDC, Tech Process Solutions, Telcel, Tele2, Telefonica, Telefonica O2, Telenor, TeliaSonera, Telma, Telus, TELUS Corp, Tetherball, The Home Depot, The NASDAQ OMX Group, The World Bank, Tigo, TIM, Toys “R” Us, Transoft, Tre, TRUE, True Move, TSYS, Twinlinx, Twitter, Uchumi, Ugg Australia, Uninor, Unwire, Utiba, Utiba Americas, Vagverket, Valista, Venda, VenFin, Venyon, VeriFone, Verisign, Vietcombank, Vietnamobile, Viettel, Vimpelcom, VinaPhone, Virgin Media, Virgin Mobile, Visa, Vision Capital, ViVOtech, Vodafone, Vodafone Qatar, Watchdata, Western Union, WIZZIT, World Bank, Yahoo!, YellowPepper, Yoigo, ZAPA, Zest Airways, Zong

New Report Focuses on NFC and Mobile Payments Landscape

September 19, 2011 by Mobile Payment Magazine

There is much buzz around the growth of mobile payments in the United States, with predictions that it will hit $214 billion by 2014, according to Aite Group.  But which of the many possible approaches — including integrated NFC, non-integrated contactless, bar codes, cloud-based solutions, and text messaging — is the best choice?

The Smart Card Alliance today released a white paper entitled, “The Mobile Payments and NFC Landscape: A U.S. Perspective.”

The white paper provides an overview of the current state of the market for mobile payments and NFC-enabled payment applications in the U.S., and evaluates the advantages and disadvantages of different mobile payment approaches.

“Technology is always changing, especially within the mobile and payments industries, so it is difficult to predict when and how mobile payments will become commonplace in the United States,” said Randy Vanderhoof, executive director of the Smart Card Alliance. “The goal of this white paper is to help industry stakeholders understand the current mobile payments landscape, anticipate how mobile payments are likely to change, and appreciate the opportunities that mobile payments, and particularly NFC-enabled mobile contactless payments, present.”

Some of the topics covered in this snapshot of mobile payments include:

  • A description of the different types of mobile financial applications in use today
  • Discussion of the different mobile payments approaches with implementation examples
  • A summary of the merchant, consumer, issuer, and mobile operator requirements for NFC mobile proximity payments and the attendant benefits
  • An update on the status of Near-Field Communications (NFC) mobile proximity payments infrastructure
  • Evaluation of how different mobile payment approaches fulfill overall market requirements

Payments Council members involved in the development of this white paper included: Accenture; American Express; Apriva; Bank of America; Capgemini; Capital One; Connexem Consulting; CPI Card Group; Datacard Group; DeviceFidelity; Discover Financial Services; Gemalto; Giesecke & Devrient; Heartland Payment Systems; Infineon Technologies; INSIDE Secure; JPMorgan Chase; LTK Engineering Services; MasterCard Worldwide; NACHA; NagraID Security; NXP Semiconductors; Oberthur Technologies; Quadagno & Associates; Thales e-Security; WatchData Technologies USA; VeriFone; Visa Inc.; ViVOtech; and Mike Kutsch; Dale Laszig; and Chandra Srivastava.

Source: MarketWire

Filed Under: Research Tagged With: Accenture, Aite Group, American Express, Apriva, Bank of America, Capgemini, Capital One, Chandra Srivastava, Connexem Consulting, CPI Card Group, Dale Laszig, Datacard Group, DeviceFidelity, Discover Financial Services, Gemalto, Giesecke & Devrient, Heartland Payment Systems, Infineon Technologies, INSIDE Secure;JP Morgan Chase, LTK Engineering Services, MasterCard Worldwide, Mike Kutsch, NACHA, NagraID Security, NFC, NXP Semiconductors, Oberthur Technologies, Quadagno & Associates, Randy Vanderhoof, Smart Card Alliance, Thales e-Security, VeriFone, Visa, ViVOtech, WatchData Technologies USA

NFC-enabled Point of Sale Ready to Explode, Says Report

September 8, 2011 by Mobile Payment Magazine

Hosted POS Revenue Projections - AITESeeking to sell hardware and grow revenue, the major original equipment manufacturers (OEMs)—VeriFone, Ingenico, and Hypercom—have developed and begun to implement business strategies that will drive near-field-communication (NFC) technologies into general availability in the United States, opening the door for a variety of new mobile marketing solutions enabled at the POS.

The current inflexibility of transaction-routing infrastructure ensures that existing authorization infrastructure will be unable to handle the new transaction types created by these marketing solutions. This will force the rapid evolution of a new set of hosted transaction-gateway and terminal-management solutions, with revenue opportunities for gateway providers approaching US$0.35 billion annually by 2015. Payments firms that miss the move will take a hit; merchant acquirers, independent sales organizations (ISOs), gateways, processors, and payment networks must develop a strategy that ensures delivery of flexible and centrally hosted POS environments.

A new report from Aite Group projects the deployment of mobile-capable hardware, software, and transaction-routing capabilities necessary to enable point-of-sale-integrated mobile marketing solutions and mobile payments in the United States. Based on more than 50 Aite Group interviews with industry stakeholders conducted from April through July 2011, the report also details the transformation of today’s point-of-sale (POS) infrastructure into tomorrow’s mobile environment.

“Current trends in the payments industry are driving a more complex point-of-sale infrastructure that will require POS services to be offered as hosted monthly services,” says Rick Oglesby, senior analyst with Aite Group and author of this report. “The POS terminal itself may soon become more similar to a cable TV box, opening a portal to a wealth of services to be accessed at the point of transaction. For payments companies, an opportunity exists to be the cable company itself, aggregating the various services in a gateway model and simplifying the way in which services can be accessed.”

Source: Aite Group

Filed Under: News, Research Tagged With: Aite Group, Hypercom, Ingenico, NFC, PoS Terminal, VeriFone

VeriFone Raises Outlook on Mobile Payment Hopes

September 8, 2011 by Mobile Payment Magazine

VeriFone Systems Inc. posted better-than-expected quarterly results and raised its full-year outlook as it ropes in more customers for mobile payment technologies. The credit card swipe machine maker is betting on strong demand for near field communication (NFC) technology that allows people to pay for their purchases by waving an NFC-enabled mobile phone.
[Read more…]

Filed Under: News Tagged With: MobilePayment, VeriFone, Veriphone

Research Report: 2011 Contactless Near Field Communication (NFC) Mobile Payments

September 5, 2011 by Mobile Payment Magazine

Javelin Strategy and Research has release a new report entitled “2011 Contactless Near Field Communication (NFC) Mobile Payments: Framing Mobile Payments on the Foundation of Mobile Banking.”

Mobile payments have been the source of much excitement for over half a decade, with the latest focus being on near field communication (NFC) payments, which uses short-range wireless technologies to allow a consumer to tap or wave a supporting mobile phone to complete an in-store payment.

Late 2010 experienced a flurry of NFC-related mobile payments announcements, detailing pilot initiatives from numerous financial institutions (FIs), payment networks, mobile phone carriers, technology giants, and third-party developers.

Despite this activity, mobile contactless/NFC is a payment option that is battling limited availability of contactless-ready merchant terminals and mobile technology, as well as low consumer demand. In order to ensure the greatest opportunity for success, FIs should integrate NFC mobile payments with their existing mobile banking platform. Javelin data shows that mobile bankers are the prime financial demographic to jumpstart mobile payments, and FIs should promote the service accordingly.

Primary Questions

  • What is the current state of the contactless payment market, and how has it changed from recent years?
  • What are the key drivers preventing consumer adoption of contactless payments?
  • How should FIs integrate mobile contactless pilots within their existing financial infrastructure, and who should the target demographic be?
  • What are some of the current NFC programs in market today?
  • What is the demographic makeup of today’s contactless payment population, and how can that information be utilized to boost mobile NFC adoption?
  • How can FIs establish the value proposition of NFC among merchants, in an effort to increase merchant acceptance of the service?

Report Index

  • Overview
  • Primary Questions
  • Methodology
  • Executive Summary
  • The State of U.S. Contactless and Mobile Commerce
  • The Consumer Roadmap to Mobile Payments
  • Mobile Banking as the Springboard for Mobile Contactless Payments
  • Demographic Trends – Who Are the Likely Mobile Contactless Users of Today?
  • Mobile Contactless Payments: The Proverbial Chicken and the Egg Dilemma
  • Appendix
  • Related Research
  • Companies Mentioned

Table of Figures

Figure 1: Mobile Payments Ecosystem
Figure 2: Percent of Consumers Who Indicate That They Are Open to Using a Contactless-Enabled Card or Device, 2007-2010
Figure 3: Key Drivers Preventing Contactless Adoption, by All Consumers
Figure 4: Consumer Adoption Roadmap to Mobile Payments
Figure 5: Likelihood of Storing Credit or Debit Card Information on Mobile Phone to Complete a Mobile Payment, by Mobile Bankers and All Consumers
Figure 6: Factors That Drive Contactless Use, by Mobile Bankers and All Likely or Current Contactless Users
Figure 7: Last Time Made Purchase Using Mobile Device, by Mobile Bankers and All Mobile Phone Owners
Figure 8: Frequency of Mobile Purchasing in the Past Month, by Mobile Bankers and All Mobile Phone Owners
Figure 9: Average Mobile Purchase Amount, by Mobile Bankers and All Mobile Phone Owners
Figure 10: Desirability of Mobile Phone Functionality, by Frequent Mobile Bankers, Mobile Bankers (Past 90 Days), and All Mobile Phone Users
Figure 11: Likelihood of Using Mobile Contactless, by Gender, Generation, and All Consumers
Figure 12: Likelihood of Using Mobile Contactless, by Ethnicity and All Consumers
Figure 13: Likelihood of Using Mobile Contactless, by Smartphone Owners, Standard Mobile Phone Owners, and All Consumers
Figure 14: Likelihood of Responding to Mobile Marketing Coupons or Promotions, by All Mobile Contactless Users and All Mobile Phone Owners
Figure 15: Percent of Consumers Who Have Used Particular Contactless Payment Devices, 2009-2010
Figure 16: Likelihood of Using a Contactless-Enabled Card or Device, by Mobile Bankers and All Consumers
Figure 17: Average Times Per Month Consumers Use a Particular Payment Option Per Month for In-Store Purchases
Figure 18: Likelihood of Using Mobile Contactless, by Income and All Consumers
Figure 19: Likelihood of Using Mobile Contactless, by iPhone Owners, BlackBerry Owners, and Android Owners

More information: 2011 Contactless Near Field Communication (NFC) Mobile Payments

Filed Under: Research Tagged With: AT&T. Isis, Bank of America, Bling Nation, Cardlytics, Cashedge, Citibank, ClairMail, DeviceFidelity, Discover, Edo Interactive, Fiserv, google, LivingSocial, M-Com, MasterCard, mFoundry, PayPal, RIM, Samsung, T-Mobile, VeriFone, Verizon, Visa

VeriFone Acquires South Africa Payments Provider Destiny Electronic Commerce

June 30, 2011 by Mobile Payment Magazine

VeriFone Systems, Inc. today announced it has completed the acquisition of Destiny Electronic Commerce (Pty) Ltd. (trading as CSC), a South Africa-based electronic payments solutions provider.

The new VeriFone unit is headquartered in Johannesburg with offices in Cape Town and Durban. CSC’s management team, headed by former CEO Llewellyn Walters, and 160 employees have been integrated into the VeriFone worldwide organization.

VeriFone will build on this organization to expand the company’s presence as a leading provider of secure payment technologies, services and solutions at the point of sale for Sub-Saharan Africa and the Indian Ocean Islands.

 

Source: VeriFone

Filed Under: News Tagged With: Destiny Electronic Commerce, South Africa, VeriFone, Veriphone

VeriFone Systems Reports Financial Results for Q2 2011

June 2, 2011 by Mobile Payment Magazine

VeriFone Systems, Inc. (NYSE: PAY), the global leader in secure electronic payment solutions, today announced financial results for the three months ended April 30, 2011 (“Q2 FY11”).

Net revenues for Q2 FY11 were $292 million, compared to $284 million in the previous quarter and $241 million in the second quarter of fiscal year 2010 (“Q2 FY10”), a 21% year-over-year increase. Services revenue grew from Q2 FY10 at more than twice the rate of systems revenue.

Non-GAAP gross margins were 43% for Q2 FY11, compared to 41% in the prior quarter and 39% in Q2 FY10. GAAP gross margins for the latest quarter were 42% compared to 39% in the prior quarter and 37% in Q2 FY10.

Non-GAAP net income per diluted share for Q2 FY11 was $0.46, compared to $0.43 in the prior quarter and $0.29 for Q2 FY10, a 59% year-over-year increase. GAAP net income per diluted share for the latest quarter was $0.27, compared to $0.35 in the prior quarter and $0.23 in the year-earlier period. Cash balances increased $52 million in Q2 FY11 to $532 million.

“We are very pleased with VeriFone’s second quarter results,” said Douglas G Bergeron, Chief Executive Officer. “For the sixth straight quarter, revenue reached an all-time high, with growth once again exceeding 20%. Gross margins and operating margins continued to expand, highlighting the strength of our services-driven strategy.” Bergeron added, “We have become the critical enablers of payment security, payment-enabled media, and smartphone-based payment at the point of sale, and together with our industry partners we are reshaping the future of payments.”

Highlights Since Last Earnings Release

VeriFone announced a partnership with Google and top retailers to deploy Google Wallet using VeriFone’s near field communication (“NFC”)-enabled point-of-sale systems to power more engaging and consumer friendly transactions. The trials are occurring throughout the U.S. at leading retailers including American Eagle Outfitters, Foot Locker, Macy’s and Toys “R” Us. VeriFone’s broad retail presence, security infrastructure and brand recognition are keys to the success of this mobile payment offering. VeriFone believes that if the trials lead to wide scale NFC deployment, its revenue could be boosted for the next several years by $100 to $150 million per year in the U.S. and even more internationally.

VeriFone announced that it has entered into a definitive agreement to acquire Destiny Electronic Commerce (Pty) Ltd., trading as CSC, a South Africa-based electronic payments solutions provider. Headquartered in Johannesburg, CSC is a leading provider of secure payment technologies, services and solutions at the point of sale. South Africa is a very attractive market for VeriFone because of its highly developed infrastructure yet growth potential as an emerging economy. The acquisition will provide a base on which to expand VeriFone’s Africa business into the company’s next $100 million market. The acquisition is expected to close this summer subject to the satisfaction of customary closing conditions.

VeriFone and MICROS Systems, Inc., the premier provider in the hospitality systems market, announced a solution to incorporate smart mobile devices with restaurant management systems to accommodate NFC-activated payments at the table as well as redemption of electronic coupons and promotions. Central to the integrated solution is the VeriFone PAYware Mobile Enterprise mobile POS system, which adapts smartphones and wireless PDAs to securely accept payment transactions and utilizes VeriFone services to interface with MICROS table management and order management systems as well as the card payment networks. PAYware Mobile Enterprise incorporates a PCI-approved PIN debit keypad, which allows merchants to leverage dramatically lower transaction costs, as well as a 2D bar code scanner for tasks such as inventory control.

VeriFone announced two compelling PAYMEDIA offerings:

  • PAYMEDIA for VeriFone’s PCI 2.0-approved Secure PumpPAY solution for pay-at-the-pump. PAYMEDIA delivers an entertaining and engaging mix of content and advertising to enhance the customer’s experience at the gas pump while generating profits for convenience operators. PAYMEDIA for Secure PumpPAY is driven by the VeriFone Digital Network (VNET), currently playing in more than 10,000 taxi cabs throughout the United States and the United Kingdom. VNET provides consumers with an engaging blend of news, weather, and lifestyle programming while also delivering targeted advertisements and promotions. Secure PumpPAY provides a very cost effective way for fuel retailers to upgrade existing fuel pumps to full PCI 2.0 approval.
  • PAYMEDIA Solutions, a comprehensive, subscription-based offering that provides small to medium-sized merchants with payment solutions and access to payment-enabled media at the checkout counter, including the integration of online services such as digital couponing, loyalty, location-based social media and value-added services. As a turnkey solution, PAYMEDIA enables ISOs, acquirers and other resellers to equip merchants with a true “intelligent checkout.” VeriFone has established partnerships to bring the services of MocaPay and vPromos to the retail checkout through PAYMEDIA and will announce additional services throughout the year. PAYMEDIA will be available beginning in June through select resellers.

Guidance – Third Quarter 2011 and Full Year

For the third quarter ending July 31, 2011, the company expects to report net revenues in the range of $295 million to $300 million and non-GAAP net income per diluted share in the range of $0.45 to $0.46.

VeriFone is raising revenue and earnings guidance for the full fiscal year 2011. The company expects to report FY11 net revenues in the range of $1,170 million to $1,180 million and non-GAAP net income per diluted share in the range of $1.80 to $1.83, excluding any impact from the Hypercom acquisition.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the forward-looking statements herein due to changes in economic, business, competitive, technological and/or regulatory factors, and other risks and uncertainties affecting the operation of the business of VeriFone Systems, Inc. These risks and uncertainties include, but are not limited to: whether the proposed transactions described herein can be completed in a timely manner and whether the anticipated benefits of the proposed transaction can be achieved, our assumptions, judgments and estimates regarding the impact on our business of the continued uncertainty in the global economic environment and financial markets, our ability to identify and complete acquisitions and strategic investments and successfully integrate them into our business, whether the expected benefits of our business initiatives are achieved, our ability to protect against fraud, the status of our relationship with and condition of third parties such as our contract manufacturers and key suppliers upon whom we rely in the conduct of our business, our dependence on a limited number of customers, uncertainties related to the conduct of our business internationally, our ability to effectively hedge our exposure to foreign currency exchange rate fluctuations, our dependence on a limited number of key employees, short product cycles, rapidly changing technologies and maintaining competitive leadership position with respect to our payment solution offerings. The forward-looking statements in this press release do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed after the date hereof. For a further list and description of such risks and uncertainties, see our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. VeriFone is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

HYPERCOM TRANSACTION

In connection with the proposed Hypercom transaction, VeriFone has filed with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that includes a proxy statement/prospectus relating to the proposed transaction. Investors are urged to read the form S-4 and proxy statement/prospectus (and all amendments and supplements thereto) and any other relevant documents filed with the SEC because they contain important information about VeriFone, Hypercom and the proposed transaction. You can obtain copies of the S-4 and proxy statement/prospectus, as well as VeriFone’s other filings, free of charge at the website maintained by the SEC at www.sec.gov. In addition, you may obtain documents filed with the SEC by VeriFone free of charge by visiting our website (www.verifone.com) or by directing a request in writing to: VeriFone, Attention: Investor Relations, 2099 Gateway Place, Suite 600, San Jose, CA 95110, by phone to (408) 232-7979 or by e-mail to ir@verifone.com. You may obtain documents filed with the SEC by Hypercom free of charge at Hypercom’s website (www.hypercom.com) or by directing a request in writing to Hypercom Corporation, Attention: Investor Relations, 8888 East Raintree Drive, Suite 300, Scottsdale, Arizona 85260, by phone to (480) 642-5000, or by e-mail to stsujita@hypercom.com.

About VeriFone Systems, Inc. (www.verifone.com)

VeriFone Systems, Inc. (“VeriFone”) (NYSE: PAY) is the global leader in secure electronic payment solutions. VeriFone provides expertise, solutions and services that add value to the point of sale with merchant-operated, consumer-facing and self-service payment systems for the financial, retail, hospitality, petroleum, government and healthcare vertical markets. VeriFone solutions are designed to meet the needs of merchants, processors and acquirers in developed and emerging economies worldwide.

FINANCIAL MEASURES

This press release and its attachments include several non-GAAP financial measures, including non-GAAP net revenues; non-GAAP cost of net revenues; non-GAAP gross profit; non-GAAP operating expenses; non-GAAP operating income; non-GAAP interest expense; non-GAAP interest income; non-GAAP other income (expense); non-GAAP income before income taxes; non-GAAP provision for income taxes, non-GAAP net income; non-GAAP net income per share as well as these non-GAAP financial measures as a percentage of net revenues. In order to assist investors, this press release provides consolidated statement of operations information on a non-GAAP basis, reflecting the adjustments made in the non-GAAP measures listed above.

Reconciliations for the non-GAAP financial measures presented in this press release are provided at the end of this press release.

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. VeriFone’s competitors may, due to differences in capital structure and investment history, record certain income and expense items, including interest, tax, depreciation, amortization, and other non-cash expenses, that differ significantly from VeriFone’s, in a manner that VeriFone’s management believes does not reflect underlying operating performance that is comparable to VeriFone’s. Management also uses these non-GAAP financial measures in VeriFone’s budget and planning process. Management also believes that the presentation of these non-GAAP financial measures is useful to investors in comparing VeriFone’s operating performance in any period with its performance in other periods and with the performance of other companies that represent alternative investment opportunities. These non-GAAP financial measures contain limitations and should be considered as a supplement to, and not as a substitute for, or superior to, disclosures made in accordance with GAAP.

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

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

Note A: Acquisition Related Expenses. VeriFone adjusts certain revenues and expenses that are the result of acquisitions. These adjustments include the amortization of purchased intangible assets, step-down in deferred revenue on acquisition and step-up in inventory on acquisition. These adjustments do not include the fair value adjustments relating to certain contracts acquired as part of an acquisition whereby third parties have yet to fulfill their contractual obligations. In addition, we adjust for the settlements of contingencies and true-up of balances established at the time of acquisition and other acquisition related charges (such as integration charges, certain interest charges and certain foreign currency impacts.) Acquisition related charges also result from events which arise from unforeseen circumstances which often occur outside of the ordinary course of business. Accordingly, VeriFone analyzes the performance of its operations without regard to such expenses. In determining whether any acquisition related revenue or expense adjustment is appropriate, VeriFone takes into consideration, among other things, how such adjustment would or would not aid the understanding of the performance of its operations.

Note B: Other Charges. VeriFone excludes certain expenses that are the result of either unique or unplanned events which are noted below. It is difficult to estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financials, these expenses may limit the comparability of our on-going operations with prior and future periods.

  • Post-restatement incremental professional services fees, which include those fees that are incurred for incremental procedures for preparation, review and audit of financial information prior to remediation of any deficiencies, including material weaknesses, in our internal control over financial reporting, and to assist in remediation, are excluded from general and administrative expenses. These incremental fees enable management to conclude that our consolidated financial statements are in accordance with GAAP.
  • Restructuring charges and gain on extinguishment of debt, which result from unforeseen circumstances and typically occur outside of the ordinary course of business, are excluded from cost of net revenues and operating expenses to ensure comparability between periods.
  • Non-cash interest expense recorded relating to the adoption of ASC 470-20, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (including partial cash settlement) is excluded to promote comparability of our non-GAAP financial results with prior and future periods and best reflects our on-going operations.
  • Income taxes are adjusted for the tax effect of excluding items related to our non-GAAP financial measures, in order to provide our management and users of the financial statements with better clarity regarding the on-going performance and future liquidity of our business.

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

Note C: Stock-Based Compensation Related Items. Our non-GAAP financial measures eliminate the effect of expense for stock-based compensation because they are non-cash expenses that management believes are not reflective of ongoing operating results. In particular, because of varying available valuation methodologies, subjective assumptions and the variety of award types which affect the calculations of stock-based compensation, we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Stock-based compensation is very different from other forms of compensation. A cash salary or bonus has a fixed and unvarying cash cost. In contrast the expense associated with an award of an option is unrelated to the amount of compensation ultimately received by the employee; and the cost to the company is based on valuation methodology and underlying assumptions that may vary over time and does not reflect any cash expenditure by the company. Furthermore, the expense associated with granting an employee an option is spread over multiple years and may be reversed based on forfeitures which may differ from our original assumptions unlike cash compensation expense which is typically recorded contemporaneously with the time of award or payment.

Note D: Non-GAAP Net Income per Share Items. VeriFone provides basic and diluted non-GAAP net income per share. The basic non-GAAP net income per share amount was calculated based on our non-GAAP net income and the weighted average number of shares outstanding during the reporting period. The diluted non-GAAP net income per share included additional dilution from potential issuance of common stock, except when such issuances would be anti-dilutive. For diluted non-GAAP net income per share, we have reduced the diluted share count for shares that would be delivered to us pursuant to hedge transactions that we believe will be effective upon conversion of the currently outstanding Senior Convertible Notes (the “Notes”) due in June 2012. Under GAAP, shares delivered to us in hedge transactions are not considered offsetting shares in the fully diluted share calculation until they are actually delivered.

VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
(UNAUDITED)
Three Months Ended April 30, Six Months Ended April 30,
2011 2010 Change (1) 2011 2010 Change (1)
Net revenues:
System Solutions $ 235,334 $ 199,548 17.9 % $ 461,041 $ 387,562 19.0 %
Services 57,112 41,164 38.7 % 115,170 76,550 50.5 %
Total net revenues 292,446 240,712 21.5 % 576,211 464,112 24.2 %
Cost of net revenues:
System Solutions 134,659 121,636 10.7 % 270,163 236,828 14.1 %
Amortization of purchased intangible assets 2,937 4,377 -32.9 % 7,573 9,270 -18.3 %
Total cost of Systems Solutions net revenues 137,596 126,013 9.2 % 277,736 246,098 12.9 %
Services 32,265 25,489 26.6 % 64,399 46,898 37.3 %
Total cost of net revenues 169,861 151,502 12.1 % 342,135 292,996 16.8 %
Gross profit 122,585 89,210 37.4 % 234,076 171,116 36.8 %
Operating expenses:
Research and development 25,402 17,811 42.6 % 47,044 34,911 34.8 %
Sales and marketing 31,139 22,415 38.9 % 59,445 42,890 38.6 %
General and administrative 27,041 19,680 37.4 % 51,057 40,161 27.1 %
Amortization of purchased intangible assets 1,665 3,605 -53.8 % 3,981 8,097 -50.8 %
Total operating expenses 85,247 63,511 34.2 % 161,527 126,059 28.1 %
Operating income 37,338 25,699 45.3 % 72,549 45,057 61.0 %
Interest expense (7,465 ) (7,134 ) 4.6 % (15,035 ) (14,388 ) 4.5 %
Interest income 287 258 11.2 % 570 554 2.9 %
Other income (expense), net (1,874 ) 982 nm (223 ) (778 ) nm
Income before income taxes 28,286 19,805 42.8 % 57,861 30,445 90.1 %
Provision for (benefit from) income taxes 3,086 (420 ) nm 630 (401 ) nm
Net income $ 25,200 $ 20,225 24.6 % $ 57,231 $ 30,846 85.5 %
Net income per share:
Basic $ 0.29 $ 0.24 $ 0.65 $ 0.36
Diluted $ 0.27 $ 0.23 $ 0.62 $ 0.35
Weighted average shares used in computing net income per share:
Basic 88,418 85,008 87,744 84,847
Diluted 93,434 87,535 92,368 87,070
(1) “nm” means not meaningful
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
GEOGRAPHIC REVENUE INFORMATION
(IN THOUSANDS, EXCEPT PERCENTAGES)
(UNAUDITED)
Change Six Months Ended April 30,
Q2 2011 Q1 2011 Q2 2010 % SEQ Inc % YoY Inc 2011 2010 % YoY Inc
United States and Canada $ 120,734 $ 128,304 $ 105,940 -5.9 % 14.0 % $ 249,038 $ 195,552 27.4 %
Europe 93,263 78,707 66,538 18.5 % 40.2 % 171,970 135,913 26.5 %
Latin America 56,217 50,131 50,488 12.1 % 11.3 % 106,348 91,111 16.7 %
Asia 22,232 26,623 17,746 -16.5 % 25.3 % 48,855 41,536 17.6 %
GAAP Total net revenues $ 292,446 $ 283,765 $ 240,712 3.1 % 21.5 % $ 576,211 $ 464,112 24.2 %
Amortization of step-down in deferred revenue on acquisition
United States and Canada (106 ) 175 – 69 –
Europe 434 – – 434 –
Asia 2 – – 2 –
United States and Canada $ 120,628 $ 128,479 $ 105,940 -6.1 % 13.9 % $ 249,107 $ 195,552 27.4 %
Europe 93,697 78,707 66,538 19.0 % 40.8 % 172,404 135,913 26.8 %
Latin America 56,217 50,131 50,488 12.1 % 11.3 % 106,348 91,111 16.7 %
Asia 22,234 26,623 17,746 -16.5 % 25.3 % 48,857 41,536 17.6 %
Non-GAAP Total net revenues $ 292,776 $ 283,940 $ 240,712 3.1 % 21.6 % $ 576,716 $ 464,112 24.3 %
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
April 30, October 31,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 531,542 $ 445,137
Accounts receivable, net 208,373 132,988
Inventories 106,411 111,901
Other current assets 89,069 71,065
Total current assets 935,395 761,091
Property, plant and equipment, net 46,289 46,007
Purchased intangible assets, net 39,105 50,121
Goodwill 177,076 169,322
Other assets 54,424 48,785
Total assets $ 1,252,289 $ 1,075,326
Liabilities and Equity
Current liabilities:
Accounts payable $ 93,367 $ 64,016
Income taxes payable 3,749 651
Deferred revenue, net 56,129 55,264
Other current liabilities 145,138 134,595
Short-term debt 5,207 5,280
Total current liabilities 303,590 259,806
Deferred revenue, net 26,103 22,344
Long-term debt 473,259 468,231
Other long-term liabilities 116,281 117,482
Noncontrolling interest 1,372 1,438
Total stockholders’ equity 331,684 206,025
Total liabilities and equity $ 1,252,289 $ 1,075,326
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six Months Ended April 30,
2011 2010
Cash flows from operating activities
Net income $ 57,231 $ 30,846
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, net 16,774 25,111
Stock-based compensation 16,757 8,682
Non-cash interest expense 7,579 7,055
Gain on bargain purchase of business (1,727 ) –
Deferred income taxes 1,271 137
Gain on adjustments to acquisition related balances (1,391 ) –
Other 760 (1,483 )
Net cash provided by operating activities before changes in working capital 97,254 70,348
Changes in operating assets and liabilities:
Accounts receivable, net (56,836 ) 23,178
Inventories 11,394 (14,182 )
Other assets (17,736 ) (23,957 )
Accounts payable 21,377 11,437
Income taxes payable 3,098 1,401
Deferred revenues, net 3,266 3,691
Other liabilities 7,014 4,078
Net cash provided by operating activities 68,831 75,994
Cash flows from investing activities
Purchases of property, plant and equipment (5,302 ) (3,606 )
Software development costs capitalized (510 ) (1,524 )
Acquisitions of businesses, net of cash acquired (14,237 ) (11,740 )
Purchase of equity investment – (5,000 )
Proceeds from disposal of property, plant and equipment – 1,595
Net cash used in investing activities (20,049 ) (20,275 )
Cash flows from financing activities
Repayments of debt and advances against banker’s acceptances (2,701 ) (8,005 )
Proceeds from debt and advances against banker’s acceptances 73 3,561
Proceeds from issuance of common stock through equity incentive plans 37,446 4,598
Other (142 ) –
Net cash provided by financing activities 34,676 154
Effect of foreign currency exchange rate changes on cash and cash equivalents 2,947 (1,881 )
Net increase in cash and cash equivalents 86,405 53,992
Cash and cash equivalents, beginning of period 445,137 324,996
Cash and cash equivalents, end of period $ 531,542 $ 378,988
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF CERTAIN NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
(UNAUDITED)
Six Months Ended April 30,
Q2 2011 Q1 2011 Q2 2010 2011 2010
GAAP Net revenues – System Solutions $ 235,334 $ 225,707 $ 199,548 $ 461,041 $ 387,562
Amortization of step-down in deferred revenue on acquisition A – – – – –
Non-GAAP Net revenues – System Solutions $ 235,334 $ 225,707 $ 199,548 $ 461,041 $ 387,562
GAAP Net revenues – Services $ 57,112 $ 58,058 $ 41,164 $ 115,170 $ 76,550
Amortization of step-down in deferred revenue on acquisition A 330 175 – 505 –
Non-GAAP Net revenues – Services $ 57,442 $ 58,233 $ 41,164 $ 115,675 $ 76,550
GAAP Net revenues $ 292,446 $ 283,765 $ 240,712 $ 576,211 $ 464,112
Amortization of step-down in deferred revenue on acquisition A 330 175 – 505 –
Non-GAAP Net revenues $ 292,776 $ 283,940 $ 240,712 $ 576,716 $ 464,112
GAAP Cost of net revenues – System Solutions $ 137,596 $ 140,140 $ 126,013 $ 277,736 $ 246,098
Stock-based compensation C (351 ) (351 ) (12 ) (702 ) (352 )
Acquisition related and Restructuring costs A B (586 ) (26 ) – (612 ) (134 )
Amortization of purchased intangible assets A (2,937 ) (4,636 ) (4,377 ) (7,573 ) (9,270 )
Non-GAAP Cost of net revenues – System Solutions $ 133,722 $ 135,127 $ 121,624 $ 268,849 $ 236,342
GAAP Cost of net revenues – Services $ 32,265 $ 32,134 $ 25,489 $ 64,399 $ 46,898
Stock-based compensation C (41 ) (47 ) (2 ) (88 ) (56 )
Acquisition related and Restructuring costs A B (133 ) 5 – (128 ) (95 )
Amortization of purchased intangible assets A (228 ) (223 ) (656 ) (451 ) (865 )
Non-GAAP Cost of net revenues – Services $ 31,863 $ 31,869 $ 24,831 $ 63,732 $ 45,882
GAAP Gross profit – System Solutions $ 97,738 $ 85,567 $ 73,535 $ 183,305 $ 141,464
Amortization of step-down in deferred revenue on acquisition A – – – – –
Stock-based compensation C 351 351 12 702 352
Acquisition related and Restructuring costs A B 586 26 – 612 134
Amortization of purchased intangible assets A 2,937 4,636 4,377 7,573 9,270
Non-GAAP Gross profit – System Solutions $ 101,612 $ 90,580 $ 77,924 $ 192,192 $ 151,220
GAAP System Solutions gross margins 41.5 % 37.9 % 36.9 % 39.8 % 36.5 %
Amortization of step-down in deferred revenue on acquisition as a % of System Solutions net revenues A 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Stock-based compensation as a % of System Solutions net revenues C 0.1 % 0.2 % 0.0 % 0.2 % 0.1 %
Acquisition related and Restructuring costs as a % of System Solutions net revenues A B 0.2 % 0.0 % 0.0 % 0.1 % 0.0 %
Amortization of purchased intangible assets as a % of System Solutions net revenues A 1.2 % 2.1 % 2.2 % 1.6 % 2.4 %
Non-GAAP System Solutions gross margins 43.2 % 40.1 % 39.1 % 41.7 % 39.0 %
GAAP Gross profit – Services $ 24,847 $ 25,924 $ 15,675 $ 50,771 $ 29,652
Amortization of step-down in deferred revenue on acquisition A 330 175 – 505 –
Stock-based compensation C 41 47 2 88 56
Acquisition related and Restructuring costs A B 133 (5 ) – 128 95
Amortization of purchased intangible assets A 228 223 656 451 865
Non-GAAP Gross profit – Services $ 25,579 $ 26,364 $ 16,333 $ 51,943 $ 30,668
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF CERTAIN NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
(UNAUDITED)
Six Months Ended April 30,
Q2 2011 Q1 2011 Q2 2010 2011 2010
GAAP Services gross margins 43.5% 44.7% 38.1% 44.1% 38.7%
Amortization of step-down in deferred revenue on acquisition as a % of Services net revenues A 0.6% 0.3% 0.0% 0.4% 0.0%
Stock-based compensation as a % of Services net revenues C 0.1% 0.1% 0.0% 0.1% 0.1%
Acquisition related and Restructuring costs as a % of Services net revenues A B 0.2% 0.0% 0.0% 0.1% 0.1%
Amortization of purchased intangible assets as a % of Services net revenues A 0.4% 0.4% 1.6% 0.4% 1.1%
Non-GAAP Services gross margins 44.5% 45.3% 39.7% 44.9% 40.1%
GAAP Gross profit $ 122,585 $ 111,491 $ 89,210 $ 234,076 $ 171,116
Amortization of step-down in deferred revenue on acquisition A 330 175 – 505 –
Stock-based compensation C 392 398 14 790 408
Acquisition related and Restructuring costs A B 719 21 – 740 229
Amortization of purchased intangible assets A 3,165 4,859 5,033 8,024 10,135
Non-GAAP Gross profit $ 127,191 $ 116,944 $ 94,257 $ 244,135 $ 181,888
GAAP Gross margins 41.9% 39.3% 37.1% 40.6% 36.9%
Amortization of step-down in deferred revenue on acquisition as a % of net revenues A 0.1% 0.1% 0.0% 0.1% 0.0%
Stock-based compensation as a % of net revenues C 0.1% 0.1% 0.0% 0.1% 0.1%
Acquisition related and Restructuring costs as a % of net revenues A B 0.2% 0.0% 0.0% 0.1% 0.0%
Amortization of purchased intangible assets as a % of net revenues A 1.1% 1.7% 2.1% 1.4% 2.2%
Non-GAAP Gross margins 43.4% 41.2% 39.2% 42.3% 39.2%
GAAP Research and development $ 25,402 $ 21,642 $ 17,811 $ 47,044 $ 34,911
Stock-based compensation C (939) (876) (329) (1,815) (1,266)
Acquisition related and Restructuring costs A B (7) (4) – (11) –
Non-GAAP Research and development $ 24,456 $ 20,762 $ 17,482 $ 45,218 $ 33,645
Non-GAAP Research and development as a % of net revenues 8.4% 7.3% 7.3% 7.8% 7.2%
GAAP Sales and marketing $ 31,139 $ 28,306 $ 22,415 $ 59,445 $ 42,890
Stock-based compensation C (3,550) (3,030) (2,017) (6,580) (3,842)
Acquisition related and Restructuring costs A B (93) (167) – (260) –
Non-GAAP Sales and marketing $ 27,496 $ 25,109 $ 20,398 $ 52,605 $ 39,048
Non-GAAP Sales and marketing as a % of net revenues 9.4% 8.8% 8.5% 9.1% 8.4%
GAAP General and administrative and amortization of purchased intangible assets $ 28,706 $ 26,332 $ 23,285 $ 55,038 $ 48,258
Stock-based compensation C (4,435) (3,138) (1,636) (7,573) (3,163)
Other charges – SOX remediation B – – – – (1,094)
Acquisition related and Restructuring costs A B (3,524) (2,759) (474) (6,283) (1,236)
Amortization of purchased intangible assets A (1,665) (2,316) (3,605) (3,981) (8,097)
Non-GAAP General and administrative $ 19,082 $ 18,119 $ 17,570 $ 37,201 $ 34,668
Non-GAAP General and administrative as a % of net revenues 6.5% 6.4% 7.3% 6.5% 7.5%
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF CERTAIN NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
(UNAUDITED)
Six Months Ended April 30,
Q2 2011 Q1 2011 Q2 2010 2011 2010
GAAP Operating expenses $ 85,247 $ 76,280 $ 63,511 $ 161,527 $ 126,059
Stock-based compensation C (8,924 ) (7,044 ) (3,982 ) (15,968 ) (8,271 )
Other charges – SOX remediation B – – – – (1,094 )
Acquisition related and Restructuring costs A B (3,624 ) (2,930 ) (474 ) (6,554 ) (1,236 )
Amortization of purchased intangible assets A (1,665 ) (2,316 ) (3,605 ) (3,981 ) (8,097 )
Non-GAAP Operating expenses $ 71,034 $ 63,990 $ 55,450 $ 135,024 $ 107,361
Non-GAAP Operating expenses as a % of net revenues 24.3 % 22.5 % 23.0 % 23.4 % 23.1 %
GAAP Operating income $ 37,338 $ 35,211 $ 25,699 $ 72,549 $ 45,057
Amortization of step-down in deferred revenue on acquisition A 330 175 – 505 –
Stock-based compensation C 9,316 7,442 3,996 16,758 8,679
Other charges – SOX remediation B – – – – 1,094
Acquisition related and Restructuring costs A B 4,343 2,951 474 7,294 1,465
Amortization of purchased intangible assets A 4,830 7,175 8,638 12,005 18,232
Non-GAAP Operating income $ 56,157 $ 52,954 $ 38,807 $ 109,111 $ 74,527
GAAP Operating margin 12.8 % 12.4 % 10.7 % 12.6 % 9.7 %
Amortization of step-down in deferred revenue on acquisition as a % of net revenues A 0.1 % 0.1 % 0.0 % 0.1 % 0.0 %
Stock-based compensation as a % of net revenues C 3.2 % 2.6 % 1.7 % 2.9 % 1.9 %
Other charges – SOX remediation as a % of net revenues B 0.0 % 0.0 % 0.0 % 0.0 % 0.2 %
Acquisition related and Restructuring costs as a % of net revenues A B 1.5 % 1.0 % 0.2 % 1.3 % 0.3 %
Amortization of purchased intangible assets as a % of net revenues A 1.7 % 2.5 % 3.6 % 2.1 % 3.9 %
Non-GAAP Operating margin 19.2 % 18.6 % 16.1 % 18.9 % 16.1 %
GAAP Interest expense $ (7,465 ) $ (7,570 ) $ (7,134 ) $ (15,035 ) $ (14,388 )
Acquisition related interest charges A 474 466 391 940 805
Non-cash interest expense B 3,762 3,819 3,484 7,581 7,055
Non-GAAP Interest expense $ (3,229 ) $ (3,285 ) $ (3,259 ) $ (6,514 ) $ (6,528 )
GAAP Interest income $ 287 $ 283 $ 258 $ 570 $ 554
Non-GAAP Interest income $ 287 $ 283 $ 258 $ 570 $ 554
GAAP Other income (expense), net $ (1,874 ) $ 1,651 $ 982 $ (223 ) $ (778 )
Acquisition related costs A 2,289 (2,178 ) (1,688 ) 108 (1,345 )
Gain on debt extinguishment B – – – – (61 )
Non-GAAP Other income (expense), net $ 415 $ (527 ) $ (706 ) $ (115 ) $ (2,184 )
VERIFONE SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATIONS OF CERTAIN NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
(UNAUDITED)
Six Months Ended April 30,
Q2 2011 Q1 2011 Q2 2010 2011 2010
Non-GAAP Income before income taxes $ 53,630 $ 49,425 $ 35,100 $ 103,052 $ 66,369
GAAP Provision for (benefit from) income taxes $ 3,086 $ (2,456 ) $ (420 ) $ 630 $ (401 )
Income tax effect of non-GAAP exclusions B 7,640 12,341 10,248 19,980 18,984
Non-GAAP Provision for income taxes (1) $ 10,726 $ 9,885 $ 9,828 $ 20,610 $ 18,583
Non-GAAP Income tax rate (1) 20 % 20 % 28 % 20 % 28 %
GAAP Net income $ 25,200 $ 32,031 $ 20,225 $ 57,231 $ 30,846
Amortization of step-down in deferred revenue on acquisition A 330 175 – 505 –
Stock-based compensation C 9,316 7,442 3,996 16,758 8,679
Other charges – SOX remediation B – – – – 1,094
Acquisition related and Restructuring costs A B 7,106 1,239 (823 ) 8,342 925
Amortization of purchased intangible assets A 4,830 7,175 8,638 12,005 18,232
Non-cash interest expense B 3,762 3,819 3,484 7,581 7,055
Gain on debt extinguishment B – – – – (61 )
Income tax effect of non-GAAP exclusions B (7,640 ) (12,341 ) (10,248 ) (19,980 ) (18,984 )
Total Non-GAAP Net income $ 42,904 $ 39,540 $ 25,272 $ 82,442 $ 47,786
Non-GAAP Net income per share:
Basic D $ 0.49 $ 0.45 $ 0.30 $ 0.94 $ 0.56
Diluted D $ 0.46 $ 0.43 $ 0.29 $ 0.89 $ 0.55
Weighted average shares used in computing GAAP net income per share:
Basic D 88,418 87,090 85,008 87,744 84,847
Diluted D 93,434 91,321 87,535 92,368 87,070
Hedge on Convertible Notes Dilution D (387 ) – – (194 ) –
Non-GAAP Diluted shares used in computing net income per share 93,047 91,321 87,535 92,174 87,070
GAAP Net income as a % of net revenues 8.6 % 11.3 % 8.4 % 9.9 % 6.6 %
Amortization of step-down in deferred revenue on acquisition as a % of net revenues A 0.1 % 0.1 % 0.0 % 0.1 % 0.0 %
Stock-based compensation as a % of net revenues C 3.2 % 2.6 % 1.7 % 2.9 % 1.9 %
Other charges – SOX remediation as a % of net revenues B 0.0 % 0.0 % 0.0 % 0.0 % 0.2 %
Acquisition related and Restructuring costs as a % of net revenues A B 2.4 % 0.4 % -0.3 % 1.4 % 0.2 %
Amortization of purchased intangible assets as a % of net revenues A 1.7 % 2.5 % 3.6 % 2.1 % 3.9 %
Non-cash interest expense as a % of net revenues B 1.3 % 1.3 % 1.4 % 1.3 % 1.5 %
Gain on debt extinguishment as a % of net revenues B 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %
Income tax effect of non-GAAP exclusions as a % of net revenues B -2.6 % -4.3 % -4.3 % -3.5 % -4.1 %
Total Non-GAAP Net income as a % of non-GAAP net revenues 14.7 % 13.9 % 10.5 % 14.3 % 10.3 %
(1) The Non-GAAP tax rate used in our Non-GAAP reconciliation was changed beginning the fiscal third quarter 2010 from 28% to 20%.

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