Test bank for advanced assessment interpreting findings and formulating diffe...
Verifone Q4 2016 Earnings
1. 71
Sheetal Shah
Operations
Increasing efficiency
and discipline
Joe Mach
June Felix
Carlos Lima
Steve Aliferis
Regional Leadership
Delivering global
solutions locally
Marc Rothman
Finance
Driving improved
results and delivering
greater shareholder
value
Paul Galant
Vision
Driven by clients’
current and future
needs
Vin D’Agostino
Strategy
Defining market
dynamics and strategy
for growth
Glen Robson
Solutions
Launching next-
generation, client-
centric devices and
services
Agenda
71
3. 73
Foundational drivers of shareholder value
Large and growing global market opportunity
Global scale and local execution
Accelerating revenue growth
Margin expansion opportunities
Higher free cash flow conversion
Optimized capital structure
1
2
3
4
5
6
72
4. 74
Sources: ABI Research, Verifone estimates, TAMS
Increasing complexity of
consumer payments
Proliferation of POS solutions
Growing consumer expectation for
omni-channel experiences
Acceleration from cash to
electronic payments
Convergence of payments and
commerce
Market forces
Five market forces are creating a large and growing market
1. LARGE AND GROWING GLOBAL MARKET OPPORTUNITY
$4B
Commerce >$100B
Payments
Systems
>$10B
Total Addressable Market (TAM)
1
2
3
4
5
Mid-single
digit growth
FY17-FY20
5. 75
Verifone is a company that is essential to the payments industry
2. GLOBAL SCALE AND LOCAL EXECUTION
Verifone cloud
services process
7.6B transactions
annually
~30M devices
globally accepting
payments
securely
Payments
accepted across
>150 countries
We earned $2B
total revenue in
FY16
~6,000
professionals
working around
the world
We are a leader
in virtually all
markets where
we operate
Provide our clients with:
• Consumer payments acceptance
• Connectivity between merchants and financial institutions
• Security and comprehensive payment and commerce services
6. 76
We are a scaled provider and investing to deliver for our clients
2. GLOBAL SCALE AND LOCAL EXECUTION
~6,000 professionals
globally with local expertise
>40 strategically placed
global services centers to
meet clients’ needs
$164M ~$200M
Systems
FY13
Services
FY17
R&D expense
Global presence (FTEs)
~1,600
~400
~2,800
~1,200
Overall investment
increased by >20% since
FY13
R&D spending driven by
Services investments
Note: P&L figures are non-GAAP
7. 77
Three pillars to accelerating revenue growth
3. ACCELERATING REVENUE GROWTH
FY17
North
America
Latin
America
EMEA
APAC
FY20
~$2.2B
~$1.9B
Business Lines Regions
CAGR
Provide new
solutions in the
market segments
where we
operate
Expand our
share in under-
penetrated
geographies
Capture new
segments with
new solutions
FY20FY17
~$2.2B
~$1.9B
Services
Systems
+4-5%
+5-6% +5-6%
+7-8%
Note: P&L figures are non-GAAP
8. 78
We are driving improvements to our business…
4. MARGIN EXPANSION OPPORTUNITIES
Introducing next-generation
devices with improved gross
margin profile
Growing digital services at a
higher rate than physical services Driving operating efficiencies
• Transitioning from fragmented
device platforms to modern,
consolidated platforms
• Supplementing physical
services with payment,
commerce, and omni-
channel services
• Reducing development time
• Improving strategic sourcing
and collaboration
• Simplifying operations
• Optimizing distribution
9. 79
… that are also improving our margin
4. MARGIN EXPANSION OPPORTUNITIES
Note: P&L figures are non-GAAP
~41%
Gross
Margin
Services
Delivery
Sourcing
~44%
New Product
Introduction
FY20Product
Mix
FreightFY17
• Supplier consolidation
• Platform commonality
• Should-be cost modeling
• Global service platform
re-engineering
• Design for cost
• Faster time to market
• Supplier innovation
• Mode-mix optimization
• Operations planning
10. 80
Focus on efficiency and cost management drives further operating
leverage…
G&A
~29%
S&MR&DFY17
Total
OpEx
FY20
~28%
…resulting in operating margin in the 15-16% range
4. MARGIN EXPANSION OPPORTUNITIES
Note: P&L figures are non-GAAP
11. 81
Delivering more robust top line growth and creating earnings per
share leverage
FY16 – FY17 FY17 – FY20
4. MARGIN EXPANSION OPPORTUNITIES
Revenue (5%)
EPS (17%)
FY16 – FY17 growth challenges
• EMV-related comps
• At-the-pump delays
• Product & Geo mix
• Unfavorable FX
Revenue 5-6%
EPS ~15%
(CAGR)
FY17 – FY20 growth drivers
• New global product launches
• Further our Services agenda
• Structural margin tailwinds
• Creating operating leverage
• Low cash tax rate
80
Note: P&L figures are non-GAAP
13. 83
Our strategic priorities for capital allocation
6. OPTIMIZED CAPITAL STRUCTURE
Debt
repayments
Modest-sized
acquisitions
Share
repurchases
Organic
investments
14. 84
• Stronger bias toward tuck-in
acquisitions
• Align with core and expansion
opportunities
• Disciplined approach to integration
M&A Considerations
6. OPTIMIZED CAPITAL STRUCTURE
84
15. 85
Sources and uses of cash from FY14 – FY16
Financial policy leverage (Gross Debt / EBITDA) between
2.0x-3.0x except for temporary M&A impacts
190
150
120
120
340
Debt
repayments
Stock
repurchases
AcquisitionsBalance
Sheet cash
Free Cash
Flow
Source
Use
6. OPTIMIZED CAPITAL STRUCTURE
85
$M
16. 86
Financial performance objectives through FY20
1
2
3
4
5
6
Organic revenue CAGR in the 5-6% range
Operating margin expansion into the 15-16% range
EPS CAGR ~15%
Convert ~80% of non-GAAP net income into free cash flow
Optimize debt levels/leverage
Target incremental top-line growth through tuck-in M&A
85
17. 87
We have the assets to deliver on our vision
Brand
Talent
ExperienceDistribution
Devices &
Services
Next-generation
devices and
services
Accepting payments in
>150 countries
35 years of experience
~6,000 people
Deep understanding
