Second Quarter Results Ended June 30, 2015
Forward Looking Statements Disclaimer This presentation contains statements, including statements about future plans and expectations, which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements are generally stated in terms of the Company’s plans, expectations and intentions. These statements are based on the current beliefs, expectations and assumptions of the Company’s management and the current economic environment. Forward looking statements are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. The Company cautions that these statements are not guarantees of future performance. There are or will be important known and unknown factors and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward looking statements. These factors, include, but are not limited to, risks associated with the global economic environment on the Company’s customer base (particularly financial services firms) potentially impacting our business and financial condition; competition; changes in technology and market requirements; decline in demand for the Company's products; inability to timely develop and introduce new technologies, products and applications; difficulties or delays in absorbing and integrating acquired operations, products, technologies and personnel; loss of market share; an inability to maintain certain marketing and distribution arrangements; and the effect of newly enacted or modified laws, regulation or standards on the Company and its products; and other factors and uncertainties discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”) . You are encouraged to carefully review the section entitled “Risk Factors” in our latest Annual Report on Form 20-F and in our other relevant filings with the SEC for additional information regarding these and other factors and uncertainties that could affect our future performance, and undue reliance should not be placed upon these statements . The forward-looking statements contained in this presentation are made as of the date hereof, and the Company undertakes no obligation to update or revise them, except as required by law.
Explanation of Non-GAAP measures Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, re-organization expenses, restructures expenses, share-based compensation, certain business combination accounting entries, settlement and related expenses and tax adjustment re non-GAAP adjustments. The purpose of such adjustments is to give an indication of our performance exclusive of non-cash charges and other items that are considered by management to be outside of our core operating results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Business combination accounting rules requires us to recognize a legal performance obligation related to a revenue arrangement of an acquired entity. The amount assigned to that liability should be based on its fair value at the date of acquisition. The non- GAAP adjustment is intended to reflect the full amount of such revenue. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business. We believe these non-GAAP financial measures provide consistent and comparable measures to help investors understand our current and future operating cash flow performance. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. Reconciliation between results on a GAAP and non-GAAP basis is provided in a table immediately following the Consolidated Statements of Income.
Q2 2015 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
Q2 2015 Highlights* 6.0% Q2 revenue Q2 operating 21% increase growth to margin in Q2 EPS to Increased full $235M; 9% increased to $0.70; high year 2015 revenue 22.3% compared end of EPS guidance growth to 18.9% last guidance excluding FX year and impact Strong Q2 Q2 gross Americas cash flow margin revenue; Product increased to increased to grew 14% , revenue $57M, more 68.7% double digit growth of than double compared to growth fourth 12% compared to 67.3% last quarter in a last year year row * All numbers, except cash flow, are Non-GAAP ** All numbers, except cash flow, are excluding Intelligence division *** All numbers include Physical Security division 5
Q2 2015 Highlights Income Statement Balance Sheet and Cash Flow Analysis Outlook
Good Growth and Execution Q2 2015 • Excluding currency impact, revenue growth REVENUES (Non-GAAP, $M ) would have been 9% 240 235 • Strong growth in product revenue 6.0% 230 222 220 210 200 Q2 14 Q2 15 • Strong growth in EPS due to revenue growth, improved gross margin and EARNINGS PER SHARE (Non-GAAP, $) continued successful execution of 1.1 operational plan 0.9 21% Excellent operating leverage • 0.70 0.7 0.58 0.5 0.3 * All numbers exclude Intelligence division and include Physical Security 0.1 division Q2 14 Q2 15
GAAP and Non-GAAP Income Statement – Q2 2015 $M (except EPS) Q2 2015 Q2 2014 GAAP revenue 234.7 221.3 Valuation adjustment on acquired deferred service revenue 0.1 0.3 Non-GAAP revenues 234.8 221.6 GAAP Cost of revenue 80.9 82.8 Amortization of acquired intangible assets on cost of product (6.8) (8.3) Cost of product revenue adjustment (0.1) (0.1) Cost of services revenue adjustment (0.5) (1.9) Non-GAAP cost of revenue 73.5 72.5 GAAP gross profit 153.7 138.5 Gross profit adjustments 7.5 10.5 Non-GAAP gross profit 161.2 149.0 GAAP operating expenses 118.4 124.8 Research and development (0.3) (1.0) Sales and marketing (2.5) (3.5) General and administrative (2.7) (4.5) Amortization of acquired intangible assets (3.7) (5.4) Acquisition related expenses - (0.2) Settlement and related expenses (0.4) - Restructuring expenses - (3.1) Non-GAAP operating expenses 108.8 107.1 * All numbers include Physical Security division ** Errors due to rounding 8
GAAP and Non-GAAP Income Statement – Q2 2015 (cont.) $M (except EPS) Q2 2015 Q2 2014 GAAP taxes on income 7.2 2.4 Tax adjustment re non-GAAP adjustments 2.9 4.8 Non-GAAP taxes on income 10.1 7.2 GAAP net income (loss) from continuing operations 28.7 11.9 Valuation adjustment on acquired deferred revenue 0.1 0.3 Amortization of acquired intangible assets 10.5 13.7 Share-based compensation 6.1 7.1 Re-organization expenses - 3.9 Acquisition related expenses - 0.2 Restructuring expenses - 3.1 Settlement and related expenses 0.4 - Tax adjustments re non-GAAP adjustments (2.8) (4.8) Non-GAAP net income from continuing operations 43.0 35.3 GAAP diluted earnings (loss) per share from continuing operations 0.47 0.19 Non-GAAP diluted earnings per share from continuing operations 0.70 0.58 * All numbers include Physical Security division ** Errors due to rounding 9
Revenue Breakdown by Region (Non-GAAP) Q2 2015 20% EMEA 70% $48M, -12% YoY AMERICAS $164M, +14% YoY 10% APAC $23M, 1% YoY EMEA and APAC negatively impacted by currency exchange rates * All numbers exclude Intelligence division and include Physical Security division
Revenue Breakdown by Business Unit (Non-GAAP) Q2 2015 24% 62% FINANCIAL CRIME & CUSTOMER COMPLIANCE INTERACTIONS $57M, +20% YoY $144M, +0% YoY 14% SECURITY $34M, +17% YoY * All numbers exclude Intelligence division and include Physical Security division
Gross Margin Q2 2015 (Non-GAAP) Gross Margin Product Margin Services Margin 68.7%| +140bp 84.2%| +100bp 60.6%| +100bp Product Gross Product Service GM Margin GM 84.2% GM 68.7% 83.2% Gross 60.6% Margin 67.3% Service GM 59.6% Q2 14 Q2 15 Q2 14 Q2 15 Q2 14 Q2 15 • Gross margin expansion is the result of an increase in product revenue and favorable product mix Product margin increase was the result of an increase in product revenue • • Increase in service margin is the result of improved effiiciencies * All numbers exclude Intelligence division and include Physical Security division
Continued Operating Margin Improvement Q2 2015 (Non-GAAP) Operating Margin 22.3% Operating Margin 18.9% Q2 14 Q2 15 Operating margin improvement is a result of an increase in gross margin and • further progress in expenses management improvement Excellent operating leverage • * All numbers exclude Intelligence division and include Physical Security division
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