ג'מלטו מציגה את התוצאות הכספיות לשנת 2014

Gemalto full year 2014 results

-- Full year revenue of [Eur]2.5 billion, up +5%, and profit from operations up +10%, at [Eur]383 million

-- Platforms & Services revenue passed the [Eur]500 million mark

-- Strong demand in the United States, revenue up +32%

AMSTERDAM, Netherlands, March 4, 2015 (GLOBE NEWSWIRE):

Gemalto (Euronext NL0000400653 - GTO), the world leader in digital security today announces its results for the full year 2014.

Key figures of the adjusted income statement

Year-on-year variations

Ongoing operations1

([Eur] in millions) Full year 2014 Full year 2013 at historical exchange rates at constant exchange rates

Revenue 2,465 2,384 +3% +5%

Gross profit 952 937 +2%

Operating expenses (569) (589) (3%)

Profit from operations 383 348 +10%

Profit margin 15.5% 14.6% +0.9 ppt

Olivier Piou, Chief Executive Officer, commented: "2014 laid the foundation for our new multi-year development plan as highlighted by several key milestones within Gemalto and its markets. Strategic investments were made at the right time and under favorable conditions to reinforce two major growth drivers for the duration of the plan, EMV and cyber security. Regarding our other operations, numerous program wins increased our eGovernment backlog, we broadened our offers to address the device manufacturers and added tokenization capability to our various platforms. Our teams are in place to deliver accelerated revenue and profit growth in 2015, and with the acquisition of SafeNet we are upgrading our 2017 profit from operations objective to over [Eur]660 million."

Basis of preparation of financial information

In this press release, the information for the full year of both 2014 and 2013 is presented for "ongoing operations" and under the 2014 format of segment reporting unless otherwise specified

Adjusted income statement and profit from operation (PFO) non-GAAP measure

The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS).

To better assess its past and future performance, the Company also prepares an adjusted income statement where the key metric used to evaluate the business and make operating decisions over the period 2010 to 2017 is the profit from operations (PFO).

PFO is a non-GAAP measure defined as the IFRS operating result adjusted for the amortization and depreciation of intangibles resulting from acquisitions, for share-based compensation charges, and for restructuring and acquisition-related expenses. These items are further explained as follows:

-- Amortization and depreciation of intangibles resulting from acquisitions

are defined as the amortization and depreciation expenses related to the

intangibles recognized as part of the allocation of the excess purchase consideration over the share of net assets acquired.

-- Share-based compensation charges are defined as (i) the discount granted to employees acquiring Gemalto shares under Gemalto Employee Stock

Purchase plans; (ii) the amortization of the fair value of stock options

and restricted share units granted by the Board of Directors to

employees, and other related costs.

-- Restructuring and acquisitions-related expenses are defined as (i)

restructuring expenses which are the costs incurred in connection with a

restructuring as defined in accordance with the provisions of IAS 37

(e.g. sale or termination of a business, closure of a plant,.), and

consequent costs; (ii) reorganization expenses defined as the costs

incurred in connection with headcount reductions, consolidation of

manufacturing and offices sites, as well as the rationalization and

harmonization of the product and service portfolio, and the integration

of IT systems, consequent to a business combination; and (iii)

transaction costs (such as fees paid as part of the acquisition process).

These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures and should be read only in conjunction with our interim condensed consolidated financial statements prepared in accordance with IFRS.

In the adjusted income statement, Operating Expenses are defined as the sum of Research and Engineering expenses, Sales and Marketing expenses, General and Administrative expenses, and Other income (expense) net.

EBITDA is defined as PFO plus depreciation and amortization expenses, excluding the above amortization and depreciation of intangibles resulting from acquisitions.

The Appendix 2 bridges the adjusted income statement to the IFRS income statement.

SafeNet's pro forma 2014 full year adjusted income statement presented in this document corresponds to management estimates. Results in Euro were translated from US dollar using monthly currency conversion rates.

Ongoing operations

For a better understanding of the current and future year-on-year evolution of the business, the Company provides revenue from "ongoing operations" for both the 2014 and 2013 reporting periods.

The adjusted income statement for ongoing operations excludes, as per the IFRS income statement, the contribution from discontinued operations, and also the contribution from assets classified as held for sale and from other items not related to ongoing operations.

In this publication reported figures for ongoing operations only differ from figures for all operations by the contribution from assets held for sale for the year 2013. For the year 2014 there is no difference between ongoing operations and all operations..

Appendix 1 bridges the adjusted income statement for ongoing operations to the adjusted income statement for all operations.

Segment information

From January 1, 2014, segment information was modified to report on progress towards the objectives set as part of the Company's new long-term development plan covering the years 2014 to 2017, publicly announced on September 5, 2013.

The Mobile segment reports on businesses associated with mobile cellular technologies. The former Mobile Communication and Machine-to-Machine segments are part of Mobile. The security evaluation business for third parties, whose contribution to Mobile Communication was minor, is now managed together with the Patents business and is as of January 1, 2014 reported in the Patents & Others segment.

The Payment & Identity segment reports on businesses associated with secure personal interactions. The former Secure Transactions and Security segments are part of Payment & Identity.

In addition to this segment information, the Company also reports as of 2014 revenue of Mobile and Payment & Identity by type of activity: Embedded software & Products (E&P) and Platforms & Services (P&S).

Historical exchange rates and constant currency figures

Revenue variations are at constant exchange rates, except where otherwise noted.

All other figures in this press release are at historical exchange rates, except where otherwise noted.

The Company sells its products and services in a very large number of countries and is commonly remunerated in other currencies than the Euro. Fluctuations in these other currencies exchange rates against the Euro have in particular a translation impact on the reported Euro value of the Company revenues. Comparisons at constant exchange rates aim at eliminating the effect of currencies translation movements on the analysis of the Group revenue by translating prior-year revenues at the same average exchange rate as applied in the current year.

Adjusted financial information for all operations

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. To better assess its past and future performance, the Company also prepares an adjusted income statement.

In comparison to the adjusted income statement for ongoing operations, the adjusted income statement for all operations also includes the contribution from assets held for sale. For the year 2014, there are no assets classified as held for sale, and for 2013 assets held for sale were minor non-strategic assets that were disposed during 2013. Appendix 1 bridges the adjusted income statement for ongoing operations to the adjusted income statement for all operations. Appendix 2 provides the reconciliation between IFRS and adjusted income statements.

Full year 2014 Full year 2013

Year-o Year-o

n-year n-year

variat variat

ion at ion at

histor consta

ical nt

exchan exchan

Extract of the adjusted income statement for all [Eur] in As a % of [Eur] in As a % of ge ge

operations millions revenue millions revenue rates rates

Revenue 2,465.2 2,388.6 +3% +5%

(0.6

Gross profit 952.2 38.6% 936.2 39.2% ppt)

+1.5

Operating expenses (569.5) (23.1%) (588.8) (24.7%) ppt

+1.2

EBITDA 478.6 19.4% 434.8 18.2% ppt

+1.0

Profit from operations 382.7 15.5% 347.4 14.5% ppt

(0.4

Net profit 315.3 12.8% 315.5 13.2% ppt)
Basic Earnings per share ([Eur]) 3.64 3.68 (1%)
Diluted Earnings per share ([Eur]) 3.55 3.57 (1%)

Total revenue came in at [Eur]2,465 million, up by +5% at constant exchange rates and up by +3% at historical rates, with growth coming from both main segments, Mobile and Payment & Identity, and from both activities, Embedded software & Products and Platforms & Services. The strong year-on-year unfavorable foreign currency translation impact experienced in the first semester was partially offset in the second part of the year by the strengthening of the US Dollar against the Euro.

In Embedded software & Products, payment-related activities contributed the most to the growth, with further expansion in revenue from EMV payment cards. Demand for connectivity and security modules for the Internet of Things also notably contributed to the revenue increase. In contrast, eGovernment documents revenue reduced due to lower sales in the Middle-East. SIM sales returned to growth in the fourth quarter, and full year revenue was lower mainly due to slower demand in certain countries in Latin America and Eastern Europe. Overall revenue for the Embedded software & Products activity increased by +4% on 2013.

Platforms & Services grew by +10%, with expansion in both segments. Issuance and personalization services represented the largest part of the growth. Revenue increase also came from mobile subscriber management services as well as from mobile payment services though the year was marked by project delays linked to discussions around new technical specifications.

Gross profit was up by [Eur]16 million, to [Eur]952 million, representing a gross margin of 39%. In Mobile, gross margin reduced by 1.3 percentage points due to the lower sales of SIMs. In Payment & Identity, gross margin was higher by 0.5 percentage points due to the scale effects of the ongoing EMV migration.

Operating expenses represented [Eur]569 million, down 3% on the previous year. The contraction came primarily from the lower cost of performance incentives, that were conditional in part on revenue objectives, and from tighter control of external costs implemented in the second part of the year.

Hedging absorbed a part of the adverse effect on the profit from operations coming from currency fluctuations against the Euro. When excluding the impact of hedge and currency variations, the year-on-year increase in profit from operations was [Eur]54 million, higher by [Eur]19 million than the [Eur]35 million increase in profit from operations actually reported.

As a result, full year 2014 profit from operations came in at [Eur]383 million, up by +10% compared to 2013. Profit from operations margin reached 15.5% of revenue, up by +1.0 percentage point compared to 2013. Both figures represent new record performances for the Company.

Gemalto financial income was ([Eur]12) million compared to ([Eur]7) million in 2013. Interest expenses increased due to the

[Eur]2 million interest charge incurred on the [Eur]400 million bond issued during the third quarter of 2014.

Share of profit in associates was ([Eur]1.0) million for the full year 2014. In 2013, there was an exceptional [Eur]20 million non-recurring profit relating to associates generated by the recognition of a gain linked to capital restructuring and IPO of an associate. As a result, adjusted profit before income tax came in at [Eur]370 million, compared to [Eur]358 million the previous year.

Adjusted income tax expense increased to ([Eur]54) million compared to ([Eur]43) million the previous year, and consequently, the adjusted net profit for all the operations of the Company was [Eur]315 million, stable when compared to last year's figure.

Adjusted basic earnings per share for all operations came in at [Eur]3.64, and adjusted diluted earnings per share for all operations at [Eur]3.55, compared to 2013 adjusted basic earnings per share for all operations of [Eur]3.68 and adjusted diluted earnings per share for all operations of [Eur]3.57.

IFRS results

Restructuring and acquisition-related expenses were [Eur]30 million vs [Eur]3 million for 2013 due mainly to the re-balancing of certain industrial and engineering capabilities across worldwide sites to optimize future productivity already reported in the first semester 2014. Amortization and depreciation of intangibles resulting from acquisitions amounted to [Eur]27 million, as in 2013. The equity-based compensation charge accounted for [Eur]55 million, vs [Eur]35 million in 2013, as the Company introduced a new long-term incentive plan that is aligned with its 2014-2017 multi-year development plan objectives and conditional on a set of cumulative progress indicators over the plan period.

The IFRS income tax rate came in at 14% for the year. As a result, Gemalto recorded an IFRS operating profit (EBIT) of [Eur]270 million for 2014 ([Eur]282 million in 2013) and IFRS net profit of [Eur]221 million for 2014 ([Eur]258 million in 2013).

IFRS basic earnings per share and diluted earnings per share were [Eur]2.55 and [Eur]2.49 respectively in 2014, compared to [Eur]3.01 and [Eur]2.92 respectively in 2013.

Statement of financial position and cash position variation schedule

For the full year 2014, Gemalto operating activities generated a cash flow of [Eur]394 million before changes in working capital, compared to the [Eur]332 million generated in 2013. Changes in working capital reduced cash flow by ([Eur]81) million compared to ([Eur]76) million in 2013 with trade receivables up year-on-year mainly from increasing sales and revenue growth in the fourth quarter stronger than in 2013, particularly near the end of the year, and slightly reduced trade and other payables resulting from the tight management of operating costs.

Capital expenditure and acquisition of intangibles amounted to [Eur]125 million, i.e. 5.1% of revenue. Purchase of Property, Plant, and Equipment represented [Eur]81 million, versus [Eur]62 million in 2013, as investments were made in personalization centers and other facilities to support growth in the Payment & Identity segment. Capitalization of development expenses represented [Eur]37 million, i.e. 1.5% of revenue ([Eur]27 million, 1.1% in 2013) and total expenditure incurred for intangible assets amounted to [Eur]44 million, i.e. 1.8% of revenue ([Eur]41 million, 1.7% in 2013).

Free cash flow from operations was up +23% compared to 2013 at [Eur]189 million before restructuring actions, and up +11% at [Eur]169 million when including the [Eur]20 million cash outflow for restructuring actions.

Net cash flow from financial income elements was a gain of [Eur]2 million, corresponding to interest received net.

Cash outflow related to acquisitions, net of cash acquired, was [Eur]84 million in 2014, up from [Eur]30 million in 2013. The main activity of the businesses acquired is to provide personalization and issuance services in the banking and government sectors in the United States.

Gemalto's share buy-back program used [Eur]17 million in cash in 2014, for the purchase of 222,286 shares, net of the liquidity program. As at December 31, 2014, the Company held 1,202,927 of its own shares in treasury, representing 1.37% of its issued and paid-up share capital. The total number of shares issued and paid-up remained unchanged during 2014 at 88,015,844 shares. Net of the 1,202,927 shares held in treasury, 86,812,917 shares were outstanding as at December 31, 2014. The average acquisition price of the shares repurchased on the market as part of the Company's buy-back program and held in treasury as at December 31, 2014 was [Eur]46.12.

On May 24, 2014, Gemalto paid a cash dividend of [Eur]0.38 per share in respect of the fiscal year 2013, up 12% on the dividend paid in 2013. This distribution used [Eur]33 million in cash.

As part of the acquisition of SafeNet, which was expected to close at the end of 2014, a seven-year bond was issued at the rate of 21/8% and existing credit lines were partially drawn, for a total amount of [Eur]555 million. Other financing activities generated [Eur]9 million in cash, including [Eur]14 million of proceeds received by the Company from the exercise of stock options by employees and ([Eur]4) million used for repayment of borrowings.

The actual closing of the SafeNet acquisition occurred in early January 2015, and consequently, Gemalto's cash and cash equivalents as at December 31, 2014 were [Eur]1,057 million. With current and non-current borrowings, excluding bank overdrafts, at [Eur]564 million, the net cash position at year end was [Eur]493 million.

At the year end 2014, the net book value of plant, property and equipment assets was [Eur]280 million, compared to [Eur]237 million at the end of 2013. Total assets grew to [Eur]3,782 million as at December 31, 2014, compared to [Eur]2,919 million as at December 31, 2013, due to the increase of current assets, balanced between trade receivables and cash in relation to the Company's increased business activities and provisions for the acquisition of SafeNet.

Shareholders' equity increased by +11%, or +[Eur]243 million, to [Eur]2,396 million as at December 31, 2014, compared to [Eur]2,153 million as at December 31, 2013. The increase was mainly the result of the positive net profit generation, partly offset by the dividend distribution. Following the issuance of the aforementioned bond and the partial drawdown of existing credit lines to fund the planned acquisition of SafeNet, current and non-current borrowings increased to [Eur]566 million compared to [Eur]7 million in 2013. Total liabilities grew to [Eur]1,386 million as at December 31, 2014 compared to [Eur]766 million as at December 31, 2013 due mainly to the increase in borrowings.

Segment information

In this section, for a better understanding of Gemalto's business evolution, comments and comparisons refer to ongoing operations.

Revenue Payment & Total Patents &

([Eur] in millions) Mobile Identity two main segments Others Total

Fourth quarter 373 332 705 1 707

Second semester 704 622 1,325 7 1,332

Full year 1,290 1,158 2,448 17 2,465

At constant rates +2% +9% +5% (7%) +5%

At historical rates +0% +8% +3% (7%) +3%

During the fourth quarter, revenue expanded by +4% at constant rates and +7% at historical exchange rates. Year-on-year growth improved in Mobile in the fourth quarter, driven by increasing sales of SIMs. Growth in Payment & Identity was +6% at constant exchange rates and +9% at historical exchange rates, slightly slower than previous quarters due to lower sales of payment cards in Europe. The significant adverse effects of currency translation movements experienced during the first part of the year turned favorable in the fourth quarter due to the strengthening of the US dollar against the Euro. For the full year of 2014, Gemalto's revenue growth was +5% at constant rates and +3% at historical rates.

Profit from operations Total Payment &

([Eur] in millions) (including Patents & Others) Mobile Identity

Second semester 263 173 89

As a percentage of the

full year profit from operations 69% 73% 63%

Year-on-year variation +21% +17% +24%

Full year 383 237 142

Year-on-year variation +10% +4% +21%

Full year profit from operations increased by +10% year-on-year, with an acceleration at +21% in the second semester. The second part of the year saw profit from operations increasing rapidly in both main segments, including a notable performance in the Payment & Identity segment, up +24% compared to 2013, due to the strong acceleration of the EMV migration in the United States that leverages investments made during previous semesters.

Acquisition of SafeNet

From January 2015, the Company's financial reporting will include the contribution from SafeNet.

SafeNet's business is now combined with Gemalto's existing Identity & Access Management business, and like Gemalto's existing Identity & Access Management business will be reported as part of the Payment & Identity segment. Most of the combined business relates to Platforms & Services activities.

For information purposes, the non-consolidated 2014 pro forma contribution of SafeNet, under the 2015 reporting format as estimated by the Company's management, is presented in the table below:

Platforms

Full year 2014 - pro forma SafeNet (estimates, [Eur] in millions) Total & Services Embedded software & Products

Revenue 292 271 21

Gross profit 201

Profit from operations 44

For a better understanding of Gemalto's future reporting, the following table presents the estimated Gemalto segment and activity pro forma results as if SafeNet had been consolidated for the full year 2014 period.

Full year 2014 - pro forma Gemalto Total

Gemalto including SafeNet pro forma full year contribution including Patents

(estimates, [Eur] in millions) By segment & Others By activity

Payment Embedded software Platforms

& Identity Mobile & Products & Services

Revenue 1,451 1,290 2,757 1,968 773

As a percentage of total revenue 53% 47% 100% 71% 28%

Gross profit 587 550 1,153

Profit from operations 186 237 427

Mobile

Full year 2014 Full year 2013 Year-on-year variation

As a % of As a % of at historical at constant

[Eur] in millions revenue [Eur] in millions revenue exchange rates exchange rates

Revenue 1,289.6 1,289.5 = +2%
Gross profit 550.2 42.7% 566.5 43.9% (1.3 ppt)
Operating expenses (313.3) (24.3%) (339.0) (26.3%) +2.0 ppt
Profit from operations 236.9 18.4% 227.5 17.6% +0.7 ppt

The Mobile segment recorded annual revenue of [Eur]1,290 million, up +2% year-on-year at constant exchange rates, and stable at historical exchange rates. In the fourth quarter, revenue grew by +2% at constant rates and +6% at historical rates. Revenue from Embedded software & Products was stable and Platforms & Services grew by +7% on top of the +21% revenue growth recorded for the full year 2013.

The high-end products range growth was offset by lower sales of mid-range products in Latin America and Eastern Europe. Machine-to-Machine growth accelerated to +10% for the full year, due to the ongoing deployment of connected devices and embedded secure elements (eSE) for the Internet of Things. Mobile Financial Services (MFS) grew +51%. In 2014, Gemalto enriched its Trusted Services Hub with tokenization capabilities to comprehensively serve the market. Mobile Subscriber Services (MSS) posted +8% growth compared to the full year 2013 and Netsize resumed growth in the fourth quarter after having adjusted to new regulatory directives issued in the first part of the year.

Gross margin was 43%, lower by 1.3 percentage points compared to 2013 mainly due to the lower revenue generated in the mid-range card business.

Operating expenses decreased by [Eur]26 million, i.e. 8%, due to lower variable cost of performance incentives conditional in part to revenue objectives and the effect of tighter control over external operating costs. Some resources were transferred to the Payment & Identity segment as operating needs significantly increased there, and investments in new Platforms & Services offers and new product offerings were maintained.

Profit from operations hence was [Eur]237 million, thus the segment posted an 18% profit margin from operations, up +70 basis points.

Payment & Identity

Full year 2014 Full year 2013 Year-on-year variation

As a % of As a % of at historical at constant

[Eur] in millions revenue [Eur] in millions revenue exchange rates exchange rates

Revenue 1,158.3 1,076.0 +8% +9%
Gross profit 386.2 33.3% 353.8 32.9% +0.5 ppt
Operating expenses (244.2) (21.1%) (236.3) (22.0%) +0.9 ppt
Profit from operations 142.0 12.3% 117.5 10.9% +1.3 ppt

Payment & Identity's full year revenue came in at [Eur]1,158 million, increasing by +9% compared to 2013. Sales were up by +8% in Embedded software & Products, and by +14% in Platforms & Services.

Commercial momentum for EMV continues to be strong around the world with all regions contributing to the +16% revenue expansion recorded in the payment business. Migration in China continued, adding regional financial institutions to the Tier-1 issuers that started their deployments in 2013, and the progressive ramp-up of EMV in the United States led to the +38% revenue growth recorded in the payment business for the entire Americas region. During the year, Gemalto reinforced its personalization services capacity to serve US financial institutions, and secured a large outsourcing contract with a leading US bank.

Revenue from the eGovernment business was lower by (2%) for the full year 2014, with improving performance in the second semester. In this business, revenue from the Middle-East, significantly lower than previous year, was the principal reason for the limited expansion of this activity. Europe and Africa continued to grow. Significant new contract awards recorded in 2014 will support the acceleration in revenue growth expected in 2015. During the second semester, Gemalto also invested in the United States to accelerate the distribution of its advanced technologies in the driving license market.

In the Identity & Access Management (IAM) business, market demand for cybersecurity solutions was stimulated by the large-scale security breaches that occurred during the course of the recent semesters. In order to expand its IAM offer and more comprehensively serve this demand, Gemalto entered into an exclusive agreement to acquire SafeNet in the third quarter and the closing of the transaction occurred on January 7, 2015. SafeNet and Gemalto's Identity & Access Management now operate as a single business unit, part of the Payment & Identity segment. If the acquisition of SafeNet had occurred on January 1, 2014, the business' combined 2014 pro forma revenue would have been [Eur]403 million.

The segment's gross profit increased by +9%, to [Eur]386 million, with gross margin improving by +50 basis points, to 33%. The largest part of the year-on-year improvement came from the payment business in the US, as operational resources and facilities to support the growth were largely already deployed and in place in 2013.

Operating expenses were kept under tight control, leveraging the sales resources deployed in the previous semesters in preparation for the EMV migration. As a percentage of revenue, the operating expense ratio reduced, to now represent 21% of the segment revenue.

As a result, profit from operations in Payment & Identity came in at [Eur]142 million, up by a notable +21% compared to the [Eur]117 million recorded in 2013.

Patents & Others

Full year 2014 Full year 2013 Year-on-year variation

As a % of As a % of at historical at constant

[Eur] in millions revenue [Eur] in millions revenue exchange rates exchange rates

Revenue 17.2 18.5 (7%) (7%)
Gross profit 15.8 91.5% 16.8 90.8% +0.7 ppt
Operating expenses (12.0) &nb