Revenue of €1.5 billion is up +32% at historical exchange rates and +20% at constant exchange rates
Revenue growth in Payment +22%, Machine-to-Machine +23%, and Government Programs +17%, at constant exchange rates, largely exceeds lower SIM products and related services revenue
Profit from operations of €160 million is up +33%

To better assess past and future performance, the income statement is presented on an adjusted basis and variations in revenue figures above and in this document are at constant exchange rates except where otherwise noted (see page 2 "Basis of preparation of financial information"). 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 the consolidated financial statements. Reconciliation with the IFRS income statement is presented in Appendix 1. The statement of financial position is prepared in accordance with IFRS, and the cash position variation schedule is derived from the IFRS cash flow statement. All figures in this press release are unaudited.

Amsterdam, August 27, 2015- Gemalto (Euronext NL0000400653 - GTO), the world leader in digital security today announces its results for the first semester 2015.
Key figures of the adjusted income statement
Year-on-year variations

(€ in millions)
First semester 2015
First semester 2014
at historical
exchange rates
at constant
exchange rates

Revenue 1,499 1,133 +32% +20%
Gross profit 574 418 +37%
Operating expenses (414) (298) +39%
Profit from operations 160 120 +33%
Profit margin 10.6% 10.6% =

Olivier Piou, Chief Executive Officer, commented: "The strong first semester revenue growth illustrated the structural transformation and successful diversification of the Company. Our flexibility enabled us to allocate more internal resources and external investments to support the faster growing businesses. Payment, Government and Machine-to-Machine are now three significant and very active growth engines, and Enterprise is reinforced by SafeNet which is currently being integrated into our portfolio. We are progressively unlocking operating leverage in those rapidly growing businesses, en route to the upgraded objectives of our 2017 multi-year development plan."

Basis of preparation of financial information
Segment information

The Mobile segment reports on businesses associated with mobile cellular technologies including Machine-to-Machine, mobile secure elements (SIM, embedded secure element) and mobile Platform & Services. The Payment & Identity segment reports on businesses associated with secure personal interactions including Payment, Government Programs and Enterprise. The SafeNet acquisition is part of the Enterprise business.

In addition to this segment information the Company also reports revenues 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

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. Revenue variations are at constant exchange rates and include the impact of currencies variation hedging program, except where otherwise noted. All other figures in this press release are at historical exchange rates, except where otherwise noted.

Pro forma figures
Following the acquisition of SafeNet and for a better understanding of the year-on-year evolution of the business, the Company presents the 2014 Gemalto segment and activity pro forma figures as if SafeNet had been consolidated for the full year 2014 period and year-on-year variations between these 2014 pro forma figures and 2015 figures as if SafeNet had been consolidated starting from January 1, 2015. The difference between 2015 actual figures and 2015 pro forma figures corresponds to the SafeNet contribution from January 1st, 2015 to January 7th, 2015, the actual transaction closing date. SafeNet's pro forma figures used in this document were translated into Euro using monthly currency conversion rates. Variations of pro forma revenue figures are at constant exchange rates and exclude the impact of currencies variation hedging program for 2014 and 2015.

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 IFRS operating profit adjusted for (i) the amortization and depreciation of intangibles resulting from acquisitions, (ii) restructuring and acquisition-related expenses , (iii) all equity-based compensation charges and associated costs; and (iv) fair value adjustments upon business acquisitions. 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.
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).
Equity-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 the related costs.
Fair value adjustments over net assets acquired are defined as the reversal, in the income statement, of the fair value adjustments recognized as a result of a business combination, as prescribed by IFRS3R. Those adjustments are mainly associated with (i) the amortization expense related to the step-up of the acquired work-in-progress and finished goods assumed at their realizable value and (ii) the amortization of the cancelled commercial margin related to deferred revenue balance acquired

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 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.

Adjusted financial information

The interim condensed 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.

First semester 2015 First semester 2014
Extract of the
adjusted income statement € in millions As a % ofrevenue € in millions As a % of
revenue
Year-on-year variation
historicalexchangerates constantexchangerates

Revenue 1,499.1 1,133.1 +32% +20%
Gross profit 574.0 38.3% 418.3 36.9% +1.4 ppt
Operating expenses (414.4) (27.6%) (298.1) (26.3%) (1.3 ppt)
EBITDA 219.6 14.6% 165.7 14.6% =
Profit from operations 159.6 10.6 120.3 10.6% =
Net profit 105.7 7.1% 95.8 8.5% (1.4 ppt)
Basic Earnings per share (€) 1.21 1.11 +9%
Diluted Earnings per share (€) 1.19 1.08 +10%

Total revenue for the first semester 2015 came in at €1,499 million. Existing business rapid growth and the addition of SafeNet drove the revenue expansion of +32% at historical exchange rates and +20% at constant exchange rates.
First semester 2015
(in percentage points)
Addition of
SafeNet
Pro forma[1]
growth
Hedge
effect
Currency
variations effect
Growth
at historical
exchange rates

Contributions to total
year-on-year revenue variation +11% +11% (2%) +11% +32%

The total Company's year-on-year revenue growth was +11% pro forma. SafeNet's combination added 11 percentage points to the 2014 reported sales. The rapid and substantial strengthening of the US dollar versus Euro compared to the first semester of 2014 and the now large part of the Company's US dollar denominated revenue explain the 11 percentage point difference between revenue growth at historical and at constant exchange rates. This difference was partly offset by the currency variation protection hedging program that induced a (2) percentage point reduction on the reported sales.

Embedded software & Products (E&P) revenue grew by +7%. Payment cards represented the largest part of the E&P growth. Strong deliveries in Government Programs and high demand for connectivity and security modules for the Internet of Things also notably contributed to the E&P revenue increase. In contrast, E&P activity in the Mobile segment reduced due to lower year-on-year SIM cards sales following the closure of the major US wireless carriers' payment venture during the period.

In Platforms & Services (P&S), sales were up by +74%, with further revenue expansion in payment issuance, in eGovernment services and due to SafeNet's new contribution to the Enterprise business. These increases largely exceeded the reduced Mobile Financial Services revenue generated in the United States.

Globally, first semester revenue growth illustrated the structural transformation and successful diversification of the Company. It posted +11% pro forma growth when SIM and related services declined (7%) year-on-year, during the period.

Gross profit was up by €156 million, to €574 million, representing a gross margin of 38.3%, up +1.4 percentage point year-on-year. The increase in gross margin in Payment & Identity came mainly from the Enterprise business and more than offset the lower contribution in Mobile due to the lower sales of product and services related to mobile payment in the United States.

Operating expenses were up by 1.3 percentage point of revenue to 27.6%, at €414 million. The increase came primarily from the addition of SafeNet's operating expenses, standing at a higher level than Gemalto's historical business and from the currency translation effects.

As a result, first semester 2015 profit from operations was €160 million, up €39 million year-on-year, representing 10.6% profit margin, as in the first semester of 2014. The operational leverage gains of the semester were offset by the rapid and significant currency variation and hedging effects. Year-on-year variation of these hedges represented an adverse impact of €31 million for the first semester 2015, which balanced the gains in profit from operations linked to the favorable natural exposure to currency variations for the period.

Gemalto's financial income was (€14) million compared to (€4) million for the first semester of 2014 as interest expense and amortized costs on the public bond, private placements and credit lines facilities amounted to (€6) million. Foreign exchange transactions and other financial items amounted to (€8) million.

As a result, adjusted profit before income tax came in at €147 million compared to €117 million the previous year, showing an increase of +26%.

Adjusted income tax expense was (€42) million, with an estimated IFRS annual income tax rate of 22% for 2015.

Consequently, the adjusted net profit of the Company was €106 million, a €10 million and +10% increase when compared to last year's figure of €96 million.

Adjusted basic earnings per share came in at €1.21, up +9% compared to the first semester 2014 adjusted basic earnings per share of €1.11. Adjusted diluted earnings per share were at €1.19, up +10% on the 2014 first semester's adjusted diluted earnings per share of €1.08.

IFRS results
Fair value adjustments relating mainly to the non-cash amortization of the IFRS revaluation of SafeNet's pre-acquisition inventories at their net realizable value accounted for (€67) million for the first semester of 2015, compared to null in 2014. Amortization and depreciation of intangibles resulting from acquisitions, another non-cash element, increased by €12 million year-on-year, to (€23) million, also mainly due to SafeNet acquisition. Restructuring and acquisition-related expenses, including SafeNet transaction fees, decreased by €2 million to (€19) million, compared to (€21) million in the first semester of 2014. The equity-based compensation charge dropped year-on-year to (€17) million versus (€27) million as the first semester of 2014 saw the introduction of the new 2014-2017 multi-year development plan's related equity incentive plan, while in 2015 the long-term incentive plan is scheduled for the second semester of the year.

Gemalto recorded an IFRS operating profit (EBIT) of €33 million for the first semester of 2015, compared to €61 million in the first semester of 2014, lower year-on-year due to the non-cash IFRS fair-value adjustments linked to SafeNet acquisition. The IFRS net profit came in at €14 million for the first semester 2015, versus €46 million in the first semester of 2014.

As a result of these, IFRS basic earnings per share and diluted earnings per share hence were €0.16 and €0.15 respectively for the reported period compared to €0.53 and €0.52 in the first semester of 2014.

Statement of financial position and cash position variation schedule

In the first semester of 2015, operating activities generated a cash flow of €199 million before changes in working capital, compared to €128 million in 2014 mainly due to the profit from operations expansion and the higher contribution of non-cash expenses in the operating expenses. Changes in working capital reduced cash flow by (€57) million, less than during the same period of 2014 at (€75) million. Although year-on-year revenue growth in the second quarter of 2015 was significantly higher than in the same period 2014, there was a reduced impact of the longer cash collection cycle in Asia. Inventories increase was higher than Company's reported revenue expansion due to the anticipated growth and the lower activity in certain businesses in the second quarter. Accounts receivables and payables increased in line with Company's reported revenue expansion.

Capital expenditure and acquisition of intangibles amounted to €104 million, or 6.9% of revenue. Property, Plant, and Equipment assets accounted for €51 million of investment, up €22 million year-on-year to support in particular the strong growth of the payment business in the United States. Acquisition and capitalization of intangible assets represented a net cash outflow of €52 million compared to €21 million for the first semester 2014. Most of the increase came from the acquisition of a new patent portfolio and the rights to use and distribute a licensed technology and a slight increase on the capitalization of development expenses to 1.7% of revenue compared to 1.5% in 2014.

The hedging program which aims at partially neutralizing the impact of sudden currency variations on the Company's profit from operations generated an advance cash outflow of €84 million related to currency exposure over the Company's 2014-2017 development plan, due to the strong and rapid US dollar appreciation against the Euro during the first part of the year.

Acquisitions used €888 million in cash, for the most part related to the acquisitions of SafeNet and Trüb, closed respectively during the first and second quarter of 2015.

Gemalto's share buy-back programs had no impact on cash for the first semester of 2015. The independently managed liquidity program generated €3 million in cash. As at June 30, 2015, the Company held 977,881 shares, or 1.1% of its own shares in treasury. The total number of Gemalto shares issued increased by +991,865 this semester, to 89,007,709 shares. Net of the 977,881 shares held in treasury, 88,029,828 shares were outstanding as at June 30, 2015.

On May 24, 2015, Gemalto paid a cash dividend of €0.42 per share in respect of the fiscal year 2014, up +11% on the dividend paid in May 2014 which was of €0.38 per share. This May 2015 distribution used €37 million in cash. Other financing activities generated €177 million in cash including mainly €149 million of private placement loan issuance, €30 million of credit lines drawdown and €4 million of proceeds received by the Company from the exercise of stock options by employees.

Cash in hand, net of bank overdrafts amounted to €257 million as at June 30, 2015

Considering the €746 million total amount of borrowings, Gemalto's net debt position was €490 million as at June 30, 2015, compared to a €363 million net cash position as of June 30, 2014, a (€853) million variation mostly due to the (€888) million used this semester for acquisitions.


tijd 09.00
De AEX 440.21 +11,48 +2,68% Gemalto EUR 70,69 -3,15 vol. 63.000