Full year revenue of €3.1 billion, up +16%, and profit from operations up +10%, at €423 million
Revenue in Payment & Identity at €1.8 billion, represents 58% of the total sales
Platforms & Services revenue reaches €898 million, up +70%
Free cash flow generation accelerated over the year, with €233 million in the second semester

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, March 4, 2016 - Gemalto (Euronext NL0000400653 - GTO), the world leader in digital security today announces its results for the full year 2015.

Key figures of the adjusted income statement
Year-on-year variations
(€ in millions)
Full year 2015 Full year 2014 at historical exchange rates at constant exchange rates
Revenue 3,122 2,465 +27% +16%
Gross profit 1,216 952 +28%
Operating expenses (793) (569) +39%
Profit from operations 423 383 +10%
Profit margin 13.5% 15.5%

Olivier Piou, Chief Executive Officer, commented: "2015 illustrates the structural transformation and successful diversification of the Company. Payment is now clearly the largest business of the Company; the Enterprise portfolio is aligned following SafeNet integration; Government Programs is back to rapid growth with a solid win rate; adjustments are supporting the SIM activity evolution; and the Machine-to-Machine business continues to expand rapidly. In a challenging 2015 Mobile environment, Gemalto demonstrated the resilience of its business model with another double digit expansion in profit from operations and strong cash generation. Entering the second part of our multi-year development plan we will focus in 2016 on expanding our gross margin, progressively optimizing our main segments' performance en route to our 2017 objectives."

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 Platforms & 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 our hedging program on currencies variation for 2014 and 2015.

Overall pro forma growth includes the 2015 organic growth coming from SafeNet activities. This metric aims at giving a fair view of the operational performance of the Company, including the ensuing synergies generated by the acquisition.

Adjusted income statement and profit from operations (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 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 millions) Full year 2015 Full year 2014

Extract of the adjusted income statement As a % of revenue As a % of revenue
Year-on-year variation at historical exchange rates constant exchange rates

Revenue 3,121.6 2,465.2 +27% +16%
Gross profit 1,215.9 39.0% 952.2 38.6% +0.3 ppt
Operating expenses (793.3) (25.4%) (569.5) (23.1%) (2.3 ppt)
EBITDA 546.9 17.5% 478.6 19.4% +14%
Profit from operations 422.6 13.5% 382.7 15.5% +10.4%
Net profit 303.5 9.7% 315.3 12.8% (4%)
In (€)
Basic Earnings per share 3.45 3.64 (5%)
Diluted Earnings per share 3.41 3.55 (4%)

Total revenue for 2015 came in at €3,122 million. Strong growth in Payment, Government Programs and Machine-to-Machine, coupled with the addition of SafeNet drove the revenue expansion of +27% at historical exchange rates and +16% at constant exchange rates.

Full year 2015
(in percentage points).
SafeNet addition Pro forma growth Hedgeeffect Currencies variation effect
Revenue growth at historical exchange rates Contributions to total .
year-on-year revenue variation +12% +6% (2%) +9% +27%

The total Company's year-on-year revenue growth was +6% pro forma. SafeNet's combination added 12 percentage points to the 2014 reported sales. The substantial strengthening of the US dollar versus Euro compared to 2014 and the now larger part of the Company's US dollar denominated revenue generated a 9 percentage point difference between revenue growth at historical and at constant exchange rates. This difference was partly reduced 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 +3%. Payment cards represented the largest part of the E&P expansion. High demand for connectivity and security modules for the Internet of Things (IoT) and strong deliveries in Government Programs also notably contributed to the E&P revenue increase. E&P activity in the Mobile segment reduced due to lower year-on-year SIM sales following the closure of the major US wireless carriers' payment venture, and to a lesser extent to lower demand in Latin America and Asia in the second semester.

In Platforms & Services (P&S), sales were up by +70%, due to further revenue expansion in payment issuance services, to growth in eGovernment services and to SafeNet's contribution to the Enterprise business. These increases largely exceeded the reduced Mobile Financial Services revenue coming from the United States.

Globally, 2015 revenue growth illustrated the structural transformation and successful diversification of the Company. Gemalto posted a +6% pro forma revenue growth though sales of SIM and Mobile related services declined by an unusual (15%) year-on-year during the period.

Gross profit was up by €264 million, to €1,216 million, representing a gross margin of 39%, up +0.3 percentage point year-on-year. The increase in gross profit in the Payment and Government Programs businesses more than offset the lower contribution from the Mobile segment.

Operating expenses were up by 2.3 percentage point of revenue to 25.4%, at (€793) million. The increase came primarily from the addition of SafeNet, running at a higher percentage of operating expenses than Gemalto's historical business, and from currency translation effects, which outweighed the absence of variable pay-out to management and employees related to profit from operations.

As a result, 2015 profit from operations came in at €423 million, representing 13.5% profit margin and up €40 million, +10.4% year-on-year.

Gemalto's financial income was (€38) million compared to (€12) million for 2014. Interest expense and amortized costs on the public bond, private placements and credit lines facilities amounted to (€13) million and foreign exchange transactions and other financial items amounted to (€24) million.

Share of profit in associates was €2 million for the full year 2015. As a result, adjusted profit before income tax came in at €387 million compared to €370 million the previous year, an increase of +5%.

Adjusted income tax expense increased to (€83) million, compared to (€54) million the previous year, as Gemalto tax rate is progressively converging toward its expected normative effective tax rate level.

Overall, the 2015 adjusted net profit for the Company was €303 million, lower by €12 million when compared to 2014.

Adjusted basic earnings per share came in at €3.45, and adjusted diluted earnings per share at €3.41, compared to 2014 adjusted basic earnings per share of €3.64 and adjusted diluted earnings per share of €3.55.

IFRS results
Fair value adjustments, mainly the non-cash amortization of the IFRS revaluation of SafeNet's pre-acquisition inventories and deferred revenue at their realizable value, accounted for (€71) million for the full year 2015. It was (€67) million for the first semester 2015, (€4) million for the second semester, and null in 2014. Amortization and depreciation of intangibles resulting from acquisitions, another non-cash element, came in at (€61) million versus (€27) million in 2014, also mainly due to the SafeNet acquisition. Restructuring and acquisition-related expenses increased to (€49) million versus (€30) million year-on-year, due to the acquisitions and to the restructuring of the Mobile Platforms & Services business and data centers. The equity-based compensation charge was reduced by (€17) million year-on-year, to (€39) million, as the Company long-term incentive plans are aligned with the multi-year development plan objectives and conditional on a set of cumulative progress indicators over the period.

The IFRS income tax rate came in at 18% for the year, up 4 percentage points versus 2014.

As a result, Gemalto recorded an IFRS operating profit (EBIT) of €203 million for 2015 compared to €270 million in 2014 and an IFRS net profit of €137 million for 2015 versus €221 million in 2014. IFRS basic earnings per share and diluted earnings per share came in at €1.56 and €1.54 respectively in 2015, compared to €2.55 and €2.49 respectively in 2014.

Statement of financial position and cash position variation schedule

For the full year 2015, Gemalto operating activities generated a cash flow before changes in working capital of €443 million, up +12%, compared to the €394 million generated in 2014. Change in working capital had a €65 million positive impact on the cash flow in 2015 compared to an (€81) million negative impact in 2014. Net trade receivables and payables improved year-on-year mainly from better cash collection, advance payments received as well as customer payments which had been delayed from 2014 to 2015.

The hedging currency protection program generated a cash outflow of (€124) million in 2015 which will be recovered within the next three years. Capital expenditure and acquisition of intangibles amounted to (€185) million, i.e. 5.9% of revenue. Property, Plant, and Equipment assets accounted for (€98) million of investment in 2015, compared to (€81) million in 2014, to support the fast growing businesses, particularly in the United States. Acquisition and Capitalization of development expenses represented (€88) million, with capitalization of development expenses representing 1.7% of revenue in 2015 compared to 1.5% in 2014.

Excluding the (€124) million prepaid derivative for hedging currency protection payment, free cash flow from operations increased by +74% at €293 million in 2015 compared to €169 million in 2014. When including this prepaid derivative payment, free cash flow from operations was €233 million in the second semester, leading to €170 million for the full year of 2015.

Cash outflow related to acquisitions, net of cash acquired, was (€897) million in 2015 versus (€84) million in 2014, mostly due to the acquisitions of SafeNet and Trüb.

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 2014. This distribution used €37 million in cash.

Gemalto's share buy-back program had no impact on the cash position in 2015 and the independently managed liquidity program generated a (€3) million cash outflow. As at December 31, 2015, the Company held 903,717 of its own shares in treasury, representing 1.0% of its issued and paid-up share capital. The total number of shares issued increased by +991,865 in 2015 to 89,007,709 as announced in first semester and, net of the 903,717 shares held in treasury, 88,103,992 shares were outstanding as at December 31, 2015. The average acquisition price of the shares repurchased on the market by the Company held in treasury as at December 31, 2015 was €40.20.

Net proceeds from financing activities generated a €117 million cash inflow, mainly coming from private placement loan issuances, credit line drawdown, financing of US operations and proceeds received by the Company from the exercise of stock options by employees.

Gemalto's cash and cash equivalents as at December 31, 2015 was €405 million. It was €1,057 million at the end of 2014. The current and non-current borrowings excluding bank overdrafts were €740 million.

As a result in particular of the (€897) million cash outflow from acquisitions, partly offset by the operating cash generation acceleration, the Company's financial position moved to a net debt position of €335 million as at December 31, 2015 from a €493 million net cash position at the end of 2014.

Proposed dividend
The Board of Gemalto has decided to propose to the 2016 Annual General Meeting of Shareholders the payment of a cash dividend of €0.47 per share in 2016 in relation with the 2015 financial year, a +12% increase compared to the cash dividend of €0.42 per share paid in 2015 in relation with the 2014 financial year. If approved, the time schedule related to the dividend payment will be as follows:

May 24, 2016 Ex-dividend date

(the date as of which shares are traded without the right to the 2015 dividend)

May 25, 2016 Dividend record date

(the date on which shareholder positions are recorded as per close of business in order to be entitled to the 2015 dividend distribution)

May 26, 2016 Payment date of dividend


Gemalto shares will trade ex-dividend as from the beginning of the trading session on May 24, 2016. Holders of Gemalto shares on May 24, 2016 who would not have previously sold their shares will be able to freely trade their shares on the stock exchange as from such date and will not need to block their shares until the payment date of the dividend to benefit from such dividend.

Outlook
For 2016, with the positive trends in Enterprise, Government Programs, Machine-to-Machine and the US EMV ramp-up effort completed, Gemalto expects to generate a +1.5 percentage point gross margin increase, accelerating its profit from operation expansion towards its 2017 objectives.

Live Audio Webcast and Conference call

Gemalto full year 2015 results presentation will be webcast in English today at 3pm Amsterdam and Paris time
(2pm London time and 9am New York time).

This listen-only live audio webcast of the presentation and the Q&A session will be accessible from our Investor web site:

www.gemalto.com/investors

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