Full year revenue of €3.13 billion with an acceleration in fourth quarter revenue growth
Platforms & Services revenue exceeded �1 billion, a year ahead of the current multi-year development plan
Company gross margin increased by +155 basis points, to 40.5%
Profit from operations grew to €453 million with strong free cash flow of €318 million, leading to net debt of €67 million
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 3, 2017 at 12:00am - Gemalto (Euronext NL0000400653 - GTO), the world leader in digital security today announces its results for the full year 2016.

Key figures of the adjusted income statement

Year-on-year variations
(€ in millions)
Full year 2016 Full year 2015 at historical exchangerates at constantexchangerates
Revenue 3,127 3,122 = +1%
Gross profit 1,266 1,216 +4%
Operating expenses (814) (793) +3%
Profit from operations 453 423 +7%
Profit margin 14.5% 13.5% +94 bp

Philippe Vallée, Chief Executive Officer, commented: "Gemalto's performance in 2016 demonstrates the strength of its business model and ability to adapt in a very adverse Mobile environment. The Payment activity grew slightly, Machine-to-Machine and Enterprise posted double-digit growth rates, and Government Programs recorded another strong performance. The structural transformation of the Company continued with Platforms & Services surpassing its annual revenue objective of €1 billion a year ahead of the current multi-year development plan. Optimization efforts paid off in the Mobile and Payment & Identity segments resulting in the Company's gross margin exceeding 40% for the first time in its history and leading to an improvement in both profitability and cash generation. In 2017, Gemalto will focus its efforts on growing sales through an increase in cross-selling between businesses. Gemalto is currently working on its new multi-year development plan that will be presented towards the end of the year."

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 in 2015 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.

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) and with section 2:362(9) of the Netherlands Civil Code.

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 Share Purchase plans; (ii) the amortization of the fair value of share 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.

Net debt and net cash

Net debt is a non IFRS measure defined as total borrowings net of cash and cash equivalents. Net cash is a non IFRS measure defined as cash and cash equivalents net of total borrowings.

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.

Proposed dividend
The Board of Gemalto has decided to propose to the 2017 Annual General Meeting of Shareholders the payment of a cash dividend of €0.50 per share in 2017 in relation with the 2016 financial year, a +6% increase compared to the cash dividend of €0.47 per share paid in 2016 in relation with the 2015 financial year. If approved, the time schedule related to the dividend payment will be as follows:

May 22, 2017
Ex-dividend date

(the date as of which shares are traded without the right to the 2016 dividend)

May 23, 2017
Dividend record date

(the date on which shareholder positions are recorded as per close of business in order to be entitled to the 2016 dividend distribution)

May 24, 2017
Payment date of dividend

Gemalto shares will trade ex-dividend as from the beginning of the trading session on May 22, 2017. Holders of Gemalto shares on May 22, 2017 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 2017, Gemalto expects its profit from operations to be between €500 million and €520 million supported by positive trends in Government Programs, Machine-to-Machine, Enterprise and taking into account the adverse mobile environment and slower migration of payment cards in the United States.

The Company expects to finalize the acquisition of 3M Identity Management business in the first semester of 2017 and will update its 2017 outlook after the closing.

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