Gemalto first semester 2014 results
- First semester revenue of €1.13 billion and profit from ongoing operations at €120 million
- Platforms & Services revenue up +10% and Embedded software & Products up +5%
- Strong performance in Mobile Financial Services (+24%) and EMV payment cards (+22%) was dampened by lower revenue from eGovernment documents and Netsize

Excluding the recently announced acquisition of SafeNet, Gemalto anticipates a double-digit expansion in its profit from operations in 2014 and an acceleration of its year-on-year revenue growth at constant exchange rates in the second semester, and with SafeNet, Gemalto expects its 2017 profit from operations objective of €600 million to increase by around +10%.

To better assess past and future performance, the income statement is presented on an adjusted basis and revenue figures above and in this document are for ongoing operations, with variations 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. Appendix 1 provides synthesis information for ongoing and total operations, and reconciliation with the IFRS income statement is presented in Appendix 2. 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 28, 2014 - Gemalto (Euronext NL0000400653 - GTO), the world leader in digital security today announces its results for the first semester 2014.

Key figures of the adjusted income statement
Year-on-year variations

Ongoing operations[1] (€ in millions)
First semester 2014 First semester 2013 at historicalexchange rates at constant exchange rates
Revenue 1,133 1,129 +0% +5%
Gross profit 418 428 (2%)
Operating expenses (298) (297) +0%
Profit from operations 120 131 (8%)
Profit margin 10.6% 11.6% (1.0 ppt)

Olivier Piou, Chief Executive Officer, commented: "The first semester was particularly busy in preparation for a year with pronounced seasonality. We extended our commercial momentum as revenue growth accelerated in the Mobile segment and new contracts were signed in the Payment & Identity segment that will generate significant revenue going forward. The ramp-up of EMV, the acceleration in the Government sector - fueled by the contracts we recently won, the launch of the previously delayed mobile contactless services and our expansion in the Identity & Access Management business all support our expectation for an accelerated revenue growth in the second part of the year. With strong operating leverage in place, we confirm our objective of double-digit increase in profit from operations for the full year 2014."

Basis of preparation of financial information

In this press release, the information for the first semester 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 interim condensed 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 take operating decisions over the period 2010 to 2017 is the profit from operations.

Profit from operations (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; and (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, Sales and Marketing, 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.

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. There is no difference for the year 2014.

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 is modified to report on progress towards the objectives set as part of the Company's new 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 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).

Appendix 6 presents revenue information in 2014 and 2013 formats.

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.

IFRS results
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. Appendix 2 provides the reconciliation between IFRS and adjusted income statements.

Restructuring and acquisition-related expenses grew to €21 million (€1 million in the first semester of 2013) due mainly to the re-balancing of certain industrial and engineering capabilities across worldwide sites to optimize future productivity. The equity-based compensation charge accounted for €27 million (€13 million in the first semester of 2013) as the Company introduced a new long-term incentive plan aligned with its 2014-2017 multi-year development plan objectives and is conditional on overall cumulative progress over the plan period. Amortization and depreciation of intangibles resulting from acquisitions amounted to €11 million (€13 million in the same period of 2013).

As a result of these additional expenses, Gemalto recorded an IFRS operating profit (EBIT) of €61 million for the first semester of 2014 (€104 million in the first semester of 2013).The IFRS net profit decreased to €46 million for the first semester 2014 from €81 million in 2013.

IFRS basic earnings per share and diluted earnings per share reduced to €0.53 and €0.52 respectively for the reported period compared €0.96 and €0.94 in the first semester of 2013.

Adjusted financial information for all operations
In this section, the financial information is presented for all operations. 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 2013, assets held for sale were minor non-strategic assets that were disposed during 2013 and there are no assets classified as held for sale for 2014.

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