EMV Helps Drive VeriFone’s North American Revenues to a Record

Point-of-sale terminal maker VeriFone Systems Inc. continued to ride the U.S. EMV chip card wave in its first quarter of fiscal 2015 as sales of EMV-compliant payment card acceptance systems helped lift North American revenues by 31% to a quarterly record.

The San Jose, Calif.-based company late Tuesday reported revenues of $160.3 million from the U.S. and Canada for the quarter ended Jan. 31 versus $122.1 million a year earlier. North America brought in 33% of VeriFone’s total revenues of $486.2 million, up 11% from $436.1 million in fiscal 2014’s first quarter. Net income came in at $13.8 million versus a $16.2 million loss a year ago.

At a conference call with analysts, VeriFone chief executive Paul Galant attributed the North American increase to “market-share gains and continued momentum in EMV” as the U.S. heads toward a major EMV deadline in October. VeriFone said it secured 20 contracts from large retailers in the first quarter, including eight from competitors, and seven contracts in the hospitality industry. VeriFone customers include coffee chain Starbucks Corp., Galant said.

According to chief financial officer Marc Rothman, revenues from North American multi-lane retailers increased 18% from fiscal 2014’s last quarter and 44% year-over-year as merchants began installing VeriFone’s MX 900 line of EMV-capable terminals. Sales to merchant acquirers and independent sales organizations serving the small and mid-sized business (SMB) sector surged 15% from the prior quarter and 49% from a year ago.

“We are growing our SMB business by delivering a broader base of certified products across U.S. acquirers and benefiting from market tailwinds in security and EMV-related upgrades,” Rothman said.

All that growth had analysts questioning how long VeriFone can ride the EMV wave. Galant’s answer: Quite a while.

For example, VeriFone estimates that only 22% of what the company believes are 6.8 million lanes in SMB locations supported EMV late last year, and close to 40% will by the October 2015 liability shift. That’s when the payment card networks will assign liability for counterfeit fraud to the party in a transaction, be it merchant or issuer, that doesn’t support EMV. “SMB is the big one,” Galant said.

VeriFone estimates that 70% of the 1.8 million POS terminals at the nation’s top 200 retailers supported EMV as of last October and 90% will by October of this year. Of 460,000 estimated terminals at mid-tier retailers (ranked 201 to 1,000), 37% supported EMV in late 2014 and close to 60% will by next October, according to Galant. And some acceptance categories, such as fuel pumps, have virtually no EMV penetration yet, he said.

In all, about 33% of the estimated 10 million U.S. POS terminals supported EMV as of last October and 52% will by the liability shift, according to Galant. He added that another 3 million card-accepting “greenfield” lanes currently served by card swipes or keyboards could be outfitted with EMV terminals.

“I don’t see a cliff in the North America business,” he said.