VeriFone’s U.S. EMV Focus Shifts From Large Retailers to Other Merchant Sectors

Multilane retailers provided much of the revenue lift that payment-acceptance hardware and software provider VeriFone Systems Inc. has enjoyed for the past couple of years as the U.S. prepped for the Oct. 1, 2015, EMV liability shift, but many of the big retailers have now completed their EMV purchases. Yet VeriFone is still expecting the EMV gift to keep on giving through gas stations, small and mid-sized businesses, and hotels and restaurants.

Such was the word from San Jose, Calif.-based VeriFone’s top brass Thursday during a conference call to review the company’s financial results for the first quarter of fiscal 2016 ended Jan. 31.

“Just as we expected, multilane revenue declined from prior periods due to the  significant episodic sales of EMV devices to Tier 1 retailers in 2015,” chief financial officer Marc Rothman said on the call. “And going forward, we see a lot of new opportunities in this business from enterprise hospitality, such as large hotel and restaurant chains, buying EMV devices and services, including mPOS [mobile point-of-sale systems], for the first time.”

Rothman also noted that VeriFone has certified new EMV equipment for smaller businesses and taxis, and the petroleum sector, a long-standing VeriFone market, is going great guns. Fuel pumps have an EMV liability shift in 2017. Rothman said VeriFone is developing EMV and media systems for fuel pumps with the big pump manufacturer Gilbarco Veeder-Root under a partnership announced in 2014.

“Petrol is now our largest North America business,” said Rothman.

Thanks to the EMV conversion, only a fraction of which is complete, in addition to services sales and other factors, VeriFone’s revenues from its North America region—the U.S. and Canada—jumped 47% year over year to $235.7 million. North America’s share of total company revenues grew from 33% in fiscal 2015’s first quarter to 46% a year later.

VeriFone’s results from its three other regions have been hurt by the weak economies in some countries and the strong U.S dollar, in addition to product gaps that VeriFone is working to close, especially in China.

In all, VeriFone reported net income of $23.5 million, up 70% from $13.8 million a year earlier, on revenues of $513.5 million, up 6% from $486.2 million.

Galant said the company continues to move away from just being a hardware provider toward generating more recurring revenues from software and services. But in the first quarter, total so-called systems sales grew nearly 8% to $337.6 million, no doubt because of so many U.S. EMV terminal deployments, compared with not quite 2% growth for services, to $175.9 million, or 34% of the company’s total revenues. Galant said he expects services to generate 45% of North American revenues by 2020.