Verifone

Verifone Beats The Street, Orients Toward A Transformational Future

Verifone’s latest quarterly earnings report is out, and after beating The Street’s expectation for both the top and bottom line, investors are happy. Verifone’s stock price shot up about 3 percent in afterhours trading on news of the release — and will likely open at least 1 percent ahead of yesterday’s close when the bell rings on Wall Street this morning.

It was just the sort of good news that Verifone rather needed this week, as reports circulated that they had been the victim of a data breach. That breach, according to Verifone, was of a limited scope and only affected their corporate network — not their payments services network. But given Verifone’s POS size and scale, even the slightest possibility of a compromise in their payments services network had touched off more than a bit of concerned speculation.

During its earnings call yesterday, Verifone did not comment on the breach — but it did have an awful lot to say about what’s next for the firm.

“2017 is an important launch year for Verifone’s next generation devices and services, and it really is an inflection point with the continued success of the company,” CEO Paul Gallant told investors in the post-release debrief. “We are on track with our execution as we start the multiyear journey to deliver topline growth and margin expansion. Verifone’s strategy is to scale our next generation devices and connect them with our expanded services to establish solutions platforms that power the future of payments and commerce.”

How did the delivery look?

By The Numbers

Verifone reported earnings of $23.2 million — or earnings per share of $0.21 for the quarter — beating the Thomson Reuters’ consensus estimate of $0.20 by $0.01. That does represent a fairly steep (59 percent) year-on-year decline — earnings in Q1 2016 clocked in at $53.7 million, or $0.48 per share.

Topline revenue figures also beat the street, coming in at $457 million during the quarter — analyst estimates were $449.37 million. Once again, that is a year-on-year decline of 11.1 percent from Q1 2016’s results of $513.6 million.
Verifone Systems updated its Q2 guidance to $0.29 EPS and its FY17 guidance to $1.35-1.39 EPS.

Beyond The Numbers: What’s Next

Verifone’s future, CEO Paul Galant said, is connected to payments hardware — but also to more than that. The goal — and the transformation underway, Galant noted — is to integrate the next generation of Verifone devices into a broader, connected and service-oriented ecosystem that Verifone represents.

Notably, Galant had nothing but nice things to say about his putative competitors in the mPOS space.

“I think First Data, and Clover and Square have done a phenomenal job of creating a new category, and it’s a category that I think will have not just North American, but global implications. Verifone’s position in this space is that we are a scale player, far greater scale than those two in terms of our device footprint — and we will be using that scale to really, I think, accelerate the third party development community’s interaction with our platform and our devices and the merchants and acquirers that we serve.”

Galant further noted that he views this as “an interoperable world” and that merchants should not be hardware-locked to use the software applications they want.

“So, if we have a litany of third party developers developing on a Verifone platform, that should be able to be used by Clover and others. I think that is the way that we all help to grow our industry — and I, for one, am very excited about that.”

Galant pointed to Verifone’s efforts in India, where payments terminals are more the exception than the rule — of its willingness to think outside of the box, and about the services the local areas need.

“India starts with having one of the lowest terminal per population stats, I mean 1.3 billion people in India and right now you have basically 1.1 terminals per thousand people, right. You compare that to the United States which has about, 44 terminals per thousand people and I’ll give you another fun stat, when I started looking, China was four terminals per one thousand people in 2011 — it’s now up 17, so clearly India has some upside and perhaps a long way to go. But we’re focused on more than just the payment devices. We’re also very interested in continuing to grow our services platform and with all those new devices will come a lot of needs that merchants and acquirers are going to have.”

And those needs — like the rest of the payments commerce ecosystem — are evolving. Which means the plan, according to Galant and Verifone’s executive team, is a long-term one oriented toward a future that is changing in real time.

Verifone is committed to changing with it — and to using its scale to get there.

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