Payments tech firm Verifone posted earnings Monday (Dec. 13) night that showed fiscal fourth quarter results topped analyst expectations. But guidance for the current quarter missed The Street, in part as the company continues to work across an EMV transition and, more recently, the announcement that EMV technology installation at the pump will be delayed for a few years.
The headline numbers showed that the firm earned an adjusted $0.30 a share on revenues of $468 million, compared to the $0.29 a share The Street had expected and the $460 million that had been estimated, driven by strength in Latin America, which held offset declines in the U.S.
Sales declined in the latest quarter on the tough comps of the EMV rollout last year, with a continued somewhat muted transition in the payments industry in North America to embrace the chip cards and, for Verifone, POS devices. In the meantime, the news this month that payment networks would be extending the liability shift for EMV “at the pump” (read: gas stations) out by three years to 2020 has led the firm to reduce guidance. As has been widely reported, gas station owners and operators across the U.S. had been delaying upgrades to pumps, due in part to the thousands of dollars it would cost, on average, for each pump to be outfitted with the technology to become EMV-compliant.
Thus, on the conference call with analysts, CEO Paul Galant stated that, while only 37 percent of storefronts across the country (as estimated by Visa) have begun accepting chip card transactions, remaining upgrades are likely to take place over “a more normalized” period, which will also be extended out. Five million terminals are likely to need upgrading as of year-end 2016, with “lower upgrade volume than we originally anticipated.” Mobility remains a key trend in retail, said the firm, and eCommerce initiatives should continue into 2017 with Engage and Carbon deployments across the United States and beyond. The company said that, by the end of next year, it will have built, organically, over 400,000 devices by year end.
Yet, management’s guidance said that earnings per share could come in at $1.35–$1.39, below the analyst estimate of $1.59, and sales at the top end of $1.9 billion as compared to The Street at $1.93 billion. And in the current first fiscal quarter, earnings could come in at $0.20 a share, leagues below the $0.36 analysts had been expecting.
That was enough to send shares down roughly 2 percent aftermarket, when earnings were reported. In part, said management, via CFO Marc Rothman, as there are a million pump locations across the country, “we were very disappointed and somewhat shocked at a three-year delay … We think that it will just stretch out how long it takes us to capture [those pumps], but the economics will go our way.”