Earnings

Verifone Beats On Q4 Estimates — But Misses On 2018 Forecasts

Verifone showed some stronger than expected results when it reported its Q4 2017 earnings yesterday — with both revenue and earnings coming in ahead of analyst expectations.

Shares were down in after-hours trading, as Verifone’s forecasts for fiscal year 2018 and next quarter both came in below analysts’ estimates.

By The Numbers

Verifone reported earnings per share of 44 cents — just slightly edging out analyst estimates of an EPS of 43 cents. Revenue also came in ahead of analyst expectations — clocking in at 477 million in Q4 2017, as opposed to the expected 472 million — an increase of 2.6 percent year-on-year.

Verifone also reported a big quarter for services, with $208 million in revenue, 43 percent of the total. The fourth quarter also represented the first year-over-year and sequential revenue growth in both its systems and services businesses since mid-2016.

For the full year picture, Verifone reported revenue of $1.871 billion, falling slightly short of forecasts of $1.874 billion by analysts. The firm is also reporting operating cash flow of $166 million.

“The Verifone team continues to make meaningful progress executing our strategy to transform Verifone from a terminal sales company to a platform services company, delivering payment and commerce solutions that help our clients grow sales and reduce operating costs while enabling Verifone to grow our base of recurring services revenue,” said Paul Galant, chief executive officer of Verifone. “Our focus now shifts from launching our next-generation devices and solutions to scaling them across the globe.”

During the conference call with analysts, the CEO said that its connected device roster included 1.8 billion terminals, which contributed half a billion dollars in recurring revenues — growing at a high single digit percentage rate — driven in part by payments as a service solutions in North America.

Saying Goodbye To Taxis

Shortly before Verifone’s latest earnings went public, the payments hardware and services company announced that it had found a buyer for its taxi business. The identity of that buyer remains a mystery, but Verifone has noted a buy price of $30 million.

Verifone had announced in June that it was looking to divest the unit, which was reportedly falling short of performance targets for both payments and advertising revenue. The 12-year-old business line generates a little over $100 million a year in revenue and operates in a number of big-city fleets in the United States and abroad. Double-digit growth was also seen in that region’s retail segment, management said on the call.

Verifone also noted in a filing that it expects to use the net proceeds from the taxi divestiture, plus available cash, to complete the remaining $50 million authorized under its previously-announced $200 million stock buyback program.

What’s Next

Verifone’s projected revenue of $1.775-1.8 billion came in well below the analyst consensus of $1.92 billion. Their Q1 2018 estimates were also below analyst targets — revenue of $431-433 billion, versus the consensus of $465.61 billion.

That was enough to send share prices down in after-hours trading, though Galant said the growth in service in 2017 gives him confidence in the 2018 road map. Among the call outs on the call was carbon, where Galant told analysts that “people see it … as an entire device family” and that customers are “interested in the services platform that we have driving it, including our soon-to-be-launched advanced marketplace for applications.”

In other remarks, he said “I’m confident we’ll get back to growth in 2018, offsetting the three-year push-out in U.S. petroleum EMV.”

Galant also noted, along with CFO Marc Rothman, that the retail and SMB segments are seeing traction in North America.  Turning to Europe, management stated that mid single-digit growth of five to seven percent is in order going forward.

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