EMV Continues Lifting VeriFone as the Terminal Maker Preps for the ‘Year of Product’

Point-of-sale terminal maker VeriFone Systems Inc. saw a nearly 20% increase in its fourth-quarter North American revenues as U.S. merchants continued to prepare for Europay-MasterCard-Visa (EMV) chip card acceptance. Looking forward, the company is getting ready to introduce major new products in fiscal 2015, a year chief executive Paul Galant dubbed the “year of product.”

San Jose, Calif.-based VeriFone, which now uses the brand name “Verifone,” reported Monday that its U.S.-Canada revenues hit $149.1 million in fiscal 2014’s fourth quarter ended Oct. 31, an increase of 19.8% from $124.5 million a year earlier. North America accounted for 30% of VeriFone’s worldwide revenues of $490.5 million, up 13.8% from $431.2 million in fiscal 2013’s last quarter.

Some of the North American growth came from Canada, where VeriFone is shipping new, more competitive products. But as they have in recent quarters, chip card-reading töerminals are driving VeriFone’s U.S. sales as merchants prepare for the card networks’ so-called liability shift in October 2015. That’s when the party in a card transaction that doesn’t support EMV, issuer or merchant, will bear the responsibility for any resulting counterfeit fraud.

Galant told analysts late Monday that about 90% of the products VeriFone shipped in the U.S. in fiscal 2014 supported EMV, and the EMV conversion will be far from complete 10 months from now despite the liability shift. Plus, petroleum merchants, a big market for VeriFone, have until 2017 to upgrade their fuel pumps before they face a lability shift. “We expect to benefit from EMV-driven upgrades for the foreseeable future,” said chief financial officer Marc Rothman.

About 70% of large, what Galant calls Tier 1, merchants have EMV terminals, and he expects about 90% will by late 2015. EMV penetration among mid-size, Tier 2 and 3 merchants is about 35% today and should be about 55% in a year, he said.

But only about 22% of small merchants have an EMV-capable terminal. Galant expects that number to “more or less double by 2015, which is a tall order” since the group consists of 7 million merchants with 9 million devices, he said. And over time, Verifone is eyeing a market for selling 3 million terminals to small businesses that don’t use such devices today. “EMV is absolutely a tail wind in the United States,” Galant said.

Late next year, VeriFone also will begin introducing a terminal platform and new products that Galant describes as “seriously exciting.” The devices will reflect the widespread move to integrate mobile commerce with the point of sale, and move the industry “well beyond one-dimensional, purpose-built devices,” according to Galant. VeriFone, however, will continue to support its existing products, allowing merchants to migrate to the new platform “at their own pace,” Galant said. As part of the effort, VeriFone has hired Glen Robson, chief technology officer at PC maker Dell Inc., to head its global terminal-solutions business, Galant announced.

VeriFone reported fourth-quarter net income of $31.1 million compared with a $247.7 million loss a year earlier, when it took a $242 million non-cash charge.