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With much of its international business under pressure because of the strong U.S. dollar and weak economies in many countries, VeriFone Systems Inc.’s North America region once again proved to be the point-of-sale hardware and payments software provider’s saving grace. Powered by the U.S. conversion to EMV chip card payments, VeriFone reported late Thursday that its North American revenues grew 61% to $208.6 million in the quarter ended July 31 from $129.8 million in the year-earlier period.
The huge growth in fiscal 2015’s third quarter exceeded North America’s 54% year-over-year growth in the second quarter and the first quarter’s 31% increase. A large part, though exactly how much San Jose, Calif.-based VeriFone did not reveal, of the region’s growth is coming from the deployment of chip-reading POS terminals as the U.S. gets ever closer to the payment networks’ Oct. 1 liability shift. That shift will force merchants that can’t read a customer’s EMV chip card to eat the losses from any resulting counterfeit fraud if an old terminal causes a transaction to default to the card’s back-up magnetic stripe.
VeriFone executives on a conference call with analysts insisted that North America will keep on growing next year despite the fact that large, so-called Tier 1, retailers will have largely completed their EMV conversions. “We’ll continue to capitalize on EMV in the United States,” said chief executive Paul Galant. “We strongly believe that there is no 2016 North America revenue cliff from EMV.”
According to Galant, 8 million magnetic-stripe-only terminals at medium-sized and small merchants, some 60% of the U.S. terminal base, remain to be converted. “Tier 1 may be 90% done, but these other folks are not,” he said.
In addition, VeriFone expects $50 million in incremental revenues in fiscal 2016 from petroleum retailers, who face a 2017 EMV liability shift for fuel pumps and are a big customer segment for the company. Based on orders in its pipeline and other factors, VeriFone expects North American revenues to grow 3% next year on a “much, much larger base,” Galant said.
Beyond the U.S. EMV conversion, VeriFone also expects its new line of mobile POS devices to generate about $35 million in global revenues next year. One of the four largest U.S. wireless carriers has ordered one of the new products, the e355, for deployment in all of its stores. The e355 pairs with Apple Inc.’s iPad tablet computer, enabling retailers to accept payments anywhere in the store.
Also in the product pipeline is an interactive commerce system dubbed Verifone Engage, which facilitates two-way communications. The product is in test and will launch early in fiscal 2016.
VeriFone reported total revenues of $509.9 million—the first time it broke the half-billion-dollar mark in a quarter—up 7% from $475.9 million in fiscal 2014’s third quarter. Net income came in at $9.5 million versus a $29 million loss a year earlier.
