Summary of VeriFone (PAY) Q4/2012 Earnings Conference Call December 13, 2012

Q4 non-GAAP revenues increased by 18 percent, of which 4 percent was organic growth (8 percent on a constant currency basis).  Non-GAAP gross margins were 44.2 percent of revenue.  Non-GAAP EPS increased by 43 percent.

Revenues in North America were strong in Q4 and the company believes the region will continue to be strong for several years.  There are a number of positive developments:  (1) there is increased interest in EMV, (2) the multilane retail systems grew substantially and are used by a number of major retailers, (3) VeriFone is providing touchscreen systems to a number of petroleum businesses, (4) Valero is implementing VeriFone's PAYMEDIA at its corporate-operated gas stations, (5) VeriFone has successfully added couponing to its VeriFone digital network, and (6) VeriFone has implemented a system allowing customers to purchase lottery tickets at the pump in Minnesota.

VeriFone has determined that its micro-merchant initiative, SAIL, is unprofitable and has decided to discontinue it.  Instead, it will focus on an indirect distribution channel to provide mobile payment solutions to micro-businesses.


In the taxi business, VeriFone won the Washington D.C. taxi business and has also signed a contract with Frias Transportation Management, the largest taxi, limo and shuttle company in Las Vegas.  VeriFone will be running ads on tablets in the back seats of cabs.  VeriFone will also be participating in the e-hailing of taxis in New York City.  It is also developing a system to allow the customer to pay for the taxi ride with their cell phone in order to be able to exit the taxi immediately.

VeriShield Protect, the encryption software business for securing cardholder data at a merchant is expanding with a total of 160 national merchants signed up.  A number of merchants have also signed up for GlobalPay Merchant payments, where merchants can accept payments on a tablet or handset.

Internationally, Europe was flat, Asia rebounded, and Latin America was down.  India was negatively impacted by the Reserve Bank of India's decision to reduce merchant discount rates for debit transactions. 

For 2013, VeriFone intends to increase its research and development to take advantage of opportunities in international markets.  It expects growth in North America and Asia, modest growth in Latin America and continued flatness in Europe. 

VeriFone may be considering a share repurchase plan, but it wants to wait until the fiscal cliff is resolved to make a decision.  It is currently hoarding cash.

The transcript of the earnings conference call can be found on Seeking Alpha at the following link:
http://seekingalpha.com/article/1063961-verifone-systems-ceo-discusses-f4q-2012-results-earnings-call-transcript?part=single

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