The secure electronic payment solutions provider, VeriFone Systems (PAY, Financial), has been a surprise to the Street. Its remarkable performance has been one of the brightest spots for investors, and its shares have risen 43% since the beginning of the year. This was mainly due to the earnings beat in the last four quarters. The company also reported its third-quarter numbers recently, which once again smashed the expectations of the analysts, sending its share price higher.
What brought the good news
Revenue surged 13.5% to $491 million, over last year's quarter. Also, it was higher than the analysts' estimate of $487 million. One of the primary reasons for growth was an increase in the number of client signups for payment as a service solution. Also, the retailer's efforts have been quite interesting in this regard, resulting in a higher top line
Going by the segments, the System solutions segment is the largest category, which makes more than 60% of total revenue. Revenue in this segment was up 19.9% to $310.9 million, over last year. Also, the Service segment revenue increased 4.5% to $179.6 million, helping total sales grow.
Geographically, all the regions registered growth. Revenue from North America jumped 19.8% to $149.1 million due to an increase in the company's EMV capable MX 900 series products. The LAC region also grew 16% to $82 million as Mexico witnessed higher sales. The EMEA region was also up 5.6% to $189 million because of growing demand in the U.K., Spain, France and Italy.
The Asia Pacific and other emerging markets have been the most lucrative regions as sales surged 23.6% to $70 million. This was also due to increase in demand in the markets of China, New Zealand and Australia.
The gross margin expanded 90 basis points to 41.5%, over last year, due to lower taxi media revenue as well as lower R&D expense. The earnings of the company jumped to $0.36 per share from $0.12 per share, much higher than the estimate of $0.09 per share.
The road ahead
There are a large number of efforts made by the company in order to increase its business. First, it is making efforts to restructure its business in order to cut costs. Thus, it has cut 500 jobs and closed some of its businesses, which has reduced its cost burden. ChargeSmart, an online bill payment business, was closed in this regard.
Further, its payment terminals also offer entertainment to customers and the electronic payment company is also making various promotions. In addition, it plans to expand its business in the overseas market with a special focus on mobile and digital technology. These efforts make VeriFone even more interesting.
The bottom line
It is quite clear that VeriFone is making the right steps and the results are evident. Along with a blockbuster quarter, the company provided a bright guidance for the year. It has increased its revenue guidance to a range of $2.02 billion to $2.04 billion as against the earlier estimate of $1.858 billion to $1.863 billion. Also, the bottom line is expected to be in between $1.85 per share and $1.90 per share as against $1.46 per share to $1.47 per share, earlier. Thus, VeriFone Systems seem to have a bright future as clearly evident from its past results, current efforts and an upgraded guidance. Investors should take a look at it.
