Strong sales in the U.S. and Latin America helped VeriFone Systems Inc.'s fiscal third-quarter results beat Wall Street's expectations, and the company said demand for wireless payment systems and gas station terminals would help drive future earnings.
The San Jose terminal maker said its revenue for the quarter, which ended July 31, rose 24% from a year earlier, to a record $261 million.
"The driver of our North American business in 2011 will be continued fantastic performance in petroleum," VeriFone Chief Executive Doug G. Bergeron said Tuesday in a conference call with analysts. "The pay-at-the-pump initiatives now have got real traction."
Gasoline retailers' need for increased security at the pump boosted revenue in VeriFone's petroleum operations by 4% from the second fiscal quarter, and about 86% from the third quarter of last year.
"In the middle of the night, there is no security" for pumps left out in the open, said Barclays Capital Inc. analyst Darrin D. Peller.
"If [thieves] know how, they can figure out how to steal data off the terminal," Peller said. "Gas station operators are realizing that they could be at risk."
Bergeron told analysts that a broad range of merchant customers "aggressively updated" their terminals to meet new security standards that all the major payments networks imposed for PIN-entry devices.
Earlier this year the company began selling its PayWare Mobile reader in Apple Inc.'s retail stores.
Nearly every major processor already supports PayWare Mobile, Pete Bartolik, a VeriFone spokesman, said in April.
The payment application first became available through resellers in January, and the U.S. version of the software became available on Apple's iPhone in February.
In the meantime, the terminal maker's efforts to increase payment card acceptance in taxis and at gas pumps is helping business.
Bergeron said VeriFone's revenue from taxi terminals was $18 million in the quarter, "well ahead" of its yearend goal.
The company is also capitalizing on the video monitor systems used by many of the taxis by selling advertising on the monitors.
"Consumers are a captive audience," said Paul Rasori, senior vice president of marketing at VeriFone. "That can be used for more than just payment."
In May, Bergeron told analysts that he expects the company's in-taxi advertising business to generate revenue of $60 million a year starting in 2011. It entered that business in 2007.
Roughly 12 out of every 13 taxis in New York City have VeriFone's advertising devices, Peller said. And there is a lot of room for growth, both in the U.S. and abroad, he said.
"You know those annoying commercials, that's them," Peller said. "Anytime you swipe your card in a cab, there are a few basis points that go to [VeriFone]."
Bergeron also alluded to a large pending contract for PayWare Mobile — Peller said it could be with "a retailer like Avon, with a lot of out-of-home salespeople."
Peller said VeriFone has other initiatives that could "blossom." These include VeriShield Protect, which encrypts cardholder data from the moment the card is swiped on a PayWare Mobile-equipped iPhone.
At midday Wednesday, VeriFone shares were trading at $24.90, up 11.6% from Tuesday's closing price. The shares had reached a 52-week high of $24.95 earlier in the day.
