VeriFone Systems Inc.’s taxi business is taking on increased importance for the point-of-sale terminal maker.
The unit has gone from generating nothing three years ago to a projected $60 million in annual revenue this fiscal year, which ends Oct. 30.
Meanwhile, VeriFone’s U.S. small business activity picked up, albeit slightly. “The standout segments in North America were petroleum, multi-lane and media,” VeriFone CEO Douglas G. Bergeron told analysts during a May 27 conference call to discuss the company’s fiscal second-quarter earnings. “We are starting to see some signs of life in small business, but nothing really to wave a flag about.”
The San Jose, Calif.-based company entered the in-taxi advertising market in 2007. The business should generate $10 million to $15 million each quarter during the current fiscal year, says Bergeron.
VeriFone generated a $20.2 million profit during the quarter ended April 30 on revenues of $240.7 million, a company record for second-quarter revenue.
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In May, VeriFone tweaked the in-taxi advertising system to enable advertisers to place content onscreen determined by the taxi’s location.
“For example, Del Frisco’s Steakhouse only wants their ad to play on the screen if the cab is within a certain radius of the store,” a VeriFone spokesperson explains. “We get this request frequently from both local and national advertisers. This benefits the advertiser greatly because it reduces wasted impressions and only focuses their ad when the rider is in close proximity, where it can have the biggest impact.”
Another feature, which VeriFone expects to launch in the third quarter, will enable riders to self-select advertising content for a particular merchant.
VeriFone’s taxi-media business stood out this year, says analyst Darrin D. Peller of New York-based Barclays Capital Inc. In particular, taxi advertising picked up during the quarter to VeriFone’s benefit, Peller says in a research note.
Earlier this year, VeriFone added to its taxi advertising sales force with the acquisition of Clear Channel Outdoor Inc., the taxi-advertising unit of Clear Channel Communications Inc.
VeriFone’s petroleum business also is contributing to the company’s financial results. Sales into the petroleum market typically account for approximately 25% of VeriFone’s quarterly revenue, Bergeron said. Tesoro Corp., a San Antonio-based gasoline retailer, recently signed a “multimillion”-dollar contract to install VeriFone’s Secure PumpPay system at its stations, he said.
Tesoro found that its multiple pump vendors could not supply secure pump terminals across a common system, Bergeron said. Approximately half of the 800,000 gas pumps in use within the United States do not meet PIN-encryption standards, according to VeriFone.
“VeriFone has a healthy presence in the petroleum area, which has been very good,” George Sutton, senior research analyst at Craig-Hallum Capital Group LLC, a Minneapolis-based investment firm, tells ISO&Agent Weekly.
VeriFone also says its VeriShield Protect, a transaction-encryption service, is gaining ground. One unnamed retailer will deploy the service to its 6,000 locations, starting with 800 stores next week, Bergeron said. An EMV chip card version of VeriShield Protect is in development and being tested by a major United Kingdom retailer, VeriFone says.
Regionally, revenue from the United States and Canada totaled $105.9 million during the quarter, up 27% from $83.4 million during the same period last year.
Analysts generally agree that VeriFone is well positioned continue growth.
“The core business, the petroleum business and the taxi-media business are performing above plan and should support solid growth this year,” Peller said.
“Results were very impressive, with PCI compliance and resumed strength in Latin America driving the upside,” Sutton said. “It is encouraging for the whole space that all major players are focused on improving gross margins as the market environment improves. The result (by definition) should be accelerating revenue growth with higher margins—typically a good outcome.
From the June 3, 2010, issue of ISO&Agent Weekly.
