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VeriFone Systems, Inc. (PAY)
Citi Financial Technology Conference
November 7, 2012 2:20 PM ET
Bob Dykes - Executive Vice President and CFO
Philip Stiller - Citi
Philip Stiller - Citi
Previous Statements by PAY
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Bob, if you could talk about what the main drivers of that growth will be, perhaps we could walk through each of your major regions and talk about what you're seeing in terms of trends there and what you expect for next year.
Okay, Phil. I want to first of all say that I can’t take any questions on Q4, which we just finished our Q1 [ph] because that sort of would be too close, we’ll announce our results on December 13. But talking about longer term and that would -- I would say for the full year of ’13 would fall into that category.
The major drivers, first of all, was 70% international, a lot of that business comes from emerging markets, such as China and the rest of Asia, Latin America. Those markets still have very - well growing middle class, growing at a good rate. And that’s really going to contribute to drive up the installation of our terminals we think in the mid-teens to 20% type rates in those markets. Similarly with Eastern Europe, we see good rates there.
For next year, I think also we’ll get a recovery in Germany, because we started to roll out the new H5000 product, which is really [driving] [ph] our revenue in Germany this year.
In France, the recovery really won’t come until the middle of the year, because our VeriFone products with integrated NFC won’t be available on that point. So the French year-over-year may not be as big a deal, because the damage was more in the latter half of the year, but I think, that we’ll see, certainly during the year, recovery in France.
In North America, we are talking about growth here, now not large absolute numbers, but lot of exciting things happening in the advertising space are continuing to gain more traction in the taxis, rolling out at gas pumps for example, and the convenience stores, so there a lot of good things there.
And then, one of the biggest drivers is really happening in retail space these days. People talk about mobile but (inaudible) take lots of different forms. But the growth of our business putting software on to iPads and similar devices, and then when a customer comes into the store, having the sales clerks out from behind the counter and engage with the customer, so that they get their telephone number or some other identifier and so what did you buy last week, I see that you bought a red dress last week, can I sell you some shoes to accessorize that?
If the shoe’s out of stock then engage with the online store and have them to the customer’s house in two days for example. That’s the type of thing that we see a very exciting growth in North America.
There is a lot of talk about EMV and NFC and things like that. But retailers themselves are much more excited about how to compete with Amazon and get that incremental sale. And so this particular aspect of mobile payments I think is the most exciting thing that’s happening and that would definitely be a growth driver for us next year.
Philip Stiller - Citi
Can you talk about the competitive environment and there is multiple facets to it as well. We could talk about the mobile tablet area in a second. But can you talk about how you feel your business is positioned against competition from either traditional terminal providers or those that are trying to turn smartphones into mobile acceptance devices.
Okay. So we’ll start at the top. Our largest competitor is Ingenico. Similar cost structure to us, pricing is pretty stable and we are in similar markets with similar products, we really don’t compete on price, we compete on relationships and [I spoke to the person] [ph]. And the big picture, (inaudible) we compete with most of the time and the picture is pretty stable.
Next size down, people like Equinox, that’s the remnant of what was Hypercom they were -- they are a big player in the U.S. right now. They were a big player in other markets, since we bought them, obviously we’d able to - they are [ankle by the tight] [ph] prices (inaudible) raise those prices. And so, in the great scheme of things, prices have actually gone up, because of our ability to raise the Hypercom product prices.
And then, we have other competitors from Asia that are - PAX for example. But they tend to not be making much headway in most markets and so we’ve not had to do any pricing to compete against them.
Our business does involve quite a lot of services and other software services aspect, it may not be apparent to investors, but there is -- there are a lot of hooks and lot of software development around our products to make them pretty sticky in most markets, not every market but most markets are pretty sticky and it’s very difficult for these new entrants to get into those markets.