VeriFone Systems Inc.

Overview Key strengths Key risks Good brand recognition within the point-of-sale hardware market as one of the two leading global vendors. Global supply chain disruptions and semiconductor chip shortage that prevent VeriFone from meeting hardware shipment demand. Increasing services revenue that should provide better revenue visibility over time. Negative working capital outflows depressing free operating cash flow (FOCF) generation in 2022, mainly due to building inventory. Above average profitability with margin accretion stemming from price increases to offset inflationary pressures as well as adequate liquidity. Rising risk of recession and uncertain macroeconomic environment that may hurt demand given the company?s high exposure to competitive and fragmented small and midsize businesses. While profits dwindle for financial hardware manufacturers such as NCR

...We expect supply chain constraints will persist through 2023 and hinder VeriFone Systems Inc.'s ability to capitalize on near- term strong demand. While profits dwindle for financial hardware manufacturers such as NCR and Diebold, VeriFone has avoided similar cost pressures mainly because it raised prices this year, offsetting much of the interim margin pressure caused by increasing freight costs and foreign exchange headwinds. VeriFone is on pace to post S&P adjusted EBITDA margins of 20.7% in 2022, a decent increase from 19.7% in 2021. The company has maintained book-to-bill above 1x since April 2021, indicating that its slower growth in...

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