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Posera HDX Signs LOI to Acquire Terminal Management Concepts to Expand its Footprint in EMV Card Business
[June 19, 2014]

Posera HDX Signs LOI to Acquire Terminal Management Concepts to Expand its Footprint in EMV Card Business

(Baystreet Stocks to Watch (Canada) Via Acquire Media NewsEdge) Credit card theft is a major problem worldwide with the digital world that we now live in leaving countless consumers subject to exploitation. Companies have searched for answers, including P.F. Chang's recent move to send out vintage credit card imprinters – the old school ones that involved mechanically swiping the device over the card, creating several copies – after customer's credit card information was stolen. Those old enough will remember when the big threat at that time was someone getting a hold of the carbon copies from those transactions.

Before the world has to go too retro, it's clear that there is demand for more secure forms of payment processing, which are coming...and coming quickly.

The magnitude of credit card info theft in the U.S. alone is staggering as brazen hackers regularly crack into leading companies. In 2007, hackers tapped into Heartland Payment Systems, stealing some 130 million credit card numbers. Those same hackers were attributed for the 2011 breach at Global Payments involving more than one million accounts and costing the company nearly $100 million. These were only a few of the thieves' criminal activities, as they also hit Commidea Ltd. (30 million credit cards), Hannaford Brothers (4.2 million credit cards) and Euronet (two million credits cards), to name just a few. Other big name companies have also be victims of "hacktivist" networks, such as Adobe (150 million credit cards), TJ Maxx (46 million credit cards) and TRW Information Systems (90 million credit cards) and Target (110 million credit cards).

These security breaches are leading to broader industry employment of EMV chip and PIN technologies worldwide. EMV, which is short for EuroPay, MasterCard and Visa, is a joint effort amongst the three companies to bolster security and ensure global interoperability of chip-based payment cards. The payment industry is in the midst of a dynamic shift to credit cards that are embedded with microchips to enhance security, with the goal of making a full transition to these new cards by October 2015.

The EMV-chip cards, which store and protect cardholder data, are inserted into a terminal with the user then following prompts to complete transactions. Unlike traditional credit cards, EMV cards do not have magnetic strips, which are easily copied and reproduced.

As part of the shift to EMV cards, card issuers are moving more of the liability for fraudulent transactions to merchants that don't conform and start processing at least three-quarters of their transactions through an EMV-enabled terminal by October of next year.

These changes in the payment business play into the wheelhouse of Toronto-based Posera-HDX Ltd. (TSX:HDX), a developer and marketer of point-of-sale system software and associated enterprise management tools. The company has deployed in excess of 20,000 systems throughout Canada and Europe, all of which are EMV chip and PIN enabled and certified. The United States is a major market opportunity, as the world's largest economy is actually one of the last jurisdictions in the world to implement the technology, creating an urgent need to widespread adoption in short order.

Posera-HDX said on Wednesday that it is broadening its offerings by acquiring Terminal Management Concepts Ltd. Only the letter of intent was announced; no terms of the agreement were disclosed.

Terminal Management Concepts, which is headquartered in Markham, Ontario with a development centre in Mumbai, India, provides wireless EMV chip and PIN "pay at the table" credit and debit card processing software and hardware to more than 2,000 Canadian merchants. Terminal's POS-agnostic middleware bridges gaps left by other technologies where software and hardware have to be matched to an establishment's POS system, which will come in handy in quickly meeting demand before the EMV deadline happens in 15 months.

The company is also developing new point-of-purchase solutions on the latest hand-held hardware for the hospitality environment.

"TMC's products give our sales team the ability to achieve payment processing relationships with restaurants that currently use competitive POS solutions. TMC's software, in conjunction with HDX's intellectual property and services, provides merchants with one-stop-shopping, one monthly payment, and one source for technical support of all of their retail technology solutions," said Paul Howell, CEO of Posera-HDX, in a statement today.

In December, Posera-HDX completed the acquisition of Zomaron Inc., a provider of credit and debit card processing solutions with 140 sales agents across Canada. The two acquisitions could pave the way to another strong year at Posera-HDX. In 2013, the company had its best year on record, posting an 18.6% improvement in revenue to $19.51 million. Net loss was trimmed from $4.79 million in 2012 to $992,438 in 2013.

From an EBITDA standpoint, the company swung to a profit of $943,596, compared to an EBITDA loss of $1.12 million a year earlier. Shares of HDX remain relatively thinly-traded and closed the day flat at 34 cents on Wednesday, equating to a market capitalization of $20.18 million.

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