Shift4 Payments : Q4 2024 Shareholder Letter
FOUR
Q4 2024 SHAREHOLDER LETTER
INVESTORS.SHIFT4.COM
Forward-Looking Statements
This letter contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Shift4 Payments, Inc. ("we," "our," the "Company," or "Shift4") intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this letter, other than statements of historical fact, including, without limitation, statements relating to our position as a leader within our industry; our future results of operations and financial position, business strategy and plans; the impact of changes in TRA liability; the anticipated benefits of and costs associated with recent acquisitions; and objectives of management for future operations and activities, including, among others, statements regarding expected growth, international expansion, future capital expenditures, debt covenant compliance, financing activities, debt service obligations including the settlement of conversions of our 2025 Convertible Notes, executive transitions and succession planning, the timing of any of the foregoing, and our financial outlook and guidance for 2025 and future periods, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "anticipate," "could," "intend," "target," "project," "contemplate," "believe," "estimate," "predict," "potential," or "continue" or the negative of these terms or other similar expressions, though not all forward-looking statements can be identified by such terms or expressions.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this letter. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: the substantial and increasingly intense competition worldwide in the financial services, payments and payment technology industries; potential changes in the competitive landscape, including disintermediation from other participants in the payments chain; the effect of global economic, political and other conditions on trends in consumer, business and government spending; fluctuations in inflation; our ability to anticipate and respond to changing industry trends and the needs and preferences of our merchants and consumers; our reliance on third-party vendors to provide products and services; risks associated with acquisitions; dispositions, and other strategic transactions; our inability to protect our IT systems and confidential information, as well as the IT systems of third parties we rely on, from continually evolving cybersecurity risks, security breaches or other technological risks; compliance with governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, marketing across different markets where we conduct our business; risks associated with a
variety of laws and regulations, including those relating to financial services, money-laundering, anti-bribery, sanctions, and counter-terrorist financing, consumer protection and cryptocurrencies; our ability to continue to expand our share of the existing payment processing markets or expand into new markets; additional risks associated with our expansion into international operations, including compliance with and changes in foreign regulations governmental policies, as well as exposure to foreign exchange rates; our ability to integrate and interoperate our services and products with a variety of operating systems, software, devices, and web browsers; our dependence, in part, on our merchant and software partner relationships and strategic partnerships with various institutions to operate and grow our business; and the significant influence Jared Isaacman, our CEO and founder, has over us, including control over decisions that require the approval of stockholders, including a change in control, his expected transition, and the timing of any of the foregoing. These and other important factors discussed under the caption "Risk Factors" in Part I, Item 1A. in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made in this letter. Any such forward-looking statements represent management's estimates as of the date of this letter. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.
Non-GAAP Financial Measures and Key Performance Indicators
We use supplemental measures of our performance which are derived from our consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). These non-GAAP financial measures include: gross revenue less network fees, which includes interchange and adjustment fees; adjusted net income; adjusted net income per share; free cash flow; Adjusted Free Cash Flow; earnings before interest expense, interest income, income taxes, depreciation, and amortization ("EBITDA"); Adjusted EBITDA; Adjusted EBITDA conversion rate; and Adjusted EBITDA margin.
Gross revenue less network fees represents a key performance metric that management uses to measure changes in the mix and value derived from our customer base as we continue to execute our strategy to expand our reach to serve larger, complex merchants.
Adjusted net income represents net income adjusted for certain non-cash and other nonrecurring items that management believes are not indicative of ongoing operations, such as acquisition, restructuring and integration costs, revaluation of contingent liabilities, impairment of intangible assets, gain (loss) on investments in securities, change in TRA liability, equity-based compensation expense, and foreign exchange and other nonrecurring items.
Adjusted EBITDA is the primary financial performance measure used by management to evaluate its business and monitor results of operations. Adjusted EBITDA represents EBITDA further adjusted for certain non- cash and other nonrecurring items that management believes are not indicative of ongoing operations. These adjustments include acquisition, restructuring and integration costs, revaluation of contingent liabilities, impairment of intangible assets, gain (loss) on investments in securities, changes in TRA liability, equity-based compensation expense, and foreign exchange and other nonrecurring items. Free cash flow represents net cash provided by operating activities adjusted for non-discretionary capital expenditures.
Adjusted EBITDA Margin represents Adjusted EBITDA divided by gross revenue less network fees.
Free cash flow represents net cash provided by operating activities adjusted for certain capital expenditures.
Adjusted Free Cash Flow represents free cash flow further adjusted for certain transactions that are not indicative of future operating cash flows, including acquisition, restructuring and integration costs, the impact of timing of annual performance bonuses, other nonrecurring expenses, and nonrecurring strategic capital expenditures that are not indicative of ongoing activities. We believe Adjusted Free Cash Flow is useful to measure the funds generated in a given period that are available to invest in the business, to repurchase stock and to make strategic decisions.
The Adjusted EBITDA conversion rate is calculated as Adjusted Free Cash Flow divided by Adjusted EBITDA.
We use non-GAAP financial measures to supplement financial information presented on a GAAP basis. We believe that excluding certain items from our GAAP results allows management to better understand our consolidated financial performance and, in the case of Adjusted Free Cash Flow, our liquidity, from period to period and better project our future consolidated financial performance as forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, we believe these non-GAAP financial measures provide our stakeholders with useful information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and, in the case of Adjusted Free Cash Flow, our liquidity, and enabling them to make more meaningful period to period comparisons. There are limitations to the use of the non-GAAP financial measures presented in this letter. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
The non-GAAP financial measures are not meant to be considered as indicators of performance, or in the case of Adjusted Free Cash Flow, as an indicator of liquidity, in isolation from or as a substitute for financial information prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis. Reconciliations each of EBITDA and Adjusted EBITDA, gross revenue less network fees, adjusted net income, adjusted net income per share, free cash flow and Adjusted Free Cash Flow to, in each case, its most directly comparable GAAP financial measure are presented in Appendix - Financial Information.
For 2025, we are unable to provide a reconciliation of Gross revenue less network fees, Adjusted EBITDA, and Adjusted Free Cash Flow to Gross Profit, Net Income, and net cash provided by operating activities, respectively, the nearest comparable GAAP measures, without unreasonable efforts. We are also unable to provide a reconciliation of free cash flow to net cash provided by operating activities for the three year period ended December 31, 2027 without unreasonable efforts. We encourage you to review the reconciliations in conjunction with the presentation of the non-GAAPfinancial measures for each of the periods presented. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. In addition, key performance indicators include end-to-endpayment volume, Blended Spread and margin. End-to-end payment volume is defined as the total dollar amount of payments that we deliver for settlement on behalf of our merchants. Included in end-to-endvolume are dollars routed via our international payments platform and alternative payment methods, including cryptocurrency and stock donations, plus volume we route to one or more third party merchant acquirers on behalf of strategic enterprise merchant relationships. This volume does not include volume processed through our legacy gateway-onlyoffering.
Blended Spread represents the average yield Shift4 earns on the average end-to-end payment volume processed for a given period after network fees.
Blended Spread is calculated as payments-based revenue less gateway revenue and network fees for a given period divided by the end-to-end payment volume processed for the same period.
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Dear Shareholders,
We wrapped up another reasonably strong quarter, executing well on our strategy - Over the next few weeks, after 26 years leading Shift4, I will transition my responsibilities to growing rapidly and profitably, generating free cash flow, improving our products, Taylor Lauber. Despite what some may think, I do not find this personally or professionally unlocking efficiencies, enhancing our capital structure and, most importantly, topping off challenging. Of course, there are so many great memories-fromour teenage basement days to what has become an impressive customer conversion funnel.
the ups and downs that forged Shift4 into the dreadnaught of a business it is today-but it is easy to step away knowing the company is well-positioned and in excellent hands. The timing feels ratherTo befortuitous:concise, Iwewanthavetodeliveredbreak downon everywhatpromisewe accomplishedfrom our IPO,thisandquarternow, alongsideand highlight
reasonablywhat we stillstronghaveQ4goingresults,forweuswillashostwe aiman Investorfor evenDaygreatto sert performancethe stage theonyearsthe roadahead. ahead.
The Investor Day will begin shortly after an abridged investor call, which you can access here: investorsAccomplishments.shift4.
Q3
This Investor Day will reinforce how Shift4 will continue to dominate in our selected verticals
• Despite accelerating some of the revenue model rebuild in our recent acquisitions
while expanding across the world. We will cover:
and facing some softening consumer spending, we delivered record
Volume of
43.5 Billion, $365 million of GRLNF, $187 million of EBITDA, $111 million of FCF,
•
Review of Q4 Results: We closed 2024 on a reasonably strong note, expanding into new
while maintaining spreads of 60bps.
geographies and securing significant wins, including the eighteen Alterra Mountain
•
Adjusted net leverage was
ketin
and we rebuilt our capital structure with new
____
Company resorts alongside tic
g for the iconic IKON Pass. We have continued to
enhanceprovidingoursubstantialproducts, efficientlyfirepower
deletingfor orgpanicrts andintelligeinorganictlyinvestmentsprioritizing ourasresourceswell as
andopportunisticrojects. As buybacksresult, our. products & services are in a lot more countries-- and our
cross-sell funnel is overfl
owing with opportunity.
• Expanded margins to
54%excluding recent M&A drag.
•
Deep Dive into SkyTab:
We exceeded our 2024 production goals, we
will cover recent
• Achieved major hospitality wins, including securing deals with
[Wynn Resorts and]
notable wins, the product roadmap (including our new mobile hardware SkyTab AIR), and
KSL Resorts, which encompasses 40 iconic properties like Blue Mountain,
our international expansion strategy. We are the second-fastest-growing player in this
Camelback, Deer Valley, and all the Hawaiian Outrigger brands. [We further won
vertical-and we don't like settling for second best.
Alterra ___ ]
•
Deep Dive into Hospitality: Highlights include recent wins like Alterra, renewal
of Great
• The sports, entertainment, and ticketing wins keep piling up including
_______
Wolf Lodge, signing the luxury Meritage Collection of resort hotels, as well as
new
stadiums.
features and updates to our international strategy. We are the global leader in serving
• Grew Skytab system installations quarter-over-quarter
_______,
including ramping
hospitality customers, which should be well reflected in the
signature wins we announce
production in the UK and Ireland.
each quarter.
••
DeepFollowedDive intoourSporstrategics & Entertainmentcustomers into:
winsnewincludecountriesaddingwithticketingmany morefor thelinedNew
Recent
Yorkup forYankethesbandlanceDallasof theMavericks,year. signing
agreements with the Portland Trail Blazers,
•
the Arizona Diamondbacks,
the University of Southern California, and partnering
h
Pulled forward the Reveland Vectron integration plan and began executing onwit e
Live Nation to power payments at their House of Blues venues. We were also honored to
V ctron 65,000 merchant conversion opp
rtunity across central Europe, with our
power payments for the College Football National Championship. Similar to Hospitality,
first installs already taking place.
when it comes to S&E, we are number one in the world.
• Announced the acquisition of Givex, expected to close in Q4, adding over 120,000
•
Introduction of the Unified Commerce Product: Over the last three years, we have built a
new gift and loyalty customers, representing what we believe to be over $300
robust "one platform, one integration" capability, enabling commerce all over the world.
billion in payment volume cross-sell opportunity. This acquisition also brings
This includes working alongside our strategic customer to shape the platform and then
product enhancements through a best-in-class gift and loyalty platform.
adding other enterprise merchants like St. Jude, Allegiant, BetMGM, Wolt and thousands
• Increased contracted volume backlog to $30B.
•
of others. Features include pay-ins, payouts, cross-border transactions, merchant-of-
We remain on track to close the year with
GRLNF exceeding 25% and
record (MOR) capabilities, local-to-local functionality,organicwide array of alternative payment
methodeasily surpas(APMs),ingintelligentall mid-termfraudoutlookmanagementgoalstools,setmoreand uniquethan threegeographicyears coverageago.
. It
is really that geographic coverage and strengths in card present and card not present that we think will drive so much growth. It is probably worth reinforcing that this platform was developed to meet the requirements of the world's most technologically advanced company and now it is ready for more just like them.
3
3
This brings us to the most significant acquisition announcement in Shift4's history-one that will transform our ability to win in unified commerce in every major market across the globe. We are pleased to announce our acquisition of Global Blue in an all-cash transaction. This opportunity has been years in the making, and only recently-thanks to the maturity of our global unified commerce platform-did we feel adequately prepared to unlock the full potential of this acquisition. Like many of our past deals, Global Blue has been overlooked and undervalued, but unlike others, this isn't a broken business. It's an exceptional one, and here's why:
With all of this in mind-and with no mystery about where our customers will come from over the next few years-I have complete confidence in Taylor and the team's ability to execute on the plan and deliver sustainable growth well into the future. This is reflected in our 2025 guidance and our new mid-term outlook, with the goal of reaching a $1 billion annual run rate in adjusted free cash flow within three years.
I will participate in the Investor Day and continue serving as CEO through confirmation, but this is likely my farewell. I could never have imagined that the company I started in my parents' basement would become the business it is today. And back then, I wasn't thinking about how my career would end, but if I had been, I wouldn't have dreamed of being nominated to lead the most accomplished space agency in the world. I have been fortunate to have a great career and I owe so much to my parents for letting me leave school to start this business-a risk I can hardly imagine allowing my own kids to ever take. I am immensely grateful to the Shift4 team for bringing so many ideas to life, the advisors and friends who supported us, the investors who believed in us, and, most importantly, this great nation, which makes the American Dream possible.
Sincerely,
Jared Isaacman
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4
Performance Highlights
Q4
Fourth Quarter 2024
+49% YoY
+47% YoY
+50% YoY
$139.3M • $205.9M
Q4 END-TO-END
GROSS PROFIT
GROSS REVENUE
NET INCOME
+51% YoY
PAYMENT VOLUME
LESS NETWORK
FEES(A)
ADJUSTED EBITDA(A)
Q4 End-to-End Payment Volume
($BILLION)
$47.9
63%
CAGR
Q4 2024 E2E
$32.1
payment
volumes were
$20.7
~7x
Q4 2020 levels
$13.4
$6.8
Q4-20 Q4-21 Q4-22
Q4-23 Q4-24
Net Income & Adjusted EBITDA(A)
($MILLION)
Net Income
Adjusted EBITDA
$205.9
$187.4
$162.4
$136.1
$139.3
$121.7
$72.2
$54.5
$19.2$28.5
Q4-23 Q1-24 Q2-24 Q3-24 Q4-24
Gross Profit & Gross Revenue Less Network Fees(A)
($MILLION)
Gross Profit: 4-Year CAGR 55%
Gross Revenue Less Network Fees: 4-Year CAGR 46%
$405.0
$269.3 $270.8
$199.4 $184.6
$146.9 $138.3
$88.8 $77.7
$47.2
Q4-20 Q4-21 Q4-22 Q4-23 Q4-24
Net Cash Provided by Operating Activities & Adjusted Free Cash Flow(A)(C)
($MILLION)
Net Cash Provided By Operating Activities
Adjusted Free Cash Flow
$142.5
$134.4
$131.0
$115.0
$111.8
$110.6
$75.3
$78.2
$76.0
$63.0
Q4-23 Q1-24 Q2-24 Q3-24 Q4-24
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Restaurant Update
Shift4 continues to gain market share in restaurants, winning new restaurants every day
Finished 2024 with nearly 38,000 SkyTab system installs, far exceeding our original 30,000 goal for the year
Installed hundreds of international restaurants across Canada, the UK, Ireland, and Central Europe
Search "Shift4"
on X (f.k.a. Twitter) to see
dozens of installs every day!
6
Hospitality Update: Alterra Mountain Company
Shift4 is proud to announce our second major collection of resort wins this quarter, Alterra, a group of 18 Ikon-ic mountain destinations
Includes the amazing Ikon pass!
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Hospitality Update
Continuing to expand market share in hospitality vertical
Shift4 has extended and expanded our partnership to power payments at Great Wolf's 22 U.S. locations, with plans to expand internationally starting with a new location opening soon in the UK.
Pasea Hotel & Spa
Ko'a Kea Resort
Steps from the beach and a short walk to the iconic Huntington Beach Pier, Paséa Hotel & Spa oceanfront luxury mixed with SoCal style.
Designed to be a romantic respite from reality, the award-winning Ko'a Kea Resort offers a luxury oceanside retreat on Kauai's Po'ipu Beach.
The Meritage Resort & Spa
Hotel Viata
The newly redesigned Meritage Resort and Spa is the largest Napa Valley resort, sprawling over 36 acres with 9 acres of active vineyards.
Hotel Viata offers the perfect luxurious and relaxing escape in a hillside hideaway just minutes from downtown Austin, TX.
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Hospitality Update
Continuing to expand market share in hospitality vertical
The Island at Fort Walton Beach ★
Harris Ranch Resort ★
This family friendly resort on Florida's Emerald Coast has everything you need in one place: beachy bliss, fun for everyone, delicious dining, ice-cold drinks, and all kinds of entertainment.
Trailborn Surf & Sound
Experience the ultimate beachside escape at this newly renovated resort on the North Carolina coast, featuring coastal accommodations and unique experiences from surfing to sailing.
Central California's Harris Ranch Resort delivers the epitome of quality accommodations and true relaxation with over 150 rooms offering modern on-site amenities.
Hotel Captain Cook ★
Located in the heart of downtown Anchorage, Alaska, Hotel Captain Cook is a perfect basecamp for adventure featuring four distinctive restaurants, 12 shops, and 546 rooms and suites.
Poco Diablo Resort
The Baywatch Resort
This full-service hotel and spa in Sedona, Arizona offers luxury accommodations, upscale on-site amenities, and breathtaking views of the iconic surrounding red rocks.
Nestled along the stunning shores of Lake Michigan, the Baywatch Resort offers modern amenities, breathtaking views, and unmatched hospitality.
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Sports & Entertainment Update
Powering payments through POS, mobile ordering, ticketing, and more
SIGNATURE WINS
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VENUES!
Shift4 has partnered with Live Nation to power payments at their House of Blues restaurant and music venues across the US.
NOW WITH TICKETING
Shift4 has expanded our relationship with the Yankees to now power the team's ticketing transactions in addition to the previously announced concessions & retail.
Dallas Mavericks
Arizona Diamondbacks
NOW WITH TICKETING
Shift4 will now power payments for ticketing transactions at American
Shift4 will power payments for food & beverage concessions at the
Airlines Center in addition to the F&B concession payments which we
Arizona Diamondbacks' Chase Field.
already process.
Portland Trail Blazers
University of Southern California
Shift4 has partnered with the Portland Trail Blazers to power payments for food & beverage concessions at their Moda Center arena.
Shift4 will power payments for food & beverage concessions at USC's Galen Center arena.
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Disclaimer
Shift4 Payments Inc. published this content on February 18, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on February 18, 2025 at 21:05:26.384.