200 Billion Reasons To Buy This Payment Processor

The Shift4 story begins like many tech legends – with founders working out of their parents’ basements. However, in addition to the fact that Shift4 isn’t based in Silicon Valley, there is a key difference between this company and its tech peers. Shift4 wasn’t founded by a college dropout. In fact, its founder didn’t go to college at all. When it launched in 1999, the brains behind the new business belonged to 16-year-old Jared Isaacman.

Isaacman knew he had a gift for technology early on. He dropped out of high school and got a GED to pursue this passion. Along the way, he realized that the traditional payment processing system was impossibly broken. Merchants who wanted to offer customers the convenience of credit cards had to complete a long application and pay for their card reader equipment. It took a month or more to complete the process, which led to frustration for everyone involved.

Shift4 Payments Pops 46% On 1st Trading Day

The alternative Isaacman offered was simple and streamlined. Through his company, United Bank Card, merchants could start swiping customers’ cards within a day or so. The application was just two pages long, and equipment was free, making United Bank Card a popular alternative to the products available from commercial banks.

After a series of acquisitions and name changes, United Bank Card eventually became Shift4 Payments. The company has moved far beyond the old card readers to advanced technology that facilitates in-demand services like digital payments.

Isaacman didn’t stop testing boundaries and pushing limits after building the company now known as Shift4 Payments from an idea in his parents’ basement to a multi-billion dollar business. For example, when the COVID-19 pandemic put the rest of the world on hold, Isaacman prepped Shift4’s IPO. The company went public in June 2020, and Shift4 stock went up 46 percent on its first day of trading.

It’s worth noting that in between growing this business and taking it public, Isaacman managed a number of major accomplishments completely unrelated to payment processing. In 2009, after just five years of flying lessons, he set a new world record by circumnavigating the globe in just under 62 hours. In 2012, he co-founded another company that performs flight training for members of the US military. In 2021, he served as commander for the SpaceX flight that marked the first time a fully-private mission went to space.

All of these accomplishments are critical to understanding the driving force behind Shift4 Payments. The company’s leader is a bold risk-taker with a talent for innovation and the skill to break records and disrupt entire industries.

200,000+ Customers + 7,000 Partners = $200 Billion Payment Volume

The company originally known as United Bank Card went through a number of changes to become Shift4 Payments. First, in 2012, Isaacman realized that the old name no longer fit as consumers and businesses transitioned to advanced payment technology. That led to a complete rebranding, and United Bank Card became Harbortouch — a name still used by one of Shift4’s subsidiaries today.

However, between Harbortouch and Shift4 Payments, there was another identity. In 2017, the company became known as Lighthouse Network. It was at this point that Harbortouch became a subsidiary.

The Lighthouse Network brand was short-lived, though. In a matter of months, the company completed its acquisition of Shift4 Corporation and renamed itself again. That’s when Shift4 Payments was introduced, and that is the brand that gained recognition as one of the few COVID-era IPOs.

Since its IPO, Shift4 has continued its expansion by acquiring a variety of complementary businesses. For example, Shift4 bought out the e-commerce platform 3dcart and rebranded it as Shift4Shop. It also acquired VenueNext in 2021 to increase its presence as a point-of-sale provider for sports and entertainment venues.

Shift4’s most recent acquisitions include Finaro, which increases access to the global payments market, and The Giving Block, a platform for philanthropy through cryptocurrency exchange.

All of the work put into building world-class payment solutions has paid off with an impressive list of stats:

• Years in Business — 25+
• Technology Integrations — 350+
• Annual Payment Volume — $200+ billion
• Annual Transaction Volume — 3.5+ billion
• Current Customers — 200,000+
• Sales Partners — 7,000+

With so much activity, it goes without saying that Shift4 must be pulling in substantial revenues, but exactly how does the company make money?

How Does Shift4 Make Money?

Shift4’s biggest strength is that the whole is greater than the sum of its three parts: the payments platform, technology solutions, and a partner-centric distribution model.

The payments platform is designed to be flexible and adaptable. It can integrate and scale updated technology as payment transfer software becomes more sophisticated. In addition to basics like credit, debit, and contactless cards, Shift4 can facilitate payments through EMV, QR Pay, and mobile wallets.

Shift4 is compatible with WeChat Pay, Google Pay, Apple Pay, and Alipay, among others, and it is always on the lookout for opportunities to expand its payment ecosystem. That’s because each time a payment is made with the help of Shift4 payments processing, a small fee is assessed. These processing fees are the biggest contributor to Shift4’s top-line revenues, and it is worth noting that for the fourth quarter of 2021, net processing revenues were up by 79 percent year-over-year.

The second area of the business that brings in revenue is Software-as-a-Service (SaaS). Shift4 solutions offer businesses the technology they need to compete in the digital age. Examples include:

• VenueNext — a white-label mobile platform for all of the purchases patrons make at sports and entertainment venues
• Shift4Shop — simple setup of online storefronts for businesses that want to add an e-commerce channel
• Lighthouse — an extensive package of business intelligence tools and resources that include intuitive analytics
• SkyTab — combination cloud/point-of-sale platform to increase efficiency and reduce expenses for restaurant and sports/entertainment venue clients

All of these services are available to clients on a subscription basis which generates reliable recurring revenue. For the fourth quarter of 2021, SaaS revenue increased by 38 percent year-over-year.

Shift4 has expanded through acquisition, but that’s not to say that it neglects organic growth. Its partner-centric distribution model puts 7,000 software partners to work on introducing Shift4 solutions to their networks of merchants. It’s a win/win. Shift4 is key to the growth of those software partners, and in turn, those software partners contribute to Shift4’s growth as they increase their client base.

More Revenue Than Ever Before

Shift4 announced its results for Q4 2021 on March 1, 2022, and the executive leadership team had a consistent message: the company is growing. The quarter delivered more solutions, more transactions, and more revenue than ever before, and leaders said those figures will continue to increase throughout 2022 and beyond.

Highlights from the report include:

• Quarterly End-to-End Payment Volume — $13.4 billion (an increase of 97 percent year-over-year)
• Quarterly Gross Revenue — $399.4 million (an increase of 89 percent year-over-year)
• Net Loss — ($13.7) million or ($0.17) per basic and diluted Class A and Class C share
• Adjusted Net Income — $7.2 million or $0.08 per basic and diluted Class A and Class C share
• EBITDA — $22.7 million
• Adjusted EBITDA — $44 million
• Adjusted EBITDA Margins — 30 percent

Of course, the big news is whether and how Shift4 will show up in 2022 and 2023. After all, when it comes to whether Shift4 stock is a buy, where the company is going is more important than where it has been.

Is FOUR Stock A Buy?

The guidance for full-year 2022 shows the leadership team’s faith that Shift4 will continue its growth trend. Specific projections include the following:

• Full-Year End-to-End Payment Volume — from $68 billion to $70 billion, representing growth of 46 percent to 50 percent year-over-year
• Gross Revenues — from $1.9 billion to $2 billion, representing growth of 37 percent to 44 percent year-over-year
• Gross Revenue Less Network Fees — from $675 million to $705 million, representing growth of 28 percent to 33 percent year-over-year
• Adjusted EBITDA — from $240 million to $250 million, representing growth of 44 percent to 50 percent year-over-year
• Full-Year Margin — approximately 35 percent, which would represent an increase of 300 basis points over full-year 2021’s 31.6 percent

The plan is to reinvest a portion of the margin into the business with a heavy focus on new verticals and expanding markets.

Of course, these estimates are based on the information available today, and any number of internal and external events could derail Shift4’s progress. For example, any resurgence of COVID-19 threatens restaurant, entertainment, and sporting event attendance, which would reduce volume – and revenues – associated with products like VenueNext and SkyTab.

On the other hand, industry experts note that the company provides payment support across a diverse mix of industries and markets, which puts it in a solid position to weather temporary challenges. When considered alongside the fact that digital payments are quickly becoming the preferred method of payment, the takeaway is clear Shift4 stock is a buy.