[FORM 10-Q General Information](index=1&type=section&id=FORM%2010-Q%20General%20Information) [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides official details of Shift4 Payments, Inc., including its state of incorporation, principal executive offices, and telephone number - Shift4 Payments, Inc. is incorporated in Delaware, with its principal executive offices located at 2202 N. Irving Street, Allentown, Pennsylvania 18109[3](index=3&type=chunk) [Securities Information](index=1&type=section&id=Securities%20Information) Details regarding the Company's registered securities are provided, specifically its Class A Common Stock | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------------------ | :---------------- | :---------------------------------------- | | Class A Common Stock, $0.0001 par value per share | FOUR | The New York Stock Exchange | [Filer Status](index=2&type=section&id=Filer%20Status) The Company's filing status under the Securities Exchange Act of 1934 is identified - The registrant is classified as a 'Large accelerated filer'[8](index=8&type=chunk) [Outstanding Shares](index=2&type=section&id=Outstanding%20Shares) This section reports the number of outstanding shares for each class of common stock as of a specific date | Class of Common Stock | Shares Outstanding (as of July 29, 2022) | | :-------------------- | :--------------------------------------- | | Class A Common Stock | 51,092,250 | | Class B Common Stock | 25,829,016 | | Class C Common Stock | 3,650,380 | [Table of Contents](index=3&type=section&id=Table%20of%20Contents) [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights that the report contains forward-looking statements covered by safe harbor provisions, emphasizing that actual results may differ materially due to known and unknown risks - Forward-looking statements are subject to known and unknown risks, including the adverse effects of the COVID-19 pandemic, intense competition, reliance on third-party vendors, acquisition risks, and the significant influence of the Company's Founder[12](index=12&type=chunk)[13](index=13&type=chunk)[14](index=14&type=chunk) [PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements and their accompanying notes for the periods ended June 30, 2022 and 2021 [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased from **$2,342.6 million** to **$2,299.6 million**, while total liabilities increased and stockholders' equity significantly decreased | Metric (in millions) | June 30, 2022 | December 31, 2021 | | :------------------------- | :------------ | :---------------- | | Total Assets | $2,299.6 | $2,342.6 | | Total Liabilities | $2,032.2 | $1,942.9 | | Total Stockholders' Equity | $267.4 | $399.7 | | Cash and cash equivalents | $1,018.2 | $1,231.5 | | Goodwill | $627.1 | $537.7 | [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2022, the company reported significant growth in gross revenue and net income, and for the six months, it turned a net loss into a net income | Metric (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross revenue | $506.7 | $351.0 | $908.6 | $590.3 | | Gross profit | $105.8 | $78.1 | $190.4 | $129.9 | | Income (loss) from operations | $22.9 | $4.9 | $11.2 | $(38.6) | | Net income (loss) | $15.0 | $4.5 | $1.8 | $(46.5) | | Net income (loss) attributable to Shift4 Payments, Inc. | $10.3 | $3.2 | $2.8 | $(29.6) | | Class A net income (loss) per share - basic | $0.19 | $0.06 | $0.05 | $(0.56) | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) For the three months ended June 30, 2022, comprehensive income was **$14.4 million**, up from **$4.5 million** in the prior year, showing significant improvement for the six-month period | Metric (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $15.0 | $4.5 | $1.8 | $(46.5) | | Unrealized income (loss) on foreign currency translation adjustment, net of tax | $(0.6) | — | $(0.6) | — | | Total other comprehensive income (loss) | $(0.6) | — | $(0.6) | — | | Comprehensive income (loss) | $14.4 | $4.5 | $1.2 | $(46.5) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity decreased from **$399.7 million** at December 31, 2021, to **$267.4 million** at June 30, 2022, influenced by net income, stock issuance, repurchases, and noncontrolling interests | Metric (in millions, except shares) | December 31, 2021 | June 30, 2022 | | :---------------------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $399.7 | $267.4 | | Additional paid-in capital | $619.2 | $635.5 | | Treasury stock, at cost | $(21.1) | $(28.8) | | Retained deficit | $(325.3) | $(422.8) | | Noncontrolling interests | $126.9 | $83.9 | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2022, net cash provided by operating activities significantly increased to **$85.0 million**, while net cash used in financing activities rose due to stock repurchases | Metric (in millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $85.0 | $5.0 | | Net cash used in investing activities | $(87.1) | $(115.5) | | Net cash used in financing activities | $(211.0) | $(117.6) | | Change in cash and cash equivalents | $(213.3) | $(228.1) | | Cash and cash equivalents, End of period | $1,018.2 | $699.7 | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the figures presented in the condensed consolidated financial statements, covering organization, accounting policies, acquisitions, revenue, debt, equity, and other financial components [1. Organization, Basis of Presentation and Significant Accounting Policies](index=13&type=section&id=1.%20Organization,%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note details the Company's organizational structure, financial statement preparation basis, liquidity plans, accounting policies, and the impact of recently adopted accounting pronouncements - Shift4 Payments, Inc. is a leading provider of integrated payment processing and technology solutions, serving diverse verticals including food and beverage, hospitality, stadiums, gaming, retail, non-profits, and eCommerce[27](index=27&type=chunk) - The Company consolidates the financial results of Shift4 Payments, LLC, where Shift4 Payments, Inc. acts as the primary beneficiary and sole managing member[30](index=30&type=chunk) - As of June 30, 2022, the Company had **$1,772.5 million** in total debt outstanding and expects to remain compliant with financial covenants for at least 12 months[34](index=34&type=chunk) - The Company adopted several accounting pronouncements, including ASC 842 (Leases), ASU 2016-13 (Credit Losses), ASU 2021-08 (Business Combinations), ASU 2021-05 (Lessors), and SAB 121 (Crypto-assets)[38](index=38&type=chunk)[39](index=39&type=chunk) - The adoption of SAB 121 resulted in the recognition of **$1.2 million** in crypto settlement assets and liabilities on the balance sheet as of June 30, 2022[42](index=42&type=chunk) [2. Acquisitions](index=17&type=section&id=2.%20Acquisitions) This note details the Company's recent acquisition of The Giving Block and the pending acquisition of Finaro, outlining the purchase considerations and strategic rationales for each - The Company acquired The Giving Block on February 28, 2022, for **$106.9 million** (net of cash acquired), aiming to accelerate growth in the non-profit sector with significant cross-sell potential[45](index=45&type=chunk) - A definitive agreement was entered into on March 1, 2022, to acquire Finaro for **$200.0 million** in cash, **6,439,316 shares** of Class A common stock (valued at approximately **$325.0 million**), and a performance-based earnout of up to **$50.0 million** in Class A common stock, expected to accelerate growth in international eCommerce markets[55](index=55&type=chunk) | Acquisition | Date of Acquisition/Agreement | Total Purchase Consideration (net of cash acquired) | | :--------------- | :---------------------------- | :------------------------------------------------ | | The Giving Block | February 28, 2022 | $106.9 million | | Finaro (Pending) | March 1, 2022 | $200.0 million cash + $325.0 million stock + up to $50.0 million earnout | [3. Revenue](index=19&type=section&id=3.%20Revenue) This note disaggregates the Company's gross revenue into payments-based revenue and subscription and other revenues, and provides details on contract assets and liabilities | Revenue Type (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Payments-based revenue | $473.9 | $324.8 | $845.4 | $540.7 | | Subscription and other revenues | $32.8 | $26.2 | $63.2 | $49.6 | | Total Gross Revenue | $506.7 | $351.0 | $908.6 | $590.3 | - Deferred revenue increased to **$20.6 million** as of June 30, 2022, from **$17.4 million** at December 31, 2021, primarily due to timing differences between customer payments and satisfaction of performance obligations[59](index=59&type=chunk) [4. Goodwill](index=20&type=section&id=4.%20Goodwill) This note outlines the changes in the carrying amount of goodwill, primarily driven by recent acquisitions | Metric (in millions) | December 31, 2021 | June 30, 2022 | | :------------------------- | :---------------- | :------------ | | Balance at beginning of period | $537.7 | $537.7 | | The Giving Block Acquisition | — | $89.4 | | Balance at end of period | $537.7 | $627.1 | - Goodwill increased by **$89.4 million** to **$627.1 million** at June 30, 2022, primarily due to The Giving Block acquisition[62](index=62&type=chunk) [5. Other Intangible Assets, Net](index=20&type=section&id=5.%20Other%20Intangible%20Assets,%20Net) This note provides a breakdown of other intangible assets, their net carrying values, and estimated future amortization expenses | Intangible Asset (in millions) | December 31, 2021 Net Carrying Value | June 30, 2022 Net Carrying Value | | :------------------------------------- | :----------------------------------- | :--------------------------------- | | Merchant relationships | $66.4 | $67.8 | | Acquired technology | $58.3 | $54.7 | | Trademarks and trade names | $16.5 | $24.7 | | Capitalized software development costs | $33.5 | $49.2 | | Residual commission buyouts | $13.8 | $22.6 | | Total other intangible assets, net | $188.5 | $219.0 | - Estimated amortization expense for other intangible assets for the remaining six months of 2022 is **$27.4 million**, with a total of **$219.0 million** expected over future periods[64](index=64&type=chunk) [6. Capitalized Acquisition Costs, Net](index=22&type=section&id=6.%20Capitalized%20Acquisition%20Costs,%20Net) This note details the Company's capitalized acquisition costs, net, and their associated amortization expenses and future amortization schedule | Metric (in millions) | December 31, 2021 | June 30, 2022 | | :------------------------------- | :---------------- | :------------ | | Capitalized acquisition costs, net | $35.1 | $36.6 | - Amortization expense for capitalized acquisition costs was **$12.7 million** for the six months ended June 30, 2022[66](index=66&type=chunk) - The estimated future amortization expense for capitalized acquisition costs for the remaining six months of 2022 is **$11.1 million**, with a total of **$36.6 million** expected through 2025[67](index=67&type=chunk) [7. Equipment for Lease, Net](index=23&type=section&id=7.%20Equipment%20for%20Lease,%20Net) This note provides information on the Company's equipment held for and under lease, including their net carrying values and depreciation expenses | Metric (in millions) | December 31, 2021 | June 30, 2022 | | :----------------------------- | :---------------- | :------------ | | Total equipment for lease, net | $58.4 | $65.2 | - Depreciation expense for equipment under lease was **$14.4 million** for the six months ended June 30, 2022[69](index=69&type=chunk) [8. Property, Plant and Equipment, Net](index=23&type=section&id=8.%20Property,%20Plant%20and%20Equipment,%20Net) This note details the components of property, plant and equipment, net, and their associated depreciation expenses | Metric (in millions) | December 31, 2021 | June 30, 2022 | | :--------------------------------------- | :---------------- | :------------ | | Total property, plant and equipment, net | $18.4 | $17.7 | - Total depreciation expense for property, plant and equipment was **$2.5 million** for the six months ended June 30, 2022[70](index=70&type=chunk) [9. Debt](index=24&type=section&id=9.%20Debt) This note provides a breakdown of the Company's outstanding debt, including convertible notes and senior notes, their maturity dates, and interest rates, along with details on a recent consent solicitation and the revolving credit facility | Debt Type (in millions) | Maturity Date | Effective Interest Rate | June 30, 2022 Principal | | :---------------------- | :------------ | :---------------------- | :---------------------- | | 2025 Convertible Notes | Dec 15, 2025 | 0.49% | $690.0 | | 2027 Convertible Notes | Aug 1, 2027 | 0.90% | $632.5 | | 2026 Senior Notes | Nov 1, 2026 | 5.13% | $450.0 | | Total Borrowings | | | $1,772.5 | - In March 2022, the Company completed a consent solicitation to amend the indenture governing the 2026 Senior Notes, incurring **$4.5 million** in consent payments and **$1.4 million** in transaction-related expenses[75](index=75&type=chunk) - The Revolving Credit Facility had a borrowing capacity of **$99.5 million** as of June 30, 2022, with no outstanding borrowings[76](index=76&type=chunk) [10. Other Consolidated Balance Sheet Components](index=25&type=section&id=10.%20Other%20Consolidated%20Balance%20Sheet%20Components) This note provides a detailed breakdown of prepaid expenses and other current assets, as well as accrued expenses and other current liabilities, highlighting significant changes such as the contingent liability earnout for The Giving Block | Metric (in millions) | December 31, 2021 | June 30, 2022 | | :-------------------------------------------- | :---------------- | :------------ | | Prepaid expenses and other current assets | $12.7 | $12.1 | | Accrued expenses and other current liabilities | $42.9 | $97.3 | | Contingent liability earnout - The Giving Block | — | $58.9 | | Crypto settlement assets | — | $1.2 | | Crypto settlement liabilities | — | $1.2 | [11. Fair Value Measurement](index=26&type=section&id=11.%20Fair%20Value%20Measurement) This note describes the Company's fair value measurements, including the hierarchy of inputs used and the valuation of contingent liabilities and outstanding debt - Contingent liabilities from acquisitions, such as The Giving Block earnout, are measured using Level 3 unobservable inputs, with an estimated fair value of **$57.5 million** as of June 30, 2022[84](index=84&type=chunk)[85](index=85&type=chunk) | Debt Type (in millions) | June 30, 2022 Carrying Value | June 30, 2022 Fair Value | December 31, 2021 Carrying Value | December 31, 2021 Fair Value | | :---------------------- | :--------------------------- | :----------------------- | :------------------------------- | :--------------------------- | | 2025 Convertible Notes | $678.7 | $560.4 | $677.0 | $735.4 | | 2027 Convertible Notes | $619.7 | $448.7 | $618.7 | $556.5 | | 2026 Senior Notes | $440.4 | $402.1 | $443.9 | $465.7 | | Total | $1,738.8 | $1,411.2 | $1,739.6 | $1,757.6 | [12. Income Taxes](index=27&type=section&id=12.%20Income%20Taxes) This note explains the Company's income tax structure, effective tax rates, and the accounting for the Tax Receivable Agreement (TRA) | Metric | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :----------------- | :------------------------------- | :----------------------------- | | Effective Tax Rate | 6.3% | (152.9)% | - The effective tax rate differs from the U.S. federal statutory rate primarily due to the loss allocated to noncontrolling interests and full valuation allowances on deferred tax assets[91](index=91&type=chunk) - A **$248.3 million** liability under the Tax Receivable Agreement (TRA) has not been recognized, as it was not probable that such payments would be made based on estimates of future taxable income[94](index=94&type=chunk) [13. Lease Agreements](index=29&type=section&id=13.%20Lease%20Agreements) This note provides details on the Company's operating leases as both a lessee (primarily for office space and equipment) and a lessor (providing hardware to merchants) | Metric (in millions) | June 30, 2022 | December 31, 2021 | | :------------------------ | :------------ | :---------------- | | Right-of-use assets | $16.2 | $18.5 | | Current lease liabilities | $4.1 | $4.8 | | Noncurrent lease liabilities | $16.0 | $17.9 | | Total lease liabilities | $20.1 | $22.7 | - Total lease income as a lessor was **$8.7 million** for the six months ended June 30, 2022, from providing hardware to merchants under operating leases[101](index=101&type=chunk) [14. Related Party Transactions](index=30&type=section&id=14.%20Related%20Party%20Transactions) This note describes transactions and relationships with related parties, including a service agreement with the Founder, the change in Searchlight's status as a related party, and the Founder's variable prepaid forward contracts - The Company incurred **$0.5 million** in expenses for the six months ended June 30, 2022, under a service agreement with its Founder, Jared Isaacman[103](index=103&type=chunk) - Searchlight is no longer considered a Continuing Equity Owner or a related party as of May 24, 2022, following the redemption of all its LLC Interests[104](index=104&type=chunk) - The Founder, through a wholly-owned special purpose vehicle, entered into variable prepaid forward contracts (VPF Contracts) covering approximately **4.44 million shares** of the Company's Class A common stock, with settlement dates in 2023 and 2024[107](index=107&type=chunk)[108](index=108&type=chunk) [15. Commitments and Contingencies](index=31&type=section&id=15.%20Commitments%20and%20Contingencies) This note addresses the Company's involvement in legal proceedings and claims, and its efforts to seek compensation for a significant vendor platform outage - The Company is not aware of any legal proceedings or claims that are expected to have a material adverse effect on its business, financial condition, or operating results[112](index=112&type=chunk) - The Company is seeking compensation through various channels for a significant payment processing service disruption caused by a TSYS platform outage in August 2021[111](index=111&type=chunk) [16. Stockholders' Equity/Members' Deficit](index=31&type=section&id=16.%20Stockholders'%20Equity/Members'%20Deficit) This note details the Company's stock repurchase programs and the related activities during the reporting period - The Board authorized three stock repurchase programs (December 2021, May 2022, and June 2022) totaling **$250.0 million** for Class A common stock through December 31, 2022[113](index=113&type=chunk) | Metric | Six Months Ended June 30, 2022 | | :-------------------------------------- | :----------------------------- | | Shares of Class A common stock repurchased | 3,887,191 | | Cost of repurchases (including commissions) | $184.4 million | | Average price paid per share | $47.40 | | Amount remaining available for future purchases | $44.5 million | [17. Noncontrolling Interests](index=32&type=section&id=17.%20Noncontrolling%20Interests) This note explains the noncontrolling interests in Shift4 Payments, LLC and the changes in ownership percentages | LLC Interests Ownership | June 30, 2022 | December 31, 2021 | | :---------------------- | :------------ | :---------------- | | Shift4 Payments, Inc. | 67.8% | 68.2% | | Continuing Equity Owners | 32.2% | 31.8% | | Total | 100.0% | 100.0% | - Searchlight ceased to be a Continuing Equity Owner as of May 24, 2022, after redeeming all its outstanding LLC Interests[119](index=119&type=chunk) [18. Equity-based Compensation](index=32&type=section&id=18.%20Equity-based%20Compensation) This note describes the Company's 2020 Incentive Award Plan, including recent amendments, and the recognized and unrecognized equity-based compensation expenses - The 2020 Incentive Award Plan was amended to increase the number of Class A common shares available for issuance to **7.5 million** and the annual 'evergreen' increase to **2%** of outstanding shares[121](index=121&type=chunk) | Metric (in millions) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Equity-based compensation expense | $9.3 | $26.2 | - Total unrecognized equity-based compensation expense related to outstanding RSUs and PRSUs was **$92.9 million** at June 30, 2022, expected to be recognized over a weighted-average period of **3.33 years**[124](index=124&type=chunk) [19. Basic and Diluted Net Income (Loss) per Share](index=34&type=section&id=19.%20Basic%20and%20Diluted%20Net%20Income%20(Loss)%20per%20Share) This note presents the calculation of basic and diluted net income (loss) per share for Class A and Class C common stock, and identifies securities excluded from diluted EPS calculations | Metric | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :-------------------------------------- | :------------------------------- | :----------------------------- | | Class A net income (loss) per share - basic | $0.19 | $0.05 | | Class C net income (loss) per share - basic | $0.19 | $0.05 | | Class A net income (loss) per share - diluted | $0.18 | $0.02 | | Class C net income (loss) per share - diluted | $0.18 | $0.02 | - Certain LLC Interests, RSUs, and Convertible Notes were excluded from the calculation of diluted net income (loss) per share due to their anti-dilutive effect or not meeting conversion price conditions[128](index=128&type=chunk)[129](index=129&type=chunk) [20. Supplemental Cash Flows Information](index=36&type=section&id=20.%20Supplemental%20Cash%20Flows%20Information) This note provides supplemental cash flow disclosures, including cash paid for interest and income taxes, and details on noncash investing and financing activities | Metric (in millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------------------------------- | :----------------------------- | :----------------------------- | | Cash paid for interest | $12.4 | $10.5 | | Cash paid for income taxes, net of refunds | $0.1 | $0.3 | | Noncash investing activities (The Giving Block acquisition shares and equity-based compensation awards) | $36.5 | — | [21. Segments](index=37&type=section&id=21.%20Segments) This note clarifies that the Company operates as a single operating and reportable segment and provides a summary of gross revenue by revenue type - The Company's operations constitute one operating segment and one reportable segment, as the Chief Operating Decision Maker (CODM) reviews financial information on a consolidated level[133](index=133&type=chunk) | Revenue Type (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Payments-based revenue | $473.9 | $324.8 | $845.4 | $540.7 | | Subscription and other revenues | $32.8 | $26.2 | $63.2 | $49.6 | | Gross revenue | $506.7 | $351.0 | $908.6 | $590.3 | [22. Subsequent Events](index=37&type=section&id=22.%20Subsequent%20Events) This note discloses significant events that occurred after June 30, 2022, including additional acquisitions, changes in executive leadership, and board realignment - Subsequent to June 30, 2022, the Company acquired three technology vendors for approximately **$56.8 million** and committed approximately **$120.0 million** to acquire ongoing merchant relationships and secure non-solicitation rights[135](index=135&type=chunk)[136](index=136&type=chunk) - Bradley Herring resigned as Chief Financial Officer, effective August 5, 2022, and Nancy Disman was appointed as the new Chief Financial Officer and principal financial officer, effective the same date[137](index=137&type=chunk)[139](index=139&type=chunk) - The Board of Directors realigned its classification to achieve an equal balance of membership among the classes of directors, effective August 5, 2022[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive discussion and analysis of the Company's financial condition, results of operations, and cash flows, including an overview of its business, recent developments, factors impacting performance, key financial definitions, and comparisons of financial results for the reported periods [Overview](index=39&type=section&id=Overview) Shift4 is a leading independent provider of payment acceptance and processing solutions in the U.S., offering an end-to-end payments platform and technology solutions through a partner-centric distribution network of over 7,000 ISVs and VARs - Shift4 is a leading independent provider of payment acceptance and processing and technology solutions in the United States, distributing services through internal teams and a network of over **7,000** independent software vendors (ISVs) and value-added resellers (VARs)[143](index=143&type=chunk)[146](index=146&type=chunk) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | End-to-end payment volume | $16.9 billion | $11.8 billion | $30.3 billion | $19.8 billion | | Contribution to gross revenue less network fees | 72% | 68% | 70% | 65% | [Recent Developments](index=40&type=section&id=Recent%20Developments) The Company authorized stock repurchase programs totaling **$250.0 million** through December 31, 2022, repurchasing **$184.4 million** of Class A common stock in the first six months of 2022, and completed or has pending significant acquisitions - The Board authorized stock repurchase programs totaling **$250.0 million** through December 31, 2022, under which **3,887,191 shares** of Class A common stock were repurchased for **$184.4 million** during the six months ended June 30, 2022[149](index=149&type=chunk)[150](index=150&type=chunk) - The Company acquired The Giving Block for **$106.9 million** (net of cash acquired) on February 28, 2022, and has a pending acquisition of Finaro for **$200.0 million** in cash, **6,439,316 shares** of Class A common stock (approximately **$325.0 million**), and a performance-based earnout of up to **$50.0 million**[151](index=151&type=chunk)[152](index=152&type=chunk) [Factors Impacting Our Business and Results of Operations](index=41&type=section&id=Factors%20Impacting%20Our%20Business%20and%20Results%20of%20Operations) Key factors influencing the business include increased adoption of software-integrated payments, conversion of gateway-only customers, merchant base mix, ability to attract and retain software partners, continuous investment in product and operations, strategic acquisitions, and macroeconomic conditions - Business growth is significantly impacted by the increased adoption of software-integrated payments and the conversion of gateway-only customers to end-to-end payment offerings[154](index=154&type=chunk)[155](index=155&type=chunk) - The ability to attract and retain software partners, continuous investment in product development and enhancements, and the pursuit of strategic acquisitions are critical for future growth and profitability[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - Macro-level consumer spending trends and economic conditions, including seasonal patterns, can cause fluctuations in quarterly revenue[161](index=161&type=chunk) [Key Financial Definitions](index=43&type=section&id=Key%20Financial%20Definitions) This section defines the key components of the Company's revenue and expenses as presented in the Condensed Consolidated Statements of Operations - Gross revenue consists of payments-based revenue (fees for processing and gateway services) and subscription and other revenues (SaaS fees, hardware sales, support, and other miscellaneous services)[162](index=162&type=chunk)[163](index=163&type=chunk) - Cost of sales includes interchange and processing fees, residual commissions, equipment costs, and amortization of capitalized software development, acquired technology, and customer acquisition costs[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Operating expenses encompass general and administrative, depreciation and amortization, professional fees, advertising and marketing, restructuring, and transaction-related expenses[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) [Comparison of Results for the Three Months Ended June 30, 2022 and 2021](index=44&type=section&id=Comparison%20of%20Results%20for%20the%20Three%20Months%20Ended%20June%2030,%202022%20and%202021) For Q2 2022, gross revenue increased **44.4%** to **$506.7 million**, driven by a **45.9%** rise in payments-based revenue due to a **43%** increase in end-to-end payment volume, leading to a **221.9%** surge in net income attributable to Shift4 Payments, Inc | Metric (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | $ Change | % Change | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Gross revenue | $506.7 | $351.0 | $155.7 | 44.4% | | Payments-based revenue | $473.9 | $324.8 | $149.1 | 45.9% | | Subscription and other revenues | $32.8 | $26.2 | $6.6 | 25.2% | | Gross profit | $105.8 | $78.1 | $27.7 | 35.5% | | Income from operations | $22.9 | $4.9 | $18.0 | NM | | Net income attributable to Shift4 Payments, Inc. | $10.3 | $3.2 | $7.1 | 221.9% | - The increase in payments-based revenue was primarily driven by a **$5.0 billion**, or **43%**, increase in end-to-end payment volume for the three months ended June 30, 2022, compared to the prior year[176](index=176&type=chunk) [Comparison of Results for the Six Months Ended June 30, 2022 and 2021](index=46&type=section&id=Comparison%20of%20Results%20for%20the%20Six%20Months%20Ended%20June%2030,%202022%20and%202021) For H1 2022, gross revenue increased **53.9%** to **$908.6 million**, with payments-based revenue up **56.4%** due to a **52.8%** increase in end-to-end payment volume, leading to a significant improvement from a net loss to a net income attributable to Shift4 Payments, Inc | Metric (in millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | $ Change | % Change | | :---------------------------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Gross revenue | $908.6 | $590.3 | $318.3 | 53.9% | | Payments-based revenue | $845.4 | $540.7 | $304.7 | 56.4% | | Subscription and other revenues | $63.2 | $49.6 | $13.6 | 27.4% | | Gross profit | $190.4 | $129.9 | $60.5 | 46.6% | | Income (loss) from operations | $11.2 | $(38.6) | $49.8 | (129.0)% | | Net income (loss) attributable to Shift4 Payments, Inc. | $2.8 | $(29.6) | $32.4 | NM | - The increase in payments-based revenue was primarily driven by a **$10.5 billion**, or **52.8%**, increase in end-to-end payment volume for the six months ended June 30, 2022, compared to the prior year[191](index=191&type=chunk) [Key Performance Indicators and Non-GAAP Measures](index=50&type=section&id=Key%20Performance%20Indicators%20and%20Non-GAAP%20Measures) This section presents key performance indicators and non-GAAP financial measures, including end-to-end payment volume, gross revenue less network fees, EBITDA, and Adjusted EBITDA, along with their reconciliations to GAAP measures | Metric (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | End-to-end payment volume | $16,873.1 | $11,833.9 | $30,294.0 | $19,820.7 | | Gross revenue less network fees | $182.6 | $136.3 | $331.4 | $233.8 | | EBITDA | $52.9 | $30.6 | $70.5 | $12.2 | | Adjusted EBITDA | $65.6 | $45.2 | $109.9 | $67.4 | - Adjusted EBITDA is the primary financial performance measure used by management to evaluate the business and monitor results of operations, as it excludes certain non-cash and other nonrecurring items not indicative of ongoing operations[208](index=208&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's sources and uses of liquidity, including cash flow from operations, debt borrowings, and equity transactions, and outlines its material cash requirements - The Company's liquidity requirements are primarily sourced from cash flow from operations and, when needed, with debt borrowings or equity transactions, with principal uses including debt service, capital expenditures, and acquisitions[216](index=216&type=chunk) | Cash Flow Activity (in millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $85.0 | $5.0 | | Net cash used in investing activities | $(87.1) | $(115.5) | | Net cash used in financing activities | $(211.0) | $(117.6) | - As of June 30, 2022, the Company had **$1,772.5 million** in fixed rate debt outstanding and a Revolving Credit Facility with a borrowing capacity of **$99.5 million**, with no outstanding borrowings[223](index=223&type=chunk)[225](index=225&type=chunk) - Net cash used in financing activities increased primarily due to **$185.9 million** in payments for the repurchase of common stock during the six months ended June 30, 2022[223](index=223&type=chunk) [Critical Accounting Estimates](index=55&type=section&id=Critical%20Accounting%20Estimates) This section highlights the accounting policies that require significant management judgment and estimation, which are critical to the portrayal of the Company's financial condition and results of operations - Critical accounting estimates include the allowance for doubtful accounts, valuation of contingent liabilities, other intangible assets, and goodwill, with the full impact of the COVID-19 pandemic remaining unknown[230](index=230&type=chunk) [New accounting pronouncements](index=55&type=section&id=New%20accounting%20pronouncements) This section directs readers to Note 1 for information regarding new accounting pronouncements and their impact on the Company's financial statements - For information regarding new accounting pronouncements and their impact, refer to Note 1 in the notes to the accompanying unaudited condensed consolidated financial statements[232](index=232&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risks, primarily related to interest rates, affecting its financial instruments - The Company is exposed to interest rate risk primarily from its **$1,772.5 million** of fixed-rate debt outstanding, which is not subject to an interest rate hedge, causing fair value fluctuations with changes in interest rates[234](index=234&type=chunk) - The Revolving Credit Facility, with a borrowing capacity of **$99.5 million**, bears floating interest rates, but no amounts were outstanding as of June 30, 2022[235](index=235&type=chunk) [Item 4. Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the Company's disclosure controls and procedures and any changes in internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2022[267](index=267&type=chunk) - There were no material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2022[268](index=268&type=chunk) [PART II. OTHER INFORMATION](index=56&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) This section provides an overview of the Company's involvement in legal claims and proceedings - The Company is party to various claims and legal proceedings arising in the ordinary course of business but does not believe any existing claims will have a material adverse effect on its business, consolidated financial condition, or results of operations[237](index=237&type=chunk) [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) This section outlines the significant risks associated with investing in the Company's Class A common stock, including business-specific risks related to regulation and cryptocurrency, and general risks such as geopolitical conflicts and inflation - Investing in the Company's Class A common stock involves a high degree of risk, and investors should carefully consider the risks described[238](index=238&type=chunk) - Key risks include governmental regulation related to privacy, data protection, information security, and cryptocurrency, as well as general risks such as the ongoing military action between Russia and Ukraine and exposure to fluctuations in inflation[239](index=239&type=chunk)[251](index=251&type=chunk)[255](index=255&type=chunk) [Business risks](index=56&type=section&id=Business%20risks) The Company faces significant regulatory and legal obligations concerning privacy, data protection, information security, and cryptocurrency across its operating markets, with non-compliance risking enforcement actions, fines, litigation, and reputational harm - The Company is subject to various privacy, data protection, information security, and consumer protection laws (e.g., GLBA, GDPR, CCPA, CPRA) across different markets, with non-compliance risking enforcement actions, fines, litigation, and reputational damage[239](index=239&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Current and planned cryptocurrency offerings could subject the Company to additional regulations, licensing requirements, and financial/third-party risks such as theft or custodian failure, potentially harming financial performance[249](index=249&type=chunk)[250](index=250&type=chunk) [General Risk Factors](index=58&type=section&id=General%20Risk%20Factors) The ongoing military action between Russia and Ukraine could adversely affect the Company's business, financial condition, and results of operations through market disruptions, financial instability, and supply chain issues, while inflation fluctuations could increase expenses and potentially reduce sales - The ongoing military action between Russia and Ukraine could adversely affect the Company's business, financial condition, and results of operations due to market disruptions, financial instability, supply chain interruptions, and increased cyberattacks[251](index=251&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - The Company is exposed to fluctuations in inflation, which could negatively affect expenses (e.g., employee compensation, supplies) and potentially lead to reduced sales or customer dissatisfaction if price increases are implemented to maintain margins[255](index=255&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's purchases of Class A common stock under its authorized repurchase programs during the three months ended June 30, 2022 | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased under the Programs (in millions) | | :--------------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------------------------------------- | | April 1-30, 2022 | 1,126,277 | $54.39 | $0 | | May 1-31, 2022 | 1,793,954 | $44.58 | $20.4 | | June 1-30, 2022 | 665,450 | $38.92 | $44.5 | | Total | 3,585,681 | | | - As of June 30, 2022, approximately **$44.5 million** remained available for future purchases under the stock repurchase programs[258](index=258&type=chunk) [Item 3. Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section reports whether there have been any defaults upon senior securities - No defaults upon senior securities were reported[259](index=259&type=chunk) [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates the applicability of mine safety disclosures to the Company - This item is not applicable to the Company[260](index=260&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This section reports any other information not covered in previous items - No other information was reported[261](index=261&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section provides a list of all exhibits filed as part of the Quarterly Report on Form 10-Q, including various corporate documents and certifications - The report includes various exhibits such as the Amended and Restated Certificate of Incorporation, By-Laws, Indentures for Convertible and Senior Notes, the Amended and Restated 2020 Incentive Award Plan, and certifications required by the Sarbanes-Oxley Act[263](index=263&type=chunk)[264](index=264&type=chunk) [SIGNATURES](index=64&type=section&id=SIGNATURES) [Signatures](index=64&type=section&id=Signatures) This section contains the official signatures of the Company's principal executive officer and principal financial officer, certifying the report - The report was duly signed on August 5, 2022, by Jared Isaacman, Chief Executive Officer, and Bradley Herring, Chief Financial Officer[272](index=272&type=chunk)

Shift4 Payments (NYSE:FOUR) Q2 2022 Results Conference Call August 4, 2022 8:30 AM ET Company Participants Tom McCrohan - Investor Relation Jared Isaacman - CEO Taylor Lauber - President, CSO Nancy Disman - Upcoming CFO Conference Call Participants Ashwin Shirvaikar - Citi Tim Chiodo - Credit Suisse Andrew Bauch - SMBC Nikko Americas Scott Wurtzel - Wolfe Research Andrew Jeffrey - Truist Securities Eugene Simone - Moffatt Nathanson Chris Brendler - D.A. Davidson John Davis - Raymond James Anita Zirngibl – S ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________________ FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number 001-39313 __________________________________ SHIFT4 PAYMENTS, INC. (Exac ...

Financial Data and Key Metrics Changes - Q1 gross revenues reached $402 million, a 68% increase year-over-year, while gross revenue less network fees was $149 million, up 53% from the previous year [54] - Adjusted EBITDA for the quarter was $44.3 million, representing a 100% increase compared to the same quarter last year, with an adjusted EBITDA margin of 30% [57][58] - Adjusted free cash flow for the quarter was $13.7 million, showing a $22.4 million improvement over the same period last year [60] Business Line Data and Key Metrics Changes - Net processing revenues increased by 70% year-over-year, driven by continued merchant adoption of the end-to-end solution [54] - SaaS and other revenue streams grew by 30%, attributed to expansion into new verticals and deeper penetration in core restaurant and hospitality sectors [54] - Gateway revenue saw a 16% increase, largely due to a modest recovery in the hospitality sector [54] Market Data and Key Metrics Changes - The hospitality sector now accounts for 21% of end-to-end volume, up from 12% in the same quarter last year, indicating a significant shift in market dynamics [56] - The company reported that its end-to-end payment volume is 288% of pre-pandemic Q1 2019 levels, with gross revenue less network fees at 224% and adjusted EBITDA at 215% over the same period [13] Company Strategy and Development Direction - The company is focusing on converting gateway-only customers to its end-to-end service, which is expected to significantly increase gross revenue opportunities [51] - The introduction of the new SkyTab POS platform aims to capture the mid to high-end restaurant market, with a 158% increase in total merchants operating on the platform compared to the previous year [28] - The company is pursuing acquisitions, including The Giving Block and Finaro, to enhance its service offerings and expand into new markets [38][41] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the macroeconomic environment, including inflation and consumer sentiment, which influenced the decision to maintain full-year guidance despite strong Q1 performance [42][44] - The company remains optimistic about its growth initiatives and may revisit guidance as the year progresses [42][84] Other Important Information - The company repurchased approximately 302,000 shares at an average price of $56.78 per share during the quarter, continuing its buyback program into April [59] - The company has over $1 billion in cash and a low pro forma leverage ratio, positioning it well for future growth and acquisitions [42] Q&A Session Summary Question: Can you provide real-world examples of accelerating conversions from gateway to end-to-end? - Management explained that they are sunsetting legacy connections to encourage migration to the end-to-end platform, freeing up resources for new customer acquisition [69][70] Question: How do you distinguish between the volume from ticketing and other services in sports and entertainment? - Management clarified that all announced wins include payment volume, but the contribution varies based on the type of service provided [74] Question: What assumptions are built into the maintained guidance despite record volumes? - Management indicated that while current performance is strong, macroeconomic uncertainties warranted a conservative approach to guidance [82][84] Question: Can you elaborate on the trajectory of free cash flow conversion? - Management confirmed a positive trajectory for free cash flow conversion, projecting a 35% to 40% conversion rate for the year [88][90] Question: What is the impact of the blended spread improvement? - Management noted that the blended spread improved due to a favorable mix shift and solid spread behavior within verticals, with expectations for continued maintenance of spreads [93][96]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________________________________________ FORM 10-K _________________________________________________________________________ x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to . Com ...

Shift4 Payments, Inc. (NYSE:FOUR) Q4 2021 Earnings Conference Call March 1, 2022 8:30 AM ET Company Participants Tom McCrohan - IR Jared Isaacman - Founder and CEO Bradley Herring - CFO Taylor Lauber - CSO Conference Call Participants Darrin Peller - Wolfe Research Daniel Perlin - RBC Capital Markets Tim Chiodo - Credit Suisse Jason Kupferberg - Bank of America David Togut - Evercore Ashwin Shirvaikar - Citi James Faucette - Morgan Stanley John Davis - Raymond James Operator Good morning and welcome to toda ...

Q3 2021 Performance Highlights - Shift4 achieved a record quarterly end-to-end payment volume of $13.5 billion, a 90% increase compared to Q3 2020[7, 10] - The company's gross revenue reached $377.8 million, up 76% from Q3 2020, or $400.2 million adjusted for the TSYS outage, representing an 86% increase[10] - Gross revenue less network fees amounted to $148.3 million, a 69% increase compared to Q3 2020[10] - Shift4 reported a net loss of $(13.8) million, or $(0.17) per share, but an adjusted net income of $21.6 million, or $0.26 per share[10] - Adjusted EBITDA for Q3 2021 was $55.8 million, with adjusted EBITDA margins at 38%, nearly 450 basis points higher than Q2 2021[10] 2021 Outlook - Shift4 reaffirmed its end-to-end payment volume guidance of $46 billion to $48 billion[18] - The company maintained its total revenue guidance of $1.3 billion to $1.4 billion[18] - Shift4 increased its gross revenue less network fees guidance to $520 million to $525 million[18] - The company also reaffirmed its adjusted EBITDA guidance of $175 million to $180 million[18] Future Growth and Expansion - Shift4 is targeting approximately $160 billion in end-to-end volume, ~$3.5 billion in gross revenue, and ~$1.15 billion in gross revenue less network fees by the end of 2024[72] - The company anticipates at least 50% CAGR growth in end-to-end payment volume and at least 30% CAGR growth in gross revenues less network fees[72] - Shift4 sees a total addressable market (TAM) of $3.7 trillion globally[79]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201%20Financial%20Statements%20(unaudited)) Shift4 Payments, Inc.'s unaudited condensed consolidated financial statements are presented, showing increased assets and liabilities, net losses, and substantial cash from financing activities [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents Shift4 Payments, Inc.'s condensed consolidated balance sheets as of September 30, 2021, and December 31, 2020 | Metric | September 30, 2021 (in millions) | December 31, 2020 (in millions) | | :--------------------------------- | :------------------------------- | :------------------------------- | | Total assets | $2,355.1 | $1,779.3 | | Total liabilities | $1,919.7 | $1,109.3 | | Total stockholders' equity | $435.4 | $670.0 | - Total assets increased by **$575.8 million (32.4%)** from December 31, 2020, to September 30, 2021, primarily due to higher cash and cash equivalents and goodwill from acquisitions[15](index=15&type=chunk) - Total liabilities increased by **$810.4 million (73.1%)** over the same period, largely driven by a significant increase in long-term debt[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents Shift4 Payments, Inc.'s condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 | Metric (in millions) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Gross revenue | $377.8 | $214.8 | $968.1 | $556.0 | | Gross profit | $64.4 | $51.5 | $194.3 | $126.5 | | Loss from operations | $(5.6) | $(3.9) | $(44.2) | $(52.1) | | Net loss | $(13.8) | $(9.8) | $(60.3) | $(89.7) | | Net loss attributable to Shift4 Payments, Inc. | $(9.2) | $(5.0) | $(38.8) | $(6.0) | | Class A net loss per share - basic and diluted | $(0.17) | $(0.12) | $(0.72) | $(0.15) | - Gross revenue increased significantly YoY for both the three-month (**75.9%**) and nine-month (**74.1%**) periods, despite a **$22.4 million** reduction due to TSYS outage payments to merchants in Q3 2021[16](index=16&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) - Net loss attributable to Shift4 Payments, Inc. worsened for the three-month period (from **$(5.0) million to $(9.2) million**) and the nine-month period (from **$(6.0) million to $(38.8) million**) YoY[16](index=16&type=chunk) [Condensed Consolidated Statements of Changes in Redeemable Preferred Units and Stockholders' Equity/Members' (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Redeemable%20Preferred%20Units%20and%20Stockholders'%20Equity%2FMembers'%20(Deficit)) This section presents Shift4 Payments, Inc.'s condensed consolidated statements of changes in redeemable preferred units and stockholders' equity/members' (deficit) | Metric (in millions) | December 31, 2020 | September 30, 2021 | | :------------------- | :---------------- | :----------------- | | Total equity | $670.0 | $435.4 | | Retained Deficit | $(278.7) | $(315.9) | | Additional paid-in capital | $738.3 | $614.3 | - Total equity decreased from **$670.0 million** at December 31, 2020, to **$435.4 million** at September 30, 2021, primarily due to net losses and the cumulative effect of ASU 2020-06 adoption[22](index=22&type=chunk) - The adoption of ASU 2020-06 resulted in a **$111.5 million decrease** to additional paid-in capital and a **$1.6 million decrease** to retained deficit[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents Shift4 Payments, Inc.'s condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 | Metric (in millions) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $25.6 | $17.0 | | Net cash used in investing activities | $(162.0) | $(31.9) | | Net cash provided by financing activities | $496.7 | $340.1 | | Change in cash and cash equivalents | $360.3 | $325.2 | | Cash and cash equivalents, end of period | $1,288.1 | $328.9 | - Net cash provided by operating activities increased by **$8.6 million (50.6%)** YoY, driven by adjustments for non-cash expenses despite a net loss[25](index=25&type=chunk)[286](index=286&type=chunk) - Net cash used in investing activities significantly increased by **$130.1 million (407.8%)** YoY, primarily due to acquisitions (VenueNext, Postec), investments in securities (SpaceX), and higher purchases of equipment for lease[25](index=25&type=chunk)[289](index=289&type=chunk) - Net cash provided by financing activities increased by **$156.6 million (46.0%)** YoY, mainly from the issuance of 2027 Convertible Notes, partially offset by payments for withholding tax related to vested restricted stock units[25](index=25&type=chunk)[289](index=289&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes to the condensed consolidated financial statements, covering accounting policies, acquisitions, revenue recognition, debt, and other financial components [Note 1. Organization, Basis of Presentation and Significant Accounting Policies](index=10&type=section&id=Note%201.%20Organization%2C%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note details Shift4 Payments, Inc.'s business, IPO, COVID-19 impact, and significant accounting policies, including recent ASU adoptions and future filer status changes - Shift4 Payments, Inc. is a **leading provider of integrated payment processing and technology solutions**, offering an end-to-end payments platform and robust technology solutions across various verticals like lodging, leisure, stadiums, and food and beverage[27](index=27&type=chunk) - The Company completed its IPO in June 2020, raising approximately **$362.6 million**, and a concurrent private placement of **$100.0 million**, with proceeds used to purchase LLC Interests and repay existing indebtedness[28](index=28&type=chunk) - The COVID-19 pandemic significantly impacted the restaurant and hospitality industries, leading to a **70% decline** in end-to-end payment volumes in March 2020, but volumes have since recovered, exceeding pre-pandemic levels by Q3 2021[35](index=35&type=chunk)[212](index=212&type=chunk) - The Company adopted ASU 2021-08 in Q3 2021, retrospectively increasing deferred revenue by **$5.7 million**, and ASU 2020-06 on January 1, 2021, which decreased additional paid-in capital by **$111.5 million** and increased long-term debt by **$109.9 million** by accounting for convertible debt as a single liability[49](index=49&type=chunk)[50](index=50&type=chunk) - The Company expects to become a **large accelerated filer** effective December 31, 2021, which will change its timeline for adopting new accounting pronouncements to align with public company standards[48](index=48&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[57](index=57&type=chunk) [Note 2. Acquisitions](index=15&type=section&id=Note%202.%20Acquisitions) This note details the acquisitions of Postec, VenueNext, and 3dcart, outlining their strategic rationale and the resulting goodwill recognized - Shift4 Payments completed the acquisition of Postec, Inc. on September 1, 2021, for **$14.0 million in cash**, enhancing its end-to-end acquiring solution and distribution capabilities[62](index=62&type=chunk) - The Company acquired VenueNext Inc. on March 3, 2021, for **$66.9 million** (net of cash acquired), expanding its presence in stadiums, arenas, entertainment, and other large verticals[69](index=69&type=chunk) - The acquisition of 3dcart (rebranded as Shift4Shop) on November 5, 2020, for **$39.9 million in cash** and **$19.2 million in Class A common stock**, expanded the Company's omni-channel transaction capabilities and eCommerce offerings[76](index=76&type=chunk) - Goodwill from the VenueNext acquisition was **$52.7 million**, and from Postec was **$10.3 million**, primarily representing revenue synergies, cross-selling opportunities, and new technology capabilities[65](index=65&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk) [Note 3. Revenue](index=18&type=section&id=Note%203.%20Revenue) This note details revenue recognition, including the impact of the TSYS platform outage and the breakdown of payments-based and subscription revenues - In Q3 2021, a TSYS platform outage led to a **$22.4 million reduction** in 'Gross revenue' (contra revenue) for payments to merchants and a **$2.3 million increase** in 'Cost of sales' for payments to partners[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) | Revenue Type (in millions) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Payments-based revenue | $346.9 | $196.8 | $887.6 | $494.4 | | Subscription and other revenues | $30.9 | $18.0 | $80.5 | $61.6 | | Total gross revenue | $377.8 | $214.8 | $968.1 | $556.0 | - Payments-based revenue increased by **76.3%** for the three months and **79.5%** for the nine months ended September 30, 2021, driven by increased end-to-end payment volume[83](index=83&type=chunk)[237](index=237&type=chunk)[254](index=254&type=chunk) - Subscription and other revenues increased by **71.7%** for the three months and **30.7%** for the nine months ended September 30, 2021, largely due to recent acquisitions[83](index=83&type=chunk)[238](index=238&type=chunk)[256](index=256&type=chunk) [Note 4. Restructuring](index=19&type=section&id=Note%204.%20Restructuring) This note details the restructuring accrual, showing changes due to severance payments and interest accretion | Metric (in millions) | December 31, 2020 | September 30, 2021 | | :------------------- | :---------------- | :----------------- | | Balance at beginning of period | $2.9 | $2.9 | | Severance payments | — | $(1.2) | | Accretion of interest | — | $0.2 | | Balance at end of period | — | $1.9 | - Restructuring accrual decreased from **$2.9 million** at December 31, 2020, to **$1.9 million** at September 30, 2021, primarily due to severance payments[90](index=90&type=chunk) [Note 5. Goodwill](index=20&type=section&id=Note%205.%20Goodwill) This note details the increase in goodwill, primarily attributed to the VenueNext and Postec acquisitions | Metric (in millions) | December 31, 2020 | September 30, 2021 | | :------------------- | :---------------- | :----------------- | | Balance at beginning of period | $477.0 | $477.0 | | VenueNext acquisition | — | $52.7 |\ | Postec acquisition | — | $10.3 | | Hospitality Technology Vendor measurement period adjustments | — | $(2.4) | | Balance at end of period | $477.0 | $537.6 | - Goodwill increased by **$60.6 million** to **$537.6 million** at September 30, 2021, primarily due to the VenueNext (**$52.7 million**) and Postec (**$10.3 million**) acquisitions[94](index=94&type=chunk) [Note 6. Other Intangible Assets, Net](index=20&type=section&id=Note%206.%20Other%20Intangible%20Assets%2C%20Net) This note details the net carrying value of other intangible assets, including merchant relationships, acquired technology, and capitalized software | Intangible Asset (in millions) | September 30, 2021 Net Carrying Value | December 31, 2020 Net Carrying Value | | :----------------------------- | :------------------------------------ | :------------------------------------ | | Merchant relationships | $73.4 | $79.3 | | Acquired technology | $61.5 | $62.9 | | Trademarks and trade names | $16.9 | $18.3 | | Capitalized software development costs | $28.3 | $19.3 | | Residual commission buyouts | $8.2 | $6.5 | | Total intangible assets | $188.3 | $186.3 | - Total net intangible assets increased slightly to **$188.3 million** at September 30, 2021, with estimated remaining amortization expense of **$14.1 million** for the rest of 2021 and **$43.6 million** for 2022[95](index=95&type=chunk)[97](index=97&type=chunk) [Note 7. Capitalized Acquisition Costs, Net](index=21&type=section&id=Note%207.%20Capitalized%20Acquisition%20Costs%2C%20Net) This note details the net capitalized acquisition costs and their associated amortization expense | Metric (in millions) | September 30, 2021 | December 31, 2020 | | :------------------- | :----------------- | :---------------- | | Capitalized acquisition costs, net | $34.3 | $30.2 | - Capitalized acquisition costs, net, increased to **$34.3 million** at September 30, 2021, with amortization expense of **$15.5 million** for the nine months ended September 30, 2021[98](index=98&type=chunk)[99](index=99&type=chunk) [Note 8. Equipment for Lease, Net](index=21&type=section&id=Note%208.%20Equipment%20for%20Lease%2C%20Net) This note details the net equipment held for lease, its depreciation, and the accounting treatment for hardware under SaaS agreements | Metric (in millions) | September 30, 2021 | December 31, 2020 | | :------------------- | :----------------- | :---------------- | | Total equipment for lease, net | $56.3 | $36.6 | - Net equipment for lease increased to **$56.3 million** at September 30, 2021, with depreciation expense of **$15.4 million** for the nine months ended September 30, 2021[101](index=101&type=chunk)[103](index=103&type=chunk) - Effective June 30, 2020, hardware provided under SaaS agreements is accounted for as operating leases, impacting depreciation and revenue recognition[103](index=103&type=chunk) [Note 9. Property, Plant and Equipment, Net](index=22&type=section&id=Note%209.%20Property%2C%20Plant%20and%20Equipment%2C%20Net) This note details the net property, plant, and equipment, along with its depreciation expense | Metric (in millions) | September 30, 2021 | December 31, 2020 | | :------------------- | :----------------- | :---------------- | | Total property, plant and equipment, net | $17.8 | $15.1 | - Net property, plant and equipment increased to **$17.8 million** at September 30, 2021, with depreciation expense of **$4.1 million** for the nine months ended September 30, 2021[104](index=104&type=chunk) [Note 10. Debt](index=23&type=section&id=Note%2010.%20Debt) This note details the Company's debt structure, including Convertible Notes, Senior Notes, and the Revolving Credit Facility, highlighting new issuances and refinancing activities | Debt Type (in millions) | September 30, 2021 | December 31, 2020 | | :---------------------- | :----------------- | :---------------- | | Convertible Notes due 2025 | $690.0 | $577.5 | | Convertible Notes due 2027 | $632.5 | — | | Senior Notes due 2026 | $450.0 | $450.0 | | Total borrowings | $1,772.5 | $1,028.4 | | Total long-term debt | $1,736.8 | $1,005.4 | - Total borrowings increased significantly to **$1,772.5 million** at September 30, 2021, primarily due to the issuance of **$632.5 million** in 2027 Convertible Notes in July 2021[106](index=106&type=chunk)[114](index=114&type=chunk) - The 2025 Convertible Notes (principal **$690.0 million**) do not bear regular interest and mature on December 15, 2025, with an initial conversion price of **$80.48 per share**[107](index=107&type=chunk) - The 2027 Convertible Notes (principal **$632.5 million**) bear **0.50% interest**, mature on August 1, 2027, and have an initial conversion price of **$122.66 per share**[114](index=114&type=chunk)[116](index=116&type=chunk) - The Company's subsidiaries issued **$450.0 million** of **4.625% Senior Notes** due 2026 in October 2020, using proceeds to repay the First Lien Term Loan Facility[120](index=120&type=chunk) - The Revolving Credit Facility was amended in January 2021, increasing borrowing capacity to **$100.0 million** and maturing on January 29, 2026, with **no outstanding borrowings** as of September 30, 2021[129](index=129&type=chunk)[297](index=297&type=chunk) [Note 11. Other Consolidated Balance Sheet Components](index=28&type=section&id=Note%2011.%20Other%20Consolidated%20Balance%20Sheet%20Components) This note details other balance sheet components, including prepaid expenses, other current assets, accrued expenses, and other current liabilities | Metric (in millions) | September 30, 2021 | December 31, 2020 | | :------------------- | :----------------- | :---------------- | | Total prepaid expenses and other current assets | $13.2 | $11.5 | | Total accrued expenses and other current liabilities | $37.4 | $30.1 | - Prepaid expenses and other current assets increased to **$13.2 million**, including prepaid merchant signing bonuses of **$1.4 million**[139](index=139&type=chunk) - Accrued expenses and other current liabilities increased to **$37.4 million**, with residuals payable (**$12.1 million**) and accrued interest (**$9.2 million**) being the largest components[142](index=142&type=chunk) [Note 12. Fair Value Measurement](index=29&type=section&id=Note%2012.%20Fair%20Value%20Measurement) This note details the Company's fair value measurements for contingent liabilities and debt, using Level 3 unobservable inputs - The Company makes recurring fair value measurements of contingent liabilities from acquisitions using Level 3 unobservable inputs, such as earnout payments and change of control provisions[144](index=144&type=chunk) - Contingent liabilities related to earnout payments were fully paid by March 31, 2021, and the change of control liability was settled with Class A common stock in conjunction with the IPO[145](index=145&type=chunk)[146](index=146&type=chunk) | Debt (in millions) | September 30, 2021 Carrying Value | September 30, 2021 Fair Value | December 31, 2020 Carrying Value | December 31, 2020 Fair Value | | :----------------- | :-------------------------------- | :---------------------------- | :------------------------------- | :--------------------------- | | 2025 Convertible Notes | $690.0 | $835.4 | $690.0 | $843.9 | | 2026 Senior Notes | $450.0 | $470.8 | $450.0 | $468.0 | | 2027 Convertible Notes | $632.5 | $647.5 | — | — | | Total | $1,772.5 | $1,953.7 | $1,140.0 | $1,311.9 | [Note 13. Income Taxes](index=30&type=section&id=Note%2013.%20Income%20Taxes) This note details the effective tax rates and their reconciliation to the U.S. federal statutory rate, including the impact of noncontrolling interests and valuation allowances | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Effective tax rate | 7.8% | (6.7)% | (6.4)% | (1.1)% | - The effective tax rate for Q3 2021 was **7.8%** (vs. **-6.7%** in Q3 2020) and for the nine months ended September 30, 2021, was **-6.4%** (vs. **-1.1%** in 2020), primarily differing from the 21% U.S. federal statutory rate due to loss allocation to noncontrolling interests and changes in valuation allowances[152](index=152&type=chunk) - The Company has not recognized any liability under the Tax Receivable Agreement (TRA) as it was not probable that such payments would be made based on estimates of future taxable income[155](index=155&type=chunk) [Note 14. Operating Lease Agreements](index=31&type=section&id=Note%2014.%20Operating%20Lease%20Agreements) This note details future minimum rental payments under operating lease agreements and total rent expense | Year | Future Minimum Rental Payments (in millions) | | :--- | :----------------------------------------- | | 2021 (remaining three months) | $1.6 | | 2022 | $4.9 | | 2023 | $4.0 | | 2024 | $3.9 | | 2025 | $3.4 | | Thereafter | $6.9 | | Total | $24.7 | - Total rent expense for the nine months ended September 30, 2021, was **$4.4 million**, slightly lower than **$4.7 million** in the prior year[157](index=157&type=chunk) [Note 15. Related Party Transactions](index=32&type=section&id=Note%2015.%20Related%20Party%20Transactions) This note details transactions with related parties, including service agreement expenses with the Founder and the Inspiration4 space mission contribution - The Company incurred **$0.7 million** in service agreement expenses with its Founder for the nine months ended September 30, 2021[160](index=160&type=chunk) - In February 2021, the Founder transferred the right to select a participant for the Inspiration4 space mission to the Company, recorded as a **$2.1 million non-cash contribution** to 'Additional paid-in capital' and expensed in 'Advertising and marketing'[163](index=163&type=chunk) - The Founder, through a special purpose vehicle (SPV), entered into variable prepaid forward contracts (VPF Contracts) in March and September 2021, covering approximately **6.44 million shares** of Class A common stock, secured by pledged Class B common stock and LLC units[167](index=167&type=chunk)[168](index=168&type=chunk) [Note 16. Commitments and Contingencies](index=33&type=section&id=Note%2016.%20Commitments%20and%20Contingencies) This note details the Company's involvement in legal proceedings and the impact of the TSYS platform outage, including efforts to seek compensation - The Company is involved in various lawsuits and legal proceedings in the ordinary course of business but does not believe any existing claims will have a material adverse effect[170](index=170&type=chunk) - In August 2021, a significant platform outage by TSYS, a key vendor, disrupted payment processing for the Company's merchants, leading to payments to merchants and partners, and the Company is seeking compensation[170](index=170&type=chunk) [Note 17. Redeemable Preferred Units](index=33&type=section&id=Note%2017.%20Redeemable%20Preferred%20Units) This note details the historical treatment of redeemable preferred units, which earned preferred dividends before conversion into LLC Interests - Prior to the Reorganization Transactions, redeemable preferred units earned a **10.50% annual preferred dividend**, which was converted into LLC Interests[171](index=171&type=chunk) [Note 18. Stockholders' Equity/Members' Deficit](index=33&type=section&id=Note%2018.%20Stockholders'%20Equity%2FMembers'%20Deficit) This note details the Company's capital structure, including authorized stock classes, voting rights, and conversion features - The Company's certificate of incorporation was amended to authorize Class A, Class B, Class C common stock, and preferred stock[173](index=173&type=chunk) - Class A common stock holders have **one vote per share**, while Class B and Class C common stock holders have **ten votes per share**[174](index=174&type=chunk) - Class C common stock converts to Class A common stock on a one-to-one basis if transferred to non-permitted transferees[174](index=174&type=chunk) [Note 19. Noncontrolling Interests](index=34&type=section&id=Note%2019.%20Noncontrolling%20Interests) This note details the noncontrolling interest representing Continuing Equity Owners' economic stake in Shift4 Payments, LLC and their redemption rights | Ownership | December 31, 2020 | September 30, 2021 | | :-------- | :---------------- | :----------------- | | Shift4 Payments, Inc. | 62.0% | 68.3% | | Continuing Equity Owners | 38.0% | 31.7% | - The noncontrolling interest, representing the economic interest of Continuing Equity Owners in Shift4 Payments, LLC, decreased from **38.0% to 31.7%** from December 31, 2020, to September 30, 2021[176](index=176&type=chunk) - Continuing Equity Owners can redeem their LLC Interests for Class A common stock or cash, at the Company's option[176](index=176&type=chunk) [Note 20. Equity-based Compensation](index=35&type=section&id=Note%2020.%20Equity-based%20Compensation) This note details equity-based compensation expense and the activity of restricted stock units (RSUs) | RSU Activity | Nine Months Ended Sep 30, 2021 | | :------------- | :----------------------------- | | Unvested balance at beginning of period | 4,840,508 | | Granted | 165,751 | | Vested | (3,262,321) | | Forfeited or cancelled | (18,206) | | Unvested balance at end of period | 1,725,732 | - Equity-based compensation expense was **$26.9 million** for the nine months ended September 30, 2021, with **$39.2 million** unrecognized expense remaining[180](index=180&type=chunk) [Note 21. Basic and Diluted Net Loss per Share](index=35&type=section&id=Note%2021.%20Basic%20and%20Diluted%20Net%20Loss%20per%20Share) This note details the basic and diluted net loss per share for Class A and Class C common stock, and the exclusion of anti-dilutive securities | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | June 5, 2020 through Sep 30, 2020 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :-------------------------------- | | Class A net loss per share - basic and diluted | $(0.17) | $(0.12) | $(0.72) | $(0.15) | | Class C net loss per share - basic and diluted | $(0.17) | $(0.12) | $(0.72) | $(0.15) | - Basic and diluted net loss per share for both Class A and Class C common stock increased for the three-month period (from **$(0.12) to $(0.17)**) and the nine-month period (from **$(0.15) to $(0.72)**) YoY[185](index=185&type=chunk) - Potentially dilutive securities, including LLC Interests, RSUs, and Convertible Notes, were excluded from diluted EPS calculation due to their anti-dilutive effect[186](index=186&type=chunk) [Note 22. Supplemental Cash Flows Information](index=37&type=section&id=Note%2022.%20Supplemental%20Cash%20Flows%20Information) This note details non-cash investing and financing activities, including shares issued for acquisitions and the Inspiration4 seat right | Noncash Investing Activities (in millions) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Shares and equity-based compensation awards issued in connection with VenueNext acquisition | $26.3 | — | | Equipment for lease | $4.6 | — | | Capitalized software development costs | $1.6 | — | | Capitalized acquisition costs | $0.4 | — | | Noncash Financing Activities (in millions) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Right associated with Inspiration4 seat | $2.1 | — | | Contingent consideration settled with Class A common stock | — | $21.1 | [Note 23. Segments](index=37&type=section&id=Note%2023.%20Segments) This note confirms the Company operates as one reportable segment and provides a breakdown of revenue types - The Company operates as one operating segment and one reportable segment, as the Chief Operating Decision Maker reviews financial information on a consolidated level[188](index=188&type=chunk) | Revenue Type (in millions) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Payments-based revenue | $346.9 | $196.8 | $887.6 | $494.4 | | Subscription and other revenues | $30.9 | $18.0 | $80.5 | $61.6 | | Total gross revenue | $377.8 | $214.8 | $968.1 | $556.0 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Shift4 Payments, Inc.'s financial condition and operational results for the three and nine months ended September 30, 2021, covering business overview, recent developments, COVID-19 impact, and key financial metrics [Overview](index=38&type=section&id=Overview) This section provides an overview of Shift4 Payments, Inc.'s business as a leading payment processing and technology solutions provider - Shift4 Payments is a leading independent provider of payment processing and technology solutions in the U.S., offering an end-to-end payments platform and technology solutions through a partner-centric distribution approach[193](index=193&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) - End-to-end payment volume was **$13.5 billion** for the three months and **$33.3 billion** for the nine months ended September 30, 2021, contributing approximately **67%** and **66%** of gross revenue less network fees, respectively[197](index=197&type=chunk) [Revision of Previously Issued Financial Statements](index=39&type=section&id=Revision%20of%20Previously%20Issued%20Financial%20Statements) This section addresses revisions made to previously reported consolidated financial statements for the three and nine months ended September 30, 2020 - The Management's Discussion and Analysis reflects revisions to previously reported consolidated financial statements for the three and nine months ended September 30, 2020, as detailed in Note 1[199](index=199&type=chunk) [Recent developments](index=39&type=section&id=Recent%20developments) This section highlights recent significant events, including a major platform outage and strategic acquisitions - A significant TSYS platform outage on August 21, 2021, disrupted payment processing, leading to **$22.4 million** in payments to merchants (contra revenue) and **$2.3 million** to partners (cost of sales) to mitigate impact[200](index=200&type=chunk)[201](index=201&type=chunk)[203](index=203&type=chunk) - The Company acquired Postec, Inc. on September 1, 2021, for approximately **$14.0 million in cash**, enhancing its end-to-end acquiring solution and distribution capabilities[205](index=205&type=chunk) [Reorganization Transactions](index=40&type=section&id=Reorganization%20Transactions) This section describes the Reorganization Transactions that established Shift4 Payments, Inc. as the managing member of Shift4 Payments, LLC - The Reorganization Transactions in June 2020 made Shift4 Payments, Inc. the sole managing member of Shift4 Payments, LLC, leading to consolidation of financial results and reporting of noncontrolling interests[206](index=206&type=chunk)[207](index=207&type=chunk) - Post-IPO, Shift4 Payments, Inc. became subject to U.S. federal, state, and local income taxes and incurs public company expenses, with Shift4 Payments, LLC making distributions to cover these obligations[208](index=208&type=chunk) [Initial public offering and concurrent private placement](index=40&type=section&id=Initial%20public%20offering%20and%20concurrent%20private%20placement) This section details the Company's Initial Public Offering and concurrent private placement in June 2020 - The IPO in June 2020 generated approximately **$362.6 million** in net proceeds, and a concurrent private placement added **$100.0 million**, totaling **$462.6 million** used to purchase LLC Interests and repay debt[209](index=209&type=chunk) [Impact of the COVID-19 Pandemic](index=40&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic) This section discusses the effects of the COVID-19 pandemic on the Company's business and payment volumes - COVID-19 significantly impacted the restaurant and hospitality industries, causing a **70% decline** in end-to-end payment volumes in March 2020[211](index=211&type=chunk)[212](index=212&type=chunk) - End-to-end payment volumes in Q3 2021 were approximately **90% higher** than Q3 2020 and **14% higher** than Q2 2021, indicating a significant recovery due to merchant reopenings and new onboarding[212](index=212&type=chunk) - The Company believes it has sufficient liquidity for at least the next twelve months but continues to monitor and adapt to potential COVID-19 impacts[213](index=213&type=chunk) [Factors impacting our business and results of operations](index=41&type=section&id=Factors%20impacting%20our%20business%20and%20results%20of%20operations) This section outlines the key factors influencing the Company's business performance and financial results - Key factors include increased adoption of software-integrated payments, focus on end-to-end payment offerings, mix of merchant base, ability to attract and retain software partners, investment in product/distribution/operations, strategic acquisitions, and economic conditions/consumer spending trends[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) [Key financial definitions](index=42&type=section&id=Key%20financial%20definitions) This section defines the key financial terms used in the Company's financial statements and analysis - Gross revenue comprises payments-based revenue (fees for processing and gateway services) and subscription and other revenues (SaaS fees, software/hardware sales, support)[223](index=223&type=chunk)[224](index=224&type=chunk) - Cost of sales includes interchange and processing fees, residual commissions, equipment costs, and amortization of capitalized software development, acquired technology, and customer acquisition costs[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - Operating expenses include general and administrative, depreciation and amortization, professional fees, advertising and marketing, restructuring, and other operating income/expense[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk) [Comparison of results for the three months ended September 30, 2021 and 2020](index=43&type=section&id=Comparison%20of%20results%20for%20the%20three%20months%20ended%20September%2030%2C%202021%20and%202020) This section compares the Company's financial results for the three months ended September 30, 2021, against the same period in 2020 | Metric (in millions) | 2021 | 2020 | $ Change | % Change | | :------------------- | :--- | :--- | :------- | :------- | | Gross Revenue | $377.8 | $214.8 | $163.0 | 75.9% | | Gross Profit | $64.4 | $51.5 | $12.9 | 25.0% | | Loss from Operations | $(5.6) | $(3.9) | $(1.7) | 43.6% | | Net Loss | $(13.8)| $(9.8) | $(4.0) | 40.8% | - Payments-based revenue increased by **$150.1 million (76.3%)** due to a **90% increase** in end-to-end payment volume, partially offset by **$22.4 million** in TSYS outage payments[237](index=237&type=chunk) - Subscription and other revenues increased by **$12.9 million (71.7%)**, primarily from the 3dcart, VenueNext, hospitality technology vendor, and Postec acquisitions[238](index=238&type=chunk) - Other costs of sales increased by **$25.3 million (69.9%)**, driven by higher residual commissions, acquisition-related costs, and TSYS outage payments to partners[241](index=241&type=chunk) - General and administrative expenses increased by **$12.7 million (35.9%)** due to higher employee-related expenses and recent acquisitions[241](index=241&type=chunk) - Advertising and marketing expenses increased by **$2.7 million**, partly due to Inspiration4 seat costs and higher trade show expenses[244](index=244&type=chunk) [Comparison of results for the nine months ended September 30, 2021 and 2020](index=46&type=section&id=Comparison%20of%20results%20for%20the%20nine%20months%20ended%20September%2030%2C%202021%20and%202020) This section compares the Company's financial results for the nine months ended September 30, 2021, against the same period in 2020 | Metric (in millions) | 2021 | 2020 | $ Change | % Change | | :------------------- | :--- | :--- | :------- | :------- | | Gross Revenue | $968.1 | $556.0 | $412.1 | 74.1% | | Gross Profit | $194.3 | $126.5 | $67.8 | 53.6% | | Loss from Operations | $(44.2)| $(52.1)| $7.9 | (15.2)% | | Net Loss | $(60.3)| $(89.7)| $29.4 | (32.8)% | - Payments-based revenue increased by **$393.2 million (79.5%)** due to a **90% increase** in end-to-end payment volume, partially offset by TSYS outage payments[254](index=254&type=chunk)[255](index=255&type=chunk) - Subscription and other revenues increased by **$18.9 million (30.7%)**, primarily from acquisitions, offset by a decrease in hardware revenue due to accounting changes for operating leases[256](index=256&type=chunk) - Other costs of sales increased by **$57.7 million (53.6%)**, driven by higher residual commissions, acquisition costs, chargeback losses from a merchant failure (**$5.5 million**), and TSYS outage payments, partially offset by lease modification impacts[259](index=259&type=chunk) - General and administrative expenses increased by **$8.5 million (5.9%)**, mainly due to higher employee-related expenses and acquisitions, offset by lower equity-based compensation[260](index=260&type=chunk) - Advertising and marketing expenses increased by **$23.2 million**, largely due to 3dcart integration/rebranding and Inspiration4 costs[263](index=263&type=chunk) - Interest expense decreased by **$11.9 million (37.1%)** due to debt prepayments and refinancing, partially offset by new 2027 Convertible Notes[267](index=267&type=chunk) [Key performance indicators and non-GAAP measures](index=49&type=section&id=Key%20performance%20indicators%20and%20non-GAAP%20measures) This section presents key performance indicators and non-GAAP financial measures, including end-to-end payment volume and Adjusted EBITDA | Metric (in millions) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | End-to-end payment volume | $13,457.2 | $7,090.7 | $33,277.9 | $17,476.8 | | Gross revenue less network fees | $148.3 | $87.7 | $382.1 | $234.2 | | EBITDA | $20.4 | $20.8 | $32.6 | $1.1 | | Adjusted EBITDA | $55.8 | $28.7 | $123.2 | $61.0 | - End-to-end payment volume increased by approximately **90%** for both the three and nine months ended September 30, 2021, compared to the prior year[272](index=272&type=chunk)[273](index=273&type=chunk) - Adjusted EBITDA increased by **94.4%** for the three months and **101.9%** for the nine months ended September 30, 2021, reflecting adjustments for non-cash and nonrecurring items like the TSYS outage and acquisition costs[272](index=272&type=chunk)[274](index=274&type=chunk) [Liquidity and capital resources](index=51&type=section&id=Liquidity%20and%20capital%20resources) This section discusses the Company's liquidity sources, capital resources, and principal uses of cash - The Company primarily sources liquidity from cash flow from operations and borrowings, with principal uses for debt service, capital expenditures, and acquisitions[282](index=282&type=chunk) | Cash Flow (in millions) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $25.6 | $17.0 | | Net cash used in investing activities | $(162.0) | $(31.9) | | Net cash provided by financing activities | $496.7 | $340.1 | - Net cash used in investing activities increased by **$130.1 million**, driven by acquisitions (VenueNext, Postec), investments in securities (SpaceX), and higher equipment purchases for lease[289](index=289&type=chunk) - Net cash provided by financing activities increased by **$156.6 million**, primarily from **$617.7 million** in net proceeds from the 2027 Convertible Notes, partially offset by **$119.7 million** in employee taxes paid on vested RSUs[289](index=289&type=chunk) - As of September 30, 2021, total principal amount of debt outstanding was **$1,772.5 million**, including 2025 Convertible Notes (**$690.0 million**), 2027 Convertible Notes (**$632.5 million**), and 2026 Senior Notes (**$450.0 million**)[290](index=290&type=chunk) [Contractual obligations](index=54&type=section&id=Contractual%20obligations) This section outlines the Company's significant contractual obligations, including long-term debt and associated interest payments | Obligation (in millions) | Total | 2021 (remaining three months) | 2022 and 2023 | 2024 and 2025 | 2026 and beyond | | :----------------------- | :---- | :---------------------------- | :------------ | :------------ | :-------------- | | Long-term debt | $1,772.5 | — | — | $690.0 | $1,082.5 | | Interest on long-term debt | $133.5 | $10.4 | $48.0 | $48.0 | $27.1 | | Total | $1,906.0 | $10.4 | $48.0 | $738.0 | $1,109.6 | [Off-balance sheet arrangements](index=54&type=section&id=Off-balance%20sheet%20arrangements) This section confirms the absence of any off-balance sheet financing activities during the reporting periods - The Company did not engage in any off-balance sheet financing activities during the periods presented[300](index=300&type=chunk) [Critical accounting policies](index=54&type=section&id=Critical%20accounting%20policies) This section discusses the critical accounting policies that require significant management estimates and judgments - The preparation of financial statements requires management to make significant estimates and judgments, particularly regarding fair value of acquired assets/liabilities, contingent liabilities, intangible assets, and goodwill[301](index=301&type=chunk) - The full impact of the COVID-19 pandemic remains uncertain, but accounting estimates have been made based on available facts and circumstances[301](index=301&type=chunk) [New accounting pronouncements](index=54&type=section&id=New%20accounting%20pronouncements) This section refers to detailed information on new accounting pronouncements and their impact, as provided in the financial statements notes - Information regarding new accounting pronouncements and their impact is detailed in Note 1 to the condensed consolidated financial statements[303](index=303&type=chunk) [JOBS Act](index=54&type=section&id=JOBS%20Act) This section explains the Company's status as an Emerging Growth Company under the JOBS Act and its implications for accounting standards adoption - As an Emerging Growth Company (EGC), Shift4 Payments has elected to delay the adoption of new or revised accounting standards, which may affect comparability with non-EGCs[304](index=304&type=chunk)[305](index=305&type=chunk) - The Company expects to cease being an EGC as of December 31, 2021, due to its market value exceeding **$700.0 million**[306](index=306&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses Shift4 Payments, Inc.'s exposure to market risks, primarily related to interest rates - As of September 30, 2021, the Company had **$1,772.5 million** in fixed-rate debt (Notes) with a fair value of **$1,953.7 million**, which does not pose interest rate risk to financial statements but affects fair value[308](index=308&type=chunk) - The Revolving Credit Facility, with a borrowing capacity of **$99.5 million**, bears interest at floating rates, exposing the Company to interest rate fluctuation risk if borrowings are outstanding[309](index=309&type=chunk)[297](index=297&type=chunk) - As of September 30, 2021, there were **no outstanding borrowings** under the Revolving Credit Facility, mitigating immediate floating rate risk[309](index=309&type=chunk)[297](index=297&type=chunk) [Item 4. Controls and Procedures](index=55&type=section&id=Item%204%20Controls%20and%20Procedures) This section outlines Shift4 Payments, Inc.'s disclosure controls and procedures, acknowledging their inherent limitations - Management acknowledges that controls and procedures provide only reasonable assurance and require judgment in balancing benefits against costs[310](index=310&type=chunk) - As of September 30, 2021, the Company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level by the principal executive and financial officers[311](index=311&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended September 30, 2021[313](index=313&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=57&type=section&id=Item%201%20Legal%20Proceedings) This section states that Shift4 Payments, Inc. is involved in various legal claims and proceedings in the ordinary course of business but does not anticipate any material adverse effects on its financial condition or operations from these matters - The Company is party to various claims and legal proceedings arising in the ordinary course of business[315](index=315&type=chunk) - Management does not believe any existing claims or proceedings will have a **material effect** on the Company's business, consolidated financial condition, or results of operations[315](index=315&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A%20Risk%20Factors) This section advises investors to carefully consider the risks associated with investing in Shift4 Payments, Inc.'s Class A common stock, referring to the detailed risk factors outlined in the Company's 2020 Form 10-K - Investing in Class A common stock involves a high degree of risk, and investors should review risk factors in the 2020 Form 10-K and other public filings[316](index=316&type=chunk) - There have been no material changes to the Company's risk factors since the 2020 Form 10-K[316](index=316&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the issuance of Class A common stock in connection with the VenueNext acquisition - In the three months ended September 30, 2021, **16,797 shares** of Class A common stock were issued to former VenueNext owners as part of the acquisition, under a Section 4(a)(2) exemption[317](index=317&type=chunk) [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - **No defaults upon senior securities occurred**[318](index=318&type=chunk) [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[319](index=319&type=chunk) [Item 5. Other Information](index=57&type=section&id=Item%205%20Other%20Information) This section states that there is no other information to report - No other information is reported in this section[320](index=320&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206%20Exhibits) This section provides a comprehensive list of exhibits filed as part of this Quarterly Report on Form 10-Q, including organizational documents, debt indentures, and certifications required by the Sarbanes-Oxley Act - The report includes exhibits such as the Amended and Restated Certificate of Incorporation and Bylaws, Specimen Stock Certificate, Indenture for 2027 Convertible Notes, and certifications by the CEO and CFO[322](index=322&type=chunk)[323](index=323&type=chunk) [Signatures](index=59&type=section&id=Signatures) This section contains the official signatures of Shift4 Payments, Inc.'s Chief Executive Officer and Chief Financial Officer, certifying the filing of the report - The report is signed by Jared Isaacman, Chief Executive Officer, and Bradley Herring, Chief Financial Officer, on November 12, 2021[327](index=327&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to . Commission file number 001-39313 SHIFT4 PAYMENTS, INC. (Exact Name of Registrant as Specified in Its Charter) (State or other jurisdiction of incorporation or organi ...

SHIFT④ Q2 2021 SHAREHOLDER LETTER INVESTORS.SHIFT4.COM #201080370 *8% 0000 0000 0000 0000 图 (1) Safe Harbor Statement and Forward Looking Information This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this presentation that do not relate to matters of historical fact should be considered forward-looking statements, including statementsregarding Shift4 Payments, Inc.'s("our", the "Company" or Shift4") e ...