four-10q_20210630.htm

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

☐	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)

Delaware			84-3676340
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
2202 N. Irving Street Allentown, Pennsylvania			18109
(Address of principal executive offices)			(Zip Code)

(Registrant’s telephone number, including area code): (888) 276-2108

N/A

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes☐ No ☒

As of August 2, 2021, there were 47,233,491 shares of the registrant’s Class A common stock, $0.0001 par value per share, outstanding, 28,240,404 shares of the registrant’s Class B common stock, $0.0001 par value per share, outstanding and 7,422,140 shares of the registrant’s Class C common stock, $0.0001 par value per share, outstanding.

SHIFT4 PAYMENTS, INC.

TABLE OF CONTENTS

	PART I. FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Changes in Redeemable Preferred Units and Stockholders’ Equity/Members’ (Deficit)	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4	Controls and Procedures	43

	PART II. OTHER INFORMATION
Item 1	Legal Proceedings	44
Item 1A	Risk Factors	44
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3	Defaults Upon Senior Securities	44
Item 4	Mine Safety Disclosures	44
Item 5	Other Information	44
Item 6	Exhibits	45
Signatures		46

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements relating to our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding expected growth, future capital expenditures and debt service obligations, the anticipated impact of the COVID-19 pandemic (and any variants of the virus) on our business, and our expectations regarding our filer status as of December 31, 2021 are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to the following:

•

the ongoing impact of the COVID-19 global pandemic on our business and results of operations;

•

substantial and increasingly intense competition worldwide in the financial services, payments and payment technology industries;

•

potential changes in the competitive landscape, including disintermediation from other participants in the payments chain;

•

our ability to anticipate and respond to changing industry trends and the needs and preferences of our merchants and consumers;

•

our reliance on third-party vendors to provide products and services;

•

risks associated with acquisitions;

•

our expansion of our share of the existing payment processing markets or into new markets;

•

integration and interoperability of our services and products with a variety of operating systems, software, device and web browsers;

•

dependence on our merchant and software partner relationships and strategic partnerships with various institutions to operate and grow our business;

•

impairment of significant amounts of goodwill and intangible assets on our balance sheet;

•

failure to comply with the U.S. Foreign Corrupt Practices Act, anti-money laundering, economic and trade sanctions regulations, and similar laws;

•

our dependence on our interest in Shift4 Payments, LLC to pay our taxes and expenses, including payments under the Tax Receivable Agreement (“TRA”);

•

Shift4 Payments, LLC’s ability to make such distributions may be subject to various limitations and restrictions;

•

our Founder and Searchlight (each as defined herein) have significant influence over us, including control over decisions that require the approval of stockholders; and

•

those factors described in the sections titled “Risk Factors and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

SHIFT4 PAYMENTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (in millions, except share and per share amounts)

	June 30,			December 31,
	2021			2020
Assets
Current assets
Cash and cash equivalents	$	699.7		$	927.8
Accounts receivable, net of allowance for doubtful accounts of $12.8 in 2021 ($5.7 in 2020) (Note 3)		177.2			92.7
Inventory		1.6			1.5
Prepaid expenses and other current assets (Note 11)		14.8			11.5
Total current assets		893.3			1,033.5
Noncurrent assets
Goodwill (Note 5)		525.2			477.0
Other intangible assets, net (Note 6)		185.1			186.3
Capitalized acquisition costs, net (Note 7)		32.8			30.2
Equipment for lease, net (Note 8)		47.2			36.6
Property, plant and equipment, net (Note 9)		17.5			15.1
Investments in securities (Note 1)		29.5			—
Other noncurrent assets		0.5			0.6
Total noncurrent assets		837.8			745.8
Total assets	$	1,731.1		$	1,779.3
Liabilities and Stockholders' Equity
Current liabilities
Current portion of debt (Note 10)	$	—		$	0.9
Accounts payable		116.4			60.6
Accrued expenses and other current liabilities (Note 11)		36.2			30.1
Deferred revenue (Note 3)		12.0			7.8
Total current liabilities		164.6			99.4
Noncurrent liabilities
Long-term debt (Note 10)		1,117.6			1,005.4
Deferred tax liability (Note 13)		0.6			2.8
Other noncurrent liabilities (Note 4)		2.1			1.7
Total noncurrent liabilities		1,120.3			1,009.9
Total liabilities		1,284.9			1,109.3
Commitments and contingencies (Note 16)
Stockholders' equity (Note 18)
Preferred stock, $0.0001 par value, 20,000,000 shares authorized at June 30, 2021 and December 31, 2020, none issued and outstanding		—			—
Class A common stock, $0.0001 par value per share, 300,000,000 shares authorized, 47,215,604 and 39,737,950 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		—			—
Class B common stock, $0.0001 par value per share, 100,000,000 shares authorized, 28,240,404 and 30,625,857 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		—			—
Class C common stock, $0.0001 par value per share, 100,000,000 shares authorized, 7,422,140 and 10,188,852 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		—			—
Additional paid-in capital		601.3			738.3
Retained deficit		(306.7	)		(278.7	)
Total stockholders' equity attributable to Shift4 Payments, Inc.		294.6			459.6
Noncontrolling interests (Note 19)		151.6			210.4
Total stockholders' equity		446.2			670.0
Total liabilities and stockholders' equity	$	1,731.1		$	1,779.3

See accompanying notes to unaudited condensed consolidated financial statements.

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SHIFT4 PAYMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (in millions, except share and per share amounts)

	Three months ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Gross revenue	$	351.0		$	141.8		$	590.3		$	341.2
Cost of sales		272.9			110.2			460.4			266.2
Gross profit		78.1			31.6			129.9			75.0
General and administrative expenses		51.7			88.3			105.2			109.4
Depreciation and amortization expense		15.5			10.4			30.9			20.9
Professional fees		3.5			1.2			9.7			2.9
Advertising and marketing expenses		2.5			0.8			22.6			2.1
Restructuring expenses (Note 4)		—			0.1			0.1			0.3
Other operating (income) expense, net (Note 3)		—			(12.4	)		—			(12.4	)
Total operating expenses		73.2			88.4			168.5			123.2
Income (loss) from operations		4.9			(56.8	)		(38.6	)		(48.2	)
Loss on extinguishment of debt (Note 10)		—			(7.1	)		(0.2	)		(7.1	)
Other income, net		—			0.2			—			0.1
Interest expense		(6.3	)		(11.7	)		(12.8	)		(25.0	)
Loss before income taxes		(1.4	)		(75.4	)		(51.6	)		(80.2	)
Income tax benefit (Note 13)		5.9			0.6			5.1			0.3
Net income (loss) (a)		4.5			(74.8	)		(46.5	)		(79.9	)
Net income (loss) attributable to noncontrolling interests (b)		1.3			(73.8	)		(16.9	)		(78.9	)
Net income (loss) attributable to Shift4 Payments, Inc. (c)	$	3.2		$	(1.0	)	$	(29.6	)	$	(1.0	)

Basic net income (loss) per share: (d)
Class A basic net income (loss) per share	$	0.06		$	(0.03	)	$	(0.56	)	$	(0.03	)
Basic weighted average common stock outstanding		46,297,553			19,002,563			44,492,680			19,002,563
Class C basic net income (loss) per share	$	0.06		$	(0.03	)	$	(0.56	)	$	(0.03	)
Basic weighted average common stock outstanding		8,151,747			20,139,163			9,075,667			20,139,163

Diluted net income (loss) per share: (d)
Class A diluted net income (loss) per share	$	0.05		$	(0.03	)	$	(0.56	)	$	(0.03	)
Diluted weighted average common stock outstanding		76,995,332			19,002,563			44,492,680			19,002,563
Class C diluted net income (loss) per share	$	0.05		$	(0.03	)	$	(0.56	)	$	(0.03	)
Diluted weighted average common stock outstanding		8,151,747			20,139,163			9,075,667			20,139,163

(a)	Net income (loss) is equal to comprehensive income (loss).

(b)

Net income (loss) attributable to noncontrolling interests is equal to comprehensive income (loss) attributable to noncontrolling interests, including the net loss for the period January 1, 2020 through June 4, 2020, the date the SEC declared effective the Company’s Registration Statement on Form S-1 filed in connection with its IPO. See Note 1 for more information.

(c)	Net income (loss) attributable to Shift4 Payments, Inc. is equal to comprehensive income (loss) attributable to Shift4 Payments, Inc.

(d)

For the three and six months ended June 30, 2020, represents basic and diluted net loss per share of Class A and Class C common stock and weighted average shares of Class A and Class C common stock outstanding for the period from June 5, 2020 through June 30, 2020, the period following the Reorganization Transactions and Shift4 Payments, Inc.'s initial public offering described in Note 1. See Note 21 for additional information on basic and diluted net income (loss) per share.

See accompanying notes to unaudited condensed consolidated financial statements.

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SHIFT4 PAYMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED UNITS AND STOCKHOLDERS’ EQUITY/ MEMBERS’ (DEFICIT)

(Unaudited) (in millions, except units and shares)

	Class A Common Stock				Class B Common Stock					Class C Common Stock					Additional
	Shares		Amount		Shares			Amount		Shares			Amount		paid-in capital			Retained Deficit			Noncontrolling Interests			Total equity
Balances at December 31, 2020		39,737,950	$	—		30,625,857		$	—		10,188,852		$	—	$	738.3		$	(278.7	)	$	210.4		$	670.0
Net loss		—		—		—			—		—			—		—			(32.8	)		(18.2	)		(51.0	)
Cumulative effect of ASU 2020-06 adoption		—		—		—			—		—			—		(111.5	)		1.6			—			(109.9	)
Issuance of Class A common stock and fair value of equity-based compensation awards assumed in connection with VenueNext acquisition		325,127		—		—			—		—			—		13.5			—			12.8			26.3
Transfer from Founder of right associated with Inspiration4 seat		—		—		—			—		—			—		1.3			—			0.8			2.1
Exchange of shares held by Searchlight		2,000,000		—		(926,000	)		—		(1,074,000	)		—		6.3			—			(6.3	)		—
Equity-based compensation		—		—		—			—		—			—		14.0			—			—			14.0
Vesting of restricted stock units, net of tax withholding		46,503		—		—			—		—			—		(1.4	)		—			(1.0	)		(2.4	)
Balances at March 31, 2021		42,109,580	$	—		29,699,857		$	—		9,114,852		$	—	$	660.5		$	(309.9	)	$	198.5		$	549.1
Net income		—		—		—			—		—			—		—			3.2			1.3			4.5
Exchange of shares held by Searchlight		3,152,165		—		(1,459,453	)		—		(1,692,712	)		—		7.9			—			(7.9	)		—
Equity-based compensation		—		—		—			—		—			—		6.6			—			—			6.6
Vesting of restricted stock units, net of tax withholding		1,953,859		—		—			—		—			—		(73.7	)		—			(40.3	)		(114.0	)
Balances at June 30, 2021		47,215,604	$	—		28,240,404		$	—		7,422,140		$	—	$	601.3		$	(306.7	)	$	151.6		$	446.2

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SHIFT4 PAYMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED UNITS AND STOCKHOLDERS’ EQUITY/ MEMBERS’ (DEFICIT) (continued)

(Unaudited) (in millions, except units and shares)

Redeemable

Preferred Units

Class A

Common Units

Class B

Common Units

Class A

Common Stock