Its Deal for 3dcart Catapults an Ambitious Shift4 Into E-Commerce Processing

Shift4 Payments Inc. on Thursday jumped into e-commerce payments processing with both feet with its acquisition of 3dcart, a 23-year-old web-store platform with some 14,000 clients globally. Terms were not announced.

The deal diversifies Allentown, Pa.-based Shift4’s product mix but also buttresses its long-term strategy aimed at moving merchants from gateway services to the more lucrative full-service, end-to-end processing business. “We’ve been doing a lot of research into entering the e-commerce market. We did a competitive matrix of the top five players in the market, and 3dcart scores high,” Shift4 chief executive Jared Isaacman told equity analysts early Thursday while discussing the deal and the company’s third-quarter results.

End-to-end processing is already rebounding for Shift4 after taking a hit from the effects of the Covid-19 pandemic. Volume from that sector of the business totaled $7.1 billion in the quarter, up better than 20% year-over-year and a 67% jump from the second quarter. The performance also beat Shift4’s expected range of $6.2 billion to $6.5 billion. 

The company has been on a long-term push to develop business that goes beyond its gateway, where it simply moves transactions to other processors. It has also recently developed technology, including QR code acceptance, to ease contactless payments for its clients in the restaurant business, where it has a heavy concentration.

But Tamarac, Fla.-based 3dcart will aid in merchant diversification. Indeed, its broad mix of merchant categories catapults Shift4 into a new arena where it will compete head-on with platforms like Shopify and Wix. “We believe we can approach that market with a more customer-friendly model,” Isaacman said, referring to pricing. “We’ve got a lot to gain from this [deal]. We’re the underdog. We could monetize this entirely from [processing] payments.” Shift4 officials on the call did not disclose 3dcart’s volume, but Isaacman said it is “in the billions” and would represent an entirely incremental gain for the company.

The dealmaking may not be over any time soon. “You should expect us to be active with [mergers and acquisitions],” Isaacman said. “Nothing has changed in our goal to have a global platform. 3dcart is a key piece in that puzzle but not the whole story.”

Shift4’s expectation for the fourth quarter is that end-to-end volume will fall into the $7.2 billion to $7.6 billion range, even without any contribution from 3dcart. That’s up from a previous projection of $6.5 billion to $6.9 billion. “We’re as excited as we have been for a long time in terms of the opportunities before us,” Isaacman said, referring to what he called “a healthy pipeline” of business.

The company recorded $214.8 million in gross revenue for the quarter and $556 million for the year through Sept. 30, representing year-over-year increases of 11% and 5%, respectively. While its net loss for the first nine months widened to $90.1 million from $44.3 million a year ago, it narrowed its loss for the third quarter to $9.9 million from last year’s $22.6 million.