Thursday , October 22, 2020

Shift4 Emerges From Its IPO With Less Debt and More Cash

Shift4 Payments Inc. is scheduled to have its first quarterly earnings call as a publicly held company on Thursday. Ahead of that call, company founder and chief executive Jared Isaacman is expressing satisfaction with the merchant acquirer’s June 4 initial public offering. 

The oversubscribed IPO was priced at $23 per share, above its earlier targets, and raised $497 million in net proceeds, according to Isaacman. That enabled Allentown, Pa.-based Shift4 to pay down more than $285 million in debt “and put north of $200 million on the balance sheet,” Isaacman tells Digital Transactions magazine for an upcoming story about payment-industry IPOs. 

“We achieved exactly what our objectives were, which were to substantially de-lever, and we put a lot of cash on the balance sheet for good times or bad,” he says. Isaacman wouldn’t give specifics about what Shift4 will do with the IPO proceeds, such as possibly buy another company. Regarding potential acquisitions, however, “We try and keep a decent pipeline,” he says.

“We achieved exactly what our objectives were,” says CEO Isaacman.

Isaacman attributes the strong IPO in part to investors noticing Shift4 was gaining share in the restaurant industry even though many establishments were getting hammered because so few people could eat inside in this spring and early summer. The hospitality industry generates more than half of Shift4’s $200 billion in annualized payment volume.

“We’ve always taken share from the competition,” he says. “Our business can’t just be measured in a static basis. We’re growing because we’re taking so much share.” He adds that “roughly a third of the restaurants and hotels in the country” use at least one Shift4 product, though not all take “our full stack” of software and payment services.

Another factor: Recent mergers have removed several leading independent payment processors from the public markets, leaving investors searching for similar firms. First Data Corp. is now part of Fiserv Inc.; Worldpay Inc., formerly Vantiv, is now part of FIS (Fidelity National Information Services Inc.); and TSYS (Total System Services Inc.) is now owned by Global Payments Inc. “Right now, there is definitely a scarcity of payments assets,” Isaacman says.

Analysts say investors gave points to Shift4’s integrated suite of software offerings and marketing. “Their technology platform allows disparate systems to connect in,” says Gary Prestopino, managing director at Chicago-based Barrington Research Associates Inc. “That gets investors excited.”

And while the acquiring industry isn’t noted for flashy advertising, Square Inc. and Shift4 have stood out, says Jared Drieling, senior director of consulting and market intelligence at Omaha, Neb.-based payments consultancy The Strawhecker Group. Shift4 has advertised on the reality TV show Bar Rescue, and in July it was designated the “Official Credit Card Processing Company of the Las Vegas Raiders” and the Raiders’ Allegiant Stadium, where all payment transactions will be processed on Shift4 technology. “They’ve done a tremendous job around marketing,” says Drieling.

Shift4 pioneered giving away point-of-sale terminals as a way of booking new accounts, a controversial tactic copied by some of its competitors. Lately it’s updated the practice by offering free QR-code payment technology or free online-ordering, takeout, and delivery systems for restaurants. Isaacman insists any short-term revenue hit through the giveaways is more than compensated by the revenue the new merchants generate over time.

“We don’t need to make money off of the individual service as long as we’re winning the long-term relationship,” he says.

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