Monday , February 6, 2023

Shift4 Plans More Overseas Business While Looking for More Conversions to End-to-End Processing

Shift4 Payments Inc. has been a busy payments provider in recent years, and early Monday the company made plain its pace will only get faster and will include continued expansion internationally. Traditionally focused on the U.S. market, executives told equity analysts the company had closed on its first acquisition in Europe, a payment-service provider, in a deal for which they would not give details. 

Meanwhile, Shift4 expects to close on its previously announced $525-milliion deal for Finaro, an e-commerce acquirer, by the end of next year’s first quarter. Finaro processes transactions in the United Kingdom, Europe, Hong Kong, and Japan, supports more than 170 alternative payment methods, vastly expanding Shift4’s currency capabilities in addition to extending the company into overseas markets in a major thrust.

Meanwhile, its new cloud-based technology, Skytab POS, which launched in September, was installed this summer for its first client outside the United States.

Isaacman: “The idea is we are gradually repricing those [gateway] accounts at contract renewals to compensate the company appropriately.”

But company executives aren’t about to take a breather. “The success we have had in our new verticals is still early days,” chief executive Jared Isaacman told the analysts on an early morning call to review the Allentown, Pa.-based company’s third-quarter results. Some of these newer “verticals” include gaming, nonprofits, and travel, extending the company’s reach well beyond its traditional markets in hotels and restaurants.

The company is also moving aggressively now in a longstanding effort to either move clients off of its gateway service or make sure they pay full value. “We have implemented new pricing on gateway merchants that we believe represents the value” delivered, said president Taylor Lauber during the call. The longstanding strategy has been to move these merchants to Shift4’s more profitable end-to-end platform, which will process between $70 billion and $71 billion in volume this year, the company projects. Volume in the quarter rose 53% over the same period last year.

“Gateway customers are primarily restaurants and hotels,” Isaacman said. “The idea is we are gradually repricing those accounts at contract renewals to compensate the company appropriately. We waive gateway fees if you upgrade to end-to-end pricing.” As a result, he added, “gateway conversions remain healthy.” Gateway merchants use Shift4 to accept transactions but then process them with other providers.

For the quarter, Shift4 reported $547 million in revenue, up 45% year-over-year. Revenue for the first nine months came to $1.46 billion, a 50% increase. Net income for the quarter swung from a $9.2-million loss a year ago to $43.1. For the first nine months, net income finished at $45.9 million compared to a $38.8-million loss in 2021.

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