Shift4 Payments Inc. refers to the volume potential it’s trying to tap as a “coiled spring” waiting to be released as Covid restrictions ease. On Thursday, the big payments processor tapped into that potential with its $72-million acquisition of VenueNext Inc., a Palo Alto, Calif.-based provider of mobile payments, point-of-sale services, and loyalty programs for sports leagues, business campuses, and similar markets.
The deal expands Shift4’s market in arenas and other venues whose business is expected to rebound as the nation moves away from rules imposed to limit the spread of the coronavirus. “We don’t sit still,” said Jared Isaacman, Shift4’s chief executive, during a call Thursday morning to review the Allentown, Pa.-based company’s fourth-quarter performance.
Shift4 had already sampled the market through its deal to handle payments at the Staples Center, a stadium also served by VenueNext and home to the basketball’s Los Angeles Lakers and hockey’s Los Angeles Kings. With the acquisition, VenueNext will funnel all transactions to Shift4’s payment platform from the range of venues it serves. The move simplifies payments handling for VenueNext but also enhances business for Shift4’s more profitable end-to-end engine, where Shift4 processes transactions rather than handing them off through its gateway to other providers.
“The sales model was fairly disjointed” for VenueNext, Taylor Lauber, chief strategy officer at Shift4, said during the earnings call. “You had to bring in a gateway, you had to bring in a payments partner.” The deal for VenueNext, he said, “is a phenomenal transaction.”
The VenueNext deal follows by a few months the acquisition of 3dcart, a deal that catapulted Shift4 full force into the e-commerce market. That deal, which also moved more volume onto Shift4’s end-to-end processing platform, brought 14,000 online merchants into the company’s fold. But Shift4 Shop, as 3dcart is now known, has already added about 8,000 since the deal closed. “We believe we can double the pre-acquisition site count by the end of the year,” Lauber said.
End-to-end volume is important to Shift4 because it generates greater profitability than the gateway business. In the fourth quarter, end-to-end volume totaled $6.8 billion, up 12% year-over-year. But the company’s projection Thursday indicated a major expansion this year, partly fueled by the deals for VenueNext and 3dcart. For all of 2021, it projects end-to-end volume between $36 billion and $38 billion, up from $24.3 billion in 2020.
More deals could well develop soon. “We’re constantly looking for new opportunities,” Isaacman said. “I can’t recall a time when I was more optimistic about the road ahead” despite “a very challenging year.” Part of that optimism could be based on a “full pipeline” he said Lauber has developed of potential targets. But he cautioned Shift4 will not succumb to the allure “of the next shiny object.” He added, “We’ve been fairly disciplined allocators of capital.”
Still, Isaacman says Shift4 can benefit from the combinations its competitors have made over the past year. “As a lot of our big competitors go through their mergers, a lot of talent is going to become available, and we’re going to get it,” he told analysts on the call.
For the quarter, Shift4 reported gross revenue of $210.9 million, up 4.4% year-over-year. Revenue for all of 2020 came to $766.9 million, a nearly 5% increase.