UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2022


o			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)

(888) 276-2108

(Registrant’s telephone number, including area code)

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:~~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 x No o

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 x No o

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	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
Emerging growth company	o

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 o No x

As of ~~July 29,~~October 31, 2022, there were ~~51,092,250~~53,006,376 shares of the registrant’s Class A common stock, $0.0001 par value per share, outstanding, 25,829,016 shares of the registrant’s Class B common stock, $0.0001 par value per share, outstanding and ~~3,650,380~~3,626,749 shares of the registrant’s Class C common stock, $0.0001 par value per share, outstanding.

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SHIFT4 PAYMENTS, INC.

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	PART I. FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Income (Loss)	7
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	8
	Condensed Consolidated Statements of Cash Flows (As Restated)	910
	Notes to Condensed Consolidated Financial Statements	1011
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3326
Item 3	Quantitative and Qualitative Disclosures About Market Risk	4643
Item 4	Controls and Procedures	5344

	PART II. OTHER INFORMATION
Item 1	Legal Proceedings	4745
Item 1A	Risk Factors	4745
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	5145
Item 3	Defaults Upon Senior Securities	5145
Item 4	Mine Safety Disclosures	5145
Item 5	Other Information	5145
Item 6	Exhibits	5145
	Signatures	5447

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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~~fact contained in this Quarterly Report on Form 10-Q, including, without limitation, statements relating to our future results of operations and financial position, business strategy and ~~plans and~~plans; objectives of management for future operations, including, among others, statements regarding expected growth, future capital expenditures and debt service ~~obligations,~~obligations; remediation of material weaknesses; and the anticipated impact of COVID-19 on our business 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, though not all forward-looking statements can be identified by such terms or expressions. The forward-looking statements in this Quarterly Report on Form 10-Q 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 on Form 10-Q 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 COVID-19 global pandemic has had and ~~may~~is expected to continue to have an adverse effect on our business and results of operations;

•substantial and increasingly intense competition worldwide in the financial services, payments and payment technology industries may adversely affect our overall business and operations;

•potential changes in the competitive landscape, including disintermediation from other participants in the payments chain, could harm our business;

•our ability to anticipate and respond to changing industry trends and the needs and preferences of our merchants and consumers may adversely affect our competitiveness or the demand for our products and services;

•because we rely on third-party vendors to provide products and services, we could be adversely impacted if they fail to fulfill their obligations;

•acquisitions create certain risks and may adversely affect our business, financial condition or results of operations;

•we may not be able to continue to expand our share of the existing payment processing markets or expand into new markets which would inhibit our ability to grow and increase our profitability;

•our services and products must integrate with a variety of operating systems, software, device and web browsers, and our business may be materially and adversely affected if we are unable to ensure that our services interoperate with such operating systems, device, software and web browsers;

•we depend, in part, on our merchant and software partner relationships and strategic partnerships with various institutions to operate and grow our business. If we are unable to maintain these relationships and partnerships, our business may be adversely affected;

•our balance sheet includes significant amounts of goodwill and intangible assets. The impairment of a significant portion of these assets would negatively affect our business, financial condition or results of operations;

•failure to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”) anti-money laundering, economic and trade sanctions regulations, and similar laws could subject us to penalties and other adverse consequences;

•our principal asset is our interest in Shift4 Payments, LLC, and, as a result, we depend on distributions from 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 (as defined herein) has significant influence over us, including control over decisions that require the approval of stockholders;

•the potential impact of, and our ability to remediate, material weaknesses in our internal control over financial reporting;

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•the ongoing military action between Russia and Ukraine could adversely affect our business, financial condition and results of operations; and

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•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~~10-K/A for the fiscal year ended December 31, 2021, filed on November 8, 2022 (the “2021 Form ~~10-K”~~10-K/A”) 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 on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q 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.

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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, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	1,018.2	$	1,231.5	Cash and cash equivalents	$	672.7	$	1,231.5
Accounts receivable, net of allowance for doubtful accounts of $10.8 in 2022 ($8.0 in 2021)		251.3		205.9
Accounts receivable, net of allowance for doubtful accounts of $14.7 in 2022 ($8.0 in 2021)						Accounts receivable, net of allowance for doubtful accounts of $14.7 in 2022 ($8.0 in 2021)	262.2		205.9
Inventory	Inventory	2.3		3.5		Inventory	5.9		3.5

Prepaid expenses and other current assets (Note 10)		12.1		12.7
Prepaid expenses and other current assets (Note 11)						Prepaid expenses and other current assets (Note 11)	19.9		12.7
Total current assets	Total current assets	1,283.9		1,453.6		Total current assets	960.7		1,453.6
Noncurrent assets	Noncurrent assets					Noncurrent assets
Goodwill (Note 4)		627.1		537.7
Other intangible assets, net (Note 5)		219.0		188.5
Capitalized acquisition costs, net (Note 6)		36.6		35.1
Equipment for lease, net (Note 7)		65.2		58.4
Property, plant and equipment, net (Note 8)		17.7		18.4
Right-of-use assets (Note 13)		16.2		18.5
Goodwill (Note 5)						Goodwill (Note 5)	777.3		537.7
Other intangible assets, net (Note 6)						Other intangible assets, net (Note 6)	561.7		188.5
Capitalized customer acquisition costs, net (Note 7)						Capitalized customer acquisition costs, net (Note 7)	35.2		35.1
Equipment for lease, net (Note 8)						Equipment for lease, net (Note 8)	70.5		58.4
Property, plant and equipment, net (Note 9)						Property, plant and equipment, net (Note 9)	21.4		18.4
Right-of-use assets (Note 14)						Right-of-use assets (Note 14)	16.7		18.5
Investments in securities	Investments in securities	32.0		30.5		Investments in securities	32.0		30.5

Other noncurrent assets	Other noncurrent assets	1.9		1.9		Other noncurrent assets	10.2		1.9
Total noncurrent assets	Total noncurrent assets	1,015.7		889.0		Total noncurrent assets	1,525.0		889.0
Total assets	Total assets	$	2,299.6	$	2,342.6	Total assets	$	2,485.7	$	2,342.6
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	155.2	$	121.1	Accounts payable	$	177.1	$	121.1
Accrued expenses and other current liabilities (Note 10)		97.3		42.9
Deferred revenue (Note 3)		18.7		15.0
Current lease liabilities (Note 13)		4.1		4.8
Accrued expenses and other current liabilities (Note 11)						Accrued expenses and other current liabilities (Note 11)	86.6		42.9
Deferred revenue (Note 4)						Deferred revenue (Note 4)	20.3		15.0
Current lease liabilities (Note 14)						Current lease liabilities (Note 14)	4.6		4.8
Total current liabilities	Total current liabilities	275.3		183.8		Total current liabilities	288.6		183.8
Noncurrent liabilities	Noncurrent liabilities					Noncurrent liabilities
Long-term debt (Note 9)		1,737.8		1,738.5
Deferred tax liability (Note 12)		1.2		0.3
Noncurrent lease liabilities (Note 13)		16.0		17.9
Long-term debt (Note 10)						Long-term debt (Note 10)	1,739.8		1,738.5
Deferred tax liability (Note 13)						Deferred tax liability (Note 13)	9.3		0.3
Noncurrent lease liabilities (Note 14)						Noncurrent lease liabilities (Note 14)	15.9		17.9
Other noncurrent liabilities	Other noncurrent liabilities	1.9		2.4		Other noncurrent liabilities	11.3		2.4
Total noncurrent liabilities	Total noncurrent liabilities	1,756.9		1,759.1		Total noncurrent liabilities	1,776.3		1,759.1
Total liabilities	Total liabilities	2,032.2		1,942.9		Total liabilities	2,064.9		1,942.9
Commitments and contingencies (Note 15)		0		0
Stockholders' equity (Note 16)
Preferred stock, $0.0001 par value, 20,000,000 shares authorized at June 30, 2022 and December 31, 2021, NaN issued and outstanding		—		—
Class A common stock, $0.0001 par value per share, 300,000,000 shares authorized, 51,458,312 and 51,793,127 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		—		—
Class B common stock, $0.0001 par value per share, 100,000,000 shares authorized, 25,829,016 and 26,272,654 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		—		—
Class C common stock, $0.0001 par value per share, 100,000,000 shares authorized, 3,650,380 and 5,035,181 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		—		—
Commitments and contingencies (Note 16)						Commitments and contingencies (Note 16)
Stockholders' equity (Note 17)						Stockholders' equity (Note 17)
Preferred stock, $0.0001 par value, 20,000,000 shares authorized at September 30, 2022 and December 31, 2021, none issued and outstanding						Preferred stock, $0.0001 par value, 20,000,000 shares authorized at September 30, 2022 and December 31, 2021, none issued and outstanding	—		—
Class A common stock, $0.0001 par value per share, 300,000,000 shares authorized, 53,006,376 and 51,793,127 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively						Class A common stock, $0.0001 par value per share, 300,000,000 shares authorized, 53,006,376 and 51,793,127 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	—		—
Class B common stock, $0.0001 par value per share, 100,000,000 shares authorized, 25,829,016 and 26,272,654 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively						Class B common stock, $0.0001 par value per share, 100,000,000 shares authorized, 25,829,016 and 26,272,654 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	—		—
Class C common stock, $0.0001 par value per share, 100,000,000 shares authorized, 3,626,749 and 5,035,181 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively						Class C common stock, $0.0001 par value per share, 100,000,000 shares authorized, 3,626,749 and 5,035,181 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	—		—
Additional paid-in capital	Additional paid-in capital	635.5		619.2		Additional paid-in capital	696.0		619.2
Treasury stock, at cost; 726,650 shares and 378,475 shares at June 30, 2022 and December 31, 2021, respectively		(28.8)		(21.1)
Treasury stock, at cost; no shares and 378,475 shares at September 30, 2022 and December 31, 2021, respectively						Treasury stock, at cost; no shares and 378,475 shares at September 30, 2022 and December 31, 2021, respectively	—		(21.1)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(0.4)		—		Accumulated other comprehensive loss	(0.7)		—
Retained deficit	Retained deficit	(422.8)		(325.3)		Retained deficit	(392.8)		(325.3)
Total stockholders' equity attributable to Shift4 Payments, Inc.	Total stockholders' equity attributable to Shift4 Payments, Inc.	183.5		272.8		Total stockholders' equity attributable to Shift4 Payments, Inc.	302.5		272.8
Noncontrolling interests (Note 17)		83.9		126.9
Noncontrolling interests (Note 18)						Noncontrolling interests (Note 18)	118.3		126.9
Total stockholders' equity	Total stockholders' equity	267.4		399.7		Total stockholders' equity	420.8		399.7
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	2,299.6	$	2,342.6	Total liabilities and stockholders' equity	$	2,485.7	$	2,342.6
See accompanying notes to unaudited condensed consolidated financial statements.	See accompanying notes to unaudited condensed consolidated financial statements.					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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Gross revenue(a)	Gross revenue(a)	$	506.7	$	351.0	$	908.6	$	590.3	Gross revenue(a)	$	547.3	$	377.8	$	1,455.9	$	968.1
Cost of sales		400.9		272.9		718.2		460.4
Gross profit		105.8		78.1		190.4		129.9
Cost of sales (exclusive of depreciation and amortization expense shown separately below) (b)										Cost of sales (exclusive of depreciation and amortization expense shown separately below) (b)	(411.6)		(313.4)		(1,129.8)		(773.8)
General and administrative expenses	General and administrative expenses	58.0		51.7		124.2		105.2		General and administrative expenses	(74.1)		(48.1)		(198.6)		(153.1)
Revaluation of contingent liabilities (Note 12)										Revaluation of contingent liabilities (Note 12)	36.9		—		37.2		(0.2)
Depreciation and amortization expense(c)	Depreciation and amortization expense(c)	16.7		15.5		34.0		30.9		Depreciation and amortization expense(c)	(28.9)		(15.0)		(62.9)		(45.9)
Professional fees	Professional fees	5.2		3.5		13.9		9.7		Professional fees	(10.4)		(3.3)		(24.3)		(13.0)
Advertising and marketing expenses	Advertising and marketing expenses	2.9		2.5		5.6		22.6		Advertising and marketing expenses	(5.6)		(3.5)		(11.2)		(26.1)
Restructuring expenses (Note 10)		0.1		—		0.1		0.1
Transaction-related expenses (Note 9)		—		—		1.4		—
Total operating expenses		82.9		73.2		179.2		168.5
Restructuring expenses (Note 11)										Restructuring expenses (Note 11)	(0.1)		(0.1)		(0.2)		(0.2)
Transaction-related expenses (Note 10)										Transaction-related expenses (Note 10)	—		—		(1.4)		—
Income (loss) from operations	Income (loss) from operations	22.9		4.9		11.2		(38.6)		Income (loss) from operations	53.5		(5.6)		64.7		(44.2)
Loss on extinguishment of debt	Loss on extinguishment of debt	—		—		—		(0.2)		Loss on extinguishment of debt	—		—		—		(0.2)
Interest income	Interest income	1.4		—		1.4		—		Interest income	3.5		—		4.9		—
Other income, net	Other income, net	0.1		—		0.3		—		Other income, net	—		0.2		0.3		0.2
Change in TRA liability (Note 13)										Change in TRA liability (Note 13)	(1.1)		—		(1.1)		—
Interest expense	Interest expense	(8.4)		(6.3)		(16.3)		(12.8)		Interest expense	(8.3)		(7.4)		(24.6)		(20.2)
Income (loss) before income taxes	Income (loss) before income taxes	16.0		(1.4)		(3.4)		(51.6)		Income (loss) before income taxes	47.6		(12.8)		44.2		(64.4)
Income tax benefit (provision) (Note 12)		(1.0)		5.9		5.2		5.1
Income tax (provision) benefit (Note 13)										Income tax (provision) benefit (Note 13)	(1.2)		(1.0)		4.0		4.1
Net income (loss)	Net income (loss)	15.0		4.5		1.8		(46.5)		Net income (loss)	46.4		(13.8)		48.2		(60.3)
Net income (loss) attributable to noncontrolling interests	Net income (loss) attributable to noncontrolling interests	4.7		1.3		(1.0)		(16.9)		Net income (loss) attributable to noncontrolling interests	3.3		(4.6)		2.3		(21.5)
Net income (loss) attributable to Shift4 Payments, Inc.	Net income (loss) attributable to Shift4 Payments, Inc.	$	10.3	$	3.2	$	2.8	$	(29.6)	Net income (loss) attributable to Shift4 Payments, Inc.	$	43.1	$	(9.2)	$	45.9	$	(38.8)

Basic net income (loss) per share:	Basic net income (loss) per share:									Basic net income (loss) per share:
Class A net income (loss) per share - basic	Class A net income (loss) per share - basic	$	0.19	$	0.06	$	0.05	$	(0.56)	Class A net income (loss) per share - basic	$	0.78	$	(0.17)	$	0.82	$	(0.72)
Class A weighted average common stock outstanding - basic	Class A weighted average common stock outstanding - basic	51,790,403		46,297,553		51,958,494		44,492,680		Class A weighted average common stock outstanding - basic	51,502,825		49,692,599		51,804,935		46,251,576
Class C net income (loss) per share - basic	Class C net income (loss) per share - basic	$	0.19	$	0.06	$	0.05	$	(0.56)	Class C net income (loss) per share - basic	$	0.78	$	(0.17)	$	0.82	$	(0.72)
Class C weighted average common stock outstanding - basic	Class C weighted average common stock outstanding - basic	4,006,159		8,151,747		4,283,096		9,075,667		Class C weighted average common stock outstanding - basic	3,648,580		6,117,997		4,069,266		8,078,943

Diluted net income (loss) per share:	Diluted net income (loss) per share:									Diluted net income (loss) per share:
Class A net income (loss) per share - diluted	Class A net income (loss) per share - diluted	$	0.18	$	0.05	$	0.02	$	(0.56)	Class A net income (loss) per share - diluted	$	0.57	$	(0.17)	$	0.58	$	(0.72)
Class A weighted average common stock outstanding - diluted	Class A weighted average common stock outstanding - diluted	78,514,880		76,995,332		78,823,068		44,492,680		Class A weighted average common stock outstanding - diluted	77,801,346		49,692,599		78,479,541		46,251,576
Class C net income (loss) per share - diluted	Class C net income (loss) per share - diluted	$	0.18	$	0.05	$	0.02	$	(0.56)	Class C net income (loss) per share - diluted	$	0.57	$	(0.17)	$	0.58	$	(0.72)
Class C weighted average common stock outstanding - diluted	Class C weighted average common stock outstanding - diluted	4,006,159		8,151,747		4,283,096		9,075,667		Class C weighted average common stock outstanding - diluted	3,648,580		6,117,997		4,069,266		8,078,943
See accompanying notes to unaudited condensed consolidated financial statements.	See accompanying notes to unaudited condensed consolidated financial statements.									See accompanying notes to unaudited condensed consolidated financial statements.

(a)For the three and nine months ended September 30, 2021, includes $22.4 million of payments to merchants associated with the TSYS outage, which are recorded as contra revenue and reflected as a reduction of “Gross revenue.” See Note 4 for more information.

(b)For the three and nine months ended September 30, 2021, includes $2.3 million of payments to partners associated with the TSYS outage. See Note 4 for more information.

(c)Depreciation and amortization expense includes depreciation of equipment under lease of $8.2 million and $22.6 million for the three and nine months ended September 30, 2022, respectively, and $5.8 million and $15.4 million for the three and nine months ended September 30, 2021, respectively.

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SHIFT4 PAYMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited) (in millions)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net income (loss)	Net income (loss)	$	15.0	$	4.5	$	1.8	$	(46.5)	Net income (loss)	$	46.4	$	(13.8)	$	48.2	$	(60.3)
Other comprehensive income (loss)
Unrealized income (loss) on foreign currency translation adjustment, net of tax		(0.6)		—		(0.6)		—
Total other comprehensive income (loss)		(0.6)		—		(0.6)		—
Other comprehensive loss										Other comprehensive loss
Unrealized loss on foreign currency translation adjustment, net of tax										Unrealized loss on foreign currency translation adjustment, net of tax	(0.5)		—		(1.1)		—
Total other comprehensive loss										Total other comprehensive loss	(0.5)		—		(1.1)		—
Comprehensive income (loss)	Comprehensive income (loss)	14.4		4.5		1.2		(46.5)		Comprehensive income (loss)	45.9		(13.8)		47.1		(60.3)
Comprehensive income (loss) attributable to noncontrolling interests	Comprehensive income (loss) attributable to noncontrolling interests	4.5		1.3		(1.2)		(16.9)		Comprehensive income (loss) attributable to noncontrolling interests	3.1		(4.6)		1.9		(21.5)
Comprehensive income (loss) attributable to Shift4 Payments, Inc.	Comprehensive income (loss) attributable to Shift4 Payments, Inc.	$	9.9	$	3.2	$	2.4	$	(29.6)	Comprehensive income (loss) attributable to Shift4 Payments, Inc.	$	42.8	$	(9.2)	$	45.2	$	(38.8)
See accompanying notes to unaudited condensed consolidated financial statements.	See accompanying notes to unaudited condensed consolidated financial statements.									See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

SHIFT4 PAYMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited) (in millions, except ~~shares)~~share amounts)

Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Additional
Paid-In
Capital
Treasury Stock
Retained
Deficit
Accumulated Other Comprehensive Loss
Noncontrolling
Interests
Total
Equity
Shares Amount Shares Amount Shares Amount Shares Amount
Balances at December 31, 2021 51,793,127 $ — 26,272,654 $ — 5,035,181 $ — $ 619.2 (378,475) $ (21.1) $ (325.3) $ — $ 126.9 $ 399.7
Net loss — — — — — — — — — (7.5) — (5.7) (13.2)
Issuance of Class A common stock and fair value of equity-based compensation awards assumed in connection with The Giving Block acquisition 785,969 — — — — — 24.7 — — — — 11.8 36.5
Repurchases of Class A common stock to treasury stock — — — — — — 4.5 (301,510) (17.2) — — (4.5) (17.2)
Exchange of shares held by Continuing Equity Owners 732,524 — — — (732,524) — — — — — — — —
Equity-based compensation — — — — — — 15.8 — — — — — 15.8
Vesting of restricted stock units, net of tax withholding 306,953 — — — — — (4.6) — — — — 1.2 (3.4)
Balances at March 31, 2022 53,618,573 — 26,272,654 — 4,302,657 — 659.6 (679,985) (38.3) (332.8) — 129.7 418.2
Net income — — — — — — — — — 10.3 — 4.7 15.0
Issuance of Class A common stock 17,287 — — — — — 0.4 — — — — 0.2 0.6
Repurchases of Class A common stock to treasury stock — — — — — — 46.8 (3,585,681) (167.2) — — (46.8) (167.2)
Retirement of treasury stock (3,539,016) — — — — — (76.4) 3,539,016 176.7 (100.3) — — —
Exchange of shares held by Continuing Equity Owners 1,095,915 — (443,638) — (652,277) — 1.6 — — — — (1.6) —
Equity-based compensation — — — — — — 9.3 — — — — — 9.3
Vesting of restricted stock units, net of tax withholding 265,553 — — — — — (5.8) — — — — (2.1) (7.9)
Cumulative translation adjustment — — — — — — — — — — (0.4) (0.2) (0.6)
Balances at June 30, 2022 51,458,312 — 25,829,016 — 3,650,380 — $ 635.5 (726,650) $ (28.8) $ (422.8) $ (0.4) $ 83.9 $ 267.4
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Additional
Paid-In
Capital
Retained
Deficit
Noncontrolling
Interests
Total
Equity
Shares Amount Shares Amount Shares Amount
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
See accompanying notes to unaudited condensed consolidated financial statements.


	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional Paid-In Capital		Treasury Stock			Retained Deficit		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
	Shares	Amount		Shares	Amount		Shares	Amount				Shares	Amount
Balances at December 31, 2021	51,793,127	$	—	26,272,654	$	—	5,035,181	$	—	$	619.2	(378,475)	$	(21.1)	$	(325.3)	$	—	$	126.9	$	399.7
Net loss	—	—		—	—		—	—		—		—	—		(7.5)		—		(5.7)		(13.2)
Issuance of Class A common stock and fair value of equity-based compensation awards assumed in connection with The Giving Block acquisition	785,969	—		—	—		—	—		24.7		—	—		—		—		11.8		36.5
Repurchases of Class A common stock to treasury stock	—	—		—	—		—	—		4.5		(301,510)	(17.2)		—		—		(4.5)		(17.2)
Exchange of shares held by Continuing Equity Owners	732,524	—		—	—		(732,524)	—		—		—	—		—		—		—		—
Equity-based compensation	—	—		—	—		—	—		15.8		—	—		—		—		—		15.8
Vesting of restricted stock units, net of tax withholding	306,953	—		—	—		—	—		(4.6)		—	—		—		—		1.2		(3.4)


Balances at March 31, 2022	53,618,573	—		26,272,654	—		4,302,657	—		659.6		(679,985)	(38.3)		(332.8)		—		129.7		418.2
Net income	—	—		—	—		—	—		—		—	—		10.3		—		4.7		15.0
Issuance of Class A common stock	17,287	—		—	—		—	—		0.4		—	—		—		—		0.2		0.6
Repurchases of Class A common stock to treasury stock	—	—		—	—		—	—		46.8		(3,585,681)	(167.2)		—		—		(46.8)		(167.2)
Retirement of treasury stock	(3,539,016)	—		—	—		—	—		(76.4)		3,539,016	176.7		(100.3)		—		—		—
Exchange of shares held by Continuing Equity Owners	1,095,915	—		(443,638)	—		(652,277)	—		1.6		—	—		—		—		(1.6)		—
Equity-based compensation	—	—		—	—		—	—		9.3		—	—		—		—		—		9.3
Vesting of restricted stock units, net of tax withholding	265,553	—		—	—		—	—		(5.8)		—	—		—		—		(2.1)		(7.9)
Cumulative translation adjustment	—	—		—	—		—	—		—		—	—		—		(0.4)		(0.2)		(0.6)

Balances at June 30, 2022	51,458,312	—		25,829,016	—		3,650,380	—		635.5		(726,650)	(28.8)		(422.8)		(0.4)		83.9		267.4
Net income	—	—		—	—		—	—		—		—	—		43.1		—		3.3		46.4
Issuance of Class A common stock in connection with acquisitions and residual commission buyouts	2,228,663	—		—	—		—	—		63.8		—	—		—		—		31.4		95.2

Retirement of treasury stock	(726,650)	—		—	—		—	—		(15.7)		726,650	28.8		(13.1)		—		—		—
Exchange of shares held by Continuing Equity Owners	23,631	—		—	—		(23,631)	—		—		—	—		—		—		—		—
Equity-based compensation	—	—		—	—		—	—		12.8		—	—		—		—		—		12.8
Vesting of restricted stock units, net of tax withholding	22,420	—		—	—		—	—		(0.4)		—	—		—		—		(0.1)		(0.5)
Other comprehensive loss	—	—		—	—		—	—		—		—	—		—		(0.3)		(0.2)		(0.5)
Balances at September 30, 2022	53,006,376	$	—	25,829,016	$	—	3,626,749	$	—	$	696.0	—	$	—	$	(392.8)	$	(0.7)	$	118.3	$	420.8

Table of Contents

SHIFT4 PAYMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited) (in millions, except share amounts)


	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional Paid-In Capital		Retained Deficit		Noncontrolling Interests		Total Equity
	Shares	Amount		Shares	Amount		Shares	Amount
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
Net loss	—	—		—	—		—	—		—		(9.2)		(4.6)		(13.8)
Issuance of Class A common stock and fair value of equity-based compensation awards assumed in connection with VenueNext acquisition	16,797	—		—	—		—	—		—		—		—		—
Exchange of shares held by Searchlight	4,250,000	—		(1,967,750)	—		(2,282,250)	—		9.0		—		(9.0)		—
Equity-based compensation	—	—		—	—		—	—		6.4		—		—		6.4
Vesting of restricted stock units, net of tax withholding	26,207	—		—	—		—	—		(2.4)		—		(1.0)		(3.4)
Balances at September 30, 2021	51,508,608	$	—	26,272,654	$	—	5,139,890	$	—	$	614.3	$	(315.9)	$	137.0	$	435.4
See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

SHIFT4 PAYMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (in millions)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2022		2021			2022		2021
Operating activities	Operating activities					Operating activities			As Restated
Net income (loss)	Net income (loss)	$	1.8	$	(46.5)	Net income (loss)	$	48.2	$	(60.3)
Adjustments to reconcile net income (loss) to net cash provided by operating activities	Adjustments to reconcile net income (loss) to net cash provided by operating activities					Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	59.0		51.0		Depreciation and amortization	101.6		76.8
Amortization of capitalized financing costs	Amortization of capitalized financing costs	3.9		2.4		Amortization of capitalized financing costs	6.0		4.1
Loss on extinguishment of debt	Loss on extinguishment of debt	—		0.2		Loss on extinguishment of debt	—		0.2
Deferred income taxes	Deferred income taxes	(5.5)		(2.3)		Deferred income taxes	(4.4)		(4.3)
Provision for bad debts	Provision for bad debts	4.3		8.1		Provision for bad debts	5.8		10.3
Revaluation of contingent liabilities	Revaluation of contingent liabilities	(0.3)		0.2		Revaluation of contingent liabilities	(37.2)		0.2
Impairment of intangible assets		—		0.1

Change in TRA liability						Change in TRA liability	1.1		—
Equity-based compensation expense	Equity-based compensation expense	26.2		20.6		Equity-based compensation expense	38.4		26.9
Other noncash items	Other noncash items	0.7		0.5		Other noncash items	0.9		1.0
Change in operating assets and liabilities	Change in operating assets and liabilities					Change in operating assets and liabilities
Accounts receivable	Accounts receivable	(49.5)		(92.0)		Accounts receivable	(58.1)		(98.0)

Prepaid expenses and other assets	Prepaid expenses and other assets	1.7		(1.6)		Prepaid expenses and other assets	(4.6)		(1.4)
Inventory	Inventory	2.9		3.0		Inventory	3.1		2.9
Capitalized customer acquisition costs						Capitalized customer acquisition costs	(19.4)		(19.3)
Accounts payable	Accounts payable	35.8		50.8		Accounts payable	44.2		59.1
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	3.1		5.2		Accrued expenses and other current liabilities	8.3		5.3
Right-of-use assets and lease liabilities, net	Right-of-use assets and lease liabilities, net	(0.3)		—		Right-of-use assets and lease liabilities, net	(0.4)		—
Deferred revenue	Deferred revenue	1.2		5.3		Deferred revenue	2.4		2.8
Net cash provided by operating activities	Net cash provided by operating activities	85.0		5.0		Net cash provided by operating activities	135.9		6.3
Investing activities	Investing activities					Investing activities
Residual commission buyouts						Residual commission buyouts	(268.2)		(4.4)
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(12.6)		(40.2)		Acquisitions, net of cash acquired	(135.2)		(54.2)
Acquisition of equipment to be leased	Acquisition of equipment to be leased	(24.9)		(18.9)		Acquisition of equipment to be leased	(39.6)		(35.3)
Capitalized software development costs	Capitalized software development costs	(20.3)		(8.3)		Capitalized software development costs	(31.7)		(13.0)
Customer acquisition costs		(14.2)		(12.7)
Residual commission buyouts		(11.8)		(0.9)
Investments in securities	Investments in securities	(1.5)		(29.5)		Investments in securities	(1.5)		(29.5)
Acquisition of property, plant and equipment	Acquisition of property, plant and equipment	(1.8)		(5.0)		Acquisition of property, plant and equipment	(6.8)		(6.3)
Net cash used in investing activities	Net cash used in investing activities	(87.1)		(115.5)		Net cash used in investing activities	(483.0)		(142.7)
Financing activities	Financing activities					Financing activities
Proceeds from long-term debt						Proceeds from long-term debt	—		632.5
Repurchases of Class A common stock to treasury stock	Repurchases of Class A common stock to treasury stock	(185.9)		—		Repurchases of Class A common stock to treasury stock	(185.9)		—
Payments for withholding tax related to vesting of restricted stock units	Payments for withholding tax related to vesting of restricted stock units	(20.2)		(116.3)		Payments for withholding tax related to vesting of restricted stock units	(20.6)		(119.7)
Deferred financing costs	Deferred financing costs	(4.9)		(0.4)		Deferred financing costs	(4.9)		(15.2)
Repayment of debt	Repayment of debt	—		(0.9)		Repayment of debt	—		(0.9)
Net cash used in financing activities		(211.0)		(117.6)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(211.4)		496.7
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(0.2)		—		Effect of exchange rate changes on cash and cash equivalents	(0.3)		—
Change in cash and cash equivalents	Change in cash and cash equivalents	(213.3)		(228.1)		Change in cash and cash equivalents	(558.8)		360.3
Cash and cash equivalents	Cash and cash equivalents					Cash and cash equivalents
Beginning of period	Beginning of period	1,231.5		927.8		Beginning of period	1,231.5		927.8
End of period	End of period	$	1,018.2	$	699.7	End of period	$	672.7	$	1,288.1
Supplemental cash flows information and noncash activities are further described in Note 20.
Supplemental cash flows information and noncash activities are further described in Note 21.						Supplemental cash flows information and noncash activities are further described in Note 21.
See accompanying notes to unaudited condensed consolidated financial statements.	See accompanying notes to unaudited condensed consolidated financial statements.					See accompanying notes to unaudited condensed consolidated financial statements.

910

Table of Contents

SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1.Organization, Basis of Presentation and Significant Accounting Policies

Organization

Shift4 Payments, Inc., (“Shift4 Payments”) (“the Company”), was incorporated in Delaware on November 5, 2019 in order to carry on the business of Shift4 Payments, LLC and its consolidated subsidiaries. The Company is a leading provider of integrated payment processing and technology ~~solutions.~~solutions in the United States (“U.S.”). The Company has also begun executing on its international expansion strategy. The Company distributes its services through its internal sales and support teams, as well as through its network of software partners. Through the Shift4 Model, the Company offers software ~~providers~~partners a single integration to an end-to-end payments offering, a powerful gateway and a robust suite of technology solutions (including cloud enablement, business intelligence, analytics, and mobile) to enhance the value of their software suites and simplify payment acceptance. The Company provides for its merchants a seamless customer experience at scale, rather than simply acting as one of multiple providers they rely on to operate their businesses. The Shift4 Model is built to serve a range of merchants from small-to-medium-sized businesses to large and complex enterprises across numerous verticals, including food and beverage, hospitality, stadiums and arenas, gaming, specialty retail, non-profits, eCommerce, and exciting technology companies. This includes the Company’s point of sale (“POS”) software offerings, as well as over ~~425~~500 additional software integrations in virtually every industry.

Basis of Presentation

The accompanying interim condensed consolidated financial statements of the Company are unaudited. These interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the ~~United States~~U.S. (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. As such, these financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statements. The December 31, 2021 Condensed Consolidated Balance Sheet was derived from audited financial statements as of that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments consisting only of normal recurring adjustments necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods. The results of operations for the interim periods presented are not necessarily indicative of results for the full year or future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the fiscal year ended December 31, 2021, as disclosed in ~~our~~the Company’s Annual Report on Form ~~10-K~~10-K/A for the fiscal year ended December 31, 2021 (the “2021 Form ~~10-K”~~10-K/A”).

The unaudited condensed consolidated financial statements include the accounts of Shift4 Payments, Inc. and its wholly-owned subsidiaries. Shift4 Payments, Inc. consolidates the financial results of Shift4 Payments, LLC, which is considered a variable interest ~~entity (“VIE”).~~entity. Shift4 Payments, Inc. is the primary beneficiary and sole managing member of Shift4 Payments, LLC and has decision making authority that significantly affects the economic performance of the entity. As a result, the Company consolidates Shift4 Payments, LLC and reports a noncontrolling interest representing the economic interest in Shift4 Payments, LLC held by Rook Holdings Inc. (“Rook”). Prior to May 24, 2022, the noncontrolling interest also included the economic interest in Shift4 Payments, LLC held by certain affiliates of Searchlight Capital Partners (“Searchlight”~~) (together~~, and together with Rook, the “Continuing Equity Owners”).

All intercompany balances and transactions have been eliminated in consolidation.

Table of Contents

SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The assets and liabilities of Shift4 Payments, LLC represent substantially all of the consolidated assets and liabilities of Shift4 Payments, Inc. with the exception of certain cash balances, contingent consideration for earnout liabilities for The Giving Block, Inc. (“The Giving Block”), amounts payable under the Tax Receivable Agreement (“TRA”), and the aggregate principal amount of $690.0 million of 2025 Convertible Notes and $632.5 million of 2027 Convertible Notes that are held by Shift4 Payments, Inc. directly. As of both ~~June~~September 30, 2022 and December 31, 2021, $9.8 million of cash was directly held by Shift4 Payments, Inc. As of ~~June~~September 30, 2022, the earnout ~~liabilities~~liability for The Giving Block ~~were~~was $~~58.9~~21.0 million and .the TRA liability was $1.1 million. Shift4 ~~Payments,~~Payments, Inc., which was ~~established~~incorporated on November 5, 2019, has not had any material operations on a standalone basis since its inception, and all of the operations of the Company are carried out by Shift4 Payments, LLC and its subsidiaries.

Change in Presentation of Condensed Consolidated Statements of Operations

~~Certain~~The Company has changed the presentation of its Condensed Consolidated Statements of Operations to remove the “Gross profit” line item and update the “Cost of sales” line item to indicate it is exclusive of depreciation and amortization expense shown separately for the three and nine months ended September 30, 2022 and 2021. The Company has also changed the presentation of the disclosure in Note 22 to remove the reconciliation between “Gross revenue” and “Gross profit.” In addition, certain prior year balances have been adjusted to present ~~contract assets~~“Revaluation of contingent liabilities” in its own line item rather than within the line item ~~“Prepaid expenses~~“General and ~~other current assets” rather than in its own line item~~administrative expenses” on the Company’s unaudited Condensed Consolidated ~~Balance Sheets.~~

~~Table~~Statements of ~~Contents~~Operations.

~~SHIFT4 PAYMENTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Liquidity and Management’s Plan

As of ~~June~~September 30, 2022, the Company had $1,772.5 million total principal amount of debt outstanding and was in compliance with the financial covenants under its debt agreements. The Company expects to be in compliance with such financial covenants for at least 12 months following issuance of these unaudited condensed consolidated financial statements. See Note 910 for further information on the Company’s debt obligations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s unaudited condensed consolidated financial statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying unaudited condensed consolidated financial statements include estimates of fair value of acquired assets and liabilities through business combinations, fair value of contingent liabilities related to earnout payments, deferred income tax valuation allowances, amounts associated with the Company’s tax receivable agreement with the Continuing Equity Owners, fair value of debt instruments, allowance for doubtful accounts, income taxes, investments in securities and noncontrolling interests. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results may differ from these estimates.

Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 2 to Shift4 Payments, Inc.’s consolidated financial statements as of and for the year ended December 31, 2021 in the 2021 Form ~~10-K.~~10-K/A. There have been no significant changes to these policies which have had a material impact on the Company’s unaudited condensed consolidated financial statements and related notes during the ~~six~~nine months ended ~~June~~September 30, 2022, except for the below.

Crypto Settlement Assets and Liabilities

The Company recognizes a liability accompanied by an asset of the same value to reflect its obligation to safeguard the crypto settlement assets it holds on behalf of users of The Giving ~~Block’s~~Block Inc.’s (“The Giving Block”) platform. These crypto settlement assets are comprised of numerous cryptocurrencies that are traded on numerous cryptocurrency exchanges. The liability and asset are remeasured at each reporting date at the fair value of the crypto settlement assets, which is determined using quoted prices from cryptocurrency exchanges. The Company’s agent, which acts as a cryptocurrency exchange and custodian, holds the cryptographic key information of the crypto settlement assets and is primarily obligated to secure the assets and protect them from loss or theft. The Company maintains the internal recordkeeping of the assets.

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Recent Accounting Pronouncements

Accounting Pronouncements Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”) with amendments in 2018 and 2019. This accounting guidance requires a lessee to record assets and liabilities on the balance sheet for the rights and obligations arising from leases with terms of more than 12 months. On January 1, 2021, the Company adopted ASC 842 using the modified retrospective method, reflecting the adoption in the Company’s annual results for the period ended December 31, 2021. Prior period amounts were not adjusted and continue to be reported in accordance with historic accounting under previous lease guidance, ASC 840, Leases (“ASC 840”). The Company elected to use the package of practical expedients permitted under the transition guidance. The Company did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or (iii) initial direct costs for any existing leases. For lease agreements where the Company is a lessee that include lease and non-lease components, the Company elected to use the practical expedient on all leases entered into or modified after January 1, 2021 to combine lease and non-lease components for all classes of assets. Additionally, the Company elected to not record leases with a term of twelve months or less on the balance sheet. Upon adoption, the Company recorded right-of-use assets of $21.4 million and lease liabilities of $25.7 million. The adoption of ASC 842 did not result in a material impact to the unaudited Condensed Consolidated Statements of Operations or unaudited Condensed Consolidated Statements of Cash Flows. See Note 1314 for ASC 842-related disclosures.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326), which changes the impairment model for most financial assets, including accounts receivable, and replaces the existing incurred loss impairment model with a current expected credit loss (“CECL”) methodology, which will result in more timely recognition of credit losses. The Company adopted ASU 2016-13 on a modified retrospective basis on December 31, 2021, reflecting the adoption as of January 1, 2021 in the Company's annual results for the period ended December 31, 2021 and interim periods beginning January 1, 2022. The adoption of ASU 2016-13 did not result in a material impact on the Company’s unaudited condensed consolidated financial statements and disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU requires an acquirer to account for revenue contracts acquired in a business combination in accordance with ASC 606, as if it had originated the contracts. Prior to ASU 2021-08, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts, at fair value on the acquisition date. The Company adopted ASU 2021-08 in the third quarter of 2021 and retrospectively applied the ASU to its acquisitions that occurred in 2021. The adoption of ASU 2021-08 resulted in an increase to “Deferred revenue” of $5.7 million, of which $1.8 million was recognized as an increase to “Gross revenue” for the fiscal year ended December 31, 2021.

In July 2021, the FASB issued ASU 2021-05, Lessors—Certain Leases with Variable Lease Payments, to amend lessor accounting for certain leases with variable lease payments that do not depend on a reference index or a rate and would have resulted in the recognition of a loss at lease commencement if classified as a sales-type or a direct financing lease. ASU 2021-05 amends the classification requirements of such leases for lessors to require operating lease classification. The Company adopted ASU 2021-05 on a retrospective basis effective January 1, 2022. The adoption did not have a significant impact on the Company’s unaudited condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

In March 2022, the SEC issued Staff Accounting Bulletin No. 121 (“SAB 121”), which provided interpretive guidance regarding the accounting for obligations to safeguard crypto-assets an entity holds for users of its crypto platform. This guidance requires entities that hold crypto-assets on behalf of platform users to recognize a liability accompanied by an asset of the same value on its balance sheet to reflect the entity’s obligation to safeguard the crypto-assets held for its platform users. The liability and asset should be measured at initial recognition and each reporting date at the fair value of the crypto-assets that the entity is responsible for holding for its platform users. The entity should also describe in the footnotes to the financial statements the nature and amount of crypto-assets the entity is responsible for safeguarding for its platform users and how the fair value is determined, and should also consider including information regarding who (e.g., the entity, its agent, or another third party) holds the cryptographic key information, maintains the internal recordkeeping of those assets, and is obligated to secure the assets and protect them from loss or theft. This guidance is effective from the first interim period after June 15, 2022 and should be applied retrospectively. The Company adopted SAB 121 on a retrospective basis effective June 30, 2022, resulting in the recognition of $1.2 million of crypto settlement assets within “Prepaid expenses and other current assets” and $1.2 million of crypto settlement liabilities within “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets as of June 30, 2022 associated with The Giving Block. The value of crypto settlement assets and crypto settlement liabilities associated with The Giving Block was $1.7 million as of September 30, 2022. The adoption of this guidance had no impact on the Company’s unaudited ~~Condensed Consolidated Statements of Operations and unaudited Condensed Consolidated Statements of Cash Flows.~~condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform, which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to certain criteria, that reference the London Interbank Offered Rate (“LIBOR”), or another reference rate that is expected to be discontinued. Companies may elect to apply these amendments through December 31, 2022. The Company is currently evaluating whether we will elect the optional expedients, as well as evaluating the impact of ASU 2020-04 on the Company’s unaudited condensed consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring the fair value of the equity security. ASU 2022-03 also clarifies that an entity cannot recognize and measure a contractual sale restriction as a separate unit of account. The amendments in ASU 2022-03 may be early adopted and are effective on a prospective basis for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company currently considers sale restrictions in measuring the fair value of shares of its Class A common stock equity securities issued in conjunction with acquisitions. The Company is currently evaluating whether it will early adopt the amendments in ASU 2022-03 and is evaluating the impact of the amendments on the Company’s unaudited condensed consolidated financial statements.

2. Restatement of Previously Issued Condensed Consolidated Financial Statements

In October 2022, it was determined that there was an error in the Company’s original Quarterly Report on Form 10-Q for the three months ended September 30, 2021 related to the classification of customer acquisition costs within the Company’s Condensed Consolidated Statements of Cash Flows. Specifically, the Company determined that “Customer acquisition costs” were incorrectly classified within “Investing activities” rather than “Operating activities” in its Condensed Consolidated Statements of Cash Flows. The Company is correcting this misclassification by restating its Condensed Consolidated Statements of Cash Flows in this Quarterly Report on Form 10-Q.

The following table summarizes the impact of these adjustments for the periods presented:


	Nine Months Ended September 30, 2021
	As Reported		Adjustments		As Restated
Net cash provided by operating activities	$	25.6	$	(19.3)	$	6.3
Net cash used in investing activities	(162.0)		19.3		(142.7)
Net cash provided by financing activities	496.7		—		496.7
Change in cash and cash equivalents	$	360.3	$	—	$	360.3

1214

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

2.3.Acquisitions

Each of the following acquisitions was accounted for as a business combination using the acquisition method of accounting. The respective purchase prices were allocated to the assets acquired and liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill and represents the future economic benefits arising from other assets acquired, which cannot be individually identified or separately recognized. Under the acquisition method of accounting for business combinations, if there are changes to acquired deferred tax balances, valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they are related to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement-period adjustment, with the offset recorded to goodwill.

Online Payments Group

On September 29, 2022, the Company acquired Online Payments Group AG (“Online Payments Group”) by acquiring 100% of its common stock for $125.9 million of estimated total purchase consideration, net of cash acquired. Online Payments Group is a European payment service provider with a world-class developer portal and checkout experience that management believes will accelerate the Company’s global eCommerce growth. Total purchase consideration was as follows:


Cash	$	74.1
Shares of Class A common stock (a)	38.6
Contingent consideration (b)	22.0
Shareholder loans transfer	2.5
Total purchase consideration	137.2
Less: cash acquired	(11.3)
Total purchase consideration, net of cash acquired	$	125.9

(a) Total purchase consideration includes 971,371 shares of common stock.
(b) The Company agreed to an earnout due to the former shareholders of Online Payments Group, not to exceed $60.0 million. $30.0 million of the earnout is payable in September 2023 if key customers of Online Payments Group contribute a specified amount of revenue from September 29, 2022 to September 28, 2023 and the remaining $30.0 million of the earnout is payable in September 2024 if key customers contribute a specified amount of revenue from September 29, 2022 to September 28, 2024. Each portion of the earnout will be paid 50% in shares of the Company’s Class A common stock and 50% in cash. The fair value of the earnout was included in the initial purchase consideration and will be revalued and recorded quarterly until the end of the earnout period as a fair value adjustment within “Revaluation of contingent liabilities” in the Company’s unaudited Condensed Consolidated Statements of Operations. As of September 30, 2022, the fair value of the earnout was $22.0 million, which is recognized in “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets.

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes the fair value assigned to the assets acquired and liabilities assumed at the acquisition date. These amounts reflect various preliminary fair value estimates and assumptions, and are subject to change within the measurement period as valuations are finalized. The primary areas of preliminary purchase price allocation subject to change relate to the valuation of contingent consideration, accounts receivable, accrued expenses and other current liabilities assumed, and residual goodwill.


Accounts receivable	$	2.2
Shareholder loans receivable (a)	2.5


Other intangible assets	44.0
Goodwill (b)	83.0
Indemnification asset (c)	6.8
Accrued expenses and other current liabilities	(0.6)
Uncertain tax position (d)	(5.0)
Deferred tax liability	(5.2)
Other noncurrent liabilities	(1.8)
Net assets acquired	$	125.9

(a) Amount is eliminated in consolidation and therefore has no impact to the Company’s Condensed Consolidated Balance Sheets.
(b) Goodwill is not deductible for tax purposes.
(c) Included within “Other noncurrent assets” in the Company’s Condensed Consolidated Balance Sheets.
(d) Included within “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets.

In the nine months ended September 30, 2022, the Company incurred expenses in connection with the acquisition of Online Payments Group of $3.8 million. These expenses are included in “Professional fees” in the Company’s unaudited Condensed Consolidated Statements of Operations. Upon acquisition, the Company assessed the probability Online Payments Group would be required to pay certain tax liabilities and recorded to “Other noncurrent liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets $5.0 million for income taxes related to unrecognized tax benefits determined in accordance with the provisions of ASC 740, “Accounting for income taxes” and $1.8 million for non-income taxes determined in accordance with the provisions of ASC 450, “Contingencies.” Online Payments Group has agreed to indemnify the Company for tax liabilities related to periods prior to the acquisition and an indemnification asset was established for $6.8 million in the purchase price allocation, which is recorded to “Other noncurrent assets” on the Company’s unaudited Condensed Consolidated Balance Sheets.

The contingent liability arising from the expected earnout payment included in purchase consideration was measured on the acquisition date using a Monte Carlo simulation in a risk-neutral framework, calibrated to Management’s revenue forecasts. The transaction was not taxable for income tax purposes. The weighted average life of developed technology and customer relationships is 5 years and 10 years, respectively. The goodwill arising from the acquisition largely consisted of revenue synergies associated with a larger total addressable market and the ability to cross-sell existing customers, new customers and technology capabilities.

The acquisition of Online Payments Group did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Accordingly, revenue and expenses related to the acquisition and pro forma financial information have not been presented.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Restaurant Technology Partners

During the three months ended September 30, 2022, the Company acquired Pinnacle Hospitality Systems LLC (“Pinnacle”), FPOS Group, Inc. (“FPOS”),Retail Control Solutions, Inc. (“RCS”), and three other restaurant technology partners in separate transactions for $80.3 million of total purchase consideration, net of cash acquired. The Company acquired 100% of each entity’s ownership interests. These acquisitions enable the boarding of the restaurant technology partners’ customers on the Company’s end-to-end acquiring solution and empower the Company’s distribution partners to sign the restaurant technology partners’ customer accounts and leverage the combined expertise to handle all aspects of installation, service, and support. Total purchase consideration was as follows:


Cash	$	63.1
Shares of Class A common stock (a)	20.7
Contingent consideration (b)	2.2
Settlement of preexisting relationship	(2.5)
Total purchase consideration	83.5
Less: cash acquired	(3.2)
Total purchase consideration, net of cash acquired	$	80.3

(a) Total purchase consideration includes 598,759 shares of common stock.

(b) The Company agreed to earnouts due to certain former shareholders of the restaurant technology partners, calculated as a multiple of the number of each partners’ merchants that are converted to the Company’s end-to-end payments platform during the 18 months following each respective acquisition date, not to exceed $4.0 million in total. The earnouts are expected to be paid in a combination of cash and shares of the Company’s Class A common stock. The fair value of the earnouts was included in the initial purchase consideration and will be revalued and recorded quarterly until the end of the earnout period as a fair value adjustment within “Revaluation of contingent liabilities” in the Company’s unaudited Condensed Consolidated Statements of Operations. As of September 30, 2022, the fair value of the earnouts was $2.2 million, which is recognized in “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets.

The following table summarizes the fair value assigned to the assets acquired and liabilities assumed at the acquisition dates. These amounts reflect various preliminary fair value estimates and assumptions, and are subject to change within the measurement period as valuations are finalized. The primary areas of preliminary purchase price allocation subject to change relate to the valuation of contingent consideration, other intangible assets, and residual goodwill.


Accounts receivable	$	1.8
Inventory	1.5
Prepaid expenses and other current assets	0.1
Goodwill (a)	67.2
Other intangible assets, net	15.6
Property, plant and equipment, net	0.3
Right-of-use assets	1.3
Accounts payable	(1.9)
Accrued expenses and other current liabilities	(0.5)
Deferred revenue	(1.9)
Current lease liabilities	(0.5)
Deferred tax liability	(1.9)
Noncurrent lease liabilities	(0.8)
Net assets acquired	$	80.3

(a) $35.9 million of goodwill is deductible for tax purposes and $31.3 million of goodwill is not deductible for tax purposes.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The fair values of intangible assets were estimated using inputs classified as Level 3 under the income approach using the multi-period excess earnings method (customer relationships). Three of the transactions were taxable for income tax purposes and three of the transactions were not taxable for income tax purposes. The weighted average lives of customer relationships range from 14 years to 17 years. The goodwill arising from the acquisitions largely consisted of revenue synergies associated with a larger total addressable market and the ability to cross-sell existing and new customers.

The acquisitions of the restaurant technology partners did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Accordingly, revenue and expenses related to the acquisition and pro forma financial information have not been presented.

In the nine months ended September 30, 2022, the Company incurred expenses in connection with the Pinnacle, FPOS, RCS, and other restaurant technology partner acquisitions of $2.6 million. These expenses are included in “Professional fees” in the Company’s unaudited Condensed Consolidated Statements of Operations.

The Giving Block

On February 28, 2022, the Company acquired The Giving Block by acquiring 100% of its common stock for $106.9 million of estimated total purchase consideration, net of cash acquired. The Giving Block is a cryptocurrency donation marketplace that the Company expects to accelerate its growth in the non-profit sector with significant cross-sell potential. Total purchase consideration was as follows:


Cash	$	16.8
Shares of Class A common stock (a)	36.4
RSUs granted for fair value of equity-based compensation awards (b)	0.1
Contingent consideration (c)	57.8
Total purchase consideration	111.1
Less: cash acquired	(4.2)
Total purchase consideration, net of cash acquired	$	106.9

(a) Total purchase consideration includes 785,969 shares of common stock.
(b) The Company assumed all equity awards held by continuing employees. The portion of the fair value of the equity-based compensation awards associated with prior service of The Giving Block employees represents a component of the total consideration as presented above and was valued based on the fair value of The Giving Block awards on February 28, 2022, the acquisition date.
(c) The Company agreed to an earnout due to the former shareholders of The Giving Block in April 2023, calculated as a multiple of revenue earned by The Giving Block from March 1, 2022 to February 28, 2023, not to exceed $246.0 million. The earnout ~~will~~is expected to be paid 75% in a combination of RSUs and shares of the Company’s Class A common stock and 25% in cash. The fair value of the earnout was included in the initial purchase consideration and will be revalued quarterly until the end of the earnout period as a fair value adjustment within ~~“General and administrative expenses”~~“Revaluation of contingent liabilities” in the Company’s unaudited Condensed Consolidated Statements of Operations. As of ~~June~~September 30, 2022, the fair value of the earnout ~~included in the purchase consideration~~ was ~~$57.5~~$20.6 million, which is recognized in “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets. In addition, a portion of the earnout due in April 2023 is considered post-acquisition compensation expense and will be accrued throughout the earnout period within “General and administrative expenses” on the Company’s unaudited Condensed Consolidated Statements of Operations. As of ~~June~~September 30, 2022, ~~$1.4~~$0.4 million is included in “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes the fair value assigned to the assets acquired and liabilities assumed at the acquisition date. These amounts reflect various preliminary fair value estimates and assumptions, and are subject to change within the measurement period as valuations are finalized. The primary areas of preliminary purchase price allocation subject to change relate to the valuation of contingent consideration, accrued expenses and other current liabilities assumed, and residual goodwill.



Prepaid expenses and other current assets (a)	$	4.8
Other intangible assets	26.0
Goodwill (b)	89.4
Accrued expenses and other current liabilities (a)	(4.9)
Deferred revenue	(2.0)
Deferred tax liability	(6.4)
Net assets acquired	$	106.9

(a) Includes $4.8 million of crypto settlement assets and liabilities. See the disclosure under “Accounting Pronouncements Adopted” in Note 1 for further information.
(b) Goodwill is not deductible for tax purposes.

In the ~~six~~three and nine months ended ~~June~~September 30, 2022, the Company incurred expenses in connection with the acquisition of The Giving Block ~~acquisition~~ of ~~$2.2 million.~~$0.1 million and $2.3 million, respectively. These expenses are included in “Professional fees” in the Company’s unaudited Condensed Consolidated Statements of Operations.

The fair values of intangible assets were estimated using inputs classified as Level 3 under the income approach using either the relief-from-royalty method (developed technology and trade name), the with or without method (donor relationships) or the multi-period excess earnings method (customer relationships). The contingent liability arising from the expected earnout payment included in purchase consideration was measured on the acquisition date using a Monte Carlo simulation in a risk-neutral framework, calibrated to Management’s revenue forecasts. The transaction was not taxable for income tax purposes. The weighted average life of developed technology, the trade name, donor relationships and customer relationships is 8 years, 15 years, 5 years and 15 years, respectively. The goodwill arising from the acquisition largely consisted of revenue synergies associated with a larger total addressable market and the ability to cross-sell existing customers, new customers and technology capabilities.

The acquisition of The Giving Block ~~acquisition~~ did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Accordingly, revenue and expenses related to the acquisition and pro forma financial information have not been presented.

Postec

On September 1, 2021, the Company acquired Postec, Inc. (“Postec”) by acquiring 100% of its membership interests for $14.3 million in cash, net of cash acquired. The purchase was funded with cash on hand. This acquisition enables the boarding of the vendor’s customers on the Company’s end-to-end acquiring solution and empowers the Company’s distribution partners to sign the vendor’s customer accounts and leverage the combined expertise to handle all aspects of installation, service, and support, similar to the hospitality technology vendor acquired in October 2020.

Pending Finaro Acquisition

On March 1, 2022, the Company entered into a definitive agreement to acquire Credorax, Inc. d/b/a Finaro (“Finaro”) for $200.0 million in cash on hand, 6,439,316 shares of the Company’s Class A common stock with a value of approximately $325.0 million as of March 1, 2022, determined by the volume weighted average price for the 30thirty trading days preceding the date of the agreement, and a performance-based earnout of up to $50.0 million in the Company’s Class A common stock. Consummation of the merger is subject to regulatory approvals, which the Company expects to receive inby the ~~fourth~~first quarter of ~~2022.~~2023. Finaro is a cross-border eCommerce platform and bank specializing in solving complex payment problems for multi-national merchants that the Company believes will accelerate its growth in international markets. In the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company incurred expenses in connection with the Finaro acquisition of ~~$1.1~~$2.7 million and ~~$4.7~~$7.4 million, respectively. These expenses are included in “Professional fees” in the Company’s unaudited Condensed Consolidated Statements of Operations.

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

3.4.Revenue

ASC 606, Revenue from Contracts with Customers (“ASC 606”)

Under ASC 606, the Company has three separate performance obligations under its recurring software as a service agreements (“SaaS”) arrangements for point-of-sale systems provided to merchants: (1) point-of-sale software, (2) lease of hardware and (3) other support services.

TSYS outage

On August 21, 2021, Total System Services, Inc. (“TSYS”), a Global Payments company and an important vendor to the Company, experienced a significant platform outage that resulted in the disruption of payment processing for the Company’s merchants (“TSYS outage”). TSYS is utilized by many major credit card issuers and payment processors, which meant the impact of the outage was felt by many card-accepting merchants and cardholders across the nation. In response to the TSYS outage, the Company distributed payments to both merchants and partners in order to alleviate the impact of the outage on their businesses. The following paragraphs describe how these payments are reflected in the Company’s condensed consolidated financial statements.

In the third quarter of 2021, the Company distributed $22.4 million in payments to its merchants to approximate the lost revenues they experienced as a result of the TSYS outage. Under ASC 606, these payments were recorded as contra revenue, which is reflected as a reduction of “Gross revenue” in the Company’s unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021.

In the third quarter of 2021, the Company also distributed $2.3 million in payments to its partners to approximate their lost revenues and compensate them for the additional support required from them to manage the outage. Consistent with the treatment of the Company’s payments to its partners in the normal course of business, these payments are reflected in “Cost of sales” in the Company’s unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021.

Disaggregated Revenue

Based on similar operational characteristics, the Company’s revenue from contracts with customers is disaggregated as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Payments-based revenue(a)	Payments-based revenue(a)	$	473.9	$	324.8	$	845.4	$	540.7	Payments-based revenue(a)	$	509.0	$	346.9	$	1,354.4	$	887.6
Subscription and other revenues	Subscription and other revenues	32.8		26.2		63.2		49.6		Subscription and other revenues	38.3		30.9		101.5		80.5
Total	Total	$	506.7	$	351.0	$	908.6	$	590.3	Total	$	547.3	$	377.8	$	1,455.9	$	968.1

(a) For the three and nine months ended September 30, 2021, payments-based revenue includes nonrecurring payments of $22.4 million the Company made to merchants related to the TSYS outage, which are recorded as contra revenue and reflected as a reduction of payments-based revenue.

Based on similar economic characteristics, the Company’s revenue from contracts with customers is disaggregated as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Over-time revenue(a)	Over-time revenue(a)	$	495.0	$	341.1	$	887.0	$	571.3	Over-time revenue(a)	$	531.9	$	366.9	$	1,418.9	$	938.2
Point-in-time revenue	Point-in-time revenue	11.7		9.9		21.6		19.0		Point-in-time revenue	15.4		10.9		37.0		29.9
Total	Total	$	506.7	$	351.0	$	908.6	$	590.3	Total	$	547.3	$	377.8	$	1,455.9	$	968.1

(a) For the three and nine months ended September 30, 2021, over-time revenue includes nonrecurring payments of $22.4 million the Company made to merchants related to the TSYS outage, which are recorded as contra revenue and reflected as a reduction of over-time revenue.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Contract Assets

Contract assets of ~~$0.2~~$0.3 million and $0.3 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively, are included within “Prepaid expenses and other current assets” on the Company’s unaudited Condensed Consolidated Balance Sheets, and contract assets of $0.5 million as of September 30, 2022 are included within “Other noncurrent assets” on the Company’s unaudited Condensed Consolidated Balance Sheets. There was no allowance for contract assets as of ~~June~~September 30, 2022 and December 31, 2021.

Contract Liabilities

The Company charges merchants for various post-contract license support/service fees and annual regulatory compliance fees. These fees typically relate to a period of one year. The Company recognizes the revenue on a straight-line basis over its respective period. As of ~~June~~September 30, 2022 and December 31, 2021, the Company had deferred revenue of ~~$20.6~~$23.6 million and $17.4 million, respectively. The change in the contract liabilities was primarily the result of a timing difference between payment from the customer and the Company’s satisfaction of each performance obligation.

The following reflects the amounts the Company recognized as annual service fees and regulatory compliance fees within “Gross revenue” in the Company’s unaudited Condensed Consolidated Statements of Operations and the amount of such fees that was included in deferred revenue at the beginning of the respective period:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Annual service fees and regulatory compliance fees	Annual service fees and regulatory compliance fees	$	10.0	$	5.7	$	19.6	$	10.1	Annual service fees and regulatory compliance fees	$	11.3	$	8.8	$	30.9	$	18.9
Amount of these fees included in deferred revenue at beginning of period	Amount of these fees included in deferred revenue at beginning of period	8.5		4.6		8.8		4.0		Amount of these fees included in deferred revenue at beginning of period	7.4		4.4		10.8		4.4

~~Table of Contents~~

~~SHIFT4 PAYMENTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Accounts Receivable

The change in the Company’s allowance for doubtful accounts was as follows:


		June 30, 2022		June 30, 2021			September 30, 2022		September 30, 2021
Beginning balance	Beginning balance	$	8.0	$	5.7	Beginning balance	$	8.0	$	5.7
Additions to expense (a)	Additions to expense (a)	4.3		8.1		Additions to expense (a)	5.9		10.3
Write-offs, net of recoveries and other adjustments	Write-offs, net of recoveries and other adjustments	(1.5)		(1.0)		Write-offs, net of recoveries and other adjustments	0.8		(2.6)
Ending balance	Ending balance	$	10.8	$	12.8	Ending balance	$	14.7	$	13.4

(a) For the six months ended June 30, 2021, includes a $5.5 million allowance on chargebacks from a single merchant, which is included in “Cost of sales” on the unaudited Condensed Consolidated Statements of Operations.
(a) For the nine months ended September 30, 2021, includes a $5.5 million allowance on chargebacks from a single merchant, which is included in “Cost of sales” on the unaudited Condensed Consolidated Statements of Operations.						(a) For the nine months ended September 30, 2021, includes a $5.5 million allowance on chargebacks from a single merchant, which is included in “Cost of sales” on the unaudited Condensed Consolidated Statements of Operations.

4.5.Goodwill

The changes in the carrying amount of goodwill were as follows:


Balance at December 31, 2021	$	537.7
The Giving Block Acquisition (Note 2)3)	89.4
Online Payments Group Acquisition (Note 3)	83.0
Restaurant Technology Partner Acquisitions (Note 3)	67.2
Balance at ~~June~~September 30, 2022	$	~~627.1~~777.3

5.
~~Other Intangible Assets, Net~~

~~Other intangible assets, net consisted of the following:~~

Weighted Average
Amortization Period
(in years) June 30, 2022
Carrying Value Accumulated
Amortization Net Carrying
Value
Merchant relationships 11 $ 96.5 $ 28.7 $ 67.8
Acquired technology 9 116.2 61.5 54.7
Trademarks and trade names 17 29.3 4.6 24.7
Capitalized software development costs 3 61.7 12.5 49.2
Residual commission buyouts (a) 3 32.3 9.7 22.6
Total other intangible assets, net $ 336.0 $ 117.0 $ 219.0

Weighted Average
Amortization Period
(in years) December 31, 2021
Carrying Value Accumulated
Amortization Net Carrying
Value
Merchant relationships 8 $ 200.1 $ 133.7 $ 66.4
Acquired technology 9 113.2 54.9 58.3
Trademarks and trade names 18 20.3 3.8 16.5
Capitalized software development costs 4 42.6 9.1 33.5
Residual commission buyouts (a) 3 20.3 6.5 13.8
Total other intangible assets, net $ 396.5 $ 208.0 $ 188.5
(a) Residual commission buyouts include contingent payments of $3.7 million and $4.2 million as of June 30, 2022 and December 31, 2021, respectively.

~~Table of Contents~~

~~SHIFT4 PAYMENTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~As of June 30, 2022, the estimated amortization expense for other intangible assets for each of the five succeeding years and thereafter is as follows:~~

2022 (remaining six months) $ 27.4
2023 50.8
2024 45.2
2025 29.2
2026 17.6
Thereafter 48.8
Total $ 219.0

~~Amounts charged to expense in the Company’s unaudited Condensed Consolidated Statements of Operations for amortization of other intangible assets were as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Depreciation and amortization expense $ 8.4 $ 9.4 $ 17.7 $ 19.5
Cost of sales 6.3 4.7 11.7 9.2
Total $ 14.7 $ 14.1 $ 29.4 $ 28.7

6.~~Capitalized Acquisition Costs, Net~~

Capitalized acquisition costs, net were $36.6 million and $35.1 million at June 30, 2022 and December 31, 2021, respectively, consisting of upfront processing bonuses with a gross carrying value of $73.0 million and $69.1 million less accumulated amortization of $36.4 million and $34.0 million at June 30, 2022 and December 31, 2021, respectively.

Capitalized acquisition costs had a weighted average amortization period of three years at both June 30, 2022 and December 31, 2021. Amortization expense for capitalized acquisition costs was $6.6 million and $12.7 million for the three and six months ended June 30, 2022, respectively, $5.1 million and $10.1 million for the three and six months ended June 30, 2021, respectively, and is included in “Cost of sales” in the Company’s unaudited Condensed Consolidated Statements of Operations.

~~As of June 30, 2022, the estimated future amortization expense for capitalized acquisition costs is as follows:~~

2022 (remaining six months) $ 11.1
2023 16.4
2024 8.2
2025 0.9
Total $ 36.6

178

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

6.Other Intangible Assets, Net

Other intangible assets, net consisted of the following:


	Weighted Average Amortization Period (in years)	September 30, 2022
		Carrying Value		Accumulated Amortization		Net Carrying Value
Merchant relationships	11	$	143.5	$	(31.3)	$	112.2
Acquired technology	9	128.8		(64.9)		63.9
Trademarks and trade names	13	27.2		(3.0)		24.2
Capitalized software development costs	3	71.6		(15.2)		56.4
Residual commission buyouts (a)	3	327.5		(22.5)		305.0

Total other intangible assets, net		$	698.6	$	(136.9)	$	561.7


(a) During the three and nine months ended September 30, 2022, the Company completed $298.8 million and $311.7 million, respectively, of residual commission buyouts with certain third-party distribution partners, pursuant to which the Company acquired their ongoing merchant relationships that subscribe to the Company’s end-to-end payments platform. Included in this amount are $298.5 million in residual commission buyouts executed under the Company’s mass strategic buyout program completed in the three and nine months ended September 30, 2022 in support of the Company’s strategic initiative to insource our sales distribution network. Total consideration for the residual commission buyouts was comprised of a combination of cash, shares of the Company’s Class A common stock, and contingent liability earnouts. Contingent payments included in the residual commission buyouts as of September 30, 2022 are $8.6 million, of which $5.6 million are related to residual commission buyouts executed under the mass strategic buyout program which are estimated based on analysis of historical outcomes for prior similar initiatives. The maximum contingent consideration for residual buyout commissions executed under the Company’s mass strategic buyout program is $22.5 million.


	Weighted Average Amortization Period (in years)	December 31, 2021
		Carrying Value		Accumulated Amortization		Net Carrying Value
Merchant relationships	8	$	200.1	$	(133.7)	$	66.4
Acquired technology	9	113.2		(54.9)		58.3
Trademarks and trade names	18	20.3		(3.8)		16.5
Capitalized software development costs	4	42.6		(9.1)		33.5
Residual commission buyouts (a)	3	20.3		(6.5)		13.8
Total other intangible assets, net		$	396.5	$	(208.0)	$	188.5

(a) Residual commission buyouts include contingent payments of $4.2 million as of December 31, 2021.

As of September 30, 2022, the estimated amortization expense for other intangible assets for each of the five succeeding years and thereafter is as follows:


2022 (remaining three months)	$	41.3
2023	161.6
2024	156.1
2025	101.7
2026	25.2
Thereafter	75.8
Total	$	561.7

Amounts charged to expense in the Company’s unaudited Condensed Consolidated Statements of Operations for amortization of acquired other intangible assets were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Depreciation and amortization expense	$	19.4	$	8.2	$	37.1	$	27.6
Cost of sales	3.3		3.2		9.9		9.5
Total	$	22.7	$	11.4	$	47.0	$	37.1

Table of Contents

SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Amounts charged to expense in the Company’s unaudited Condensed Consolidated Statements of Operations for amortization of non-acquired other intangible assets were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Depreciation and amortization expense	$	0.1	$	—	$	0.1	$	0.1
Cost of sales	3.7		1.7		8.8		4.6
Total	$	3.8	$	1.7	$	8.9	$	4.7

7.Capitalized Customer Acquisition Costs, Net

Capitalized customer acquisition costs, net were $35.2 million and $35.1 million at September 30, 2022 and December 31, 2021, respectively, consisting of upfront processing bonuses with a gross carrying value of $73.2 million and $69.1 million less accumulated amortization of $38.0 million and $34.0 million at September 30, 2022 and December 31, 2021, respectively.

Capitalized customer acquisition costs had a weighted average amortization period of three years at both September 30, 2022 and December 31, 2021. Amortization expense for capitalized customer acquisition costs was $6.6 million and $19.3 million for the three and nine months ended September 30, 2022, respectively, and $5.4 million and $15.5 million for the three and nine months ended September 30, 2021, respectively, and is included in “Cost of sales” in the Company’s unaudited Condensed Consolidated Statements of Operations.

As of September 30, 2022, the estimated future amortization expense for capitalized customer acquisition costs is as follows:


2022 (remaining three months)	$	5.8
2023	18.0
2024	9.7
2025	1.7
Total	$	35.2

8.Equipment for Lease, Net

Equipment for lease, net consisted of the following:


		Weighted Average Depreciation Period (in years)	June 30, 2022							Weighted Average Depreciation Period (in years)	September 30, 2022
			Carrying Value		Accumulated Depreciation		Net Carrying Value				Carrying Value		Accumulated Depreciation		Net Carrying Value
Equipment under lease	Equipment under lease	3	$	89.8	$	(34.9)	$	54.9	Equipment under lease	3	$	95.3	$	(37.9)	$	57.4
Equipment held for lease (a)	Equipment held for lease (a)	N/A	10.3		—		10.3		Equipment held for lease (a)	N/A	13.1		—		13.1
Total equipment for lease	Total equipment for lease		$	100.1	$	(34.9)	$	65.2	Total equipment for lease		$	108.4	$	(37.9)	$	70.5


	Weighted Average Depreciation Period (in years)	December 31, 2021
		Carrying Value		Accumulated Depreciation		Net Carrying Value
Equipment under lease	3	$	72.9	$	(24.2)	$	48.7
Equipment held for lease (a)	N/A	9.7		—		9.7
Total equipment for lease, net		$	82.6	$	(24.2)	$	58.4

(a) Represents equipment that was not yet initially deployed to a merchant and, accordingly, is not being depreciated.

The amount charged to “Depreciation and amortization expense” in the Company’s unaudited Condensed Consolidated Statements of Operations for depreciation of equipment under lease was ~~$7.4~~$8.2 million and ~~$14.4~~$22.6 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and ~~$5.1~~$5.8 million and ~~$9.6~~$15.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

8.~~Property, Plant and Equipment, Net~~

~~Property, plant and equipment, net consisted of the following:~~

June 30,
2022 December 31,
2021
Equipment $ 11.6 $ 10.5
Capitalized software 4.1 5.1
Leasehold improvements 9.4 9.1
Furniture and fixtures 1.7 2.0
Vehicles 0.2 0.3
Total property, plant and equipment, gross 27.0 27.0
Less: Accumulated depreciation (9.3) (8.6)
Total property, plant and equipment, net $ 17.7 $ 18.4

~~Amounts charged to expense in the Company’s unaudited Condensed Consolidated Statements of Operations for depreciation of property, plant and equipment were as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Depreciation and amortization expense $ 0.9 $ 1.0 $ 1.9 $ 1.8
Cost of sales 0.3 0.4 0.6 0.8
Total depreciation expense $ 1.2 $ 1.4 $ 2.5 $ 2.6

1810

Table of Contents

SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

9.Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following:


	September 30, 2022		December 31, 2021
Equipment	$	16.2	$	10.5
Capitalized software	4.2		5.1
Leasehold improvements	9.0		9.1
Furniture and fixtures	1.5		2.0
Vehicles	0.5		0.3
Total property, plant and equipment, gross	31.4		27.0
Less: Accumulated depreciation	(10.0)		(8.6)
Total property, plant and equipment, net	$	21.4	$	18.4

Amounts charged to expense in the Company’s unaudited Condensed Consolidated Statements of Operations for depreciation of property, plant and equipment were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Depreciation and amortization expense	$	1.2	$	1.0	$	3.1	$	2.8
Cost of sales	0.1		0.5		0.7		1.3
Total depreciation expense	$	1.3	$	1.5	$	3.8	$	4.1

10.Debt

The Company’s outstanding debt consisted of the following:


		Maturity	Effective Interest Rate	June 30, 2022		December 31, 2021			Maturity	Effective Interest Rate	September 30, 2022		December 31, 2021
Convertible Notes due 2025 (2025 Convertible Notes)	Convertible Notes due 2025 (2025 Convertible Notes)	December 15, 2025	0.49%	$	690.0	$	690.0	Convertible Notes due 2025 (2025 Convertible Notes)	December 15, 2025	0.49%	$	690.0	$	690.0
Convertible Notes due 2027 (2027 Convertible Notes)	Convertible Notes due 2027 (2027 Convertible Notes)	August 1, 2027	0.90%	632.5		632.5		Convertible Notes due 2027 (2027 Convertible Notes)	August 1, 2027	0.90%	632.5		632.5
Senior Notes due 2026 (2026 Senior Notes)	Senior Notes due 2026 (2026 Senior Notes)	November 1, 2026	5.13%	450.0		450.0		Senior Notes due 2026 (2026 Senior Notes)	November 1, 2026	5.13%	450.0		450.0
Total borrowings	Total borrowings			1,772.5		1,772.5		Total borrowings			1,772.5		1,772.5
Less: Unamortized capitalized financing fees	Less: Unamortized capitalized financing fees			(34.7)		(34.0)		Less: Unamortized capitalized financing fees			(32.7)		(34.0)
Total long-term debt	Total long-term debt			$	1,737.8	$	1,738.5	Total long-term debt			$	1,739.8	$	1,738.5

Amortization of capitalized financing fees is included in “Interest expense” in the Company’s unaudited Condensed Consolidated Statements of Operations. Amortization expense for capitalized financing fees was ~~$2.0~~$2.1 million and ~~$3.9~~$6.0 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and ~~$1.2~~$1.7 million and ~~$2.4~~$4.1 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

Future principal payments

As of ~~June~~September 30, 2022, future principal payments associated with the Company’s long-term debt were as follows:


2025	$	690.0
2026	450.0
2027	632.5
Total	$	1,772.5

~~Convertible Notes due 2025~~

~~The net carrying amount of the Convertible Senior Notes due 2025 (“2025 Convertible Notes”) was as follows:~~

June 30,
2022 December 31,
2021
Principal outstanding $ 690.0 $ 690.0
Unamortized debt issuance costs (11.3) (13.0)
Net carrying value $ 678.7 $ 677.0

~~Convertible Notes due 2027~~

~~The net carrying amount of the 0.50% Convertible Senior Notes due 2027 (“2027 Convertible Notes”) was as follows:~~

June 30,
2022 December 31,
2021
Principal outstanding $ 632.5 $ 632.5
Unamortized debt issuance costs (12.8) (13.8)
Net carrying value $ 619.7 $ 618.7

1911

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Convertible Notes due 2025

The net carrying amount of the Convertible Senior Notes due 2025 (“2025 Convertible Notes”) was as follows:


	September 30, 2022		December 31, 2021
Principal outstanding	$	690.0	$	690.0
Unamortized debt issuance costs	(10.5)		(13.0)
Net carrying value	$	679.5	$	677.0

Convertible Notes due 2027

The net carrying amount of the 0.50% Convertible Senior Notes due 2027 (“2027 Convertible Notes”) was as follows:


	September 30, 2022		December 31, 2021
Principal outstanding	$	632.5	$	632.5
Unamortized debt issuance costs	(12.2)		(13.8)
Net carrying value	$	620.3	$	618.7

Senior Notes due 2026

In March 2022, Shift4 Payments, LLC (the “Issuer”) and Shift4 Payments Finance Sub, Inc. (the “Co-Issuer” and together with the Issuer, the “Issuers”), completed a consent solicitation to amend the indenture governing the $450.0 million principal amount of 4.625% Senior Notes due 2026 (“2026 Senior Notes”) to allow for the repurchase of capital stock as part of the Market Capitalization exception that had been included. In connection with the solicitation, the Company paid $4.5 million of consent payments to note holders, which was capitalized and recognized in the Company’s unaudited Condensed Consolidated Balance Sheets as a reduction of long-term debt, and incurred fees of $1.4 million, which were recorded to “Transaction-related expenses” in the unaudited Condensed Consolidated Statements of Operations in the ~~six~~nine months ended ~~June~~September 30, 2022.

Revolving Credit Facility

Borrowing capacity on the Company’s Revolving Credit Facility under the First Lien Credit Agreement (“Revolving Credit Facility”) was $99.5 million as of ~~June~~September 30, 2022, net of a $0.5 million letter of credit.

Restrictions and Covenants

The 2025 Convertible Notes, 2026 Senior Notes, 2027 Convertible Notes (collectively, the “Notes”) and Revolving Credit Facility include certain restrictions on the ability of Shift4 Payments, LLC to make loans, advances, or pay dividends to Shift4 Payments, Inc.

At ~~June~~September 30, 2022 and December 31, 2021, the Company was in compliance with all financial covenants.

Other than as provided above, there are no significant changes to the information disclosed in the 2021 Form ~~10-K.~~

~~10.Other Consolidated Balance Sheet Components~~

~~Prepaid expenses and other current assets~~

~~Prepaid expenses and other current assets consisted of the following:~~

June 30,
2022 December 31,
2021
Crypto settlement assets (a) $ 1.2 $ —
Prepaid insurance 0.9 3.3
Prepaid merchant signing bonuses (b) 0.2 0.7
Other prepaid expenses (c) 7.2 6.1
Taxes receivable 1.7 1.8
Contract assets 0.2 0.3
Agent and employee loan receivables 0.1 0.2
Other current assets 0.6 0.3
Total prepaid expenses and other current assets $ 12.1 $ 12.7
(a) See the disclosure within “Accounting Pronouncements Adopted” in Note 1 for information regarding the Company’s crypto settlement assets.
(b) Represents deal bonuses paid to merchants to obtain processing contracts, which are amortized over their contractual term of one year.
(c) Includes prepayments related to information technology, rent, tradeshows and conferences.
10-K/A.

2012

Table of Contents

SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

11.Other Consolidated Balance Sheet Components

Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following:


	September 30, 2022		December 31, 2021
Prepaid insurance	$	4.4	$	3.3
Taxes receivable	1.7		1.8
Crypto settlement assets (a)	1.7		—
Prepaid merchant signing bonuses (b)	0.3		0.7
Other prepaid expenses (c)	10.5		6.1
Contract assets	0.3		0.3

Other current assets	1.0		0.5
Total prepaid expenses and other current assets	$	19.9	$	12.7

(a) See the disclosure within “Accounting Pronouncements Adopted” in Note 1 for information regarding the Company’s crypto settlement assets.
(b) Represents deal bonuses paid to merchants to obtain processing contracts, which are amortized over their contractual term of one year.
(c) Includes prepayments related to information technology, rent, tradeshows and conferences.

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Contingent liability earnout - The Giving Block (a)		$	58.9	$	—
Contingent liability earnouts for acquisitions (a)						Contingent liability earnouts for acquisitions (a)	$	45.2	$	—
Contingent liability earnouts for residual commission buyouts						Contingent liability earnouts for residual commission buyouts	7.6		0.9
Residuals payable	Residuals payable	17.0		13.1		Residuals payable	7.2		13.1
Accrued interest	Accrued interest	4.8		4.8		Accrued interest	9.3		4.8
Accrued payroll	Accrued payroll	5.6		15.3		Accrued payroll	7.3		15.3
Taxes payable	Taxes payable	2.1		1.6		Taxes payable	2.9		1.6
Deferred employer social security tax pursuant to the CARES Act	Deferred employer social security tax pursuant to the CARES Act	1.6		1.6		Deferred employer social security tax pursuant to the CARES Act	1.6		1.6
Crypto settlement liabilities (b)	Crypto settlement liabilities (b)	1.2		—		Crypto settlement liabilities (b)	1.7		—
Restructuring accrual (c)	Restructuring accrual (c)	0.7		1.5		Restructuring accrual (c)	0.3		1.5

Other current liabilities	Other current liabilities	5.4		5.0		Other current liabilities	3.5		4.1
Total accrued expenses and other current liabilities	Total accrued expenses and other current liabilities	$	97.3	$	42.9	Total accrued expenses and other current liabilities	$	86.6	$	42.9

(a) Represents the fair value of the contingent liability earnout for The Giving Block as of June 30, 2022, including $57.5 million of estimated purchase consideration and $1.4 million of post-acquisition compensation expense. See Note 2 for more information.
(a) Consists of $44.8 million of estimated contingent consideration and $0.4 million of post-acquisition compensation expense as of September 30, 2022. Primarily represents the fair value of contingent liability earnouts for The Giving Block and Online Payments Group. See Note 3 for more information.						(a) Consists of $44.8 million of estimated contingent consideration and $0.4 million of post-acquisition compensation expense as of September 30, 2022. Primarily represents the fair value of contingent liability earnouts for The Giving Block and Online Payments Group. See Note 3 for more information.

(b) See the disclosure within “Accounting Pronouncements Adopted” in Note 1 for information regarding the Company’s crypto settlement liabilities.	(b) See the disclosure within “Accounting Pronouncements Adopted” in Note 1 for information regarding the Company’s crypto settlement liabilities.					(b) See the disclosure within “Accounting Pronouncements Adopted” in Note 1 for information regarding the Company’s crypto settlement liabilities.
(c) The Company made severance payments of $0.9 million for the six months ended June 30, 2022. The restructuring accrual of $0.7 million as of June 30, 2022 is expected to be paid in 2022.
(c) The Company made severance payments of $1.2 million for the nine months ended September 30, 2022. The restructuring accrual of $0.3 million as of September 30, 2022 is expected to be paid in 2022.						(c) The Company made severance payments of $1.2 million for the nine months ended September 30, 2022. The restructuring accrual of $0.3 million as of September 30, 2022 is expected to be paid in 2022.

~~11.~~Table of Contents

SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

12.Fair Value Measurement

U.S. GAAP defines a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted process in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The Company determines the fair values of its assets and liabilities that are recognized or disclosed at fair value in accordance with the hierarchy described below. The following three levels of inputs may be used to measure fair value:

•Level 1—Quoted prices in active markets for identical assets or liabilities;

•Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include items where the determination of fair value requires significant management judgment or estimation.

The Company makes recurring fair value measurements of contingent liabilities arising from certain acquisitions and residual commission buyouts using Level 3 unobservable inputs. ~~These amounts relate to~~Contingent liabilities for residual commission buyouts are expected earnout payments related to the number of existing point-of-sale merchants that convert to full acquiring merchants. Contingent liabilities included in the purchase price of an acquisition are based on achievement of specified performance metrics as defined in the purchase agreement.

In conjunction with the acquisition of Online Payments Group on September 29, 2022, the Company entered into a contingent consideration agreement that requires the Company to pay up to $60.0 million if key customers of Online Payments Group contribute a certain amount of revenue for the twelve months ending September 28, 2023 and the twenty-four months ending September 28, 2024. The fair value of the contingent consideration was estimated using a Monte-Carlo simulation model, which included significant unobservable Level 3 inputs, such as projected revenues over the earnout period along with estimates for revenue volatility of 36.0% and the discount rate of 8.1% as of September 30, 2022. See Note 3 for more information on the terms of the earnout agreement. The estimated fair value of the contingent consideration of $22.0 million as of September 30, 2022 is recognized in “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets.

In conjunction with the acquisition of The Giving Block ~~Inc.~~ on February 28, 2022, the Company entered into a contingent consideration agreement that requires the Company to pay up to $246.0 million if certain revenue thresholds of the acquired business are achieved for the twelve months ending February 28, 2023. The fair value of the contingent consideration was estimated using a Monte-Carlo simulation model, which included significant unobservable Level 3 inputs, such as projected ~~financial performance~~revenues over the ~~earn-out~~earnout period along with estimates for revenue volatility of ~~20.9%~~18.6% and 16.7% as of ~~June~~September 30, 2022 and February 28, 2022, respectively, and the discount rate of ~~8.5%~~9.4% and 7.1% as of ~~June~~September 30, 2022 and February 28, 2022, respectively. Changes in the volatility and discount rate were due to broader market conditions. See Note 23 for more information on the terms of the earnout agreement. The Company recognized fair value adjustments to the contingent liability for The Giving Block of $(36.9) million and $(37.2) million for the three and nine months ended September 30, 2022, respectively, primarily due to a decrease in projected revenues over the earnout period. The fair value adjustments are recognized in “Revaluation of contingent liabilities” on the Company’s unaudited Condensed Consolidated Statements of Operations. The estimated fair value of the contingent consideration of $20.6 million as of September 30, 2022 is recognized in “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets.

In conjunction with the acquisitions of certain restaurant technology partners, the Company entered into contingent consideration agreements that require the Company to pay up to an aggregate of $4.0 million. The fair values of the contingent consideration were estimated using Monte-Carlo simulation models, which included significant unobservable Level 3 inputs, such as projected performance over the earnout periods and discount rates ranging from 4.4% to 5.1% as of September 30, 2022. See Note 3 for more information on the terms of the earnout agreements. The estimated fair value of the contingent consideration related to purchase consideration of ~~$57.5~~$2.2 million as of ~~June~~September 30, 2022 is recognized in “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets.

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The table below provides a reconciliation of the beginning and ending balances for the Level 3 contingent liabilities:


		Six Months Ended June 30,					Nine Months Ended September 30, 2022
		2022		2021			Contingent Liabilities for Acquisitions		Contingent Liabilities for Residual Commission Buyouts		Total Contingent Liabilities
Balance at beginning of period	Balance at beginning of period	$	—	$	—	Balance at beginning of period	$	—	$	0.9	$	0.9
Contingent consideration for The Giving Block acquisition		57.8		—
Contingent consideration for acquisitions (a)						Contingent consideration for acquisitions (a)	82.0		—		82.0
Contingent consideration for residual commission buyouts						Contingent consideration for residual commission buyouts	—		7.3		7.3
Cash payments made for contingent liabilities related to earnout payments	Cash payments made for contingent liabilities related to earnout payments	—		(0.2)		Cash payments made for contingent liabilities related to earnout payments	—		(0.4)		(0.4)
Write-off of contingent liabilities that did not achieve earnout						Write-off of contingent liabilities that did not achieve earnout	—		(0.2)		(0.2)

Fair value adjustments	Fair value adjustments	(0.3)		0.2		Fair value adjustments	(37.2)		—		(37.2)
Balance at end of period	Balance at end of period	$	57.5	$	—	Balance at end of period	$	44.8	$	7.6	$	52.4

(a) Includes $22.0 million for the acquisition of Online Payments Group, $57.8 million for the acquisition of The Giving Block, and $2.2 million for the acquisitions of certain restaurant technology partners.						(a) Includes $22.0 million for the acquisition of Online Payments Group, $57.8 million for the acquisition of The Giving Block, and $2.2 million for the acquisitions of certain restaurant technology partners.

Fair value adjustments are recorded within ~~“General and administrative expenses”~~“Revaluation of contingent liabilities” in the Company’s unaudited Condensed Consolidated Statements of Operations. There were no transfers into or out of Level 3 during the ~~six~~nine months ended ~~June~~September 30, ~~2022 and 2021.~~2022.

The estimated fair value of the Company’s outstanding debt using quoted prices from over-the-counter markets, considered Level 2 inputs, was as follows:


		June 30, 2022				December 31, 2021					September 30, 2022				December 31, 2021
		Carrying Value (a)		Fair Value		Carrying Value (a)		Fair Value			Carrying Value (a)		Fair Value		Carrying Value (a)		Fair Value
2025 Convertible Notes	2025 Convertible Notes	$	678.7	$	560.4	$	677.0	$	735.4	2025 Convertible Notes	$	679.5	$	607.2	$	677.0	$	735.4
2027 Convertible Notes	2027 Convertible Notes	619.7		448.7		618.7		556.5		2027 Convertible Notes	620.3		485.7		618.7		556.5
2026 Senior Notes	2026 Senior Notes	440.4		402.1		443.9		465.7		2026 Senior Notes	440.9		408.2		443.9		465.7
Total	Total	$	1,738.8	$	1,411.2	$	1,739.6	$	1,757.6	Total	$	1,740.7	$	1,501.1	$	1,739.6	$	1,757.6

(a) Carrying value excludes unamortized debt issuance costs related to the Revolving Credit Facility of $1.0 million and $1.1 million as of June 30, 2022 and December 31, 2021, respectively.
(a) Carrying value excludes unamortized debt issuance costs related to the Revolving Credit Facility of $0.9 million and $1.1 million as of September 30, 2022 and December 31, 2021, respectively.										(a) Carrying value excludes unamortized debt issuance costs related to the Revolving Credit Facility of $0.9 million and $1.1 million as of September 30, 2022 and December 31, 2021, respectively.

The estimated fair value of the Company’s crypto settlement assets and crypto settlement liabilities was $1.7 million as of September 30, 2022. There are no active markets for the Company’s crypto settlement liabilities and the corresponding crypto settlement assets. Accordingly, the Company has valued the assets and liabilities using quoted prices from active cryptocurrency exchanges for the underlying crypto assets, considered Level ~~1 inputs, was $1.2 million as of June 30, 2022.~~2 inputs. See Note 1 for more information on the Company’s crypto settlement assets and crypto settlement liabilities.

Other financial instruments not measured at fair value on the Company’s unaudited Condensed Consolidated Balance Sheets at ~~June~~September 30, 2022 and December 31, 2021 include cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, other noncurrent assets, accounts payable, ~~and~~ accrued expenses and other current liabilities, and other noncurrent liabilities, as their estimated fair values reasonably approximate their carrying value as reported on the Company’s unaudited Condensed Consolidated Balance Sheets.

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~12.~~13.Income Taxes

The Company holds an economic interest in Shift4 Payments, LLC and consolidates its financial position and results. The remaining ownership of Shift4 Payments, LLC not held by the Company is considered a noncontrolling interest. Shift4 Payments, LLC is treated as a partnership for income tax reporting and its members, including the Company, are liable for federal, state, and local income taxes based on their share of the LLC’s taxable income. In addition, Shift4 ~~Corporation and VenueNext, Inc., 2 operating subsidiaries of Shift4~~ Payments, LLC wholly owns various U.S. and foreign subsidiaries which are ~~considered C-Corporations~~taxed as corporations for ~~U.S. federal, state and local income~~ tax ~~purposes.~~reporting. Taxable income or loss from ~~Shift4 Corporation and VenueNext Inc.~~these subsidiaries is not passed through to Shift4 Payments, LLC. Instead, itsuch taxable income or loss is taxed at the corporate level subject to the prevailing corporate tax rates.

The Company has assessed the realizability of the net deferred tax assets and in that analysis has considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The Company has recorded a full valuation allowance against the deferred tax assets at Shift4 Payments, Inc. as of ~~June~~September 30, 2022, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.

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~~SHIFT4 PAYMENTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

The Company’s effective tax rate was ~~6.3%~~2.5% and ~~(152.9)~~(9.0)% for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively. The Company’s effective tax rate was ~~(421.4)%~~7.8% and ~~(9.9)~~(6.4)% for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. The effective tax rate for the three and ~~six~~nine months ended ~~June~~September 30, 2022 was different than the U.S. federal statutory income tax rate of 21% primarily due to the income allocated to the noncontrolling interest, the full valuation allowances on Shift4 Payments, Inc. and certain corporate subsidiaries in the U.S., and the nontaxable adjustment related to the revaluation of the contingent liability of The Giving Block. In addition, the nine months ended September 30, 2022 also includes the impact of a $6.4 million income tax benefit related to the valuation allowance release due to acquired deferred tax liabilities from The Giving Block. The income tax expense for the three months ended September 30, 2021 was different than the U.S. federal statutory income tax rate of 21% primarily due to the loss allocated to the noncontrolling interest and the full valuation allowances on Shift4 Payments, Inc. and ~~VenueNext, Inc.~~certain corporate subsidiaries in the ~~United States. In addition, the six months ended June 30, 2022 also includes the impact of a $6.4 million~~U.S.. The income tax benefit ~~related to the valuation allowance release due to acquired deferred tax liabilities from The Giving Block. The effective tax rate~~ for the ~~three and six~~nine months ended ~~June~~September 30, 2021 was different than the U.S. federal statutory income tax rate of 21% primarily due to the loss allocated to the noncontrolling interest, changes in the ~~full~~ valuation allowances on Shift4 Payments, Inc. and ~~VenueNext, Inc.~~certain corporate subsidiaries in the ~~United States,~~U.S., and the tax windfall related to vested equity-based compensation ~~awards,~~awards.

Uncertain Tax Positions

The effects of uncertain tax positions are recognized in the condensed consolidated financial statements if these positions meet a “more-likely-than-not” threshold. For those uncertain tax positions that are recognized in the condensed consolidated financial statements, liabilities are established to reflect the portion of those positions it cannot conclude “more-likely-than-not” to be realized upon ultimate settlement. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits within “Income tax (provision) benefit” in the ~~near break-even loss before income taxes for~~Company’s Condensed Consolidated Statements of Operations. Accrued interest and penalties, if any, are included within “Deferred tax liability” in the ~~three months ended June~~Company’s Condensed Consolidated Balance Sheets. As of September 30, ~~2021.~~2022, $5.0 million of uncertain tax positions were recognized within “Other noncurrent liabilities” in the Company’s Condensed Consolidated Balance Sheets, which were recognized in conjunction with acquisitions. As of December 31, 2021, there were no uncertain tax positions recognized in the condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Tax Receivable Agreement

The Company expects to obtain an increase in its share of the tax basis in the net assets of Shift4 Payments, LLC as LLC Interests are redeemed from or exchanged by Rook, at the option of the Company, determined solely by the Company’s independent directors. The Company intends to treat any redemptions and exchanges of LLC Interests as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that it would otherwise pay in the future to various tax authorities. In connection with the ~~Reorganization Transactions~~Company’s initial public offering in June 2020 and certain organizational transactions that the ~~IPO,~~Company effected in connection with it, the Company entered into the Tax Receivable Agreement (“TRA”) with the Continuing Equity Owners.

The TRA provides for the payment by Shift4 Payments, Inc. of 85% of the amount of any tax benefits the Company actually realizes, or in some cases is deemed to realize, as a result of (i) increases in the Company’s share of the tax basis in the net assets of Shift4 Payments, LLC resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA. The Company expects to benefit from the remaining 15% of any of cash savings that it realizes.

During the three months ended September 30, 2022, the Company recognized a $1.1 million TRA liability after concluding it was probable that, based on estimates of future taxable income, the Company will realize tax benefits associated with the TRA in the 2022 tax year. The liability is recognized in “Other noncurrent liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets. The Company has not re~~cognized a $248.3~~recognized the remaining $247.2 million liability under the TRA after concluding it was not probable that ~~such TRA Payments would~~the Company will be ~~paid~~able to realize the remaining tax benefits based on ~~its~~ estimates of future taxable income. No payments were made to the Continuing Equity Owners pursuant to the TRA during the three and ~~six~~nine months ended ~~June~~September 30, 2022. The ~~amounts payable~~estimation of liability under the ~~TRA will vary depending upon a number of factors, including~~tax receivable agreement is by its nature imprecise and subject to significant assumptions regarding the amount, character, and timing of the taxable income of Shift4 Payments, Inc. in the future. If the valuation allowance recorded against the deferred tax assets applicable to the tax attributes referenced above is released in a future period, the remaining TRA liability may be considered probable at that time and recorded within earnings.

If Rook were to exchange all of its LLC Units, the Company does not expect the deferred tax asset or TRA liability to vary substantially from the amounts reported in the 2021 Form ~~10-K.~~10-K/A. The actual amount of deferred tax assets and related liabilities are impacted by the timing of the exchanges, the valuation of Shift4 Corporation, the price of the Company’s shares of Class A common stock at the time of the exchange, and the tax rates then in effect.

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~13.~~14.Lease Agreements

As Lessee

The Company has operating leases primarily for office space and equipment. The following amounts were recorded on the Company’s unaudited Condensed Consolidated Balance Sheets relating to operating leases:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Assets	Assets					Assets
Right-of-use assets	Right-of-use assets	$	16.2	$	18.5	Right-of-use assets	$	16.7	$	18.5
Liabilities	Liabilities					Liabilities
Current lease liabilities	Current lease liabilities	$	4.1	$	4.8	Current lease liabilities	$	4.6	$	4.8
Noncurrent lease liabilities	Noncurrent lease liabilities	16.0		17.9		Noncurrent lease liabilities	15.9		17.9
Total lease liabilities	Total lease liabilities	$	20.1	$	22.7	Total lease liabilities	$	20.5	$	22.7

The expected future payments related to leases with initial non-cancellable lease terms in excess of one year at ~~June~~September 30, 2022 were as follows:


2022 (remaining six months)		$	2.4
2022 (remaining three months)				2022 (remaining three months)	$	1.3
2023	2023	4.5		2023	5.1
2024	2024	4.4		2024	4.7
2025	2025	3.4		2025	3.7
2026	2026	2.9		2026	3.0
Thereafter	Thereafter	4.4		Thereafter	4.5
Total lease payments	Total lease payments	22.0		Total lease payments	22.3
Less: Interest	Less: Interest	(1.9)		Less: Interest	(1.8)
Present value of minimum payments	Present value of minimum payments	$	20.1	Present value of minimum payments	$	20.5

Total operating lease expense, which is included in “General and administrative expenses” in the Company’s unaudited Condensed Consolidated Statements of Operations, was ~~$1.4~~$1.1 million and ~~$2.8~~$3.9 million fofor r the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and ~~$1.4~~$1.5 million and ~~$2.9~~$4.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

Supplemental balance sheet information related to leases was as follows:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Weighted average remaining lease term (in years):	Weighted average remaining lease term (in years):	5.4		5.6		Weighted average remaining lease term (in years):	5.1		5.6

Weighted average discount rate	Weighted average discount rate	3.2	%	3.2	%	Weighted average discount rate	3.2	%	3.2	%

Operating lease payments included in operating cash flows were $~~3.0~~4.3 million and $~~3.2~~4.6 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

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~~SHIFT4 PAYMENTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

As Lessor

The Company provides hardware, including terminals and point-of-sale equipment, to its merchants under operating leases. The Company’s operating leases generally include options to extend the contract for successive one-year periods. Extension options are not included in the determination of lease income unless, at lease inception, it is reasonably certain that the option will be exercised. The Company’s operating leases do not generally include purchase options.

Lease payments received are recognized as income on a straight-line basis over the term of the agreement in accordance with ASC 606 and classified as gross revenue on the Company’s unaudited Condensed Consolidated Statements of Operations.

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Total lease income for the three and ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$4.4~~$4.5 million and ~~$8.7~~$13.2 million, respectively, and ~~$4.2~~$4.3 million and ~~$8.2~~$12.5 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. Variable lease income was not material for the three and ~~six~~nine months ended ~~June~~September 30, 2022 or 2021.

The Company expects to receive future minimum lease payments for hardware provided under the Company’s SaaS agreements of ~~$10.3~~$10.4 million from ~~July~~October 1, 2022 through ~~June~~September 30, 2023. See Note 34 and Note 78 for more information on the accounting for these operating leases.

~~14.~~15.Related Party Transactions

The Company has a service agreement with Jared Isaacman, the Company’s Chief Executive Officer and founder (“Founder”), including access to aircrafts and a property. Total expense for this service, which is included in “General and administrative expenses” in the Company’s unaudited Condensed Consolidated Statements of Operations, was ~~$0.3~~$0.2 million and ~~$0.5~~$0.7 million for the three and ~~six~~nine months ended both ~~June~~September 30, 2022 and 2021, respectively. There were no amounts outstanding at ~~June~~September 30, 2022 or December 31, 2021.

In the third and fourth quarters of 2021, the Company incurred $1.1 million in costs associated with a proposed Follow-on Offering that were reimbursable by Searchlight, which were included in “Accounts receivable, net” on the Company’s unaudited Condensed Consolidated Balance Sheets as of December 31, 2021. There were no amounts outstanding at ~~June~~September 30, 2022. In addition, on May 24, 2022, Searchlight redeemed all of its remaining LLC Interests. As a result, Searchlight is no longer a Continuing Equity Owner or a related party of the Company as of May 24, 2022.

In February 2021, the Company accepted the transfer of the right to select a participant for one seat on board Inspiration4, the first all-civilian mission to space, from the Founder, who is also the commander of the mission. The right was transferred to the Company as a non-cash contribution and recorded at its estimated fair value of $2.1 million in “Additional paid-in capital” on the Company’s unaudited Condensed Consolidated Balance Sheets and expensed within “Advertising and marketing” on the Company’s unaudited Condensed Consolidated Statements of Operations in March 2021 when the participant was selected for the mission through a contest held by the Company.

In the fiscal year ended December 31, 2021, the Company incurred a significant amount of nonrecurring expenses to integrate, rebrand and promote 3dcart to Shift4Shop in conjunction with the Inspiration4 announcement. Certain expenses, totaling $0.9 million, were directly associated with the Inspiration4 mission and were reimbursable by the Founder. As of December 31, 2021, a $0.1 million receivable from the Founder was recorded as “Accounts receivable” on the Company’s unaudited Condensed Consolidated Balance Sheets. There were no amounts outstanding at ~~June~~September 30, 2022.

In March 2021, the Founder, through a wholly-owned special purpose vehicle (“SPV”), entered into a variable prepaid forward contract (“VPF Contract”) with an unaffiliated dealer (“Dealer”), covering approximately 2.0 million shares of the Company’s Class A common stock. The VPF Contract is scheduled to settle on specified dates in February, March and April 2023, at which time the actual number of shares of the Company’s Class A common stock to be delivered by the SPV will be determined based on the price of the Company’s Class A common stock on such dates relative to the forward floor price of $73.19 per share and the forward cap price of $137.24 per share, with the aggregate number not to exceed approximately 2.0 million shares, which is the number of shares of Company’s Class B common stock and LLC units pledged by Rook to secure its obligations under the contract. Subject to certain conditions, the SPV can also elect to settle the VPF Contract in cash and thereby retain full ownership of the pledged shares and units.

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~~SHIFT4 PAYMENTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

In September 2021, the Founder, through the SPV, entered into 2two VPF Contracts with a Dealer, one covering approximately 2.18 million shares of the Company’s Class A common stock and the other covering approximately 2.26 million shares of the Company’s Class A common stock. The VPF Contracts are both scheduled to settle on specified dates in June, July, August and September 2024, at which time the actual number of shares of the Company’s Class A common stock to be delivered by the SPV will be determined based on the price of the Company’s Class A common stock on such dates relative to the forward floor price of approximately $66.424 per share and the forward cap price of approximately $112.09 per share for the contract covering approximately 2.18 million shares of the Company’s Class A common stock, and to the forward floor price of $66.424 per share and the forward cap price of approximately $120.39 per share for the contract covering approximately 2.26 million shares of the Company’s Class A common stock, with the aggregate number not to exceed approximately 4.44 million shares, which is the aggregate number of shares of Company’s Class B common stock and their associated common units of Shift4 Payments, LLC pledged by the SPV to secure its obligations under the contracts. Subject to certain conditions, the SPV can also elect to settle the VPF Contracts in cash and thereby retain full ownership of the pledged shares and units.

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

If Rook were to default on its obligations under the VPF Contracts and fail to cure such default, the Dealer would have the right to exchange the pledged Class B stock and LLC interests for an equal number of the Company’s Class A common stock, and sell such Class A common stock to satisfy Rook’s obligation.

In June 2022, the Company entered into a $3.6 million residual commission buyout agreement with a relative of the Founder, consisting of an initial payment of $2.5 million in cash and $0.6 million in shares of the Company’s Class A common stock, and a contingent payment of $0.5 million in cash payable after 12 months, subject to certain conditions related to the performance of the acquired assets.

~~15.~~16.Commitments and Contingencies

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm the Company’s business. In August 2021, TSYS, a Global Payments company and an important vendor to the Company, experienced a significant platform outage resulting in a payment processing service disruption that lasted for several hours. TSYS is utilized by many major credit card issuers and payment processors, which meant the impact of the outage was felt by many ~~card accepting~~card-accepting merchants and cardholders across the nation. The Company took steps to lessen the financial impact to its merchants and partners due to the TSYS outage and is seeking compensation through a variety of channels, including engaging with the responsible party.

The Company is currently not aware of any legal proceedings or claims that the Company believes will have a material adverse effect on its business, financial condition or operating results.

~~16.~~17.Stockholders’ ~~Equity/Members’ Deficit~~Equity

Stock Repurchases

On December 16, 2021, the Company’s Board of Directors (the “Board”) authorized a stock repurchase program (the “December 2021 Program”), pursuant to which the Company was authorized to repurchase up to $100.0 million of shares of its Class A common stock through December 31, 2022. On May 11, 2022, the Board authorized a stock repurchase program (the “May 2022 Program”), pursuant to which the Company was authorized to repurchase up to an additional $100.0 million of shares of its Class A common stock through December 31, 2022, and on June 15, 2022, the Board authorized a stock repurchase program (the “June 2022 Program” and, together with the December 2021 Program and the May 2022 Program, the “Programs”), pursuant to which the Company was authorized to repurchase up to an additional $50.0 million of shares of its Class A common stock through December 31, 2022.

Repurchases under the Programs may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases depending on market conditions and corporate needs. Open market repurchases will be structured to occur within the pricing and volume requirements of Rule 10b-18. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares pursuant to the Programs.

The Programs do not obligate the Company to acquire any particular amount of common stock. The Programs may be extended, modified, suspended or discontinued at any time at the Company’s discretion.

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~~SHIFT4 PAYMENTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

As of December 31, 2021, the Company had repurchased 378,475 shares of Class A common stock under the December 2021 Program for $21.1 million, including commissions paid, at an average price paid of $55.81 per share.

On May 24, 2022, Searchlight exchanged its shares of the Company’s Class B and Class C common stock for an equal number of shares of Class A common stock, which Searchlight subsequently redeemed. During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company ~~repurchased~~repurchased 3,887,191 shares of Class A common stock under the Programs for $184.4 million, including commissions paid, at an average price paid of $47.40 perper share. Included in these amounts during the ~~six~~nine months ended ~~June~~September 30, ~~2022~~2002 is the Company’s repurchase of all 967,600 shares of Searchlight’s Class A common stock for $43.1 million at an average price paid of $44.54 per share. As of ~~June~~September 30, 2022, approximately ~~$44.5~~$44.5 million remained available for future purchases under the ~~Programs.~~June 2022 Program.

Repurchased shares of common stock that have not been retired are recorded as “Treasury stock” on the Company’s unaudited Condensed Consolidated Balance Sheets. Upon retirement, the Company allocates the value of treasury stock between Additional paid-in capital and Retained earnings. During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company retired ~~3,539,016~~4,265,666 shares of common stock it had repurchased under the Programs. There were ~~726,650~~no shares of treasury stock outstanding as of ~~June~~September 30, ~~2022, which were retired on July 1,~~ 2022.

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~17.~~18.Noncontrolling Interests

Shift4 Payments, Inc. is the sole managing member of Shift4 Payments, LLC, and consolidates the financial results of Shift4 Payments, LLC. The noncontrolling interests balance represents the economic interest in Shift4 Payments, LLC held by the Continuing Equity Owners. On May 24, 2022, Searchlight redeemed all of its outstanding LLC Interests and is therefore no longer a Continuing Equity Owner or a component of noncontrolling interests as of that date. The following table summarizes the ownership of LLC Interests in Shift4 Payments, LLC:


		June 30, 2022			December 31, 2021				September 30, 2022			December 31, 2021
		LLC Interests	Ownership %		LLC Interests	Ownership %			LLC Interests	Ownership %		LLC Interests	Ownership %
Shift4 Payments, Inc.	Shift4 Payments, Inc.	54,382,042	67.8	%	56,449,833	68.2	%	Shift4 Payments, Inc.	57,004,236	68.8	%	56,449,833	68.2	%
Continuing Equity Owners	Continuing Equity Owners	25,829,016	32.2	%	26,272,654	31.8	%	Continuing Equity Owners	25,829,016	31.2	%	26,272,654	31.8	%
Total	Total	80,211,058	100.0	%	82,722,487	100.0	%	Total	82,833,252	100.0	%	82,722,487	100.0	%

~~18.~~19.Equity-based Compensation

2020 Incentive Award Plan

In June 2020, the Company adopted the 2020 Incentive Award Plan (“2020 Plan”), which provides for the grant of stock options, restricted stock dividend equivalents, stock payments, restricted stock units (“RSUs”), performance restricted stock units (“PRSUs”), stock appreciation rights, and other stock or cash awards. A maximum of 418,973 shares of the Company’s Class A common stock is available for issuance under the 2020 Plan. The number of shares available for issuance is subject to an annual increase on the first day of each year beginning in 2021 and ending in and including 2030, equal to the lesser of (1) 1% of the shares outstanding (on an as-converted basis, taking into account any and all securities convertible into, or exercisable, exchangeable or redeemable for, shares of Class A common stock (including LLC Interests of Shift4 Payments, LLC)) on the last day of the immediately preceding fiscal year and (2) such smaller number of shares as determined by the Board.

On April 28, 2022, the Board adopted, and on June 10, 2022, the Company’s shareholders approved, the amendment and restatement of the Shift4 Payments, Inc. 2020 Incentive Award Plan (the “Restated Equity Plan”). The Restated Equity Plan (a) increased the number of shares of the Company’s Class A common stock available for issuance under the Restated Equity Plan to a total of 7,500,000 shares, (b) increased the annual “evergreen” increase to the number of shares of the Company’s Class A common stock available for issuance under the Restated Equity Plan from 1% of the shares outstanding to 2% of the shares outstanding, (c) limited the number of shares of the Company’s Class A common stock that may be issued upon the exercise of incentive stock options to no more than 7,500,000 shares, and (d) extended the term of the Restated Equity Plan to ten years from the date it was adopted by the Board.

~~Table of Contents~~

~~SHIFT4 PAYMENTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

RSUs and PRSUs

RSUs represent the right to receive shares of the Company’s Class A common stock at a specified date in the future.

The RSU activity for the ~~six~~nine months ended ~~June~~September 30, 2022 was as follows:


		Six Months Ended June 30, 2022				Nine Months Ended September 30, 2022
		Number of RSUs	Weighted Average Grant Date Fair Value			Number of RSUs	Weighted Average Grant Date Fair Value
Unvested balance at beginning of period	Unvested balance at beginning of period	2,402,694	$	43.28	Unvested balance at beginning of period	2,402,694	$	43.28
Granted (a)	Granted (a)	604,188	45.51		Granted (a)	1,142,405	45.20
Vested	Vested	(619,175)	29.77		Vested	(650,437)	30.18
Forfeited or cancelled	Forfeited or cancelled	(143,591)	55.94		Forfeited or cancelled	(195,174)	55.23
Unvested balance at end of period	Unvested balance at end of period	2,244,116	$	48.93	Unvested balance at end of period	2,699,488	$	48.22
									(a) Includes 157,330 RSUs not subject to continued service, which vested immediately in March 2022 and 16,422 RSUs issued in connection with The Giving Block acquisition, of which 9,347 RSUs vest in equal installments in December 2022, 2023 and 2024 and 7,075 RSUs which are not subject to continued service, and vested immediately in March 2022.

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The grant date fair value of RSUs and PRSUs subject to continued service or those that vest immediately was determined based on the price of the Company’s Class A common stock on the grant date.

The Company recognized equity-based compensation expense of ~~$9.3~~$12.2 million and ~~$26.2~~$38.4 million for ~~for~~ the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and ~~$6.6~~$6.3 million and ~~$20.6~~$26.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. At ~~June~~September 30, 2022, the total unrecognized equity-based compensation expense related to outstanding RSUs and PRSUs was $~~92.9~~102.1 million, which is expected to be recognized over a weighted-average period of ~~3.33~~3.18 years.

2822

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~19.~~20.Basic and Diluted Net Income (Loss) per Share

Basic net income (loss) per share has been computed by dividing net income (loss) attributable to common shareholders by the weighted average number of shares of common stock outstanding for the same period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period in which the shares were outstanding. Diluted net income (loss) per share has been computed in a manner consistent with that of basic net income (loss) per share while giving effect to all shares of potentially dilutive common stock that were outstanding during the period. The following table presents the calculation of basic and diluted net income (loss) per share under the two-class method:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net income (loss)	Net income (loss)	$	15.0	$	4.5	$	1.8	$	(46.5)	Net income (loss)	$	46.4	$	(13.8)	$	48.2	$	(60.3)
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	4.7		1.3		(1.0)		(16.9)		Less: Net income (loss) attributable to noncontrolling interests	3.3		(4.6)		2.3		(21.5)
Net income (loss) attributable to Shift4 Payments, Inc.	Net income (loss) attributable to Shift4 Payments, Inc.	10.3		3.2		2.8		(29.6)		Net income (loss) attributable to Shift4 Payments, Inc.	43.1		(9.2)		45.9		(38.8)
Adjustment to net income (loss) attributable to common stockholders	Adjustment to net income (loss) attributable to common stockholders	—		—		0.1		(0.3)		Adjustment to net income (loss) attributable to common stockholders	—		(0.1)		—		(0.6)
Net income (loss) attributable to common stockholders	Net income (loss) attributable to common stockholders	$	10.3	$	3.2	$	2.9	$	(29.9)	Net income (loss) attributable to common stockholders	$	43.1	$	(9.3)	$	45.9	$	(39.4)

Numerator - allocation of net income (loss) attributable to common stockholders:	Numerator - allocation of net income (loss) attributable to common stockholders:									Numerator - allocation of net income (loss) attributable to common stockholders:
Net income (loss) allocated to Class A common stock - basic	Net income (loss) allocated to Class A common stock - basic	$	9.6	$	2.7	$	2.7	$	(24.8)	Net income (loss) allocated to Class A common stock - basic	$	40.2	$	(8.2)	$	42.6	$	(33.5)
Reallocation of net income (loss) attributable to common stockholders from assumed conversion of LLC interests and assumed vesting of RSUs		4.7		1.4		(1.0)		—
Reallocation of net income attributable to common stockholders from assumed conversion of LLC interests and assumed vesting of RSUs										Reallocation of net income attributable to common stockholders from assumed conversion of LLC interests and assumed vesting of RSUs	4.1		—		3.2		—
Net income (loss) allocated to Class A common stock - diluted	Net income (loss) allocated to Class A common stock - diluted	$	14.3	$	4.1	$	1.7	$	(24.8)	Net income (loss) allocated to Class A common stock - diluted	$	44.3	$	(8.2)	$	45.8	$	(33.5)

Net income (loss) allocated to Class C common stock - basic	Net income (loss) allocated to Class C common stock - basic	$	0.7	$	0.5	$	0.2	$	(5.1)	Net income (loss) allocated to Class C common stock - basic	$	2.9	$	(1.1)	$	3.3	$	(5.9)
Reallocation of net income attributable to common stockholders from assumed conversion of LLC interests and assumed vesting of RSUs	Reallocation of net income attributable to common stockholders from assumed conversion of LLC interests and assumed vesting of RSUs	—		(0.1)		(0.1)		—		Reallocation of net income attributable to common stockholders from assumed conversion of LLC interests and assumed vesting of RSUs	(0.8)		—		(0.9)		—
Net income (loss) allocated to Class C common stock - diluted	Net income (loss) allocated to Class C common stock - diluted	$	0.7	$	0.4	$	0.1	$	(5.1)	Net income (loss) allocated to Class C common stock - diluted	$	2.1	$	(1.1)	$	2.4	$	(5.9)

Denominator:	Denominator:									Denominator:
Weighted average shares of Class A common stock outstanding - basic	Weighted average shares of Class A common stock outstanding - basic	51,790,403		46,297,553		51,958,494		44,492,680		Weighted average shares of Class A common stock outstanding - basic	51,502,825		49,692,599		51,804,935		46,251,576
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
LLC Interests	LLC Interests	26,087,399		28,869,471		26,179,515		—		LLC Interests	25,829,016		—		26,061,398		—
RSUs	RSUs	637,078		1,726,595		685,059		—		RSUs	469,505		—		613,208		—
2025 Convertible Notes		—		101,713		—		—

Weighted average shares of Class A common stock outstanding - diluted	Weighted average shares of Class A common stock outstanding - diluted	78,514,880		76,995,332		78,823,068		44,492,680		Weighted average shares of Class A common stock outstanding - diluted	77,801,346		49,692,599		78,479,541		46,251,576

Weighted average shares of Class C common stock outstanding - basic and diluted	Weighted average shares of Class C common stock outstanding - basic and diluted	4,006,159		8,151,747		4,283,096		9,075,667		Weighted average shares of Class C common stock outstanding - basic and diluted	3,648,580		6,117,997		4,069,266		8,078,943

Net income (loss) per share - Basic:	Net income (loss) per share - Basic:									Net income (loss) per share - Basic:
Class A common stock	Class A common stock	$	0.19	$	0.06	$	0.05	$	(0.56)	Class A common stock	$	0.78	$	(0.17)	$	0.82	$	(0.72)
Class C common stock	Class C common stock	$	0.19	$	0.06	$	0.05	$	(0.56)	Class C common stock	$	0.78	$	(0.17)	$	0.82	$	(0.72)
Net income (loss) per share - Diluted:	Net income (loss) per share - Diluted:									Net income (loss) per share - Diluted:
Class A Common Stock	Class A Common Stock	$	0.18	$	0.05	$	0.02	$	(0.56)	Class A Common Stock	$	0.57	$	(0.17)	$	0.58	$	(0.72)
Class C Common Stock	Class C Common Stock	$	0.18	$	0.05	$	0.02	$	(0.56)	Class C Common Stock	$	0.57	$	(0.17)	$	0.58	$	(0.72)

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following were excluded from the calculation of diluted net income (loss) per share as the effect would be anti-dilutive:


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2022	2021	2022	2021		2022	2021	2022	2021
LLC Interests that convert into potential Class A common shares	LLC Interests that convert into potential Class A common shares	—	—	—	28,240,404	LLC Interests that convert into potential Class A common shares	—	27,115,975	—	28,806,699
RSUs and performance RSUs - employee	RSUs and performance RSUs - employee	999,475	—	999,475	1,742,656	RSUs and performance RSUs - employee	912,248	1,712,790	912,248	1,712,790
RSUs - non-employee directors	RSUs - non-employee directors	10,742	—	10,742	10,244	RSUs - non-employee directors	11,884	12,942	11,884	12,942
2025 Convertible Notes						2025 Convertible Notes	—	46,130	—	49,281
Total	Total	1,010,217	—	1,010,217	29,993,304	Total	924,132	28,887,837	924,132	30,581,712

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company has excluded from the calculation of diluted net income per share the effect of the following:

•the conversion of the 2025 Convertible Notes and 2027 Convertible Notes, as the last reported sales price of the Company’s Class A common stock was not greater than or equal to 130% of the conversion price for 20 trading days during a period of 30 consecutive trading days prior to ~~June~~September 30, 2022, per the terms of the ~~agreement.~~agreement, and

•shares of the Company’s Class A common stock to be issued in connection with the earnouts due to the former shareholders of The Giving Block, Online Payments Group, and certain restaurant technology partners. See Note 3 for more information about shares to be issued in connection with earnouts.

For the ~~six~~three and nine months ended ~~June~~September 30, 2021, the Company has excluded from the calculation of diluted net ~~income (loss)~~loss per share the effect of the conversion of the ~~2025~~2027 Convertible Notes, as the last reported sales price of the Company’s Class A common stock was not greater than or equal to 130% of the conversion price for 20 trading days during a period of 30 consecutive trading days prior to ~~June~~September 30, 2021, per the terms of the agreement.

The Company will pay in cash the $690.0 million principal of the 2025 Convertible Notes and the $632.5 million principal of the 2027 Convertible Notes with any excess to be paid or delivered in cash or shares of the Company’s Class A common stock or a combination of both at the Company’s election.

In addition, for the three and six months ended June 30, 2022, the Company has excluded from the calculation of diluted net income per share the effect of shares of the Company’s Class A common stock to be issued in connection with the earnout due to the former shareholders of The Giving Block. The earnout will be calculated as a multiple of revenue earned by The Giving Block from March 1, 2022 to February 28, 2023, not to exceed $246.0 million in total, of which 75% will be paid in a combination of RSUs and shares of the Company’s Class A common stock. ~~See Note 2 for more information.~~

~~20.~~21.Supplemental Cash Flows Information

Supplemental cash flows disclosures and noncash information consisted of the following:


		Six Months Ended June 30,					Nine Months Ended September 30,
		2022		2021			2022		2021
Cash paid for interest	Cash paid for interest	$	12.4	$	10.5	Cash paid for interest	$	14.0	$	10.5
Cash paid for income taxes, net of refunds	Cash paid for income taxes, net of refunds	0.1		0.3		Cash paid for income taxes, net of refunds	0.4		0.4
Noncash investing activities	Noncash investing activities					Noncash investing activities
Shares and equity-based compensation awards issued in connection with The Giving Block acquisition		36.5		—
Shares and equity-based compensation awards issued in connection with VenueNext acquisition		—		26.3
Shares and equity-based compensation awards issued in connection with acquisitions						Shares and equity-based compensation awards issued in connection with acquisitions	95.8		26.3
Shares issued in connection with residual commission buyouts	Shares issued in connection with residual commission buyouts	0.6		—		Shares issued in connection with residual commission buyouts	36.6		—
Contingent consideration for acquisitions						Contingent consideration for acquisitions	82.0		—
Contingent consideration for residual commission buyouts						Contingent consideration for residual commission buyouts	7.3		0.5
Cash consideration not yet paid in connection with residual commission buyouts						Cash consideration not yet paid in connection with residual commission buyouts	8.2		—
Equipment for lease	Equipment for lease	2.0		5.8		Equipment for lease	5.2		4.6
Shareholder loans transferred in connection with the acquisition of Online Payments Group						Shareholder loans transferred in connection with the acquisition of Online Payments Group	2.5		—
Capitalized software development costs	Capitalized software development costs	1.6		0.5		Capitalized software development costs	1.2		1.6

Noncash financing activities	Noncash financing activities					Noncash financing activities
Right-of-use assets obtained in exchange for operating lease liabilities	Right-of-use assets obtained in exchange for operating lease liabilities	0.5		—		Right-of-use assets obtained in exchange for operating lease liabilities	2.3		—
Right associated with Inspiration4 seat	Right associated with Inspiration4 seat	—		2.1		Right associated with Inspiration4 seat	—		2.1

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SHIFT4 PAYMENTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~21.~~22.Segments

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) for the purposes of allocating resources and evaluating financial performance. The Company’s CODM is the chief executive officer, who reviews financial information on a consolidated level for purposes of allocating resources and evaluating financial performance, and as such, the Company’s operations constitute 1one operating segment and 1one reportable segment.

The following table summarizes gross revenue by revenue type:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Payments-based revenue(a)	Payments-based revenue(a)	$	473.9	$	324.8	$	845.4	$	540.7	Payments-based revenue(a)	$	509.0	$	346.9	$	1,354.4	$	887.6
Subscription and other revenues	Subscription and other revenues	32.8		26.2		63.2		49.6		Subscription and other revenues	38.3		30.9		101.5		80.5
Gross revenue	Gross revenue	506.7		351.0		908.6		590.3		Gross revenue	$	547.3	$	377.8	$	1,455.9	$	968.1
Less: network fees		324.1		214.7		577.2		356.5
Less: Other costs of sales		76.8		58.2		141.0		103.9
Gross profit		$	105.8	$	78.1	$	190.4	$	129.9

(a) For the three and nine months ended September 30, 2021, payments-based revenue includes nonrecurring payments of $22.4 million the Company made to merchants related to the TSYS outage, which are recorded as contra revenue and reflected as a reduction of payments-based revenue. See Note 4 for more information about the TSYS outage.										(a) For the three and nine months ended September 30, 2021, payments-based revenue includes nonrecurring payments of $22.4 million the Company made to merchants related to the TSYS outage, which are recorded as contra revenue and reflected as a reduction of payments-based revenue. See Note 4 for more information about the TSYS outage.

~~22.~~23.Subsequent Events

~~Acquisitions~~In preparing the unaudited condensed consolidated financial statements, the Company evaluated events and ~~Investments~~

~~Subsequent to June~~transactions occurring after September 30, 2022 ~~the Company acquired 3 technology vendors~~ for approximately $56.8 million of total purchase consideration, comprised of a combination of cash and shares of the Company’s Class A common stock. Due to the timing of these acquisitions, the initial accounting for the acquisitions, including the valuation of assets and liabilities acquired, is incomplete. As such, the Company is unable to disclose certain information, including the preliminary fair value of assets acquired and liabilities assumed, atrecognition and/or disclosure purposes. Based on this ~~time.~~

~~In addition,~~evaluation, there were no subsequent ~~to June~~events from September 30, 2022 through the ~~Company committed approximately $120.0 million, comprised of a combination of cash and shares of~~date the ~~Company’s Class A common stock, to acquire ongoing merchant relationships and secure non-solicitation rights from third-party distribution partners.~~financial statements were issued.

~~Departure of Bradley Herring and Appointment of Nancy Disman as Chief Financial Officer~~

On August 3, 2022, Bradley Herring and the Company agreed that Mr. Herring will no longer serve as the Company’s Chief Financial Officer, effective August 5, 2022. In connection with Mr. Herring’s resignation, the Company entered into a separation and release of claims agreement with Mr. Herring on August 3, 2022.

On August 3, 2022, Nancy Disman tendered her resignation as a Class II director of the Board and stepped down from the Board and its Audit, Compensation and Nominating and Corporate Governance Committees, in each case effective August 5, 2022.

On August 3, 2022, the Board appointed Ms. Disman as the Company’s Chief Financial Officer and principal financial officer, in each case effective August 5, 2022, (the “Transition Date”). In connection with Ms. Disman’s appointment as the Chief Financial Officer, the Company entered into an employment agreement (the “Employment Agreement”) with Ms. Disman on August 3, 2022, effective the Transition Date. The Employment Agreement provides for an initial three-year term of employment with automatic one-year renewal terms unless otherwise terminated in accordance with the terms of the Employment Agreement.

~~Table of Contents~~

~~SHIFT4 PAYMENTS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~Realignment of Board Classification~~

On August 3, 2022, in accordance with the Company’s amended and restated bylaws, the Board decreased the size of the Board to six members and, in order to achieve an equal balance of membership among the classes of directors, determined to move Christopher N. Cruz from Class III with a term expiring at the 2023 Annual Meeting of Stockholders to Class II with a term expiring at the 2025 Annual Meeting of Stockholders, in each case effective August 5, 2022. Accordingly, on the same date, Mr. Cruz, who was a Class III director, resigned as a director and was immediately elected by the Board as a Class II director. The resignation and re-election of Mr. Cruz was effected solely to rebalance the Board's classes and, for all other purposes, including compensation, Mr. Cruz’s service on the Board is deemed to have continued uninterrupted. The Board now consists of 2 Class I directors, 2 Class II directors and 2 Class III directors. The current Class I Directors are now Karen Roter Davis and Jared Isaacman; the current Class II Directors are Christopher Cruz and Sarah Goldsmith-Grover; and the current Class III Directors are Jonathan Halkyard and Donald Isaacman.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the information presented in our unaudited condensed consolidated financial statements and the related notes ~~and other financial data~~ and other financial data included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form ~~10-K~~10-K/A (“Form ~~10-K”~~10-K/A”) for the fiscal year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (“SEC”) on ~~March 1,~~November 8, 2022 (the “2021 Form ~~10-K”~~10-K/A”). In addition to historical information, the following discussion contains forward-looking statements, such as statements regarding our expectation for future performance, liquidity and capital resources, that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described in “Cautionary Note Regarding Forward-Looking Statements,” and “Risk Factors” in Part I, Item 1A. of our 2021 Form ~~10-K.~~10-K/A. We assume no obligation to update any of these forward-looking statements.

Certain prior year items within this Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” have been updated as a result of the restatement of the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021, as described in further detail in Note 2 to the accompanying unaudited condensed consolidated financial statements and Part I, Item 4. “Controls and Procedures.”

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to:

•“we,” “us,” “our,” the “Company,” “Shift4” and similar references refer to Shift4 Payments, Inc. and, unless otherwise stated, all of its subsidiaries.

•“Continuing Equity Owners” refers collectively to our Founder and their respective permitted transferees who may redeem at each of their options, in whole or in part from time to time, their LLC Interests for, at our election, cash or newly-issued shares of Shift4 Payments, Inc.’s Class A common stock. Searchlight was a Continuing Equity Owner prior to May 24, 2022.

•“LLC Interests” refers to the common units of Shift4 Payments, LLC.

•“Founder” refers to Jared Isaacman, our Chief Executive Officer and the sole stockholder of Rook Holdings Inc. Our Founder is a Continuing Equity Owner and an owner of Class C common stock.

•“Rook” refers to Rook Holdings Inc., a Delaware corporation wholly-owned by our Founder and for which our Founder is the sole stockholder.

•“Searchlight” refers to Searchlight Capital Partners, L.P., a Delaware limited partnership, and certain funds affiliated with Searchlight. Searchlight was a Continuing Equity Owner prior to May 24, 2022.

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Overview

We are a leading independent provider of payment acceptance and payment processing and technology solutions in the United States (“U.S.”) based on total volume of payments processed. We have also begun executing on our international expansion strategy, and we expect our international presence to continue to grow in the future. We have achieved our leadership position through decades of solving business and operational challenges facing our customers’ overall commerce needs. We distribute our services through our internal sales and support teams, as well as through our network of independent software vendors (“ISVs”) and value-added resellers (“VARs”). For our software partners, we offer a single integration to an end-to-end payments offering, a proprietary gateway and a robust suite of technology solutions to enhance the value of their software and simplify payment acceptance. For our merchants, we provide a seamless, unified consumer experience as an alternative to relying on multiple providers to accept card-based payments, while providing the digital tools necessary to provide their end-customers a seamless commerce experience.

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At the heart of our business is our payments platform. Our payments platform is a full suite of integrated payment products and services that can be used across multiple channels (in-store, online, mobile and tablet-based) and industry verticals, including:

•end-to-end payment processing for a broad range of payment types;

•merchant acquiring;

•proprietary omni-channel gateway capable of multiple methods of mobile, contactless and QR code-based payments;

•complementary software integrations;

•full eCommerce capabilities, including web-store design, hosting, shopping cart management and fulfillment integrations;

•integrated and mobile POS solutions;

•security and risk management solutions; and

•reporting and analytical tools.

~~In addition, we~~We also offer innovative technology solutions that go beyond payment processing. Some of our solutions are developed in-house, such as business intelligence and POS software, while others are powered by our network of complementary third-party applications. Our focus on innovation, combined with our product-driven culture, enables us to create scalable technology solutions that benefit from an extensive library of intellectual property.

WeIn addition to our internal sales and support teams, we have a ~~partner-centric~~partner-based distribution approach. We market and sell our solutions through a diversified ~~network~~network of ~~over 7,000~~ thousands of software partners, which consists of ISVs and VARs. ISVs are technology providers that develop commerce-enabling software suites with which they can bundle our payments platform. VARs are organizations that provide distribution support for ISVs and act as trusted and localized service providers to merchants by providing them with software and services. Together, our ISVs and VARs provide us immense distribution scale and provide our merchants with front-line service and support.

Our end-to-end payments offering combines our payments platform, including our proprietary gateway and breadth of software integrations, and our suite of technology solutions to create a compelling value proposition for our merchants. Our end-to-end payment volume was ~~$16.9~~$20.6 billion and ~~$11.8~~$13.5 billion for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and ~~$30.3~~$50.9 billion and ~~$19.8~~$33.3 billion for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. This end-to-end payment volume contributed ~~72%~~69% and ~~68%~~67% of gross revenue less network fees for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and 70% and ~~65%~~66% of gross revenue less network fees for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

Our merchants range from small to medium sized businesses (“SMBs”) to large enterprises across numerous verticals including food and beverage, hospitality, stadiums and arenas, gaming, specialty retail, non-profits, eCommerce, and exciting technology companies. We expect our newest verticals, including stadiums and arenas, gaming, non-profits, and exciting technology companies, to contribute to our end-to-end payment volume significantly more in future periods than they have to date.

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Recent Developments

Launch of SkyTab POS

During the three months ended September 30, 2022, we launched SkyTab POS, our next-generation restaurant POS system. SkyTab POS includes sleek, cutting-edge hardware and powerful performance; robust functionality, including integrated online ordering and payment, contactless/QR code ordering and payment, and built-in marketing tools and loyalty programs; powerful management tools such as advanced reporting and analytics, remote menu management, and labor scheduling; and various mobile solutions.

Distribution Insourcing & Residual Commission Buyouts

During the three and nine months ended September 30, 2022, we completed $298.8 million and $311.7 million, respectively, of residual commission buyouts with certain third-party distribution partners, pursuant to which we acquired their ongoing merchant relationships that subscribe to our end-to-end payments platform. These amounts include $298.5 million in residual commission buyouts executed under our mass strategic buyout program completed in the three months ended September 30, 2022 in support of our strategic initiative to insource our sales distribution network. Total consideration for the residual commission buyouts was comprised of a combination of cash, shares of our Class A common stock, and contingent liability earnouts.

Stock Repurchases

On December 16, 2021, our Board of Directors (the “Board”) authorized a stock repurchase program (the “December 2021 Program”), pursuant to which we were authorized to repurchase up to $100.0 million of shares of our Class A common stock through December 31, 2022. On May 11, 2022, the Board authorized a stock repurchase program (the “May 2022 Program”), pursuant to which we were authorized to repurchase up to an additional $100.0 million of shares of our Class A common stock through December 31, 2022, and on June 15, 2022, the Board authorized a stock repurchase program (the “June 2022 Program” and, together with the December 2021 Program and the May 2022 Program, the “Programs”), pursuant to which we were authorized to repurchase up to an additional $50.0 million of shares of our Class A common stock through December 31, 2022.

During the ~~six~~nine months ended ~~June~~September 30, 2022, we ~~repurchased~~repurchased 3,887,191 shares of our Class A common stock for $184.4 million, including commissions paid, at an average price paid of $47.40 per share. During the three months ended September 30, 2022, we did not repurchase any shares of our Class A common stock. As of ~~June~~September 30, 2022, ~~approximately~~approximately $44.5 million remained available for future purchases under the Programs. See Note 1617 to the accompanying unaudited ~~condensed~~condensed consolidated financial statements for more ~~information~~ ~~and Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds.”~~information.

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Recent ~~Acquisition~~Acquisitions

Online Payments Group

On September 29, 2022, we acquired Online Payments Group for $125.9 million of total purchase consideration, net of cash acquired. Online Payments Group is European payment service provider with a world-class developer portal and checkout experience that we believe will accelerate our global eCommerce growth.

Restaurant Technology Partners

During the three months ended September 30, 2022, we acquired Pinnacle Hospitality Systems LLC (“Pinnacle”), FPOS Group, Inc. (“FPOS”), Retail Control Solutions, Inc. (“RCS”), and three other restaurant technology partners in separate transactions for $80.3 million of total purchase consideration, net of cash acquired.

These acquisitions enable the boarding of the restaurant technology partners’ customers on our end-to-end acquiring solution and empower our distribution partners to sign the restaurant technology partners’ customer accounts and leverage the combined expertise to handle all aspects of installation, service, and support.

The Giving Block

On February 28, 2022, we acquired The Giving Block for $106.9 million of total purchase consideration, net of cash acquired. The Giving Block is a cryptocurrency donation marketplace that ~~the Company expects~~we expect to accelerate ~~its~~our growth in the non-profit sector with significant cross-sell potential.

See Note 3 to the accompanying unaudited condensed consolidated financial statements for more information.

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Pending ~~Acquisition~~Acquisitions

Finaro

On March 1, 2022, we entered into a definitive agreement to acquire Credorax, Inc. d/b/a Finaro (“Finaro”) for $200.0 million in cash on hand, 6,439,316 shares of our Class A common stock with a value of approximately $325.0 million as of March 1, 2022, determined by the volume weighted average price for the thirty trading days preceding the date of the agreement, and a performance-based earnout of up to $50.0 million in shares of our Class A common stock. Consummation of the merger is subject to regulatory approvals, which we expect to receive inby the ~~fourth~~first quarter of ~~2022~~2023. Finaro is a cross-border eCommerce platform and bank specializing in solving complex payment problems for multi-national merchants that we believe will accelerate our growth in international markets.

Factors Impacting Our Business and Results of Operations

In general, our results of operations are impacted by factors such as the adoption of software solutions that are integrated with our payment solutions, continued investment in our core capabilities, ongoing pursuit of strategic acquisitions, and macro-level economic trends.

Increased adoption of software-integrated payments. We primarily generate revenue through fees assessed on end-to-end payment volume initiated through our internal sales team and our integrated software partners. These fees include volume-based payments, transaction fees and subscription fees for software and technology solutions. We expect to grow this volume by attracting new integrated software partners through our market-leading and innovative solutions. These integrated software partners have proven to be an effective and efficient way of acquiring new merchants and servicing these relationships.

Continued focus on converting our gateway-only customers to our end-to-end payments offering. Currently, a large percentage of our merchant base relies only on our proprietary gateway technology solution to process card-based payments. However, as more of these gateway-only merchants choose to also adopt our end-to-end payment solutions, our revenue per merchant and merchant retention are expected to increase given the fees we generate on end-to-end payment processing services are significantly higher than the per transaction fees we earn on gateway-only services.

Mix of our merchant base. We continue to experience a shift to higher average revenue and higher average volume per merchant. The revenue and volume contribution of each merchant within our portfolio is affected by several factors, including the amount of payment volume processed per merchant, the industry vertical in which the merchant operates, and the number of solutions implemented by the merchant. The size and sophistication of our average merchant continues to increase, and we may experience shifts in the average revenue per merchant and the weighted average pricing of the portfolio.

Ability to attract and retain software partners. ~~A key~~While we have been increasing the size and scope of our internal sales and support teams, our partner-based distribution approach remains a pillar of our Shift4 Model ~~is our partner-centric distribution approach.~~. We work with our software partners who rely on our suite of payment-related technology solutions to simplify the commerce needs of their end clients. Our ability to attract and retain our software partners ~~is essential for~~impacts our future growth and our ability to service our existing base of merchants. To this end, it is critical we maintain our product leadership through continued investment in innovative technology solutions as a means to ensure we retain our current software partners while attracting new software partners.

Investment in product, distribution and operations. We make significant investments in both new product development and existing product enhancements, such as mobile point-of-sale, cloud enablement for our software partners’ existing systems, and contactless payments, including QR code based mobile payment technologies. New product features and functionality are brought to market through varied distribution and promotional activities, including collaborative efforts with industry leading software providers, tradeshows, and customer conferences. Further, we will continue to invest in operational support in order to maintain service levels expected by our merchant customers. We believe these investments in product development and software integrations will lead to long-term growth and profitability.

Pursuit of strategic acquisitions. From time to time, we may pursue acquisitions as part of our ongoing growth strategy that includes adding complementary technology capabilities to service our base of customers and adding critical sales and support capabilities within a specific industry vertical or geography. While these acquisitions are intended to add long-term value, in the short term they may add redundant operating expenses or additional carrying costs until the underlying value is unlocked.

Impact of international operations. We are subject to foreign exchange risk due to fluctuations in exchange rates between the U.S. dollar and the foreign currencies of countries in which we operate. Additionally, international operations expose us to additional risks and subject us to international laws and regulations.

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Economic conditions and resulting consumer spending trends. Changes in macro-level consumer spending trends, including as a result of the COVID-19 pandemic, inflation, and consumer confidence, could affect the amount of volume processed on our platform, thus resulting in fluctuations in our quarterly reported revenue. Our quarterly revenue is also impacted by seasonal, consumer spending habit patterns, which historically have resulted in higher volumes and revenue being reported in our second and third fiscal quarters.

TSYS outage. On August 21, 2021, Total System Services, Inc. (“TSYS”), a Global Payments Company and an important vendor to us, experienced a significant platform outage that resulted in the disruption of payment processing for our merchants (“TSYS outage”). TSYS is utilized by many major credit card issuers and payment processors, which meant the impact of the outage was felt by many card-accepting merchants and cardholders across the nation. In response to the TSYS outage, we distributed payments to both merchants and partners in order to alleviate the impact of the outage on their businesses. The following paragraphs describe how these payments are reflected in our accompanying unaudited condensed consolidated financial statements and disclosures.

In the third quarter of 2021, we distributed $22.4 million in payments to our merchants to approximate the lost revenues they experienced as a result of the TSYS outage. Under ASC 606, these payments were recorded as contra revenue, which is reflected as a reduction of “Gross revenue” in our unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021. These payments are considered nonrecurring and are therefore reflected as an adjustment when calculating Adjusted EBITDA. In addition, for the three and nine months ended September 30, 2021, gross revenue less network fees excludes the impact of the TSYS outage.

In the third quarter of 2021, we also distributed $2.3 million in payments to our partners to approximate their lost revenues and compensate them for the additional support required from them to manage the outage. Consistent with the treatment of our payments to our partners in the normal course of business, these payments are reflected as an increase to “Cost of sales” in our unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021. These payments are considered nonrecurring and are therefore reflected as an adjustment when calculating Adjusted EBITDA.

See Note 4 to the accompanying unaudited condensed consolidated financial statements for more information about the TSYS outage and Key performance indicators and non-GAAP measures for more information about Adjusted EBITDA and gross revenue less network fees.

Key Financial Definitions

The following briefly describes the components of revenue and expenses as presented in the accompanying unaudited Condensed Consolidated Statements of Operations.

Gross revenue consists primarily of payments-based revenue and subscription and other revenues:

Payments-based revenue includes fees for payment processing services and gateway services. Payment processing fees are primarily driven as a percentage of end-to-end payment volume. They may also have a fixed fee, a minimum monthly usage fee and a fee based on transactions. Gateway services, data encryption and tokenization fees are primarily driven by per transaction fees as well as monthly usage fees. In addition, the three and nine months ended September 30, 2021 include nonrecurring payments of $22.4 million we made to our merchants due to the TSYS outage, which were treated as contra revenue and as such reduced payments-based revenue.

Subscription and other revenues include software as a service (“SaaS”) fees for point-of-sale systems and terminals provided to merchants and our Shift4Shop eCommerce platform. Point-of-sale and terminal SaaS fees are assessed based on the type and quantity of equipment deployed to the merchant. Shift4Shop SaaS fees are based on the eCommerce platform chosen by the merchant. SaaS fees also include statement fees, fees for our proprietary business intelligence software, annual fees, regulatory compliance fees and other miscellaneous services such as help desk support and warranties on equipment. Subscription and other revenues also includes revenue derived from software license sales, hardware sales, third-party residuals and fees charged for technology support.

Cost of sales consists of interchange and processing fees, residual commissions, equipment and other costs of sales:

Interchange and processing fees represent payments to card issuing banks and assessments paid to card associations based on transaction processing volume. These also include fees incurred by third-parties for data transmission and settlement of funds, such as processors and sponsor banks.

Residual commissions represent monthly payments to third-party distribution partners. These costs are typically based on a percentage of payment-based revenue.

Equipment represents our costs of devices that are purchased by the merchant.

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Other costs of sales includes amortization of capitalized software development costs, capitalized software, acquired technology and capitalized customer acquisition costs. It also includes incentives and shipping and handling costs related to the delivery of devices. Capitalized software development costs are amortized using the straight-line method on a product-by-product basis over the estimated useful life of the software. Capitalized software, acquired technology and capitalized customer acquisition costs are amortized on a straight-line basis in accordance with our accounting policies. In addition, the three and nine months ended September 30, 2021 include nonrecurring payments of $2.3 million we made to our partners related to the TSYS outage.

General and administrative expenses consist primarily of compensation, benefits and other expenses associated with corporate management, finance, human resources, shared services, information technology and other activities.

Revaluation of contingent liabilities represents adjustments to the fair value of contingent liabilities associated with acquisitions and residual commission buyouts.

Depreciation and amortization expense consists of depreciation and amortization expenses related to merchant relationships, trademarks and trade names, residual commission buyouts, equipment, leasehold improvements, other intangible assets, and property, plant and equipment. We depreciate and amortize our assets on a straight-line basis in accordance with our accounting policies. Leasehold improvements are depreciated over the lesser of the estimated life of the leasehold improvement or the remaining lease term. Maintenance and repairs, which do not extend the useful life of the respective assets, are charged to expense as incurred. Intangible assets are amortized on a straight-line basis over their estimated useful lives which range from two years to twenty years.

Professional fees consists of costs incurred for accounting, tax, legal, and consulting services.

Advertising and marketing expenses relate to costs incurred to participate in industry tradeshows and dealer conferences, advertising initiatives to build brand awareness, and expenses to fulfill loyalty program rewards earned by software partners.

Restructuring expenses relate to strategic initiatives we have taken that include, but are not limited to, severance or separation costs and other exit and disposal costs. These expenses are typically not reflective of our ongoing operations.

Transaction-related expenses relate to debt issuance or modification costs that are not capitalizable. These expenses are typically not reflective of our ongoing operations.

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Loss on extinguishment of debt represents losses recorded for unamortized capitalized financing costs associated with debt prepayments.

Interest income primarily consists of interest income earned on our cash and cash equivalents.

Other income, net primarily consists of other non-operating items.

Change in TRA liability represents adjustments to the Tax Receivable Agreement (“TRA”) liability.

Interest expense consists of interest costs incurred on our borrowings and amortization of capitalized financing costs.

Income tax (provision) benefit ~~(provision)~~ represents federal, state and local taxes based on income in multiple domestic jurisdictions.

Net income (loss) attributable to noncontrolling interests arises from net income (loss) from the non-owned portion of businesses where we have a controlling interest but less than 100% ownership. This represents the noncontrolling interests in Shift4 Payments, LLC and its consolidated subsidiaries, which is comprised of the income (loss) allocated to Continuing Equity Owners as a result of their proportional ownership of LLC Interests.

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Comparison of Results for the Three Months Ended ~~June~~September 30, 2022 and 2021

The following table sets forth the consolidated statements of operations for the periods presented:


		Three Months Ended June 30,									Three Months Ended September 30,
(in millions)	(in millions)	2022		2021		$ change		% change		(in millions)	2022		2021		$ change		% change
Payments-based revenue	Payments-based revenue	$	473.9	$	324.8	$	149.1	45.9	%	Payments-based revenue	$	509.0	$	346.9	$	162.1	46.7	%
Subscription and other revenues	Subscription and other revenues	32.8		26.2		6.6		25.2	%	Subscription and other revenues	38.3		30.9		7.4		23.9	%
Gross revenue	Gross revenue	506.7		351.0		155.7		44.4	%	Gross revenue	547.3		377.8		169.5		44.9	%
Less: Network fees		324.1		214.7		109.4		51.0	%
Less: Other costs of sales		76.8		58.2		18.6		32.0	%
Gross profit		105.8		78.1		27.7		35.5	%
Network fees										Network fees	(350.6)		(251.9)		(98.7)		39.2	%
Other costs of sales (exclusive of depreciation and amortization expense shown separately below)										Other costs of sales (exclusive of depreciation and amortization expense shown separately below)	(61.0)		(61.5)		0.5		(0.8)	%
General and administrative expenses	General and administrative expenses	58.0		51.7		6.3		12.2	%	General and administrative expenses	(74.1)		(48.1)		(26.0)		54.1	%
Revaluation of contingent liabilities										Revaluation of contingent liabilities	36.9		—		36.9		NM
Depreciation and amortization expense(a)	Depreciation and amortization expense(a)	16.7		15.5		1.2		7.7	%	Depreciation and amortization expense(a)	(28.9)		(15.0)		(13.9)		92.7	%
Professional fees	Professional fees	5.2		3.5		1.7		48.6	%	Professional fees	(10.4)		(3.3)		(7.1)		215.2	%
Advertising and marketing expenses	Advertising and marketing expenses	2.9		2.5		0.4		16.0	%	Advertising and marketing expenses	(5.6)		(3.5)		(2.1)		60.0	%
Restructuring expenses	Restructuring expenses	0.1		—		0.1		NM		Restructuring expenses	(0.1)		(0.1)		—		—	%
Transaction-related expenses		—		—		—		NM
Total operating expenses		82.9		73.2		9.7		13.3	%
Income from operations		22.9		4.9		18.0		NM
Loss on extinguishment of debt		—		—		—		NM

Income (loss) from operations										Income (loss) from operations	53.5		(5.6)		59.1		NM

Interest income	Interest income	1.4		—		1.4		NM		Interest income	3.5		—		3.5		NM
Other income, net	Other income, net	0.1		—		0.1		NM		Other income, net	—		0.2		(0.2)		NM
Change in TRA liability										Change in TRA liability	(1.1)		—		(1.1)		NM
Interest expense	Interest expense	(8.4)		(6.3)		(2.1)		33.3	%	Interest expense	(8.3)		(7.4)		(0.9)		12.2	%
Income (loss) before income taxes	Income (loss) before income taxes	16.0		(1.4)		17.4		NM		Income (loss) before income taxes	47.6		(12.8)		60.4		NM
Income tax benefit (provision)		(1.0)		5.9		(6.9)		NM
Net income		15.0		4.5		10.5		233.3	%
Net income attributable to noncontrolling interests		4.7		1.3		3.4		NM
Net income attributable to Shift4 Payments, Inc.		$	10.3	$	3.2	$	7.1	221.9	%
Income tax provision										Income tax provision	(1.2)		(1.0)		(0.2)		20.0	%
Net income (loss)										Net income (loss)	46.4		(13.8)		60.2		NM
Net income (loss) attributable to noncontrolling interests										Net income (loss) attributable to noncontrolling interests	3.3		(4.6)		7.9		NM
Net income (loss) attributable to Shift4 Payments, Inc.										Net income (loss) attributable to Shift4 Payments, Inc.	$	43.1	$	(9.2)	$	52.3	NM

We have changed the presentation of this table relative to prior periods to remove the “Gross profit” line item and update the “Other costs of sales” line item to indicate it is exclusive of depreciation and amortization expense shown separately for the three months ended September 30, 2022 and 2021.

(a)Depreciation and amortization expense includes depreciation of equipment under lease of $8.2 million and $5.8 million for the three months ended September 30, 2022 and 2021, respectively.

Results for the three months ended September 30, 2021 include nonrecurring payments of $22.4 million we made to our merchants and $2.3 million we made to our software partners due to the TSYS outage. An additional $0.4 million of associated costs were incurred as a result of the outage. The TSYS outage payments and associated costs, which did not impact our results for the three months ended September 30, 2022, had the following impact on our results in our unaudited Condensed Consolidated Statements of Operations for the three months ended September 30, 2021:

•$22.4 million decrease to Payments-based revenue and Gross revenue;

•$2.3 million increase to Other costs of sales; and

•$25.1 million decrease to Loss from operations and Net loss.

See Factors Impacting Our Business and Results of Operations above and Note 4 to the accompanying unaudited condensed consolidated financial statements for more information about the TSYS outage.

Gross revenue

Gross revenue was ~~$506.7~~$547.3 million for the three months ended ~~June~~September 30, 2022, compared to ~~$351.0~~$377.8 million for the three months ended ~~June~~September 30, 2021, an increase of ~~$155.7~~$169.5 million or ~~44.4%~~44.9%. Gross revenue is comprised of payments-based revenue and subscription and other revenues. Gross revenue for the three months ended September 30, 2021 includes $22.4 million in payments we made to merchants as a result of the TSYS outage, which were recorded as contra revenue.

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Payments-based revenue was ~~$473.9~~$509.0 million for the three months ended ~~June~~September 30, 2022, compared to ~~$324.8~~$346.9 million for the three months ended ~~June~~September 30, 2021, an increase of ~~$149.1~~$162.1 million or ~~45.9%~~46.7%. The increase in payments-based revenue was primarily driven by the increase in end-to-end payment volume of ~~$5.0~~$7.1 billion, or ~~43%~~52.9%, for the three months ended ~~June~~September 30, 2022, compared to the three months ended ~~June~~September 30, ~~2021.~~

~~Table~~2021, in addition to $22.4 million in payments we made to merchants in the third quarter of ~~Contents~~

2021 as a result of the TSYS outage, which were recorded as contra revenue.

Subscription and other revenues were ~~$32.8~~$38.3 million for the three months ended ~~June~~September 30, 2022, compared to ~~$26.2~~$30.9 million for the three months ended ~~June~~September 30, 2021, an increase of ~~$6.6~~$7.4 million or ~~25.2%~~23.9%. The increase in subscription and other revenues was primarily driven by ~~the Postec and The Giving Block~~ acquisitions, which collectively contributed ~~$4.4~~$4.7 million more to subscription and other revenues in the three months ended ~~June~~September 30, 2022, compared to the three months ended ~~June~~September 30, 2021. In addition, ~~deferred revenue~~hardware sales increased ~~$2.4~~$2.9 million for the three months ended ~~June~~September 30, 2022, compared to the three months ended ~~June~~September 30, 2021.

Network fees

Network fees were ~~$324.1~~$350.6 million for the three months ended ~~June~~September 30, 2022, compared to ~~$214.7~~$251.9 million for the three months ended ~~June~~September 30, 2021, an increase of ~~$109.4~~$98.7 million or ~~51.0%~~39.2%. This increase is correlated with the increase in end-to-end payment volume as described above.

Gross revenue less network fees was ~~$182.6~~$196.7 million for the three months ended ~~June~~September 30, 2022, compared to ~~$136.3~~$148.3 million for the three months ended ~~June~~September 30, 2021, an increase of ~~$46.3~~$48.4 million or ~~34.0%~~32.6%. For the three months ended September 30, 2021, gross revenue less network fees excludes the $22.4 million impact of the TSYS outage to gross revenue. The increase in gross revenue less network fees was largely correlated with the increase in end-to-end payment volume. See “Key Performance Indicators and Non-GAAP Measures” below for a reconciliation of gross profit to gross revenue less network fees.

Other costs of sales

Other costs of sales was ~~$76.8~~$61.0 million for the three months ended ~~June~~September 30, 2022, compared to ~~$58.2~~$61.5 million for the three months ended ~~June~~September 30, 2021, ~~an increase~~a decrease of ~~$18.6~~$0.5 million, or ~~32.0%~~0.8%. This ~~increase~~decrease was primarily driven by:

•~~higher~~lower residual commissions, which decreased other costs of sales $7.3 million, primarily driven by the impact of residual commission buyouts completed during the third quarter of 2022; and

•payments to partners of $2.3 million due to the TSYS outage, which increased other costs of sales ~~$12.9 million, primarily driven by~~in the ~~growth~~three months ended September 30, 2021 and were nonrecurring in ~~gross revenue less network fees;~~nature;

partially offset by:

•~~the Postec and The Giving Block acquisitions~~higher equipment sales, which ~~collectively~~ increased other costs of sales ~~$1.7 million in the three months ended June 30, 2022;~~by $2.9 million;

•higher capitalized software development amortization, which increased other costs of sales $2.0 million;

•acquisitions, which collectively increased other costs of sales $1.5 million; and

•higher capitalized customer acquisition cost amortization, which increased other costs of sales ~~$1.3~~$1.2 million, related to deal bonuses paid to third-party distribution partners to obtain processing contracts.

~~Operating expenses~~

General and administrative ~~expenses.~~expenses

General and administrative expenses were ~~$58.0~~$74.1 million for the three months ended ~~June~~September 30, 2022, compared to ~~$51.7~~$48.1 million for the three months ended ~~June~~September 30, 2021, an increase of ~~$6.3~~$26.0 million or ~~12.2%~~54.1%. The increase was primarily driven by ~~the acquisitions~~higher compensation and other employee-related expenses of ~~Postec and The Giving Block, which collectively increased general and administrative expenses $2.4~~$14.7 million in the three months ended ~~June 30, 2022, and higher insurance and travel expenses of $1.3 million and $0.7 million, respectively, in the three months ended June~~September 30, 2022, compared to the three months ended ~~June~~September 30, 2021, as a result of our continued growth and expansion. In addition, our acquisitions collectively increased general and administrative expenses $6.0 million in the three months ended September 30, 2022.

~~Depreciation and amortization expense.~~ ~~Depreciation and amortization expense was $16.7~~Revaluation of contingent liabilities

Revaluation of contingent liabilities of $36.9 million for the three months ended ~~June~~September 30, 2022 ~~compared to $15.5~~is driven by a decrease in the contingent liability for The Giving Block in the three months ended September 30, 2022.

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Depreciation and amortization expense

Depreciation and amortization expense was $28.9 million for the three months ended ~~June~~September 30, 2022, compared to $15.0 million for the three months ended September 30, 2021, an increase of ~~$1.2~~$13.9 million or ~~7.7%~~92.7%. The increase was primarily driven by higher amortization of intangible assets of $10.5 million due to the significant residual commission buyouts completed in the three months ended September 30, 2022. In addition, depreciation and amortization expense increased due to higher depreciation for equipment under lease of ~~$2.3~~$2.5 million in the three months ended ~~June~~September 30, 2022, compared to the three months ended ~~June~~September 30, 2021. ~~In addition, the acquisitions of Postec and The Giving Block~~Acquisitions collectively increased depreciation and amortization expense ~~$0.6~~$0.8 million in the three months ended ~~June~~September 30, 2022. ~~This was partially offset by lower amortization of intangible assets of $1.6 million in the three months ended June 30, 2022.~~

Professional ~~fees.~~ fees

Professional fees were ~~$5.2~~$10.4 million for the three months ended ~~June~~September 30, 2022, compared to $3.3 million for the three months ended September 30, 2021, an increase of $7.1 million or 215.2%. The increase was primarily driven by higher acquisition-related costs.

Advertising and marketing expenses

Advertising and marketing expenses were $5.6 million for the three months ended September 30, 2022, compared to $3.5 million for the three months ended ~~June~~September 30, 2021, an increase of ~~$1.7~~$2.1 million or ~~48.6%~~60.0%. The increase was ~~due to higher acquisition-related costs.~~primarily driven by our 4WARD conference held in the third quarter 2022 and an increase in sponsorship expenses, partially offset by $1.6 million of costs associated with the Inspiration4 seat in the three months ended September 30, 2021 that were nonrecurring in nature.

Interest income

Interest income was ~~$1.4~~$3.5 million for the three months ended ~~June~~September 30, 2022, consisting primarily of interest income earned on our cash and cash equivalents. We had immaterial interest income for the three months ended September 30, 2021.

Change in TRA liability

~~Table~~The change in TRA liability resulted in $1.1 million of ~~Contents~~

expense for the three months ended September 30, 2022. There was no corresponding expense for the three months ended September 30, 2021. See Note 13 in the notes to the accompanying unaudited condensed consolidated financial statements for more information on the TRA.

Interest expense

Interest expense was ~~$8.4~~$8.3 million for the three months ended ~~June~~September 30, 2022, compared to ~~$6.3~~$7.4 million for the three months ended ~~June~~September 30, 2021, an increase of ~~$2.1~~$0.9 million or ~~33.3%~~12.2%. The increase ~~in interest expense~~ was primarily driven by ~~the issuance~~higher amortization of the Convertible Senior Notes due 2027 (“2027 Convertible Notes”) in July 2021, as well as a $0.4 million special interest payment made for the Convertible Senior Notes due 2025 (“2025 Convertible Notes”) during the three months ended June 30, 2022.capitalized financing fees.

Income tax ~~benefit (provision)~~provision

The effective tax rate for the three months ended ~~June~~September 30, 2022 was ~~6.3%~~2.5%, compared to the effective tax rate for the three months ended ~~June~~September 30, 2021 of ~~(421.4)%~~7.8%.

The effective tax rate for the three months ended ~~June~~September 30, 2022 ~~was different than the U.S. federal statutory income tax rate of 21% primarily due to the loss allocated to the noncontrolling interest~~ and ~~the full valuation allowances on Shift4 Payments, Inc. and VenueNext, Inc. in the United States. The effective tax rate for the three months ended June 30,~~ 2021 was different than the U.S. federal statutory income tax rate of 21% primarily due to the ~~loss~~income allocated to the noncontrolling interest, the full valuation allowances on Shift4 Payments, Inc. and ~~VenueNext, Inc.~~certain corporate subsidiaries in the ~~United States,~~U.S., and the ~~tax windfall~~nontaxable adjustment related to ~~vested equity-based compensation awards, and~~ the ~~near break-even loss before income taxes~~revaluation of contingent liabilities for ~~the three months ended June 30, 2021.~~The Giving Block.

Net income (loss) attributable to noncontrolling interests

Net income attributable to noncontrolling interests of Shift4 Payments, LLC was ~~$4.7~~$3.3 million for the three months ended ~~June~~September 30, 2022, compared to ~~$1.3~~a net loss attributable to noncontrolling interests of $4.6 million for the three months ended ~~June~~September 30, 2021.

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Comparison of Results for the ~~Six~~Nine Months Ended ~~June~~September 30, 2022 and 2021

The following table sets forth the consolidated statements of operations for the periods presented:


		Six Months Ended June 30,									Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		$ change		% change		(in millions)	2022		2021		$ change		% change
Payments-based revenue	Payments-based revenue	$	845.4	$	540.7	$	304.7	56.4	%	Payments-based revenue	$	1,354.4	$	887.6	$	466.8	52.6	%
Subscription and other revenues	Subscription and other revenues	63.2		49.6		13.6		27.4	%	Subscription and other revenues	101.5		80.5		21.0		26.1	%
Gross revenue	Gross revenue	908.6		590.3		318.3		53.9	%	Gross revenue	1,455.9		968.1		487.8		50.4	%
Less: Network fees		577.2		356.5		220.7		61.9	%
Less: Other costs of sales		141.0		103.9		37.1		35.7	%
Gross profit		190.4		129.9		60.5		46.6	%
Network fees										Network fees	(927.8)		(608.4)		(319.4)		52.5	%
Other costs of sales (exclusive of depreciation and amortization expense shown separately below)										Other costs of sales (exclusive of depreciation and amortization expense shown separately below)	(202.0)		(165.4)		(36.6)		22.1	%
General and administrative expenses	General and administrative expenses	124.2		105.2		19.0		18.1	%	General and administrative expenses	(198.6)		(153.1)		(45.5)		29.7	%
Revaluation of contingent liabilities										Revaluation of contingent liabilities	37.2		(0.2)		37.4		NM
Depreciation and amortization expense(a)	Depreciation and amortization expense(a)	34.0		30.9		3.1		10.0	%	Depreciation and amortization expense(a)	(62.9)		(45.9)		(17.0)		37.0	%
Professional fees	Professional fees	13.9		9.7		4.2		43.3	%	Professional fees	(24.3)		(13.0)		(11.3)		86.9	%
Advertising and marketing expenses	Advertising and marketing expenses	5.6		22.6		(17.0)		(75.2)	%	Advertising and marketing expenses	(11.2)		(26.1)		14.9		(57.1)	%
Restructuring expenses	Restructuring expenses	0.1		0.1		—		NM		Restructuring expenses	(0.2)		(0.2)		—		—	%
Transaction-related expenses	Transaction-related expenses	1.4		—		1.4		NM		Transaction-related expenses	(1.4)		—		(1.4)		NM
Total operating expenses		179.2		168.5		10.7		6.4	%
Income (loss) from operations	Income (loss) from operations	11.2		(38.6)		49.8		(129.0)	%	Income (loss) from operations	64.7		(44.2)		108.9		NM
Loss on extinguishment of debt	Loss on extinguishment of debt	—		(0.2)		0.2		(100.0)	%	Loss on extinguishment of debt	—		(0.2)		0.2		NM
Interest income	Interest income	1.4		—		1.4		NM		Interest income	4.9		—		4.9		NM
Other income, net	Other income, net	0.3		—		0.3		NM		Other income, net	0.3		0.2		0.1		50.0	%
Change in TRA liability										Change in TRA liability	(1.1)		—		(1.1)		NM
Interest expense	Interest expense	(16.3)		(12.8)		(3.5)		27.3	%	Interest expense	(24.6)		(20.2)		(4.4)		21.8	%
Loss before income taxes		(3.4)		(51.6)		48.2		(93.4)	%
Income (loss) before income taxes										Income (loss) before income taxes	44.2		(64.4)		108.6		NM
Income tax benefit	Income tax benefit	5.2		5.1		0.1		2.0	%	Income tax benefit	4.0		4.1		(0.1)		(2.4)	%
Net income (loss)	Net income (loss)	1.8		(46.5)		48.3		NM		Net income (loss)	48.2		(60.3)		108.5		NM
Net loss attributable to noncontrolling interests		(1.0)		(16.9)		15.9		(94.1)	%
Net income (loss) attributable to noncontrolling interests										Net income (loss) attributable to noncontrolling interests	2.3		(21.5)		23.8		NM
Net income (loss) attributable to Shift4 Payments, Inc.	Net income (loss) attributable to Shift4 Payments, Inc.	$	2.8	$	(29.6)	$	32.4	NM		Net income (loss) attributable to Shift4 Payments, Inc.	$	45.9	$	(38.8)	$	84.7	NM

(a)Depreciation and amortization expense includes depreciation of equipment under lease of $22.6 million and $15.4 million for the nine months ended September 30, 2022 and 2021, respectively.

Results for the nine months ended September 30, 2021 include nonrecurring payments of $22.4 million we made to our merchants and $2.3 million we made to our software partners due to the TSYS outage. An additional $0.4 million of associated costs were incurred as a result of the outage. The TSYS outage payments and associated costs, which did not impact our results for the nine months ended September 30, 2022, had the following impact on our results in our unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021:

•$22.4 million decrease to Payments-based revenue and Gross revenue;

~~Table~~•$2.3 million increase to Other costs of ~~Contents~~sales; and

•$25.1 million decrease to Loss from operations and Net loss.

See Factors Impacting Our Business and Results of Operations above and Note 4 to the accompanying unaudited condensed consolidated financial statements for more information about the TSYS outage

Gross revenue

Gross revenue was ~~$908.6~~$1,455.9 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$590.3~~$968.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$318.3~~$487.8 million or ~~53.9%~~50.4%. Gross revenue is comprised of payments-based revenue and subscription and other revenues. The nine months ended September 30, 2021 includes $22.4 million in payments we made to merchants as a result of the TSYS outage, which were recorded as contra revenue.

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Payments-based revenue was ~~$845.4~~$1,354.4 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$540.7~~$887.6 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$304.7~~$466.8 million or ~~56.4%~~52.6%. The increase in payments-based revenue was primarily driven by the increase in end-to-end payment volume of ~~$10.5~~$17.6 billion, or ~~52.8%~~52.9%, for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to the ~~six~~nine months ended ~~June~~September 30, ~~2021.~~2021, in addition to $22.4 million in payments we made to merchants in the third quarter of 2021 as a result of the TSYS outage, which were recorded as contra revenue.

Subscription and other revenues were ~~$63.2~~$101.5 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$49.6~~$80.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$13.6~~$21.0 million or ~~27.4%~~26.1%. The increase in subscription and other revenues was driven primarily by ~~the VenueNext, Postec and The Giving Block~~ acquisitions, which collectively contributed ~~$12.4~~$18.1 million more to subscription and other revenues in the ~~six~~nine months ended ~~June~~September 30, 2022, compared to the ~~six~~nine months ended ~~June 30, 2021. In addition, deferred revenue increased $2.0 million for the six months ended June 30, 2022, compared to the six months ended June~~September 30, 2021.

Network fees

Network fees were ~~$577.2~~$927.8 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$356.5~~$608.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$220.7~~$319.4 million or ~~61.9%~~52.5%. This increase is correlated with the increase in end-to-end payment volume as described above.

Gross revenue less network fees was ~~$331.4~~$528.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$233.8~~$382.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$97.6~~$146.0 million or ~~41.7%~~38.2%. For the nine months ended September 30, 2021, gross revenue less network fees excludes the $22.4 million impact of the TSYS outage to gross revenue. The increase in gross revenue less network fees was largely correlated with the increase in end-to-end payment volume. See “Key Performance Indicators and Non-GAAP Measures” below for a reconciliation of gross profit to gross revenue less network fees.

Other costs of sales

Other costs of sales was ~~$141.0~~$202.0 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$103.9~~$165.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$37.1~~$36.6 million, or ~~35.7%~~22.1%. This increase was primarily driven by:

•higher residual commissions, which increased other costs of sales ~~$29.1~~$21.8 million, were driven by the growth in gross revenue less network ~~fees;~~fees, partially offset by the impact of residual commission buyouts;

•~~the VenueNext, Postec and The Giving Block~~ acquisitions, which collectively increased other costs of sales ~~$3.8 million in the six months ended June 30, 2022;~~$8.4 million;

•higher variable costs associated with processing fees of ~~$3.2~~$4.1 million;

•higher capitalized acquisition cost amortization, which increased other costs of sales $2.5 million, related to deal bonuses paid to third-party distribution partners to obtain processing contracts; and

•higher capitalized software development amortization, which increased other costs of sales ~~$2.0~~$3.8 million; and

•higher capitalized customer acquisition cost amortization, which increased other costs of sales $3.6 million, related to deal bonuses paid to third-party distribution partners to obtain processing contracts;

partially offset byby:

•higher than normal chargeback losses during the ~~six~~nine months ended ~~June~~September 30, 2021 driven by the business failure of one merchant causing $5.5 million in estimated unrecoverable chargeback transactions in ~~2021.~~2021; and

~~Operating expenses~~•payments to partners of $2.3 million due to the TSYS outage, which increased other costs of sales in the nine months ended September 30, 2021 and were nonrecurring in nature.

General and administrative ~~expenses.~~expenses

General and administrative expenses were ~~$124.2~~$198.6 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$105.2~~$153.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$19.0~~$45.5 million or ~~18.1%~~29.7%. The increase was primarily driven by higher compensation and other employee-related expenses of ~~$7.2~~$21.7 million and higher insurance expenses of ~~$1.5~~$2.8 million ~~and higher travel expenses of $1.2 million in the six months ended June 30, 2022,~~ compared to the ~~six~~nine months ended ~~June~~September 30, 2021, as a result of our continued growth and expansion. In addition, ~~the~~our acquisitions ~~of VenueNext, Postec and The Giving Block~~ collectively increased general and administrative expenses ~~$6.7~~$13.5 million in the ~~six~~nine months ended ~~June~~September 30, 2022.

Revaluation of contingent liabilities

Revaluation of contingent liabilities of $37.2 million for the nine months ended September 30, 2022 is driven by a decrease in the contingent liability for The Giving Block in the nine months ended September 30, 2022.

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Depreciation and amortization ~~expense.~~expense

Depreciation and amortization expense was ~~$34.0~~$62.9 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$30.9~~$45.9 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$3.1~~$17.0 million or ~~10.0%~~37.0%. The increase was primarily driven by higher amortization of intangible assets of $7.6 million due to the significant residual commission buyouts completed in the third quarter of 2022 and higher depreciation for equipment under lease of ~~$4.8~~$7.2 million in the ~~six~~nine months ended ~~June~~September 30, 2022, compared to the ~~six~~nine months ended ~~June~~September 30, 2021. In addition, ~~the~~our acquisitions ~~of VenueNext, Postec and The Giving Block~~ collectively increased depreciation and amortization expense ~~$1.1~~$2.0 million in the ~~six~~nine months ended ~~June~~September 30, 2022. ~~This was partially offset by lower amortization of intangible assets of $2.9 million in the six months ended June 30, 2022.~~

Professional ~~fees.~~ fees

Professional fees were ~~$13.9~~$24.3 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$9.7~~$13.0 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$4.2~~$11.3 million or ~~43.3%~~86.9%. The increase was primarily due to higher acquisition-related costs.

Advertising and marketing ~~expenses.~~ expenses

Advertising and marketing expenses were ~~$5.6~~$11.2 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$22.6~~$26.1 million for the ~~six~~nine months ended ~~June~~September 30, 2021, a decrease of ~~$17.0~~$14.9 million or ~~75.2%~~57.1%. The decrease was primarily driven by expenses in the ~~six~~nine months ended ~~June~~September 30, 2021 related to the integration of 3dcart and its rebranding as Shift4Shop and $3.7 million of costs associated with the Inspiration4 seat that were nonrecurring in nature. In February 2021, the Company accepted the transfer of the right to select a participant for one seat on board Inspiration4, the first all-civilian mission to space, from the Founder, who was also the commander of the mission. The Company incurred a significant amount of nonrecurring expenses to integrate, rebrand and promote 3dcart to Shift4Shop in conjunction with the Inspiration4 announcement. This was partially offset by ~~the VenueNext, Postec and The Giving Block~~ acquisitions, which collectively increased advertising and marketing expenses ~~$1.1~~$2.5 million in the ~~six~~nine months ended ~~June~~September 30, ~~2022.~~2022, in addition to our 4WARD conference held in the third quarter 2022 and an increase in sponsorship expenses.

Transaction-related ~~expenses.~~ expenses

Transaction-related expenses were $1.4 million for the ~~six~~nine months ended ~~June~~September 30, 2022. These expenses were associated with a consent solicitation for the 2026 Senior Notes in March 2022. See Note 910 in the notes to the accompanying unaudited condensed consolidated financial statements for more information.

Interest income

Interest income was ~~$1.4~~$4.9 million for the ~~six~~nine months ended ~~June~~September 30, 2022, consisting primarily of interest income earned on our cash and cash equivalents. We had immaterial interest income for the nine months ended September 30, 2021.

Change in TRA liability

The change in TRA liability resulted in $1.1 million of expense for the nine months ended September 30, 2022. There was no corresponding expense for the nine months ended September 30, 2021. See Note 13 in the notes to the accompanying unaudited condensed consolidated financial statements for more information on the TRA.

Interest expense

Interest expense was ~~$16.3~~$24.6 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$12.8~~$20.2 million for the ~~six~~nine months ended ~~June~~September 30, 2021, an increase of ~~$3.5~~$4.4 million or ~~27.3%~~21.8%. The increase in interest expense was primarily driven by the issuance of the Convertible Senior Notes due 2027 (“2027 Convertible ~~Notes~~Notes”) in July 2021, as well as ~~a $0.4 million special interest payment made for the 2025 Convertible Notes~~higher amortization of capitalized financing fees during the ~~six~~nine months ended ~~June~~September 30, 2022.

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Income tax benefit (provision)

The effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~(152.9)~~(9.0)%, compared to the effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2021 of ~~(9.9)~~(6.4)%.

The effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2022 was different than the U.S. federal statutory income tax rate of 21% primarily due to the ~~loss~~income allocated to the noncontrolling interest, the full valuation allowances on Shift4 Payments, Inc. and ~~VenueNext, Inc.~~certain corporate subsidiaries in the ~~United States,~~U.S., the nontaxable adjustment related to the revaluation of contingent liabilities for The Giving Block, and a $6.4 million income tax benefit related to the valuation allowance release due to acquired deferred tax liabilities from The Giving Block. The effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2021 was different than the U.S. federal statutory income tax rate of 21% primarily due to the loss allocated to the noncontrolling interest, the full valuation allowances on Shift4 Payments, Inc. and ~~VenueNext, Inc.~~certain corporate subsidiaries in the ~~United States,~~U.S., and the tax windfall related to vested equity-based compensation awards.

Net ~~loss~~income (loss) attributable to noncontrolling interests

Net ~~loss~~income attributable to noncontrolling interests of Shift4 Payments, LLC was ~~$(1.0)~~$2.3 million for the ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$(16.9)~~net loss of $21.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021.

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Key Performance Indicators and Non-GAAP Measures

The following table sets forth our key performance indicators and non-GAAP measures for the periods presented.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2022		2021		2022		2021
End-to-end payment volume	End-to-end payment volume	$	16,873.1	$	11,833.9	$	30,294.0	$	19,820.7	End-to-end payment volume	$	20,579.4	$	13,457.2	$	50,873.4	$	33,277.9
Gross revenue less network fees	Gross revenue less network fees	182.6		136.3		331.4		233.8		Gross revenue less network fees	196.7		148.3		528.1		382.1
EBITDA	EBITDA	52.9		30.6		70.5		12.2		EBITDA	95.0		20.4		165.5		32.6
Adjusted EBITDA	Adjusted EBITDA	65.6		45.2		109.9		67.4		Adjusted EBITDA	85.4		55.8		195.3		123.2

End-to-end payment volume

End-to-end payment volume is defined as the total dollar amount of ~~card~~ payments that we ~~authorize and settle~~deliver for settlement on behalf of our ~~merchants~~merchants. Included in end-to-end volume are dollars routed via our international payments platform and alternative payment methods, including cryptocurrency donations, plus ~~total cryptocurrency amounts transacted, translated at the spot price~~volume we route to ~~U.S. dollars.~~one or more third party merchant acquirers on behalf of strategic enterprise merchant relationships. This volume does not include volume processed through our legacy gateway-only ~~merchants.~~offering.

Gross revenue less network fees, EBITDA and Adjusted EBITDA

We use supplemental measures of our performance which are derived from our consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with GAAP. These non-GAAP financial measures include: gross revenue less network fees, which includes interchange and assessment fees; earnings before interest, income taxes, depreciation, and amortization (“EBITDA”); and Adjusted EBITDA.

Gross revenue less network fees represents a key performance metric that management uses to measure changes in the mix and value derived from our customer base as we continue to execute our strategy to expand our reach to serve larger, complex merchants. For the three and nine months ended September 30, 2021, gross revenue less network fees excludes the impact of the payments to merchants, included in “Gross revenue,” and payments to partners and associated expenses due to the TSYS outage, included in “Cost of sales” in our unaudited Condensed Consolidated Statements of Operations. These are nonrecurring payments that occurred outside of our day-to-day operations, and we have excluded them in order to provide more useful information to investors in the evaluation of our performance period-over-period.

Adjusted EBITDA is the primary financial performance measure used by management to evaluate its business and monitor results of operations. Adjusted EBITDA represents EBITDA further adjusted for certain non-cash and other nonrecurring items that management believes are not indicative of ongoing operations. These adjustments include the TSYS outage and associated costs, acquisition, restructuring and integration costs, revaluation of contingent liabilities, change in TRA liability, equity-based compensation expense, and other nonrecurring items. The financial impact of certain elements of these activities is often large relative to the Company’s overall financial performance and can adversely affect the comparability of our operating results and investors’ ability to analyze the business from period to period.

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We use non-GAAP financial measures to supplement financial information presented on a GAAP basis. We believe that excluding certain items from our GAAP results allows management to better understand our consolidated financial performance from period to period and better project our future consolidated financial performance as forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, we believe these non-GAAP financial measures provide our stakeholders with useful information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period to period comparisons. There are limitations to the use of the non-GAAP financial measures presented in this Quarterly Report on Form 10-Q. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from, or as a substitute for, net income (loss) prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis. Reconciliations of gross revenue less network fees, EBITDA and Adjusted EBITDA to its most directly comparable GAAP financial measure are presented below. We encourage you to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items.

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Reconciliations of gross revenue less network fees, EBITDA and Adjusted EBITDA

The tables below provide reconciliations of gross profit to gross revenue less network fees and net ~~loss~~income (loss) on a consolidated basis for the periods presented to EBITDA and Adjusted EBITDA.

Gross revenue less network fees:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2022		2021		2022		2021
Gross profit		$	105.8	$	78.1	$	190.4	$	129.9
Add back: Other costs of sales		76.8		58.2		141.0		103.9
Gross revenue										Gross revenue	$	547.3	$	377.8	$	1,455.9	$	968.1
Less: Network fees										Less: Network fees	(350.6)		(251.9)		(927.8)		(608.4)
Less: Other costs of sales (exclusive of depreciation of equipment under lease)										Less: Other costs of sales (exclusive of depreciation of equipment under lease)	(61.0)		(61.5)		(202.0)		(165.4)
											135.7		64.4		326.1		194.3
Less: Depreciation of equipment under lease										Less: Depreciation of equipment under lease	(8.2)		(5.8)		(22.6)		(15.4)
Gross profit (a) (b) (c)										Gross profit (a) (b) (c)	$	127.5	$	58.6	$	303.5	$	178.9

Gross profit (a) (b) (c)										Gross profit (a) (b) (c)	$	127.5	$	58.6	$	303.5	$	178.9
Add back: Other costs of sales (b)										Add back: Other costs of sales (b)	61.0		61.5		202.0		165.4
Add back: Depreciation of equipment under lease										Add back: Depreciation of equipment under lease	8.2		5.8		22.6		15.4
Add back: TSYS outage payments (c)										Add back: TSYS outage payments (c)	—		22.4		—		22.4
Gross revenue less network fees	Gross revenue less network fees	$	182.6	$	136.3	$	331.4	$	233.8	Gross revenue less network fees	$	196.7	$	148.3	$	528.1	$	382.1

(a) The calculation of gross profit relative to prior periods was revised to include depreciation of equipment under lease. The table reflects the calculation of gross profit for all periods presented, including the differences from previously reported gross profit metrics that had excluded depreciation of equipment under lease.										(a) The calculation of gross profit relative to prior periods was revised to include depreciation of equipment under lease. The table reflects the calculation of gross profit for all periods presented, including the differences from previously reported gross profit metrics that had excluded depreciation of equipment under lease.
(b) The three and nine months ended September 30, 2021 include $2.3 million of nonrecurring payments to partners related to the TSYS outage. See Factors Impacting Our Business and Results of Operations above and Note 4 to the accompanying unaudited condensed consolidated financial statements for more information about the TSYS outage.										(b) The three and nine months ended September 30, 2021 include $2.3 million of nonrecurring payments to partners related to the TSYS outage. See Factors Impacting Our Business and Results of Operations above and Note 4 to the accompanying unaudited condensed consolidated financial statements for more information about the TSYS outage.
(c) The three and nine months ended September 30, 2021 include $22.4 million of nonrecurring payments to merchants related to the TSYS outage. See Factors Impacting Our Business and Results of Operations above and Note 4 to the accompanying unaudited condensed consolidated financial statements for more information about the TSYS outage.										(c) The three and nine months ended September 30, 2021 include $22.4 million of nonrecurring payments to merchants related to the TSYS outage. See Factors Impacting Our Business and Results of Operations above and Note 4 to the accompanying unaudited condensed consolidated financial statements for more information about the TSYS outage.

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EBITDA and Adjusted EBITDA:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2022		2021		2022		2021
Net income (loss)	Net income (loss)	$	15.0	$	4.5	$	1.8	$	(46.5)	Net income (loss)	$	46.4	$	(13.8)	$	48.2	$	(60.3)
Interest expense	Interest expense	8.4		6.3		16.3		12.8		Interest expense	8.3		7.4		24.6		20.2
Interest income	Interest income	(1.4)		—		(1.4)		—		Interest income	(3.5)		—		(4.9)		—
Income tax provision (benefit)	Income tax provision (benefit)	1.0		(5.9)		(5.2)		(5.1)		Income tax provision (benefit)	1.2		1.0		(4.0)		(4.1)
Depreciation and amortization expense	Depreciation and amortization expense	29.9		25.7		59.0		51.0		Depreciation and amortization expense	42.6		25.8		101.6		76.8
EBITDA	EBITDA	52.9		30.6		70.5		12.2		EBITDA	95.0		20.4		165.5		32.6
Acquisition, restructuring and integration costs (a)	Acquisition, restructuring and integration costs (a)	2.4		3.2		10.2		29.0		Acquisition, restructuring and integration costs (a)	13.0		4.0		23.5		32.8
Equity-based compensation (b)		9.7		11.3		26.8		25.4
Other nonrecurring items (c)		0.6		0.1		2.4		0.8
Revaluation of contingent liabilities (b)										Revaluation of contingent liabilities (b)	(36.9)		—		(37.2)		0.2
Change in TRA liability (c)										Change in TRA liability (c)	1.1		—		1.1		—
Equity-based compensation (d)										Equity-based compensation (d)	12.3		6.6		39.1		32.0
TSYS outage payments and associated costs (e)										TSYS outage payments and associated costs (e)	—		25.1		—		25.1
Other nonrecurring items (f)										Other nonrecurring items (f)	0.9		(0.3)		3.3		0.5
Adjusted EBITDA	Adjusted EBITDA	$	65.6	$	45.2	$	109.9	$	67.4	Adjusted EBITDA	$	85.4	$	55.8	$	195.3	$	123.2

(a) For the three months ended June 30, 2022, primarily consisted of $2.5 million of acquisition-related costs, partially offset by a $0.3 million adjustment to contingent consideration for the The Giving Block acquisition. For the three months ended June 30, 2021, primarily consisted of $1.4 million of acquisition-related costs and $1.3 million of expenses related to the integration of 3dcart and its rebranding as Shift4Shop. For the six months ended June 30, 2022, primarily consisted of $8.3 million of acquisition-related costs and $1.4 million of transaction-related expenses associated with a consent solicitation for the 2026 Senior Notes in March 2022, partially offset by a $0.3 million adjustment to contingent consideration for the The Giving Block acquisition. For the six months ended June 30, 2021, primarily consisted of $20.4 million of expenses related to the integration of 3dcart and its rebranding as Shift4Shop, $4.3 million of acquisition-related costs, and $2.1 million of expense for the Inspiration4 seat.
(b) Represents equity-based compensation expense for RSUs, including employer taxes for vested RSUs. See Note 18 in the notes to the accompanying unaudited condensed consolidated financial statements for more information on equity-based compensation.
(c) For the six months ended June 30, 2022, primarily consisted of $1.2 million of costs associated with an internal processing system disruption that required technical remediation, $0.4 million of costs associated with an early retirement initiative completed in the first quarter of 2022 and $0.3 million of legal and professional fees for one-time matters.
(a) For the three months ended September 30, 2022, primarily consisted of $10.3 million of acquisition-related costs and a signing bonus of $2.0 million to our Chief Financial Officer. For the three months ended September 30, 2021, primarily consisted of $2.0 million of acquisition-related costs and $1.6 million of costs associated with the Inspiration4 seat. For the nine months ended September 30, 2022, primarily consisted of $19.1 million of acquisition-related costs, a signing bonus of $2.0 million to our Chief Financial Officer, and $1.4 million of transaction-related expenses associated with a consent solicitation for the 2026 Senior Notes in March 2022. For the nine months ended September 30, 2021, primarily consisted of $20.4 million of expenses related to the integration of 3dcart and its rebranding as Shift4Shop, $6.3 million of acquisition-related costs, and $3.7 million of costs associated with the Inspiration4 seat.										(a) For the three months ended September 30, 2022, primarily consisted of $10.3 million of acquisition-related costs and a signing bonus of $2.0 million to our Chief Financial Officer. For the three months ended September 30, 2021, primarily consisted of $2.0 million of acquisition-related costs and $1.6 million of costs associated with the Inspiration4 seat. For the nine months ended September 30, 2022, primarily consisted of $19.1 million of acquisition-related costs, a signing bonus of $2.0 million to our Chief Financial Officer, and $1.4 million of transaction-related expenses associated with a consent solicitation for the 2026 Senior Notes in March 2022. For the nine months ended September 30, 2021, primarily consisted of $20.4 million of expenses related to the integration of 3dcart and its rebranding as Shift4Shop, $6.3 million of acquisition-related costs, and $3.7 million of costs associated with the Inspiration4 seat.
(b) Represents the change in the valuation of the contingent liability for The Giving Block.										(b) Represents the change in the valuation of the contingent liability for The Giving Block.
(c) Represents adjustments to the TRA liability. See Note 13 in the notes to the accompanying unaudited condensed consolidated financial statements for more information on the TRA.										(c) Represents adjustments to the TRA liability. See Note 13 in the notes to the accompanying unaudited condensed consolidated financial statements for more information on the TRA.
(d) Represents equity-based compensation expense for RSUs, including employer taxes for vested RSUs. See Note 19 in the notes to the accompanying unaudited condensed consolidated financial statements for more information on equity-based compensation.										(d) Represents equity-based compensation expense for RSUs, including employer taxes for vested RSUs. See Note 19 in the notes to the accompanying unaudited condensed consolidated financial statements for more information on equity-based compensation.
(e) The three and nine months ended September 30, 2021 include nonrecurring payments of $22.4 million that we made to merchants and $2.3 million that we made to partners related to the TSYS outage, and other expenses incurred associated with the TSYS outage of $0.4 million. See Factors Impacting Our Business and Results of Operations above and Note 4 to the accompanying unaudited condensed consolidated financial statements for more information about the TSYS outage.										(e) The three and nine months ended September 30, 2021 include nonrecurring payments of $22.4 million that we made to merchants and $2.3 million that we made to partners related to the TSYS outage, and other expenses incurred associated with the TSYS outage of $0.4 million. See Factors Impacting Our Business and Results of Operations above and Note 4 to the accompanying unaudited condensed consolidated financial statements for more information about the TSYS outage.
(f) For the three months ended September 30, 2022, primarily consisted of a $0.5 million donation and $0.4 million of nonrecurring advertising and marketing expenses. For the nine months ended September 30, 2022, primarily consisted of $1.1 million of costs associated with an internal processing system disruption that required technical remediation, $0.8 million of nonrecurring advertising and marketing expenses, $0.5 million of legal and professional fees for one-time matters, a $0.5 million donation and $0.4 million of costs associated with an early retirement initiative completed in the first quarter of 2022.										(f) For the three months ended September 30, 2022, primarily consisted of a $0.5 million donation and $0.4 million of nonrecurring advertising and marketing expenses. For the nine months ended September 30, 2022, primarily consisted of $1.1 million of costs associated with an internal processing system disruption that required technical remediation, $0.8 million of nonrecurring advertising and marketing expenses, $0.5 million of legal and professional fees for one-time matters, a $0.5 million donation and $0.4 million of costs associated with an early retirement initiative completed in the first quarter of 2022.

Liquidity and Capital Resources

Overview

We have historically sourced our liquidity requirements primarily with cash flow from operations and, when needed, with debt borrowings or equity transactions. The principal uses for liquidity have been debt service, capital expenditures (including research and development) and funds required to finance acquisitions.

We do not intend to pay cash dividends on our Class A common stock in the foreseeable future. Shift4 Payments, Inc. is a holding company that does not conduct any business operations of its own. As a result, Shift4 Payments, Inc.’s ability to pay cash dividends on its common stock, if any, is dependent upon cash dividends and distributions and other transfers from Shift4 Payments, LLC. The amounts available to Shift4 Payments, Inc. to pay cash dividends are subject to the covenants and distribution restrictions in its subsidiaries’ agreements governing its indebtedness, including covenants in such agreements providing that the payments of dividends or other distributions are subject to annual limitations based on our market capitalization.

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The following table sets forth summary cash flow information for the periods presented.


		Six Months Ended June 30,					Nine Months Ended September 30,
(in millions)	(in millions)	2022		2021		(in millions)	2022		2021
Net cash provided by operating activities(a)	Net cash provided by operating activities(a)	$	85.0	$	5.0	Net cash provided by operating activities(a)	$	135.9	$	6.3
Net cash used in investing activities(a)	Net cash used in investing activities(a)	(87.1)		(115.5)		Net cash used in investing activities(a)	(483.0)		(142.7)
Net cash used in financing activities		(211.0)		(117.6)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(211.4)		496.7
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(0.2)		—		Effect of exchange rate changes on cash and cash equivalents	(0.3)		—
Total		$	(213.3)	$	(228.1)
Change in cash and cash equivalents						Change in cash and cash equivalents	$	(558.8)	$	360.3

(a) Amounts are restated for the nine months ended September 30, 2021. See Note 2 in the notes to the accompanying unaudited condensed consolidated financial statements for more information.

Operating activities

Net cash provided by operating activities consists of net income (loss) adjusted for certain non-cash items and changes in other assets and liabilities.

For the ~~six~~nine months ended ~~June~~September 30, 2022, net cash provided by operating activities of ~~$85.0~~$135.9 million was primarily a result of:

•net income of ~~$1.8~~$48.2 million adjusted for non-cash expenses, including depreciation and amortization of ~~$59.0~~$101.6 million, equity-based compensation of ~~$26.2 million, deferred income taxes of $(5.5)~~$38.4 million, and ~~provision for bad debts~~revaluation of ~~$4.3~~contingent liabilities of $(37.2) million; ~~plus,~~

partially offset by:

•an impact from working capital of ~~$(5.1)~~$(24.5) million, ~~due primarily to the timing of interest payments and $15.6~~which includes $19.9 million of additional funds deposited in our sponsor bank merchant settlement account to facilitate gross card transaction deposits for those customers we bill on a monthly, versus a daily ~~basis.~~basis, and $19.4 million of capitalized customer acquisition costs.

For the ~~six~~nine months ended ~~June~~September 30, 2021, net cash provided by operating activities of ~~$5.0~~$6.3 million was primarily a result of:

•net loss of ~~$46.5~~$60.3 million, which includes $25.1 million of nonrecurring payments to our merchants and partners due to the TSYS outage and associated costs incurred in the third quarter of 2021, adjusted for non-cash expenses, including depreciation and amortization of ~~$51.0~~$76.8 million, equity-based compensation of ~~$20.6~~$26.9 million, and provision for bad debts of ~~$8.1 million and amortization of capitalized financing cost of $2.4~~$10.3 million;

partially offset ~~by,~~by:

•an impact from working capital of ~~$(29.3)~~$(48.6) million, which is primarily a result of ~~$24.1~~$25.3 million of funds deposited in our sponsor bank merchant settlement account to facilitate gross card transaction deposits for those customers we bill on a monthly, versus a daily ~~basis.~~basis and $19.3 million of capitalized customer acquisition costs.

Investing activities

Net cash used in investing activities includes cash paid for acquisitions, purchases of future commission streams of our software partners, purchases of property, plant and equipment, purchases of equipment to be leased, capitalized software development costs, ~~upfront processing bonuses provided to software partners~~ and investments in non-marketable securities.

Net cash used in investing activities was $~~87.1~~483.0 million for the ~~six~~nine months ended ~~June~~September 30, 2022, ~~a decrease~~ an increase of ~~$28.4~~$340.3 million compared to net cash used in investing activities of ~~$115.5~~$142.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021. ~~This decrease~~This increase was ~~primarily~~primarily the result of:

•higher residual commission buyouts of $263.8 million as a result of our mass strategic buyout program completed in the three months ended September 30, 2022 in support of our strategic initiative to insource our sales distribution network;

•the acquisition of Online Payments Group in September 2022 for $125.9 million in aggregate purchase consideration, including $62.8 million in cash, net of cash acquired of $11.3 million;

•the acquisitions of Pinnacle, FPOS, RCS, and three other restaurant technology partners between July and August 2022 for $80.3 million in aggregate purchase consideration, including $59.9 million in cash, net of cash acquired of $3.2 million;

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•the acquisition of The Giving Block in March 2022 for $106.9 million in aggregate purchase consideration, including $12.6 million in cash, net of cash acquired of $4.2 million; and

•higher capitalized software development costs of ~~$12.0~~$18.7 million;

•partially off~~higher residual commission buyouts of $10.9 million; partially offset by~~set by:

•the acquisition of VenueNext in March 2021 for $68.5 million in aggregate purchase consideration, including $40.6 million in cash, net of cash acquired of $1.6 million; ~~and~~

•the investment in SpaceX of $27.5 million in the ~~six~~nine months ended ~~June~~September 30, ~~2021.~~2021; and

•

~~Table~~the acquisition of ~~Contents~~Postec in September 2021 for $14.0 million, net of cash acquired of $1.7 million.

Financing activities

Net cash used in financing activities was ~~$211.0~~$211.4 million for the ~~six~~nine months ended ~~June~~September 30, 2022, ~~an increase~~a decrease of ~~$93.4~~$708.1 million, compared to net cash ~~used in~~provided by financing activities of ~~$117.6~~$496.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021. This ~~increase~~decrease was primarily the result of:

•the net proceeds from the 2027 Convertible Notes during the nine months ended September 30, 2021 of $617.7 million;

•payments for the repurchase of common stock of $185.9 million during the ~~six~~nine months ended ~~June~~September 30, 2022 pursuant to the Programs; and

•payments associated with solicitation for the 2026 Senior Notes in March 2022 of $4.5 million;

partially offset byby:

•lower employee taxes paid on vested RSUs of ~~$96.1~~$99.1 million during the ~~six~~nine months ended ~~June~~September 30, 2022 compared to the ~~six~~nine months ended ~~June~~September 30, 2021, primarily the result of RSUs that vested in the ~~six~~nine months ended ~~June~~September 30, 2021 related to our IPO.

Convertible Notes, Senior Notes and Revolving Credit Facility

As of ~~June~~September 30, 2022 and December 31, 2021, we had $1,772.5 million total principal amount of debt outstanding, including $690.0 million of the Convertible Senior Notes due 2025 (“2025 Convertible ~~Notes,~~Notes”), $632.5 million of 2027 Convertible Notes and $450.0 million of 2026 Senior Notes. See Note 910 to the accompanying unaudited condensed consolidated financial statements for more information about our debt.

On March 17, 2022, we announced the expiration of our Consent Solicitation Statement (the “Consent Solicitation Statement”), dated as of March 11, 2022, to amend the indenture related to the 2026 Senior Notes. In connection with the results of the Consent Solicitation Statement, we received the requisite consents to amend the indenture governing the 2026 Senior Notes and entered into a supplemental indenture to allow for the repurchase of capital stock as part of the Market Capitalization exception under the original indenture.

Revolving Credit Facility

The Revolving Credit Facility has a borrowing capacity of $99.5 million, net of a $0.5 million letter of credit. As of ~~June~~September 30, 2022, we had no outstanding borrowings under the Revolving Credit Facility.

Stock repurchases

On December 16, 2021, our Board authorized the December 2021 Program, pursuant to which we were authorized repurchase up to $100.0 million of shares of our Class A common stock through December 31, 2022. On May 11, 2022, the Board authorized the May 2022 Program, pursuant to which we were authorized to repurchase up to an additional $100.0 million of shares of our Class A common stock through December 31, 2022, and on June 15, 2022, the Board authorized the June 2022 Program pursuant to which we were authorized to repurchase up to an additional $50.0 million of shares of our Class A common stock through December 31, 2022.

In the ~~six~~nine months ended ~~June~~September 30, 2022, we repurchased 3,887,191 shares of Class A common stock for $184.4 million, including commissions paid, at an average price paid of $47.40 per share. As of ~~June~~September 30, 2022, approximately $44.5 million remained available for future purchases under the June 2022 Program. See Note 1617 in the notes to the accompanying unaudited condensed consolidated financial statements for more information.

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Cash Requirements

Our material cash requirements include the following contractual obligations.

Debt

As of ~~June~~September 30, 2022, we had $1,772.5 million of fixed rate debt outstanding with maturities beginning in 2025. Future interest payments associated with the outstanding debt total ~~$111.1~~$109.5 million, with $24.0 million payable within twelve months.

Leases

As of ~~June~~September 30, 2022, we are obligated under non-cancellable operating leases for our premises, which expire through November 2030. Rent expense incurred under operating leases, which totaled ~~$2.8~~$3.9 million for the ~~six~~nine months ended ~~June~~September 30, 2022, is included in “General and administrative expenses” in our accompanying unaudited Condensed Consolidated Statements of Operations.

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Critical Accounting Estimates

Our discussion and analysis of our historical financial condition and results of operations for the periods described is based on our audited consolidated financial statements, and our accompanying unaudited condensed consolidated financial statements, each of which have been prepared in accordance with U.S. GAAP. The preparation of these historical financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments in certain circumstances that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We evaluate our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Additionally, the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated. However, we have made accounting estimates for our allowance for doubtful accounts, valuation of our contingent liabilities, other intangible assets and goodwill based on the facts and circumstances available as of the reporting date. Actual results may differ from these estimates under different assumptions or conditions.

We have provided a summary of our significant accounting policies in Note 1 in the notes to the accompanying unaudited condensed consolidated financial statements. The following critical accounting discussion pertains to accounting policies management believes are most critical to the portrayal of our historical financial condition and results of operations and that require significant, difficult, subjective or complex judgments. Other companies in similar businesses may use different estimation policies and methodologies, which may impact the comparability of our financial condition, results of operations and cash flows to those of other companies.

New accounting pronouncements

For information regarding new accounting pronouncements, and the impact of these pronouncements on our unaudited condensed consolidated financial statements, if any, refer to Note 1 in the notes to the accompanying unaudited condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our future income, cash flows and fair values relevant to financial instruments are subject to risks relating to interest rates.

As of ~~June~~September 30, 2022, we had approximately $1,772.5 million of fixed rate debt outstanding pursuant to the Notes, with a fair value of ~~$1,411.2~~$1,501.1 million, none of which was subject to an interest rate hedge. Since these Notes bear interest at fixed rates, they do not result in any financial statement risk associated with changes in interest rates. However, the fair value of these Notes fluctuates when interest rates change.

We also have a Revolving Credit Facility available to us with available borrowing capacity of $99.5 million, net of a $0.5 million letter of credit. We are obligated to pay interest on loans under the Revolving Credit Facility as well as other customary fees, including an upfront fee and an unused commitment fee based on our debt rating. Borrowings under the Revolving Credit Facility, if any, bear interest at floating rates. As a result, we are exposed to the risk related to fluctuations in interest rate to the extent of our borrowings. As of ~~June~~September 30, 2022 and December 31, 2021, we had no amounts outstanding under the Revolving Credit Facility. See “Liquidity and Capital Resources” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2. of this Quarterly Report on Form 10-Q and Note 910 in the notes to the accompanying unaudited condensed consolidated financial statements for more information.

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ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Disclosure Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2022, due to the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective at the reasonable assurance level. In light of the material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted principles. Accordingly, management concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for each of the periods presented.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified a material weakness related to a lack of an effectively designed control activity over the classification of customer acquisition costs within our Consolidated Statements of Cash Flows. The associated error related to the historical classification of customer acquisition costs within our Consolidated Statements of Cash Flows resulted in the restatement of the Company’s previously filed consolidated financial statements as of and for the years ended December 31, 2021, 2020 and 2019 and for each of the quarterly periods ended September 30, 2021, March 31, 2022 and June 30, 2022. Additionally, the material weakness could result in a material misstatement of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Remediation Plan for the Material Weakness

In order to remediate the material weakness, the Company’s management plans to enhance the design of its control activity over the classification of customer acquisition costs within our Consolidated Statements of Cash Flows. The material weakness cannot be considered remediated until the newly designed control activity operates for a sufficient period of time and management has concluded, through testing, that the control is operating effectively.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are, from time to time, party to various claims and legal proceedings arising out of our ordinary course of business, but we do not believe that any of these existing claims or proceedings will have a material effect on our business, consolidated financial condition or results of operations.

ITEM 1A. RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described under the heading “Risk Factors” in Part I, Item 1A. of our 2021 Form ~~10-K,~~10-K/A, the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes, as well as our other public filings with the SEC, before deciding to invest in our Class A common stock. ~~Other than as described below, there~~There have been no material changes to the Company’s risk factors previously disclosed in our 2021 Form ~~10-K.~~10-K/A. The occurrence of any of the events described therein could harm our business, financial condition, results of operations, liquidity or prospects. In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business.

~~Business risks~~

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, cryptocurrency, and consumer protection laws across different markets where we conduct our business. Our actual or perceived failure to comply with such obligations could harm our business.

In the United States and other jurisdictions in which our services are used, we are subject to various privacy, data protection and information security, and consumer protection laws (including laws on disputed transactions) and related regulations. If we are found to have breached such laws or regulations in any such market, we may be subject to enforcement actions that require us to change our business practices in a manner which may negatively impact our revenue, as well as expose ourselves to litigation, fines, civil and/or criminal penalties and adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation and business in a manner that harms our financial position.

As part of our business, we collect personal information, also referred to as personal data, and other potentially sensitive and/or regulated data from our consumers and the merchants we work with. Laws and regulations in the United States restrict how personal information is collected, processed, stored, transferred. used and disclosed, as well as set standards for its security, implement notice requirements regarding privacy practices, and provide individuals with certain rights regarding the use, disclosure and sale of their protected personal information. For example, the Federal Trade Commission (“FTC”) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. Such standards require us to publish statements that describe how we handle personal data and choices individuals may have about the way we handle their personal data. If such information that we publish is considered untrue or inaccurate, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences. Moreover, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal data secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act. State consumer protection laws provide similar causes of action for unfair or deceptive practices. Some states, such as California and Massachusetts, have passed specific laws mandating reasonable security measures for the handling of consumer data. Further, privacy advocates and industry groups have regularly proposed and sometimes approved, and may propose and approve in the future, self-regulatory standards with which we must legally comply or that contractually apply to us.

The Gramm-Leach-Bliley Act (“GLBA”) regulates, among other things, the use of non-public personal information of consumers that is held by financial institutions. We are subject to various GLBA provisions, including rules relating to the use or disclosure of the underlying data and rules relating to the physical, administrative and technological protection of non-public personal financial information. Breach of the GLBA can result in civil and/or criminal liability and sanctions by regulatory authorities.

~~Table of~~ ~~Contents~~

Several foreign jurisdictions, including the EU and the United Kingdom, have laws and regulations which are more restrictive in certain respects than those in the United States. We are also subject to data privacy and security laws in foreign jurisdictions which have laws and regulations which are more restrictive in certain respects than the United States. For example, in the European Economic Area (“EEA”), we are subject to the General Data Protection Regulation 2016/679 (“GDPR”) and in the United Kingdom, we are subject to the United Kingdom data protection regime consisting primarily of the UK General Data Protection Regulation and the UK Data Protection Act 2018, in each case in relation to our collection, control, processing, sharing, disclosure and other use of data relating to an identifiable living individual (personal data). The GDPR, and national implementing legislation in EEA member states, and the United Kingdom regime, impose a strict data protection compliance regime including: providing detailed disclosures about how personal data is collected and processed (in a concise, intelligible and easily accessible form); demonstrating that an appropriate legal basis is in place or otherwise exists to justify data processing activities; granting rights for data subjects in regard to their personal data (including data access rights, the right to be “forgotten” and the right to data portability); introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; defining pseudonymized (i.e., key-coded) data; imposing limitations on retention of personal data; maintaining a record of data processing; and complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit.

We are also subject to European Union and United Kingdom rules with respect to cross-border transfers of personal data out of the EEA and the United Kingdom, respectively. Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EEA and the United Kingdom to the United States. Most recently, on July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU-US Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the EEA to US entities who had self-certified under the Privacy Shield scheme.

While the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place.

We have previously relied on our own Privacy Shield certification and our relevant customers’ and partners’ Privacy Shield certifications for the purposes of transferring personal data from the EEA to the U.S. in compliance with the GDPR’s data export conditions. These recent developments will require us to review and amend the legal mechanisms by which we make and/ or receive personal data transfers to/ in the U.S., including updating agreements to put in place standard contractual clauses. The developments also create uncertainty and increase the risk around our international operations. European court and regulatory decisions subsequent to the CJEU decision of July 16, 2020 have taken a restrictive approach to international data transfers. For example, the Austrian and the French data protection supervisory authorities, as well as the European Data Protection Supervisor, have recently ruled that use of Google Analytics by European website operators involves the unlawful transfer of personal data to the United States; a number of other EU supervisory authorities are expected to take a similar approach which may impact other business tools that we use. As the enforcement landscape further develops, and supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, we could suffer additional costs, complaints and/or regulatory investigations or fines, have to stop using certain tools and vendors and make other operational changes, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

We are also subject to evolving EU and UK privacy laws on cookies, tracking technologies and e-marketing. In the EU and the UK under national laws derived from the ePrivacy Directive, informed consent is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing. The GDPR also imposes conditions on obtaining valid consent for cookies, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. The current national laws that implement the ePrivacy Directive are highly likely to be replaced across the EU (but not directly in the UK) by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance.

~~Table of~~ ~~Contents~~

In the United States, both the federal and various state governments have adopted or are considering, laws, guidelines or rules for the collection, distribution, use and storage of information collected from or about consumers or their devices. For example, California enacted the California Consumer Privacy Act (“CCPA”), which became enforceable by the California Attorney General on July 1, 2020, and requires new disclosures to California consumers, imposes new rules for collecting or using information about minors, and affords consumers new abilities to opt out of certain disclosures of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The effects of the CCPA, its implementing regulations, and uncertainties about the scope and applicability of exemptions that may apply to our business, are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply. Additionally, the California Privacy Rights Act (“CPRA”), recently passed in California. The CPRA significantly amends the CCPA, and imposes additional data protection obligations on covered companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. It also creates a new California data protection agency specifically tasked to enforce the law, which would likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA will go into effect on January 1, 2023, and become enforceable on July 1, 2023. In addition, Virginia and Colorado have enacted the Consumer Data Protection Act (“VCDPA”) and the Colorado Data privacy Act (“CDPA”), respectively, which will go into effect in 2023 and will impose obligations similar to or more stringent than those we may face under other data protection laws.

Restrictions on the collection, use, sharing or disclosure of personal information or additional requirements and liability for security and data integrity could require us to modify our solutions and features, possibly in a material manner, could limit our ability to develop new services and features and could subject us to increased compliance obligations and regulatory scrutiny. Non-compliance with data protection and privacy requirements may result in regulatory fines (which for certain breaches of the GDPR (“UK GDPR”) are up to the greater of €20/£17.5 or 4% of total global annual turnover), regulatory investigations, reputational damage, orders to cease/change our processing of our data, enforcement notices, and/ or assessment notices (for a compulsory audit). We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm.

Furthermore, our current and planned cryptocurrency offerings could subject us to additional regulations, licensing requirements, or other obligations. The rapidly evolving regulatory landscape with respect to cryptocurrency may subject us to inquiries or investigations from regulators and governmental authorities, require us to make product changes, restrict or discontinue product offerings, and implement additional and potentially costly controls. If we fail to comply with regulations, requirements, prohibitions or other obligations applicable to us, we could face regulatory or other enforcement actions and potential fines and other consequences.

In addition, financial and third party risks related to our cryptocurrency offerings, such as inappropriate access to or theft or destruction of cryptocurrency assets held by our custodian, insufficient insurance coverage by the custodian to reimburse us for all such losses, the custodian’s failure to maintain effective controls over the custody and settlement services provided to us, the custodian’s inability to purchase or liquidate cryptocurrency holdings, and defaults on financial or performance obligations by counterparty financial institutions, could materially and adversely affect our financial performance and significantly harm our business.

~~General Risk Factors~~

~~The ongoing military action between Russia and Ukraine could adversely affect our business, financial condition and results of operations.~~

On February 24, 2022, Russian military forces launched a military action in Ukraine, and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of the ongoing military conflict in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage.

~~Table of~~ ~~Contents~~

Russia’s recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military action against Ukraine have led to an unprecedented expansion of sanction programs imposed by the United States, the European Union, the UK, Canada, Switzerland, Japan and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic, including, among others:

• blocking sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, payment system) and certain Russian businesses, some of which have significant financial and trade ties to the European Union;

• blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians and those with government connections or involved in Russian military activities; and

• blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on investments and access to capital markets and bans on various Russian imports.

In retaliation against new international sanctions and as part of measures to stabilize and support the volatile Russian financial and currency markets, the Russian authorities also imposed significant currency control measures aimed at restricting the outflow of foreign currency and capital from Russia, imposed various restrictions on transacting with non-Russian parties, banned exports of various products and other economic and financial restrictions. The situation is rapidly evolving as a result of the conflict in Ukraine, and the United States, the European Union, the UK and other countries may implement additional sanctions, export controls or other measures against Russia, Belarus and other countries, regions, officials, individuals or industries in the respective territories. Such sanctions and other measures, as well as the existing and potential further responses from Russia or other countries to such sanctions, tensions and military actions, could adversely affect the global economy and financial markets and could adversely affect our business, financial condition and results of operations.

We are actively monitoring the situation in Ukraine and assessing its impact on our business, including our business partners and customers. To date we have not experienced any material interruptions in our infrastructure, supplies, technology systems or networks needed to support our operations. We have no way to predict the progress or outcome of the conflict in Ukraine or its impacts in Ukraine, Russia or Belarus as the conflict, and any resulting government reactions, are evolving and beyond our control. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time. Any of the above mentioned factors could affect our business, financial condition and results of operations. Any such disruptions may also magnify the impact of other risks described in our 2021 Form 10-K.

~~We are exposed to fluctuations in inflation, which could negatively affect our business, financial condition and results of operations.~~

The United States has recently experienced historically high levels of inflation. According to the U.S. Department of Labor, the annual inflation rate for the United States was approximately 7.0% for 2021. If the inflation rate continues to increase, it will likely affect our expenses, including, but not limited to, employee compensation expenses, increased costs for supplies, In the event inflation continues to increase, we may seek to increase the sales prices of our products and services in order to maintain satisfactory margins. Any attempts to offset cost increases with price increases may result in reduced sales, increase customer dissatisfaction or otherwise harm our reputation. Moreover, to the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our business, financial condition and results of operations.

~~Table of~~ ~~Contents~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~The following indicates our purchases of Class A common stock during the three months ended June 30, 2022.~~

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (in millions)
April 1-30, 2022 1,126,277 $ 54.39 1,126,277 $ —
May 1-31, 2022 1,793,954 44.58 1,793,954 20.4
June 1-30, 2022 665,450 38.92 665,450 44.5
Total 3,585,681
(a) On December 16, 2021, our Board authorized a stock repurchase program (the “December 2021 Program”), pursuant to which we were authorized to repurchase up to $100.0 million of shares of our Class A common stock through December 31, 2022. On May 11, 2022, the Board authorized a stock repurchase program (the “May 2022 Program”), pursuant to which we were authorized to repurchase up to an additional $100.0 million of shares of our Class A common stock through December 31, 2022. On June 15, 2022, the Board authorized a stock repurchase program (the “June 2022 Program” and, together with the December 2021 Program and the May 2022 Program, the “Programs”), pursuant to which we were authorized to repurchase up to an additional $50.0 million of shares of our Class A common stock through December 31, 2022. Repurchases under the Programs may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases depending on market conditions and corporate needs. Open market repurchases will be structured to occur within the pricing and volume requirements of Rule 10b-18 of the Exchange Act. We may also, from time to time, enter into Rule 10b5-1 of the Exchange Act plans to facilitate repurchases of our shares under this authorization. The exact number of shares to be repurchased by us is not guaranteed and the Programs may be suspended, modified, or discontinued at any time at our discretion and without prior notice.
None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.

~~INDEX TO EXHIBITS~~Evaluation of Disclosure Controls and Procedures

Incorporated by Reference
Exhibit
Number
Exhibit Description Form File No. Exhibit
Filing
Date
Filed/Furnished
Herewith

3.1
Amended and Restated Certificate of Incorporation of Shift4 Payments, Inc.
S-8 333-239042 4.1 06/09/2020

3.2
Amended and Restated By-Laws of Shift4 Payments, Inc.
S-8 333-239042 4.2 06/09/2020

4.1
Specimen Stock Certificate evidencing the shares of Class A common stock.
S-1/A 333-238307 4.1 06/01/2020
4.2
Indenture, by and among Shift4 Payments, LLC, Shift4 Payments Finance Sub, Inc. the subsidiary guarantors named therein and U.S. Bank National Association, as trustee, dated October 29, 2020 (and Form of Global Note).
8-K 001-39313 4.1 10/29/2020
Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Remediation Plan for the Material Weakness

Changes in Internal Control Over Financial Reporting

~~Table of~~ ~~Contents~~

4.3
Indenture, dated as of December 7, 2020, between Shift4 Payments, Inc. and U.S. Bank National Association, as trustee (and Form of Global Note).
8-K 001-39313 4.1 12/07/2020

4.4
Indenture, dated as of July 26, 2021, between Shift4 Payments, Inc. and U.S. Bank National Association, as trustee (and Form of Global Note).
8-K 001-39313 4.1 07/26/2021
4.5
Fourth Supplemental Indenture dated March 16, 2022, 4.625% Senior Notes due 2026.
10-Q 001-39313 4.5 05/06/2022

10.1
Amended and Restated Shift4 Payments, Inc. 2020 Incentive Award Plan.
8-K 001-39313 10.1 06/13/2022
31.1
Certification of Registrant’s Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
*

31.2
Certification of Registrant’s Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
*

32.1
Certification of Registrant’s Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
**

32.2
Certification of Registrant’s Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
**

101.INS Inline XBRL Instance Document. *

101.SCH Inline XBRL Taxonomy Extension Schema Document. *

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. *

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. *

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. *

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. *
104* Cover Page Interactive Data File (formatting as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
** Furnished herewith.

5244

Table of Contents

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described under the heading “Risk Factors” in Part I, Item 1A. of our 2021 Form 10-K/A, the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes, as well as our other public filings with the SEC, before deciding to invest in our Class A common stock. There have been no material changes to the Company’s risk factors previously disclosed in our 2021 Form 10-K/A. The occurrence of any of the events described therein could harm our business, financial condition, results of operations, liquidity or prospects. In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. ~~CONTROLS AND PROCEDURES~~MINE SAFETY DISCLOSURES

~~Limitations~~Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following is a list of exhibits filed as part of this Quarterly Report on ~~Effectiveness of Controls and Procedures~~Form 10-Q.

Evaluation of Disclosure Controls and Procedures

Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of ~~June~~September 30, 2022, due to the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective at the reasonable assurance level. In light of the material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted principles. Accordingly, management concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for each of the periods presented.

Remediation Plan for the Material Weakness

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~quarter~~three months ended ~~June~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

5344

Table of Contents

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described under the heading “Risk Factors” in Part I, Item 1A. of our 2021 Form 10-K/A, the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes, as well as our other public filings with the SEC, before deciding to invest in our Class A common stock. There have been no material changes to the Company’s risk factors previously disclosed in our 2021 Form 10-K/A. The occurrence of any of the events described therein could harm our business, financial condition, results of operations, liquidity or prospects. In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.

INDEX TO EXHIBITS

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File No.

Exhibit

Filing

Date

Filed/Furnished

Herewith

3.1

Amended and Restated Certificate of Incorporation of Shift4 Payments, Inc.

S-8

333-239042

4.1

06/09/2020

3.2

Amended and Restated By-Laws of Shift4 Payments, Inc.

S-8

333-239042

4.2

06/09/2020

4.1

Specimen Stock Certificate evidencing the shares of Class A common stock.

S-1/A

333-238307

4.1

06/01/2020

4.2

Indenture, by and among Shift4 Payments, LLC, Shift4 Payments Finance Sub, Inc. the subsidiary guarantors named therein and U.S. Bank National Association, as trustee, dated October 29, 2020 (and Form of Global Note).

8-K

001-39313

4.1

10/29/2020

4.3

Indenture, dated as of December 7, 2020, between Shift4 Payments, Inc. and U.S. Bank National Association, as trustee (and Form of Global Note).

8-K

001-39313

4.1

12/07/2020

Table of Contents

4.4

Indenture, dated as of July 26, 2021, between Shift4 Payments, Inc. and U.S. Bank National Association, as trustee (and Form of Global Note).

8-K

001-39313

4.1

07/26/2021

4.5

Fourth Supplemental Indenture dated March 16, 2022, 4.625% Senior Notes due 2026.

10-Q

001-39313

4.5

05/06/2022

10.1

Employment Agreement, by and between Shift4 Payments, Inc. and Nancy Disman, dated August 3, 2022.

10.2

Separation Agreement, by and between Shift4 Payments, Inc. and Bradley Herring, dated August 3, 2022.

31.1

Certification of Registrant’s Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Registrant’s Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Registrant’s Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Registrant’s Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatting as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Shift4 Payments, Inc.


		By:	/s/ Jared Isaacman
			Jared Isaacman
Date:	~~August 5,~~November 8, 2022		Chief Executive Officer (principal executive officer)


		By:	/s/ ~~Bradley Herring~~Nancy Disman
			~~Bradley Herring~~Nancy Disman
Date:	~~August 5,~~November 8, 2022		Chief Financial Officer (principal financial officer)

5447


2022 (remaining six months)	$	11.1
2023	16.4
2024	8.2
2025	0.9
Total	$	36.6


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (in millions)
April 1-30, 2022	1,126,277	$	54.39	1,126,277	$	—
May 1-31, 2022	1,793,954	44.58		1,793,954	20.4
June 1-30, 2022	665,450	38.92		665,450	44.5
Total	3,585,681

(a) On December 16, 2021, our Board authorized a stock repurchase program (the “December 2021 Program”), pursuant to which we were authorized to repurchase up to $100.0 million of shares of our Class A common stock through December 31, 2022. On May 11, 2022, the Board authorized a stock repurchase program (the “May 2022 Program”), pursuant to which we were authorized to repurchase up to an additional $100.0 million of shares of our Class A common stock through December 31, 2022. On June 15, 2022, the Board authorized a stock repurchase program (the “June 2022 Program” and, together with the December 2021 Program and the May 2022 Program, the “Programs”), pursuant to which we were authorized to repurchase up to an additional $50.0 million of shares of our Class A common stock through December 31, 2022. Repurchases under the Programs may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases depending on market conditions and corporate needs. Open market repurchases will be structured to occur within the pricing and volume requirements of Rule 10b-18 of the Exchange Act. We may also, from time to time, enter into Rule 10b5-1 of the Exchange Act plans to facilitate repurchases of our shares under this authorization. The exact number of shares to be repurchased by us is not guaranteed and the Programs may be suspended, modified, or discontinued at any time at our discretion and without prior notice.