UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A10-Q
Amendment No. 1
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| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20222023
OR
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| 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 April 29, 2022,May 4, 2023, there were 53,628,41757,271,931 shares of the registrant’s Class A common stock, $0.0001 par value per share, outstanding, 26,272,65423,831,883 shares of the registrant’s Class B common stock, $0.0001 par value per share, outstanding and 4,302,6572,090,706 shares of the registrant’s Class C common stock, $0.0001 par value per share, outstanding.
Explanatory Note
This Amendment No. 1 on Form 10-Q/A (as amended, the “Quarterly Report” or the “Quarterly Report on Form 10-Q/A”) amends and restates certain items noted below in the Quarterly Report on Form 10-Q of Shift4 Payments, Inc. (the “Company”) for the three months ended March 31, 2022, as originally filed with the Securities and Exchange Commission (“SEC”) on May 6, 2022 (the “Original Form 10-Q”).
Background and Effect of Restatement
On October 17, 2022, the Audit Committee (“Audit Committee”) of the Board of Directors of the Company, after discussion with management, concluded that the Company’s (i) previously filed Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and (ii) previously filed Quarterly Reports on Form 10-Q for each of the quarterly periods ended September 30, 2021, March 31, 2022 and June 30, 2022 (collectively the “Prior Financial Statements”), and any reports, related earnings releases, investor presentations or similar communications of the Company’s Prior Financial Statements should no longer be relied upon.
The determination resulted from an error in the Prior Financial Statements identified by the Company 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 through the amendments of the Prior Financial Statements.
The Company determined that the restatement did not have any impact on the Company’s operating performance or reported key performance indicators.
Internal Control Considerations
As a result of this restatement, the Company’s management has re-evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2022. Management has concluded that the Company’s disclosure controls and procedures were not effective at March 31, 2022 due to a material weakness in internal control over financial reporting. Specifically, there was a lack of an effectively designed control activity related to the classification of customer acquisition costs within the Consolidated Statements of Cash Flows. See additional discussion included in Part I, Item 4. “Controls and Procedures” of this Quarterly Report.
Items Amended in this Quarterly Report on Form 10-Q/A
For the convenience of the reader, this Quarterly Report presents the Original Form 10-Q in its entirety. It includes (i) items that have been amended as a result of the restatement in: Part I, Item 1. “Financial Statements”; Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; Part I, Item 4. “Controls and Procedures”; and Part II, Item 6. “Exhibits”; and in addition to these items amended due to the restatement, updates to certain other information as follows: (ii) certain other conforming changes within Part I, Item 1. “Financial Statements” and Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; (iii) updates to cross-references throughout the Quarterly Report; and (iv) an updated Signatures page (together, the “Amended Items”). In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is also including with this Quarterly Report currently dated certifications of the Company’s principal executive officer and principal financial officer (included in Part II, Item 6. “Exhibits” and attached as Exhibits 31.1, 31.2, 32.1, and 32.2).
Except for the Amended Items, this Quarterly Report is presented as of the date of the Original Form 10-Q and has not been updated to reflect events occurring subsequent to the filing of the Original Form 10-Q other than the Amended Items and those associated with the restatement of our unaudited condensed consolidated financial statements. Among other things, forward-looking statements made in the Original Form 10-Q have not been revised to reflect events, results or developments that occurred or facts that became known to us after the date of the Original Form 10-Q, other than the Amended Items and those associated with the restatement of our unaudited condensed consolidated financial statements, and such forward-looking statements should be read in conjunction with our filings with the SEC, including those subsequent to the filing of the Original Form 10-Q.
SHIFT4 PAYMENTS, INC.
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q/A10-Q (“Quarterly Report”) 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 factsfact contained in this Quarterly Report, on Form 10-Q/A, including, without limitation, statements relating to our position as a leader within our industry, our future results of operations and financial position, business strategy and plans, objectives of management for future operations, including, among others, statements regarding expected growth and future capital expenditures and debt covenant compliance and service 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/A 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/A 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 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;
•global economic, political and other conditions may adversely affect trends in consumer, business and government spending, which may adversely impact the demand for our services and our revenue and profitability;
•we are exposed to inflation, which could negatively affect our business, financial condition and results of operations;
•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;
•our inability to protect our systems and data from continually evolving cybersecurity risks, security breaches or other technological risks could affect our reputation among our merchants and consumers and may expose us to liability;
•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, devicedevices, 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, devices, 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;
•the ongoing military action between Russia and Ukraine could adversely affect our business, financial condition and results of operations; and
•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/A10-K for the fiscal year ended December 31, 2021,2022, filed on November 8, 2022March 1, 2023 (the “2021“2022 Form 10-K/A”10-K”) and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q/A.Report.
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/A and the documents that we reference in this Quarterly Report on Form 10-Q/Aherein 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.
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) | | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| Assets | Assets | | | | Assets | | | |
| Current assets | Current assets | | | | Current assets | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 1,189.0 | | | $ | 1,231.5 | | Cash and cash equivalents | $ | 743.9 | | | $ | 702.5 | |
| Accounts receivable, net of allowance for doubtful accounts of $9.5 in 2022 ($8.0 in 2021) | 223.0 | | | 205.9 | | |
| Restricted cash | | Restricted cash | 74.0 | | | 74.0 | |
| Accounts receivable, net | | Accounts receivable, net | 209.3 | | | 195.0 | |
| Inventory | Inventory | 2.9 | | | 3.5 | | Inventory | 4.3 | | | 4.8 | |
| Contract assets (Note 4) | 0.3 | | | 0.3 | | |
| | Prepaid expenses and other current assets (Note 12) | Prepaid expenses and other current assets (Note 12) | 12.9 | | | 12.4 | | Prepaid expenses and other current assets (Note 12) | 17.5 | | | 15.4 | |
| Total current assets | Total current assets | 1,428.1 | | | 1,453.6 | | Total current assets | 1,049.0 | | | 991.7 | |
| Noncurrent assets | Noncurrent assets | | | | Noncurrent assets | | | |
| Goodwill (Note 6) | 627.0 | | | 537.7 | | |
| Goodwill (Note 4) | | Goodwill (Note 4) | 737.0 | | | 735.0 | |
| Residual commission buyouts, net (Note 6) | | Residual commission buyouts, net (Note 6) | 283.0 | | | 303.9 | |
| Other intangible assets, net (Note 7) | Other intangible assets, net (Note 7) | 213.0 | | | 188.5 | | Other intangible assets, net (Note 7) | 306.0 | | | 306.8 | |
| Capitalized customer acquisition costs, net (Note 8) | Capitalized customer acquisition costs, net (Note 8) | 35.3 | | | 35.1 | | Capitalized customer acquisition costs, net (Note 8) | 39.6 | | | 36.1 | |
| Equipment for lease, net (Note 9) | Equipment for lease, net (Note 9) | 60.0 | | | 58.4 | | Equipment for lease, net (Note 9) | 89.6 | | | 80.7 | |
| Property, plant and equipment, net (Note 10) | Property, plant and equipment, net (Note 10) | 18.1 | | | 18.4 | | Property, plant and equipment, net (Note 10) | 23.7 | | | 22.3 | |
| Right-of-use assets (Note 15) | Right-of-use assets (Note 15) | 17.0 | | | 18.5 | | Right-of-use assets (Note 15) | 20.6 | | | 19.5 | |
| Investments in securities | Investments in securities | 32.0 | | | 30.5 | | Investments in securities | 56.0 | | | 47.1 | |
| | Other noncurrent assets | Other noncurrent assets | 1.6 | | | 1.9 | | Other noncurrent assets | 10.4 | | | 10.9 | |
| Total noncurrent assets | Total noncurrent assets | 1,004.0 | | | 889.0 | | Total noncurrent assets | 1,565.9 | | | 1,562.3 | |
| Total assets | Total assets | $ | 2,432.1 | | | $ | 2,342.6 | | Total assets | $ | 2,614.9 | | | $ | 2,554.0 | |
| Liabilities and Stockholders' Equity | Liabilities and Stockholders' Equity | | | | Liabilities and Stockholders' Equity | | | |
| Current liabilities | Current liabilities | | Current liabilities | |
| Accounts payable | Accounts payable | $ | 137.3 | | | $ | 121.1 | | Accounts payable | $ | 173.8 | | | $ | 166.7 | |
| Accrued expenses and other current liabilities (Note 12) | Accrued expenses and other current liabilities (Note 12) | 95.2 | | | 42.9 | | Accrued expenses and other current liabilities (Note 12) | 82.5 | | | 80.0 | |
| Deferred revenue (Note 4) | 21.9 | | | 15.0 | | |
| Deferred revenue (Note 3) | | Deferred revenue (Note 3) | 21.0 | | | 16.3 | |
| Current lease liabilities (Note 15) | Current lease liabilities (Note 15) | 4.4 | | | 4.8 | | Current lease liabilities (Note 15) | 5.8 | | | 5.3 | |
| Total current liabilities | Total current liabilities | 258.8 | | | 183.8 | | Total current liabilities | 283.1 | | | 268.3 | |
| Noncurrent liabilities | Noncurrent liabilities | | | | Noncurrent liabilities | | | |
| Long-term debt (Note 11) | Long-term debt (Note 11) | 1,735.9 | | | 1,738.5 | | Long-term debt (Note 11) | 1,744.0 | | | 1,741.9 | |
| Deferred tax liability (Note 14) | Deferred tax liability (Note 14) | 0.4 | | | 0.3 | | Deferred tax liability (Note 14) | 13.1 | | | 18.6 | |
| Noncurrent lease liabilities (Note 15) | Noncurrent lease liabilities (Note 15) | 16.6 | | | 17.9 | | Noncurrent lease liabilities (Note 15) | 18.8 | | | 18.1 | |
| Other noncurrent liabilities | 2.2 | | | 2.4 | | |
| Other noncurrent liabilities (Note 12) | | Other noncurrent liabilities (Note 12) | 29.5 | | | 26.5 | |
| Total noncurrent liabilities | Total noncurrent liabilities | 1,755.1 | | | 1,759.1 | | Total noncurrent liabilities | 1,805.4 | | | 1,805.1 | |
| Total liabilities | Total liabilities | 2,013.9 | | | 1,942.9 | | Total liabilities | 2,088.5 | | | 2,073.4 | |
| Commitments and contingencies (Note 17) | Commitments and contingencies (Note 17) | | | | Commitments and contingencies (Note 17) | | | |
| Stockholders' equity (Note 18) | Stockholders' equity (Note 18) | | Stockholders' equity (Note 18) | |
| Preferred stock, $0.0001 par value, 20,000,000 shares authorized at March 31, 2022 and December 31, 2021, none issued and outstanding | — | | | — | | |
| Class A common stock, $0.0001 par value per share, 300,000,000 shares authorized, 53,618,573 and 51,793,127 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | — | | | — | | |
| Class B common stock, $0.0001 par value per share, 100,000,000 shares authorized, 26,272,654 shares issued and outstanding at both March 31, 2022 and December 31, 2021 | — | | | — | | |
| Class C common stock, $0.0001 par value per share, 100,000,000 shares authorized, 4,302,657 and 5,035,181 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | — | | | — | | |
| Preferred stock, $0.0001 par value, 20,000,000 shares authorized at March 31, 2023 and December 31, 2022, none issued and outstanding | | Preferred stock, $0.0001 par value, 20,000,000 shares authorized at March 31, 2023 and December 31, 2022, none issued and outstanding | — | | | — | |
| Class A common stock, $0.0001 par value per share, 300,000,000 shares authorized, 56,770,614 and 54,153,218 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | | Class A common stock, $0.0001 par value per share, 300,000,000 shares authorized, 56,770,614 and 54,153,218 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | — | | | — | |
| Class B common stock, $0.0001 par value per share, 100,000,000 shares authorized, 24,162,351 and 25,829,016 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | | Class B common stock, $0.0001 par value per share, 100,000,000 shares authorized, 24,162,351 and 25,829,016 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | — | | | — | |
| Class C common stock, $0.0001 par value per share, 100,000,000 shares authorized, 2,090,706 and 2,889,811 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | | Class C common stock, $0.0001 par value per share, 100,000,000 shares authorized, 2,090,706 and 2,889,811 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | — | | | — | |
| Additional paid-in capital | Additional paid-in capital | 659.6 | | | 619.2 | | Additional paid-in capital | 730.2 | | | 702.6 | |
| Treasury stock, at cost; 679,985 shares and 378,475 shares repurchased at March 31, 2022 and December 31, 2021, respectively | (38.3) | | | (21.1) | | |
| | Accumulated other comprehensive income | | Accumulated other comprehensive income | 10.4 | | | 8.3 | |
| Retained deficit | Retained deficit | (332.8) | | | (325.3) | | Retained deficit | (348.8) | | | (363.6) | |
| | Total stockholders' equity attributable to Shift4 Payments, Inc. | Total stockholders' equity attributable to Shift4 Payments, Inc. | 288.5 | | | 272.8 | | Total stockholders' equity attributable to Shift4 Payments, Inc. | 391.8 | | | 347.3 | |
| Noncontrolling interests (Note 19) | Noncontrolling interests (Note 19) | 129.7 | | | 126.9 | | Noncontrolling interests (Note 19) | 134.6 | | | 133.3 | |
| Total stockholders' equity | Total stockholders' equity | 418.2 | | | 399.7 | | Total stockholders' equity | 526.4 | | | 480.6 | |
| Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | $ | 2,432.1 | | | $ | 2,342.6 | | Total liabilities and stockholders' equity | $ | 2,614.9 | | | $ | 2,554.0 | |
| 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. |
SHIFT4 PAYMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (in millions, except share and per share amounts)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| | 2022 | | 2021 |
| Gross revenue | $ | 401.9 | | | $ | 239.3 | |
| Cost of sales (exclusive of depreciation and amortization expense shown separately below) | (317.3) | | | (187.5) | |
| General and administrative expenses | (66.2) | | | (53.5) | |
| Depreciation and amortization expense (a) | (17.3) | | | (15.4) | |
| Professional fees | (8.7) | | | (6.2) | |
| Advertising and marketing expenses | (2.7) | | | (20.1) | |
| Restructuring expenses (Note 5) | — | | | (0.1) | |
| Transaction-related expenses (Note 11) | (1.4) | | | — | |
| Loss from operations | (11.7) | | | (43.5) | |
| Loss on extinguishment of debt | — | | | (0.2) | |
| Other income, net | 0.2 | | | — | |
| Interest expense | (7.9) | | | (6.5) | |
| Loss before income taxes | (19.4) | | | (50.2) | |
| Income tax benefit (provision) (Note 14) | 6.2 | | | (0.8) | |
| Net loss (b) | (13.2) | | | (51.0) | |
| Net loss attributable to noncontrolling interests (c) | (5.7) | | | (18.2) | |
| Net loss attributable to Shift4 Payments, Inc. (d) | $ | (7.5) | | | $ | (32.8) | |
| | | |
| Basic and diluted net loss per share: | | | |
| Class A net loss per share - basic and diluted | $ | (0.13) | | | $ | (0.62) | |
| Class A weighted average common stock outstanding - basic and diluted | 52,119,378 | | | 42,667,754 | |
| Class C net loss per share - basic and diluted | $ | (0.13) | | | $ | (0.62) | |
| Class C weighted average common stock outstanding - basic and diluted | 4,573,372 | | | 10,009,852 | |
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| (a) Depreciation and amortization expense includes depreciation of equipment under lease of $7.0 million and $4.5 million for the three months ended March 31, 2022 and 2021, respectively. |
| (b) Net loss is equal to comprehensive loss. |
| (c) Net loss attributable to noncontrolling interests is equal to comprehensive loss attributable to noncontrolling interests. |
| (d) Net loss attributable to Shift4 Payments, Inc. is equal to comprehensive loss attributable to Shift4 Payments, Inc. |
|
| See accompanying notes to unaudited condensed consolidated financial statements. |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
| Gross revenue | $ | 547.0 | | | $ | 401.9 | | | | | |
| Cost of sales (exclusive of certain depreciation and amortization expense shown separately below) | (401.6) | | | (317.3) | | | | | |
| General and administrative expenses | (85.7) | | | (66.2) | | | | | |
| Revaluation of contingent liabilities (Note 13) | (7.0) | | | — | | | | | |
| Depreciation and amortization expense (Note 5) (a) | (35.3) | | | (17.3) | | | | | |
| Professional fees | (6.1) | | | (10.1) | | | | | |
| Advertising and marketing expenses | (2.5) | | | (2.7) | | | | | |
| Income (loss) from operations | 8.8 | | | (11.7) | | | | | |
| | | | | | | |
| Interest income | 7.6 | | | — | | | | | |
| Other income, net | 0.1 | | | 0.2 | | | | | |
| Unrealized gain on investments in securities (Note 13) | 8.9 | | | — | | | | | |
| Change in TRA liability (Note 14) | (0.5) | | | — | | | | | |
| Interest expense | (8.1) | | | (7.9) | | | | | |
| Income (loss) before income taxes | 16.8 | | | (19.4) | | | | | |
| Income tax benefit (Note 14) | 3.6 | | | 6.2 | | | | | |
| Net income (loss) | 20.4 | | | (13.2) | | | | | |
| Net income (loss) attributable to noncontrolling interests | 5.6 | | | (5.7) | | | | | |
| Net income (loss) attributable to Shift4 Payments, Inc. | $ | 14.8 | | | $ | (7.5) | | | | | |
| | | | | | | |
| Basic net income (loss) per share (Note 21) | | | | | | | |
| Class A net income (loss) per share - basic | $ | 0.26 | | | $ | (0.13) | | | | | |
| Class A weighted average common stock outstanding - basic | 55,236,204 | | | 52,119,378 | | | | | |
| Class C net income (loss) per share - basic | $ | 0.26 | | | $ | (0.13) | | | | | |
| Class C weighted average common stock outstanding - basic | 2,241,648 | | | 4,573,372 | | | | | |
| | | | | | | |
| Diluted net income (loss) per share (Note 21) | | | | | | | |
| Class A net income (loss) per share - diluted | $ | 0.24 | | | $ | (0.13) | | | | | |
| Class A weighted average common stock outstanding - diluted | 82,238,704 | | | 52,119,378 | | | | | |
| Class C net income (loss) per share - diluted | $ | 0.24 | | | $ | (0.13) | | | | | |
| Class C weighted average common stock outstanding - diluted | 2,241,648 | | | 4,573,372 | | | | | |
| See accompanying notes to unaudited condensed consolidated financial statements. |
(a)Depreciation and amortization expense includes depreciation of equipment under lease of $7.2 million and $7.0 million for the three months ended March 31, 2023 and 2022, respectively.
SHIFT4 PAYMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited) (in millions)
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
| Net income (loss) | $ | 20.4 | | | $ | (13.2) | | | | | |
| Other comprehensive income | | | | | | | |
| Unrealized gain on foreign currency translation adjustment, net of tax | 3.0 | | | — | | | | | |
| Total other comprehensive income | 3.0 | | | — | | | | | |
| Comprehensive income (loss) | 23.4 | | | (13.2) | | | | | |
| Comprehensive income (loss) attributable to noncontrolling interests | 6.5 | | | (5.7) | | | | | |
| Comprehensive income (loss) attributable to Shift4 Payments, Inc. | $ | 16.9 | | | $ | (7.5) | | | | | |
| See accompanying notes to unaudited condensed consolidated financial statements. |
SHIFT4 PAYMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited) (in millions, except share amounts)
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| | Class A Common Stock | | Class B Common Stock | | Class C Common Stock | | Additional Paid-In Capital | | Treasury Stock | | Retained Deficit | | | | 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) | |
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| 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 | |
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| 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 | |
|
| See accompanying notes to unaudited condensed consolidated financial statements. |
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| | Class A Common Stock | | Class B Common Stock | | Class C Common Stock | | Additional Paid-In Capital | | | | Retained Deficit | | Accumulated Other Comprehensive Income | | Noncontrolling Interests | | Total Equity |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | | | | | | | | |
| Balances at December 31, 2022 | 54,153,218 | | | $ | — | | | 25,829,016 | | | $ | — | | | 2,889,811 | | | $ | — | | | $ | 702.6 | | | | | | | $ | (363.6) | | | $ | 8.3 | | | $ | 133.3 | | | $ | 480.6 | |
| Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | 14.8 | | | — | | | 5.6 | | | 20.4 | |
| Issuance of Class A common stock in connection with acquisitions and residual commission buyouts | 27,780 | | | — | | | — | | | — | | | — | | | — | | | 5.5 | | | | | | | — | | | — | | | 2.1 | | | 7.6 | |
| Exchange of shares held by Rook | 2,465,770 | | | — | | | (1,666,665) | | | — | | | (799,105) | | | — | | | 4.9 | | | | | | | — | | | — | | | (4.9) | | | — | |
| Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | — | | | — | | | (1.8) | | | (1.8) | |
| Equity-based compensation | — | | | — | | | — | | | — | | | — | | | — | | | 21.9 | | | | | | | — | | | — | | | — | | | 21.9 | |
| Vesting of restricted stock units, net of tax withholding | 123,846 | | | — | | | — | | | — | | | — | | | — | | | (4.7) | | | | | | | — | | | — | | | (0.6) | | | (5.3) | |
| Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | — | | | 2.1 | | | 0.9 | | | 3.0 | |
| Balances at March 31, 2023 | 56,770,614 | | | $ | — | | | 24,162,351 | | | $ | — | | | 2,090,706 | | | $ | — | | | $ | 730.2 | | | | | | | $ | (348.8) | | | $ | 10.4 | | | $ | 134.6 | | | $ | 526.4 | |
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| Class A Common Stock | | Class B Common Stock | | Class C Common Stock | | Additional Paid-In Capital | | Treasury Stock | | Retained Deficit | | 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 | |
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| See accompanying notes to unaudited condensed consolidated financial statements. |
SHIFT4 PAYMENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in millions)
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Operating activities | Operating activities | As Restated | | As Restated | Operating activities | | | |
| Net loss | $ | (13.2) | | | $ | (51.0) | | |
| Adjustment to reconcile net loss to net cash provided by operating activities | | |
| Net income (loss) | | Net income (loss) | $ | 20.4 | | | $ | (13.2) | |
| 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 | 29.1 | | | 25.3 | | Depreciation and amortization | 47.6 | | | 29.1 | |
| Amortization of capitalized financing costs | Amortization of capitalized financing costs | 1.9 | | | 1.2 | | Amortization of capitalized financing costs | 2.1 | | | 1.9 | |
| Loss on extinguishment of debt | — | | | 0.2 | | |
| | Deferred income taxes | Deferred income taxes | (6.3) | | | (0.1) | | Deferred income taxes | (5.6) | | | (6.3) | |
| Provision for bad debts | Provision for bad debts | 3.0 | | | 6.7 | | Provision for bad debts | 3.2 | | | 3.0 | |
| Revaluation of contingent liabilities | Revaluation of contingent liabilities | — | | | 0.2 | | Revaluation of contingent liabilities | 7.0 | | | — | |
| | Unrealized gain on investments in securities | | Unrealized gain on investments in securities | (8.9) | | | — | |
| Change in TRA liability | | Change in TRA liability | 0.5 | | | — | |
| Equity-based compensation expense | Equity-based compensation expense | 16.9 | | | 14.0 | | Equity-based compensation expense | 20.9 | | | 16.9 | |
| Other noncash items | Other noncash items | 0.3 | | | 0.3 | | Other noncash items | 0.3 | | | 0.3 | |
| Change in operating assets and liabilities | Change in operating assets and liabilities | | Change in operating assets and liabilities | |
| Accounts receivable | Accounts receivable | (20.0) | | | (40.7) | | Accounts receivable | (17.1) | | | (20.0) | |
| | Prepaid expenses and other assets | Prepaid expenses and other assets | 0.6 | | | 1.1 | | Prepaid expenses and other assets | 0.1 | | | 0.6 | |
| Inventory | Inventory | 1.7 | | | 0.1 | | Inventory | 0.7 | | | 1.7 | |
| Capitalized customer acquisition costs | Capitalized customer acquisition costs | (6.3) | | | (5.4) | | Capitalized customer acquisition costs | (7.3) | | | (6.3) | |
| Accounts payable | Accounts payable | 15.4 | | | 28.0 | | Accounts payable | 5.3 | | | 15.4 | |
| Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 3.1 | | | 6.4 | | Accrued expenses and other current liabilities | 5.9 | | | 3.1 | |
| Right-of-use assets and lease liabilities, net | Right-of-use assets and lease liabilities, net | (0.1) | | | — | | Right-of-use assets and lease liabilities, net | 0.1 | | | (0.1) | |
| Deferred revenue | Deferred revenue | 4.7 | | | 6.6 | | Deferred revenue | 4.2 | | | 4.7 | |
| Net cash provided by (used in) operating activities | 30.8 | | | (7.1) | | |
| Net cash provided by operating activities | | Net cash provided by operating activities | 79.4 | | | 30.8 | |
| Investing activities | Investing activities | | | | Investing activities | | | |
| Residual commission buyouts | | Residual commission buyouts | (2.1) | | | (4.6) | |
| Acquisitions, net of cash acquired | Acquisitions, net of cash acquired | (12.6) | | | (40.6) | | Acquisitions, net of cash acquired | (1.2) | | | (12.6) | |
| Acquisition of equipment to be leased | Acquisition of equipment to be leased | (9.9) | | | (10.4) | | Acquisition of equipment to be leased | (14.7) | | | (9.9) | |
| Capitalized software development costs | Capitalized software development costs | (8.0) | | | (3.6) | | Capitalized software development costs | (10.7) | | | (8.0) | |
| Residual commission buyouts | (4.6) | | | (0.8) | | |
| Acquisition of property, plant and equipment | | Acquisition of property, plant and equipment | (2.7) | | | (1.0) | |
| Investments in securities | Investments in securities | (1.5) | | | (16.0) | | Investments in securities | — | | | (1.5) | |
| Acquisition of property, plant and equipment | (1.0) | | | (0.7) | | |
| Net cash used in investing activities | Net cash used in investing activities | (37.6) | | | (72.1) | | Net cash used in investing activities | (31.4) | | | (37.6) | |
| Financing activities | Financing activities | | | | Financing activities | | | |
| | Repurchases of Class A common stock to treasury stock | Repurchases of Class A common stock to treasury stock | (18.7) | | | — | | Repurchases of Class A common stock to treasury stock | — | | | (18.7) | |
| Payments for withholding tax related to vesting of restricted stock units | Payments for withholding tax related to vesting of restricted stock units | (12.2) | | | (2.4) | | Payments for withholding tax related to vesting of restricted stock units | (5.3) | | | (12.2) | |
| Deferred financing costs | Deferred financing costs | (4.8) | | | (0.4) | | Deferred financing costs | — | | | (4.8) | |
| Repayment of debt | — | | | (0.9) | | |
| Distributions to noncontrolling interests | | Distributions to noncontrolling interests | (1.4) | | | — | |
| | Payments on contingent liabilities | | Payments on contingent liabilities | (0.3) | | | — | |
| Net cash used in financing activities | Net cash used in financing activities | (35.7) | | | (3.7) | | Net cash used in financing activities | (7.0) | | | (35.7) | |
| Change in cash and cash equivalents | (42.5) | | | (82.9) | | |
| Cash and cash equivalents | | |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | | Effect of exchange rate changes on cash and cash equivalents and restricted cash | 0.4 | | | — | |
| Change in cash and cash equivalents and restricted cash | | Change in cash and cash equivalents and restricted cash | 41.4 | | | (42.5) | |
| Cash and cash equivalents and restricted cash | | Cash and cash equivalents and restricted cash | |
| Beginning of period | Beginning of period | 1,231.5 | | | 927.8 | | Beginning of period | 776.5 | | | 1,231.5 | |
| End of period | End of period | $ | 1,189.0 | | | $ | 844.9 | | End of period | $ | 817.9 | | | $ | 1,189.0 | |
| Supplemental cash flows information and noncash activities are further described in Note 22. | | 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. |
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 or “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 independent provider of integratedsoftware and payment processing solutions in the United States (“U.S.”) based on total volume of payments processed. The Company has achieved its leadership position through decades of solving business and technology solutions. Throughoperational challenges facing its customers’ overall commerce needs. The Company’s merchants range in size from small owner-operated local businesses to multinational enterprises conducting commerce throughout the Shift4 Model,world. The Company distributes its services through a scaled network of seasoned internal sales and support teams, as well as through its network of software partners. For its software partners, the Company offers software providers a single integration to ana global end-to-end paymentspayment offering, a powerfulproprietary 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. TheFor its merchants, the Company provides for its merchants a seamless, customerunified consumer experience at scale, rather than simply acting as one ofand fulfills business needs that would otherwise require multiple providers they rely on to operate their businesses.software, hardware and payment vendors. The Shift4 Model is built to serve a range of merchants from small-to-medium-sizedsmall owner-operated local businesses to large and complexmultinational enterprises across numerous verticals,conducting commerce throughout the world, including food and beverage, hospitality, stadiums and arenas, gaming, specialty retail, non-profits, eCommerce, and eCommerce.exciting technology companies. This includes the Company’s point of sale (“POS”) software offerings, as well as over 425 additional500 software integrations inacross virtually every industry.industry vertical.
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 StatesU.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, 20212022 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, 2021,2022, as disclosed in ourthe Company’s Annual Report on Form 10-K/A10-K for the fiscal year ended December 31, 20212022 (the “2021“2022 Form 10-K/A”10-K”).
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 certain affiliates of Rook and Searchlight Capital PartnersHoldings Inc. (“Searchlight”) (together, the “Continuing Equity Owners”Rook”).
All intercompany balances and transactions have been eliminated in consolidation.
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 (together, the “Convertible Notes”) that are held by Shift4 Payments, Inc. directly. As of both March 31, 20222023 and December 31, 2021,2022, $12.3 million and $9.8 million of cash, wasrespectively, was directly held by Shift4 Payments, Inc. As of March 31, 2023 and December 31, 2022, the earnout liabilitiesliability for The Giving Block were $59.2was $2.9 million and $10.9 million, respectively. The $2.9 million liability as of March 31, 2023 represents the cash portion of the earnout, which is expected to be paid in the second quarter of 2023. As of March 31, 2023 and December 31, 2022, the TRA liability was $2.2 million and $1.7 million, respectively. In connection with the issuance of the Convertible Notes, Shift4 Payments, Inc. entered into Intercompany Convertible Notes with Shift4 Payments, LLC, whereby Shift4 Payments, Inc. provided the net proceeds from the issuance of the Convertible Notes to Shift4 Payments, LLC in the amount of $1,322.5 million. Shift4 Payments,Payments, Inc., which was establishedincorporated 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.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
March 31, 2023 due to the final measurement of the earnout payment.Change in Presentation of Unaudited Condensed Consolidated Balance Sheets
Certain prior year balances have been adjusted to present “Restricted cash” on its own line item rather than within “Cash and cash equivalents” on the Company’s unaudited Condensed Consolidated Balance Sheets to conform to the current period presentation.
Change in Presentation of Unaudited Condensed Consolidated Statements of Operations
The Company has changedCertain prior year balances have been adjusted to present “Transaction-related expenses” within “Professional fees” rather than its own line item on the presentation of itsCompany’s unaudited 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 months ended March 31, 2022 and 2021. The Company has also changed the presentation of the disclosure in Note 23 to remove the reconciliation between “Gross revenue” and “Gross profit.”Operations.
Liquidity and Management’s Plan
As of March 31, 2022,2023, the Company had $1,772.5$1,772.5 million total principal amount of debt outstanding under its credit facilities 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 the issuance of these unaudited condensed consolidated financial statements. See Note 11 for further information on the Company’s debt obligations.
The rapid spread of COVID-19 resulted in governmental authorities throughout the United States and the rest of the world implementing a variety of containment measures with the objective of slowing the spread of the virus, including travel restrictions, shelter-in-place orders and business shutdowns or other restrictions. The COVID-19 pandemic and these containment measures have had, and could continue to have, a significant impact on the Company’s business. While the Company has experienced year-over-year growth in its gross revenues and end-to-end payment volumes, end-to-end payment volumes in certain merchant categories, particularly those associated with international travel and corporate travel are running lower than pre-COVID-19 pandemic levels. The ultimate impact that the COVID-19 pandemic and any variants will have on the Company’s consolidated results of operations in future periods remains uncertain. The Company will continue to evaluate the nature and extent of these potential impacts to its business, consolidated results of operations and liquidity.
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 Rook and certain affiliates of Searchlight Capital Partners (together, 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.
Additionally, the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated. However, the Company has made accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are differences between these estimates and actual results, the unaudited condensed consolidated financial statements may be materially affected.
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 yearsyear ended December 31, 2021 and 20202022 in the 20212022 Form 10-K/A.10-K. 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 three months ended March 31, 2022.2023, except for the below.
Cash and Cash Equivalents and Restricted Cash
Highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents and are stated at cost, which approximates fair value. The Company’s cash equivalents consist of highly liquid investments in money market funds, which amounted to $672.2 million and $652.8 million as of March 31, 2023 and December 31, 2022, respectively.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSThe Company classifies as restricted certain cash that is not available for use in its operations. Prior to December 2022, the Company had funds deposited in a sponsor bank merchant settlement account (“Settlement Funds”) to facilitate gross card transaction deposits for those customers the Company bills on a monthly, versus a daily basis. This amount fluctuates based upon end-to-end payment volumes and timing of billing cycles. The funds deposited at the sponsor bank were included within “Accounts receivable, net” prior to December 2022. In December 2022 and March 2023, pursuant to amendments to its agreement, the Company received in cash its Settlement Funds of $74.0 million, which was restricted as to withdrawal by the sponsor bank. In January 2023 and April 2023, the Company, as required by the amendments, deposited $74.0 million to its sponsor bank merchant settlement account. See Note 24 for more information on the April 2023 amendment to the sponsor bank agreement. As of both March 31, 2023 and December 31, 2022, Restricted cash was $74.0 million, representing the Company’s Settlement Funds.
(Unaudited) (in millions, except share, unit andThe Company maintains its cash with what are widely considered to be high credit quality financial institutions. The total cash balances insured by the Federal Deposit Insurance Corporation are up to $250 thousand per unit amounts)
bank.Recent Accounting Pronouncements
Accounting Pronouncements Adopted
In February 2016, the FASB issued 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 Topic 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 on the balance sheet leases with a term of twelve months or less. 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 consolidated statements of operations or cash flows. See Note 15 for ASC 842-related disclosures.
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.
Accounting Pronouncements Not Yet Adopted
In March 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“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. ASU 2020-04 was subsequently amended by ASU 2022-06, Reference Rate Reform, which extends the date through which entities can elect these optional expedients and exceptions. Companies may elect to apply these amendments as of March 12, 2020 through December 31, 2022.2024. The Company is currently evaluating whether weit 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.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
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 March 31, 2022 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 through the amendment of its Quarterly Report on Form 10-Q.
The following tables summarize the impact of these adjustments for the periods presented:
| | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2022 |
| As Reported | | Adjustments | | As Restated |
| Net cash provided by operating activities | $ | 37.1 | | | $ | (6.3) | | | $ | 30.8 | |
| Net cash used in investing activities | (43.9) | | | 6.3 | | | (37.6) | |
| Net cash used in financing activities | (35.7) | | | — | | | (35.7) | |
| Change in cash and cash equivalents | $ | (42.5) | | | $ | — | | | $ | (42.5) | |
| | | | | |
| Three Months Ended March 31, 2021 |
| As Reported | | Adjustments | | As Restated |
| Net cash used in operating activities | $ | (1.7) | | | $ | (5.4) | | | $ | (7.1) | |
| Net cash used in investing activities | (77.5) | | | 5.4 | | | (72.1) | |
| Net cash used in financing activities | (3.7) | | | — | | | (3.7) | |
| Change in cash and cash equivalents | $ | (82.9) | | | $ | — | | | $ | (82.9) | |
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
Online Payments Group
On September 29, 2022, the Company completed the acquisition method of accountingOnline Payments Group AG (“Online Payments Group”) by acquiring 100% of its common stock for business combinations, if there$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 March 31, 2023, the fair value of the earnout was $40.2 million, of which $28.0 million is recognized in “Accrued expenses and other current liabilities” and $12.2 million is recognized in “Other noncurrent 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 date. These amounts reflect various preliminary fair value estimates and assumptions, and are changessubject to acquired deferredchange 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 | |
| Goodwill (b) | 49.9 | |
| Other intangible assets | 84.0 | |
| Indemnification asset (c) | 7.5 | |
| Accounts payable | (0.4) | |
| Accrued expenses and other current liabilities | (1.4) | |
| Uncertain tax position (d) | (6.7) | |
| Deferred tax liability | (9.9) | |
| 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 unaudited Condensed Consolidated Balance Sheets. |
| (b) Goodwill is not deductible for tax purposes. |
| (c) Included within “Other noncurrent assets” in the Company’s unaudited Condensed Consolidated Balance Sheets. |
| (d) Included within “Other noncurrent liabilities” in the Company’s unaudited Condensed Consolidated Balance Sheets. |
Upon acquisition, the Company assessed the probability Online Payments Group would be required to pay certain tax balances, valuation allowances orliabilities and recorded to “Other noncurrent liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets $6.7 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 uncertainperiods prior to the acquisition and an indemnification asset was established for $7.5 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 positionspurposes. Other intangible assets consists of definite-lived intangible assets, which includes customer relationships and developed technology. The fair values of these intangible assets were estimated using inputs classified as Level 3 under the income approach using the relief-from-royalty method (developed technology) or the multi-period excess earnings method (customer relationships). Management’s estimates of fair value are based upon assumptions related to projected revenues, earnings before interest expense and income tax (“EBIT”) margins, customer attrition rates, and discount rates. The transaction was not taxable for income tax purposes. The weighted average life of developed technology and customer relationships is 8 years and 13 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.
Restaurant Technology Partners
During the year ended December 31, 2022, the Company completed the acquisitions of 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. In addition, on January 20, 2023, the Company completed the acquisition of one restaurant technology partner for $1.5 million, 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 | $ | 65.1 | |
| Shares of Class A common stock (a) | 20.7 | |
| Contingent consideration (b)(c) | 2.5 | |
| Settlement of preexisting relationship | (2.5) | |
| Total purchase consideration | 85.8 | |
| Less: cash acquired | (4.0) | |
| Total purchase consideration, net of cash acquired | $ | 81.8 | |
| |
| (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 acquired in 2022, 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 March 31, 2023, the fair value of the earnouts was $1.8 million, of which $0.5 million is recognized in “Accrued expenses and other current liabilities” and $1.3 million is recognized in “Other noncurrent liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets. |
| (c) The Company agreed to an earnout due to certain former shareholders of the restaurant technology partner acquired in 2023, calculated as a multiple of the number of the restaurant technology partner’s merchants that are converted to the Company’s end-to-end payments platform during the 24 months following September 1, 2022, not to exceed $2.5 million in total. The earnout is expected to be paid 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 March 31, 2023, the fair value of the earnout was $0.3 million, which is recognized in “Other noncurrent 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 they areresidual goodwill.
| | | | | |
| Accounts receivable | $ | 1.2 | |
| Inventory | 1.2 | |
| Prepaid expenses and other current assets | 0.3 | |
| Goodwill (a) | 54.3 | |
| Residual commission buyouts | 12.7 | |
| Other intangible assets | 20.8 | |
| Property, plant and equipment | 0.2 | |
| Right-of-use assets | 1.3 | |
| Accounts payable | (2.7) | |
| Accrued expenses and other current liabilities | (0.8) | |
| Deferred revenue | (1.9) | |
| Current lease liabilities | (0.5) | |
| Deferred tax liability | (3.5) | |
| Noncurrent lease liabilities | (0.8) | |
| Net assets acquired | $ | 81.8 | |
| |
| (a) $27.7 million of goodwill is deductible for tax purposes and $26.6 million of goodwill is not deductible for tax purposes. |
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). Four 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 6 years to 14 years. The weighted average lives of residual commission buyouts range from 5 years to 9 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 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.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
The Giving Block
On February 28, 2022, the Company acquiredcompleted the acquisition of The Giving Block Inc. (“The Giving Block”) forby 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. TheApproximately 75% of the earnout will be paid 75% inwas comprised of a combination of RSUs and shares of the Company’s Class A common stock and approximately 25% inof the earnout was comprised of cash. The cash portion of the earnout, valued at $2.9 million as of March 31, 2023, is included within “Accounts payable” on the Company’s unaudited Condensed Consolidated Balance Sheets. The stock portion of the earnout, valued at $7.3 million as of March 31, 2023, is included within “Additional paid-in-capital” on the Company’s unaudited Condensed Consolidated Balance Sheets. The fair value of the earnout was included in the initial purchase consideration and will bewas revalued quarterly untilthrough 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 March 31, 2022, the fair value of the earnout included in the purchase consideration was $57.8 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 March 31, 2022, $1.4 million was included in “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets. |
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, other current liabilities assumed and residual goodwill.date:
| | | | | |
Accounts receivablePrepaid expenses and other current assets (a) | $ | 0.14.8 | |
| Goodwill (b) | 89.4 | |
| Other intangible assets | 26.0 | |
GoodwillAccrued expenses and other current liabilities (a) | 89.3 (4.9) | |
| Deferred revenue | (2.1)(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. |
(a)(b) Goodwill is not deductible for tax purposes. | |
In the three months ended March 31, 2022, the Company incurred expenses in connection with The Giving Block acquisition of $2.2 million. 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'sManagement’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
The Company completed the acquisition of Postec, Inc. (“Postec”) on September 1, 2021, 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 approximately $200.0 million in cash on hand, $325.0 million in shares of the Company’s Class A common stock 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 in the fourth quarter of 2022. 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 months ended March 31, 2022, the Company incurred expenses in connection with the Finaro acquisition of $3.6 million. These expenses are included in “Professional fees” in the Company's unaudited Condensed Consolidated Statements of Operations.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
4.3.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.
Disaggregated Revenue
Based on similar operational characteristics, the Company’s revenue from contracts with customers is disaggregated as follows:
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | 2022 | | 2021 | | 2023 | | 2022 | |
| Payments-based revenue | Payments-based revenue | $ | 371.5 | | | $ | 215.9 | | Payments-based revenue | $ | 511.0 | | | $ | 371.5 | | |
| Subscription and other revenues | Subscription and other revenues | 30.4 | | | 23.4 | | Subscription and other revenues | 36.0 | | | 30.4 | | |
| Total | Total | $ | 401.9 | | | $ | 239.3 | | Total | $ | 547.0 | | | $ | 401.9 | | |
Based on similar economic characteristics, the Company’s revenue from contracts with customers is disaggregated as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| Over-time revenue | $ | 392.0 | | | $ | 230.2 | |
| Point-in-time revenue | 9.9 | | | 9.1 | |
| Total | $ | 401.9 | | | $ | 239.3 | |
Contract Assets
Contract assets were as follows:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Contract assets, net - beginning of period | $ | 0.3 | | | $ | — | |
| Less: Contract assets, net - beginning of the period, current | (0.3) | | | — | |
| Contract assets, net - beginning of period, noncurrent | — | | | — | |
| Contract assets, net - end of period | 0.3 | | | 0.3 | |
| Less: Contract assets, net - end of the period, current | (0.3) | | | (0.3) | |
| Contract assets, net - end of period, noncurrent | $ | 0.3 | | | $ | — | |
There was no allowance for contract assets as of March 31, 2022 and December 31, 2021. | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
| Over-time revenue | $ | 538.2 | | | $ | 392.0 | | | | | |
| Point-in-time revenue | 8.8 | | | 9.9 | | | | | |
| Total | $ | 547.0 | | | $ | 401.9 | | | | | |
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 March 31, 20222023 and December 31, 2021,2022, the Company had deferred revenue of $24.1$23.3 million and $17.4$19.1 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.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
The following reflects the amounts the Company recognized as annual service fees and regulatory compliance fees within “Gross revenue” in the Company'sCompany’s unaudited Condensed Consolidated Statements of Operations and the amount of such fees that waswere included in deferred revenue at the beginning of theeach respective period:
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | 2022 | | 2021 | | 2023 | | 2022 | |
| Annual service fees and regulatory compliance fees | Annual service fees and regulatory compliance fees | $ | 9.6 | | | $ | 4.4 | | Annual service fees and regulatory compliance fees | $ | 10.8 | | | $ | 9.6 | | |
| Amount of these fees included in deferred revenue at beginning of period | Amount of these fees included in deferred revenue at beginning of period | 4.9 | | | 2.1 | | Amount of these fees included in deferred revenue at beginning of period | 6.4 | | | 4.9 | | |
Allowance for Doubtful Accounts Receivable
The change in the Company’s allowance for doubtful accounts was as follows:
| | | | | | | | | | | | | Three Months Ended March 31, |
| | March 31,
2022 | | March 31,
2021 | | 2023 | | 2022 |
| Beginning balance | Beginning balance | $ | 8.0 | | | $ | 5.7 | | Beginning balance | $ | 18.1 | | | $ | 8.0 | |
| Additions to expense (a) | 3.0 | | | 6.7 | | |
| Additions to expense | | Additions to expense | 3.2 | | | 3.0 | |
| Write-offs, net of recoveries and other adjustments | Write-offs, net of recoveries and other adjustments | (1.5) | | | (0.3) | | Write-offs, net of recoveries and other adjustments | (1.1) | | | (1.5) | |
| Ending balance | Ending balance | $ | 9.5 | | | $ | 12.1 | | Ending balance | $ | 20.2 | | | $ | 9.5 | |
| | (a) For the three months ended March 31, 2021, includes a $5.2 million allowance on chargebacks from a single merchant, which is included in “Cost of Sales” on the unaudited Condensed Consolidated Statements of Operations. | |
The following table summarizes the changes in the Company’s restructuring accrual:
| | | | | |
Balance at December 31, 2021 | $ | 1.5 | |
Severance payments | (0.4) | |
| |
Balance at March 31, 2022 | $ | 1.1 | |
| |
|
The current portion of the restructuring accrual of $1.1 million and $1.5 million at March 31, 2022 and December 31, 2021, respectively, is included within “Accrued expenses and other current liabilities” on the Company's unaudited Condensed Consolidated Balance Sheets and is expected to be paid in 2022.
6.4.Goodwill
The changes in the carrying amount of goodwill were as follows:
| | | | | |
Balance at December 31, 20212022 | $ | 537.7735.0 | |
The Giving Block AcquisitionRestaurant technology partner acquisition (Note 3)2) | 89.31.1 | |
| Purchase price adjustments related to prior period acquisitions | (0.2) | |
| Effect of foreign currency translation | 1.1 | |
Balance at March 31, 20222023 | $ | 627.0737.0 | |
5.Depreciation and Amortization
Amounts charged to expense in the Company’s unaudited Condensed Consolidated Statements of Operations for depreciation and amortization were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amortization | | Depreciation | | |
| | Residual Commission Buyouts
(Note 6) | | Other Intangible Assets
(Note 7) | | Capitalized Customer Acquisition
Costs (Note 8) | | Equipment Under Lease
(Note 9) | | Property, Plant and Equipment
(Note 10) | | Total |
| Three Months Ended March 31, 2023 | | | | | | |
| Depreciation and amortization expense | | $ | 21.6 | | | $ | 5.2 | | | $ | — | | | $ | 7.2 | | | $ | 1.3 | | | $ | 35.3 | |
| Cost of sales | | — | | | 8.3 | | | 3.8 | | | — | | | 0.2 | | | 12.3 | |
| Total depreciation and amortization (a) | | $ | 21.6 | | | $ | 13.5 | | | $ | 3.8 | | | $ | 7.2 | | | $ | 1.5 | | | $ | 47.6 | |
| | | | | | | | | | | | |
| Three Months Ended March 31, 2022 | | | | | | |
| Depreciation and amortization expense | | $ | 1.9 | | | $ | 7.4 | | | $ | — | | | $ | 7.0 | | | $ | 1.0 | | | $ | 17.3 | |
| Cost of sales | | — | | | 5.4 | | | 6.1 | | | — | | | 0.3 | | | 11.8 | |
| Total depreciation and amortization (b) | | $ | 1.9 | | | $ | 12.8 | | | $ | 6.1 | | | $ | 7.0 | | | $ | 1.3 | | | $ | 29.1 | |
(a) Total amortization of $38.9 million consisted of amortization of acquired intangibles of $30.0 million and amortization of non-acquired intangibles of $8.9 million.
(b) Total amortization of $20.8 million consisted of amortization of acquired intangibles of $12.5 million and amortization of non-acquired intangibles of $8.3 million.
As of March 31, 2023, the estimated amortization expense for each of the five succeeding years and thereafter is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Residual Commission Buyouts | | Other Intangible Assets | | Capitalized Customer Acquisition Costs | | Total Amortization |
| 2023 (remaining nine months) | $ | 63.0 | | | $ | 47.0 | | | $ | 11.5 | | | $ | 121.5 | |
| 2024 | 83.8 | | | 59.5 | | | 14.0 | | | 157.3 | |
| 2025 | 81.9 | | | 51.1 | | | 10.0 | | | 143.0 | |
| 2026 | 48.3 | | | 30.3 | | | 3.9 | | | 82.5 | |
| 2027 | 1.6 | | | 22.6 | | | 0.2 | | | 24.4 | |
| Thereafter | 4.4 | | | 95.5 | | | — | | | 99.9 | |
| Total | $ | 283.0 | | | $ | 306.0 | | | $ | 39.6 | | | $ | 628.6 | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS6.Residual Commission Buyouts
(Unaudited) (in millions, except share, unitResidual commission buyouts, net consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighted Average Amortization Period (in years) | | March 31, 2023 |
| | Carrying Value | | Accumulated Amortization | | Net Carrying Value |
| Residual commission buyouts from asset acquisitions | | 4 | | $ | 334.6 | | | $ | (63.3) | | | $ | 271.3 | |
| Residual commission buyouts from business combinations | | 8 | | 12.7 | | | (1.0) | | | 11.7 | |
| Total residual commission buyouts | | | | $ | 347.3 | | | $ | (64.3) | | | $ | 283.0 | |
| | | | | | | | |
| | Weighted Average Amortization Period (in years) | | December 31, 2022 |
| | Carrying Value | | Accumulated Amortization | | Net Carrying Value |
| Residual commission buyouts from asset acquisitions | | 4 | | $ | 334.5 | | | $ | (42.6) | | | $ | 291.9 | |
| Residual commission buyouts from business combinations | | 8 | | 12.6 | | | (0.6) | | | 12.0 | |
| Total residual commission buyouts | | | | $ | 347.1 | | | $ | (43.2) | | | $ | 303.9 | |
Residual commission buyouts represent transactions with certain third-party distribution partners, pursuant to which the Company acquires their ongoing merchant relationships that subscribe to the Company’s end-to-end payments platform. During the year ended December 31, 2022, the Company executed $305.4 million of residual commission buyouts under the Company’s strategic buyout program in support of the Company’s initiative to insource its sales distribution network.
Contingent consideration included in Residual commission buyouts, net as of March 31, 2023 and per unit amounts)December 31, 2022 was $14.2 million, of which $8.3 million was related to residual commission buyouts executed under the strategic buyout program which was estimated based on projected attrition rates and other financial metrics within the respective merchant portfolios over the earnout periods. As of March 31, 2023 and December 31, 2022, the maximum contingent consideration for residual buyout commissions executed under the Company’s strategic buyout program was $23.0 million.
7.Other Intangible Assets, Net
Other intangible assets, net consisted of the following:
| | | Weighted Average
Amortization Period
(in years) | | March 31, 2022 | | Weighted Average
Amortization Period
(in years) | | March 31, 2023 |
| Carrying Value | | Accumulated
Amortization | | Net Carrying
Value | | Carrying Value | | Accumulated
Amortization | | Net Carrying
Value |
| Merchant relationships | Merchant relationships | 8 | | $ | 214.1 | | | $ | 140.8 | | | $ | 73.3 | | Merchant relationships | 12 | | $ | 198.4 | | | $ | (41.0) | | | $ | 157.4 | |
| Acquired technology | Acquired technology | 9 | | 116.2 | | | 58.2 | | | 58.0 | | Acquired technology | 9 | | 123.3 | | | (67.4) | | | 55.9 | |
| Trademarks and trade names | Trademarks and trade names | 17 | | 29.3 | | | 4.1 | | | 25.2 | | Trademarks and trade names | 13 | | 27.2 | | | (4.4) | | | 22.8 | |
| Capitalized software development costs | Capitalized software development costs | 4 | | 51.7 | | | 10.8 | | | 40.9 | | Capitalized software development costs | 3 | | 90.4 | | | (20.5) | | | 69.9 | |
| Residual commission buyouts (a) | 3 | | 23.6 | | | 8.0 | | | 15.6 | | |
| | Total intangible assets | | $ | 434.9 | | | $ | 221.9 | | | $ | 213.0 | | |
| Total other intangible assets, net | | Total other intangible assets, net | | $ | 439.3 | | | $ | (133.3) | | | $ | 306.0 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Weighted Average
Amortization Period
(in years) | | December 31, 2022 |
| Carrying Value | | Accumulated
Amortization | | Net Carrying
Value |
| Merchant relationships | 12 | | $ | 196.3 | | | $ | (36.4) | | | $ | 159.9 | |
| Acquired technology | 10 | | 123.1 | | | (64.1) | | | 59.0 | |
| Trademarks and trade names | 13 | | 27.2 | | | (3.8) | | | 23.4 | |
| Capitalized software development costs | 3 | | 80.3 | | | (15.8) | | | 64.5 | |
| Total other intangible assets, net | | | $ | 426.9 | | | $ | (120.1) | | | $ | 306.8 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 intangible assets | | | $ | 396.5 | | | $ | 208.0 | | | $ | 188.5 | |
| | | | | | | |
| (a) Residual commission buyouts include contingent payments of $4.4 million and $4.2 million as of March 31, 2022 and December 31, 2021, respectively. |
As of March 31, 2022, the estimated amortization expense for intangible assets for each of the five succeeding years and thereafter is as follows:
| | | | | |
| 2022 (remaining nine months) | $ | 37.5 | |
| 2023 | 41.6 | |
| 2024 | 36.4 | |
| 2025 | 27.1 | |
| 2026 | 20.9 | |
| Thereafter | 49.5 | |
| Total | $ | 213.0 | |
Amounts charged to expense in the Company's unaudited Condensed Consolidated Statements of Operations for amortization of intangible assets were as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| Depreciation and amortization expense | $ | 9.3 | | | $ | 10.1 | |
| Cost of sales | 5.4 | | | 4.5 | |
| Total | $ | 14.7 | | | $ | 14.6 | |
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
8.Capitalized Customer Acquisition Costs, Net
Capitalized customer acquisition costs, net were $35.3$39.6 million and $35.1$36.1 million at March 31, 20222023 and December 31, 2021,2022, respectively. This consistedThese amounts consist of upfront processing bonuses with a gross carrying value of $70.5$78.6 million and $69.1$72.3 million less accumulated amortization of $35.2$39.0 million and $34.0$36.2 million at March 31, 20222023 and December 31, 2021,2022, respectively.
Capitalized customer acquisition costs had a weighted average amortization period of threefour years at both March 31, 20222023 and December 31, 2021. Amortization expense for capitalized customer acquisition costs was $6.1 million and $5.0 million for the three months ended March 31, 2022 and 2021, respectively, and was included in “Cost of sales” in the Company's unaudited Condensed Consolidated Statements of Operations.2022.
As of March 31, 2022, the estimated future amortization expense for capitalized customer acquisition costs is as follows:
| | | | | |
| 2022 (remaining nine months) | $ | 15.4 | |
| 2023 | 14.0 | |
| 2024 | 5.7 | |
| 2025 | 0.2 | |
| Total | $ | 35.3 | |
9.Equipment for Lease, Net
Equipment for lease, net consisted of the following:
| | | Weighted Average Depreciation Period (in years) | | March 31, 2022 | | Weighted Average Depreciation Period (in years) | | March 31, 2023 |
| Carrying Value | | Accumulated Depreciation | | Net Carrying Value | | Carrying Value | | Accumulated Depreciation | | Net Carrying Value |
| Equipment under lease | Equipment under lease | 3 | | $ | 79.4 | | | $ | 29.6 | | | $ | 49.8 | | Equipment under lease | 4 | | $ | 124.0 | | | $ | (47.1) | | | $ | 76.9 | |
| Equipment held for lease (a) | Equipment held for lease (a) | N/A | | 10.2 | | | — | | | 10.2 | | Equipment held for lease (a) | N/A | | 12.7 | | | — | | | 12.7 | |
| Total equipment for lease | Total equipment for lease | | $ | 89.6 | | | $ | 29.6 | | | $ | 60.0 | | Total equipment for lease | | $ | 136.7 | | | $ | (47.1) | | | $ | 89.6 | |
| | | Weighted Average Depreciation Period (in years) | | December 31, 2021 | | Weighted Average Depreciation Period (in years) | | December 31, 2022 |
| Carrying Value | | Accumulated Depreciation | | Net Carrying Value | | Carrying Value | | Accumulated Depreciation | | Net Carrying Value |
| Equipment under lease | Equipment under lease | 3 | | $ | 72.9 | | | $ | 24.2 | | | $ | 48.7 | | Equipment under lease | 4 | | $ | 107.7 | | | $ | (40.3) | | | $ | 67.4 | |
| Equipment held for lease (a) | Equipment held for lease (a) | N/A | | 9.7 | | | — | | | 9.7 | | Equipment held for lease (a) | N/A | | 13.3 | | | — | | | 13.3 | |
| Total equipment for lease, net | Total equipment for lease, net | | $ | 82.6 | | | $ | 24.2 | | | $ | 58.4 | | Total equipment for lease, net | | $ | 121.0 | | | $ | (40.3) | | | $ | 80.7 | |
| | (a) Represents equipment that was not yet initially deployed to a merchant and, accordingly, is not being depreciated. | (a) Represents equipment that was not yet initially deployed to a merchant and, accordingly, is not being depreciated. | (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 $7.0 million and $4.5 million for the three months ended March 31, 2022 and 2021, respectively.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
10.Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following:
| | | March 31,
2022 | | December 31,
2021 | | March 31,
2023 | | December 31,
2022 |
| Equipment | Equipment | $ | 11.2 | | | $ | 10.5 | | Equipment | $ | 17.5 | | | $ | 17.0 | |
| Capitalized software | Capitalized software | 5.2 | | | 5.1 | | Capitalized software | 3.8 | | | 3.8 | |
| Leasehold improvements | Leasehold improvements | 9.1 | | | 9.1 | | Leasehold improvements | 12.8 | | | 10.4 | |
| Furniture and fixtures | Furniture and fixtures | 1.9 | | | 2.0 | | Furniture and fixtures | 1.1 | | | 1.3 | |
| Vehicles | Vehicles | 0.3 | | | 0.3 | | Vehicles | 0.5 | | | 0.5 | |
| Total property, plant and equipment, gross | Total property, plant and equipment, gross | 27.7 | | | 27.0 | | Total property, plant and equipment, gross | 35.7 | | | 33.0 | |
| Less: Accumulated depreciation | Less: Accumulated depreciation | (9.6) | | | (8.6) | | Less: Accumulated depreciation | (12.0) | | | (10.7) | |
| Total property, plant and equipment, net | Total property, plant and equipment, net | $ | 18.1 | | | $ | 18.4 | | Total property, plant and equipment, net | $ | 23.7 | | | $ | 22.3 | |
Amounts charged to expense in the Company's unaudited Condensed Consolidated Statements
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| Depreciation and amortization expense | $ | 1.0 | | | $ | 0.8 | |
| Cost of sales | 0.3 | | | 0.4 | |
| Total depreciation expense | $ | 1.3 | | | $ | 1.2 | |
11.Debt
The Company’s outstanding debt consisted of the following:
| | | | | Maturity | | Effective interest rate | | March 31,
2022 | | December 31,
2021 | | | Maturity | | Effective Interest Rate | | March 31,
2023 | | December 31,
2022 |
| Convertible Notes due 2025 (2025 Convertible Notes) | Convertible Notes due 2025 (2025 Convertible Notes) | | December 15, 2025 | | 0.48% | | $ | 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 | | 0.89% | | 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 | | 5.125% | | 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 costs | | (36.6) | | | (34.0) | | |
| Less: Unamortized capitalized financing fees | | Less: Unamortized capitalized financing fees | | (28.5) | | | (30.6) | |
| Total long-term debt | Total long-term debt | | $ | 1,735.9 | | | $ | 1,738.5 | | Total long-term debt | | $ | 1,744.0 | | | $ | 1,741.9 | |
Amortization of capitalized financing fees is included inwithin “Interest expense” in the Company'sCompany’s unaudited Condensed Consolidated Statements of Operations. Amortization expense for capitalized financing fees was $1.9$2.1 million and $1.2$1.9 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
Future principal payments
As of March 31, 2022,2023, future principal payments associated with the Company'sCompany’s long-term debt were as follows:
| | | | | | | | |
| 2025 | | $ | 690.0 | |
| 2026 | | 450.0 | |
| 2027 | | 632.5 | |
| Total | | $ | 1,772.5 | |
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:
| | | March 31,
2022 | | December 31,
2021 | | March 31,
2023 | | December 31,
2022 |
| Principal outstanding | Principal outstanding | $ | 690.0 | | | $ | 690.0 | | Principal outstanding | $ | 690.0 | | | $ | 690.0 | |
| Unamortized debt issuance costs | Unamortized debt issuance costs | (12.2) | | | (13.0) | | Unamortized debt issuance costs | (8.9) | | | (9.7) | |
| Net carrying value | Net carrying value | $ | 677.8 | | | $ | 677.0 | | Net carrying value | $ | 681.1 | | | $ | 680.3 | |
Senior Notes due 2026
The net carrying amount of the 4.625% Senior Notes due 2026 (“2026 Senior Notes”) was as follows:
| | | | | | | | | | | |
| March 31,
2023 | | December 31,
2022 |
| Principal outstanding | $ | 450.0 | | | $ | 450.0 | |
| Unamortized debt issuance costs | (8.0) | | | (8.6) | |
| Net carrying value | $ | 442.0 | | | $ | 441.4 | |
Convertible Notes due 2027
The net carrying amount of the 0.50% Convertible Senior Notes due 2027 (“2027 Convertible Notes”) was as follows:
| | | March 31,
2022 | | December 31,
2021 | | | March 31,
2023 | | December 31,
2022 |
| Principal outstanding | Principal outstanding | $ | 632.5 | | | $ | 632.5 | | | Principal outstanding | $ | 632.5 | | | $ | 632.5 | |
| Unamortized debt issuance costs | Unamortized debt issuance costs | (13.2) | | | (13.8) | | | Unamortized debt issuance costs | (10.9) | | | (11.5) | |
| Net carrying value | Net carrying value | $ | 619.3 | | | $ | 618.7 | | | Net carrying value | $ | 621.6 | | | $ | 621.0 | |
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 amount21
Revolving Credit Facility
Borrowing capacity on the Company’s Revolving Credit Facility under the waFirst Lien Credit Agreement (“Revolving Credit Facility”) was $99.5s $100.0 million as of March 31, 2022, net of a $0.5 million letter of credit.2023.
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 March 31, 20222023 and December 31, 2021,2022, 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 20212022 Form 10-K/A.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
12.Other Consolidated Balance Sheet Components
Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following:
| | | | | | | | | | | |
| March 31,
2022 | | December 31,
2021 |
| Prepaid insurance | $ | 1.6 | | | $ | 3.3 | |
| Prepaid merchant signing bonuses (a) | 0.3 | | | 0.7 | |
| Other prepaid expenses (b) | 8.4 | | | 6.1 | |
| Taxes receivable | 1.7 | | | 1.8 | |
| Agent and employee loan receivables | 0.5 | | | 0.2 | |
| Other current assets | 0.4 | | | 0.3 | |
| Total prepaid expenses and other current assets | $ | 12.9 | | | $ | 12.4 | |
| | | |
| (a) Represents deal bonuses paid to merchants to obtain processing contracts, which are amortized over their contractual term of one year. |
| (b) Includes prepayments related to information technology, rent, tradeshows and conferences. |
| | | | | | | | | | | |
| March 31,
2023 | | December 31,
2022 |
| Prepaid insurance | $ | 2.4 | | | $ | 3.2 | |
| Taxes receivable | 1.4 | | | 1.8 | |
| Crypto settlement assets | 3.2 | | | 1.8 | |
| Other prepaid expenses (a) | 8.7 | | | 7.3 | |
| | | |
| Other current assets (b) | 1.8 | | | 1.3 | |
| Total prepaid expenses and other current assets | $ | 17.5 | | | $ | 15.4 | |
| | | |
|
| (a) Includes prepayments related to information technology, rent, tradeshows and conferences. |
| (b) Includes $0.1 million of contract assets as of March 31, 2023 and December 31, 2022. There was no allowance for contract assets as of March 31, 2023 and December 31, 2022. |
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following:
| | | March 31,
2022 | | December 31,
2021 | | March 31,
2023 | | December 31,
2022 |
| Contingent liability earnout - The Giving Block (a) | $ | 59.2 | | | $ | — | | |
| Contingent liability earnouts for acquisitions (a) | | Contingent liability earnouts for acquisitions (a) | $ | 28.5 | | | $ | 34.9 | |
| Contingent liability earnouts for residual commission buyouts | | Contingent liability earnouts for residual commission buyouts | 9.8 | | | 10.0 | |
| Residuals payable | Residuals payable | 14.5 | | | 13.1 | | Residuals payable | 9.4 | | | 8.9 | |
| Accrued interest | Accrued interest | 9.2 | | | 4.8 | | Accrued interest | 9.3 | | | 4.9 | |
| Accrued payroll | Accrued payroll | 2.6 | | | 15.3 | | Accrued payroll | 13.0 | | | 10.0 | |
| Taxes payable | Taxes payable | 1.8 | | | 1.6 | | Taxes payable | 5.3 | | | 4.4 | |
| Deferred employer social security tax pursuant to the CARES Act | 1.6 | | | 1.6 | | |
| Restructuring accrual | 1.1 | | | 1.5 | | |
| | Crypto settlement liabilities | | Crypto settlement liabilities | 3.2 | | | 1.8 | |
| Other current liabilities | Other current liabilities | 5.2 | | | 5.0 | | Other current liabilities | 4.0 | | | 5.1 | |
| Total accrued expenses and other current liabilities | Total accrued expenses and other current liabilities | $ | 95.2 | | | $ | 42.9 | | Total accrued expenses and other current liabilities | $ | 82.5 | | | $ | 80.0 | |
| | (a) Represents the fair value of the contingent liability earnout for The Giving Block as of March 31, 2022, including $57.8 million of estimated purchase consideration and $1.4 million of post-acquisition compensation expense. See Note 3 for more information. | |
| (a) As of March 31, 2023, primarily represents the fair value of the contingent liability earnout for Online Payments Group. As of December 31, 2022, primarily represents the fair value of the contingent liability earnouts for The Giving Block and Online Payments Group. See Note 2 for more information. | | (a) As of March 31, 2023, primarily represents the fair value of the contingent liability earnout for Online Payments Group. As of December 31, 2022, primarily represents the fair value of the contingent liability earnouts for The Giving Block and Online Payments Group. See Note 2 for more information. |
|
Other noncurrent assets
Other noncurrent assets consisted of the following:
| | | | | | | | | | | |
| March 31,
2023 | | December 31,
2022 |
| Indemnification asset (Note 2) | $ | 7.5 | | | $ | 7.5 | |
| Prepaid expenses and other noncurrent assets | 2.5 | | | 3.0 | |
| Contract assets (a) | 0.4 | | | 0.4 | |
| Total other noncurrent assets | $ | 10.4 | | | $ | 10.9 | |
| | | |
| (a) There was no allowance for contract assets as of March 31, 2023 and December 31, 2022. | | | |
Other noncurrent liabilities
Other noncurrent liabilities consisted of the following:
| | | | | | | | | | | |
| March 31,
2023 | | December 31,
2022 |
| Contingent liability earnouts for acquisitions (a) | $ | 13.8 | | | $ | 10.3 | |
| Taxes payable (b) | 10.0 | | | 9.9 | |
| Deferred revenue | 2.3 | | | 2.8 | |
| TRA liability (Note 14) | 2.2 | | | 1.7 | |
| Other noncurrent liabilities | 1.2 | | | 1.8 | |
| Total other noncurrent liabilities | $ | 29.5 | | | $ | 26.5 | |
| | | |
| (a) Primarily represents the fair value of the contingent liability earnout for Online Payments Group. See Note 2 for more information. |
| (b) Includes uncertain tax positions of $8.1 million and $8.0 million as of March 31, 2023 and December 31, 2022, respectively. See Note 14 for more information. |
13.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.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
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 toContingent 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 The Giving Block, Inc.Online Payments Group on February 28,September 29, 2022, the Company entered into a contingent consideration agreement that requires the Company to pay up to $246.0$60.0 million if key customers of Online Payments Group contribute a certain revenue thresholdsamount of the acquired business are achievedrevenue for the twelve months ending FebruarySeptember 28, 2023.2023 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 financial performancerevenues over the earn-outearnout period along with estimates for revenue volatility (16.7%)of 53.6% and 54.4% as of March 31, 2023 and December 31, 2022, respectively, and the discount rate (7.1%).of 7.6% and 7.2% as of March 31, 2023 and December 31, 2022, respectively. See Note 32 for more information on the terms of the earnout agreement. The Company recognized fair value adjustments to the contingent liability for Online Payments Group of $7.0 million for the three months ended March 31, 2023, primarily due to an increase 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 was $40.2 million as of March 31, 2023, of which $28.0 million is recognized in “Accrued expenses and other current liabilities” and $12.2 million is recognized in “Other noncurrent liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets.
In conjunction with the acquisition of The Giving Block on February 28, 2022, the Company entered into a contingent consideration agreement that required the Company to pay up to $246.0 million if certain revenue thresholds of the acquired business were achieved for the twelve months ending February 28, 2023. Prior to the final measurement date, 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, estimates for revenue volatility, and the discount rate. See Note 2 for more information on the terms of the earnout agreement. The earnout, valued at $10.2 million as of March 31, 2023, reflects the final measurement of the earnout payment. The Company recognized a fair value adjustment to the contingent liability for The Giving Block of $(0.5) million for the three months ended March 31, 2023 due to the final measurement of the earnout payment. The fair value adjustment is recognized in “Revaluation of contingent liabilities” on the Company’s unaudited Condensed Consolidated Statements of Operations.
In conjunction with the acquisitions of certain restaurant technology partners in 2022 and 2023, the Company entered into contingent consideration agreements that require the Company to pay up to an aggregate of $6.5 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 6.5% to 7.3% as of March 31, 2023 and from 5.1% to 6.7% as of December 31, 2022. See Note 2 for more information on the terms of the earnout agreements. The Company recognized fair value adjustments to the contingent liability for the restaurant technology partners of $0.5 million for the three months ended March 31, 2023, primarily due to an increase in expected performance over the earnout period. The estimated fair value of the contingent consideration is $2.1 million as of March 31, 2023, of which $0.5 million is recognized in “Accrued expenses and other current liabilities” and $1.6 million is recognized in “Other noncurrent liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets.
In conjunction with residual commission buyouts executed in conjunction with asset acquisitions, the Company entered into contingent consideration agreements that require the Company to pay up to an aggregate of $24.5 million. The fair values of the contingent consideration were estimated based on projected attrition rates and other financial metrics within the respective merchant portfolios over the earnout periods. The estimated fair value of the contingent consideration related to purchase considerationresidual commission buyouts of $57.8$9.8 million as of March 31, 2022 was2023 is recognized in “Accrued expenses and other current liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets.
The table below provides a reconciliation of the beginning and ending balances for the Level 3 contingent liabilities:
| | | Three Months Ended March 31, | | Three Months Ended March 31, 2023 |
| | 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 | $ | 45.2 | | | $ | 10.0 | | | $ | 55.2 | |
| Contingent consideration for The Giving Block acquisition | 57.8 | | | — | | |
| Cash payments made for contingent liabilities related to earnout payments | — | | | (0.2) | | |
| Contingent consideration for acquisitions | | Contingent consideration for acquisitions | 0.3 | | | — | | | 0.3 | |
| | Contingent liabilities that achieved earnout | | Contingent liabilities that achieved earnout | (10.2) | | | (0.2) | | | (10.4) | |
| | | Fair value adjustments | Fair value adjustments | — | | | 0.2 | | Fair value adjustments | 7.0 | | | — | | | 7.0 | |
| Balance at end of period | Balance at end of period | $ | 57.8 | | | $ | — | | Balance at end of period | $ | 42.3 | | | $ | 9.8 | | | $ | 52.1 | |
| |
Fair value adjustments for contingent liabilities are recorded within “General and administrative expenses”“Revaluation of contingent liabilities” in the Company'sCompany’s unaudited Condensed Consolidated Statements of Operations. There were no transfers into or out of Level 3 during the three months ended March 31, 2022 and 2021.2023.
The estimated fair value of the Company'sCompany’s outstanding debt using quoted prices from over-the-counter markets, considered Level 2 inputs, was as follows.follows:
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value | | Carrying
Value (a) | | Fair
Value | | Carrying
Value (a) | | Fair
Value |
| 2025 Convertible Notes | 2025 Convertible Notes | $ | 690.0 | | | $ | 725.6 | | | $ | 690.0 | | | $ | 735.4 | | 2025 Convertible Notes | $ | 681.1 | | | $ | 790.7 | | | $ | 680.3 | | | $ | 686.9 | |
| 2027 Convertible Notes | 2027 Convertible Notes | 632.5 | | | 554.1 | | | 632.5 | | | 556.5 | | 2027 Convertible Notes | 621.6 | | | 601.1 | | | 621.0 | | | 533.7 | |
| 2026 Senior Notes | 2026 Senior Notes | 450.0 | | | 437.1 | | | 450.0 | | | 465.7 | | 2026 Senior Notes | 442.0 | | | 427.2 | | | 441.4 | | | 423.0 | |
| Total | Total | $ | 1,772.5 | | | $ | 1,716.8 | | | $ | 1,772.5 | | | $ | 1,757.6 | | Total | $ | 1,744.7 | | | $ | 1,819.0 | | | $ | 1,742.7 | | | $ | 1,643.6 | |
| | (a) Carrying value excludes unamortized debt issuance costs related to the Revolving Credit Facility of $0.7 million and $0.8 million as of March 31, 2023 and December 31, 2022, respectively. | | (a) Carrying value excludes unamortized debt issuance costs related to the Revolving Credit Facility of $0.7 million and $0.8 million as of March 31, 2023 and December 31, 2022, respectively. |
The estimated fair value of the Company’s investments in securities was $56.0 million and $47.1 million as of March 31, 2023 and December 31, 2022, respectively. These non-marketable equity investments have no readily determinable fair values and are measured using the measurement alternative, which is defined as cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. Adjustments for these investments, if any, are recorded in “Unrealized gain on investments in securities” on the Company’s unaudited Condensed Consolidated Statements of Operations. The Company recognized fair value adjustments to its investments in securities of $8.9 million for the three months ended March 31, 2023, the entire amount of which related to securities still held as of March 31, 2023, based on secondary offerings of identical securities by the respective companies in 2023. The Company has recognized cumulative fair value adjustments to its investments in securities of $24.0 million.
The estimated fair value of the Company’s crypto settlement assets and crypto settlement liabilities was $3.2 million and $1.8 million as of March 31, 2023 and December 31, 2022, respectively. 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 2 inputs.
Other financial instruments not measured at fair value on the Company’s unaudited Condensed Consolidated Balance Sheets atas of March 31, 20222023 and December 31, 20212022 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'sCompany’s unaudited Condensed Consolidated Balance Sheets.
14.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., two operating subsidiaries of Shift4 Payments, LLC wholly owns various U.S. and foreign subsidiaries which are considered C-Corporationstaxed 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.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
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 March 31, 2022,2023, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.
The Company’s effective tax rate was (32.0)(21.4)% and 1.6%(32.0)% for the three months ended March 31, 2023 and 2022, respectively. The effective tax rate for the three months ended March 31, 2023 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 2021, respectively.certain corporate subsidiaries in the U.S., and a $4.8 million tax benefit related to the valuation allowance release due to a legal entity restructuring. The effective tax rate for the three months ended March 31, 2022 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 allowance on Shift4 Payments, Inc. and VenueNext, Inc.certain corporate subsidiaries in the United States,U.S., and a $6.4 million income tax benefit related to the valuation allowance release due to acquired deferred tax liabilities from The Giving Block.
Uncertain Tax Positions
The effectiveeffects of uncertain tax rate forpositions are recognized in the three months endedcondensed 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 Company’s unaudited Condensed Consolidated Statements of Operations. Accrued interest and penalties, if any, are included within “Deferred tax liability” in the Company’s Condensed Consolidated Balance Sheets. As of March 31, 2021 was different than the U.S. federal statutory income2023 and December 31, 2022, $8.1 million and $8.0 million, respectively, of uncertain 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.positions were recognized within “Other noncurrent liabilities” in the United States.Company’s unaudited Condensed Consolidated Balance Sheets, which were recognized in conjunction with acquisitions.
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 the Continuing Equity Owners, 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 TransactionsCompany’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”)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.
As of March 31, 2023 and December 31, 2022, the Company recognized a TRA liability of $2.2 million and $1.7 million, respectively, after concluding it was probable that, based on estimates of future taxable income, the Company will realize tax benefits associated with the TRA. The liability is recognized in “Other noncurrent liabilities” on the Company’s unaudited Condensed Consolidated Balance Sheets. As of March 31, 2023, the Company has not recognized a $248.3the remaining $291.6 million liability under the TRA after concluding it was not probable that such TRA Payments wouldthe Company will be paidable 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 months ended March 31, 2023 and 2022. The amounts payableestimation of liability under the TRA will vary depending upon a number of factors, includingtax 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 all of the remaining Continuing Equity OwnersRook were to exchange allany of theirits LLC Units, the Company does not expect the deferred tax asset or TRA liabilityInterests subsequent to vary substantially from the amounts reported in the 2021 Form 10-K/A. The actual amount ofMarch 31, 2023, such exchanges could generate additional deferred tax assets and related liabilitiesTRA liability. As of December 31, 2022, the estimated impact of the exchange of all of Rook’s LLC Interests was an additional deferred tax asset of approximately $457.3 million and a TRA liability of approximately $388.7 million. The actual amounts as of March 31, 2023 could differ materially from those disclosed as of December 31, 2022 as they are impacted by the timing of the exchanges, the valuation of Shift4 Corporation,corporate subsidiaries, 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.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
15.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 leases:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Assets | | | |
| Operating lease assets | $ | 17.0 | | | $ | 18.5 | |
| Liabilities | | | |
| Current operating lease liabilities | $ | 4.4 | | | $ | 4.8 | |
| Noncurrent operating lease liabilities | 16.6 | | | 17.9 | |
| Total lease liabilities | $ | 21.0 | | | $ | 22.7 | |
Operating lease assets are included within “Right-of-use assets” and operating lease liabilities are included within “Accrued expenses and other current liabilities” and “Other noncurrent liabilities” in the Company's unaudited Condensed Consolidated Balance Sheets.
The expected future payments related to leases with initial non-cancellable lease terms in excess of one year at March 31, 2022:
| | | | | | |
| 2022 (remaining nine months) | $ | 3.8 | | |
| 2023 | 4.4 | | |
| 2024 | 4.3 | | |
| 2025 | 3.3 | | |
| 2026 | 2.8 | | |
| Thereafter | 4.4 | | |
| Total lease payments | $ | 23.0 | | |
| Less: Interest | (2.0) | | |
| Present value of minimum payments | $ | 21.0 | | |
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 million and $1.7 million for the three months ended March 31, 2022 and 2021, respectively.
Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Weighted average remaining in lease term (in years): | 5.5 | | 5.6 |
| | | |
| Weighted average discount rate | 3.2 | % | | 3.2 | % |
Operating lease payments included in operating cash flows were $1.5 million and $1.6 million for the three months ended March 31, 2022 and 2021, respectively.
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'sCompany’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'sCompany’s unaudited Condensed Consolidated Statements of Operations.
Total lease income for the three months ended March 31, 2023 and 2022 and 2021 was $4.3$5.3 million and $4.0$4.3 million, respectively. Variable lease income was not material for the three months ended March 31, 20222023 or 2021.2022.
The Company expects to receive future minimum lease payments for hardware provided under the Company’s SaaS agreements of $10.3$11.8 million from April 1 2022, 2023 through March 31, 2023.2024. See Note 43 and Note 9 for more information on the accounting for these operating leases.
16.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 $0.2 million for the three months ended both March 31, 2023 and 2022. There were no amounts outstanding at March 31, 2023 or December 31, 2022. In addition, during the three months ended March 31, 2022 and 2021. There were no amounts outstanding at March 31, 2022 or December 31, 2021.
In the third and fourth quarters of 2021,2023, the Company incurred $1.1made $1.4 million in costs associated with a proposed Follow-on Offering that are reimbursable by Searchlight. As of March 31, 2022 and December 31, 2021, $0.5 million and $1.1 million, respectively,distributions related to income taxes paid on behalf of Rook, which are included in "Accounts receivable, net" on the Company's unaudited Condensed Consolidated Balance Sheets.
In February 2021, the Company accepted the transfer of the right“Distributions 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 millionnoncontrolling interests” in “Additional paid-in capital” on the Company’s unaudited Condensed Consolidated Balance Sheets as of March 31, 2022, and expensed within “Advertising and marketing” on the Company's unaudited Condensed Consolidated Statements of Operations in MarchCash Flows.
In November 2021, when the participant was selectedCompany implemented a one-time discretionary equity award program for the missionnon-management employees. The Founder agreed to fund 50% of this program through a contest held by the Company.
In the fiscal year ended December 31, 2021, the Company incurred a significant amountcontribution of nonrecurring expenses to integrate, rebrand and promote 3dcart to Shift4Shop in conjunction with the Inspiration4 announcement. Certain expenses, totaling $0.1 million, were directly associated with the Inspiration4 mission and were reimbursable by the Founder.shares of his Class C common stock. As of March 31, 2022 and December 31, 2021, a $0.1 million receivable2023, the expected contribution from the Founder was recorded as "Accounts receivable"totaled 767,748 shares of his Class C common stock. The one-time discretionary equity award program will vest in three equal installments annually beginning in the third year. Vesting of the awards is subject to the continued employment of non-management employees.
Rook has entered into margin loan agreements, pursuant to which, in addition to other collateral, it has pledged LLC Interests and shares of the Company’s Class A and Class B common stock (collectively, “Rook Units”) to secure a margin loan. If Rook were to default on its obligations under the Company's unaudited Condensed Consolidated Balance Sheets.margin loan and fail to cure such default, the lender would have the right to exchange and sell up to 15,000,000 Rook units to satisfy Rook’s obligation.
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 settlesettles 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 the 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.
During the three months ended
25
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unitcommon stock owned by the SPV were effectively converted to Class A common stock and per unit amounts)
delivered to the SPV through the VPF Contract.In September 2021, the Founder, through the SPV, entered into two 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 $66.4240$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 $66.4240$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.
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.
17.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 acceptingcard-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 other legal proceedings or claims that the Company believes will have a material adverse effect on its business, financial condition or operating results.
18.Stockholders’ Equity/Members’ DeficitEquity
Stock Repurchases
On December 16,In 2021 and 2022, the Company’s Board of Directors (the “Board”) authorized commencement of athree sequential stock repurchase program. The stock repurchase program authorizesprograms (the “Programs”), pursuant to which the Company was authorized to repurchase up to $100.0an aggregate of $250.0 million of the Company’sshares of its Class A common stock par value $0.0001 (“Common Stock”) and will expire onthrough December 31, 2022.
Repurchases under the program mayPrograms were able to 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 bewere 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 repurchasesthird of its shares under this authorization.
This program does not obligate the Company to acquire any particular amount of Common Stock and the program may be extended, modified, suspended or discontinued at any time at the Company’s discretion.
As ofthese Programs expired on December 31, 2021, the Company repurchased 378,475 shares of Common stock for $21.1 million, including commissions paid, at an average price paid of $55.81 per share.2022.
InDuring the three months ended March 31, 2022, the Company repurchased 301,510 shares of CommonClass A common stock under the Programs for $17.2 million, including commissions paid, at an average price paid of $56.78 per share. As
Repurchased shares of March 31, 2022, approximately $61.8 million remained available for future purchases under the program.
The shares repurchasedcommon stock that have not been retired are recorded as “Treasury stock” on the Company'sCompany’s unaudited Condensed Consolidated Balance Sheets.
In April 2022, Upon retirement, the Company repurchased 1,126,277allocates the value of treasury stock between Additional paid-in capital and Retained earnings. There were no shares of Commontreasury stock for $61.3 million, including commissions paid, at an average price paidoutstanding as of $54.39 per share.March 31, 2023 or December 31, 2022.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
19.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.Rook. The following table summarizes the ownership of LLC Interests in Shift4 Payments, LLC:
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | LLC Interests | | Ownership % | | LLC Interests | | Ownership % | | LLC Interests | | Ownership % | | LLC Interests | | Ownership % |
| Shift4 Payments, Inc. | Shift4 Payments, Inc. | 57,241,245 | | | 68.5 | % | | 56,449,833 | | | 68.2 | % | Shift4 Payments, Inc. | 59,024,237 | | | 71.0 | % | | 57,121,314 | | | 68.9 | % |
| Continuing Equity Owners | 26,272,654 | | | 31.5 | % | | 26,272,654 | | | 31.8 | % | |
| Rook | | Rook | 24,162,351 | | | 29.0 | % | | 25,829,016 | | | 31.1 | % |
| Total | Total | 83,513,899 | | | 100 | % | | 82,722,487 | | | 100 | % | Total | 83,186,588 | | | 100.0 | % | | 82,950,330 | | | 100.0 | % |
20.Equity-based Compensation
2020 Incentive Award Plan
In June 2020, the Company adopted theThe Company’s 2020 Incentive Award Plan, (“2020as amended and restated in June 2022 (the “Restated Equity 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 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 20212023 and ending in and including 2030,2032, equal to the lesser of (1) 1%2% 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 Common StockClass 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 the amendment and restatementAs of March 31, 2023, a maximum of 721,911 shares of the Shift4 Payments, Inc. 2020 Incentive Award Plan (the “Restated Equity Plan”), subject to stockholder approval. The Restated Equity Plan will become effective if it is approved by the stockholders at the Company’s annual meeting of stockholders to be held on June 10, 2022. If approved, the Restated Equity Plan would (a) increase the number of sharesClass A common stock were available for issuance under the Restated Equity Plan to a totalPlan.
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 three months ended March 31, 20222023 was as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
Number of RSUs | | Weighted
Average
Grant Date
Fair Value |
| Unvested balance at beginning of period | 2,402,694 | | | $ | 43.28 | |
| Granted (a) | 491,639 | | | 45.86 | |
| Vested | (53,647) | | | 57.99 | |
| Forfeited or cancelled | (184,011) | | | 43.03 | |
| Unvested balance at end of period | 2,656,675 | | | $ | 45.24 | |
| | | |
| (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. |
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
| | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
Number of RSUs | | Weighted Average
Grant Date
Fair Value |
| Unvested balance at December 31, 2022 | 2,465,355 | | | $ | 47.57 | |
| Granted | 1,245,155 | | | 64.30 | |
| Vested | (194,613) | | | 60.59 | |
| Forfeited or cancelled | (129,176) | | | 53.40 | |
| Unvested balance at March 31, 2023 | 3,386,721 | | | $ | 52.75 | |
| | | |
|
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.date (or, in the case of the RSUs granted in connection with the IPO, the IPO price of $23.00 per share). The grant date fair value of the RSUs issued in connection with the IPO, that are not subject to continued service, was determined using the Finnerty discount for lack of marketability pricing model, taking into account the vesting provisions on the shares prior to June 2021.
The Company recognized equity-based compensation expenseexpense of $20.9 million and $16.9 million and $14.0 million for the three months ended March 31, 2023 and 2022, and 2021, respectively. AtAs of March 31, 2022,2023, the totalCompany had $139.7 million of total unrecognized equity-based compensation expense related to outstanding RSUs and PRSUs, was $102.3 million, which is expected to be recognized over a weighted-average period of 3.50 years.3.27 years.
21.Basic and Diluted Net LossIncome (Loss) per Share
The following table presents the calculation of basic and diluted net loss per share under the two-class method.
Basic net lossincome (loss) per share has been computed by dividing net lossincome (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 lossincome (loss) per share has been computed in a manner consistent with that of basic net lossincome (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 March 31, |
| 2022 | | 2021 |
| Net loss | $ | (13.2) | | | $ | (51.0) | |
| Less: Net loss attributable to noncontrolling interests | 5.7 | | | 18.2 | |
| Net loss attributable to Shift4 Payments, Inc. | $ | (7.5) | | | $ | (32.8) | |
| Adjustment to net loss attributable to common stockholders | — | | | 0.2 | |
| Net loss attributable to common stockholders | $ | (7.5) | | | $ | (32.6) | |
| | | |
| Numerator - Basic and Diluted: | | | |
| Net loss attributable to common stockholders | $ | (7.5) | | | $ | (32.6) | |
| Allocation of net loss among common stockholders: | | | |
| Net loss allocated to Class A common stock | $ | (6.9) | | | $ | (26.4) | |
| Net loss allocated to Class C common stock | $ | (0.6) | | | $ | (6.2) | |
| | | |
| Denominator - Basic and Diluted: | | | |
| Weighted average shares of Class A common stock outstanding | 52,119,378 | | | 42,667,754 | |
| Weighted average shares of Class C common stock outstanding | 4,573,372 | | | 10,009,852 | |
| | | |
| Net loss per share - Basic and Diluted: | | | |
| Class A common stock | $ | (0.13) | | | $ | (0.62) | |
| Class C common stock | $ | (0.13) | | | $ | (0.62) | |
| | | |
| | | |
| | | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
| Net income (loss) | $ | 20.4 | | | $ | (13.2) | | | | | |
| Less: Net income (loss) attributable to noncontrolling interests | 5.6 | | | (5.7) | | | | | |
| Net income (loss) attributable to Shift4 Payments, Inc. | 14.8 | | | (7.5) | | | | | |
| Adjustment to net income (loss) attributable to common stockholders | — | | | — | | | | | |
| Net income (loss) attributable to common stockholders | $ | 14.8 | | | $ | (7.5) | | | | | |
| | | | | | | |
| Numerator - allocation of net income (loss) attributable to common stockholders: | | | | | | | |
| Net income (loss) allocated to Class A common stock - basic | $ | 14.2 | | | $ | (6.9) | | | | | |
| Reallocation of net income attributable to common stockholders from assumed conversion of LLC interests and assumed vesting of RSUs | 5.7 | | | — | | | | | |
| Net income (loss) allocated to Class A common stock - diluted | $ | 19.9 | | | $ | (6.9) | | | | | |
| | | | | | | |
| Net income (loss) allocated to Class C common stock - basic | $ | 0.6 | | | $ | (0.6) | | | | | |
| Reallocation of net income attributable to common stockholders from assumed conversion of LLC interests | (0.1) | | | — | | | | | |
| Net income (loss) allocated to Class C common stock - diluted | $ | 0.5 | | | $ | (0.6) | | | | | |
| | | | | | | |
| Denominator: | | | | | | | |
| Weighted average shares of Class A common stock outstanding - basic | 55,236,204 | | | 52,119,378 | | | | | |
| Effect of dilutive securities: | | | | | | | |
| LLC Interests | 25,533,462 | | | — | | | | | |
| RSUs | 1,469,038 | | | — | | | | | |
| | | | | | | |
| Weighted average shares of Class A common stock outstanding - diluted | 82,238,704 | | | 52,119,378 | | | | | |
| | | | | | | |
| Weighted average shares of Class C common stock outstanding - basic and diluted | 2,241,648 | | | 4,573,372 | | | | | |
| | | | | | | |
| Net income (loss) per share - Basic: | | | | | | | |
| Class A common stock | $ | 0.26 | | | $ | (0.13) | | | | | |
| Class C common stock | $ | 0.26 | | | $ | (0.13) | | | | | |
| Net income (loss) per share - Diluted: | | | | | | | |
| Class A Common Stock | $ | 0.24 | | | $ | (0.13) | | | | | |
| Class C Common Stock | $ | 0.24 | | | $ | (0.13) | | | | | |
The following were excluded from the calculation of diluted net lossincome (loss) per share as the effect would be anti-dilutive.anti-dilutive:
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | 2022 | | 2021 | | 2023 | | 2022 | |
| LLC Interests that convert into potential Class A common shares | LLC Interests that convert into potential Class A common shares | 26,272,654 | | | 29,699,857 | | LLC Interests that convert into potential Class A common shares | — | | | 26,272,654 | | |
| RSUs and performance RSUs - employee | 2,643,733 | | | 2,363,289 | | |
| RSUs - non-employee directors | 12,942 | | | 38,819 | | |
| RSUs and performance RSUs | | RSUs and performance RSUs | 6,908 | | | 2,656,675 | | |
| | Total | Total | 28,929,329 | | | 32,101,965 | | Total | 6,908 | | | 28,929,329 | | |
For the three months ended March 31, 2023, 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 March 31, 2023, per the terms of the 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 Online Payments Group and certain restaurant technology partners. See Note 2 for more information about shares to be issued in connection with earnouts.
For the three months ended March 31, 2022, the Company has excluded from the calculation of diluted net loss 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'sCompany’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 March 31, 2022, per the terms of the agreements.
SHIFT4 PAYMENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (in millions, except share, unit and per unit amounts)
For the three months ended March 31, 2021, the Company has excluded from the calculation of diluted net loss per share the effectshares of the conversion of the 2025 Convertible Notes, as the last reported sales price of the Company'sCompany’s Class A common stock was not greater than or equal to 130%be issued in connection with the earnout due to the former shareholders of the conversion priceThe Giving Block. See Note 2 for 20 trading days during a period of 30 consecutive trading days priormore information about shares to March 31, 2021, per the terms of the agreement.be issued in connection with earnouts.
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'sCompany’s Class A common stock or a combination of both at the Company'sCompany’s election.
In addition, for the three months ended March 31, 2022, the Company has excluded from the calculation of diluted net loss 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 3 for more information.
22.Supplemental Cash Flows Information
Supplemental cash flows disclosures and noncash information consisted of the following:
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| 2022 | | 2021 | 2023 | | 2022 |
| Cash paid for interest | Cash paid for interest | $ | 1.6 | | | $ | — | | Cash paid for interest | $ | 1.6 | | | $ | 1.6 | |
| Cash paid for income taxes, net of refunds | | Cash paid for income taxes, net of refunds | 1.3 | | | — | |
| Noncash investing activities | | Noncash investing activities | |
| Shares and equity-based compensation awards issued in connection with acquisitions | | Shares and equity-based compensation awards issued in connection with acquisitions | — | | | 36.5 | |
| | Noncash investing activities | | |
| Contingent consideration for acquisitions | | Contingent consideration for acquisitions | 0.3 | | | 57.8 | |
| | 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 | | |
| | Equipment for lease | Equipment for lease | 3.9 | | | — | | Equipment for lease | 6.0 | | | 3.9 | |
| | Capitalized software development costs | Capitalized software development costs | 2.2 | | | — | | Capitalized software development costs | 2.1 | | | 2.2 | |
| Capitalized acquisition costs | — | | | 0.7 | | |
| Acquisition of property, plant and equipment | | Acquisition of property, plant and equipment | 1.9 | | | — | |
| Noncash financing activities | Noncash financing activities | | Noncash financing activities | |
| | Right associated with Inspiration4 seat | — | | | 2.1 | | |
| Shares and equity-based compensation awards measured but not yet issued in connection with settlement of contingent consideration for acquisitions | | Shares and equity-based compensation awards measured but not yet issued in connection with settlement of contingent consideration for acquisitions | 7.6 | | | — | |
| Right-of-use assets obtained in exchange for operating lease liabilities | | Right-of-use assets obtained in exchange for operating lease liabilities | 2.4 | | | — | |
23.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 one operating segment and one reportable segment.
The following table summarizes gross revenue by revenue type:
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| 2022 | | 2021 | 2023 | | 2022 | |
| Payments-based revenue | Payments-based revenue | $ | 371.5 | | | $ | 215.9 | | Payments-based revenue | $ | 511.0 | | | $ | 371.5 | | |
| Subscription and other revenues | Subscription and other revenues | 30.4 | | | 23.4 | | Subscription and other revenues | 36.0 | | | 30.4 | | |
| Gross revenue | Gross revenue | $ | 401.9 | | | $ | 239.3 | | Gross revenue | $ | 547.0 | | | $ | 401.9 | | |
|
24.Subsequent Events
Acquisition
Subsequent to March 31, 2023, the Company acquired Focus POS Systems for $45.0 million of total purchase consideration, comprised of $35.0 million of cash and $10.0 million of shares of the Company’s Class A common stock. Due to the timing of this acquisition, the initial accounting for the acquisition, 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, at this time.
Material Agreements
Prior to an amendment to the Company’s agreement with its sponsor bank, as discussed in Note 1, Settlement Funds to facilitate gross card transaction deposits for those customers the Company bills on a monthly, versus a daily basis funds were deposited at the sponsor bank and included within “Accounts receivable, net” on the Company’s unaudited Condensed Consolidated Balance Sheets prior to December 2022.
In April 2023, the Company finalized an amendment which established a new long-term agreement with its sponsor bank, which augments services and expands tiered pricing that lowers the Company’s cost as transaction volume increases. The agreement also establishes by what means the Company’s cash will be restricted based on settlement activity flows. Under this agreement, the Company is required to maintain an account in the Company’s name at the sponsor bank, with a minimum balance equal to the greater of $25.0 million or 110% of the highest merchant settlement account overdraft balance over a rolling 90-day period. This amount will fluctuate based on end-to-end payment volumes and the timing of billing cycles and will be recognized as “Restricted cash” on the Company’s unaudited Condensed Consolidated Balance Sheets.
Stock Repurchase Program
On May 3, 2023, the Board authorized a new stock repurchase program (the “May 2023 Program”), pursuant to which the Company is authorized to repurchase up to $250.0 million of shares of its Class A common stock through December 31, 2023.
Repurchases under the May 2023 Program 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 May 2023 Program.
The May 2023 Program does not obligate the Company to acquire any particular amount of common stock. The May 2023 Program may be extended, modified, suspended or discontinued at any time at the Company’s discretion.
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 included elsewhere in this Quarterly Report on Form 10-Q/A,10-Q (“Quarterly Report”), as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K/A (“Form 10-K/A”)10-K for the fiscal year ended December 31, 2021,2022, filed with the U.S. Securities and Exchange Commission (“SEC”) on November 8, 2022March 1, 2023 (the “2021“2022 Form 10-K/A”10-K”). 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 20212022 Form 10-K/A.10-K. We assume no obligation to update any of these forward-looking statements.
Certain 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 amendment and restatement of this Quarterly Report on Form 10-Q/A, as described in further detail in the “Explanatory Note.” For further detail regarding the restatement, also see 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/A, 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” prior to May 24, 2022 refers collectively to Searchlight Capital Partners, L.P., a Delaware limited partnership, and certain of its affiliated funds, 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. From May 24, 2022 onwards, the Founder is the sole remaining Continuing Equity Owner.
•“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.stock and the sole remaining Continuing Equity Owner.
•“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 is a Continuing Equity Owner and an owner of Class C common stock.
Overview
We are a leading independent provider of payment acceptancesoftware and payment processing and technology solutions in the United States (“U.S.”) based on total volume of payments processed. We have achieved our leadership position through decades of solving business and operational challenges facing our customerscustomers’ overall commerce needs. Our merchants range in size from small owner-operated local businesses to multinational enterprises conducting commerce throughout the world. We distribute our services through a scaled network of seasoned internal sales and support teams, as well as through our network of software partners. Our software partners are comprised of independent software vendors (“ISVs”) and value-added resellers (“VARs”). For our software partners, we offer a single integration to ana global end-to-end paymentspayment 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 onand fulfill business needs that would otherwise require multiple providers to accept card-based payments, while providing the digital tools necessary to provide their end-customers a seamless commerce experience.software, hardware and payment vendors.
At the heart of our business is our payments platform.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 POSpoint of sale (“POS”) solutions;
•security and risk management solutions; and
•reporting and analytical tools.
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.
We have a partner-centric distribution approach. WeIn addition to our scaled network of seasoned internal sales and support teams, we market and sell our solutions through a diversified network of over 7,000thousands 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 $13.4 $22.3 billion and $8.0$13.4 billion for the three months ended March 31, 2023 and 2022, and 2021, respectively. This end-to-end payment volume contributed approximately 69% and 61% of gross revenue less network fees for the three months ended March 31, 2022 and 2021, respectively.
Our merchants range in size from small owner-operated local businesses to medium sized businesses (“SMBs”) to largemultinational enterprises conducting commerce throughout the world. We operate across numerous verticals including food and beverage, hospitality, stadiums and arenas, gaming, specialty retail, non-profits, eCommerce, and eCommerce.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.
Recent Developments
Caring with Crypto
In March 2022, we announced the launch of the “Caring with Crypto” campaign to raise over $20.0 million for nonprofit organizations on The Giving Block, Inc.’s (“The Giving Block”) cryptocurrency (“crypto”) fundraising platform. Our Founder will personally match up to $10.0 million in crypto donations by existing and new non-profit customers of The Giving Block.
Stock Repurchases
In the three months ended March 31, 2022, we repurchased 301,510 shares of Common stock for $17.2 million, including commissions paid, at an average price paid of $56.78 per share, which is recorded as “Treasury stock” in the accompanying unaudited Condensed Consolidated Balance Sheets. As of March 31, 2022, approximately $61.8 million remained available for future purchases under the program. In April 2022, we repurchased 1,126,277 shares of Common stock for $61.3 million, including commissions paid, at an average price paid of $54.39 per share. See Note 18 to the accompanying unaudited condensed consolidated financial statements for more information and Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds.”
Recent Acquisition
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 to accelerate its 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.
Pending Acquisition
Finaro
On March 1, 2022, we entered into a definitive agreement to acquire Credorax, Inc. d/b/a Finaro (“Finaro”) for approximately $200.0 million in cash, on hand, $325.0 million in6,439,316 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 towill occur within 60 days of receiving regulatory approvals, which we expect to receive in the fourth 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.
COVID-19 Pandemic Update
While great progress has been made in the fight against the COVID-19 pandemic, the pandemic remains a global challenge and continues to impact international travel and corporate travel patterns, both of which remain below pre-pandemic levels. The Omicron variant began to adversely impact our processing volumes in December 2021, but by full-month March 2022, end-to-end volumes had recovered and exceeded volumes in the prior year period. However, our financial performance could be adversely impacted by any local or government-imposed pandemic restrictions, although we are currently unable to predict the extent to which the COVID-19 pandemic may adversely impact our future business operations, financial performance and results of operations. For a further discussion of the risks, uncertainties and actions taken in response to COVID-19, see the sections entitled “Risk Factors” in Part I, Item 1A. and “Human Capital” in Part I, Item 1. in our 2021 Form 10-K/A.
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 continue to grow this volume by attracting newthrough both our internal sales team and integrated software partners, through our market-leading and innovative solutions. These integrated software partnerswho 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. We have also implemented price increases for those merchants who have chosen to not adopt our end-to-end payment solutions.
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 internal sales team and software partners. A key 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 internal sales team and software partners is essential forimpacts our future growth and our ability to service our existing base of merchants. To this end, itfacilitate internal talent attraction and retention, we strive to make Shift4 a diverse, inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits and health and wellness programs. It is also 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,POS, 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, trade shows,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 continue to lead to long-term growth and profitability.
Pursuit of strategic acquisitions. From time to time, we may pursue strategic 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. While our foreign exchange and international operating risks have historically been negligible, we may increasingly be subject to said risks as we continue our international expansion efforts.
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 reduced consumer confidence and discretionary spending, 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.
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 revenueconsists primarily of payments-based revenue and subscription and other revenues:
Payments-based revenueincludes 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.
Subscription and other revenues include software as a service (“SaaS”) fees for point-of-salePOS systems and terminals provided to merchants and our Shift4Shop eCommerce platform. Point-of-salemerchants. POS 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 resellers, including ISVs.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.
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.
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, and 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 expensesInterest income relate to strategic initiatives we have taken that include, but are not limited to, severance or separation costsprimarily consists of interest income earned on our cash 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.
Loss on extinguishment of debt represents losses recorded for unamortized capitalized financing costs associated with debt prepayments.cash equivalents.
Other income, net primarily consists of other non-operating items.
Unrealized gain on investments in securities represents adjustments to the fair value of our investments in non-marketable securities.
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 domesticjurisdictions, in addition to income taxes incurred in foreign jurisdictions.
Net lossincome (loss) attributable to noncontrolling interests arises from net lossincome (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 lossincome (loss) allocated to Continuing Equity Owners as a result of their proportional ownership of LLC Interests.
Comparison of Results for the Three Months Ended March 31, 20222023 and 20212022
The following table sets forth the consolidated statements of operations for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | |
| (in millions) | 2022 | | 2021 | | $ change | | % change |
| Payments-based revenue | $ | 371.5 | | | | | | | $ | 215.9 | | | $ | 155.6 | | | 72.1 | % |
| Subscription and other revenues | 30.4 | | | | | | | 23.4 | | | 7.0 | | | 29.9 | % |
| Gross revenue | 401.9 | | | | | | | 239.3 | | | 162.6 | | | 67.9 | % |
| Network fees | (253.1) | | | | | | | (141.8) | | | (111.3) | | | 78.5 | % |
| Other costs of sales (exclusive of depreciation and amortization expense shown separately below) | (64.2) | | | | | | | (45.7) | | | (18.5) | | | 40.5 | % |
| General and administrative expenses | (66.2) | | | | | | | (53.5) | | | (12.7) | | | 23.7 | % |
| Depreciation and amortization expense (a) | (17.3) | | | | | | | (15.4) | | | (1.9) | | | 12.3 | % |
| Professional fees | (8.7) | | | | | | | (6.2) | | | (2.5) | | | 40.3 | % |
| Advertising and marketing expenses | (2.7) | | | | | | | (20.1) | | | 17.4 | | | (86.6) | % |
| Restructuring expenses | — | | | | | | | (0.1) | | | 0.1 | | | NM |
| Transaction-related expenses | (1.4) | | | | | | | — | | | (1.4) | | | NM |
| Loss from operations | (11.7) | | | | | | | (43.5) | | | 31.8 | | | (73.1) | % |
| Loss on extinguishment of debt | — | | | | | | | (0.2) | | | 0.2 | | | NM |
| Other income, net | 0.2 | | | | | | | — | | | 0.2 | | | NM |
| Interest expense | (7.9) | | | | | | | (6.5) | | | (1.4) | | | 21.5 | % |
| Loss before income taxes | (19.4) | | | | | | | (50.2) | | | 30.8 | | | (61.4) | % |
| Income tax benefit (provision) | 6.2 | | | | | | | (0.8) | | | 7.0 | | | NM |
| Net loss | (13.2) | | | | | | | (51.0) | | | 37.8 | | | (74.1) | % |
| Net loss attributable to noncontrolling interests | (5.7) | | | | | | | (18.2) | | | 12.5 | | | (68.7) | % |
| Net loss attributable to Shift4 Payments, Inc. | $ | (7.5) | | | | | | | $ | (32.8) | | | $ | 25.3 | | | (77.1) | % |
We have changed the presentation of this table from the presentation in the Original Form 10-Q 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 March 31, 2022 and 2021. | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | |
| (in millions) | 2023 | 2022 | | $ change | | % change |
| Payments-based revenue | $ | 511.0 | | | $ | 371.5 | | | $ | 139.5 | | | 37.6 | % |
| Subscription and other revenues | 36.0 | | | 30.4 | | | 5.6 | | | 18.4 | % |
| Gross revenue | 547.0 | | | 401.9 | | | 145.1 | | | 36.1 | % |
| Network fees | (347.0) | | | (253.1) | | | (93.9) | | | 37.1 | % |
| Other costs of sales (exclusive of certain depreciation and amortization expense shown separately below) | (54.6) | | | (64.2) | | | 9.6 | | | (15.0) | % |
| General and administrative expenses | (85.7) | | | (66.2) | | | (19.5) | | | 29.5 | % |
| Revaluation of contingent liabilities | (7.0) | | | — | | | (7.0) | | | NM |
| Depreciation and amortization expense (a) | (35.3) | | | (17.3) | | | (18.0) | | | 104.0 | % |
| Professional fees | (6.1) | | | (10.1) | | | 4.0 | | | (39.6) | % |
| Advertising and marketing expenses | (2.5) | | | (2.7) | | | 0.2 | | | (7.4) | % |
| Income (loss) from operations | 8.8 | | | (11.7) | | | 20.5 | | | NM |
| | | | | | | |
| Interest income | 7.6 | | | — | | | 7.6 | | | NM |
| Other income, net | 0.1 | | | 0.2 | | | (0.1) | | | (50.0) | % |
| Unrealized gain on investments in securities | 8.9 | | | — | | | 8.9 | | | NM |
| Change in TRA liability | (0.5) | | | — | | | (0.5) | | | NM |
| Interest expense | (8.1) | | | (7.9) | | | (0.2) | | | 2.5 | % |
| Income (loss) before income taxes | 16.8 | | | (19.4) | | | 36.2 | | | NM |
| Income tax benefit | 3.6 | | | 6.2 | | | (2.6) | | | (41.9) | % |
| Net income (loss) | 20.4 | | | (13.2) | | | 33.6 | | | NM |
| Net income (loss) attributable to noncontrolling interests | 5.6 | | | (5.7) | | | 11.3 | | | NM |
| Net income (loss) attributable to Shift4 Payments, Inc. | $ | 14.8 | | | $ | (7.5) | | | $ | 22.3 | | | NM |
(a)Depreciation and amortization expense includes depreciation of equipment under lease of $7.0$7.2 million and $4.5$7.0 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
Gross revenue
Gross revenue was $547.0 million for the three months ended March 31, 2023, compared to $401.9 million for the three months ended March 31, 2022, compared to $239.3 million for the three months ended March 31, 2021, an increase of $162.6$145.1 million or 67.9%36.1%. Gross revenue is comprised of payments-based revenue and subscription and other revenues.
Payments-based revenue was $511.0 million for the three months ended March 31, 2023, compared to $371.5 million for the three months ended March 31, 2022, compared to $215.9 million for the three months ended March 31, 2021, an increase of $155.6$139.5 million or 72.1%37.6%. The increase in payments-based revenue was primarily driven by the increase in end-to-end payment volume of $5.4$8.8 billion, or 68%65.8%, for the three months ended March 31, 2022,2023, compared to the three months ended March 31, 2021.2022.
Subscription and other revenues were $36.0 million for the three months ended March 31, 2023, compared to $30.4 million for the three months ended March 31, 2022, compared to $23.4 million for the three months ended March 31, 2021, an increase of $7.0$5.6 million or 29.9%18.4%. The increase in subscription and other revenues iswas primarily driven primarily by the VenueNext, Postec and The Giving Blockour recent acquisitions, which collectively contributed $6.0an additional $3.8 million more to subscription and other revenues in the three months ended March 31, 2022,2023, compared to the three months ended March 31, 2021.2022. In addition, software licensehardware sales revenue increased $0.7$1.9 million for the three months ended March 31, 2022,2023, compared to the three months ended March 31, 2021.
Network fees
Network fees were $347.0 million for the three months ended March 31, 2023, compared to $253.1 million for the three months ended March 31, 2022, compared to $141.8 million for the three months ended March 31, 2021, an increase of $111.3$93.9 million or 78.5%37.1%. This increase iswas correlated with the increase in end-to-end payment volume as described above.
Gross revenue less network fees was $200.0 million for the three months ended March 31, 2023, compared to $148.8 million for the three months ended March 31, 2022, compared to $97.5 million for the three months ended March 31, 2021, an increase of $51.3$51.2 million or 52.6%34.4%. The increase in gross revenue less network fees was largely correlated with the increase in end-to-end payment volume.volume. See “—Key performance indicators“Key Performance Indicators and non-GAAP measures”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 $54.6 million for the three months ended March 31, 2023, compared to $64.2 million for the three months ended March 31, 2022, compared to $45.7 million for the three months ended March 31, 2021, an increasea decrease of $18.5$9.6 million, or 40.5%15.0%. This increasedecrease was primarily a result of:driven by:
•higherlower residual commissions, which increaseddecreased other costs of sales $16.2$14.2 million, wereprimarily driven by our strategic buyout program executed in the growth in gross third quarter of 2revenue less network fees;022; and
•higher variablelower capitalized customer acquisition cost amortization, which decreased other costs associated with processing fees of $2.3 million;
•the VenueNext, Postec and The Giving Block acquisitions which collectively increased other cost of sales $1.8$2.4 million, inprimarily due to the impact of changing the useful life of capitalized customer acquisition costs from three months ended March 31,years to four years, effective October 1, 2022;
partially offset by:
•higher capitalized acquisitionsoftware development cost amortization, which increased other costs of sales $1.2$2.8 million, relatedprimarily due to deal bonuses paid to VARs to obtain processing contracts;an increase in capitalized costs; and
•higher equipment sales,our recent acquisitions, which collectively increased other costs of sales $0.6 million; and
•higher capitalized software development amortization, which increased other costs of sales $0.6 million; partially offset by:
•higher than normal chargeback losses during the three months ended March 31, 2021 driven by the business failure of one merchant causing $5.2 million in estimated unrecoverable chargeback transactions.$2.0 million.
General and administrative expenses
General and administrative expenses were $85.7 million for the three months ended March 31, 2023, compared to $66.2 million for the three months ended March 31, 2022, compared to $53.5 million for the three months ended March 31, 2021, an increase of $12.7$19.5 million or 23.7%29.5%. The increase was primarily due to higher employee-relateddriven by our recent acquisitions, which collectively increased general and administrative expenses of $6.4$8.3 million in the three months ended March 31, 2022,2023 compared to the three months ended March 31, 2021, as a result of our continued growth and expansion, as well as higher equity-based compensation expense of $2.2 million in the three months ended March 31, 2022. In addition, the acquisitionscompensation and other employee-related expenses increased by $7.2 million primarily as a result of VenueNext, Postecour continued growth and The Giving Block collectively increased general and administrative expenses $3.3expansion.
Revaluation of contingent liabilities
Revaluation of contingent liabilities of $7.0 million infor the three months ended March 31, 2023 is primarily driven by fair value adjustments to contingent liabilities arising from acquisitions we completed in 2022.
Depreciation and amortization expense
Depreciation and amortization expense was $35.3 million for the three months ended March 31, 2023, compared to $17.3 million for the three months ended March 31, 2022, an increase of $18.0 million or 104.0%. The increase was primarily driven by higher residual commission buyout amortization of $19.2 million due to the significant amount of residual commission buyouts completed in 2022. In addition, amortization of new intangible assets as a result of acquisitions collectively increased amortization expense $3.1 million in the three months ended March 31, 2023. This is offset by a decline in other intangible asset amortization of $4.7 million in the three months ended March 31, 2023, compared to $15.4the three months ended March 31, 2022, driven by intangibles that reached the end of their useful life.
Professional fees
Professional fees were $6.1 million for the three months ended March 31, 2021, an increase of $1.9 million or 12.3%. The increase was primarily due to higher deprecation for equipment under lease of $2.5 million in the three months ended March 31, 2022,2023, compared to the three months ended March 31, 2021.
Professional fees
Professional fees were $8.7$10.1 million for the three months ended March 31, 2022, compared to $6.2 million for the three months ended March 31, 2021, an increase of $2.5 million or 40.3%. The increase was due to higher acquisition-related costs.
Advertising and marketing expenses
Advertising and marketing expenses were $2.7 million for the three months ended March 31, 2022, compared to $20.1 million for the three months ended March 31, 2021, a decrease of $17.4$4.0 million or 86.6%39.6%. The decrease was primarily duedriven by lower acquisition-related costs, in addition to transaction-related expenses in the three months ended March 31, 2021 related to the integration of 3dcart and its rebranding as Shift4Shop that were nonrecurring in nature. This was partially offset by the VenueNext, Postec and The Giving Block acquisitions, which collectively increased advertising and marketing expenses $0.5 million in the three months ended March 31, 2022.
Transaction-related expenses
Transaction-related expenses were $1.4 million for the three months ended March 31, 2022. These expenses are associated with a consent solicitation for the 2026 Senior Notes in March 2022.
Interest income
Interest income was $7.6 million for the three months ended March 31, 2023, consisting primarily of interest income earned on our cash and cash equivalents. We had immaterial interest income for the three months ended March 31, 2022.
Unrealized gain on investments in securities
The unrealized gain on investments in securities resulted in $8.9 million of non-cash income for the three months ended March 31, 2023. There was no corresponding income for the three months ended March 31, 2022. See Note 11 in the notes13 to the accompanying unaudited condensed consolidated financial statements for more information.information on our investments in securities.
InterestChange in TRA liability
The change in TRA liability resulted in $0.5 million of non-cash expense
Interest expense was $7.9 million for the three months ended March 31, 2022, compared to $6.5 million2023. There was no corresponding expense for the three months ended March 31, 2021, an increase of $1.4 million or 21.5%. The increase in interest expense was primarily due2022. See Note 14 to the issuance ofaccompanying unaudited condensed consolidated financial statements for more information on the Convertible Senior Notes due 2027 (“2027 Convertible Notes”) in July 2021.TRA.
Income tax benefit (provision)
The effective tax rate for the three months ended March 31, 20222023 was (32.0)(21.4)%, compared to the effective tax rate for the three months ended March 31, 20212022 of 1.6%(32.0)%.
The effective tax rate for the three months ended March 31, 2023 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 a $4.8 million tax benefit related to the valuation allowance release due to a legal entity restructuring. The effective tax rate for the three months ended March 31, 2022 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 allowance on Shift4 Payments, Inc. and VenueNext, Inc.certain corporate subsidiaries in the United States, 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 three months ended March 31, 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 allowance on Shift4 Payments, Inc. and VenueNext, Inc. in the United States.
Net lossincome (loss) attributable to noncontrolling interests
Net lossincome attributable to noncontrolling interests of Shift4 Payments, LLC was a$5.6 million for the three months ended March 31, 2023, compared to net loss attributable to noncontrolling interests of $5.7 million for the three months ended March 31, 2022, compared to a loss2022.
Key performance indicatorsPerformance Indicators and non-GAAP measuresNon-GAAP Measures
The following table sets forth our key performance indicators and non-GAAP measures for the periods presented.presented:
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| (in millions) | (in millions) | 2022 | | 2021 | (in millions) | 2023 | | 2022 | |
| End-to-end payment volume | End-to-end payment volume | $ | 13,420.9 | | | $ | 7,986.8 | | End-to-end payment volume | $ | 22,256.9 | | | $ | 13,420.9 | | |
| Gross revenue less network fees | Gross revenue less network fees | 148.8 | | | 97.5 | | Gross revenue less network fees | 200.0 | | | 148.8 | | |
| EBITDA | EBITDA | 17.6 | | | (18.4) | | EBITDA | 64.9 | | | 17.6 | | |
| Adjusted EBITDA | Adjusted EBITDA | 44.3 | | | 22.2 | | Adjusted EBITDA | 89.3 | | | 44.3 | | |
End-to-end payment volume
End-to-end payment volume is defined as the total dollar amount of card payments that we authorize and settledeliver for settlement on behalf of our merchantsmerchants. 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 pricevolume 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 expense, interest income, 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.
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 acquisition, restructuring and integration costs, revaluation of contingent liabilities, unrealized gain (loss) on investments in securities, change in TRA liability, equity-based compensation expense, and other nonrecurring items. The financial impact of certain elements of these activities is often largelargely relative to the Company'sour overall financial performance and can adversely affect the comparability of our operating results and investors'investors’ ability to analyze the business from period to period.
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/A.Report. 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.
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 lossincome (loss) on a consolidated basis for the periods presented to EBITDA and Adjusted EBITDA.
Gross revenue less network fees:
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| (in millions) | (in millions) | 2022 | | 2021 | (in millions) | 2023 | | 2022 | |
| Gross revenue | Gross revenue | $ | 401.9 | | | $ | 239.3 | | Gross revenue | $ | 547.0 | | | $ | 401.9 | | |
| Less: Network fees | Less: Network fees | (253.1) | | | (141.8) | | Less: Network fees | (347.0) | | | (253.1) | | |
| Less: Other costs of sales (exclusive of depreciation of equipment under lease) | Less: Other costs of sales (exclusive of depreciation of equipment under lease) | (64.2) | | | (45.7) | | Less: Other costs of sales (exclusive of depreciation of equipment under lease) | (54.6) | | | (64.2) | | |
| | 84.6 | | | 51.8 | | | 145.4 | | | 84.6 | | |
| Less: Depreciation of equipment under lease | Less: Depreciation of equipment under lease | (7.0) | | | (4.5) | | Less: Depreciation of equipment under lease | (7.2) | | | (7.0) | | |
| Gross profit (a) | Gross profit (a) | $ | 77.6 | | | $ | 47.3 | | Gross profit (a) | $ | 138.2 | | | $ | 77.6 | | |
| | Gross profit (a) | Gross profit (a) | $ | 77.6 | | | $ | 47.3 | | Gross profit (a) | $ | 138.2 | | | $ | 77.6 | | |
| Add back: Other costs of sales | Add back: Other costs of sales | 64.2 | | | 45.7 | | Add back: Other costs of sales | 54.6 | | | 64.2 | | |
| Add back: Depreciation of equipment under lease | Add back: Depreciation of equipment under lease | 7.0 | | | 4.5 | | Add back: Depreciation of equipment under lease | 7.2 | | | 7.0 | | |
| Gross revenue less network fees | Gross revenue less network fees | $ | 148.8 | | | $ | 97.5 | | Gross revenue less network fees | $ | 200.0 | | | $ | 148.8 | | |
|
(a)The determination of gross profit is inclusive of depreciation of equipment under lease that is included within Depreciationin “Depreciation and amortization expense inexpense” on the Condensed Consolidated Statements of Operations. The table reflects the determination of gross profit for all periods presented. Although gross profit is no longernot presented on the Condensed Consolidated Statements of Operations, it represents the most comparable metric calculated under U.S. GAAP to non-GAAP gross revenues less network fees.
EBITDA and Adjusted EBITDA:
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| (in millions) | 2023 | | 2022 | | | | |
| Net income (loss) | $ | 20.4 | | | $ | (13.2) | | | | | |
| Interest expense | 8.1 | | | 7.9 | | | | | |
| Interest income | (7.6) | | | — | | | | | |
| Income tax provision (benefit) | (3.6) | | | (6.2) | | | | | |
| Depreciation and amortization expense | 47.6 | | | 29.1 | | | | | |
| EBITDA | 64.9 | | | 17.6 | | | | | |
| Acquisition, restructuring and integration costs (a) | 4.3 | | | 7.8 | | | | | |
| Revaluation of contingent liabilities (b) | 7.0 | | | — | | | | | |
| Change in unrealized gain on investments in securities (c) | (8.9) | | | — | | | | | |
| Change in TRA liability (d) | 0.5 | | | — | | | | | |
| Equity-based compensation (e) | 21.2 | | | 17.1 | | | | | |
| Other nonrecurring items (f) | 0.3 | | | 1.8 | | | | | |
| Adjusted EBITDA | $ | 89.3 | | | $ | 44.3 | | | | | |
| | | | | | | |
| (a) For the three months ended March 31, 2023, primarily consisted of $3.9 million of acquisition-related costs. For the three months ended March 31, 2022, primarily consisted of $6.3 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. |
| (b) For the three months ended March 31, 2023, primarily consisted of fair value adjustments to contingent liabilities arising from acquisitions. |
| (c) For the three months ended March 31, 2023, represents adjustments to the fair value of investments in non-marketable securities. See Note 13 to the accompanying unaudited condensed consolidated financial statements for more information on the investments in non-marketable securities. |
| (d) For the three months ended March 31, 2023, represents adjustments to the TRA liability. See Note 14 to the accompanying unaudited condensed consolidated financial statements for more information on the TRA. |
| (e) Represents equity-based compensation expense for RSUs, including employer taxes for vested RSUs. See Note 20 to the accompanying unaudited condensed consolidated financial statements for more information on equity-based compensation. |
| (f) For the three months ended March 31, 2022, primarily consisted of $1.2 million of costs associated with an internal processing system disruption that required technical remediation and $0.4 million of costs associated with an early retirement initiative completed in the first quarter of 2022. |
EBITDA and Adjusted EBITDA:
| | | | | | | | | | | |
| | Three Months Ended March 31, |
| (in millions) | 2022 | | 2021 |
| Net loss | $ | (13.2) | | | $ | (51.0) | |
| Interest expense | 7.9 | | | 6.5 | |
| Income tax (benefit) provision | (6.2) | | | 0.8 | |
| Depreciation and amortization expense | 29.1 | | | 25.3 | |
| EBITDA | 17.6 | | | (18.4) | |
| Acquisition, restructuring and integration costs (a) | 7.8 | | | 25.8 | |
| Equity-based compensation (b) | 17.1 | | | 14.1 | |
| Other nonrecurring items (c) | 1.8 | | | 0.7 | |
| Adjusted EBITDA | $ | 44.3 | | | $ | 22.2 | |
| | | |
| (a) For the three months ended March 31, 2022, primarily consisted of $6.3 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. For the three months ended March 31, 2021, consists primarily of expenses related to the integration of 3dcart and its rebranding as Shift4Shop of $19.0 million, $2.1 million of expense for the Inspiration4 seat and the acquisition of VenueNext of $1.0 million. |
| (b) Represents equity-based compensation expense for RSUs, including employer taxes for vested RSUs. See Note 20 in the notes to the accompanying unaudited condensed consolidated financial statements for more information on equity-based compensation. |
| (c) For the three months ended March 31, 2022, consists primarily of $1.2 million of costs associated with an internal processing system disruption that required technical remediation 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 under our Credit Facilities or equity transactions. The principal uses for liquidity have been debt service, capital expenditures (including research and development) and funds required to finance acquisitions. Given the impact the COVID-19 pandemic has had on the restaurant and hospitality industries, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure we can continue to operate during these uncertain times.
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.
The following table sets forth summary cash flow information for the periods presented.presented:
| | | | | | | | | | | |
| | Three Months Ended March 31, |
| (in millions) | 2022 | | 2021 |
| Net cash provided by (used in) operating activities (a) | $ | 30.8 | | | $ | (7.1) | |
| Net cash used in investing activities (a) | (37.6) | | | (72.1) | |
| Net cash used in financing activities | (35.7) | | | (3.7) | |
| Total | $ | (42.5) | | | $ | (82.9) | |
(a)Amounts are restated. See Note 2 for more information. | | | | | | | | | | | |
| | Three Months Ended March 31, |
| (in millions) | 2023 | | 2022 |
| Net cash provided by operating activities | $ | 79.4 | | | $ | 30.8 | |
| Net cash used in investing activities | (31.4) | | | (37.6) | |
| Net cash used in financing activities | (7.0) | | | (35.7) | |
| Effect of exchange rate changes on cash and cash equivalents | 0.4 | | | — | |
| Change in cash and cash equivalents | $ | 41.4 | | | $ | (42.5) | |
Operating activities
Net cash provided by (used in) operating activities consists of net lossincome (loss) adjusted for certain non-cash items and changes in other assets and liabilities.
For the three months ended March 31, 2023, net cash provided by operating activities of $79.4 million was primarily a result of:
38partially offset by:
Table•an impact from working capital of Contents$(8.1) million.For the three months ended March 31, 2022, net cash provided by operating activities of $30.8 million was primarily a result of:
•net loss of $13.2 million, which is adjusted for non-cash expenses, including depreciation and amortization of $29.1 million, equity-based compensation of $16.9 million, deferred income taxes of $(6.3) million, and provision for bad debts of $3.0 million;
partially offset by:
•changes in operating assets and liabilities an impact from working capitalof $(0.9) million, which includes $4.8 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.
For the three months ended March 31, 2021, net cash used in operating activities of $7.1 million was primarily a result of:
•net loss of $51.0 million, adjusted for non-cash expenses, including depreciation and amortization of $25.3 million, equity-based compensation of $14.0 million, provision for bad debts of $6.7 million and amortization of capitalized financing cost of $1.2 million; plus
•changes in operating assets and liabilities of $(3.9) million, which is primarily a result of $8.8 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, partially offset by higher deferred revenue of $6.6 million primarily due to the timing of annual compliance fees billed to our merchants.
Investing activities
Net cash used in investing activities includes cash paid for acquisitions, purchases of futureresidual commission streams of our software partners,buyouts, purchases of property, plant and equipment, purchases of equipment to be leased, investments in securities, and capitalized software development costs, and investments in non-marketable securities.costs.
Net cash used in investing activities was $31.4 million for the three months ended March 31, 2023, a decrease of $6.2 million, compared to net cash used in investing activities wasof $37.6 million for the three months ended March 31, 2022 an increase of $34.5 million compared to net cash used in investing activities of $72.1 million for the three months ended March 31, 2021.. This increasedecrease was primarilyprimarily the result of:
•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;
•partially offhigher capitalized software development costs of $4.4 million;set by:
•higher residual commission buyoutspurchases of $3.8 million; partially offset by:equipment to be leased of $4.8 million.
•the investment in SpaceX of $16.0 million in the three months ended March 31, 2021.
Financing activities
Net cash used in financing activities was $35.7$7.0 million for the three months ended March 31, 2022, an increase2023, a decrease of $32.0$28.7 million, compared to net cash used in financing activities of $3.7$35.7 million for the three months ended March 31, 2021.2022. This increasedecrease was primarily the result of:
•payments for the repurchase of common stock of $18.7 million during the three months ended March 31, 2022;
•higherlower employee taxes paid on vested RSUs of $9.8 million during the three months ended March 31, 2022 compared to three months ended March 31, 2021;$6.9 million; and
•payments associated with solicitation for the 2026 Senior Notes in March 2022 of $4.5 million.
Convertible Notes, Senior Notes and Revolving Credit FacilitiesFacility
As of March 31, 20222023 and December 31, 2021,2022, we had $1,772.5 million total principal amount of debt outstanding, including $690.0 million of 2025 Convertible Notes, $632.5 million of 2027 Convertible Notes, and $450.0 million of 2026 Senior Notes. See Note 11 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 capacitycapacity of $99.5 million, net of a $0.5 million letter of credit. $100.0 million. As of March 31, 2022,2023, we had no outstanding borrowings under the Revolving Credit Facility.
Stock repurchases
On December 16, 2021, our Board of Directors authorized the commencement of a stock repurchase program. The stock repurchase program authorizes us to repurchase up to $100.0 million of our Class A common stock, par value $0.0001 (“Common Stock”) and will expire on December 31, 2022.
In the first quarter of 2022, we repurchased 301,510 shares of Common stock for $17.2 million, including commissions paid, at an average price paid of $56.78 per share, which is recorded as “Treasury stock” on our unaudited Condensed Consolidated Balance Sheets. As of March 31, 2022, approximately $61.8 million remained available for future purchases under the program.
In April 2022, we repurchased 1,126,277 shares of Common stock for $61.3 million, including commissions paid, at an average price paid of $54.39 per share. See Note 18 to the accompanying unaudited condensed consolidated financial statements for more information.
Cash Requirements
Our material cash requirements include the following contractual obligations.
Debt
As of March 31, 2022,2023, we had $1,772.5 million of fixed rate debt principal outstanding with maturities beginning in 2025. Future interest payments associated with the outstanding debt total $121.5$97.5 million, with $24.0 million payable within twelve months.
LeasesContingent Liabilities
As of March 31, 2022,2023, the fair value of contingent liabilities to potentially be paid out in cash was $31.7 million, with $31.4 million payable within twelve months. As of March 31, 2023, the maximum amount of contingent liabilities to potentially be paid out in cash was $58.0 million, with $55.5 million payable within twelve months.
Leases
As of March 31, 2023, we are obligated under non-cancellable operating leases for our premises, which expire through November 2030. Rent expense incurred underFuture rent payments associated with outstanding operating leases which totaled $1.4total $27.0 million, with $6.7 million payable within twelve months.
We believe that our cash and cash equivalents and future cash flow from operations will be sufficient to fund our operating expenses and capital expenditure requirements for at least the threenext twelve months ended March 31, 2022, is included in “General and administrative expenses” ininto the foreseeable future based on our accompanying unaudited condensed consolidated statements of operations.current operating plan.
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
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.
JOBS Act
Prior to December 31, 2021, we were an emerging growth company (“EGC”) as defined by the JOBS Act. The JOBS Act provides that an EGC can take advantage of the extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We had elected to avail ourselves of this exemption prior to December 31, 2021, when we were an EGC, and as a result, our financial statements prior to that date may not have been comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. As of December 31, 2021, we are no longer an EGC.
Subject to certain conditions, as an EGC we also were able to rely on certain of the exemptions and reduced reporting requirements of the JOBS Act, including without limitation, from providing an auditor's attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 and from complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. Because we no longer qualify as an EGC, we are no longer able to take advantage of the extended transition period for the adoption of certain accounting standards or of the reduced disclosure and other benefits available to EGCs, including our exemption from providing our auditor’s attestation on our system of internal control over financial reporting.
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 March 31, 2022,2023, we had approximately $1,772.5 million of fixed rate debt principal outstanding pursuant to the Notes,notes with a fair value of $1,716.8 million, none of which was subject to an interest rate hedge.$1,819.0 million. Since these Notesnotes 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 Notesnotes 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.$100.0 million. 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 riskrisks related to fluctuations in interest raterates to the extent ofit impacts our borrowings. As of March 31, 20222023 and December 31, 2021,2022, 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/A and Note 11 in the notes to the accompanying unaudited condensed consolidated financial statements for more information.
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/A,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 March 31, 2022, due to the material weakness in our internal control over financial reporting described below,2023, 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/A 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 monthsquarter ended March 31, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 20212022 Form 10-K/A,10-K, the other information in this Quarterly Report, on Form 10-Q/A, 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 20212022 Form 10-K/A.10-K. 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
The following indicates our purchases of Class A common stock during the three months ended March 31, 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) |
| January 1-31, 2022 | | 245,700 | | | $ | 56.48 | | | 624,175 | | | $ | 65.0 | |
| February 1-28, 2022 | | — | | | — | | | 624,175 | | | 65.0 | |
| March 1-31, 2022 | | 55,810 | | | 58.11 | | | 679,985 | | | 61.8 | |
| Total | | 301,510 | | | | | | | |
|
| (a) On December 16, 2021, the Company announced that its Board of Directors had initiated a stock repurchase program pursuant to which the Company may repurchase up to $100.0 million of shares of its Class A common stock through December 31, 2022. Repurchases under the program 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. The Company may also, from time to time, enter into Rule 10b5-1 of the Exchange Act plans to facilitate repurchases of its shares under this authorization. The exact number of shares to be repurchased by the Company is not guaranteed and the program may be suspended, modified, or discontinued at any time at the Company’s discretion and without prior notice. |
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/A.Report.
INDEX TO EXHIBITS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Incorporated by Reference | | |
Exhibit Number | | Exhibit Description | | Form | | File No. | | Exhibit | | Filing Date | | Filed/Furnished Herewith |
| | | | | | | | | | | | | |
| 3.1 | | | | S-8 | | 333-239042 | | 4.1 | | 06/09/2020 | | |
| | | | | | | | | | | | | |
| 3.2 | | | | S-8 | | 333-239042 | | 4.2 | | 06/09/2020 | | |
| | | | | | | | | | | | | |
| 4.1 | | | | S-1/A | | 333-238307 | | 4.1 | | 06/01/2020 | | |
| | | | | | | | | | | | |
| 4.2 | | | | 8-K | | 001-39313 | | 4.1 | | 10/29/2020 | | |
| | | | | | | | | | | | |
| 4.3 | | | | 8-K | | 001-39313 | | 4.1 | | 12/07/2020 | | |
| | | | | | | | | | | | | |
| 4.4 | | | | 8-K | | 001-39313 | | 4.1 | | 07/26/2021 | | |
| | | | | | | | | | | | |
| 4.5 | | | | | | | | | | | | * |
| | | | | | | | | | | | | |
| 10.1*** | | | | | | | | | | | | * |
| | | | | | | | | | | | |
| 31.1 | | | | | | | | | | | | * |
| | | | | | | | | | | | | |
| 31.2 | | | | | | | | | | | | * |
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| 32.1 | | | | | | | | | | | | ** |
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| 32.2 | | | | | | | | | | | | ** |
| | | | | | | | | | | | | |
| 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. | | | | | | | | | | * |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Incorporated by Reference | | |
Exhibit Number | | Exhibit Description | | Form | | File No. | | Exhibit | | Filing Date | | Filed/Furnished Herewith |
| | | | | | | | | | | | | |
| 3.1 | | | | S-8 | | 333-239042 | | 4.1 | | 06/09/2020 | | |
| | | | | | | | | | | | | |
| 3.2 | | | | S-8 | | 333-239042 | | 4.2 | | 06/09/2020 | | |
| | | | | | | | | | | | | |
| 4.1 | | | | S-1/A | | 333-238307 | | 4.1 | | 06/01/2020 | | |
| | | | | | | | | | | | |
| 4.2 | | | | 8-K | | 001-39313 | | 4.1 | | 10/29/2020 | | |
| | | | | | | | | | | | |
| 4.3 | | | | 8-K | | 001-39313 | | 4.1 | | 12/07/2020 | | |
| | | | | | | | | | | | | |
| 4.4 | | | | 8-K | | 001-39313 | | 4.1 | | 07/26/2021 | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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. |
*** Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Regulation S-K, Item 601(b)(10). Such omitted information is not material and the registrant customarily and actually treats such information as private or confidential. Additionally, schedules and attachments to this exhibit have been omitted pursuant to Regulation S-K, Items 601(a)(5). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 4.5 | | | | 10-Q | | 001-39313 | | 4.5 | | 05/06/2022 | | |
| | | | | | | | | | | | | |
| 31.1 | | | | | | | | | | | | * |
| | | | | | | | | | | | | |
| 31.2 | | | | | | | | | | | | * |
| | | | | | | | | | | | | |
| 32.1 | | | | | | | | | | | | ** |
| | | | | | | | | | | | | |
| 32.2 | | | | | | | | | | | | ** |
| | | | | | | | | | | | | |
| 101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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. |
|
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: | November 8, 2022May 9, 2023 | | Chief Executive Officer (principal executive officer) |
| | | |
| | | |
| | By: | /s/ Nancy Disman |
| | | Nancy Disman |
| Date: | November 8, 2022May 9, 2023 | | Chief Financial Officer (principal financial officer) |
