| Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2020 |
| Accounting Policies [Abstract] | |
| Initial Public Offering and Concurrent Private Placement | Initial Public Offering and Concurrent Private Placement On June 4, 2020, the Securities and Exchange Commission, or the SEC, declared effective the Company’s Registration Statement on Form S-1 (File No. 333-238307), as amended, filed in connection with its IPO, or the Registration Statement. The Company’s Class A common stock started trading on The New York Stock Exchange on June 5, 2020. On June 9, 2020, the Company completed its IPO of 17,250,000 shares of Class A common stock, including 2,250,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $23.00 per share. Upon completion of the IPO, the Company received net proceeds of approximately $362.6 million, after deducting underwriting discounts and commissions and offering expenses of approximately $34.2 million. Concurrently with the IPO, the Company also completed a $100.0 million private placement of 4,625,346 shares of Class C common stock to Rook Holdings Inc., or Rook, a corporation wholly-owned by the Company’s Founder and Chief Executive Officer. The total net proceeds from the IPO and concurrent private placement were approximately $462.6 million. Shift4 Payments, Inc. used the proceeds to purchase newly-issued limited liability company interests from Shift4 Payments, LLC, or LLC Interests. Shift4 Payments, LLC used these amounts received from Shift4 Payments, Inc. to repay certain existing indebtedness and for general corporate purposes. See Note 12 for more information. |
| Reorganization Transactions | Reorganization Transactions In connection with the IPO, the Company completed the following transactions, or the Reorganization Transactions:
•
The limited liability company agreement of Shift4 Payments, LLC was amended and restated to, among other things, (1) convert all existing ownership interests in Shift4 Payments, LLC (including redeemable preferred units) into a single class of LLC Interests and (2) appoint Shift4 Payments, Inc. as the sole managing member of Shift4 Payments, LLC. See Note 20 for additional information.
•
The certificate of incorporation of Shift4 Payments, Inc. was amended to, among other things, authorize three classes of common stock: Class A common stock, Class B common stock, Class C common stock, and one class of preferred stock. Class A and Class C common stock have both voting and economic rights while Class B common stock has voting rights but no economic rights. See Note 20 for additional information.
•
The Company acquired all the LLC Interests held by a former equity owner of Shift4 Payments, LLC in exchange for an equivalent number of shares of Class A common stock. See Note 20 for additional information.
•
The Company acquired a portion of the LLC Interests held by certain affiliates of Searchlight Capital Partners, or Searchlight, in exchange for shares of Class B and Class C common stock. The Reorganization Transactions resulted in the Company becoming the sole managing member of Shift4 Payments, LLC. As the sole managing member of Shift4 Payments, LLC, the Company operates and controls all of the business and affairs of Shift4 Payments, LLC. Accordingly, the Company consolidates the financial results of Shift4 Payments, LLC, and reports a noncontrolling interest in its consolidated financial statements representing the economic interest in Shift4 Payments, LLC held by Rook and Searchlight (together, the Continuing Equity Owners). As the Reorganization Transactions are considered transactions between entities under common control, the financial statements for the periods prior to the IPO and Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes. Prior to the Reorganization Transactions, Shift4 Payments, Inc. had no operations. |
| Follow-on Offerings | Follow-on Offerings On September 15, 2020, the Company completed a follow-on offering, in which it issued and sold 2,000,000 shares of its Class A common stock, and Searchlight and a former equity owner, which we refer to together as the selling stockholders, sold 7,856,373 and 143,627 shares of Class A common stock, respectively, at a price to the public of $48.50 per share, or the September Follow-on Offering. On October 6, 2020, Searchlight and a former equity owner sold an additional 1,473,070 and 26,930 shares of Class A common stock, respectively, pursuant to the exercise by the underwriters of their option to purchase additional shares. The Company received net proceeds from the September Follow-on Offering of $93.1 million, after deducting underwriting discounts and commissions and offering expenses of approximately $3.9 million. Searchlight has agreed to reimburse the Company for its allocable share of costs of the September Follow-on Offering. The Company did not receive any of the proceeds from the sale of Class A common stock by the selling stockholders. The total net proceeds from the September Follow-on Offering were used to purchase newly-issued LLC interests directly from Shift4 Payments, LLC at a price per unit equal to the price to the public of Class A common stock in the Follow-on Offering, less underwriting discounts and commissions. Shift4 Payments, LLC used these amounts received from Shift4 Payments, Inc. for general corporate purposes. In connection with the September Follow-on Offering, the Company also completed the following transactions:
•
The redemption by Searchlight of 4,319,532 LLC Interests in exchange for 4,319,532 shares of Class A common stock, and an immediate cancellation of an equivalent number of shares of Class B common stock.
•
The conversion of 5,009,911 shares of Class C common stock held by Searchlight In December 2020, the Company completed a follow-on offering where Searchlight sold 9,200,000 shares of the Company’s Class A common stock in a registered public offering at a price to the public of $55.50 per share, or the December Follow-on Offering. The Company did not sell any shares of Class A common stock in the December Follow-on Offering and did not receive any of the proceeds from, nor incur any expense for, the sale of shares by Searchlight in the December Follow-on Offering. Searchlight has agreed to reimburse the Company for the costs of the December Follow-on Offering. In connection with the December Follow-on Offering, the Company also completed the following transactions:
•
The redemption by Searchlight
•
The conversion of 4,940,400 shares of Class C common stock held by Searchlight to 4,940,400 shares of Class A common stock sold. Senior Notes Offering – 2026 Notes On October 29, 2020, Shift4 Payments, LLC and Shift4 Payments Finance Sub, Inc. completed the issuance and sale of $450.0 million aggregate principal amount of 4.625% Senior Notes due 2026, or the 2026 Notes, to qualified institutional buyers in an offering exempt from registration under the Securities Act. The Company received net proceeds, after deducting initial purchasers’ discounts and estimated offering expenses, of approximately $442.8 million from the offering of the Notes. The net proceeds of the 2026 Notes, together with cash on hand, were used to repay all indebtedness outstanding under the First Lien Term Loan Facility. Convertible Notes Offering – 2025 Notes In December 2020, Shift4 Payments, Inc. issued an aggregate $690.0 million of convertible senior notes due 2025 to qualified institutional buyers in an offering exempt from registration under the Securities Act. The Company received net proceeds, after deducting initial purchasers’ discounts and estimated offering expenses, of approximately $673.6 million from the Convertible Notes Offering. The net proceeds of the 2025 Notes Offering, together with cash on hand, will be used for general corporate purposes. Amended and Restated Revolving Credit Facility On January 29, 2021, Shift4 Payments, LLC amended and restated its First Lien Credit Agreement and increased the borrowing capacity under the Revolving Credit Facility to $100.0 million. The Revolving Credit Facility matures on September 15, 2025. A commitment fee of 0.5% of the unused commitment under the Revolving Credit Facility is payable quarterly. Interest is payable in arrears on any outstanding principal balance at a rate equal to the LIBO rate plus 3.5% or Alternate Base Rate, dependent on type of borrowing. |
| Basis of Presentation | Basis of Presentation The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The 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, or VIE. 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. All intercompany balances and transactions have been eliminated in consolidation. The 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 years presented. 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 and the aggregate principal amount of $690.0 million of 2025 Notes that are held by Shift4 Payments, Inc. directly. See Note 12 for information on the accounting for the 2025 Notes. As of December 31, 2020, $684.5 million of cash was held by Shift4 Payments, Inc. Shift4 Payments Inc. had no cash or debt at December 31, 2019. For the years ended December 31, 2020 and 2019, Shift4 Payments Inc., which was established 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. |
| Liquidity and Managements Plan | Liquidity and Management’s Plan The unprecedented and rapid spread of COVID-19 as well as the shelter-in place orders, promotion of social distancing measures, restrictions to businesses deemed non-essential, and travel restrictions implemented throughout the United States have significantly impacted the restaurant and hospitality industries. As a result, the Company’s revenues, which are largely tied to processing volumes in these verticals, were materially impacted beginning in the final two weeks of March 2020. The Company took proactive measures in April 2020 to reduce costs, preserve adequate liquidity and maintain its financial position. These included limiting discretionary spending across the organization, reducing spending through reprioritizing its capital projects, instituting a company-wide hiring freeze, reducing salaries for management across the organization, furloughing approximately 25% of its workforce and accelerating expense reduction plans related to previous acquisitions. Since late March, the Company has seen a significant recovery in its end-to-end payment volumes as merchants reopened their operations. As a result, as of December 31, 2020, substantially all of the Company’s workforce that was furloughed has been reinstated with additional hiring in certain areas to accommodate new merchant onboarding. Further, salary reductions were fully reinstated in October 2020 for management across the organization. While end-to-end volumes for the year ended December 31, 2020 have exceeded those for the year ended December 31, 2019, the ultimate impact that the COVID-19 pandemic 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. As of December 31, 2020, the Company had $1,140.0 million outstanding under its credit facilities and was in compliance with the financial covenants under its debt agreements. The Company expects to be in compliance for at least 12 months following issuance of these consolidated financial statements. See Note 12 for further information on the Company’s debt obligations. On January 29, 2021, the Company amended and restated its First Lien Credit Agreement and increased the borrowing capacity under the Revolving Credit Facility to $100.0 million. The Revolving Credit Facility matures on January 29, 2026 or, if greater than $150.0 million aggregate principal amount of Shift4 Payments, LLC’s convertible notes remains outstanding on September 15, 2025, on that date. |
| Use of Estimates | 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 consolidated financial statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include estimates of fair value of acquired assets and liabilities through business combinations, fair value of the liability and equity components of the convertible notes, fair value of contingent liabilities related to earnout payments and change of control, allowance for doubtful accounts, income taxes 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 consolidated financial statements may be materially affected. |
| Revision of Previously Issued Financial Statements | Revision of Previously Issued Financial Statements During the course of preparing the Company’s consolidated financial statements for the year ended December 31, 2020, it was identified that $4.8 million of acquired technology recorded in “Other intangible assets, net” in the Consolidated Balance Sheet should have been impaired during fiscal year 2018. Although the Company has determined that this error did not have a material impact on its previously issued consolidated financial statements, it has revised the accompanying consolidated financial statements to correct for this error and to reflect the associated decrease in amortization expense of $0.6 million recorded in “Cost of Sales” for the year ended December 31, 2019. In addition, a misclassification of $6.2 million and $4.9 million was identified for the years ended December 31, 2019 and 2018, respectively, resulting from expensing equipment provided to customers under the Company’s warranty program as “General and administrative expenses” which should have been classified as “Cost of sales” in the accompanying Consolidated Statements of Operations. This misclassification, and other immaterial errors, have also been corrected in connection with the revision of the accompanying 2019 Consolidated Balance Sheet and 2019 and 2018 Consolidated Statements of Operations. The revisions had no net impact on cash flows from operating, investing or financing activities in the accompanying consolidated Statement of Cash Flows. The applicable notes to the accompanying consolidated financial statements have also been revised to correct for these errors. Refer to Note 27 for the impact of the errors and resulting revision on our unaudited interim quarterly financial information. The following are selected line items from the Company’s consolidated financial statements illustrating the effect of the revisions:
As of December 31, 2019
Consolidated Balance Sheet
As previously reported
Adjustment
As revised
Other intangible assets, net
$
213.2
$
(4.0
)
$
209.2
Total noncurrent assets
681.6
(4.0
)
677.6
Total assets
788.0
(4.0
)
784.0
Retained deficit (1)
(178.4
)
(4.0
)
(182.4
)
Total stockholders' equity attributable to Shift4 Payments, Inc./members' (deficit)
(28.9
)
(4.0
)
(32.9
)
Total liabilities and stockholders' equity/members' deficit
788.0
(4.0
)
784.0
(1)
As a result of the revisions, “Retained deficit” as of December 31, 2018 was revised from $113.3 million to $118.8 million.
For the year ended December 31, 2019
For the year ended December 31, 2018
Consolidated Statement of Operations
As previously reported
Adjustment
As revised
As previously reported
Adjustment
As revised
Cost of sales
$
552.4
$
5.6
$
558.0
$
410.2
$
9.7
$
419.9
Gross profit
179.0
(5.6
)
173.4
150.4
(9.7
)
140.7
General and administrative expenses
124.4
(7.3
)
117.1
83.7
(3.9
)
79.8
Total operating expenses
185.1
(7.3
)
177.8
157.7
(3.9
)
153.8
Loss from operations
(6.1
)
1.7
(4.4
)
(7.3
)
(5.8
)
(13.1
)
Loss before income taxes
(56.6
)
1.7
(54.9
)
(53.7
)
(5.8
)
(59.5
)
Income tax benefit (provision)
(1.5
)
(0.2
)
(1.7
)
3.8
0.3
4.1
Net loss (1)
(58.1
)
1.5
(56.6
)
(49.9
)
(5.5
)
(55.4
)
(1)
Net loss is equal to comprehensive loss. |
| Cash and Cash Equivalents | Cash and cash equivalents Highly liquid investments with maturities of three months or less at the date of the purchase are considered to be cash equivalents and are stated at cost, which approximates fair value. Cash equivalents consist of highly liquid investments in money market funds and were $886.7 million at December 31, 2020. There were no cash equivalents at December 31, 2019. The Company maintains its cash with high credit quality financial institutions. The total cash balances insured by the Federal Deposit Insurance Corporation, or FDIC, are up to $250 thousand per bank. |
| Accounts Receivable | Accounts Receivable Accounts receivable are primarily comprised of amounts due from the Company’s processing partners. The receivables are typically received within 10 business days following the end of the month. In addition, accounts receivable includes amounts due from merchants for point-of-sale software, support services, and other miscellaneous service fees, as well as receivables related to chargeback transactions, as described below. Accounts receivable are stated at the invoice amount. Disputes between a cardholder and a merchant periodically arise as a result of, among other things, cardholder dissatisfaction with merchandise quality, unsatisfactory merchant services, nondelivery of goods or nonperformance of services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the disputed amount is refunded to the cardholder through the acquiring bank and charged to the merchant. If the merchant has inadequate funds, the Company must bear the credit risk for the full amount of the transaction. The Company’s sponsorship bank holds merchant funds that are available to meet merchant chargeback liabilities if the merchant has inadequate funds to the meet the obligation. Total merchant funds held at the Company’s sponsorship bank totaled $4.6 million and $4.8 million as of December 31, 2020 and 2019, respectively. The carrying amount of accounts receivable is reduced by an allowance for doubtful accounts that reflects management’s best estimate of accounts that will not be collected. The allowance for doubtful accounts is primarily comprised of (1) credit risk associated with processing receivables where the credit card or automatic clearing house, or ACH, transaction to settle the customer accounts was rejected and the Company estimates an amount to be uncollectible and (2) transactions disputed by a cardholder in which the Company bears the credit risk. The allowance is based on current economic trends, historical loss experience, and any current or forecasted risks identified through collection matters. Any change in the assumptions used may result in an additional allowance for doubtful accounts being recognized in the period in which the change occurs. Changes in the allowance related to charge-back receivables are recognized within “Cost of sales” in the Consolidated Statements of Operations. Changes in the allowance for all other receivables are recognized within “General and administrative expenses” in the Consolidated Statements of Operations. The change in the Company’s allowance for doubtful accounts was as follows:
December 31,
2020
2019
2018
Beginning balance
$
2.5
$
2.7
$
0.5
Additions to expense
7.6
2.8
2.2
Write-offs, net of recoveries and other adjustments
(4.4
)
(3.0
)
—
Ending balance
$
5.7
$
2.5
$
2.7 |
| Accounts Payable | Accounts Payable Accounts payable are primarily comprised of amounts due to the Company’s processing partners for interchange and processing fees. |
| Inventory | Inventory Inventory represents credit and debit card terminals, point-of-sale systems and electronic cash registers on hand and not in service. Inventory is recorded at cost, which approximates average cost. Inventory deemed to have costs greater than their respective values are reduced to net realizable value as a loss in the period recognized. |
| Shipping and Handling Costs | Shipping and Handling Costs The Company includes shipping and handling costs relating to the delivery of its terminal and point-of sale systems directly from third-party vendors to the Company and, from the Company to its merchants within “Cost of sales” in the Consolidated Statements of Operations. The Company incurred shipping and handling costs of $2.8 million for each of the years ended December 31, 2020, 2019 and 2018, respectively. |
| Property, Plant and Equipment, Net | Property, Plant and Equipment, Net Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the asset’s estimated useful life. 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. The estimated useful life of each asset category is as follows:
Useful life
Equipment
3-5 years
Capitalized software
3-5 years
Leasehold improvements
5-10 years
Furniture and fixtures
5 years
Vehicles
5 years |
| Goodwill | Goodwill Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. The Company evaluates goodwill for impairment annually at October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred. The Company has determined that its business comprises one reporting unit. The Company has the option to first assess qualitative factors to determine whether events or circumstances indicate it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, in which case a quantitative impairment test is not required. The quantitative goodwill impairment test is performed using a two-step process. The first step of the process is to compare the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not impaired and the second step of the quantitative impairment test is not required. The second step of the quantitative goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. An impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value. The Company performed a quantitative impairment assessment as of October 1, 2020 and the estimated fair value of the reporting unit exceeded its carrying value, and therefore, no impairment was recorded. The Company performed qualitative goodwill impairment assessments as of October 1, 2019 and 2018, and concluded it was more likely than not that the fair value of the reporting unit exceeded its carrying value, and therefore, no impairment was recorded. |
| Other Intangible Assets, Net | Other Intangible Assets, Net Other intangible assets, net consists of merchant relationships, acquired technology, trademarks and trade names, noncompete agreements, capitalized software development costs, leasehold interests, and residual commission buyouts. The Company capitalizes software development costs in developing internal use software when capitalization requirements have been met. Costs prior to meeting the capitalization requirements are expensed as incurred. Residual commission buyouts represent amounts paid to an independent sales organization, or ISO, to buy out their future residual commission streams. The typical payment to the ISO is comprised of a lump sum payment due immediately and a contingent payment due fourteen months following the buyout agreement dependent on attrition rates and/or other financial metrics within the respective merchant portfolios. |
| Impairment of Long-lived Assets | Impairment of long-lived assets We evaluate long-lived assets (including intangible assets) for impairment whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. An asset is considered impaired when the carrying amount of the asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If impaired, the asset’s carrying value is written down to its fair value. See Note 3 for information about impairments recorded for the year ended December 31, 2019. See Note 2 for a revision made for the year ended December 31, 2018 to reflect an impairment charge. |
| Equipment for Lease | Equipment for Lease Equipment for lease represents terminals and point-of-sale systems that are provided under the Company’s software as a service, or SaaS, arrangements. Equipment for lease is stated at cost, less accumulated depreciation. Certain costs incurred in connection with the assembly and delivery of leased assets to the merchant are capitalized as part of the cost of such assets. Depreciation commences when new equipment is first deployed to a merchant and is computed using the straight-line method over an estimated useful life of three years. |
| Leases | Leases Leases are classified as either operating or capital, based on the substance of the transaction at inception of the lease. Classification is re-assessed if the terms of the lease are changed. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments under an operating lease (net of any incentives received from the lessor) are recognized to “General and administrative expenses” in the Consolidated Statements of Operations on a straight-line basis over the period of the lease. |
| Revenue Recognition | Revenue Recognition On January 1, 2019, the Company adopted Accounting Standards Codification 606, or ASC 606: Revenue from Contracts with Customers Revenue Recognition The new revenue recognition guidance provides a single model to determine when and how revenue is recognized. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company recognizes revenue using a five-step model resulting in revenue being recognized as performance obligations within a contract have been satisfied. The steps within that model include: (i) identifying the existence of a contract with a customer; (ii) identifying the performance obligations within the contract; (iii) determining the contract’s transaction price; (iv) allocating the transaction price to the contract’s performance obligations; and, (v) recognizing revenue as the contract’s performance obligations are satisfied. Judgment is required to apply the principles-based, five-step model for revenue recognition. Management is required to make certain estimates and assumptions about the Company’s contracts with its customers, including, among others, the nature and extent of its performance obligations, its transaction price amounts and any allocations thereof, the events which constitute satisfaction of its performance obligations, and when control of any promised goods or services is transferred to its customers. The Company provides its merchants with an end-to-end payments offering that combines its payments platform, including its proprietary gateway and breadth of software integrations, and its suite of technology solutions. The Company primarily earns revenue through volume-based payments and transactions fees, as well as subscription revenue for its software and technology solutions. Payments-Based Revenue Payments-based revenue includes fees for payment processing and gateway services. Payment processing fees are primarily driven as a percentage of payment volume. They may have a fixed fee, a minimum monthly usage fee and a fee based on transactions. Gateway services, data encryption and tokenization are primary driven by per transaction fees as well as monthly usage fees. The Company’s payment processing agreements have an initial term of three years and automatically renew every two years thereafter. The Company satisfies its performance obligations and recognizes transaction fees upon authorization of a transaction by the merchant’s bank. These transaction fees represent the full amount of the fee charged to the merchant, including interchange and payment network costs paid to the card brands pursuant to the transactions the Company facilitates through the network while performing an end-to-end payment obligation. The Company’s performance obligation is to stand-ready to provide payment processing services for each day during the duration of the payment processing agreement. Providing payment processing services involves multiple promises including: 1) payment processing, 2) gateway services including tokenization and data encryption, 3) risk mitigation, and 4) settlement services. The Company considers each of these promises to be inputs to produce a combined output of providing a fully secured and integrated end-to-end payment processing service to a merchant. Further, the combination of these services is transformative in nature in that the significant integration allows for front-end and back-end risk mitigation, merchant portability, third party software integrations, and enhanced reporting functionality. In addition, the Company applies the right to invoice practical expedient to payment processing services as each performance obligation is recognized over time and the amounts invoiced are reflective of the value transferred to the customer. Payments-based revenue is recognized on a gross basis as the Company is the principal in the delivery of the payment processing solution to its merchants because it controls the service on its payments platform. The Company also contracts directly with its merchants and has complete pricing latitude on the processing fees charged to its merchants. As such, it bears the credit risk for network fees and transactions charged back to the merchant. Subscription-Based Revenue The Company generates revenues from recurring SaaS fees for point-of-sale systems provided to merchants and SaaS fees for the Company’s Shift4Shop ecommerce platform. Point-of-sale SaaS fees are based on the type and quantity of point-of-sale systems deployed to the merchant. This includes statement fees, fees for the Company’s proprietary business intelligence software, annual fees, regulatory compliance fees and other miscellaneous services such as help desk support and warranties on equipment. Shift4Shop SaaS fees are assessed based upon the selected plan. SaaS contracts are for a contractual term of one year beginning June 30, 2020 and three years prior to June 30, 2020, and are billed ratably over that time period. Annual fees are deferred and recognized as revenue over the respective period the fee covers, which is one year or less. The Company’s SaaS arrangements for its point-of-sale systems include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company determines standalone selling prices based on the fair value of each product and service. As part of the SaaS fees, for its point-of-sale systems provided to merchants, the Company identified the following separate performance obligations under ASC 606:
(1)
Point-of-sale software: The Company provides a “Hybrid Cloud” arrangement which includes on-premise software as well as a cloud component. The on-premise solution interacts with the cloud service to provide an end-to-end integrated solution to the merchant. As the on-premise software and cloud-based service are transformative in nature, they are not distinct performance obligations. The revenue allocated to software from the monthly SaaS fee qualifies as a service and revenue is recognized ratably over time as the performance obligation represents a stand-ready obligation to provide the service.
(2)
Hardware revenue: The Company provides hardware to its merchants. The Company satisfies its performance obligation upon delivery of the hardware to its merchants, at which time the revenue allocated to this performance obligation is recognized. For the period January 1, 2019 through June 29, 2020, the hardware was accounted for as a sales-type lease and as such, the revenue allocated to this performance obligation was recognized when the hardware was delivered to the merchant. Effective June 30, 2020, the Company modified the terms and conditions of its SaaS arrangements and updated its operational procedures. As a result, beginning June 30, 2020, the hardware is accounted for as an operating lease and the revenue allocated to this performance obligation is recognized ratably over time.
(3)
Other support services: The Company offers merchants technical support services and warranty for the leased hardware. Technical support services include the promise to provide the merchant with software updates if and when available. The Company also provides the merchant with assurance that its equipment will function in accordance with contract specifications over the lease term. Revenue allocated to this performance obligation is recognized ratably over time as the performance obligation represents a stand-ready obligation to provide the service. Other Revenue Other revenue is generally recognized at a point-in-time and primarily includes revenue derived from software license sales, hardware sales, third party residuals, automated teller machine services, and fees charged for technology support to merchants. Contract Assets As discussed above, for the period January 1, 2019 through June 29, 2020, the revenue allocated to hardware under the Company’s SaaS arrangements for its point-of-sale systems was treated as a sales-type lease and recognized in the Company’s Consolidated Statements of Operations when the hardware was delivered to the merchant. The Company utilized its best estimate of selling price when calculating the hardware revenue to be recorded. At the time revenue was recognized, a Contract Asset was created in the Company’s Consolidated Balance Sheet representing the present value of minimum lease payments. Accordingly, a portion of the lease payments were recognized as interest income. Such interest income for the years ended December 31, 2020 and 2019 was $1.0 million and $2.2 million, respectively. Effective June 30, 2020, the Company modified the terms and conditions of its SaaS arrangements and updated its operational procedures. As a result, beginning June 30, 2020, the hardware is accounted for as an operating lease and the revenue allocated to this performance obligation is recognized ratably over time. See Note 4 for more information on the impact the lease modification had on the Company’s consolidated financial statements. The carrying amount of contract assets was reduced by an allowance for doubtful accounts that reflected management’s best estimate of accounts that will not be collected. Changes in the allowance were recognized within “General and administrative expenses” in the Consolidated Statements of Operations. The change in the Company’s allowance for contract assets was as follows:
December 31,
2020
2019
Beginning balance
$
4.6
$
—
Cumulative effect of ASC 606 adoption
—
4.7
Beginning balance, adjusted
4.6
4.7
Conversion from sales-type lease to operating lease accounting treatment (Note 4)
(4.5
)
—
Additions to expense
0.7
2.8
Write-offs, net of recoveries and other adjustments
(0.8
)
(2.9
)
Ending Balance
$
—
$
4.6
Capitalized Acquisition Costs The Company incurs costs to obtain payment processing contracts with customers, primarily in the form of upfront processing bonuses provided to software partners, which consist of independent software vendors and value-added resellers. The Company recognizes as an asset the incremental costs of obtaining a contract with a customer if it expects to recover the costs. Capitalized acquisition costs are amortized ratably over the estimated life of the customer, which is generally three to five years. Amortization of costs to obtain a contract are classified as “Cost of sales” on the Company’s Consolidated Statements of Operations. |
| Noncontrolling Interests | Noncontrolling Interests Noncontrolling interests represents the economic interests of LLC Interests held by the Continuing Equity Owners. Income or loss is attributed to the noncontrolling interests based on the weighted average LLC Interests outstanding during the period. The noncontrolling interests’ ownership percentage can fluctuate over time as the Continuing Equity Owners elect to exchange LLC Interests for shares of Class A common stock. For the year ended December 31, 2020, noncontrolling interests also includes the loss prior to the IPO. |
| Equity-based Compensation | Equity-based Compensation The Company’s equity-based compensation consists of Restricted Stock Units, or RSUs, and Performance Restricted Stock Units, or PRSUs, issued to certain employees and non-employee directors. Equity-based compensation expense is recorded within “General and administrative expenses” in the Consolidated Statements of Operations. The Company accounts for forfeitures when they occur. RSUs Compensation expense for RSUs is recognized on a straight-line basis over the requisite service period based on the fair value of the award on the date of grant. PRSUs Vesting for PRSUs is subject to satisfying objective operating performance conditions. Compensation expense for PRSUs is based on the fair value of the award on the date of grant. Compensation expense is recognized ratably, following a graded vesting pattern, during the vesting period only when it is probable that the operating performance conditions will be achieved. The Company records a cumulative adjustment to compensation expense for PRSUs if there is a change in the determination of the probability that the operating performance conditions will be achieved. |
| Income Taxes | Income Taxes As a result of the Reorganization Transactions, Shift4 Payments, Inc. became the sole managing member of Shift4 Payments, LLC, a partnership that is not subject to tax. Any taxable income or loss from Shift4 Payments, LLC is passed through and included in the taxable income or loss of its members, including Shift4 Payments, Inc., following the Reorganization Transactions. Shift4 Payments, Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to Shift4 Payments, Inc.’s allocable share of any taxable income or loss of Shift4 Payments, LLC following the Reorganization Transactions. The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets or DTAs, and deferred tax liabilities, or DTLs, for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine DTAs and DTLs on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date. The Company recognizes DTAs to the extent it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If it’s determined that the Company is able to realize DTAs in the future in excess of their net recorded amount, an adjustment to the DTA valuation allowance would be recorded, which would reduce the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740, Income Taxes, . The Company records interest and penalties related to uncertain tax positions in the provision for income taxes in the Consolidated Statements of Operations. |
| Basic and Diluted Net Loss Per Share | Basic and Diluted Net Loss Per Share The Company applies the two-class method for calculating and presenting net loss per share, and separately presents net loss per share for Class A common stock and Class C common stock. In applying the two-class method, the Company determined that undistributed earnings should be allocated equally on a per share basis between Class A and Class C common stock. Under the Company’s Certificate of Incorporation, the holders of the Class A and Class C common stock are entitled to participate in earnings ratably, on a share-for-share basis, as if all shares of common stock were of a single class, and in such dividends as may be declared by the board of directors. Holders of the Class A and Class C common stock also have equal priority in liquidation. Shares of Class B common stock do not participate in earnings of Shift4 Payments, Inc. As a result, the shares of Class B common stock are not considered participating securities and are not included in the weighted-average shares outstanding for purposes of loss per share. |
| Advertising Costs | Advertising Costs The Company expenses advertising costs as incurred. Advertising expenses were $1.3 million, $1.2 million and $1.1 million for the years ended December 31, 2020, 2019 and 2018, respectively, and included in “Advertising and marketing expenses” in the Consolidated Statements of Operations. |
| Research and Development Costs | Research and Development Costs The Company expenses research and development costs as incurred. Research and development expenses, which consists primarily of third-party costs, were $1.2 million, $1.6 million and $1.6 million for the years ended December 31, 2020, 2019 and 2018, respectively, and included in “General and administrative expenses” in the Consolidated Statements of Operations. |
| Business Combinations | Business Combinations Upon acquisition of a company, the Company determines if the transaction is a business combination, which is accounted for using the acquisition method of accounting. Under the acquisition method, once control is obtained of a business, the assets acquired, and liabilities assumed, including amounts attributed to noncontrolling interests, are recorded at fair value. The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. One of the most significant estimates relates to the determination of the fair value of these assets and liabilities. The determination of the fair values is based on estimates and judgments made by management. The Company’s estimates of fair value are based upon assumptions it believes to be reasonable, but which are inherently uncertain and unpredictable. Measurement period adjustments are reflected at the time identified, up through the conclusion of the measurement period, which is the time at which all information for determination of the values of assets acquired and liabilities assumed is received, and is not to exceed one year from the acquisition date. The Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. Additionally, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluates these estimates and assumptions periodically and records any adjustments to preliminary estimates to goodwill, provided the Company is within the measurement period. If outside of the measurement period, any subsequent adjustments are recorded to the Company’s Consolidated Statements of Operations. |
| Concentration of Credit Risk | Concentration of Credit Risk The Company’s merchant processing activity has been facilitated by two vendors. The Company believes that these vendors maintain appropriate backup systems and alternative arrangements to avoid a significant disruption of the processing in the event of an unforeseen event. A majority of the Company’s revenue is derived from the processing of card transactions. Because the Company is not a “member bank”, in order to process these bank card transactions, the Company has entered into a sponsorship agreement with a member bank. The agreement with the bank sponsor requires, among other things, that the Company abide by the by-laws and regulations of the credit card companies. If the Company breaches the sponsorship agreement, the bank sponsor may terminate the agreement and, under the terms of the agreement, the Company would have 180 days to identify an alternative bank sponsor. |
| Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company, an emerging growth company, or EGC, has elected to take advantage of the benefits of the extended transition period provided for in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards which allows the Company to defer adoption of certain accounting standards until those standards would otherwise apply to private companies. Accounting Pronouncements Adopted In August 2018, the FASB issued ASU 2018-13: Fair Value Measurement—Disclosure Framework (Topic 820) Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02: Leases Codification Improvements to Topic 842, Leases Leases (Topic 842) Targeted Improvements Leases (Topic 842) - Narrow Scope Improvements for Lessors In June 2016, the FASB issued ASU 2016-13: Financial Instruments—Credit Losses (Topic 326) In January 2017, the FASB issued ASU 2017-04: Simplifying the Test for Goodwill Impairment In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. |
