Shift4 Deep Dive
Announcing the release of our 85-page Extensive Research Report on Shift4
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While nearly every entrepreneur was chasing VC funding for the latest “.com” company in the late 90s, one prescient 16 year old dropped out of high school to disrupt a complicated and unsexy industry: payments.
Jared Isaacman started United Bank Card in 1999 to streamline the payment acceptance process. Instead of 30 page contracts that took a month to set up, he streamlined the process to take just one day.
The company didn’t take a dollar of VC money, which turned out to be its saving grace when the tech bubble crashed. Despite the lack of external funding, they were aggressive in acquiring customers, pioneering the free hardware giveaway to win customers.
They were almost too early though.
They sat in the awkward position of being the best merchant acquirer, but for an antiquated payment system. In 2012 they made their first attempt to beat back faster growing payment peers like Square and Stripe with new touchscreen hardware and a rebrand to HarborTouch. It wasn’t quite enough though.
The big strategy change came after they accepted private equity money and acquired a business called Shift4. Shift4 operated a “payment gateway”, which was the linchpin of any legacy payment process—and very tough to switch out. Instead of winning payment processing revenues by winning new customers, they could just acquire customers and then push a conversion to payment processing.
This opened up a new strategic playbook for Shift4: acquire key nodes in the payment stack, inherit the merchant relationship, and then use the high switching costs of those systems to migrate merchants onto Shift4’s payment processing.
It by and large worked.
The byproduct of this strategy meant they would increasingly move upmarket, focusing on the largest and most complex customers. Today they have an 80% share in stadiums and a 40% share in hospitality.
But not to forget the lower end of the market, they reinvented their hardware and software ecosystem to create a fully integrated platform called SkyTab. This gave them a new weapon to go after SMBs and the likes of Toast, Square, Clover, and other newer products. They now have a #2 position in restaurant.
With dozens of acquisitions, revenues are growing very fast at over a 30% CAGR since 2019. Today they generate $3.9bn in revenues and are still growing 22%, while run-rating about half a billion in free cash flow.
While they have had continued market share gains, strong profitability, and revenue growth, they also just made their largest acquisition ever. They acquired Global Blue, a VAT refund business, for $2.5bn—about 1/3rd of their market cap at the time. In contrast to other acquisitions, investors fear the cross-sell will be much weaker. Founder Jared Isaacman has also stepped down as Chairman to run NASA. And the payment industry is as competitive as ever.
Is Shift4 going to continue to be able to win business? Was Global Blue a mistake? Is their acquisition model at risk of slowing down? And what assumptions does an investor need to make to get a strong return?
All of this and much more in our 85-page research report!
Read the full report by becoming a member below! You can also just buy the Shift4 report through the link below.
(Please reach out to info@speedwellresearch.com if you have any issues or need to speak to us to become an approved research vendor in order to expense the membership).
If you are a member, you can access the Shift4 report here.
The Synopsis Podcast.
We will be releasing a company episode just on Shift4 in the future. Follow our Podcast below to make sure you get it when it is released!
Shift4 Table of Contents
Founding History
Business History
Business
Competitive Landscape
LightSpeed
SpotOn
Clover
Toast
Shift4 Model
Capital Allocation & ROIC
Valuation
Risks
Summary Model
Conclusion
Become a member today for access to our Shift4 as well as many others! See our full list of coverage here.
