Shift4 Payments, Inc. (FOUR) Earnings Call Transcript
August 12, 2026
Earnings Call Speaker Segments
Okay. Great. Thank you all for joining us today. I'm delighted to be hosting this fireside with Chris. I'm going to do a brief introduction, and then we'll get started. We have about -- 12 questions to go through, and I think we harmonized them, and we went through them fairly carefully, and I think they will address most of the questions that investors have sent me over the last week. By background, Chris joined Shift4 as CFO after serving on of [ this ] Board of Directors for nearly a decade. So Chris was a partner as many of you know, at Searchlight Capital Partners. He led a majority investment in Shift4 for in 2016 and subsequently, the public listing of the business on the New York Stock Exchange in 2020. Prior to that, it was at Oaktree Capital. I met Chris, we were just remembering about 10 years ago, and I went into his office, it was after 4:00 on a Friday. He was at search late at the time. And after well over an hour, I was exhausted with his energy and copious knowledge of the industry, which I did not have, and I left exhausted. So that was our first meeting and we are grateful to have been reconnected over the years, especially in this capacity. So Chris, welcome. Thank you for joining us today.
Thank you for having me,
So I want to start with perspective type question. So in your CFO overall, which is now 13, almost 14 months, what would you say are the major changes you've implemented over that time? And what have been the biggest lessons that you've learned? And importantly, how would you describe your current priorities?
Yes, sure. Great question. And thanks, again, Jamie, for having us and the team on here. So I'm coming up on a year for -- in the seat, and it's amazing what can happen in a year. I will start by saying that I was very fortunate to have come into a finance organization in a company that had a really solid foundation from which to support this global expansion and this fast growth at Shift4. And so when I came in, the biggest changes were really just about focusing on the integration work that was in front of us, namely with the acquisition of Global Blue really at the forefront of this year. But importantly, that's an integration that whether it was across leadership, across people, across systems, across ways of working, there was a lot of already existing commonality and I think there is a lot to be appreciated about our respective organizations that actually have a lot of cultural similarity. But a really important example within some of that change in order to bring all of this together was actually benefiting from some of the really high-quality talent and leadership that came with these companies. [ Some ] of which are now key leaders within the finance organization on a global basis. And I couldn't be happier about the ability to bring all of that leadership together into a single kind of operating model, a single structure that, like I said, focuses on really helping Shift4 with the global expansion across all of its different experienced economy lines of business. And so I would say the integration piece is probably one of the biggest things from a change standpoint. On the priorities front, I'll try to -- there's so many, but I will say I will try to keep it to the audience with the audience in mind. And I would say my #1 priority for this audience is helping investors understand the business and the financial profile. My background from where we come from, it's one where I'm very used to being able to get access to every nook and [ cranny ] of information, and that is simply not the reality of the public world, especially simply because the competition for time and bandwidth in something like an incredibly busy earnings calendar is nearly impossible. And so we're a dynamic company. We have bold growth ambitions, a track record of expansion. And it's not lost on me that with that kind of a model comes and ask -- [ a ] pretty high ask of information synthesis from investors who certainly have a lot of competition for their time. And so it's our job from a priority standpoint to really help folks acclimate to the model, to the financial profile, especially in a year like where we're integrating our TFS business, and it has its impacts on the financial profile change. It's our job to really help people try to synthesize that. It's been great to get positive feedback that we are making good progress on that front with some net new disclosures, some approach as to how to like building block up the growth algorithm. But I totally appreciate [ there's ] still so much to do. And I really do welcome the investor engagement around it and appreciate the advice that we're getting through it. So those are probably the most appropriate of my priorities as it relates to this [ audience ].
No, that's all well put. And it's interesting because last comments about adjusting disclosures is thematic throughout fintech. So this is going around. And I think the investor base will benefit from it even at the industry level. So revisiting the Q2 and the revised guidance, you reported a strong Q2, including the Middle East impact coming in. Now that was, I think, correct me if I'm wrong, a little bit better or less bad than you had thought...
That's right.
At the same time, you did lower guidance. So can you help summarize the quarter for us and the guidance revision?
Sure. So Q2 was a record quarter. We delivered a record Q2. We delivered results ahead of guidance across the board, like a 51% year-over-year growth in our gross revenue less network fees or [ GRL NF ], 39% year-over-year growth in adjusted EBITDA and delivered on $21 million of adjusted free cash flow against $10 million guide. So we view it as a really important kind of demonstration of resilience. But when you kind of look at it through the lens of the building box, the growth algorithm that we introduced at the beginning of the year, we're also really proud of how that's tracking through to the year-to-date results. We have pretty much the 5 categories almost like the payments based revenue Americas worldwide, [ TFS ] and other, effectively everything is either intact or ahead. And so payments-based revenue, for example, that's our north star of growth. In the Americas region, we saw 19% year-to-date growth in the worldwide region. It's growing more than 50%. Now keep in mind that is against the growth algorithm variable that we believe high 20s. We're probably exceeding that in the [ toll ] for the year. But I do think that, that's an important distinction that, that 50% isn't what we expect for the full year. The tax-free shopping business to your point, is growing right in line with the growth algorithm despite the fact that it has been impacted by this Middle East travel disruption [ and ] the conflict. And I do want to take a moment to remind people, though, in the growth algorithm for tax-free shopping, we started the year acknowledging that this was year 1. This is the first year you own a business. In my years of experience of owning companies, your year 1 has to be conservative. And I think we even used the words conservative when we described our growth outlook on tax-free shopping. And we thought it was an appropriately conservative variable to put MSD down there because first year running a business, they have a way of surprising you. And this definitely was one of those types of years. But historically, this is a business when it was stand-alone public, we acknowledge that it had historically given kind of like a high single digit, low double-digit kind of growth outlook for it. And so when we look at mid-single-digit growth algorithm actually being hit, it is important to remind people that, that was a conservative variable at the outset of the year. And that we do think that there is the opportunity for that business to accelerate. For example, the underlying luxury goods market that it serves, [ that ] grows mid-single digits, just as a market variable. And when you think about what we do as providing a digital payment ecosystem for tax-free shopping of these luxury goods, we are benefiting from the tailwind of existing TFS markets digitizing. We are benefiting from new TFS markets opening globally. So we are going to outgrow that underlying MSD luxury growth -- luxury [ goods ] market. And I also think that given the disruptions that we saw there, we're definitely pleased to see that the resilience of the business across its other geographies is what has made this business perform the way it has. So strength from the U.S. consumer going to Europe, that's an outperforming corridor or strength within the inter-Asia corridor. Those are really absorbing the underperformance of the -- or the impacted corridors of Southeast Asia flying through the Middle East and trying to get to Europe or the GCC consumer trying to get to Europe. And so we like this global diversified resilience that TFS has and this is not an anomaly. It has demonstrated this kind of diverse resilience throughout its history, and we've tracked this business for years. So in short, as we look at the business in total, the growth algorithm variables, we feel pretty validated that this is exactly the high-quality business we expected it to be. And people should not mistake our year 1 conservatism as sort of the long-term view on growth. And then the last thing I'd say about the quarter, we delivered another consecutive quarter of low double-digit organic growth in the business. And on an FX-neutral basis, Q2 actually had organic growth expand by about 145 basis points over Q1. And so that's something we're proud of. And so look, it's a lot in the quarter to consume, but it's in our minds, a demonstration of a really positive outcome and a really strong quarter and when you take that into consideration against what we're operationally trying to achieve, expanding internationally, integrating our most material investment to date, navigating geopolitical and macro volatility. I [ mean ] I can't imagine a better way to sum it up than to say that this is a demonstration of durability and resilience and the kind of performance that Q2 demonstrated. And then your second question was about the guide, I think, if you want to need to [ go ] there. So in terms of the full year guide in the quarter, we revised guidance to incorporate the Q3 estimated impact of the Middle East conflicts, travel disruption continuing and as well as the impact of of FX on the business from a translation standpoint. And then we also, for the purposes of helping people appreciate and understand adjusted free cash flow and EPS, we reminded people about the impact that the new $1 billion incremental term loan B would have on the business. And so when you take all of those pieces together, they all impact the revision on the guide. I think for reasons that one, a, were telegraphed as it related to the Middle East variable [ but ] in terms of the capital structure, I think, is a very positive one in the sense that we now have termed out any maturities all the way to 2031 to when our undrawn revolver would come due. But in terms of funded debt, our maturities are pushed all the way out to 2032. And then on the revenue side, though, but to come back to it, right, the midpoint of the revised revenue guidance was only reduced by 100 basis points on an FX-neutral basis. And we'd like to believe that given that, that was well telegraphed should have been appreciated, it should have been well understood. But at the same time, I can appreciate where there might have been some differences of opinion on that.
So in terms of the organic trajectory, as you mentioned, the organic accelerated in the second quarter, you delivered low double-digit organic growth in the first half overall, correct me if I'm wrong. I find one of the debates among investors is the [ GR LNF ] guidance relative to the organic because it may appear to something to be back-end loaded. So long-winded question, but what does the guidance assume for organic GLF in the back half?
Yes. No, it's a great kind of clarifying question. I can appreciate why you're asking it. I'm sure a lot of investors have been inbounding to you about it. We've been getting our fair share of clarifiers around it as well. So organic for the first half has been low double digits, [ kind ] of a back-to-back 11%. I mentioned on [ a ] net-neutral basis, Q2 actually accelerated over Q1 by about 145 basis points. In the back half, a couple of things are happening. One, because of the anniversary of the close of Global Blue, tax-free shopping will come into the organic and Global Blue as a whole will come into the organic in the third quarter, and Smartpay comes into the organic in the fourth quarter. And you factor that into the equation if you acknowledge that tax-free shopping, the largest part of Global Blue is growing at kind of this mid-single-digit growth rate. We acknowledge that the Middle East conflict is continuing. It's reasonable to assume that a reported growth rate of the guide in Q3, 10%, that should come with an organic growth rate that's high single digit as all of that math comes together and that shouldn't be a surprise to anyone. At the same time, we also acknowledge that if not for the $25 million impact that we're forecasting into Q3 for the Middle East conflict, this organic variable would be low double digits, and it would have been an expansion to Q2. So that's probably the first thing I'd look to say. In total, the back half has these kind of pieces that you need to put together, and we generally have had some questions about that. I'd say the other thing that people have been asking about, and I think they're sort of mismodeling is that the contributions for Bambora and Smartpay in terms of what they're they are -- how they're impacting the business in the reported versus organic. I think they're being overestimated because folks are probably applying gross revenues associated with those businesses as opposed to net revenues or what we would call gross revenue less network fees. And so we've had past disclosures around that to help people understand what those are, but I do think there's probably some overestimation on the impact of those businesses embedded within it. But the net takeaway that I think people should appreciate is is that as this comes together, the Q3 reported kind of guide point of 10% plus [ that ] converges with our organic. But as it all goes together, the organic number is probably an HSD, but if not for this Middle East conflict variable, that would have been an [ LDD ].
When reviewing the 10-Q, you disclosed a $300 million acquisition in here, and it's a [ cut-out ] re-lead ed. So can you provide some additional color on that acquisition and why you found this to be a good use of capital allocation and how it fits in strategically.
Yes. Yes. Another popular question for sure. So first, I will say that as a reminder, like our capital allocation framework is consistent -- has been consistent for years, the three parts of it. We invest organically in this instance. We have a lot of organic opportunities in front of us as we open up new markets geographically, as we achieve kind of record levels of investment into the platform, into the technology of the business and we have really great unit economics to invest behind. So that's definitely an attractive area for us. Inorganic opportunities are finally starting to show themselves. In quarters past, we've observed that there was a pretty wide discrepancy between public market valuations and private market valuations that's finally starting to compress and assets that we've deemed strategic and would accelerate kind of existing objectives that we have are finally starting to show themselves. And this account-to-account payments acquisition would be a good example of it. But three, our bucket [ three ] of share repurchases and being able to deploy capital against our capital structure has been an area we've been active. We were intentionally conservative in the second quarter around it, but it is an area that continues to show itself as potentially an attractive area to deploy capital. I say all of that for context because it helps people appreciate that we do have to balance this at all times. It's not new for us to look at the framework this way. But right now, all three variables within the framework seem to have attractive areas to deploy capital around. And so the bar is just higher. I think that ultimately should express itself in terms of like good outcomes, but it's not lost on us on decision-makers that are at the company that impact capital allocation decisions, it's not lost on them that the bar is simply higher and that when $1 of capital has to fight for its return, that is now just a higher bar across the board. Now to be more specific, account-to-account payments is a capabilities enhancement. So for those that have followed us for a long time, we sort of have a few different buckets for our tuck-in acquisition categories. And this is a capabilities enhancement that we think is a really intriguing one. The ability to have sort of a bank-based kind of money movement capability within the payment platform, that's something that appeals to varying types of high-ticket type transactions. It is something that is utilized much more in international and global markets, and it's highly complementary to the places that we are expanding into and the parts of the experienced economy that we serve, especially parts where -- that are less carded, we'll say, and are areas that happen to have often like higher tickets associated with them. It's also complementary to the capabilities enhancement that we recently were able to acquire in the form of ACH capabilities from the Bambora North America transaction. And so I would like to add that component [ of ] -- so we've been very thoughtful about capabilities enhancements onto the platform, tuck-ins that accelerate an existing strategic initiative. But we also want investors to take away from it that the bar is high, and we're aware of that. And so the attractiveness of this transaction was something that really stood out. I would also say, just as a reminder to -- you started with the question of phrasing it is a $300 million acquisition. Importantly, it's $140 million of upfront purchase price, and then the balance is contingent consideration. And that's been pretty typical of our transactions that we would have these multiyear contingent considerations that are driven by -- that are meant to drive alignment towards achieving objectives, objectives that are, in our minds, high-value objectives that ultimately we and our shareholders would want [ this ] to see achieved. And so this is a transaction that we've been advised [ will ] go through regulatory and close in an estimated 90 days. And importantly, this is not in the guide. And that has been our standard practice to -- if we were including something in our guide that was a signed transaction. It's only ever happened historically because the closing was imminent, like within a day of the announcement that we are making. So very clearly, this transaction is not in the guide.
Okay. That's an important point. So I wanted to ask you about the experienced economy. You guys have a lot of mind share in a number of different areas in payments, [ sexytech ]. And obviously, stadium. So can you speak a bit more about the experience economy and why this is an area that you view as strategic?
Yes. Look, I love this question because it is the way we think about ourselves. It is the way that I'd like to believe our brand ought to evolve. And it is an emphasis point that we have the right to win in because of sort of the power lanes of where our market-leading propositions are. But the experience economy is sort of like what is it at the highest level, it's really touching on this overarching concept that consumers are favoring experiences and that the allocation of especially affluent and aspirational consumers towards experiences, is something that has an above-average discretionary growth rate tied to it. And whether it's coming from us, whether it's coming from the airlines themselves, whether it's coming from hoteliers talking about opening much more 5-star versus economy, the airlines talking about generating their revenues from the front of the plane versus the plane overall. I think this concept of being a leader in the experienced economy is really just about aligning yourself to a growth trend that is likely to outpace an underlying growth trend of discretionary spend, but one that's far more durable. And when we think about being able to work with merchants and be their commerce partner in serving luxury retail for the luxury travel shopper or the fan that is going to stadiums for [ pro sporting ] events or concerts, our ability to deliver in an environment like the World Cup across every stadium in the U.S. and Canada and then do so, and then serve that merchant who's trying to serve the consumer in these resort ecosystems in these tableside dining establishments like overall, that is demonstrating itself to be a good macro trend to be aligned towards. But another important part of it is that it's a trend that is very in person. It's very physical. It is actually happening in the real world. And when we think about the roots of our company, as being something that was very focused on operationally -- operational excellence, physical provisioning, being able to support a Super Bowl in terms of its level of spike demands, demand and commerce environment. We take a look at our DNA, and we know what we're good at, and we want to take that capability, bring it globally and bring it all across the experience economy where demanding in-person payments, are required. It doesn't mean that we don't do e-commerce and [ omni-commerce ] well. I think that's [ table 6 if ] you need to take a reservation in a hotel. But in short, we like the underlying trends of this mega trend shift towards experiences as an underlying market growth, but we also acknowledge that our point of difference is high-demand in-person environments where we can be a commerce tech partner for some of the biggest tastemakers kind of in the world. Then the last thing I would say is that we're also starting to see a real convergence across a lot of these industries where restaurants are in hotels, that's not necessarily new, but for sports teams to now have hotels, build out shopping and retail and restaurant districts around their stadiums and really want to own that in support of an ever-growing set of valuations in sports and entertainment, we're just starting to see our experience economy converge. And so the phone is ringing for us because of our ability to interoperate across all of these different verticals and see our ability to perform in places like World Cup and Super Bowl.
All right. That makes a lot of sense. Right I hear you [ out ] clear on the experienced economy. I wanted to ask you about revisiting the Investor Day algorithm. So you guys had a great Investor Day in February 2025. There are a lot of incremental disclosures. There was a great amount of detail about the strategy of the company, the tactics of the company. At that time, you had laid out mid-teens Americas, high 20s worldwide mid-single-digit TFS. So now we're 18 months in worldwide running 52%. You alluded to this earlier. TFS is seeing corridor pressure. So how do you think about the algorithm now? Does it need rebasing? Or is it dispersed enough, so it comes in as expected.
Yes. I would say that the growth algorithm that we introduced at the start of the year, is the way to think about the business, certainly through my lens. I came into this role with the priority of really wanting to help bridge as it relates to the investor community. Really help bridge the -- how do you model the business -- how do you think about the building blocks of growth and how do you acclimate to the new financial profile of the business, especially with TFS coming into the equation and its seasonality dynamics and its margin profile. You take all of that together, and I think it is important to then step back and kind of acknowledge that this growth algorithm and the way we talk about the business now is the -- is probably the best way to kind of not just model, not just track but to, let's say, continue to track the business in a way that will map the kind of the data points that we're providing. And what we intend to report out on consistently is the pieces of the growth algorithm, the disclosures that we've laid out, whether that's the various disaggregated revenue categories, the organic disclosure, I do think we're going to be much more front-footed around FX components and the impact on that in disclosures. And so I think it is important to kind of just look at the current when thinking about how to best appreciate the financial profile of the business.
Okay. Thank you. I'm going to come back to the free cash flow, but I did want to get a perspective on the Global Blue cross-sell. So [ Taylor ] had said on the Q2 call, Global Blue is somewhat different than past cross-sell playbooks. You're deliberately investing in the sales build-out across countries and anticipating a meaningful synergy benefit not just -- not in 2026, but more over in 2027. So what are the early conversation was looking like on the cross-sell I think you have a goal of a few thousand merchants per month exiting a year. How are you trending towards that indicator?
Sure. So I think it's important to sort of start with the context and level set that when we embarked upon the announcement of the Global Blue transaction, we highlighted sort of this $80 million synergy potential and that, that would be very much a 2027 event. And so when we think about reporting out against kind of hard and fast figures, KPIs that will do so as we move into that time period. The most important milestones though, that I do think are tracking and what we're trying to report out to people are the operational milestones. That's why in the prior quarter, we were really focused on reporting out on the product milestones of something like Shift4 One and DCC and talk about where we are with that from a readiness standpoint, the integration milestones of the company as a whole. Making sure that go-to-market was aligned, making sure that the operational support systems, ways of working are aligned and that leadership was aligned. And I think those things we reported out on as positive. And as we move into the Q2, the critical one -- the critical milestone that I think we wanted to emphasize the most was how many countries we were live in and what is our goal that [ we've ] set out the 15 country target and we're tracking to -- in Q2, disclosed that we were at [ 12% ]. And I do think that is one of the most important operational milestones to have an appreciation for. But as it relates to Shift4 One, we're really pleased by the progress and really pleased by the way that the commercial resources are growing, the way that we're live in those countries. The only thing I would add, though, that I think often gets lost is the appreciation that when Shift4 One is "live" in a country, it means that our -- all of our in-person payment capabilities, our tax-free shopping integrations to those payment capabilities, our DCC capabilities or current dynamic currency conversion solutions are all live in these countries. And that means that the infrastructure has already been laid out for us to bring all of our other market-leading solutions potentially as fast follows into these live markets. It's -- we talk about Shift4 One being live in 12 countries, but we also announced that in Q2, Shift4 [ dine ] got live in two new countries. And that component of the narrative, I think, does get lost and is underappreciated about why we bought into or invested into all of the infrastructure that came with the [ pan-regional ] markets of Global Blue. So just wanted to add that as a piece that I think often gets a bit lost.
So this reminds me of the Friday meeting 10 years ago where we covered a lot of territory, and there was more to go. You, me and Chris, so I am delighted to have hosted you today and gotten your perspective. There's a lot more we could cover, unfortunately, we are running out of time. So -- but we are grateful to you, Chris and Shift4 and add Tom and [ Poor ] joining us today. Folks, I think that you guys just stay here, Chris, you too, and then we have additional meetings coming up with Mastercard shortly and the rest of the day. So thank you, Chris. Thank you very much.
Thank you, Jamie, and thanks to Susquehanna team. Appreciate it.
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