Shift4 Payments, Inc. (FOUR) September 2026 Conference Transcript

All right. We're going to kick it off here. Kicking us off for the third day of the conference is Chris Cruz, CFO of Shift4. Chris, thanks for joining us.

Thanks for having us. Well, I'm really happy to be here. Great conference.

Wouldn't miss it. So, look, I wanted to kick us off kind of high level here. When you think about the story for Shift4, how are you thinking about the story of differentiation for the company? What do you think the major selling points to customers are?

No, it's a great way to kind of think about us as we're coming into this year and really embracing this idea of who we are as the company that wants to help empower the experience economy, whether that's shopping, dining, staying, or playing across all of these different sub-verticals of the experience economy. we want to be the provider of payments integrated to commerce technology that helps power all of those experiences. Restaurants, hotels, lodging, resorts, stadiums and entertainment like Levi's Stadium here where the 49ers play or where they hosted the Super Bowl. This is all the in-person payment experience that's super complex. It's very hard. It requires not just lines of code and payment platforms. You need to integrate into vast libraries of software that run revenue centers. You need to deliver on multiple payment modalities, cards, bank rails, APMs, etc., and you need to do it all with a real physical infrastructure in mind so that when the dinner rush comes 7 o'clock Saturday night, you can actually go and break fix. You can actually keep the uptime. And when something like the Super Bowl happens, you have the ability to provision all of that infrastructure, make it happen, because those in-person memories and moments that matter, the things that we want to keep that uptime on. And then we do all of that with, I think, kind of the revenue model that aligns with reliability. So the idea that it's almost like the original usage-based billing model, right? That's what payments brings to the table. If the uptime is there and the merchant is making money and collecting those payments, we are aligned with revenue. And if it's down, we're down. So I view that as kind of the core things of what we do, what differentiates us, and how our value proposition resonates with these experienced economy and markets.

And when you think about what that brings from a financial perspective, how does that inform how you communicate the growth algorithm to investors?

Yeah. So coming into this year, it was really important to really help take this globally expanding, growing business, covering the experience economy as a whole, and trying to break it down into some of my own sort of understanding in financial formula in growth algorithm. So we introduced the concept of the growth algorithm at the beginning of the year, cutting across two very important axes, the first of which is how our revenues are generated. So our disaggregated revenue categories of payments-based revenue, our North Star, three-fifths of the business, tax-free shopping, and subscription and other. But then we also look at the business through the lens of our geographies. The global expansion narrative of what we're after is a really important part of our growth algorithm, and that's where we look at the Americas region versus worldwide as a whole. And those are really important, like two very important axes to look at the business. And so when you look at that growth algorithm, you know, essentially a composition that calls for payment-based revenue to grow sort of in the low 20s, that's like a mid-teens in the Americas, and kind of a high 20s but outperforming in the worldwide region, a tax-free shopping growth algorithm that's calling for mid-single digits, and a subscription and other that's calling for low single digits. That was for the year. So when you look at that growth algorithm and you look at the first half of the year, I'll admit that it is a difficult thing to then turn into a framework for ongoing growth because you have something, for example, like worldwide payments-based revenue year-to-date has grown 50-plus percent. How do I turn that into some sort of a framework for future growth? So what I like to point people to is it's important to understand that the second half implied in our growth algorithm really does show you the building blocks of taking – you take the year-to-date, you take the full-year outlook, and you can see that our second half kind of runs with a growth algorithm that would suggest 9 to 13. So high single-digit, low double-digit. And I think that that kind of a way of thinking about the building blocks of the business, that kind of growth algorithm is an important framework to appreciate and understand as you start to think about durable growth in the future.

Yeah, no, that makes sense. Maybe just on the near term. So at the most recent quarter, you took the full-year guide down at the midpoint. The bulk of that revision came from FX and some of the continued travel disruptions out of the Middle East. So two parts. How much of the remaining guide would you characterize as de-risked at this point? And then separately, on the broader spending environment, is there anything to call out on the same-source sales dynamics that you're seeing as we sit here sort of late in the quarter?

Yeah, so let's unpack that. So we revised the full-year guidance at the second quarter earnings, rightfully so, a little less than 200 basis points at the midpoint. On a constant currency basis, it actually is like about clustered 100 basis points in terms of the revision when you kind of play it through. Absolutely right. The two biggest drivers of that revision were, one, just trying to adjust for the fact that FX volatility has moved quite a bit. So when we set out the plan at the beginning of the year to where we are today, it's amazing to think that we were talking about a world where the U.S. dollar was supposed to depreciate against the euro. pretty meaningfully, and I think Goldman and JP were sort of debating by how much, because it all hinged on how many rate cuts were we going to have. And we are just in such a far cry from that. So a large portion of that revision was just simply updating those effects. And then, of course, the topic that we've been talking about quite a bit over the last couple of quarters, the Middle East conflict creating travel disruption resulted in us finally revising guidance for second half with Q3 having now an impact embedded into the forecast. We were able to absorb the first half of the year in conflict. We did not revise, but finally coming into what is now a bit more of a lasting duration of a conflict, we had to revise and include that into the Q3. But we did not include anything into the Q4. For those that are trying to sensitize what a Q4 impact might be using the same framework that we have been using, which is a framework that looks at the forward forecast of flight capacity, flight availability, and bookings, you could size the fourth quarter roughly in line with what the second quarter impact was. And I think that's something that we've been trying to be really transparent on to help people with the modeling.

Got it. So that makes sense. So another thing on the quarter was on free cash flow. I think this is really the guiding light for a lot of Shift4 investors. The acquisitions and capital structure have created some noise in free cash flow this Historically, you've talked about roughly a 60% flow through of incremental EBITDA converting to free cash flow. Does that algorithm still hold going into next year? And are there any other puts and takes that we should be considering?

Yes. So I'll stay at the kind of high level of how I think about that incremental free cash flow conversion algorithm without trying to sort of provide any specific guidance around the following year. But I think the answer is yes. The way to think about the algorithm of for a dollar change in EBITDA, the flow through into free cash flow conversion, roughly speaking, 60%, I think that formula, that framework should hold. And it is important, though, to get the capital structure impact correct. So that is separate in a way from the fact that interest expense wills have changed as a result of the term loan transaction, which pre-funded a 2027 convert maturity. So if you can normalize for that and factor that into your models, you then go into next year and you actually have to now capture that in August of 27, that convert, $633 million, that convert comes due. It matures. We will then take the excess cash on balance sheet that we've pre-funded. We're going to redeem and pay down that convert. So the 633 that was earning interest income comes off the balance sheet, and the 50 basis point running cost on that convert also comes off. So if you can get that part right into the model, you then have the formula hold, 60% incremental free cash flow conversion. Got it. Okay.

All right. That's very clear. Another point on free cash flow that's been very topical across the industry has been on hardware. I think for Shift 4, this runs to the P&L mostly through DNA. It's more of a cash flow item. So I think it amounted to roughly $140 million over the last 12 months. As we think about what has been going on with memory costs, how should investors be thinking about the impact that this could have on free cash flow going forward?

Yeah, so it's a really topical one that I think we have been able to navigate really well as a procurement team, as an organization that's probably one of the more scaled purchasers of OEM-created payment-specific hardware. As one of the largest purchasers there, I think our purchasing scale has afforded us sort of a better weathering of this storm than others, it seems. And I say that because despite the fact that there are larger payments companies than ours, many of them don't actually procure equipment through the same OEMs, the same scaled OEMs that manufacture payment devices. Some larger players actually component manufacture and then assemble themselves, which then exposes them to probably more spot rate dynamics of a market, versus us, who really gets to leverage being one of the largest buyers from some of the largest equipment manufacturers. Importantly, though, we've also been able to weather this storm, I think, a bit better than others because not every new merchant win has the same amount of hardware across our portfolio. So we, of course, have a restaurant vertical where within that vertical you have POS systems, you have payment devices. We're in stadiums and entertainment environments that also have POS systems, payment devices. But on the other end of the spectrum, we do win our fair share of card not present where you wouldn't have hardware. We do have our fair share of luxury retail. We have a market-leading position in luxury retail or in hotel lodging where you have a lot less of a ratio hardware to revenue than, we'll say, some of our competitors that might be talking more about hardware. So I do think those are two key distinctions. But between our purchasing scale and our ability to keep negotiating well and the composition of our revenue, having more of a mix between revenue to hardware ratios, I think those are two key distinctions that investors need to appreciate about why we're able to weather this storm perhaps a bit better than others. And for the year, we have not, you know, we stay on top of this topic very closely, and we are not making any revisions associated with the year, associated with memory for the year. Got it.

Okay, that's very clear. Sticking with kind of balance sheet type topics, you're at 3.7 times pro forma net leverage. You said the business should delever to low threes by end of the year. You've also turned out a lot of your debt maturities to 2031 and pre-funded to 27, as you just talked about. Where does leverage go from here? Is low-3 the right long-term operating zone? And then how do you think about the trade-offs between deleveraging the remaining share repurchase authorization? And I'd also throw M&A in there as well.

So our capital allocation framework has remained totally consistent since the beginning, And frankly, since the beginning of being public and well before that, my involvement with the company now is, I think I just crossed over my 10-year anniversary of being involved with the business. And as far back as I can remember, our capital allocation framework has stayed completely consistent, three parts. So the first of which is looking at capital allocation organically. And for us, right now, a lot of great opportunities. We're expanding international markets. That's organic opportunity to invest. We're investing in product and platform. I think our second quarter was a record quarter of investment within the product and platform from a technology standpoint, and that is competing for capital allocation. You have our inorganic opportunities where today, relative to the recent history, we are finally starting to see private company valuations start to converge with the public. So said another way, we're starting to see more attractive opportunities in the pipeline. And our pipeline is a patient, proactive, long-dated database of pipeline where we will be monitoring opportunities for multiple years. And finally, when we start to see those valuations converge and attractive opportunities that could generate really high ROI start to show themselves, we get pretty excited. That's starting to compete for capital. And then as a public company, capital allocation towards minimizing the dilution and trying to keep share repurchases in the forefront, that remains an opportunity. So we've got to balance all three of those while acknowledging the constraint of where we are on leverage. It's not an easy feat. It's definitely something that manifested itself in the second quarter where we actually had to be more conservative around share repurchases, right? We only ended up investing a little more than $20 million within share repurchases because we acknowledge it. We get it. That was a cash outflow or a low cash generation quarter. And now that we're in the back half of the year, much more cash generative quarters, we can look at this capital allocation framework. And even though it has to all compete for the highest and best generated returns of capital, we've got to balance this formula out. So I would say that, yes, three and three quarters, not to exceed three and three quarters on a sustained basis, that's the message people should take away. If the business kind of runs on its own, just through EBITDA growth and free cash flow generation, we could get to the low threes this year. but we are going to be opportunistic when looking at our framework and trying to balance out where are we going to generate high ROI with dollars deployed.

So it sounds like you have some flexibility by the end of the year. If you're already on a trajectory to low threes and you're kind of managing to kind of the mid to high three range, it seems like there's flexibility to resume kind of more normal capital allocation going forward.

Yeah, I think that's fair to say, But I would say that the nice part about the model right now is because all three of those are competing for capital, that is a high-class problem. It is a balancing act that we have to acknowledge, but I think I would view it through the lens of it being a pretty high-class problem right now.

And then on the M&A side, how are you thinking about potential size? On the spectrum between tuck-in acquisitions and Global Blue, where are you thinking is the right use of capital?

Staying absolutely consistent on kind of the messaging over the last few quarters, this is about tuck-ins. This is about investments that are going to accelerate existing strategic alternatives, enhance capabilities on the platform, expand distribution in the markets that we think we have a really unique right to win. Those are going to be the areas. Nothing of the material size and scale, certainly of an investment like a Global Blue. But that's, I think, the best way to think about it this year is a focus on tuck-ins.

Sure. Okay. All right. So let's talk about organic growth. I think the organic growth disclosure has been a really helpful disclosure. It's given investors a common language to talk about the growth in the business. You've printed 11% for two quarters. Tax-free shopping rolls into organic starting in the third quarter. it sounds like the message is kind of 9 to 13. It's sort of the pro forma organic growth rate in the back half of the year. How should investors think about durable organic growth rate? Is it that 9 to 13 range? And then how do you think about opportunities to accelerate that when they come?

Yeah. So a few parts there. One, I appreciate you saying that people have appreciated the incremental disclosure around it, we're probably still one step to go, which is to, given the global nature of the business, introducing a constant currency concept within that probably is one more net helpful piece to the equation. Because, for example, if you were to have looked at kind of a constant currency basis for Qs 1 and 2, you would have actually seen Q2 was about a 145 basis point expansion in organic growth on a constant currency basis relative to Q1. So you would have seen sort of about 9 and change percent in Q1 would have come to a 10.5 or so in Q2. So I think that's something that folks should expect us to evolve into. When you think about your point about the implied second half reported growth of 9 to 13, it is important to appreciate that, for example, in Q3, we've got a guide out there for 10% reported growth. Organic would therefore be high single digits. It'll be just underneath the reported number. And that'll end up kind of converging over time, certainly as Global Blue becomes organic, SmartPay in the third quarter, SmartPay becomes organic in the fourth quarter, as those all roll in, you sort of end up in a range where reported kind of high single digit to low double digit, organic should be just a little under that. But I do think that in general, you know, this kind of consistency around high single digit growth to low double digit growth, that's what's been showing up within the numbers, both organically and even on sort of parts of the reported basis. It's kind of what we point to within the growth algorithm in the second half implied. And I think that's the right framing.

Got it.

Okay. All right.

Very helpful. One thing that came out of the quarter in the 10Q, I think you disclosed a roughly $300 million acquisition for an account, the accounts platform, $140 million up front. The balance is contingent consideration. Presumably that's not in guidance. Maybe you can clarify that. But bigger picture, Can you provide any more information on it and maybe how you think about how much that could add inorganically once it's closed?

Yeah, so clarify that point for sure, not in the guidance. That's a transaction that after we signed it, we were expected to have, call it, 90-ish days between signing and closing for the closed process. So the account-to-account opportunity is a really unique one It's a very interesting one. It's something that we've been pursuing for multiple years. And I'll start with the first part. The topic that comes up, or question that comes up a lot, is kind of the decisions around the disclosure of it. And I'll start with wanting to clarify that when we were approaching the earnings and talking through the best way to disclose, we knew we had disclosure around subsequent events, but it was a decision between kind of all of the parties involved that a key commercial discussion and negotiation was happening for the business and that it would be in the best interest to not sort of shine a spotlight on it in such a large forum. We absolutely are committed to talking about why we're excited about the business, the thesis of it, and the sort the minute we get to the close of it, And happily, the negotiation that really brought this into the forefront is going well. So we're happy about that, but it was an important decision that we had to make, hence the disclosure choice that we had. Account-to-account is interesting because when we talk about being a payments company within different payment modalities, it's very easy to think solely about cards. And I think that actually is a very – we're a business that was born in the Americas. It tends to be Ameri-centric, that the cards culture here is really strong and prevalent. But there are many other payment modalities that, especially in other countries around the world, are the lion's share of volume. And bank rails tends to be an area. In our Bambora acquisition, we were able to obtain an ACH capability, an integrated ACH capability that we were already building, but we were able to acquire, and that gave a bank-to-bank kind of capability. But think of that as B2B, a corporate bank-to-bank capability. A2A is basically the consumer-to-business side of bank-to-bank as a rail. It tends to be for things like, for categories where a payment card may not be as well suited. So think of a large ticket transaction where you might exceed a card limit. You might exceed an authorization limit. You're likely to see a high kind of rate of failed transaction. That is where an account-to-count, a bank transfer, may actually make sense. Those can happen in high-ticket environments like high-ticket luxury, ticketing where there's a one-time purchase that may be outside the norms of the spending patterns for that cardholder, or even making a deposit on a special night out in a restaurant for a private room. Those kinds of spikes in cardholder behavior tend to trip an off rate, in which case a user or a consumer may want to start to go to an account-to-account, or they might be topping up a wallet of some sort. So having all of these different payment modalities in our platform just help us round out the total value proposition to a merchant and allow us to take off the table any one-off things that the platform may have otherwise been missing, and therefore the merchant may have a reason to look elsewhere. Dynamic currency conversion was one. We took that off the table. ACH was one. We took that off the table. ADA was one of the last ones we needed. Makes a ton of sense.

I wanted to maybe zoom out a bit. A lot of financial-oriented questions. Let's talk a little bit about the business and maybe start with Shift4 venue and the experience economy. I think there's been a big point of framing that the team has leaned into recently about Shift4's exposure across multiple dimensions for the experience economy. We just had the World Cup, great showcase for your leverage to that theme. How does the positioning around the experience economy impact the way that you think about the resilience of the business and sort of the long-term growth prospects of the company?

Yeah, I know. It's a great question. And we like to think of it as when you step back and look at some of the bigger trends, trying to zoom out to the trend level, it is clear that there is a growth and a demand for experiences over goods, and that trend continues. And experiences in our world is also nicely aligned to the fact that it tends to be very in-person, right? It tends to be in the real world. It tends to require all of the physicality of provisioning of payments and commerce solutions that help make that moment happen. We like to think of it, too, that our technology, especially in a place like a sports and entertainment venue, our technology is actually the last technology that the consumer is probably interfacing with, sitting in their seat, ordering ahead, or they're a season ticket holder, so they might actually be using a wallet that's provisioned by us. And that's the last interface between consumer to technology in the venue. But we're also the last piece of technology that a sales associate or an employee is likely interfacing with before they face the consumer, too. So the technology that exists that we're providing, whether it's payments or POS, tends to actually be that last piece of touchpoint where technology now meets a person, either an employee or an actual consumer. And we think that's really powerful because when you think about crafting kind of future experiences around commerce, around payments, unifying them together with things like loyalty, unifying them together with accessing the proprietary data assets we have on fans, on luxury shoppers, there's a lot that we are able to innovate with our merchants as a result of it. And we like knowing that we're in the conversation with some of the most innovative experience makers. It's the folks that are right at the forefront of the resort hotel ecosystem, right at the forefront of stadium entertainment, at the forefront of luxury retail, like categories that we think are unparalleled in their desire to deliver the best experiences within shop, dine, stay, and play. And so that knowledge base and us being able to then cross-pollinate the ideas that we have with each of these categories, each of these experience makers, I think also gives us a pretty unique differentiation.

Okay, let's talk about luxury retail a bit. I think this is one of the biggest swings at the Shift4 playbook that you guys have taken. Born out of the Global Blue acquisition, this is your way of integrating that platform with Shift4's payments platform. Can you walk through what that sales motion looks like? and talk about how your visibility into the $80 million of revenue synergies from that deal has changed, and what are your latest views on timing?

Yeah, so Shift War One is a really exciting product for us because it brings together a few of the things that we've been strategically and tactically putting together to be differentiated in a massive category of retail, luxury retail in particular, and give us the entry pan-regionally into Europe, again, with a fundamental point of Because when you take tax-free shopping combined with payments and combined with currency solutions like DCC, it's really that tax-free shopping piece that is one of one, right? That is a 75%, 80% market share leading value proposition that is very difficult to displace because that's a system that is integrating merchants to fiscal authorities to customs authorities at airport checkout and housing that data in order to deliver a pretty unique experience of money movement and payment. And when you take that piece of uniqueness and then you actually then say, well, by the way, this tax-free shopping experience works best when the payments are integrated because a card that gets swiped with a foreign bin range, a foreign bank, can automatically detect whether that person should be eligible for a tax-free shopping rebate. So the integration makes sense to you as the merchant, makes sense to your consumer for a better experience. We're going to displace an unintegrated bank device that is probably provided by a local bank that's not investing nearly as much in commerce technology, and we're going to match a rate. And we can do all of that and have incremental revenues. You add currency solutions on top of that, which, again, is actually a unique product because the merchant can actually make money off of that solution too. So when you combine it all together, the value proposition is very compelling to the merchant, not just for themselves economically, but because it's better for their consumer. And it's incredibly compelling to us because when you stack all of that ARPU together, tax-free shopping, currency solution, payments, and pull that together, that actually gives us the ability to certainly have that ARPU built, create the best unit economics in the business, but it also gives us quite a lot to be able to maybe invest back into the customer. So where I said match the rate, well, we could actually consider having some amount of a strategy to go after the market share. So it's a pretty compelling overall offering. Our go-to-market and selling motion with this solution, today is about going country by country, building up go-to-market resources, a mix of direct and indirect partner. You're going to see the direct build first and build fastest, and that's been the experience that we've been seeing. And that's because the partner channel, unlike in the U.S., where integrated payments has been able to teach partners, partners being software companies themselves or the distributors that sell the software and integrate it, aka value-added resellers. In the U.S., those partner channels have had more than a decade to mature in becoming payments salespeople. That didn't exist a decade ago. Those revenue streams and commissions to those types of partners, that was a foreign concept. In Europe, it's still a foreign concept. So what we're seeing is mobilizing these channels and mobilizing these partners is something that is going to take some time, but we think it's a very worthwhile investment because we can just take the pattern recognition of everything we saw in the U.S., accelerate that time frame to mobilizing these partners, but we know that if we're the first to be able to do it and really build the loyalty within that channel, it's an incredibly powerful channel. And so that's the investment we're making. So as we move country by country, we start with direct, we then add the indirect, we acknowledge the indirect, will take a little more time, but it's a very worthwhile investment because if you get it, it's a pretty fantastic asset.

And then how do you think about the achievability of the $80 million through direct channels versus needing that kind of extra push from the indirect side?

So the plan was always to have the combined power of a dense go-to-market model where the revenue synergies are going to come from the combination of Shift 4.1, DCC, the cross-selling motion of the variety of solutions that came out of Global Blue moving through this now larger and scaled go-to-market asset spread out across the many countries that we'll be live in and bringing some of those solutions live into the U.S. So the combination of all of that is in motion. We haven't yet begun the reporting out against revenue synergies. That will be in 27. But what we can say is that we're hitting the progress milestones that we needed to hit on product, on go-to-market scaling, on countries live, which is a really important metric, and on being ready with payment platform capability that can actually deliver these in-person payment capabilities that we need to be live. So we're hitting all of those milestones and feel good about it.

Got it. Great. All right, we've got just about a minute left. Chris, I wanted to maybe get your thoughts on the stock as both an investor and CFO. The stock seems to be pricing at a much lower level of earnings and growth than what it has historically. And that seems disconnected from a lot of the energy that's coming out of the team from you, Taylor, and everyone. What do you think the market is telling you about the business? And what do you think the market is missing?

Yeah, well, first I can say we can be very patient people. I've been involved in the business for 10 years. You can go back to the S1 of the company, take a look at fiscal 18, fiscal 19 financial stats, and you're going to see 30%, 40% CAGRs through time. Like, I mean, we know that our playbook works. We know that the combination of doing what we do well, of cross-selling, of enabling payments and commerce technology to converge, and then allocating capital to create outsized through inorganic investment and other outsized rates of growth, we know that that formula works and we're committed to it we're excited about it so even when you sort of have the backdrop that you have of macro and markets and volatility as a result of all of that we can we know that we can put our heads down and just execute our way through and we know on the other side of this we will be able to continue to compound at high rates of growth the valuation though is at times something that simply means that in your capital allocation framework you have to take a serious look at, in some respects, the gift that the market is giving you. There's a whole host of reasons that these things can happen, industry-specific, macro-specific. And at best, what we can do is play our playbook, execute that, and allocate capital if we think it's attractive to something like share repurchases. And that's what we have been doing. But as an investor, I do think that it does seem like we're at a point in time, as someone that's kind of studied the payment space for like 20 plus years as an investor, you can look at the multiples to growth ratio and we're at the low point, right? We haven't seen this since GFC, right? So the idea that I can take simple ratios like a peg multiple, I can take simple ratios like adjusted EBITDA to growth rates over a multiple, like that's simple math. And I can look at it at a whole sector level and acknowledge that, wow, this is not a sector that's supposed to be running it at a 0.5 peg, right? That is for like speculative junior gold, right? Like this is not that. I think payments has always been recurring revenue, durable, and certainly warrants a growth-adjusted multiple that reflects that kind of durability. So I think we do know that we're at kind of an interesting point in time right now. Yeah, makes sense. Well, I think we'll have to leave it there. Thank you for joining us. It's been a great conversation.

Yeah, awesome.

Thank you for having me.