Investment Case Update: May 7, 2025

Market Capitalization: $7.3B
Enterprise Value: $9.2B
Price: $82.36 (5/2/25)

What the Company Does

Shift4 provides payment processing solutions and business intelligence software with a focus on the hospitality and entertainment sectors, processing over $260B in payments annually for more than 200,000 customers. Shift4 also owns TheGivingBlock, which is the leading facilitator of charitable giving in cryptocurrency. The average cryptocurrency donation is over 30x the size of the average fiat donation, and crypto is the fastest-growing donation method. Shift4 has historically operated in the United States but is now attempting to expand internationally, with an initial focus in Europe.

Why We Own It

Shift4 provides sticky, and likely growing, cash flows at a compelling valuation with an impressive, highly aligned management team in a large addressable market. Former CEO Jared Isaacman founded the company in his teens and grew it in a capital-efficient way until he was nominated to become the Administrator of NASA in December 2024. Between FOUR’s IPO in June 2020 and the end of 2024, total employee headcount grew 3.4x, while Adjusted EBITDA per employee (i.e. productivity) grew 2.1x over the same period. Over the company’s first sixteen years, Shift4 grew organically with neither outside capital nor acquisitions, and has increased revenue by a double-digit percentage in all 26 years of the company’s history, including through downturns. Management has also proven adept at acquiring competitors in a cost-effective way, as they invested $2.7B in mergers & acquisitions (M&A) deals between June 2020 and the end of 2024, which delivered incremental Adjusted EBITDA of $590MM and free cash flow of $424MM, implying highly favorable reinvestment multiples of <5x EBITDA and a nearly ~16% free cash flow yield.

Management still sees a long runway for growth in an estimated $14T addressable market, as organic growth opportunities, such as international expansion and upgrading gateway-only customers to full end-to-end processing, and the recent acquisition of Global Blue, a leading international VAT tax refund provider, are expected to drive 3-year revenue and Adjusted EBITDA compound annual growth rates of 25%+ between 2025-2027.1 As of 5/2/25, the stock trades at 9.1x FY26 EBITDA estimates, or a ~19% discount to peers (FIS, PYPL, XYZ, TOST, WEX, GPN, LSPD, FI) despite significant prospects for continued top-line growth and margin expansion thanks to operating leverage from prior investments.

How Management Allocates Capital

The company’s new CEO has reiterated management’s 3 priorities are – 1) customer acquisition, 2) product investments (R&D), and 3) M&A and share repurchases. Since FOUR’s returns on customer acquisition are so high, management ultimately views both product investment and M&A as levers to increase cash flow generation and free up more dollars to continue feeding their customer acquisition machine, which carries a less than 12-month payback period. The market appears concerned with overspending on recent acquisitions and the recent CEO transition, risks we believe are mitigated by share repurchases of $209MM (2.9% of current market cap) over the last four quarters, and Isaacman’s significant equity stake in the company’s economics (nearly 25%).