Shift4 Payments recently reported strong performance in the first quarter, despite challenges such as political commentary and capital markets volatility. The payment processing solutions company, known by its stock symbol FOUR, saw a significant increase, with shares rising by 10% through mid-morning trading on Tuesday.
The company exceeded earnings expectations, posting an adjusted profit of $1.07 per share, against the anticipated $0.95. However, revenue fell short of forecasts, coming in at $848.3 million compared to the projected $862 million.
During the first quarter, Shift4’s president Taylor Lauber highlighted a record payment volume of $45 billion. Lauber described the payment volumes as “healthy” and stated that consumer spending across their merchants remained robust despite external factors.
The company’s payment volume rose by 35%, contributing to a 40% growth in gross revenue after network fees—though less than predicted, yet still strong. Net income decreased by 32%, and the company’s adjusted free cash flow was reported at $70.5 million, a 10% year-over-year decline, albeit with some ambiguity in its calculation.
A traditional measure of free cash flow, subtracting capital expenditures and capitalized software costs from operating cash flow, estimates it to range between $46.6 million and $76.9 million.
Looking ahead, Shift4’s management has adjusted its revenue forecast for the year to between $1.66 billion and $1.73 billion, indicating a year-over-year growth rate of 23% to 28%, slower than the first quarter. They also expect an adjusted free cash flow conversion rate of roughly 50%. Based on their forecast for adjusted EBITDA, this would imply a free cash flow of $420 million to $432.5 million for the year, valuing the company at about 13 times its free cash flow, potentially offering good value given its over 20% revenue growth rate.
