Shift4 Trims Guidance as Cash Flow Slides on Acquisition-Fueled Growth
Shift4 Payments' Adjusted Free Cash Flow fell 82% from a year earlier even as reported gross revenue climbed 34%, prompting the company to lower its full-year outlook.
Shift4 Payments (FOUR), the payments-processing and point-of-sale technology company, reported second-quarter gross revenue of $1.3 billion, up 34% from a year earlier, while gross revenue less network fees (GRLNF) rose 51% to $624 million and gross profit climbed 53% to $420 million. Stripped of the Global Blue acquisition and other deal activity, organic growth was 11%, underscoring how much of the headline expansion came from acquired businesses rather than the existing base.
The company's payments-based revenue less network fees, the metric it has designated its primary growth gauge, grew 27% year over year, a pace management has held up as evidence the core business is still expanding at a healthy clip even as reported figures are inflated by deal-making. Volume reached $61 billion, up 22% from $50 billion a year earlier, matching the prior year's growth rate rather than accelerating.
Profitability improved sequentially but not year over year on every measure. Net income rebounded to $24 million from $12 million in the first quarter, though it remained below the $53 million posted in the fourth quarter of 2024 and the $41 million recorded a year earlier. Adjusted EBITDA rose to $284 million from $234 million in the first quarter, matching the fourth quarter's $304 million and marking a 39% increase from a year ago, with the Adjusted EBITDA margin on a GRLNF basis at 46%.
Cash generation told a starker story. Net cash provided by operating activities fell 56% year over year to $63 million, and Adjusted Free Cash Flow dropped 82% to $21 million, a sharp reversal from the $172 million and $224 million in operating cash flow and the $118 million and $141 million in Adjusted Free Cash Flow posted in the third and fourth quarters of 2024, respectively. Cash and equivalents fell to $356 million as of June 30 from $964 million at the end of December, while settlement assets rose to $753 million from $350 million over the same period.
Shift4 disclosed a new segment breakout showing Payments-Based GRLNF of $402 million, up 27%, alongside Tax-Free Shopping revenue of $117 million and Subscription and Other revenue of $105 million, up 8%. Blended spread came in at 65 basis points, down slightly from roughly 63 basis points year-to-date and below the roughly 60-basis-point algorithm target the company has cited for the full year, pointing to spread compression even as GRLNF growth runs ahead of that same algorithm.
Shift4 lowered the midpoint of its full-year GRLNF growth guidance by roughly 200 basis points, cutting the range down from 26% to 31%, citing about $25 million of Middle East-related travel disruption expected in the third quarter along with about $20 million of foreign-currency translation impact. Full-year Adjusted EBITDA growth guidance was cut to a range of 19% to 22% from 20% to 25%, and Adjusted Free Cash Flow conversion guidance was lowered to 40% from 42%. Full-year non-GAAP earnings-per-share guidance was raised to $5.35 from $5.15, even as growth metrics for the third quarter were revised downward across volume, GRLNF and EBITDA.
The company took steps to shore up its balance sheet, closing a $1 billion incremental term loan in July to extend its capital structure to 2031 and address near-term maturities. Shift4 also repurchased 0.7 million shares for $25 million during the quarter, bringing total buybacks to 10.5 million shares under its newly announced $1 billion authorization, with $375 million remaining.
International expansion continued alongside the financial recalibration. Shift4 One was live in 12 countries, on track for 15 by year-end, and the company launched Shift4 Dine in Spain and Australia during the quarter.