Analyst Asks Why SEC Is Not Investigating Shift4 Numbers

What follows is commentary an analyst sent to us in regards to Shift4’s reporting.

We often thought Shift4’s numbers looked a little funky, especially as it relates to their POS numbers and growth. We continue to see Shift4 use every April and October network update as a way to absolutely cream merchants on rate increases.

Could this be cover for their underperforming POS business, which sees trivial investment relative to its competition?

Here’s the deeper dive:

I’ve watched the meteoric rise of Shift 4, overcoming an IPO during the Covid pandemic and rocketing to nearly $100 per share. This was nothing short of amazing based on what was going on with the rest of the economy. I read every quarterly earnings call when it becomes available so that I can keep abreast of what is going on with this amazing success story.

But the more quarterly calls I attend, the more I find myself with questions that seem to go unanswered. So I feel the need to come right out and ask Shift4 about things that I’ve seen that leave any logical person puzzled. 

Question 1

In Q3 ‘21 Shift4 stated that they had “2,000 plus merchants, including the United Center” using their new SkyTab Android based point-of-sale system. 

Impressive! 

Then in Q4 ‘21 they had “approximately 3,000 restaurants” using their new SkyTab solution – 1,000 new merchants in 3 short months. 

Half the growth of Toast: amazing! 

Then in Q1 ‘22 they had “in excess of 3,000 restaurant clients that signed up”. 

Wait a second: signed up or actually using the product? 

Big difference. 

Also in Q1 ‘22, “We haven’t disclosed the specific figure [POS installations] in our data this quarter, but it’s over 3,000, which I think that would be around – it’s above where we listed last quarter – our Q4 call by several hundred merchants.” 

So Shift4 went from adding a thousand merchants in one quarter to several hundred? 

How many merchants are using the new SkyTab POS – not the payments app Shift4 branded SkyTab several years ago and bolted onto legacy POS systems? Global Payments did the same thing with Xenial and it fooled no one.

Can we get an exact count of merchants ringing sales on Shift4’s new POS system? Also, can Shift4 please break that down by US, Canada and Europe? It makes a HUGE difference.

Question 2 

In Q3 ‘21, Shift4 stated that they had “7,000 expert distribution partners”. Assuming the bulk of their presence is in the US (knock off 1,000 for non-US just for laughs), they have 120 expert distribution partners in every state: that’s practically one on every street corner. 

But wait a minute, didn’t they just tell us that they had ~3,000 installs? Across 7,000 expert partners? Then why don’t they have 7,000 installs if these guys are all so “expert”?

Of these 7,000 expert partners, how many have boarded 12 new merchants in the last year? An “expert” partner should be good for at least one deal per month, surely. For comparison, Toast sales reps carry quotas that are approximately six times that number. And these are early 20 somethings pulled off the street – i.e. not experts.

Is Shift4 counting zombie dealer contracts with businesses that no longer exist or have moved on to other products? I have a hard time coming up with 7,000 resellers left standing in a market that’s been absolutely pummeled by direct distribution.

Question 3

In Q1 ‘22 Shift4 stated that they have “SkyTab POS offering and our unique integration with 425 mission-critical software suites”. 

I had to sit and think on this one for a while. 

I added up all the accounting, payroll, social media, online order and ordering apps I could think of and I didn’t even get to 100. 

Then I went to Toast’s integration partner website. Granted these are likely only Toast “partners” that, aside from getting raked over the coals on integration costs, are also paying to be listed. Regardless, I counted 73 partners.

For shits and giggles I went to Square’s restaurant integrations page and counted 40 integrations. 

Researched the same numbers for Clover and, shocker, about 300 apps.

Can we see a complete list of all these 3^rd party integrations that Shift4 has? I would think with all that R&D put into so many different and time consuming integrations that they would be anxious to show that list off. Especially since POS competitors with more market share and, what I believe to be true, winning substantially more market share, don’t have nearly as many integrations, with Clover’s numbers in particular being raised by a material number of zombie apps that nobody uses.

Question 4

In Q1 ‘22 Shift4 stated “We already have 125,000 restaurants to pursue” with their partners. 

So if they have 7,000 partners that means that every partner gets a whopping 17.85 leads to chase down. 

Sorry, that’s not even a question, but I think it needs to be pointed out.

How many partners are losing sleep at night just imagining all the business Shift4 has in store for them?

We guess none, which is why we suspect Shift4 is buying as many of their resellers as possible. 

Question 5

In Q2 ‘22 you see lots of specific numbers: “nearly 42% 4-year volume CAGR, including 52% volume CAGR in restaurants and 170% volume”, so I’m confident that the accounting department is capable of providing concise data. 

But when it comes to the most important metrics regarding the long term trajectory of the company and its brand new flagship product, you get round numbers (125,000 restaurants, 7,000 partners, somewhere around 3,000 beta sites, 425 3^rd party integrations). 

I would wager that there is virtually no statistical possibility that 3 of the 4 numbers would come out exactly to the thousand or that all four would be evenly divisible by 25. 

Why are all the most important metrics of the company in round numbers or vague references?

I find it troubling that the key product that Shift 4 is betting its future on is not more newsworthy. 

Not one customer testimonial, and with 3,000+ customers using it you would expect to hear at least some gossip in the traditional POS and payments channels.

As for the vague and questionable numbers:

Hey SEC, you climbed up Elon Musk’s ass over a 420 joke but this kind of obvious bullshit goes unquestioned? 

Shift4 is peddling a story of offering valuable, competitive software, with POS as the central anchor to their narrative that can be simplified to “look how much we can gouge people on payments when we get them on our POS that’s hard to switch”.

Feels like they should at least be a little more transparent with their shareholders than they are with their customers.