Very excited to have the full team from Shift4 here. Jared, Nancy, Taylor, thank you very much for joining us, first of all. We really appreciate it. We'll dive into Shift4 over the next 50 minutes or so. We have a relatively intimate group here. We do have a fancy technology this time around where you can scan the QR code and the questions will pop up here if you have questions for the guys. Frankly, if you wanna kinda raise your hand and shout them out in this sizable group, I think that will work as well. Very exciting company. A lot of topics to discuss. Can I start with Jared? I don't know if you have any opening statements, just your general comments to make. We can open up with that. Not especially. Everything's working kind of as it should. I mean, we get, you know, a lot of typical questions right now about what we're seeing in the macro. Mm-hmm. I mean, we're, you know, we're setting records pretty much every day, but we should. If we're growing at like, you know, better than 50% year-over-year in volume growth, then you should be setting records all the time. It's from our perspective, like we gotta get to a couple, I'd say, important milestone days, like seeing Mother's Day and Memorial Day weekend are important checkpoints for us. 'Cause this is like interesting relative to other periods of uncertainty in the economy that we've seen in the past or actually even downturns. You know, obviously Great Recession, pretty much everyone stopped spending, although restaurants did pretty well actually relative to others. Like right now it's a really interesting environment, right? You know, if we look at like advanced bookings, talk to our customers that are in Las Vegas or Florida, you know, they're gonna have... They're like, "We're gonna have a bang-up summer. Everything's gonna be amazing," right? We know travel and leisure is doing well. Our, our new verticals, e-commerce, sports, entertainment, stadiums, like people will always fill a stadium even if like it's not the best climate. You know, maybe the price of the hot dog goes down from $100 or something. What's really just unknown, right, is are people are gonna go out and have a burger and a beer on their Main Street restaurant, right? Like are they gonna do it at the same frequency that they did it last year, you know, when there was a lot of euphoria and people were eager to get back out? That's like really important right now, you know, for us. I think our big checkpoint will be, you know, Memorial Day weekend. From there we can have a much better sense. From our perspective, this is not really like a product of today's climate. We've always grown based on taking share. Yeah. I mean even in 2020 we grew payment volumes double digits when restaurants and hotels weren't even generally allowed to be open. We took a lot of share. That's what we have to focus on is just, you know, what we can control. We can, you know, we can leverage our strengths and win new customers. We can control our expenses and that's pretty much how, you know, we've set up our year and what we've communicated to our investors. Yeah. Got it. Okay. Well, that's very helpful, overall comments on the macro. Speaking of burgers and beers, I wanna start going through the different verticals where you focus. I wanna start with restaurants 'cause that's, correct me if I'm wrong, but that's kind of the historical core of the company, maybe where you started. Mm-hmm. Still remains a very large portion of what you do. On that specific question on your recent rollout of SkyTab, I'd love to talk a bit about that and maybe starting with the question: What motivated you to kinda make the investment in the development of SkyTab? Why now was the right time? Maybe compare and contrast what you had in your legacy systems versus what you have now in SkyTab from functionality perspective, et cetera. I mean, SkyTab was always part of the plan even back in 2017 when we started acquiring other restaurant brands. I mean, just to be clear, give you guys a sense for how long we've been doing this, we were bundling our own restaurant POS software, hardware, you know, with an aim to monetize through payments and put a SaaS bow on it going back to 2006. We did that under like an organic initiative as part of a brand within our organization called Harbortouch. We had a lot of success with that. That was what ultimately emboldened us to go out and buy several other POS brands. Now, at the time, it was like, well, Like the revenue synergies from doing these deals are extraordinary. Like you're buying like this $2 million EBITDA business that has, you know, 20,000 restaurants using their software pumping through like $20 billion and they're making nothing off it. It's like, yeah, we're gonna buy that, pivot the revenue model, and obviously like those were extraordinary deals. For the long term you're not gonna wanna carry four or five different, you know, restaurant POS brands. You're gonna squeeze all the synergies out of it. You're gonna learn as much as you can. You're gonna apply that talent to building something better. More than five years ago is when we started the SkyTab POS- Mm-hmm ... product initiative. When you have such share within the restaurant vertical and you know, such powerful distribution, you're never gonna cede ground in, you know, with that opportunity. We started building SkyTab again like probably five years ago and it reached like kind of its, you know, it's not peak maturity, but it got show ready the end of last year. That's when we said, "Look, a lot's changed now. You know, it's not Windows-based systems. It's cloud-based systems. Like, you know, do you need as much of the, you know, the operating leverage you got with local distribution in the past, do you need it as much now?" We were like, "This is a great opportunity to consolidate brands, in-source distribution, take control of the customer experience, and rally everyone around the SkyTab banner and sunset those older brands." That's what we did in the second half of last year. The results right now are just extraordinary. I mean, can dramatically change the margin free cash flow profile of the business. It substantially improved unit economics. Every new SkyTab customer we sign up today has a considerably better payback, has a lower customer acquisition cost and a much quicker payback than any other restaurant POS customer we signed up in the 14 years prior or whatever that we were doing, restaurant POS. All things pretty happy. Generally it's a landscape of two, right? I mean, you know, it's really Toast and Shift4 that's out there. There's nothing really that cosmic about ringing up a cheeseburger. You know, it's about, you know, having good coverage with a decent product when customers are ready to migrate from an older solution that's costly or a legacy provider that's not adding as much value anymore. Yeah. What drives the unit economics of SkyTab? Why are customer acquisitions lower than for the legacy products? It's in two parts. One, it's Android-based now. Windows hardware just costs more. I mean, just a Windows license on our older generation POS was probably, you know, 10% of like the solution cost. I mean, Android, you know, the operating system is free. The hardware is like it's not as bloated as a Windows environment, so you don't need as much processing horsepower. Overall cost of the hardware is meaningfully less. You don't have the ongoing revenue share because you have a direct sales model now relative to the past third-party distribution. Mm-hmm. In the past, I mean, we were paying out, you know, 45%, you know, 40% or so of like our processing related revenue streams to our third-party distribution partners. We've now insourced all of them. We traded that ongoing variable expense for a fixed cost. Like it's, it's a worthwhile trade, especially in markets that you know will continue to, you know, generate new sales, which they are. Yeah. Okay. I do wanna come back to the distribution strategy in a bit, but a couple of more questions about SkyTab and restaurants. One, you mentioned it's a market of two versus Toast. Obviously, Toast is in everybody's mind as the winner, presumably, in the restaurant space. Can you maybe pause on that for a second? Compare and contrast for us, you know, is the functionality, because I think there's a lot of maybe confusion or lack of clarity for folks out there. Is the functionality of a system like SkyTab basically the same as, let's say, what Toast offers? Yes. There's I mean, really, guys, I can't. Like, hopefully no one's talking any AI craziness yet about what's going on when you ring up a cheeseburger. Actually, I think Wendy's now is thinking about something like that. Realistically, like, seriously, how does it go in a restaurant? You're all, you know, patrons in that environment. You know, extra cheese, no tomatoes, add mustard, side of mashed potatoes, right? Like they all do essentially the exact same thing. There are some like total table stake items that you have to have. Like, you gotta be in a cloud-based world right now. It takes so much burden overhead off of the restaurant operator themselves. You have to have integrations into all the delivery players, your GrubHubs, your Uber Eats, your DoorDashes. You have to have loyalty. You have to have online ordering. You have to have like a mobile manager app. Those are the basics. Like we're same, right? There are kinda some ways you differentiate with some sizzle features Toast has. Like Toast absolutely caters more for like, they wanna win the brand new restaurant. Mm-hmm. You know, capital offerings with like high, you know, high APR is like you're not winning like a well-established restaurant by offering them like a loan with like a, you know, 40% effective interest rate or something. Payroll offerings like- Yeah. A mature restaurant is generally with an ADP or Paycom, but a small restaurant would be like, "That's a nice feature." On our end, like we give away our business intel product, we give away our marketplace, we give away our loyalty product, we give away online ordering. Like, if you do a side-by-side comparison between Toast and Shift4, they charge for a lot more on software because at their core, they were a software company, and their take rates are, you know, meaningfully less than ours. Us, like, we give away the software, the hardware. We charge very little SaaS, but we monetize more through payments. Yeah. Just to be clear, like that bar and grill on Main Street is not RFPing Toast and SkyTab. We're not coming there you know, at this like and going blow to blow with them. They're leaving Heartland, they're leaving FIS. You know, Heartland at one point had like the lion's share of the restaurant market when they had the National Restaurant Association partnership for 20 years. This is purely like a Toast or a Shift4 salesperson being at the right place at the right time when that merchant is fed up with whatever they had before, you know? NCR has a ransomware attack, you know. Heartland decides to have like another new fee or something like that, they're like, "You know what? I'm done." Whoever is there is winning that opportunity. Yeah. Like it's not them throwing out Toast to go to Shift4 or throwing out Shift4 to get to Toast. We're both like equal beneficiaries. By the way, there's like very rarely a winner take all in any product or tech business. Got it. Got it. Last question on this timeline from here in terms of the rollout of SkyTab, kind of what are the stages? If I understand correctly, you're starting with new customers, right? Yeah. The next phase would be to roll out into your existing base. What timeframe are we talking about here? Like is it next several years before SkyTab is the dominant platform? Yeah. We think ultimately it'll be a multi-year effort. Like quite frankly, we've got more demand for SkyTab than we can fulfill. Mm-hmm. With our customer base. Mm-hmm. There is obviously, you know, significant organizational efficiency to getting everyone on a single product. We intend to do that over a period of time. Right now it's kind of new customers are the highest priority. Needs-based are the second highest priority. I wanna switch for one reason or another. I've encountered a pain point. I don't want another Windows workstation is another good example. The last phase is if you're content on our existing, you know, hardware, software solution, we're happy to keep you there as long as you'd like, and you know SkyTab is available to you. One day you'll wake up, and there'll be, you know, a free upgrade option in our business intelligence portal for you because that organizational efficiency will be, you know, basically the last benefit to squeeze from it. Right now, new customers are 100% the focus. Got it. Yeah. I mean, you know, if it's a way to save a customer, we'll absolutely upgrade them. You'd know if we showed up into a quarter and we're like, "Hey, we got, you know, 5,000 new SkyTabs," and they were all upgrades because it would be a huge hit to free cash flow, right? If we're coming into the quarter and said, "Yeah, we've added thousands of new SkyTab customers," and like you continue to see margin free cash flow expansion, then you know we're winning at new customers. Gotcha. There's a question. Yeah. Do you have a sense of how big, if you look at the install base of, you know, what is that legacy opportunity? Because I think everyone thinks of, like, Square as like who's winning. Center. Like, the point that you were making, not to be repetitive. I'm just curious at how big the runway is for all the cloud players, you know, even in restaurants. I'll start. First of all, I would say really important to segment the restaurant population down. I think we, you know, the, software players in the space do a disservice by kind of broadly categorizing that. The market that Square serves is quite very different than even the market Clover serves, and that is very different than the markets that we've been talking about. We focus exclusively, not exclusively, but the majority of our business is on table service restaurants. That's where we see, you know, ourselves and Toast as really the only two games in town. You know, I would handicap that, significantly more than half of that table service market is still on a solution that is not Shift4, SkyTab and Toast. Like, the greenfield opportunity in that is quite significant. Again, you have to look at table service because the operating environment is just so fundamentally different from, you know, a farmer's market or a coffee shop or anything else, that the software needs are different. You know, we get asked very frequently about Square and restaurants. I think it's been a stated objective of theirs for a long time. They are largely not in table service restaurants, but they are incredibly dominant in, you know, all these other areas of the food service business. Yeah. I mean, you're talking, like, four winners there, just so you know. Like, those are all companies that are gonna win, and they can do that without really hurting each other. You know, Square and Clover have some overlap for sure, but, like, I mean, in markets that you would never see Toast in. I mean, like, you know, a convenience store here that is also a deli, like that should be on Clover. You know, maybe they graduate out of Square onto Clover. Like, you know, food trucks and coffee shops. Like, really, like, unless you're really gunning for location count, like, you shouldn't be trying to put a Toast or a SkyTab in there because just, like, the total cost of ownership over time doesn't make sense for a business that's doing $250,000 a year in revenue. It makes sense for a $1 million a year plus type customer. All four of those, by the way, like, they're all beneficiaries of merchants leaving non-integrated terminal solutions, older Windows solutions, even cash registers, and there's not a lot of, like, beating each other up. Like, of those four who are the two last ones standing, they're really serving different lanes. There's a question. Do you ever run into UCP from Global Payments or Worldpay Total from FIS? What is UCP? This might even be an answer in itself. I forget what the exact acronym is. It's like an omnichannel solution. Like Global Payments, is this like a restaurant specific type? Sure, yeah. Okay. Like, for example, in Global Payments, like we would know that, what was usually used to be called Mobile Bytes is Heartland POS is, like, their only restaurant solution. You don't see it anywhere. Like, the other brands they had before that, like Dinerware and Digital Dining, have all, like, closed up. FIS, like, I've never seen them with a product anywhere. Like they were pretty big on partner with everybody, and that was actually I think their ultimately their downfall is all those partners got swept out from underneath them. Like, I've never seen them actually have a product out in the market that they're directly selling. I'm like, I'll look these up, but yeah, I mean. Yeah. Is there another question there? We'll move on. With the competitive set, I think PAR has talked about doing more of a table service specifically. I think they're also bundling some other stuff in there, industry as well. Do you see them in the market? How do you think about their solution? I mean, PAR is in fast food for sure. They are, they I've never seen them in a table service environment at all. That would be pretty surprising. You know, it's like interesting. Like they, you know, spent a lot of money buying a loyalty product, which, you know, that happens to be one of our sizzle features is free loyalty. It's actually, it's relatively simple in order to do it. Like, it's either, you know, frequency-based or dollar redemption-based and pretty simple calculation there. Like, I don't know. I mean, I think they're gonna stay in their strength, which is if they stay, if they're in QSR, they're only competing with dinosaurs. Like Brink is probably a best in class for fast food, and they, like, they'd have, like, a really tough time, I think, moving to table service, but I don't know. Great. All right. Good discussion on restaurants. You do have other verticals, so let's- Yeah. -move to those. Another, a couple other topics. All right. Next one, lodging. Obviously, big growth verticals for you guys, the last couple of years. When I think lodging, I think the gateway opportunity. I think that's been the core of your strategy. Correct me if I'm wrong. Maybe let's talk about that. Maybe a year ago or less, you announced sort of an acceleration of, you know, putting foot on the gas for gateway conversions is how I interpreted it. How is that going? Maybe give us a little bit of an update. Is it accelerating? Are you seeing faster conversions there? Yeah. I'll start. Maybe just to level set what is this gateway opportunity? If you're a hotel, it's not a question of which software you wanna use, like any of the names that we threw out here. It's a question of which payments provider can work with all of the software across your ecosystem. Take where we are today. There's front desk, there's online reservations, there's probably a salon, spa, there's multiple restaurants. Every one of these is a different piece of software, they all need to be compatible with a common platform. Your guests get a common experience. The security is of a consistent standard. Your analytics are useful. You know how much is being spent across your estate. We are immensely advantaged because we own, you know, a gateway that has 500 software integrations. That means we're usually the first call for a hotel that says, "I can assume that Shift4 can support my ecosystem," whether that's Pebble Beach or, you know, a Best Western. The technical capabilities give us an extreme advantage, both in winning new hotels and in the hotels that had signed up for that payment gateway throughout its history as an independent company before we acquired it. It's important to note, we acquired, you know, the larger of the two payment gateways we did just before the pandemic. Best laid plans, to win a lot of business over from them. You know, four months into their acquisition, most of these businesses were shuttered, and in the hotel case, many didn't open for well over a year. We entered 2022 saying, "Now's the right time to kind of continue on what was ultimately our acquisition thesis," which is the better go-to-market, both for the customer and for ourselves, is that we're not just a gateway sending all this volume to a bank that's earning 50 basis points, that we do all of the functions for the customer. The customer saves time, they save money, it's a much better technical experience, and we get substantially more gross profit. The loser in that equation is, you know, the bank. We said we're just gonna sort of organizationally enact the things that we had laid out in our acquisition thesis, which is, over time, we're not gonna offer to be a gateway. We're not gonna continue to sign gateway-only customers. We are going to price the solution to what we think is fair for the level of differentiation and level of service that we're providing. All that has worked exceptionally well. What you've seen over the last year is we've added a really substantial number of enterprise customers. That's a result of kinda these actions. It's quite frankly, it's a very simple conversation. It's you're trusting our technical solution with the majority of your revenue collection. As a gateway-only provider, we're just not paid enough to place the emphasis that you'd want us to on that. But if you can, use us as an end-to-end provider, you can save money and we get a really substantial lift in gross profit. We tried to lay out in our last earnings materials a table just to kinda illustrate what this has looked like, which is that, just prior to the pandemic, we had three customers who were delivering us more than $100 million of end-to-end payment volume. As of the recent quarter, we've got 50. Mm-hmm. Half of those have come from exactly what I talked about, which is they were using the gateway-only service. Now they're using us for end-to-end. We think that pace of kinda winning big customers is gonna accelerate for two reasons. Number one, we just really didn't have an opportunity to speak to these customers over the past few years as a result of the pandemic. Number two, they do take longer to make a decision. They're starting to make these decisions, and we're benefiting from that substantially. Maybe just jump on it. A lot of people associate our kind of growth and dominance within the hotel vertical specific to our gateway advantage, which is a huge help. I mean, we had $200 billion of, you know, pretty captive volume. To Taylor's point, it's pretty easy between the combination of some carrots and sticks. You can save them money, have, like, that one throat to choke, and it's a massive lift in gross profit for us. We pick those customers up. That's, like, half of our production. The other half is we simply just win net new customers all the time, including the hotel vertical. Mm. We try and put that into, you know, our earnings material, like, every quarter. Sure, gateway conversion is working. There's $150 billion more to go, so hang on. We also win the new ones. This past quarter was VAI. Largest new a pretty cool cover if you saw the earnings report. This massive new resort, it'll be the largest resort in Arizona, which has some pretty awesome resorts. It almost looks like a Vegas resort in the middle of the desert. That's a brand-new cloud-based property management system. It's a billion-dollar VC unicorn. For anyone thinks it's like, well, it's all old Oracle and Agilysys stuff, no, we have all the new cloud-based PMS systems too, and we win the new ones. You know, I think a quarter or two ago, Nobu in Atlanta, brand-new property in Atlanta, new PMS system integrated to Shift4. Unfortunately, we couldn't disclose the names. People seem more sensitive to that now. Two new Vegas properties, those are both brand-new resorts using new property management systems that we signed last quarter that are on Shift4. We win a lot in lodging. We're super lucky to have our gateway business 'cause it's like the yellow brick road for new, you know, for growth. We also just win net new customers too. Yeah. Great. All right, moving on to other verticals. In addition to restaurant and lodging, you're going in several other, you know, areas, probably gaming, stadiums, you know, entertainment arenas, e-commerce, nonprofits are kinda top of the list. There's, there's others, and international I wanna talk about separately. The overarching question I always have on that is, you know, what do you feel like gives you the right to win in these distinct verticals? I think what we've seen in general in this market, it's much easier to win, obviously, if you're Toast, if you're, "I'm the restaurant specialist. I invest everything in designing those systems." When we see you really trying to go very broad, it's ambitious. It's impressive that you're trying that. What gives you confidence that you can actually do that? Uh- Across many verticals? I don't know, 65%, 66% year-over-year volume growth. The fact that it's working. We've been growing volume really fast and revenue for 24 years, we do know a thing or two. Like, I think some of this is, like, not PowerPoint. It's pretty reflect in the numbers. You know, look, that said, Like, some of the most, like, absolutely badass payment companies in the world serve, like untold number of verticals. I mean, take Stripe and Adyen. Like, Stripe and Adyen, like, they don't build a Netflix product, a Microsoft product, an Uber Eats product. They're an amazing payments platform that attracts integrations from software companies to meet their requirements, right? We built a payment platform that meets the needs of certain software companies and certain verticals' requirements. Now it happens to be on, like, the least sexy verticals, the ones like. maybe I actually think they're awesome and sexy verticals, but, like, what people like is the visibility of seeing, like, "Oh, that's a Square terminal. I know what that looks like. Look at that. That's a Toast terminal. That's a Clover terminal," right? Like, you know, you'd have to go into, like, the mainframe room at Caesars Palace to see the Shift4 magic, right? like, we specifically cater to the most, like, demanding and complex payment environments in the world, where no one piece of software can make it happen. If you can download a piece of software on an iPad and run the business, that's Square's world. they're... Then when they graduate out of Square's world, they're going to Clover, right? You know, we have almost every ski resort in the country, and it's not just the hotel portion, it's the ski rental shop is integrated to Shift4. It's the salon and spa. You know, it's the three restaurants and the gift shop and all of that. Like, that's where we thrive. Actually, when you zoom out and look at the verticals that we're playing in right now, they all share those characteristics. Like, we were surprised about stadiums. We had one stadium at the time of the IPO, which was Raiders Stadium, and they were using the same Oracle software that was in every one of our hotels. We were like, "Sure, we can do this." When you looked under the hood, you're like, "Man, it's just like a hotel that doesn't have the hotel rooms." They've got restaurants in them. I mean, some of the ones have nightclubs in them. They've got the VIP suites. They've got a merchandise store. It's generally all different software. We're like, "We can do this." You know, actually, nonprofits was another surprise. When you realize, like, this isn't a world where people are just sending a $20 check to their charity anymore. You can have people streaming, you know, Fortnite and making donations. You're doing YouTube stuff. They're using lots of different software. In the end, you're trying to get it all populated into a common donor management database. All of the verticals we are trying to conquer all share those same characteristics of lots of different software that integrates into a payment platform that's designed for that purpose. Just no different, again, from Adyen or Stripe or any other, like, really amazing payments company that's trying to attract software integrations. Yeah. Are you competing with Adyen for some of those mandates, or who do you see most often? I mean, we generally try and pick verticals that, you know, the best-in-class players, you know, out there can't easily play in. Yeah. Like, for example, in hotels specifically, I mean, you need to have 500 software integrations and 20 years of version history in order to ever be able to respond to an RFP from Pebble Beach or Caesars Palace or something. We intentionally try and stay out of lanes. Like, we like when our competitor is, like, U.S. Bank. Yeah. That's our biggest competitor in hotels. Gaming, for example, is another good one. We were so, 40% or so of the casinos in this country, like the physical casinos, are our customers. Should totally go for gaming. I would hope if we could leverage the data, the tokens we have in an in-venue casino, that gives us a right to win the mobile gaming solution. We try and have a pretty significant advantage if we're going to dive into a vertical, because anyone, you know, that's purely going head-to-head with Adyen and Stripe, if you don't have some extra magic or sizzle to differentiate, you should lose. Yeah. Makes sense. All right. Let's talk about international quickly. Big strategic growth vector for you guys potentially. I guess talk about, you know, it's a huge opportunity, huge market. What's your strategy of approaching it? How do you get a toehold there, and where we are right now in that journey? It's a few things. This has been something we've been working on for quite some time. You know, if you think about the merchants we serve, we've got, like, a handful of the key ingredients for success around the world. We have the software integrations that are being used all over the world. You know, we love to illustrate, the Hilton in Madrid is using the same software as the Hilton in Times Square. It's integrated to Shift4. You know, we can serve the merchant in that capacity, and we have the relationship with the merchant. What we don't have is the local payment methods that are prevalent that that merchant demands inside of, you know, their geography. It's been a multi-year effort of us exploring how are we gonna tackle this, what is ultimately a big, you know, complex problem of, you know, supporting all the local payment methods that are relevant for our merchants. We've been fortunate, through, you know, innovation and relationships to win a handful of big global e-commerce merchants that have committed to giving us business in any country we can serve them. That's emboldened us to kind of accelerate this international expansion strategy. We announced that we are acquiring a European payments platform, which is unlocking an entire continent for us, with the plan always being we're gonna double back now and make all the card-present magic that's made us successful in the U.S. work there. What's really compelling about that is there really isn't the concept of Software integrated payments throughout the world anywhere near how it exists in the U.K., I'm sorry, how it exists in the U.S. You still go to many countries, and even if they have a piece of software, they've got a local bank terminal that's not at all integrated to it. To Jared's point, we've had kind of 20+ years of success integrating software and payments here in the US in a highly competitive market, and we can bring those capabilities overseas. Very happy to report we already have, you know, it's through partnership 'cause we don't own this acquisition yet, but we already have, you know, SkyTab transactions working in restaurants. Mm-hmm. In Europe, by way of example, and that can be just a huge market for us. It's in many ways taking the playbook that's made us successful in the U.S. and just identifying markets where they're not necessarily at the same level of maturity and saying, "How can we get there? Yeah. I mean, look, it's a giant, like, TAM expansion opportunity. I think like a lot of companies, when you talk about TAM expansion, like especially the unprofitable ones, is like, this is why you can have comfort that eventually I'm gonna have this all sorted out because it's huge, right? Like, we've been competing in the U.S., which is like a super competitive market, for 24 years right now, and we've grown revenue every single year in that. We are profitable, and we have customers that have locations all over the world, and we've been afraid for the longest period of time to make that leap because international integrated payments is super hard. Super hard, right? I mean, Visa, Mastercard was a nonprofit organization for the longest time, and every bank was treated equally, specifically so a major U.S. Bank couldn't go into another market and bulldoze it, right? It's been designed to be hard. Then they came up with all their local, like, debit methods. Their own encryption standards are different in different countries. Like, there's not just the general EU standard for this. It was made really intentionally to be hard. Now, those that have success, and you're talking really only to, again, is, like, Adyen and Stripe. They have, like, a really good global commerce solution. They did it with card not present, e-commerce- Yeah ... because it is a nightmare to do it in card present. We were like, "We wanna do this. We have the customers. We have the integrations. We know if we make it work, if we're profitable, we're growing really fast in the U.S., we should be able to. There's restaurants and hotels all over the world. We should be able to take our products into those markets and find success." How do you really de-risk it to be willing to embark on what is a challenging journey that no one has done from a card present perspective? It was one, like, really premium customer and a great relationship that said, "I will give you this yellow brick road all over the world. You follow us. We'll tell you what we like, what we dislike, what we've already learned, because we're already there and you're not. You'll make your product better, make us happy. Then once we're there and we've got it figured out, you bring all your restaurant, hotel, and stadium integrations, everything that made us successful in the U.S., into those markets," 'cause they have restaurants, hotels, and stadiums. So that's, like, the whole game plan, and we're really far along with the Finaro one. Like, from the time we announced that deal 13, 14 months ago, it's a better company today than it was at the time we signed the deal. We've plenty of time to work through our integration approach to such extent that, like, you know, we've been dating long enough that we should be able to get married and then go on and look for our next bride, which is what we're, what we're doing now in other contexts. Got it. All right. We're gonna be looking forward to that being resolved finally. Moving on to a couple of other topics that I wanted to hit before we run out of time. One is coming back to the distribution strategy and what you mentioned, Jared, right? That was a relatively big strategic move last year. Sure. You acquiring what? 50% of your, of your third-party distributors and sourcing them. Just taking a step back, historically, you really liked, I think, or relied on the third-party distributor model. It seemed to be, you know, pretty core to the company, as they, you know, gave you flexibility to grow, et cetera. That's how I'm thinking about it. Why the decision to make this move now or whatever, like, last year? What prompted it? Yeah. I mean, at some point or another, you had to let go of, like, the legacy brands that we acquired in 2017. We squeezed all the payment volume out of it. Now you're maintaining a lot of Windows-based POS systems. I mean, by far, I mean, if you look at call it 2,400 employees, more than half our workforce is supporting restaurants. Like, that is your most labor intense, high overhead. You know, you can have one employee supporting a multi-billion dollar, you know, hospitality customer, and you need, like, 1,000 employees to capture the equivalent in restaurant volume. Right? You gotta unlock efficiencies. You have to delete the parts. Sunset, like, your Windows-based POS products and align everyone around a common product. That's hard to do, right? Like the... Our four or so, you know, POS brands, plus we played really nice with MICROS and Agilysys, we're able to differentiate based on their product brand and their software. Now you're saying all that has to go away, right? That's like a forced migration to a new product. Knowing that that was, like, inevitable, that you had to do that from, like, the sake of brand building and operational efficiencies and concentrating resources on single product development and everything else, like, how do you do it, right? Now, at the same time, you also have the advantage of a new cloud-based solution where you no longer necessarily require the same amount of resources in the field to support the customer. You still want local service and support. That is an important way we try and differentiate from the other player out there. It's not as labor intense in the field as it was previously because it's cloud-based. We can log in, see what they see, make a change. They see the change we made, so on and so forth. That's what kind of gave us, you know, the rationale of you have to do this. You have some advantages now with cloud-based product to say, like, "Let's pick off our best partners. Let's bring them in-house." These are the best relationships we've had for, like, 15 years. They built the business for the last 10, 15 years. You know which markets are gonna be successful based on just historical customer base and, you know, production trends. Say, "We're gonna bring them in-house." It's a, obviously changes, dramatically changes the margin free cash flow profile business, but again, it's huge you know, huge unit economic enhancement here. Quicker paybacks, lower customer acquisition costs. In markets where you're unsure, the more sparsely populated areas where you don't wanna trade a variable cost for a fixed cost, you keep those partnerships rolling. That's exactly what we did towards the end of last year. By the way, like, this... I put that in my shareholder letter at the beginning of 2022, which is the road is uncertain right now. We don't know if the $100 stakes are gonna last. The good times of, you know, 2021 are look like they're coming to an end. Our promise is to prioritize our resources towards the absolute needle movers. That's exactly what we did. Like, we focused on a couple key things, Gateway sunset, launching a new restaurant POS product, insourcing distribution, and the results of it were extraordinary. It's obviously, it's played out way better than we've expected. I mean, you got thousands of new customers coming every quarter from SkyTab. Got it. Great. Okay. Now the topic I wanted to talk about quickly, at least, is the unit economics, the direction of the yields, et cetera. I think that's, it's an important topic for you guys. Starting with the yields, investors look at the yields closely. First, when we compare your yields to the other players in the industry, they are very high. I think you've already mentioned it, Jared, and I think that, correct me if I'm wrong, that sounds like just a function of almost how you monetize- Yeah. -your products versus the others. That's probably a very important point. Now they're coming down, and it comes in spurts. I think last quarter was kind of big year-over-year drop, 4 points, 4 basis points sequential drop. Can you talk a little bit about what's driving that and what can we expect going forward on the yields? Yeah. You guys should both weigh in on this, but I wanna set the stage 'cause it's like, I think rightfully, like, a lot of investors are like, "Like, I don't even, I don't even understand payments anymore, and I hate it all or something at times." Right? 'Cause it's confusing. Like, who's winning? Who's losing? Who can I trust? Who can I not? Like, to be really clear, like, there are no real price wars anymore. That was a time. That was, like, of a different generation when scale mattered, and there was a lot of consolidation going on right now. Like, actually, like, the good platforms, like, we get really good take rates. Like, if you're adding a lot of value from a commerce experience perspective, you're getting good take rates. I mean, look, in the last probably quarter, you know, Stripe, Toast, Shopify, they all went up in price. If you wanna use their online ordering modules, you wanna use like. They all went up. Everybody's taking more. Square added a, like, subscription fees to, like, every one of their third-party services. Like, you're adding good value. You're getting decent take rates right now. When you see take rates come down, like, this is purely a factor of mix, where you are going from 17 years of our history serving just the Irish pub on the corner that does between, I don't know, $800,000-$1 million a year in payments, you get, like, 90 basis points, right? When you sign up, like, the Washington Commanders or the Baltimore Ravens, they're not paying that, right? You sign up, like, a multi-billion-a-year hotel operator, they're not paying, like, 70, 90 basis points. It's like, there's gotta be like, you know, like, crazy market forces at play here, like, highly competitive. Believe me, like, there is no way a major NFL stadium or a multi-billion-dollar hospitality operator is switching for 3 basis points. I mean, the Four Seasons went from, like, $600 a night to $1,200. Guys, they don't care about 3 basis points. What do they care about? Mobile check-in, because they can't get people for the front desk, right? Like, that's, it's all about adding value through a broader commerce experience and very, very little to do with an approval or decline anymore. What is the KPI that matters? If you are growing volume, you are adding value, and you are winning. If you are not sharing what your volume KPI is anymore as a payments company, you are shrinking, and you don't wanna talk about it. Right? Moving that needle first makes sense. If you're moving upmarket from $800,000 a year customers to, like, $4 billion a year customers, yeah, you should expect take rates to come down. I still think, like, we are, like, relative to anyone that we're compared against, like, we're meaningfully higher because 85% of our restaurants don't pay any SaaS fees at all. We choose to entirely monetize through payments. With hotels, like, where we're often, like, you know, criticized, "Look at these guys' customer acquisition costs. They give away devices." You get 10 basis points more on, like, $2 million a year. It pays back in nine months. It's actually smart. Anyway, please weigh in. I think you said it well, but I think the key is just to like, go back from all that and just say, "This is a blended spread. Yeah. It is not a compressing spread, right? We've tried this a couple of different ways over the last couple of quarters. I'm hoping we've hit the mark at this point. Our high-growth core and our historical business spreads are consistent. They are unchanged. They're as solid as they ever were. When we came out this quarter, and I think even when I look at kind of exiting Q4, we're about 71 basis points. We messaged, you know, that we started Q1 right in line with Q4, but we knew, right, that we had, you know, a large hospitality client that was coming in, that was going to bring those spreads down. That's just math, right? It's a blended spread. I think that's why we tried to give out the trajectory for this year of kind of saying full year should average about 65 basis points. The choppiness, and this is just new to Shift4 as we're going upmarket and we're bringing in behemoths, is that it could be choppy, right? Quarter to quarter, you know, we've joked that maybe we should have waited one more month to bring in that hospitality client and had a quarter of spreads that looked just like Q4. Of course, not having that large enterprise hospitality client in for a whole quarter, it will blend it down slightly as we go into Q2. That's why we thought putting that measure out was. Yeah. Was so important. I think, though, it would be remiss not to just mention what I think has already somewhat been stated. There is an offset of the service model, you know, in exchange for a lower take rate. You also are investing lower SG&A, right? That's why we're able to expand margins over time, even with a blended spread coming down. I think EBITDA margin and free cash flow conversion is really the test point at the end of the day of the model, and I think those kind of have spoken for themselves. Yeah. I would like just if spreads weren't coming down and we were dropping the same logos that we have been in our quarterly earnings report, that should be a huge red flag. Like, how is that possible? Like, are the... Like, a man, that product must be really good if they're gonna be a 1% partner in the, in an NFL stadium that's worth $5 billion or something, right? Like, that should... I would think, like, instead of reacting the other way, it's like, oh, the product's winning and it's just making sense given the size of the customer. If take rates weren't coming down as we're mix shifting up, that would be a red flag. Right. Great. Okay. Well, perfect segue into conversation about EBITDA and free cash flow, 'cause I did wanna hit that again before we run out of time. First, very simple question that I get asked often, and I don't know if I have a perfect answer to it. What's the secret sauce? Why are you able to be consistently profitable? Let's just start with that simple question. Whereas the peers who are seemingly competing and doing basically the same thing are, you know, in the red, pretty deeply in the red, frankly. Yeah. What's the secret sauce? The secret sauce is we were a basement startup in New Jersey. That's why. Like, there was no series A, B, C, D, E in Shift4. Like, it was $10,000 seed check from my grandfather, and you've gotta pay your own bills from here forward. I mean, honestly, it's like, that's the truth. We were EBITDA positive. We started the company in late 1999. We were EBITDA positive in 2004. First outside capital that we took was in 2014, our first acquisition. We financed all of our growth. Like, making payroll meant taking in more revenue than expense for the bulk of our history, so, like, that's more our DNA, you know? It's just a more disciplined approach. Like, you look at, like, when you're hiring people and what you're paying them is like, you know, your cash that's going out the door. We, you know, our actual, like, normalized stock-based compensation is, like, you know, sub 1%, because at the time of the IPO, we had two shareholders in the company. There wasn't a stock-based plan. Now I'm big in equity alignment, but it didn't exist prior to the time of our IPO. I think we were raised as a completely different organization that, you know, cash won't always be waiting around the corner and had to have an eye on profitability. It means, like, you're challenged to find a better way, right? Like, exactly like the Focus POS acquisition this past quarter. Like, you got $45 million in cash you probably didn't know we had. You could throw it towards digital marketing and Google AdWords and brand building, you might attract a lot of restaurants that go out of business in the first year 'cause their pizza sucks. You put it towards a company that has 10,000 customers, highly sticky on their product, that do $15 billion a year in payments, you probably synergize that thing down to less than 1x. Great use of capital. I mean, that's what you're. When you're using your own cash the entire time, you find a better way to get there. That's not, like, knocking the other way. The other way works. If you time it right in a zero interest rate environment, you can create some pretty extraordinary businesses. I think Square and Toast have great products. You know, they're much more of, like, I think, like a West Coast success story from Silicon Valley. Right ... than kinda how we do things. Yeah. Got it. Okay. The path from here on EBITDA margin, and I'd love to hear your thoughts on free cash flow conversion. The trajectory of improvement may be on both. What drives that? What should we expect over the next couple of years, kinda medium term? Yeah. Look, we've kinda talked about this year's trajectory. You could get it from the guide that we do feel like there's still some expansion from here. You know, we are very thoughtful. I was thinking the word that Jared said, which is disciplined. We are investing when needed for growth, right? You can't not invest, right? We talk about headcount flat, but that's offset by talent upgrade. We'll make choices when it feels right to propel growth and stability for future growth. Look, we think there's room. You know, I know Jared hasn't used it in a while, but when you look at kind of where Adyen is versus where we are, we think there's room somewhere in between. We'll never get to be an Adyen because we have our legacy high-growth core, which has a higher, you know, intensive service model, but we think there's still room. I mean, I think with the discipline and the blend of the business that we're bringing in, we think you'll see some more from here going forward. Yeah, on the margin. On the free cash flow conversion, just to point on that specifically, how quick? Now you kinda, in the 50s on the adjusted measure, some gradual improvement this year. I know first quarter was much higher, I know it also facilitates quarter by quarter. Over, you know, over what timeframe do you expect to get to, you know, to the 80%s, your level, which I think when you look across mature companies, that's where they are? Yeah. I'll be quick. We probably will never get to the 80%s- Uh-huh ... because our model is, you know, equipment and our capitalized acquisition costs. Like, we like our model, right? Mm-hmm. When you compare us to others, we do have a little bit more capital intensive model. Mm-hmm ... that we trade off for other costs and unit economics. Again, I would give you generally the same answer. There's room, but don't look for us to be at an 80%- Got it. it. Got it. ... free cash flow in the near term. Yeah. This is, like, critically. We don't wanna be a mature company. Just to be clear. Like, if we're not investing meaningfully in customer growth with good profitability, like, that is a huge caveat, then I don't think, you know, the company's on the trajectory that it has been on for 24 years. Got it. Got Got it. Great. Okay. Well, we covered a lot of topics, in a relatively short time. Jared, maybe you can, close off with, you know, your current elevator pitch. Why is now the right time to invest in Shift4? Yeah, I mean, time of the IPO, when people first, you know, bought into kind of the Shift4 dream from a public perspective, we had, like, I don't know, maybe, like, 80% of our business was from restaurants. A substantial portion in a single vertical that, at least during the pandemic, was, like, for a while, regulated closed. We actually were able to grow through that in double digits revenue and volume perspective. The business since that time, like we even said, if we're able to pull an IPO off in this climate, right? We have to emerge from this a more diversified and stronger organization, right? Since that time, moved into vertical of hotels. Not like they exactly fared much better than than restaurants did during the pandemic, but we have a lot more of them now today than we did before. Specialty retail, and then moved into new verticals, right? E-commerce, gaming, travel and leisure, nonprofits. Now, at the time we set expectations for investors, like, right when the euphoria was fading in late 2021, we had nothing more than an anchor customer in every one of those verticals. Commitment from St. Jude, a commitment from a very strategic e-commerce subscription player, a commitment from BetMGM. We had no integrations at that point. Like, we had to build it. We said we're going international, but we didn't have any means to authorize or settle transactions in Europe at that time, right? We got through and beat our first-year midterm outlook, and basically in the second half of the year, got those integrations done and set ourselves up for year two, which we're in now. This is the easy year, right? Like, all those integrations are done, and you're getting the annualized effect from all those behemoths that we signed last year. You've got, like, the international on a path where I said it's a better company today, in the case of Finaro, than it was at the time we signed. The point is, in terms of delivering on the expectations we told you at the time of the IPO, look at every one of the KPIs that are associated with it, look at every vertical, look at the penetration within it, and we've exceeded expectations. I'm telling you, it's easier now than it was at the time we set those expectations. Got it. Okay. Well, thank you very much. We really appreciate it. Thank you. Thank you. Thanks, all.