Hello and welcome to the Shift4 Fourth Quarter and Full Year 2020 Earnings Conference Call. My name is Lauren, and I will be coordinating your call today. There will be an opportunity for questions at the end of the presentation. Please note that this call along with the Q&A will be for a duration of 60 minutes. I will now hand you over to your host, Tom McCrohan, Head of Investor Relations to begin. Tom, please go ahead.

Thank you, operator and good morning everyone, and welcome to Shift4's fourth quarter earnings conference call. With me on the call today are Jared Isaacman, Shift4's Chief Executive Officer, Taylor Lauber, our President and Chief Strategy Officer; and Nancy Disman, our Chief Financial Officer. This call is being webcast on the Investor Relations section of our website, which can be found at investors.shift4.com. Our quarterly shareholder letter, quarterly financial results, and other materials related to our quarterly results have all been posted to our IR website. Our call and earnings materials today include forward-looking statements. These statements are not guarantees of future performance and our actual results could differ materially as a result of many important factors. Additional information concerning those factors is available in our most recent reports on Forms 10-K and 10-Q, which you can find on the SEC's website and the Investor Relations section of our corporate website. For any non-GAAP financial information discussed on this call, the related GAAP measures and reconciliations are available in today's quarterly shareholder letter. With that, let me turn the call over to Jared. Jared?

Thank you, Tom. Good morning everyone. We are very pleased with the record results we delivered this year in the face of ongoing economic uncertainty. We ended full year 2022 with record levels of volume, gross revenue, gross revenue less network fees, adjusted EBITDA, and adjusted free cash flow all in excess of our midterm outlook. Our 2022 results were predominantly driven through organic initiatives, including the release of new products and timely entry into new verticals. Our high-growth core, which represented the totality of our business at the time of our 2020 IPO was still the primary driver of our growth last year, with an ever-increasing contribution from our new verticals. Shift4 continues to merge payments and commerce, enabling software, and we are well on our way to delivering that capability globally. On that note, this past year included several important company milestones and marked the beginning of our European and international expansion, the successful launch of our next-generation restaurant point-of-sale solution, SkyTab POS, including a pivot towards more direct distribution. We also cemented our position as the preferred technology provider for sporting arenas and entertainment venues across the country. Our entire management team is extremely proud of our employees embracing the Shift4 way, which embodies the core principles and beliefs driving our success. As we enter 2023, our team is very excited about the abundance of opportunities we see ahead of us. Our excitement for the future is viewed through a lens of cautious optimism in light of the uncertain climate we currently operate in. Industry-wide payment volumes moderated during the December quarter and as such, this informed our internal planning process, including how we constructed our 2023 guidance. That is to say that while we remain confident in our ability to deliver profitable growth well in excess of our peers, the range of potential outcomes is wider this year, as you would expect. Nancy will go into more detailed assumptions surrounding our guidance later in the call. Regardless, we will respond accordingly to changes in market conditions and are confident our growth model affords us a higher degree of relative visibility or stability otherwise unavailable to our peers. For those that have been newer to the story, Shift4 possesses significant competitive advantages given the embedded opportunities that exist within our gateway as well as our software products. This was best demonstrated in 2020 when we delivered double-digit growth despite the overwhelming majority of our customers comprising restaurants and hotels that were highly impacted by the pandemic. Our ability to take market share and grow has only accelerated since and that confidence remains as we look to the year ahead. So, on to our quarterly performance and results. For the fourth quarter, we generated 55% year-over-year growth in our end-to-end payment volume and 36% year-over-year growth in our gross revenue less network fees, both quarterly records. In fact, we achieved quarterly records across all our KPIs, including gross profit, adjusted EBITDA, and adjusted free cash flow. The cornerstone of our performance remained our high-growth core with an increasing contribution from our new verticals, particularly sports and entertainment, gaming, travel and leisure, and Sexy Tech. Our gateway conversion strategy continues to be a reliable source of incremental volumes and we continue to renew additional enterprise gateway customers on economic terms comparable to our end-to-end offering as part of our Gateway Sunset initiative. As a reminder, our Gateway Sunset is a multiyear initiative that remains in its early innings, and there are new actions on the table for 2023 that are also in the works. The fourth quarter represented the first time we participated in cross-border and European payments. And despite early success, the needle will really begin to move only after the closing of the Finaro acquisition. Taylor will provide a more detailed update on Finaro including expected contributions and synergies during his prepared remarks. I will focus the rest of my comments on three areas: our high-growth core, new verticals, and global expansion. Starting with high-growth core, the foundation remains the over 500-plus software integrations that allow us to market and service the needs of merchants, especially complex merchants operating in a multi-software environment. We added over 100 new software integrations during 2022 and continue to identify new ways to incentivize our gateway-only customers to convert to our end-to-end offering. As we highlighted in our recent investor event this past November, we officially launched our new restaurant point-of-sale system in September of 2022. We now have over 10,000 SkyTab POS systems deployed and are highly encouraged with our overall sales pipeline. Note that we have yet to turn on the marketing engine and continue to enjoy industry-leading customer acquisition costs. We are pleased to announce that the major entertainment venue chain, Live, signed up to install SkyTab POS at restaurants operating across all of their US venues. This includes venues such as Xfinity Live near Wells Fargo Arena in Philadelphia, Texas Live located between the Texas Rangers’ Globe Life Baseball Stadium and the AT&T Stadium, home of the Dallas Cowboys, and the Power and Light District located in Kansas City. We anticipate just Live locations contributing hundreds of millions in SkyTab POS payment volume in the year ahead. This also includes Sports & Social and The Vibe Cowboys, two of the fastest-growing concepts in the country. These entertainment-related venues provide a natural extension of our growing presence in professional sports and entertainment and validate the capabilities of our SkyTab POS offering in the marketplace overall. Other notable SkyTab POS wins this quarter include the L.A. Music Center and FedEx Field, home of the Washington Commanders professional football team. SkyTab POS is also making significant progress with traditional restaurants. Its disruptive price-to-value proposition is resonating as we had expected, and our highly motivated and energized direct sales team, called Skyforce, has already signed thousands of new restaurants. It’s important to note our success has been achieved without much marketing or promotional efforts. By offering an unmatched customer experience with leading-edge technology at a disruptive price point, SkyTab POS represents a compelling migration path for our existing base of restaurants that are seeking new capabilities and key integrations to better serve their patrons. We expect this to yield meaningful cost savings to drive operational efficiencies in the year ahead. When serving such a large existing base of customers, we can generate substantial referrals, which also contribute to our low customer acquisition costs and yields a very attractive unit economic model. Moving to our other organic initiatives within high-growth core. We signed numerous hotels and resorts during the quarter, including the Manhattan Club, a luxury hotel located in New York City; Charleston Harbor Resort outside of Charleston, South Carolina; and The Cliffs at Princeville located on the North Shore. I'm also really pleased to announce that we signed a strategic enterprise agreement with a major hospitality operator that we are unable to disclose, but that we expect will contribute a billion in additional payment volume in the year ahead. All of these organic initiatives are driving our performance. When viewed on a four-year volume CAGR growth basis, our volumes grew 45% since 2018 compared to low double-digit growth at the two major card networks. Moreover, our average volume per merchant continues to increase, reaching 200% of pre-pandemic 2019 levels for the most recent quarter. Our quarterly volume growth is 342% of our pre-pandemic levels, along with gross revenue less network fees at 237% and adjusted EBITDA at 456% over the same period. Our mix continues to shift towards higher-end merchants, although it's important to highlight that spreads within our restaurant and hotel verticals remain very stable. On to new verticals, we consider new verticals to consist of all the verticals we entered into post our IPO, including sports, entertainment, Sexy Tech, travel, non-profits and gaming, as well as volume contributions from various alternative payment methods or APMs, which we currently support as a result of our international expansion. Consistent with our commentary from last quarter, we're not breaking out volumes or spreads between our new verticals, including our strategic enterprise relationship and our high-growth core due to confidentiality and competitive sensitivity with certain strategic customers. That stated, and as we expected and previously communicated, we did witness a sequential improvement in our spreads during the fourth quarter as a result of new customer onboardings along with processing of international and APM volume. It's worth highlighting that as we continue to expand internationally and partner with international gateways and alternative payment methods, like our recently announced PayPal partnership, we may not be directly settling funds for those transactions, the impact of which is that our gross revenue and gross revenue less network fees will essentially be the same. For the quarter, volume contribution across all our new verticals continued to ramp as expected, benefiting from the fall NFL football season, including ticket sales, the non-profit donation season, volume contributions from large strategic customers, and contributions from Allegiant Airlines. We are now processing all of the US ticketing volume. As mentioned above, we also signed a partnership agreement with PayPal to enable PayPal Checkout, including PayPal Pay Later, as well as Venmo, to our enterprise clients. We will also more prominently promote PayPal as a checkout option to Ship4Shop merchants and QR Pay customers in return for an expanded revenue share wherever PayPal is selected at checkout. In sports and entertainment, we signed ticketing agreements with Premier Productions and the Space Center in Houston. Last month, we began processing ticketing for several professional teams, including the New Orleans Saints, New Orleans Pelicans, and Arizona Cardinals. We also signed payment processing and ticketing agreements with the Baltimore Orioles, the Baltimore Ravens, the Florida Panthers, Cleveland Cavaliers, and the University of Minnesota. We expect to see much more ticketing volume in 2023, now that the integration with CPET is complete. In college sports, we expect to begin processing ticketing for college sports through our integration with relevant organizations in the coming weeks. We will look back on 2022 as the year Shift4 cemented its position as the preferred payments and technology partner for sports and entertainment venues, including ticketing. Our pipeline remains very healthy in the sports and entertainment vertical. In gaming, we signed agreements with SoCal Casino Resort in Southern California, one of the top 10 largest casinos in California, as well as the last Casino, one of the largest casinos in the state of Washington. We also signed a partnership with Passcode Technology, a leading gaming technology provider for cash advance and ATM services where Shift4 is assisting in the development of a cashless gaming experience. We continue to add state and tribal gaming licenses, including the District of Columbia and added additional states with BetMGM. We anticipate being live in every online state with BetMGM by the end of this first quarter. We are constantly adding critical integrations within our online gaming ecosystem and are currently testing multiple B2B integrations that operate in more than a dozen jurisdictions. We are also incorporating Finaro's European gaming capabilities within our US payment platform. Moving to non-profits. Our non-profit vertical continues to grow, and during 2022, we added over 1,000 new non-profits to the platform. The Giving Block has expanded outside of crypto, enhancing their product suite to include stock donations in addition to the ability to accept traditional card-based payments. The Giving Block has evolved from its position as the leading crypto donation platform to the leading non-cash fundraising platform that supports all forms of digital assets. The Giving Block will continue adding new payment methods and product capabilities as we pursue the $450 billion payment opportunity in the non-profit vertical. In travel, the integration of Allegiant Airlines is now complete, and we are now processing all of Allegiant's ticketing volume. We signed another US airline during the quarter, which we look forward to disclosing next quarter. With respect to Sexy Tech, we continue to serve an increasingly exciting mix of next-generation e-commerce customers. As you are aware, one very fast-growing customer is driving the next evolution of Shift4 and our global expansion strategy. Additionally, we entered into partnerships with Zipin and Maskin, two next-generation retail concepts that allow customers to check out without having to interact with a cashier. Zipin is already in use in several retail locations in the Dallas-Fort Worth Airport, and Maskin has deployed more than 2,300 locations across the US. Additionally, in this category, we began processing payments and completed a Bridger Pay integration. All of our success supporting much larger merchants in a variety of new verticals has garnered interest from other large multinational merchants. We are evaluating several exciting RFPs across all our new verticals, which we believe will only accelerate as we expand internationally. On that note, I also would like to provide you with an update on our global expansion progress. International expansion remains our number one capital allocation priority, both in terms of our M&A pipeline and organic investment initiatives. We expect to receive final regulatory approval on Finaro shortly, and our 2023 guidance does not include any contribution from Finaro. We will update our guidance accordingly following the deal closing. In the meantime, we are integrating our payment platform through partnerships and continue to refer merchants to each other. As you recall, we announced last quarter that we acquired a highly capable European payment service provider, or PSP, that now affords us strike-like integration capabilities to offer our European and US merchants. These capabilities include the ability to optimize conversion and authorization rates, sophisticated fraud protection, and best-in-class recurring billing and payment technology. We now offer these capabilities in over 40 countries. We are also expanding organically into Canada and the Caribbean and in partnership with Finaro, we are already expanding into Eastern Europe. In the year ahead, I firmly believe we will begin processing payments across Europe for many hotels, restaurants, and stadiums. Before handing the call over to Taylor, I want to provide a few more comments on 2022 and how we are thinking about 2023. In the beginning of 2022, we were one of the first payment companies to express concern about the deteriorating macroeconomic conditions. I commented that this is the type of climate that Shift4 performs best in. Unlike many of our peers that grew up in a zero-interest-rate environment and a growth-at-all-cost mentality, we self-funded Shift4 through the first 15 years of our existence. We grew through every economic downturn, including the Great Recession and the challenging pandemic conditions of 2020. Based on past experience, I stated we would reduce spending and focus our resources in 2022 on the true needle movers. As a result, we generated growth rates in line with our midterm outlook in 2022 and expect to continue driving real growth across our core and new verticals. We are accomplishing this while expanding internationally and improving our margins and free cash flow. As we look ahead to 2023, we have assembled guidance that we feel confident we will be able to deliver upon and assuming consumer spending remains reasonably stable, we are poised to deliver another year of similar performance. Nancy will go into this in just a minute, but I want to speak a bit about expenses. I've expressed a very strong position that the leadership team at Shift4 will meet our growth targets this year while striving to keep expenses and headcount as flat as possible exiting Q4. I fully expect we will be upgrading talent throughout the year as competitors we admire continue to shed personnel, but I will resist to the greatest extent possible increasing spending. I believe this is a responsible way to navigate the year ahead and will demonstrate the scalability of the Shift4 platform. Last, Shift4 has a strong record of unlocking value through accretive M&A. Our balance sheet remains strong, and we are reducing leverage now at an accelerated pace. Our adjusted net leverage on a trailing 12-month basis is now 2.7 times, giving us ample capacity to pursue other strategic priorities.

Thanks Jared, and good morning everyone. I'd like to provide a bit more detail on some of the more interesting trends we saw in the fourth quarter, early views on 2023, and how we are positioning ourselves strategically for the year ahead. As Jared mentioned, we approached 2022 with deliberate caution given what we viewed as potential for a slowdown in consumer spending in the face of rising interest rates and broader economic conditions. While we believe that approach would be highly prudent, it has not manifested itself in our processing volumes. Merchants largely exhibited a normal seasonal cadence with restaurants moderating from the summer highs and our sports and entertainment and other new verticals filling the gap nicely. Hotels performed stronger than usual as travel was not impacted by large waves of COVID that we had experienced in prior years. As we mentioned during our Q3 call in November, we also began to see some benefit from our international expansion and alternative payment methods during the fourth quarter, which helped contribute to spread expansion versus Q3. Early indications for 2023 are positive. We saw record volume days as travel resumed during President's Day weekend and suspect that Spring Break and Easter travel will create strong month-over-month growth as it has in prior years. As you may recall, we typically experience our slowest period during January and early February. While that was true, we have benefited from some easier comparisons when considering the impact of Omicron in January of last year. We are sometimes compared to payment companies operating in a single industry vertical, and I think our performance in Q4 highlights the advantages that our vertical expansion strategy has created. We have large and fast-growing franchises in restaurants, hotels, sports and entertainment, gaming, non-profit, travel, and core Sexy Tech, all of which serve to bolster our performance when a single sector experiences moderation. Most importantly, we've been able to deliver these strong results and expand our margins and free cash flow. As we've mentioned before, many of our competitors in the Fintech arena have not been required to operate with a focus on profitability and positive cash flow. Shift4 approached our growth with a very disciplined and consistent process, constantly balancing a desire for growth with a realistic payback assumption. This means that we generally deploy capital with an expectation for positive returns within 12 to 18 months or less. As investors demand higher returns in free cash flow, we believe that many of our competitors will be forced to dramatically change their behavior. As Jared mentioned, this type of operating environment is typically where Shift4 thrives, and we are leaning into the current environment, which positions us well to continue to grow and take share, as well as to continue operating in the same fiscally responsible manner that we have since our founding 24 years ago. To that point, stock-based compensation and the dilutive effects on shareholder returns have been a significant focus in the investment community of late. Since long before our IPO, we've been prudent in balancing the benefits of broad-based employee equity ownership with the dilution it causes to existing shareholders. We have had average dilution of about 1% a year for 2021 and 2022, and this includes the impact of equity used for acquisitions. Our adjusted EBITDA grew by nearly 75% during that same timeframe. A strong early mover understanding of integrated payments alongside M&A has been a significant driver of our ability to rapidly gain share in numerous verticals and geographies. The current climate and our balance sheet position us well to continue executing in that regard. We do not have any M&A transactions during the fourth quarter and have not included the impact of potential M&A in our guidance, but do expect it will present upside opportunities in the quarters ahead. On that note, we are nearing what we believe to be the final stages of regulatory review for our acquisition of Finaro. Bear in mind, these regulatory approvals can typically take up to 18 months, and while the timing is inherently uncertain, we believe a closing during Q2 is likely. When we announced the transaction, we estimated a full year contribution to volume and adjusted EBITDA of $15 billion and $30 million, respectively. We will continue to update you on the closing progress and pro forma economic contribution as we get closer to closing. Before turning the call over to Nancy, I'd like to recognize her contributions. During her short time as CFO, she has made meaningful contributions to help enhance our operating performance, free cash flow, and forecasting abilities. Her approach to expense discipline is particularly helpful as we strive to maintain both best-in-class growth and our very strong margins.

Thanks so much, Taylor, and good morning everyone. In the fourth quarter, we delivered record results and ended the year exceeding the top end of our previously provided guidance ranges for volume, gross revenue less network fees, and adjusted EBITDA. We also meaningfully exceeded our adjusted free cash flow guidance. Total Q4 volume of $20.7 billion grew 55% compared to the same period last year. Q4 gross revenues were $537.7 million, up 35% from the same quarter last year, and gross revenue less network fees were $199.4 million, an increase of 36% over last year. Our adjusted EBITDA for the quarter was $94.4 million, and our adjusted EBITDA margins were strong for the quarter at 47%. Our quarterly results were driven by the continued strength of our high-growth core, improved economics earned from our gateway customers, and higher unit economics resulting from our decision to insource a large portion of our go-to-market distribution in connection with the launch of SkyTab in the third quarter, shifting from third-party distribution to direct in major markets. As expected, we continue to add and ramp very large enterprise merchants, which is resulting in lower blended spreads. The blended spread for the fourth quarter was 71 basis points versus 74 basis points a year ago and 68 basis points last quarter. We anticipate the ongoing mix shift will continue into 2023 and that our blended spread will continue to decline as we successfully grow our market. As we mentioned last quarter, we are not further breaking down the components of the blended spread, given disclosure limitations and competitive sensitivities. However, we saw sequential improvement in both our hybrid core and non-hybrid core spreads in Q4 compared to Q3, driven by volume mix, new onboardings, and international growth. Having an early look at Q1, spreads remained strong and in line with Q4 but will decline modestly due to the impact of the newly signed strategic enterprise agreement with a major hospitality operator that Jared previously mentioned. We are very pleased with the margin expansion we delivered this year. For the full year 2022, our adjusted EBITDA margins were 39.8%, representing over 800 basis points of expansion compared to full year 2021. We delivered this margin expansion despite ongoing growth-related investments, including international expansion, new vertical expansion, and the SkyTab product launch. We are very confident in our ability to deliver further margin expansion in 2023 and are committed to remain disciplined in our cost management while continuing to support and invest in growth. Net income was $38.5 million for the quarter. Net income per share was $0.51 and $0.46 per share on a basic and diluted basis, respectively. Adjusted net income for the quarter was $40.5 million, or $0.47 per share on a diluted basis. Adjusted free cash flow in the quarter was $56.7 million, bringing full year total adjusted free cash flow to $147.2 million. Adjusted free cash flow conversion was 60% for the quarter and 51% for the full year. A complete reconciliation of adjusted free cash flow is available in the appendix of our earnings materials. In reviewing these materials, you will see that as of year-end, we settled the outstanding receivable we had with our sponsor bank. We did not include the benefit of the settlement cash inflow in our adjusted free cash flow balances. We are exiting the quarter with just over $776 million of cash, $1.8 billion of debt, and $100 million undrawn on our credit facility. Our net leverage at year-end was 3.5 times and approximately 2.7 times, as Jared mentioned, when adjusted for the contribution of recent initiatives based on the trailing four quarters of adjusted EBITDA. Our strong balance sheet and free cash flow profile will continue to allow us to invest in the business and our strategic growth priorities while we remain disciplined in our capital allocation approach. For the full year of 2023, we are introducing guidance ranges for each of our key performance indicators. Our guidance range attempts to account for a variety of business and economic scenarios. As demonstrated last year, the onboarding of multibillion-dollar enterprise merchants can have significant weighting on volume in a particular quarter and it’s difficult to predict. Additionally, the persistent uncertainty of the macroeconomic climate compels us to be cautious. The low end of our guidance contemplates modest headwinds in consumer spending during which we are confident we can deliver best-in-class growth among our peer set. The high end of our guidance invites a continuation of recent trends in both our growth and consumer spending. As Taylor mentioned, Finaro is not included in either scenario and we will be adjusting our guidance as soon as the closing date becomes certain. Regardless, both the high and low end of our ranges represent strong profitable growth, including margin expansion and improved free cash flow conversion. For 2023, we expect to deliver total end-to-end volumes of $100 billion to $109 billion, representing 40% to 52% year-over-year growth. Gross revenues of $2.5 billion to $2.7 billion, representing 25% to 35% year-over-year growth; gross revenue less network fees of $915 million to $955 million, representing 26% to 31% year-over-year growth; and adjusted EBITDA of $410 million to $435 million, representing 42% to 50% year-over-year growth. We anticipate adjusted EBITDA margins to expand approximately 500 basis points at the midpoint of our guidance ranges and adjusted free cash flow conversion to expand to 52% plus. As a reminder, this guidance does not include Finaro or any other contemplated M&A in 2023.

Thank you, Nancy. So, operator, we're ready to take questions.

Thank you. Our first question comes from Dan Perlin from RBC. Dan, please go ahead.

Thanks. Good morning and a lot of good stuff in the results today. I just wanted to ask a question around the embedded expectations within guidance. And Jared, I appreciate the fact you don't want to give like the vertical number specifically. But I was just wondering kind of directionally, how do we think about how much contributions ultimately are going to be coming from kind of net new business, some of that being vertical, some of that being other opportunities versus just high-growth core and how that may toggle given some of the macro scenarios you've built into the year assumptions? Thanks.

Thank you, Dan. I'm looking around to see if Taylor and Nancy want to add anything. If we were to construct a volume bridge for 2023, it would closely resemble what we achieved last year, based on the percentage of current volume. We would assess how much is coming from the annualized effect of 2022, how much comes from new high-growth segments, and the remainder would be from new verticals, with a small contribution from international expansion.

Yes, that's exactly right. The one thing to keep in mind is as Jared mentioned, annualizing our onboarding last year is always the largest contributor inside of the year. We had a half a year on average contribution from those merchants, and just getting a full year is a really nice growth benefit that we get. One thing to keep in mind with a lot of these big merchants did not contribute a full year last year. So, while we surprised, I think investors with the contribution of new verticals serving in Q3 and expanding further, you can expect that growth benefit to help. The one thing I would just sort of maybe caveat Jared's statement with is we were more pessimistic on same-store sales growth in our guidance this year than we were last year. So, if you recall, we had a portion of our bridge that was same-store sales growth and travel recovery. I think we're more cautious on that front because I think it's prudent to be so.

Yes. No, that's great. And then just a quick follow-up. Just any initial commentary around the success you're having in sourcing strategy. The go-to-market strategy here is a lot more direct distribution than what you've had. Obviously, you had a quarter now to kind of see how that's going. So, I would just love to hear any kind of initial phases there. Thank you.

Sure, Dan. We're very pleased with our progress. We haven't invested much in digital marketing or social media for lead generation related to Skyforce. Our focus over the first couple of quarters was primarily on refining our operational processes. One key area is achieving a five-day turnaround from signing a new customer to having a fully operational POS system in place at their restaurants. We wanted to get that process working smoothly before intensifying our marketing efforts. The increase in production can be attributed to the partners we acquired who already had customer portfolios with competitors like Heartland or Spot On. Many were former dealers, giving them access to an existing list of potential customers to approach and sign up for SkyTab without requiring major marketing support. This strategic choice was intended to leverage the first few quarters to capitalize on that accessible market while fine-tuning our process before launching broader marketing efforts. Consequently, we've experienced an impressively low customer acquisition cost recently, and we’re satisfied with how everything is progressing. We have a great balance between our direct team and our authorized partners, and we're thrilled with the product's performance in several high-volume locations.

Thank you.

Thank you. Our next question comes from Timothy Chiodo from Credit Suisse. Timothy, please go ahead.

Hey, thank you. Good morning everyone. I want to talk a little bit about the ticketing opportunity. So, you have mentioned you have Ticket Socket. You recently got the Pacion integration, which opens up a lot of college sports and stadiums there. Maybe you could just expand upon what Pacion actually does for you in terms of the opportunity? And then also, if there are any thoughts around the potential to integrate with Ticketmaster, which I believe remains the only large integration that you have yet to make.

Hey Tim, I'll cover that one. I don't want to talk about any of the names specifically. We are trying to be pretty deliberate in avoiding specific customer or partner names. The way you should think about a ticketing opportunity is an integration of a software platform that lots of other merchants use. So, pick any of those names that you mentioned. Getting an integration to the platform means that you're now technically capable of serving a total addressable market that is substantially wider than the day before you completed that integration. Having the integration means that you can quickly onboard a customer that is using it, but the integration itself is what takes a lot of time to complete. We announced our foray into sports and entertainment in a meaningful way with the acquisition of VenueNext in March 2021. We started to win full-stack stadiums and start to have ticketing conversations throughout the end of 2021 and into 2022. We've completed most of the ticketing integration work, and now it's much faster for us to onboard customers, similarly to how we can onboard a customer using a hotel property management software integration that we already have. Being able to deliver for that in the high-demand environment of their stadium allows us to confidently handle their ticketing volume as well. You should think about each integration as an instant way to expand our total addressable market, with the volume following much faster as a result of having the integration.

Excellent. Really helpful. And congratulations on those integrations. The quick follow-up is around inorganic contributions. I realize they're small from the European TSB and a little from The Giving Block, but could you just recap what was included in Q4 that was inorganic and the small portion that's included for the 2023 guide for both volumes and revenues?

Yes, sure. It's sufficient to say, I think we have these comments in November. We were not terribly optimistic around The Giving environment at the time, and this is probably pre-some of the other tough news in the crypto community. So, the contribution from The Giving Block largely came in the form of SaaS from the incremental customers they signed up; it was not particularly meaningful. Although when you think about that customer base being double what it was, as The Giving environment starts to improve, the donations should come quickly thereafter. So, we're quite constructive on that platform despite the troubles in the crypto community leading to lower donation volume. And I think we commented in the same call in November that we expected the contribution of our international PSP to be less than 1% of our net revenue for the year. I think it's landed where we expected it to be, so it was reasonably inconsequential in the quarter, although it adds really strong technical capabilities.

Yes, I think just to layer on that, it's important for all investors to understand it is not uncommon for us to acquire assets that we think give us some unique advantages within a specific vertical and then totally pivot the revenue model around payments. A great example is the VenueNext acquisition; at the time we purchased it, it was a fantastic software but not a cash-generating business. We pivoted it from predominantly SaaS at that point and now it’s contributing from a volume perspective, which is driving a lot of the net revenue not to mention it’s opened doors for ticketing opportunities as well. With The Giving Block, right now, the overwhelming majority of the revenue we generate from non-profits comes from major non-profit brands like St. Jude and others, utilizing traditional card payment volume, many of which we solicited from the 2,200 existing Giving Block customers. As for the European PSP, we bought that asset to establish volumes that we already had with some of our strategic customers in the European market. So, while it’s been a question we've been asked since the IPO, the contributions are almost always organically supplemented because you often have to refine the revenue model of the existing business you acquired to pivot towards our organic strategy. I think that holds for both bills we executed in 2022.

Perfect. Thanks a lot, Jared and Taylor.

Thank you. Our next question comes from William Nance from Goldman Sachs. William, please go ahead.

Hey guys. Good morning. Thanks for taking the question. Jared, I think the company benefited a lot from some of the aggressive actions you guys took, including distribution insourcing, rolling out of SkyTab, and Gateway Sunset. What's kind of the big needle mover in your mind for 2023? What are the main two or three things that investors should be focused on to track the next leg of growth this year?

Yes, what an awesome question. I think we set the table incredibly well through 2022, which also aligns with the Investor Day we had in November of 2021, where we essentially told our investors that we're diversifying from just restaurants and hotels into all these exciting new verticals: gaming, non-profits, sports entertainment. We moved into 2022 building on every one of those initiatives. We certainly saw or at least were concerned enough that there would be a deteriorating economic climate in 2022, so much so that we decided to move a bit faster on things like our Gateway Sunset initiative, rolling out SkyTab POS with a balanced direct and indirect distribution. We made meaningful progress with Finaro, which is still in commercial capacity now, and an inorganic acquisition in Europe to set the stage well. I think we set the stage incredibly well in 2022, leading into 2023. Right now, the needle movers are as follows: let’s start with high-growth core. Gateway Sunset will still deliver significant results in the years ahead. There is still an enormous amount of volume on our gateway business; we’re still in the early innings of it. I expect it to be the largest contributor to our growth in 2023. All the new verticals we've built upon and gained traction now have Repricing benefits. We’ve got almost every major sport represented. The seasonal trends we saw in prior years in sports and entertainment won’t be there anymore. We’re making real progress in international markets, both inorganically and organically. That’s why I’m excited for the year ahead as I believe we can replicate the success we’ve seen domestically across Europe.

Got it. That’s super helpful. And maybe if I could just follow up on some comments regarding the Gateway Sunsetting strategy. You mentioned being in the middle innings. I know it's back to the basics with Shift4, but could you provide an update on the expectations for the pace of conversions going forward? I think you talked about something in the ballpark of $8 billion a year. It sounds like that’s accelerated as a result of the sunsetting strategy. So, whether it's full conversions or repricing to better economic terms, how much of the kind of growth in the near term do you expect solely to come from that opportunity?

Yes, just to clarify, I didn’t say we’re still in early innings. So, maybe we’re in the second inning – I don’t know, late bottom of the second. I still expect Gateway Sunset to contribute a substantial amount of volume. We didn’t pre-discuss what our current gateway-only volume is; most of us don’t actually track it that closely. However, you’re still talking about well in excess of $100 billion in volume there. Even when we’re working around the clock, there’s still a lot of volume to migrate. We did say that we’re trying to take our Gateway Sunset initiative and optimize it to not stretch over a decade or five years; we’re trying to condense it into three years. There's still plenty of volume to deliver during that period. The focus is to ensure we're properly rewarded for the capabilities we're delivering, which is the core of the integrated payment solution; our customers benefit immensely. We mentioned last year that we basically added a Netflix subscription to hotels and restaurants to millions a year in volume. So, I’d say that our efforts are still very much ongoing.

The one thing I’d add to contextualize it for smaller merchants on the gateway and B2B merchants doing $1 million, $2 million, or $3 million a year in volume is that decisions are typically made by the owner/operator. They happen quite quickly and regular course. We get hundreds of these a month. And it’s really just a function of getting the time with that owner/operator to have the conversation on the benefits and obviously, the pricing actions that Jared mentioned nudging the conversation in our direction. Larger operators, which include many multibillion-dollar companies, take longer to make these decisions; they happen over multiple quarters. The one thing Nancy mentioned in her script is that we want to be mindful here; we've had much more time to engage these institutions, and as they agree to move over – and increasingly, they are – it creates a bit of lumpiness in the volume growth for that quarter and the corresponding spread we deliver in that quarter. So, we want to be cautious as we establish good enterprise-level conversations, making sure that we’re managing the volume growth and the effective spread thoughtfully.

Got it. Appreciate you taking the question. Very helpful.

Thank you. Our next question comes from Darrin Peller from Wolfe Research. Darrin, please go ahead.

Hey everyone, great results. Thank you. I wanted to discuss the international build further regarding the opportunities available. Clearly, closing the Finaro deal will be beneficial. Can you provide some insights into the past and your view on the potential for vertical expansion? I know your large customer is serving as an anchor, which is advantageous. What opportunities do you envision for both 2023 and the longer term, Jared? Additionally, Nancy, I have a quick follow-up concerning the financial aspect, as I assume this will require significant time and resources to develop. When we look at the margin implications of this effort, it seems like your margins are stable, with growth stemming from these initiatives, once we factor out the residual benefits from last year or this year. What’s going on internally regarding investment and what can be done with margins as you expand? Thanks, everyone.

Nancy, why don’t you start?

Okay. Starting on the margin side, I would say you’re right. Certainly, the insourced distribution helps the margin lift by design, of course. As we're strategically looking at where we want to invest for growth, from an international perspective, many of these tuck-in or small technology and product deals we're considering provide a lot of opportunity without necessitating use of the US platform to make core investments for those expansions. When I look at Shift4 and kind of the history, I think there was some discipline, but the opportunity here without really cutting into any muscle or really at this point, I would say we’re just at like a very first layer of fat level and focusing on putting better process in place that will generate a lot of margin expansion from here forward. We're going to get an annualization benefit from the insourcing. But beyond that, there's room across every piece of the business to optimize. The investment for growth will accompany these tuck-in acquisitions or partnerships, so I feel confident. You could tell from the EBITDA guidance we provided that we feel solid about that. Lastly, you know the Shift4 way; we always aim to beat these expectations. So, I would just say there’s room there for us to be nimble and make the investments we need.

Yes, and to layer on a little bit on that point. With every initiative, we're trying to make this point in Q4 of last year. Virtually everything we are doing has a margin and efficiency benefit, which translates to margins and free cash flow. Just to give you an example, it’s actually more labor-intensive for us to support a gateway customer than an end-to-end. As more customers move from our gateway to our end-to-end solutions, it simplifies the support processes – and allows us to handle issues more efficiently. Every SkyTab POS system makes it 3x to 4x easier to support than our legacy POS systems. We’ve previously received fair criticism for our legacy systems. Every day that goes by, more SkyTab POS systems come in, and we can support a higher volume of the most labor-intensive portion of our customer base, which is small restaurants. Lastly, our diversification into new verticals allows us to more efficiently allocate resources; a stadium generating hundreds of millions a year in volume can be managed by one person part-time versus having thousands of restaurants requiring more people for support. Overall, there are many areas of the business where we can operate more efficiently, freeing resources to make investments in areas like R&D and finance as we expand internationally.

That's really helpful. Thanks. Just one last quick follow-up is on SkyTab and the progress you've been making. It seems really strong on the locations added. Just maybe a quick update on expectations for the year ahead.

Yes, we thought it was fair to give you some sense of how SkyTab is moving because I think it's such an important part of the distribution and sourcing story. Our expectations are high. I think both Toast and Chip will continue to have excellent years. I'm sure both will take our products into international markets, and we’ll go clean up all those legacy terminals and Windows-based POS systems. I think it’s a two-horse race, and there won’t be a winner-take-all scenario; both Toast and Chip will have great success with our cloud-based products in the US and in other markets.

That’s great, guys. Thanks again.

Thank you. Our next question comes from Andrew Bauch from SMBC Nikko. Andrew, please go ahead.

Hey guys. Nice set of results, and thanks for taking my questions. I just want to tail Darrin’s international question there. In the context of the regulatory approvals needed for Finaro, I know that you're not factoring anything from Finaro into this guide, but given how important the international expansion and roadmap is for the Shift4 story right now, is there any kind of changes to how results would shake out one way or another if the regulatory approvals were signed off today versus bleeding into the third quarter or even beyond?

I don't believe so. As Jared mentioned during his scripted remarks, we have an arm's length partnership that's allowed us to complete a great deal of technical work to service customers today. I think there have been previous comments around this. We've successfully made transactions on SkyTab through a combination of platforms at VenueNext as well. We share a handful of customers today. So, while there may be a modest improvement in economics from having the deal in a given quarter versus the next, we are not focusing on it in those terms. We want to close it as soon as we are allowed to, as it will help both companies operate under a clearer lens towards the future.

That’s good to hear. And then I wanted to get a bit more color around the investment philosophy here. What are the key macro indicators you guys are looking for to give you more confidence about stepping down the gas with investments? I really appreciate the commentary in the shareholder letter about focusing on upgrading talent versus outright adding heads. So, perhaps if you could give a sense of the investment versus the macro and what areas you are really focusing on with talent upgrades?

Stepping on the gas is an interesting way to phrase it because I think we always feel like our foot is pretty heavy on the gas. The reality is we think about capital deployment or M&A through a few lenses: Number one, does this acquisition provide a capability we need that we don’t currently possess? That has been a portion of our M&A strategy but not all of it. Another segment is whether this represents an acquisition funnel that is substantially more cost-effective than finding customers through organic means. If you consider acquisitions such as the Merchant Link gateway or the restaurant ISP brands, we routinely monitor these factors. Market valuations don’t greatly affect how we execute; we pursue appropriate opportunities when and where they arise. The toughest part is when the first phase of an acquisition involves enhancing capabilities, which typically requires higher upfront investment or doesn’t yield immediate margin accretion, necessitating a disciplined approach to what companies we acquire.

Yes, I think I’d just say this area may look a little bit toward our past. Prior to the IPO, we had a key sponsor that kept us at a comfortable six times leverage primarily to support periodic dividend recaps. During that time, we were reasonably active with M&A, which meant many acquisitions needed to be synergized profitable almost immediately. Fortunately, our current leverage profile means we don’t need to find gems, but we are focusing on deals that would be profit-accretive within a 12 to 18-month time frame, which Taylor mentioned earlier. We remain disciplined considering the uncertain road ahead. That said, capital prioritization is key. International expansion and supporting our global strategy with robust infrastructure have been our focus. This is a journey towards achieving $1 billion plus in EBITDA, and we won’t lose sight of that.

Got it. Thanks, Jared, and congrats on a really impressive year.

Thank you. Our final question comes from Rayna Kumar from UBS. Rayna, please go ahead.

Rayna?

Hey, sorry. This is Anthony Cyganovich filling in for Rayna. Thanks for taking the question. I know you commented on it a little bit before, but I was hoping you could talk about the drivers of the really strong EBITDA margin in the quarter. I know you mentioned the insourced distribution, but can you help us better understand if there’s anything unusual to call out or kind of the sustainability of that?

Yes. Hi, it’s Nancy. I’ll take that first, and anyone else can jump in here. But for sure, we are incredibly confident about sustaining that margin into 2023, as the guidance indicates. I think the benefits we’ve already talked about include the insourced distribution, the changing model for new vertical support and service delivery. The model and diversification as the book has evolved overrides the flow-through. Our discipline around SG&A is the biggest driver here. When you look at our SG&A trends, both on a reported basis and adjusted basis, we feel confidence that these exit rates can be sustained into 2023. There’s room across every part of the business for optimization. The investments for growth, particularly outside of the US, will not necessitate significant resources from our US platform. We're excited about the future.

Got it. That’s helpful. And just a quick follow-up. Do you think the macro conditions are impacting restaurant demand for the SkyTab POS, and how is it impacting demand for SaaS-based solutions or willingness to pay fees? Thank you.

So, a few things in there. I don’t think like the restaurant – at least if we look at Q4, the restaurant vertical felt very normal. It typically moderates off the highs of summer in Q3. That’s what we saw inside our restaurant base; it did not affect our ability to add customers. Now, as Jared mentioned earlier, we stacked the deck in that regard. The entirety of our insourcing distribution was not merely about gross margin; it was also about attractive customer acquisition costs and all the low-hanging fruit that comes with it. Our ability to gain market share has proven resilient to macroeconomic impacts. We have a captive base of customers that we can serve into, which has driven our success in the past. We are happy to be proven wrong if we see more resiliency than we anticipate, but we are, above all, focused on sound operational planning.

Thanks for taking the question.

Thank you. We appreciate everyone joining our call this morning, and have a good day.

Thank you. This concludes today's call. Thank you for joining. You may now disconnect.