Greetings. Welcome to Shift4 Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Thomas McCrohan, Executive Vice President, Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, everyone. We are joined by Jared Isaacman, our 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. Today's call is also being simulcast on X Spaces, formerly known as Twitter, which can be accessed through our corporate Twitter account at @Shift4. A 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 certain risks, uncertainties, and many important factors. Additional information concerning those factors is available in our most recent reports on forms 10-K and 10-Q, which can be found 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?

Thanks, Tom. Okay, so we made a lot of progress in 2023, and I am really pleased with how the year has ended. Every quarter we delivered consistent growth, record KPIs, expanding margins, and free cash flow. Last year, we completed three synergy-rich acquisitions: Focus POS, Finaro, and Appetize. We successfully unified our sales team around our flagship POS system, which is SkyTab, and installed over 25,000 systems. We also signed many notable hotel brands, began processing for large ticketing partnerships, and made investments in internal systems and AI. We took big steps on our geographic expansion journey with hotels and restaurants now processing in Europe and Canada. That was all last year, and I expect 2024 will be even more dynamic. Turning to the fourth quarter specifically, we closed on our long-awaited Finaro acquisition, but we also had our hands full with many enterprise go-lives, especially in the sports and entertainment vertical. Other than a few enterprise deals getting delayed and some timing nuances with our gateway migrations, we really delivered a reasonably strong quarter. Our Q4 results were largely in line with our previously provided quarterly guidance. We generated 55% growth in end-to-end payment volume, 31% growth in gross revenue, 33% growth in gross profit, and 35% growth in gross revenue less network fees. We generated $136 million of adjusted EBITDA, representing 44% year-over-year growth, as our margins expanded 320 basis points to 50.5% versus the corresponding year-ago quarter. Our operating margins expanded despite the margin drag from acquisitions of Appetize and Finaro, both of which negatively impacted our margins by over 250 basis points for the quarter. We also generated $75.3 million of adjusted free cash flow, which was up 33% versus a year ago. Our blended spreads remained stable, coming in at approximately 64 basis points. Our quarterly results would have been even stronger had it not been for some large customers electing to delay their go-live dates and timing nuances with a few enterprise gateway migrations. These include a large resort, VAI hotel, which further delayed its opening to the end of Q2 2024, along with a major resort that's now expected to go live at the end of Q3 2024. As mentioned, we entered into agreements with multi-billion dollar enterprise customers at pretty aggressive initial terms, but they include a meaningful revenue opportunity in the coming years as franchises adopt more of our services. The result in the short term is a reduction in gateway revenue and a slight drag on spreads, but we expect these deals to be worthwhile in the year ahead. Despite this timing nuance, we achieved our volume, EBITDA, and free cash flow targets for the quarter and feel confident we have a very strong foundation for growth in 2024. It is worthwhile to take a step back and evaluate our overall financial performance since our IPO. We have diversified into many new verticals, in-sourced a large portion of our restaurant distribution, and added thousands of hotels and resorts while expanding internationally. We have also invested in two new headquarters, internal system upgrades, and new products such as SkyTab that have proven to be very successful while expanding margins and free cash flow. We have not had to cut our way to profitability—we have been investing in growing profitably the entire time. So where does that leave us at the end of 2023? Our three-year CAGR growth for our primary KPIs—end-to-end payment volume, gross revenue less network fees, and EBITDA grew 50%, 33%, and 66%, respectively. I think what also gets lost in this evolution is the improvement in our unit economic model. Since our IPO, our incremental margins have improved considerably, despite the mix-shift driven decline in our blended spreads. It should be clear—the trade-off between spreads and incremental margins was a very good trade, and I would refer you to the chart on page five of our shareholder letter, depicting the three-year trend in incremental gross profit margins. In short, our strategic investments made since our IPO have resulted in an improved unit economic model, which ultimately supports margins and free cash flow over time. I know many of you are waiting for an update on our recent acquisition of Appetize, along with the current operating performance of Finaro, which from here forward, we will refer to as our European operations. I am pleased to report that the integration of Appetize and Finaro continues to go smoothly. We are unlocking meaningful synergies from both of these acquisitions in line with our expectations. Across our European platform, we have developed relationships to power EV charging and other unattended payment applications. Additionally, we have significantly expanded our relationship with several European food delivery providers. We have been installing SkyTab systems in various U.K. locations. In the U.K., we signed our first retailer, which leverages our existing ISV integrations—Ede and Ravenscroft. We also have some big news on the horizon as we make our sports and entertainment debut in Europe. Turning to Appetize, we remain on track to achieve $15 million of run rate EBITDA by the end of 2024 as we migrate their 600 plus clients over to VenueNext and capture payment processing economics along the way. Some notable conversions we are currently working on include Yankee Stadium and MetLife Stadium, home of the New York Giants and New York Jets. I will be talking more about the overall sports and entertainment momentum, including ticketing, in just a bit. Given the ongoing strategic review, we had no other M&A transactions during the fourth quarter, but we are pleased with the pipeline. We are good at identifying assets where we can unlock value that others simply cannot or possibly do not fully appreciate, and we do expect that acquisitions will remain a key part of our overall capital allocation priorities, especially those that can add distribution or other growth accelerants within our core or new verticals. Our core, which is composed primarily of restaurants, hotels, and specialty retail, again contributed very meaningfully to our growth, especially with the pace of progress as we convert and further monetize our gateway customers and distribute our cloud-based SkyTab POS solution. In restaurants, we were awarded the payment processing business for several large establishments, including Rocket Farm Restaurants, which owns a portfolio of approximately a dozen different restaurant brands in Atlanta, Houston, and Nashville; Andrew Scotto Restaurants, which operates restaurant concepts in the New York area; and Medium Rare Restaurant Group, a chain of steakhouses in the Washington D.C. area with ambitious expansion plans. They have already opened a new location in New Orleans and announced plans for Boston, New York City, Houston, and San Francisco. We also signed Elmer's Restaurants, a longstanding Portland, Oregon restaurant started in 1960 that now has 29 locations throughout the Pacific Northwest, California, and Arizona. Additionally, we won the Metropolitan Hospitality Group, which is Virginia Beach's Chick's Oyster Bar, and Four Top Hospitality Group. Our next generation cloud-based SkyTab POS platform continues to sign up thousands of new restaurants that are attracted to our modern architecture and low total cost of ownership. We are seeing SkyTab installed not only at standalone restaurants but also deployed within very large high-volume environments, such as the Cordish Companies' live branded entertainment districts, many professional sporting arenas, and other entertainment venues. As mentioned earlier, in the fourth quarter, we began rolling out SkyTab in the U.K. as we prepare for wider distribution throughout Europe. We continue to invest in the platform and recently completed development on significant features targeting multi-unit operators, as well as an AI website builder that Taylor will touch on shortly. For those curious, I encourage you to check out Shift4 on X or Twitter daily to see the numerous SkyTab installs that are taking place every day. In hotels, we had another stellar quarter of hotel and resort signings, including a material expansion with one of our valued Las Vegas relationships. We signed Carter Hospitality, a family-owned hospitality company with four luxury hotels and resorts, including three wineries across California, Texas, and Florida. We also signed Destination Residences Hawaii, a collection of 17 luxury vacation rental properties located in the Hawaiian Islands, Kaiya Beach Resort in Seacrest, Florida, and Westmont Hospitality Group, which is one of the largest privately held hospitality organizations in the world with over 500 properties. Old Edwards Hospitality Group, owner of several hotels, including Old Edwards Inn in North Carolina, recognized as one of the leading resorts in the South, and the Cliffs Hotel and Spa located on California's Central Coast, are also among our signings. All five of these hotels were gateway conversion wins. Additional wins include the Sonnenalp Resorts of Vail, Jiri Hotels, The Lenox Collection, the Beach House, and Ojo Caliente, among others. It was a particularly busy quarter for us with our hotel resorts and gateway conversion wins. In specialty retail, we signed notable merchants, including Big Y, which is an operator of over 100 grocery stores throughout New England, and online jewelry retailer James Allen Diamonds. Daniel’s Jewelers, with over 100 jewelry stores in California, Arizona, Texas, and Nevada, is another notable customer. We also gained a longtime Detroit area business, MANS Lumber, and Wilson Creek Winery in Southern California. Moving to new verticals, in sports, entertainment, and ticketing, we have made tremendous strides integrating Appetize, and we are executing well on converting the 600 plus legacy Appetize customers onto our VenueNext platform. Yankee Stadium is converting over to our VenueNext platform in time for Major League Baseball's spring season. We added several new ticketing deals during the quarter, including the Los Angeles Rams, the New York Giants, New York Jets, San Diego Padres, St. Louis Blues, and the Florida Gators. We also entered into agreements to provide ticketing for eight minor league baseball teams, including concessions, and we will be processing all retail purchases at LA Dodger Stadium. Furthermore, we signed a comprehensive payment processing relationship with MetLife Stadium, the Ultimate Fighting Championship, Cirque du Soleil, Kia Forum, and fast-growing dine-in movie theater chain CMX Cinemas. Finally, on February 11, we powered the payments for the fans that attended Super Bowl 58, held at Allegiant Stadium in Las Vegas. Congratulations to the Kansas City Chiefs and the San Francisco 49ers on a great game. It's worth noting that many of the customers of payment companies we are often compared to each quarter are not particularly appealing venues. At Shift4, we power some of the coolest venues and experiences you could ever want to attend, including the Super Bowl just a few weekends ago. Regarding new verticals, our donation platform, the Giving Block, which serves the non-profit vertical, continues to add marquee clients globally. Recent additions include organizations like the Association for Autism and Neurodiversity, Cure Cancer Australia, Children's Medical Research Institute, Vision Australia, the Earthlight Foundation, Bay Area Services, and Hillsdale College. We are successfully cross-selling our card processing capabilities into the installed base of these Giving Block customers. For example, this quarter, we signed an agreement with GivenGain to power its card transactions following GivenGain's integration into the Giving Block platform back in Q3. GivenGain is known for its relationships with other prominent non-profits such as the Boston Marathon and UNICEF, among others. The integrations with Donorbox and Ministry Brands, leading online donation platforms, were also completed in Q4. This sector remains an important growth vertical for Shift4, and the Giving Block remains the category leader in non-cash giving. In technology, we continue to innovate in autonomous retail and recently partnered with Portugal's Sensei to deliver a more streamlined shopping experience without the hassle of waiting in checkout lines. We announced a partnership with softPOS provider MagicCube to offer their unique tap and pay technology to our merchant base, and partnered with MobilePay, one of the most popular payment methods in the Nordics. In gaming, we're in the process of rolling out hundreds of our SkyTab mobile devices throughout the BetMGM sportsbook locations, including all 24 sportsbook locations across nine states. Our SkyTab devices are also being integrated with Passport Technology, one of our technology partners in the gaming industry, to enable various cashless gaming experiences on the casino floor. We are introducing Passport Technology and the SkyTab experience at casinos like Morongo Casino outside of Palm Springs. Lastly, we signed several new online gaming clients during the quarter, including Rivals.com, targeting the competitive gaming community, Prime Sports Betting, currently in Ohio with expansion plans, and HefaBet, an online betting platform aimed at the underserved Latino community. HefaBet is owned by Las Vegas hospitality operator Fifth Street Gaming, and we also partnered with Rolling Riches, an online gaming site blending social media with casino games. Touching a bit more on international, I mentioned some of our early success with SkyTab and our hotel integrations in Europe and Canada. To provide more specifics, our relationship with online delivery platform Wolt is ramping up quickly; Wolt is a global leader in home delivery of essential items, including food and home goods, and was acquired by DoorDash a few years ago. We have also developed relationships with several European fintechs that enable unattended payments for European EV charging and fuel stations, including NAICS, a European PSP focused on unintended use cases, and Fortech, an Italian fintech providing customized solutions for EV charging and fuel stations, as well as convenience stores. We partnered with TOMRA, the world leader in waste collection and sorting, to power payments for their innovative reverse vending machines across the Nordics, and with leading Swedish neobank Northmill to provide their 6,000 plus merchants and 800,000 end users with a complete payment solution. There is a lot to unpack here. We ended 2023 positioned well for the year ahead. Our priorities in 2024 include installing over 30,000 new SkyTab systems domestically, an additional 10,000 new hotels and restaurants, and numerous stadiums in Europe and Canada. We will continue to execute the integration of Appetize, sign up dozens of additional ticketing wins in the U.S., and support the go-live of many major hospitality operators. We will keep following our major customers into new markets while bringing our full suite of products and services. Through the lens of a still uncertain economic environment and an ongoing strategic review, we have introduced 2024 guidance that contemplates a range of outcomes that Nancy will discuss shortly. Most importantly, we see strong profitable growth, especially in the back half of the year. Additionally, we provided a progress update on our mid-term outlook in the shareholder letter, which I believe you will find useful. We have been steadily moving towards our mid-term outlook and have converted many skeptics into believers, as evidenced by upward revisions to consensus estimates since we introduced our outlook in the fall of 2021. Before handing off to Taylor, I am sure many of our investors would like to know the status of our ongoing strategic review. I will summarize what I wrote in my Q4 shareholder letter this morning. Our board of directors' formal review of alternatives is still active and ongoing, and we will provide updates as soon as they are available. In the interim, please know we remain focused on running the business and executing our game plan. With that, let me turn the call over to Taylor.

Thanks, Jared. As on prior calls, I thought it would be helpful to provide you with additional color on the trends we experienced in the prior quarter and what we're seeing in the early days of Q1. Volume across our verticals was largely as expected in the quarter, with table service restaurants exhibiting slightly negative same-store sales growth, offset by hotels having modest growth. Jared mentioned a few enterprise hospitality delays, but we are incredibly proud of the pace at which we've met demand for new installations, as evidenced by the successful opening of Fountain Blue in Las Vegas during the quarter. As our long-term investors know, Q1 represents a seasonally lower volume quarter for us, even when adjusted for growth. Consumers tend to dine out and travel less immediately after the holidays, with activities typically increasing in March with warmer weather and spring break travel. We expect this trend to be the case in 2024, although we are pleased with the diversification that the merchants across our new verticals and geographies bring. Previous M&A transactions continue to enhance our capabilities, bringing in excellent talent and a large group of merchants for which we can offer more services. Jared mentioned the recent successes at Appetize and Finaro. We also introduced a new AI-powered restaurant website generator from our Shift4 shop team that can create a full-featured and personalized restaurant website in less than a minute at no additional cost. It launched a couple of weeks ago, and hundreds of SkyTab restaurants now have a beautiful and functional web presence that uniquely represents their businesses. As Jared mentioned, it was a good quarter with respect to our Gateway Sunset initiative, but despite this success, we still have over $120 billion of annualized gateway volume that is currently paying us less than 3 basis points, for which we expect to earn several multiples in the years ahead. Our ability to identify and execute against highly synergistic opportunities, with rigid price discipline, is one reason we can execute against our strategic objectives at our current pace. Of course, the uncertain economic environment makes predicting consumer behavior difficult. Despite that, we are incredibly pleased with the operating environment. Our record free cash flow and strong balance sheet provide us with the ability to hire talent while competitors are shrinking, invest in product capabilities, expand in new geographies, and maintain an increasingly attractive pipeline of M&A targets. This is the Shift4 way. Nancy will now walk you through our financial results.

Thanks, Taylor, and good morning, everyone. We delivered another quarter of strong and consistent results. Total payment volume of $32.1 billion grew 55% year-over-year. Q4 gross revenues were $705.4 million, up 31% from the same quarter last year. Gross revenue less network fees grew 35% to $269.3 million. Our adjusted EBITDA for the quarter was $136.1 million, up 44%, and adjusted EBITDA margins expanded significantly. Our quarterly results were driven by the continued strength of our hospitality and restaurant verticals, momentum across our enterprise merchants, including new verticals, and capturing better economics from our gateway-only customers in line with our Gateway Sunset initiative. The blended spread for Q4 was 64 basis points, averaging 65 basis points for the full year, in line with our expectations. These blended spreads benefited from higher spread international volume and ticketing offset by the ongoing mix shift as we add and scale enterprise accounts and optimize and convert legacy gateway customers. Spreads across our core businesses of restaurant, hospitality, and specialty retail remain stable. We expect spreads to blend down modestly in 2024 as we continue on our current path. We will successfully move up market and onboard large enterprise merchants, resulting in some downward pressure on spreads, which will be positively offset by international ticketing, SMB growth, the acceleration of SkyTab, and revenue expansion from the recent conversions Jared referenced earlier, that will allow us to move from a single corporate arrangement to individual franchise deals. To that end, for the year ahead, we approach a floor of 60 basis points. Any deviation from this will likely be a function of volume outperformance. Gateway revenue decreased in the quarter, reflecting the success of our Gateway Sunset initiative. The remaining gateway conversion population currently represents less than 3 basis points of spread, highlighting the magnitude of the remaining opportunity ahead of us. Subscription and other revenue in Q4 was up 64% compared to the same period last year, in part due to progress we are making with SkyTab and our overall pursuit of the restaurant vertical. Restaurant SaaS was up 69% year-over-year in Q4. In Q4, total general and administrative expenses increased 24% year-over-year to $85.2 million. We continue managing towards our goal of keeping headcount flat while investing in talent upgrades, driving further efficiency across our operating model, and demonstrating the scalability of our platform. During the quarter, in conjunction with the acquisition of Finaro, we halted development on several in-process software projects, as we determined that the intellectual property obtained in the Finaro transaction was better suited for the objectives of these projects. The total non-cash charge associated with these projects was $18.6 million. For the full year 2023, our adjusted EBITDA margins were 49%, representing over 900 basis points of expansion compared to full-year 2022. We remain highly committed to a disciplined approach to expense management while continuing strategic investments for growth. Many opportunities to further improve margins are still on the horizon through the utilization of AI technology, implementation of new internal systems, and ongoing streamlining efforts to enhance scalability throughout our business operations. Our adjusted free cash flow in the quarter was $75.3 million, bringing year-to-date adjusted free cash flow to $273.5 million. Full-year 2023 adjusted free cash flow conversion was 59.5%, well above our current full-year guidance of 57% plus and our initial guidance of 52% plus. Net income was $19.2 million for Q4, and diluted earnings per Class A and Class C share was $0.21. Adjusted net income for the quarter was $68.5 million, or $0.76 per A and C share on a diluted basis based on 90.1 million average fully diluted shares outstanding. We are exiting the quarter with $530 million of total cash, $1.78 billion of total debt, and $100 million undrawn on our credit facility. Our net leverage at quarter-end was approximately 2.7 times. Our strong balance sheet and free cash flow profile will continue to allow us to invest in the business, pursue our strategic priorities, and opportunistically repurchase shares. As a reminder, we raised capital when the market allowed us to do so attractively. Our weighted average cost of debt is currently 1.35%, and we have no maturities until December 2025. For 2024, we are introducing guidance ranges for key performance indicators. Our guidance range accounts for various business and economic scenarios, particularly alongside our ongoing strategic review. For 2024, we expect to deliver end-to-end volume of $167 billion to $183 billion, representing 53% to 68% year-over-year growth; gross revenue less network fees of $1.3 billion to $1.35 billion, representing 38% to 44% year-over-year growth; adjusted EBITDA of $635 million to $675 million, representing 38% to 46% year-over-year growth; and adjusted free cash flow conversion of at least 58%. There are several things to note about our guidance. We are no longer guiding to gross revenue, as it is less relevant now, especially with our international expansion where we may not always be settling the funds for the merchant but receiving the equivalency in spread. Although our business continues to evolve, using last year's seasonality by quarter is the best indicator for current expectations for quarterly results for 2024 at this time. We expect heavier weighting to the back half of the year. The onboarding of multi-billion dollar enterprise merchants can have significant weight on volume in a particular quarter, making predictions difficult. The low end of our guidance contemplates modest headwinds in consumer spending, during which we are confident we can continue to deliver best-in-class growth among our peers. The high end implies a continuation of recent trends in both our growth and consumer spending. While the midpoint of our guidance implies modest margin expansion, excluding the impacts from legacy Finaro and Appetize, margins are expanding meaningfully into 2024. Before turning the call back to Jared, I want to reiterate that our balance sheet, cash generation, and profitable growth position us incredibly well in the current macroeconomic environment. With that, let me turn the call back to Jared.

Thanks, Nancy. As mentioned in my letter, we are still very much in the midst of a strategic review, which may limit our ability to comment on certain subjects. We will provide a more formal update as soon as it's available, but again, thank you for your understanding. And with that, we'll turn it over to questions with the operator.

I'll leave you to answer the one question from X before kicking off the Q&A.

Yes. Perfect. Thank you very much. Just before we go to questions on the line, we did mention that we were going to take a question from X. I want to thank Andre Nicolin for this multipart question related to the sports and entertainment vertical. The first question is, regarding the 600-plus Appetize accounts: even if 50% of them switch over to end-to-end payments using VenueNext and ad ticketing, how much additional revenue would that equal? Secondly, should we assume a higher spread on this revenue due to ticketing? Third, what are some of the objections, if any, you have received over the last few months as we make this migration? And lastly, how long are we willing to accept letting customers remain on the Appetize platform if they're not willing to commit? We didn't specifically quantify the revenue opportunity associated with the Appetize migration other than to say that a business that had been hemorrhaging cash its entire existence, by the end of year one of our acquisition, will represent $15 million of run rate EBITDA. That's after the first year of a multi-year plan. I would say that we characterized last quarter that the contributions from Appetize will be a material contributor to the business. In terms of spread direction, I think it's good in general because people are always trying to figure out all the moving pieces in our pricing. Nancy covered it well in her prepared remarks. Essentially, you have smaller restaurants, your SMB customers, and card-not-present international transactions that contribute to the higher end of spread. We also have a specific transition of a single corporate customer in the billions range of volume that is moving to an individual franchise model that comes in at higher rates, providing a tailwind. Ticketing is more middle-of-the-road. On the flip side, significant enterprise customers may pull it down due to lower rates. Concessions and lodging contribute as well. There are a lot of moving pieces, but generally, ticketing spread is more favorable than in-venue elements, which are among the lowest risk spreads. Regarding objections from customers moving from Appetize to VenueNext, I am not aware of any. These customers were moving to VenueNext prior to the acquisition, and we are just accelerating that process. They seem satisfied with that transition. As for how long we are willing to tolerate customers remaining on the Appetize platform without commitment, we expect to transition half of the customers before the 2024 seasons for their respective leagues, with the balance moving in 2025. Andre, thanks for the question. Now, operator, we'll go to the line.

Thank you. We will now begin the question-and-answer session. Our first questions come from Timothy Chiodo with UBS. Please go ahead with your questions.

Great, thank you so much. Following up on that last topic around Appetize, could you dig a bit into the contractual or mechanical elements involved in getting those Appetize customers over to end-to-end? Specifically, can you talk about what it takes to switch them over to SkyTab, whether they are using a current third-party gateway, and if they are under contract, in many cases, for their end-to-end processing? Also, what is the contractual element to consider on the ticketing side? I appreciate that context.

Yes. Thanks, Tim, Jared here. The existing contracts that these customers are under do present one of the obstacles we are navigating. It's really about scheduling, getting deals done before the start of a sports season, and managing the resources and logistics associated with deploying the installations, because in many cases, you are talking about hundreds of devices. These are customers that were moving to Shift4 VenueNext anyway, and we were making a lot of progress prior to the acquisition of Appetize. We acquired Appetize under very attractive terms, which speaks to what was happening internally at that business. So we don't have many objections to this migration. Yes, there are many parties involved for these customers—they have separate merchant acquirers and third-party gateways, similar to many of the hospitality customers we win from. This perfectly illustrates why Shift4 wins. Any penalties they might incur with their other merchant acquirer aren't viewed as obstacles by these large sports teams, who prioritize providing a great experience for their fans. Our main challenge has been efficiently marshaling resources to facilitate installations before the season starts, with Yankee Stadium being a great example. We allocated significant resources there to ensure we were ready in time for the upcoming spring training.

Thank you. Yes, that's exactly what I was trying to get at in terms of that penalty piece and how you put it in context there. Thank you. The brief follow-up is more of a modeling question. You mentioned following last year's seasonality when thinking about distributing the end-to-end volumes this year. I want to confirm that the comment holds, despite the fact that Q4 would have had inorganic contributions that might have boosted the seasonality in Q4. We should still be modeling the overall reported seasonality of 2023.

Yes, that's exactly right.

Hey, guys. Appreciate you taking the questions. I'll start with a numerical one and then maybe ask something more thematic. But the previous commentary around the seasonality, I just wanted to ensure we understood that correctly, relating to the first quarter and its slightly softer trends. It seems that the seasonality last year in terms of percentage of volume you observed in the first quarter would point to volume being slightly up. I wanted to confirm that was your message and not indicating volume would be slightly down, given the earlier commentary. Also, Nancy, if you could clarify the comment around approaching a floor in net spreads at 60 basis points. Is that where you expect to end the year, or are you saying you don't expect to go below that long-term?

Yes, let me break that down because I know it's important for modeling. When comparing Q4 to Q1, we expect to see some sequential uptick, but we still anticipate Q1 will be our lowest point for the year. Looking at both volume and gross revenue less network fees seasonality for 2024, you should apply the 2023 timing for best expectations. Regarding the spread, yes, we got this question last year. Obviously, I'm bringing it up earlier than we did last year, but as we consider the guidance, it is indeed for 2024. Just consider that for this year and we will provide updates likely by Q1, Q2 in terms of the near-term guidance. Yes, approaching a floor, think of that as a basis for your modeling beyond 2024.

Got it. That's very helpful. Okay, and then maybe just on the gateway conversion. It seems like there were some moving pieces there. In the fourth quarter, you highlighted several gateway conversions in the shareholder letter, and I believe there's been some chatter about you being a bit more aggressive, possibly seeing some churn related to this conversion strategy. So maybe an update on how that progress is going. Have there been any changes to the tactics you are using, either carrots or sticks to encourage conversion?

I'm happy to kick it off here. Jared here, and then Taylor is managing that project closely. I don't see any notable new churn associated with our Gateway Sunset initiative. Sure, every quarter, we see movement. Some legacy customers are adding gateway customers while a few hospitality operators that decided to switch off the platform a few years ago. We have a lot of merchant conversions ongoing. We've expressed before how we want to condense a 10-year strategy into three or four years. I believe we are learning and optimizing our approach, which still incorporates both incentives and consequences for more migrations. This past quarter illustrates this, especially with a few large multi-billion dollar customers who had other priorities. You may renegotiate terms, which might be slightly more favorable than they previously paid for the gateway, but create significant opportunity at potentially thousands of franchisee locations. Those moves are worthwhile for us. As mentioned in Taylor's remarks, the remaining opportunity is still significant. Taylor, do you want to add anything?

Yes, absolutely. Jared outlined it well, but looking at the data, we have had great success with gateway conversions in the last quarter. We still have $120 billion of annualized volume at low spreads, and we are content whether to raise prices on those customers or convert them into acquiring customers. I want to reiterate that this is only our third attempt at this effort since we began it as a major strategic initiative in summer '22. The hospitality sector has enjoyed two excellent business seasons recently, meaning our pricing actions may have gone unnoticed. We are entering '24 and '25 with a refined and more thoughtful approach, and much volume remains to be captured. It's worth noting the $120 billion in volume demonstrates we have not encountered significant attrition.

Hey, guys. Thanks. Let me double-check something. First, on the organic versus inorganic side. When we think about guidance, it appears we are calculating a high revenue growth rate by backing out items like the pure inorganic contributions from Finaro and Appetize. Is that correct? As part of that guidance discussion, I remember you did not include same-store sales growth in your bridge. So I suppose I am trying to understand other conservative factors contributing to the outlook and how much has already been booked. How much of your customer wins are in that bridge, along with the bookings from this year and next year.

Yes. Darrin, Jared here again. I can address the first part of that question regarding the separation of organic and inorganic growth. For 2024, the organic portion of our revenue growth will be well above 25%. It’s quite challenging to analyze Q4, where we closed two acquisitions and aimed to overhaul existing revenue models. But for our 2024 forecasts, you can confidently expect the organic side to greatly exceed that 25%. Nancy?

Overall, as we think about our guidance on the revenue side, it will carry over more than 250 basis points of margin expansion. I feel confident about the organic growth going into '24 for exactly the reason you mentioned. Much of how we build our guidance comes from what we see in the pipeline, not just arbitrary percentages from a large volume pool. A large portion of our growth is already booked, has implementation schedules, or is clear in the pipeline. We have a super high confidence level for this growth observation. As for macro reasons concerning same-store sales, we are proceeding conservatively. Our assumptions for growth are above 23% for mid-to-high-end results, which exhibits our efforts to remain realistic and prudent.

That's very helpful, guys. And just quickly on the international side, it's great to hear the color on the progress you're making. When considering multinational hotel chains in Europe, are there any developments in relation to those, and how is that tied to your restaurant momentum throughout this year?

Yes, definitely. We are implementing every aspect of our strategy in Europe. As for the activity we observed in December, Jared mentioned an ISV integrated with us that brought a retailer into Europe. We mentioned hotel signings in Canada on established integrations that are compatible with Shift4's systems. In terms of the U.K., we're rolling out SkyTab. We don't just see M&A opportunities in Europe; our organic growth strategy emphasizes the continent too. Given our existing customers and partners across this globe, we're attentive to the international expansion priority while taking a selective, strategic approach. In summary, all aspects of our U.S. strategy apply to Europe as well.

Additionally, as we enter 2024, we’re proactively managing demand in Canada and Europe based on software integration needs, hardware requirements, and SkyTab's fiscal compliance. We would never have anticipated leveraging our retail integrations when entering Europe due to the misconception of Shift4 specializing in retail software. We operate in markets where our capabilities have been awaited, creating immense opportunity. Our strategies merge effectively across our capabilities, and we are experiencing growing demand.

Nancy, I want to talk about free cash flow. The quarter was strong, and I believe you ended 2023 with a 60% free cash flow conversion. Could you explain any drags and why it might be slightly down? I appreciate it's at 58% plus for 2024, but any comments on headwinds or adjustments regarding free cash flow as we look into 2024?

Yes, certainly. There will always be fluctuations with quarters. We have two periods, Q2 and Q4, where we have interest payments, which impacts those figures. It's essential to think of free cash flow on a yearly basis rather than quarter-over-quarter. We are focused on improving cash generation while negotiating with vendors, managing AR, and optimizing AP turns. There aren’t substantial concerns, just a strong commitment to maintaining our trajectory of improvement for conversion.

Great. And on margins, the midpoint of the guidance implies about 60 basis points of expansion. Nancy, you indicated Finaro and Appetize were margin headwinds. Can you quantify or provide any color on the underlying core margin expansion within the '24 guide?

Sure. As Jared mentioned in our guidance, we are anticipating over 25% organic revenue growth for the year, which aligns with an organic margin expansion opportunity projected at 250 basis points+. We are focused on sustainable growth for 2024 and everything we've indicated already demonstrates that commitment.

Hi, this is Joel on for Andrew Jeffrey. As we consider SkyTab in the context of accelerating end-to-end volume conversions, do you believe SkyTab can be effectively positioned as a viable migration path for enterprise clients? Specifically, as enterprise customers consider replacing Micros, do you see SkyTab stepping in?

Absolutely. If you consider Micros as a case study, our Chief Technology Officer and Chief Product Officer hail from Micros. We manage two of the largest Micros resellers in the nation. We have extensive expertise with their product suite, and SkyTab is designed to compete effectively within that realm, as it is with others. Live integration within stadiums, for instance, clearly showcases the capacity of our platform to handle high volumes—especially visible when sports teams are generating excitement, like during the Texas Rangers' victory in the World Series.

Yes, to add to that, the largest segment of our legacy gateway customers are lodging and hospitality prospects. SkyTab is standard practice for onboarding large deals with major property operators, providing us opportunity in their locations. During our past big deals, like with Sonesta a couple of quarters back, we mentioned it as a hunting license for SkyTab sales within those establishments. Furthermore, SkyTab offers the lowest cost of ownership compared to any restaurant cloud POS system, enhancing its overall value proposition. Naturally attractive, particularly for lodging volume which exceeds standard restaurants substantially. Simultaneously, there exists a significant pool of large restaurants that pay relatively low SaaS rates, without engaging in gateway volume. For instance, chains like Blooming and Cheesecake Factory are ideal candidates for upgrading to a cloud-based solution. We are well positioned in these accounts, and they are certainly on the radar for proposals involving SkyTab.

Okay. Awesome. And as a quick follow-up, we have witnessed competitors in software-integrated POS taking price in 2023, particularly Clover. Can you elaborate on your pricing philosophy for SkyTab and any opportunities you envision for repricing across SMB and enterprise segments? I understand that pricing in the enterprise segment is more complex.

Certainly, we are fully aware that we offer the lowest total cost of ownership through SkyTab. In 2023, many competitors’ pricing strategies benefitted us, so there was no pressing need to adjust our pricing. However, over a five-year span, there presents opportunities to consider more comprehensive pricing adjustments down the line. Last year was not the optimal moment for modifications to pricing structures, particularly with direct consumer costs. That said, there are indeed paths for adjustments ahead.

Thank you. We have reached the end of our question-and-answer session. And with that, I would like to bring the call to a close. We appreciate your participation. Thank you for joining us today, and have a great day.