Earnings Call Transcript - FOUR Q4 2025

Operator, Operator

Hello, and welcome to Shift4 Payments, Inc.'s Q4 2025 Earnings Conference Call. It is now my pleasure to turn the meeting over to Thomas McCrohan, EVP of Investor Relations. Please proceed.

Thomas McCrohan, EVP, Investor Relations

Thank you, operator, and good morning, everyone, and welcome to Shift4's Fourth Quarter 2025 Earnings Conference Call. Joining me today are Taylor Lauber, our CEO, and Christopher Cruz, our Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at investors.shift4.com. Additionally, it is being simulcast on X Spaces through our corporate X account @Shift4. Our quarterly shareholder letter, financial results, and other related materials have been posted to our IR website. Please note that today's call and earnings materials include forward-looking statements, which are not guarantees of future performance. Actual results may differ significantly due to various risks, uncertainties, and important factors. You can find more information regarding these factors in our most recent Forms 10-K and 10-Q available on the SEC's website and our corporate IR page. For any non-GAAP financial information discussed, the relevant GAAP measures and reconciliations are included in today's quarterly shareholder letter. Now, I will turn the call over to Taylor. Taylor?

Taylor Lauber, CEO

Good morning. It's great to be speaking with you all. 2025 was yet another pivotal year for Shift4. We produced record results, executed on transformative M&A, grew nicely and diversified the quality of our business, all while overcoming occasional setbacks in more ways than one. We also fundamentally strengthened our global footprint, our technology capabilities, and organized our talent around our priorities that will continue to move the needle in 2026. As mentioned in my shareholder letter, the rapid expansion across multiple verticals has created confusion as to exactly why we win and who we compete with. This is understandable, but from our perspective, each vertical we serve is carefully selected based on the lessons we've learned over 28 years. Contrary to popular belief, we are in these verticals because we view the competitive landscape as narrow and typically have one or fewer good competitors in each vertical. To simplify things for everyone, I will succinctly say that we power the experience economy. We enable businesses to deliver the moments that matter and can be found anywhere you shop, dine, stay, or play. These experiences demand high availability and often in-person engagement, and come with high expectations from both the guests and the merchant. What as little as 5 years ago might have seen Shift4 powering a night out at your favorite local restaurant has evolved into us earning the responsibility to power some of the largest global resorts operating 24/7, championship matches and so much more. In a world of constant innovation, especially digitally, the skill sets to power high-demand person experiences is increasingly valued. Now to touch on some highlights for the quarter and the full year. We closed on the acquisition of Global Blue back in July, marking our entry into the luxury retail vertical. As a quick reminder, Global Blue is the market share leader of tax-free shopping capabilities to merchants selling luxury goods, with the #1 market share globally and a 4x relative market share to their nearest competitor. Global Blue's business remained resilient despite the weakening U.S. dollar and rising tensions between China and Japan. While a weaker U.S. dollar translates into higher prices for those traveling to Europe, having a business over-indexed to wealthy consumers remains the key benefit in this K-shaped economy. The integration of Global Blue remains on track, including the timing of revenue synergies to begin being realized this year as expected. As you can see from our materials, we continue to add many new merchants and can increasingly be seen anywhere you shop, dine, stay or play, with many of these wins a direct result of us successfully cross-selling payments. We powered payments at the big game at Levi's Stadium in early February. So congrats to all you Seahawks Fans. And we are constantly renewing key merchants, recently signing a 5-year renewal with Choice Hotels. Some other key milestones: In Europe, we continue to add many thousands of new SkyTab POS merchants across the U.K., Ireland, and Germany, ending the year with over 80,000 merchants outside of the Americas, which is before cross-selling any Global Blue merchants. Canada is also a focus as we've only recently had full stack capabilities in the region, but inherited many world-class customer relationships from both the Eigen and Givex acquisitions. We entered the Australia and New Zealand markets, and now have a substantive sales force via the acquisition of Smartpay. This progress translated into solid financial performance, including nearly $2 billion of total gross revenue less network fees, representing 46% year-over-year growth. Excluding the contribution of Global Blue and Smartpay, we delivered roughly 23% year-over-year growth in gross revenue less network fees during 2025. We achieved $970 million of adjusted EBITDA, representing 49% adjusted EBITDA margins and $500 million of adjusted free cash flow. We are proud of both of our margins in light of ongoing investments we're making in both products and expansion. We introduced an all-in-one payments, DCC and tax-free shopping terminal last year, which we began piloting in several European countries. We also invested heavily in making our restaurants, sports and entertainment, and other products suitable for the global stage. I want to stress that our story is not a complicated one. We are experts in handling software, hardware and payments in demanding verticals and in the most competitive market in the world, the United States. We've grown from an SMB restaurant-oriented technology business to powering commerce across the experience economy, and our most meaningful growth has been as a public company for all to see. We are now taking those lessons learned and our industry-leading products out into the world. One only needs to study our evolution in the U.S. to understand what we will be doing in less mature and often less competitive markets. Unlike our history in the U.S., we are aided by excellent beachheads provided to us by acquisition and already have a presence in over 75 countries around the world. As we look to 2026, the macro environment remains dynamic, but we view the diversity of our end markets, our disciplined approach to customer acquisition, and healthy operating margins as affording us a degree of resiliency and optionality relative to many of our peers. In terms of priorities, I'm focused on the following: We have only just begun delivering our all-in-one payment terminals throughout Europe. As mentioned previously, the Global Blue tax-free shopping product is unrivaled. When combined with eligibility detection at the point of payment, it adds meaningful utility to retailers of all sizes. We believe we can add many thousands of merchants as a result of this capability and are targeting 15 countries for launch in 2026. Our go-to-market motion across these countries will allow us not just to win retail merchants but also deliver our restaurant, hotel and stadium products, replicating the vertical success we've had in the U.S. While on the topic of the U.S., we still have plenty of market share to win across our key verticals, and enabling DCC across our merchant base will be particularly valuable in anticipation of the World Cup this year and the Summer Olympics in 2028. We continue to leverage our restaurant merchant estate to inform our roadmap for SkyTab, which has been growing nicely in both customer counts and volume per merchant. To better leverage the larger Shift4 brand and our presence in the broader experience economy, we will be rebranding SkyTab to Shift4 Dine later in the year. Asia and the Middle East are also increasingly becoming important strategic markets for us, particularly Japan and the Kingdom of Saudi Arabia. These are large markets that align perfectly with our core competencies and currently only offer one of our products today. Lastly, our AI roadmap is extensive on both the operational and product fronts. We've partnered with xAI for broad-based adoption of Grok in virtually every area of our business. We've deployed AI assistance within our key products to help resolve inquiries more quickly and with less human intervention. These tools have recently been expanded to provide operational insights to our merchants as well. We are building predictive models that analyze merchant signals to prevent churn before it happens while leveraging the vast trove of data we collect from customer interactions to identify and resolve customer pain points more rapidly than ever before. On the productivity front, we've seen a doubling in our Grok production as a result of broader adoption of AI tools within our technology teams. Many of you know that Palantir has been powering our mission control platform for several years at this point. So none of this should be a big surprise. Before I turn the call over to Chris, I want to summarize the simplification transaction announced earlier this year. We've successfully collapsed all B and C shares previously held by our founder into Class A common. As a result, Shift4 is no longer a controlled company under the NYSE rules. Going forward, Jared will own approximately 27% of our outstanding Class A shares with voting rights that are par passu to all other shareholders. Additionally, Jared has agreed to transfer all future benefits of its tax receivable agreement to the company, permanently eliminating an estimated $440 million of future TRA payments. We believe these improvements to our governance and capital structure significantly broaden our appeal to the investment community. In summary, 2026 marks a new chapter defined by a simplified corporate structure, improved disclosure and clear strategic focus. As we expand our footprint globally, we are laser-focused on execution, ensuring we deliver our immediate financial goals without sacrificing the balance between growth and margins. And with that, I'll turn the call over to Chris.

Christopher Cruz, CFO

Thanks, Taylor. 2025 was another record year for Shift4 across all financial metrics underpinned by strong execution, integration, capital allocation, and continuing to achieve scale diversification, both geographically and across multiple verticals in the experience economy. We delivered record results with full year gross revenue of $4.18 billion, above the high end of the range we provided last quarter, volume of $209 billion, again, near the high end of last quarter's guided range. Blended spreads came in at 61 basis points, exceeding our guidance of above 60 basis points. Gross revenue less network fees, or GRLNF, of $1.98 billion, representing 46% growth year-over-year. Adjusted EBITDA of $970 million, representing 43% growth year-over-year at a 49% margin, and adjusted free cash flow of $500 million, which exceeded our guided adjusted free cash flow conversion range by 150 basis points. Now let's move on to our quarterly performance and then shift to 2026 guidance and close with our capital allocation framework. For fourth quarter results, gross revenue increased 34% year-over-year to $1.189 billion. Volumes grew 23% year-over-year to $59 billion towards the higher end of the guidance range. Q4 volume mix was influenced by a few enterprise go-lives with strong seasonal volumes. Blended spreads came in at 57 basis points, influenced by the aforementioned few enterprise go-lives. This enterprise volume outperformance has an inverse mix shift impact on our blended spreads. That said, our full year 2025 blended spreads delivered in line with our previously communicated guidance of greater than 60 basis points, and we anticipate blended spreads to continue above 60 basis points for the full year in 2026 as well. GRLNF grew 51% to $610 million, which was towards the lower end of our guidance range as the aforementioned outperformance in enterprise did not offset the continuation of Q3's same-store sales trends, particularly amongst SMBs in the Americas region, which were further impacted by late Q4 weather events. Going forward, we will disaggregate our revenue into three categories: first, payments base revenue reported on a gross basis, so it's noteworthy to back out network fees to arrive at the relative contribution to GRLNF; second, tax-free shopping revenue; and third, subscription and other revenue. We have consciously chosen to report these three disaggregated revenue categories in order to let investors focus on our North Star growth in payments-based revenue and clearly break out the tax-free shopping revenue for transparency as investors acclimate to the performance of this line of business. Adjusted EBITDA grew 48% to $304 million, delivering a 50% margin. Non-GAAP EPS came in at $1.60. Our adjusted free cash flow in the quarter was a record $171 million, representing year-over-year growth of 28% and free cash flow conversion from adjusted EBITDA of 56%. As of year-end, our net leverage pro forma for the full year effect of Global Blue was 3.4x and includes the effects of our November activity of repaying the 2025 convertible notes, issuing incremental euro-denominated senior notes under our existing 2033 indenture, and repricing our term loan generating 50 basis points of run rate savings. Our leverage guidance remains unchanged with a view that the business should not exceed $3 to $3.25 net leverage on a sustained basis. Now, for full year 2026, we are introducing the following guidance ranges: Volume of $240 billion to $260 billion, representing 15% to 24% year-over-year growth. We are anticipating stable spreads in 2026, remaining above 60 basis points for the full year. GRLNF range of $2.5 billion to $2.6 billion, representing 26% to 31% year-over-year growth. To help model our trajectory to 2026, we are introducing a growth algorithm bridge, providing further transparency on the disaggregated GRLNF growth categories. As mentioned, we're reporting disaggregated revenue across three categories: payments-based revenue, tax-free shopping, and subscription and other. Within our payments-based revenue less network fees, we think it's noteworthy to appreciate the difference between our two geographic regions: first, the Americas; and second, the worldwide region, excluding Americas. For the Americas market, this is our most mature region where all of our market-leading experience economy commerce solutions are present, and there will be minimal impact from prior year M&A annualization in 2026. In this region, we expect payments-based revenue less network fees to deliver mid-teens percentage growth, which is more than 3x the baseline growth of the comparable market. The worldwide region, excluding the Americas, is our faster-growing market where multiple high-growth themes exist, such as: bringing our market-leading solutions proven in the competitive Americas market into the region; disrupting a largely unintegrated bank-distributed card-present market with our proven bundled value proposition; and benefiting from our excess capital allocation through acquisitions of Global Blue and Smartpay, providing both attractive business attributes and serving as the infrastructure accelerant for deploying our solutions into this region. In this region, we expect high 20% growth. On tax-free shopping, we expect mid-single-digit pro forma growth. We are cautious going into 2026 with a few headwinds that include a weakening outlook on the U.S. dollar relative to the euro, albeit with diverging views across major banks, as well as cross-border travel tension in Asia. Additionally, it's noteworthy that the business delivered low double-digit growth last year on the high end of its medium-term outlook range disclosed when Global Blue was an independent public company. Thus, it is growing over a strong comparable period. On subscription and other, we expect low single-digit growth with quarterly fluctuations as we anticipate less impact from applying our strategies against acquisitions than in prior years, while continuing to prioritize growth in our core payments-based revenue. Summing these parts builds to our guidance range of $2.5 billion to $2.6 billion in GRLNF. We are guiding an adjusted EBITDA range of $1.165 billion to $1.215 billion, representing 20% to 25% year-over-year growth and margins of approximately 47%. We are introducing a non-GAAP EPS guidance range of $5.50 to $5.70. Our EPS range assumes an effective tax rate of 26%. We are guiding adjusted free cash flow of $490 million to $510 million. We anticipate free cash flow conversion to moderate in 2026, averaging approximately 42% as a result of three factors: first, the annualization of interest expense; second, lower interest income due to relative cash balances; and third, Global Blue-related impacts such as integration investments and the impact of Global Blue seasonality on year-over-year results, given the timing of the close in the second half of '25. If you isolate the incremental flow-through of adjusted free cash flow, the implied conversion is expected to be 59%. This guidance includes the close of Bambora, as we expect it to take place in the next couple of days. Now for Q1 quarterly guidance. For the upcoming first quarter of 2026, we are introducing guidance as follows: GRLNF of $548 million, adjusted EBITDA of $233 million, and adjusted free cash flow of $70 million. Additionally, gross revenue for the quarter is expected to be $1.05 billion. Our shareholder letter materials provide a detailed bridge on these various components to our guidance to help you model these specific impacts. Consistent with our commentary in Q3 earnings, as we looked at our capital allocation options in Q4, we found the most attractive risk-adjusted return was repurchasing our own stock. Between Q4 and year-to-date Q1, we have repurchased 7.7 million shares and now have a remaining $500 million against the $1 billion share repurchase authorization recently announced. In light of the current market environment and the continued opportunity it presents for share repurchases, we think it more appropriate to base the previously stated goal of $1 billion of exit rate Q4 2027 adjusted free cash flow on a per share basis through the lens of a long-term owner of the business. Lastly, on capital allocation. As mentioned, we repurchased a total of 7.7 million shares, of which 4.3 million shares were repurchased during the fourth quarter and the remaining 3.4 million shares were repurchased during Q1 of this year. We have $500 million remaining under our existing authorization. As a reminder, we allocate capital on a comparative assessment basis of our four priorities: customer acquisition, product investment, acquisitions, and share repurchases. We've utilized buybacks recently due to the clear relative value. While our valuation remains attractive, we are mindful of the associated relative value balance and net leverage ratios. Our focus in 2026 will be to continue employing our balanced approach to capital allocation using this relative framework. This quarter, we want to provide investors with insights into our capital efficiency. In our view, the textbook financial formula for value creation is driving sustainable positive spread of return on invested capital, or ROIC, greater than weighted average cost of capital, or WACC. A couple of key takeaways from this: first, we have a historical track record of value creation. Throughout 2023 and 2024, our ROIC averaged approximately 13%, consistently exceeding the midpoint of our WACC range by 300 to 400 basis points. This demonstrates that our historical acquisition strategy has been accretive not just to the top line, but to shareholder value. All of this while deepening our durable competitive advantages, scaling and diversifying the business as a whole. Second takeaway, we have been able to maintain this value creation spread across the investment cycle. Even in historical periods of invested capital expansions in our history, we have maintained a positive ROIC over WACC spread and expect this to continue. Our track record shows that we have been here before and experienced the integration phase of an investment, with ROIC experiencing short-term dilution followed by very high incremental returns. Now before turning the call back to Taylor, I want to sincerely thank our fellow shareholders, the broader management team, and especially the finance organization for supporting a seamless transition. I'm energized by the momentum we've built and look forward to the year ahead. And with that, let me now turn the call back to Taylor.

Taylor Lauber, CEO

Thanks, Chris. With that, operator, we're ready for questions.

Operator, Operator

Our first question will come from Darrin Peller with Wolfe Research.

Darrin Peller, Analyst

Let me just first start with a question on guidance, and then I'm going to shift to a question on free cash, if that's okay, as a follow-up. But just on guidance. When we look at the outlook you're giving now, and I understand, Chris, you probably tried to build an element of safety and conservatism given the macro uncertainty. So maybe just touch on how you built it up? What the organic assumptions were embedded in it for overall organic revenue growth rates? And how we should think about the potential cross-sell integration in there for the year ahead of us?

Christopher Cruz, CFO

Yes. Thanks for that, Darrin. So to kind of unpack the pieces, I think one of the things that we definitely wanted to provide some visibility into is the GRLNF growth algorithm. To give a sense for how some of the parts in our three disaggregated revenue categories are expected to behave in the year in the 2026 guide. And so to look at that piece within the bridge in the materials is probably a place I'll reference and cite everyone toward. Within that, you can see that you've got the payments-based revenue piece, split out between kind of the new disaggregation of giving visibility into our two geographic regions of Americas versus the worldwide ex Americas. Then we give our tax-free shopping, which is obviously a new disaggregated revenue disclosure that we'll be providing and give that on a pro forma basis. It's expecting to be on the mid-single-digit and then, of course, sub and other. But maybe the incremental piece that you're asking within what's inside of these guidance points might be a bit more related to some of the macro that you're asking about. Did I hear that within your question?

Darrin Peller, Analyst

Well, I'm trying to understand really if you think you've built in a layer of effectively conservatism around macro or even your own bottoms-up assumptions, just given the results last year have been a little challenging versus your prior guide. I'm curious to hear where you build that in? And then again, I understand your subsegments, but as a company-wide, I think we're coming to about a low to mid-teens organic revenue growth rate. I'm curious if that's about right?

Christopher Cruz, CFO

Yes. So when I think about what is inside of the guide, obviously, you're right to point out that last year had a little bit of a volatile macro backdrop and maybe more specifically within the world of same-store sales in the Americas, so inside of the payments-based revenue piece. And then within sales in stores, which is kind of the equivalent of the volume metric in the tax-free shopping, both had exhibited volatility. But the one that probably you're hinting at is the volatility that was the result of the Triple S, mainly in the Americas, amongst SMBs, for example, within restaurants, lodging, and retail. Within that, I think what we're looking at in the start of the year is really a tale of kind of like two halves. In the first half of the year, we're anticipating that there's a continuation of the kind of exit rate trends that we were seeing within the Triple S. That seems to be holding up, because even though we had what looks like a little bit of a continuation of softer trends in January, February was looking strong, but you have to offset some of that with weather events. But I think in total, you end up with a place that says, that's the first half of the year, assume similar trends to what you were seeing coming out of the end of the year. Then in the back half, an assumption is that there will be an anniversary over some softer comps, and you see some positive rebound. Overall, though, I think the outlook for the year is a fairly neutral view, which is admittedly a couple of points lower, like low single-digit points lower than what might have existed in years past as we were laying out kind of Triple S impact within an overall outlook for the year. Then I'll take the other opportunity to just say that one of the other variables that we're sort of trying to get our heads around is the concept of the FX variable and how that impacts the tax-free shopping business. I think we alluded to it a couple of times that the outlook on a weakening USD relative to the euro, although has maybe a benefit on financial translation, it has a more negative benefit on demand. So within tax-free shopping. So if there is a continued sort of weakening within USD relative to expectations against the euro, which right now, there are pretty divergent views, even amongst the major banks as to what that weakening looks like. To the extent that, that is a headwind relative to expectations and you could have some pressures there, but we're anticipating what sort of in the consensus.

Darrin Peller, Analyst

I have a quick follow-up regarding free cash. If I understand correctly, the variations in interest expense and income due to the combination of buybacks and available cash for interest income, along with integration costs, are resulting in free cash being relatively stable. Could you help quantify those factors? Additionally, is there any information on chip or memory costs that could potentially affect our free cash guidance this year? I want to ensure we are still on track for the exit rate of '27 to align with the $1 billion range you previously indicated.

Christopher Cruz, CFO

Thank you, Darrin. Let me break it down into three parts. First, we aimed to quantify the components that contribute to the variance in free cash flow. We provided materials that include a bridge page illustrating the year-over-year outlook and guidance for free cash flow. On this bridge page, you can see the effects of the various components, with the largest being the annualization of our capital structure and interest expense. The second largest factor is a reduction in year-over-year interest income, influenced by changes in our cash balances. For instance, in Q2, our cash balance was unusually high at $3 billion as we prepared for the Global Blue transaction. These two factors are the most significant in the bridge, and we also addressed integration and investment expenses related to Global Blue. It's worth noting that if we exclude interest expenses and integration costs, the flow-through of adjusted free cash flow is still high, around a 59% to 60% conversion rate. I encourage everyone to refer to the bridge for further details. As for the second part of your question about free cash flow, could you please repeat that?

Darrin Peller, Analyst

It was just whether chips, higher memory costs are impacting...

Christopher Cruz, CFO

Yes, thanks for that. So from our perspective, even though we are seeing sort of the back end of inflation and maybe trade-related activity start to abate within some of these cost components, there are still other factors separate and away from that, that might be impacting hardware costs, specifically within the supply chain of how payment devices are manufactured and the competitive landscape of that within payment terminals and devices. But for the most part, within our free cash flow and within our P&L, we're not anticipating a material change such that anything was noteworthy to call out as it relates to those types of costs. A component that might be different than what you might hear from others is just that within how we manage inventory policy, how we flow that all through within our P&L versus our cash flow, those variances and differences from others exist might be some of the explanation as to why we're not seeing it in the same way others are.

Operator, Operator

Our next question comes from Dan Dolev with Mizuho.

Dan Dolev, Analyst

Great job here. Really appreciate it. Chris, I know you were asked before about the assumptions for 2026. But can you maybe just elaborate a little deeper on the exact macro assumptions and how you kind of frame the low end and the high end of the guide when it comes to your macro assumptions? I think that would be really helpful. And great job.

Christopher Cruz, CFO

Yes, sure. Thanks for that, Dan. If I were to categorize the macro environment into three parts, I would focus on the impact of Triple S, particularly in our Americas region, which primarily affects small to medium-sized businesses such as restaurants, hotels, and retail. Secondly, there’s the foreign exchange component that affects the tax-free shopping revenue line. The third aspect is related to geopolitical tensions that impact tax-free shopping in some markets. Regarding Triple S, we expected a relatively neutral year, with performance potentially falling low single digits compared to previous trends in the macro environment, which is a notable difference. This variable certainly influences our projected range. Additionally, we've observed some weather-related volatility in Q4 and most recently in February, all of which contributes to Triple S. As for foreign exchange, while approximately a quarter of our revenue comes from non-U.S. dollar sources, a weaker U.S. dollar is generally viewed as beneficial for financial translation. However, it poses a greater challenge for tax-free shopping demand. A weaker U.S. dollar against the euro, for instance, would likely result in decreased demand for tax-free shopping between those markets, which we are closely monitoring. There is considerable divergence in bank forecasts regarding the USD-euro exchange rate currently. Lastly, I should mention that inflation appears to have a less significant impact on our P&L volatility, and we expect this variable to remain fairly benign.

Operator, Operator

Our next question will come from Timothy Chiodo with UBS.

Timothy Chiodo, Analyst

I want to see if we could dig in a little bit to the fiscal 2026 guide around the spread staying relatively stable and that 60 bps or potentially slightly higher range. I'm assuming that some of that is related to dynamic currency conversion, which I gather has been going well. I want to see if you could talk a little bit about that assumption in terms of supporting the spread and maybe any of the contributions from either Smartpay or we already have with the Global Blue acquiring business and those spreads. Maybe there's some mix shift factors as well, but really just any of the underlying drivers of the spread staying stable, at least on an overall fiscal year basis? And then a quick follow-up.

Taylor Lauber, CEO

Yes, sure, Tim. I'll hit the first part of that and then Chris can layer on. Q4 was slightly anomalous in terms of how spreads represented themselves. If you recall, even back to our last call, we were relatively cautious on the same-store sales volatility we were seeing, particularly in SMB and particularly in restaurants. Those are our highest spread categories from a merchant perspective. Offsetting that was some really nice volume from the enterprise activation. Volume performing okay with spread a little lower than expected. That's somewhat anomalous. Especially as you hear how kind Chris is forecasting the business, it's kind of a muted view on the same-store sales progress in all those categories throughout the rest of the year. That's one thing that Q4 is slightly anomalous. At the year ahead, I think forecasting a more normalized trend even on kind of these lower same-store sales comps that we're seeing is one thing. Separately, you've heard us talk about this as well, but the real early success we're seeing in Global Blue and really just our international expansion more broadly is in that SMB space where you do expect to earn towards the higher end of your spread averages. It's not to say we're forecasting a decline in enterprise or anything like that. The reality is, though, when you enter these new markets, the quickest merchants to adopt your solution are at the lower end, and the medium and large merchants come in over the course of the year to two years ahead. We tried to illustrate this in our materials. We have 80,000 merchants outside the U.S. The vast majority of those are SMBs, which generate a higher spread. So I think the spread mix is going to be somewhat predictable largely because we're forecasting kind of the average quality of our merchants to be pretty predictable through the year ahead.

Christopher Cruz, CFO

Yes, I can add to that, Tim. A good way to approach the blended spread figure of 57 basis points starting from Q4 is to normalize for three enterprise merchants. Doing so provides a blended spread of over 60 basis points. The activities affecting this have primarily been seasonal, including an unexpected large volume allocation from a competitor. These seasonal fluctuations combined with positive surprises led to a Q4 spread that was slightly below 60 basis points. However, when forecasting the business considering all aspects and the slight shift towards SMBs mentioned by Taylor, we can guide that blended spreads will remain stable above 60.

Timothy Chiodo, Analyst

Excellent. So it sounds like DCC might not be too large of a component there, but a quick follow-up on DCC. Last quarter you gave a really helpful disclosure in terms of the contribution to net payments revenue from DCC. Is it fair to assume that in Q4, there was directionally in that same ballpark? I believe last quarter, it was around $11.5 million.

Christopher Cruz, CFO

I wanted to mention that when we discuss the blended spreads across the product, I want to clarify that it does include a positive contribution from FX-based spread revenues, like DCC and similar products. There is certainly a benefit associated with this. So, you're right to identify it as a positive factor. This has been a significant advantage of acquiring a business like Global Blue, as it has given us the capability and expertise in-house, which enhances our value proposition and the offerings for merchants. I just wanted to make that clear from the start.

Taylor Lauber, CEO

Yes, that's what I was getting at, particularly in terms of the U.S. cross-sell. So it sounds like a good opportunity.

Operator, Operator

Our next question will come from Will Nance of Goldman Sachs.

William Nance, Analyst

I wanted to circle back on the free cash flow and come back to the bridge that you guys provided. So I think we get most of the moving pieces around interest expense and cash balances. Could you speak to the $30 million of integration and investment spending? How long do you expect that spend to persist? And if we think about the flow-through of free cash flow kind of excluding some of these items being at 60%, is it possible we could be north of 60% into 2027 as the integration spend winds down?

David Lauber, CEO

Yes. I'll break down, not necessarily in whole dollar terms, but a significant portion of that $30 million is what I would consider in-year integration expense one time. There is a portion where we anticipate building sales teams. As you know, when we build sales teams in different geographies around the world, they don't pay for themselves in the first year; they take kind of 1 to 2 years to pay for themselves. So I don't think a significant portion of that line would be recurring, but all of the line would be paying for itself to the extent we hit our sales objectives. This is something we challenge ourselves on pretty constantly. Will, you know probably better than most that our preference is to deploy capital and buy small payments organizations that have a proven track record of selling in one geography or another, and we've executed against that pretty successfully in places like Germany and the U.K. We anticipate launching in 15 countries with our all-in-one payment product, and it's just impractical to assume that you can find that many interesting M&A opportunities across those countries. So the forecast skews a little bit more towards an organic build instead of what we probably prefer. It takes a little longer, and it costs you, to your point, this capital upfront. But in the absence of finding a great sales team locally that we can partner with or we can buy, we won't ignore the opportunity simply because it requires some fixed cost.

Christopher Cruz, CFO

Yes. And Will, maybe just to add, in terms of where you might see some of that line show up within the financials is actually in the form of probably the CAC and the EUL lines within the cash flow statement, or you'll probably end up seeing some of that. The reason for that is that we expect that when we're newer in a market we'd like to be more aggressive around some of the incentivization as you kind of 'prime the pump' in entering the market with a differentiated totally new offering, and you want to get potential partners very excited to work with us and embrace the value proposition. So that's just a little bit of extra color on that.

Operator, Operator

Our next question will come from Dominic Ball with Rothschild & Co Redburn.

Dominic Ball, Analyst

It's very clear regarding the guidance. As we look past this quarter, many investors are eager to understand what successful integration with Global Blue will look like moving forward. It's not easy to gauge from the outside. Global Blue is essential to Shift4's equity story. Could you provide more insight into what the internal process looks like, any key metrics, and when you anticipate beginning discussions with Global Blue retail merchants regarding cross-selling opportunities?

David Lauber, CEO

Thank you for the question. I want to emphasize that we are already in motion. We have merchants operating in several countries and are working to expand further. Our goal is to be active in 15 countries, targeting businesses that Global Blue is currently engaged with, but where we lack a payment solution. To measure our success internally, we aim to onboard several thousand merchants in the latter half of this year, primarily smaller ones. The core of your inquiry is significant because, unlike traditional metrics based on volume that investors often focus on, we do not prioritize that for cross-selling. Global Blue's customer portfolio includes high-end brands, such as LVMH, which account for a substantial volume, but also a lengthy list of small and medium-sized businesses (SMBs). For example, consider a hypothetical small business in Bellagio, Italy, that represents a significant portion of our customer base. These clients will benefit from our unique product that integrates various services into a single terminal, providing exceptional eligibility detection similar to top-tier offerings seen in Paris. This product is being launched rapidly and we are investing in local sales teams across Europe. You can see this reflected in our job postings for sales representatives focused on this product throughout the continent. Historically, Global Blue was underprepared to engage this long tail of SMBs, so we are developing that sales force. We have a strategy where our dedicated Shift4 team works in local Global Blue offices to enhance our capabilities. Once they establish a base of around 100 merchants, they transition responsibility to the regional manager. We're already observing positive results in certain countries, and our aim is to replicate this in 15 countries. We are concentrating on the number of merchants rather than volume. We understand what successful payment businesses can achieve on a merchant basis in Europe, and we are confident that onboarding several thousand merchants monthly is achievable, especially with our target of 70,000 potential Global Blue customers. We are encouraged by our internal advancements. Additionally, we are also working on cross-selling our DCC services to our U.S. customer base, but in Europe, our focus is on SMBs. The all-in-one terminal we offer replaces traditional bank terminals and provides enhanced features and functionalities to increase TFS adoption. When merchants see the value of this product, they tend to adopt it quickly. We anticipate a balanced mix of new wins and the cross-selling of existing Global Blue customers due to these efforts.

Dominic Ball, Analyst

Yes, that's great to hear. And just one more, if that's okay. I mean the future growth of Shift4, as you mentioned, seems very much more international, but a good minority of your existing stock, shall we say, are still in the U.S. and SMBs. A lot of your direct peers in the restaurant space are stepping up when it comes to the direct sales force. It seems like you're now, as you mentioned, rebranding SkyTab as well. Would you follow your peers in terms of a larger direct sales force or more rely on the more traditional Shift4 route when it comes to gateway M&A-driven growth, et cetera?

David Lauber, CEO

It's a great question. We have been scaling our sales force, our direct sales force, but in a pretty deliberate and measured way. We have a higher bar for capital allocation around the SMB space, especially in our more mature markets than our peers. The idea of chasing them is not a good example. Our Head of Marketing was challenging me around the SkyTab brand and what we could do to elevate it. I was very candid with him, to say, if we look at what our peers spend on sales and marketing, we're not going to come close to that. The Shift4 brand is a much larger, much more powerful, much more visible one. Why should we have two different products when we could leverage the Shift4 brand and our presence in many tens of thousands of restaurants that we're already in? It's a relatively simplistic move to simplify the product names to lead the part, but I think it will have some meaningful value. We have a very, very disciplined approach to customer acquisition cost. We spend far less than our peers, and this still helps us. It's a good step to gain incremental progress. We are adding direct salespeople to the tune that you mentioned, but with the capital discipline that I think really differentiates us, we will not chase the capital curve around customer acquisition costs that we see some of our peers doing. Yes, we will still grow nicely.

Operator, Operator

Our next question will come from Dan Perlin with RBC Capital Markets.

Daniel Perlin, Analyst

I wanted to just touch on maybe the backlog for a second. I think you're implying like $32 billion embedded in the guide, that's down a bit from the $35 billion last quarter. And so the question really is just have we reached a point now where the burn rate is greater than maybe the net new signings? I know last quarter you installed $6 billion and you signed $6 billion. So just trying to kind of work through that framework a little bit?

David Lauber, CEO

Yes. It's still kind of a relatively new disclosure for us as we think about the backlog. It's a relatively new form of measurement for us. I would say it shouldn't be that much of a surprise for a slight step down when you consider the other comments made by Chris that we experienced more enterprise volume in the quarter than we necessarily expected. There are chunky enterprises, whether it be Alterra, Ikon Pass, which is a multibillion-dollar opportunity and a handful of others. We didn't view this as a change in kind of our relative progress. Keep in mind, most of our SMB opportunity never hits that backlog. But we did see a little bit of, I would call it, enterprise volume that was faster than we anticipated in Q4.

Daniel Perlin, Analyst

Yes, that totally puts. Kind of staying on that same vein, if you think about the end-to-end volume guide, it's a pretty reasonable band that you guys put out for 15% to 24%. It sounds like this year it's totally more towards SMB versus maybe some of the enterprise that we've seen in the past. The question is really just how does that impact the visibility that you might have in terms of forecasting that line item? Or does that not really matter?

Christopher Cruz, CFO

Just to clarify that one, Dan, when you say you're referring to the Americas versus the worldwide when you talk about when you set those two numbers?

Daniel Perlin, Analyst

I was really talking about total end-to-end volume, kind of total volume that you guys are calling out $240 billion to $260 billion. It sounded like in the way you guys were describing maybe that book of business as you're thinking about it, it sounds like tilting a little more towards SMB this year as opposed to more enterprise maybe in the years past. I'm just wondering if that increases or makes it harder to forecast that line.

David Lauber, CEO

Well, indulge me why we kind of travel around the world, because there are nuances to this. In the Americas, our SMB forecasts are pretty reliable. This is a 28-year-old business. Our SMB presence has never dwindled. The change that you saw in the business over the last few years is that enterprise was entering the mix for the first time, and the relative contribution of enterprise has matured. Again, talking about just the Americas for a second, it's a relatively mature business. Our SMB progress is quite easy to predict. In the enterprise, to your point, longer lead time, better visibility. The mix of SMB to enterprise is more mature there. Now, when you go outside of the U.S., the SKU is heavily skewed toward SMB. This isn't because we're strategically limited. This is the reality that SMBs make decisions quickly, same day. The higher you go up in the spectrum, the longer they take to make decisions. If you follow our shareholder letters over the course of the past couple of years, we only just began internationally a couple of years ago, a lot of SMB-oriented wins are just starting to play through in this year, but again, still heavily skewed towards SMBs. There's one area of guesswork; it is how many SMB merchants can we add internationally over the course of the year. We are anticipating an acceleration there. But to give you a sense for how we predict it, we have a pretty wide swath of data. We act as a payment service provider for large PSPs. So we know what SMB production can look like in good, bad, and different scenarios throughout Europe. We believe several thousand merchants a month is a very achievable result on top of kind of the 1,000-plus that we've been executing on relatively recently. I would say yes, you're believing that we can execute against that cross-sell plan and that build-out of that sales force. But the numbers that we have are quite grounded and reasonable.

Operator, Operator

Thank you. This concludes our Q&A session and also brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Thank you.