Shift4 Payments, Inc. (FOUR) Earnings Call Transcript & Summary

Good afternoon, everybody. This is Matt O'Neill from Goldman Sachs' Financial Services Conference. I'm very pleased to be able to introduce and host Jared Isaacman and team from Shift4 Payments. So Jared, I believe we just passed the 6-month mark of Shift4 being a public company. So first and foremost, congrats on that. Despite that, and a couple of secondary sense, I think it still may be helpful for the group. Let me start with a brief summary of the company. And Jared, if you wouldn't mind giving us a little background on yourself, what's now Shift4 Payments has been one of your primary passions since you were just 16, I believe.

Yes. So I mean, I'll get the -- my personal background out of the way fast. This is pretty much what I've done my entire adult and teenage life. So the company was founded in my parent's basement 21-plus years ago. And obviously, it's been an incredible journey since. Big culmination, ring the bell at the New York Stock Exchange, as you said, 6 months ago. So to tell a little bit of a story about Shift4. The payments landscape is obviously in this great transition right now. And a lot of the names that everyone would have been familiar with 10 or 15 years ago are being replaced by names like Square and Shopify and Clover and Toast and such. As merchants seek out more value than simply providing an approval or decline on a credit card transaction, but are looking for an entirely vertically integrated technology suite that does more than just payments. Now if you were to look at the spectrum in a Square, for example, might live here on the extreme end of simplicity in commerce, Shift4 lives on the other end in the extreme end of complexity. So our customers rely on multiple different software applications to drive commerce at their establishment. So our type of customers would be like Pebble Beach or Mandarin Oriental or Hilton or Hyatt or UPS stores. These are businesses like Caesars Palace, for example, 30 different software applications are powering the hotel, the restaurant, the golf course, the salon and spa. And they all have to be networked together and integrated. So you can have tokenization and analytics across the entire estate. You can have certainly credit card authorization services, value-added solutions like QR code and contactless and pay-at-table and such, all coming back to a central point of reconciliation and settlement. So we specifically live where there is no one-size-fits-all software. A Square can't be a ski resort in a hotel and a golf course all in one and such. So that's typically where we approach the market. And we are in a fortunate position where there's really only 3 payment platforms that have the technical capabilities and software integrations to kind of address these verticals we aim to conquer. And ultimately, to give you a sense of size of the organization, there's some 200,000 businesses in North America that rely on Shift4 payment technology. And in 2019, that represented about $200 billion in payment volume.

Yes. Thanks so much for that background on you and on the company. Understanding that a lot of your end market concentration still today lies in both restaurants and increasingly larger hospitality, casino-type merchants. 2020 with the pandemic has been a particularly hard year on those end markets. It'd be great if you could discuss with some more detail, some of the technology that Shift4 has made quickly available and deploy it to both restaurants, hotels, et cetera, to help them address changing landscape and things that come to mind that I'm aware of and I think a lot of the investors in the group have started to peel back the onion on things like your SkyTab offering or your QR code capability. And in general, if you could just kind of address the shift, particularly at restaurants, to contactless that you guys have observed as people have started to come back, either in-store or hybrid tech solutions, whether it's order online and pickup or fulfillment or whatnot?

Yes. I mean -- so first, our customers are very much impacted. There's been a lot of enthusiasm around the Shift4 story because of the growth profile of the business. Every month this year with the exception of April and May, we grew our end-to-end payment volume, which is our #1 KPI year-over-year, including October at 28%. That is certainly not because our customers are somehow immune to the reality of this pandemic. We do have a lot of hotels. They're probably -- depending on whether they're in the city or in a suburban area, anywhere from 60%, in some cases, maybe 20% of normal, and it's not a great place to be. And we have a lot of restaurants as well, and they're probably on average, number around 70% of normal. So the volume growth we've been able to achieve is largely because of the share we've been taking in the market, which our value proposition does revolve around eliminating a lot of layers of complexity to deliver a lower effective cost of service. Merchants will migrate into that at a pretty accelerated rate prior to COVID. That's certainly a value proposition that is especially relevant during the most difficult times. And how we kind of solve for those multiple layers of complexity and deliver more value is that single vendor solution is by providing technology and other capabilities to solve real pain points for the business, which goes right to your question of QR codes, contactless payment options, things like SkyTab. And in many cases, and we were lucky, we developed these technologies long before COVID and what we did is work very fast to push out enhancements to it. So QR codes, for example, we built out QR code payments and QR code ordering capability more than 6 years ago as a pre-Apple Pay collaboration partner. Now QR codes were different then. You actually had to download an app on your phone in order to complete the experience. Today, all the smartphones, the camera has the embedded technology to it. So we had to do a little bit of a tweak, but then we were able to push out QR code acceptance to literally like tens of thousands of merchants by just hitting a button. And we provided that service at no cost in order to grow that #1 KPI, which is end-to-end volume. But in the case of those handheld devices you're referring to, SkyTab, that was originally built as a pay-at-table, order-at-table product, which was long overdue in the U.S. market. Obviously, during a pandemic, there is no in-venue commerce, that's not a very useful product. So we remotely pushed out an update that enabled curbside delivery and takeout options. And we saw like a 300%-plus increase in the product, moving it from a pay-at-table type solution that was already pretty successful to one that was more accommodating to just the COVID realities. So those are just a couple of examples, but we did push out a lot of updates in order to help our customers and obviously grow the business at the same time.

Yes. That's very helpful. Along those lines, soon after the pandemic, you guys and teams set up Shift4Cares.com, which is pretty unique in the industry, frankly. There's not too many other players that I'm aware of that are providing that kind of weekly transaction data by sort of the subsectors that you guys are uniquely exposed to in restaurants and hotels and sort of the other industries where you do business and help merchants. As we look at that data, given the recent kind of resurgence in COVID, both restaurants and hotel transactions have ticked down a little bit relative to the somewhat stable kind of July through November time frame. I'm curious if these results remain roughly in line with your overall expectations for the company. And then secondly, and somewhat curiously, in the other category, if you will, there was a recent uptick at least in kind of like the last week's data. And I was curious if there something to explain that if it was kind of holiday seasonal related or if there's -- maybe that was just a blip on the radar alternatively.

Yes. There's a lot of good questions there. So first, as you mentioned, we put up Shift4Cares.com, and started refreshing that volume regularly well before we were a public company, to draw attention to the challenges that the food, bev and hospitality industry were suffering. It is very important, especially as investors look at it that the data that you might see, which is coming from the gateway is really -- does not really translate like 1 for 1 or close to it in terms of the financial performance of the business. Because remember, there's $200 billion-ish of volume that goes across our rails, less than like 15%, 16% of it is end-to-end volume, which is 80% of our EBITDA. So you can have the broader gateway fluctuate as we saw throughout the summer. Las Vegas, obviously, was not firing in all cylinders. Well, that's largely gateway business, not really contributing to the far more impactful and end business. So even though gateway volume may fluctuate again, it may have a lot less to do with end-to-end volume. Now all that said, are we seeing a little bit of a pullback in some of the hospitality and restaurant spend going into November and December? This was anticipated, if anyone looked at the Q4 guidance raise we provided. There was certainly an indication in there that we were baking in some seasonal slowdown. Even just COVID aside, as long as there was capacity restrictions on restaurants, you're not going to be able to eat outdoors in colder weather climate, even if virus cases weren't going up. The country gets blanketed by snow, you're going to have an impact there. So we tried to take a little bit of that into account. I certainly think you're seeing a factor of cold. And certainly, consumer confidence being less than what it was before cases were rising. Now in terms of the other volume. We're very much known for our hospitality and restaurant exposure, but as I've been educating our investors. We live wherever there is a multi-software environment designed establishment. Whenever there's a degree of complexity into commerce enablement, And that lives in the specialty retail, too. So we have 5,500 UPS stores. We also have all of their e-commerce business. As you can imagine, we're going into a time where shipping is definitely picking up with holiday shopping and such. So I think a fair amount of that uptick you would have seen in the other camp is probably attributed to our specialty retail business, probably even a decent amount from UPS stores.

Got it. That's very helpful, especially to sort of disaggregate the gateway from the end-to-end, understanding that we're looking at the sort of all-in volumes, which obviously gateway represent a large percentage of at the moment. So sort of beyond that data, you've enjoyed kind of continued success converting gateway customers to end-to-end, and that's certainly helped drive growth in end-to-end volumes, particularly when, again, some of the end markets have been experiencing challenges with COVID in restaurants and hotels. You've alluded to this already in our chat as far as taking the complex and making it more simple. I've heard you previously kind of make the analogy to why a consumer would prefer an iPhone versus a discrete cellphone MP3 player and camera is a good analogy as to why a gateway-only customer would be fairly easily persuaded to become an end-to-end customer. Would you mind just kind of elaborating on that premise that you've laid out before and kind of help us understand what it is, that's the biggest pain point that now that you've married together the end-to-end capability with the gateway customers? What you can solve for them and why they're most attracted to that?

Yes. It's interesting in one of the investor conversations we had earlier today, just somebody posed the question of like why do you even have a gateway product? He's like Clover doesn't have a gateway. Toast doesn't have a gateway. Square doesn't have a gateway. Shopify doesn't have a gateway. That's because the actual product in itself predated our acquisitions of those businesses. There was no iPhone at the time those customers and the $200 billion in payment volume they represent, there was no iPhone at the time they signed up to that gateway service. So what we did is recognize the trend towards vertically-integrated technology platforms to deliver value in order to win over payments customers. And just like prior to Shopify, you had businesses where there's 1 vendor who's in -- who designs websites. And then you go to like, I don't know, GoDaddy to have the domain and the hosting. And then you used an authorized net payment gateway to get to first data or something. Well, Well, that's all been collapsed down into just Shopify, right? That's the trend where I think a lot of merchants are migrating towards. We recognize that trend was inevitable in the complex end of commerce, especially in food, bev and hospitality. It's why we went out and acquired the 2 gateways that we did and narrowed the landscape down to really just 3 companies that are capable of addressing these verticals now in terms of new customer sign-ups. Of course, no one's going to the separate phone and separate camera and have the separate mp3 player. Almost all of our sign-ups are going to be essentially the iPhone service, which is our full stack and end offering. That said, we still have over the last 20-some-odd years, a very large quantity of customers that didn't know that existed at the time they signed up. And that's why 50% of our production in any given month is one of those customers leaving the multi-device solution to come to the iPhone. And in doing so, they're going to get a lower effective cost of service. There's just that many less mouths to feed. You're going to get the one throat to choke from a service and support perspective. And we're probably going to shower you with a lot of incentives and inducements and other technology solutions along the way in order to make that journey.

Got it. That's helpful. I guess, along those lines, it's been the better part of, I think, just under 3 years now since you acquired the first of the 2 gateways. Can you give us a little understanding of the kind of the cadence of the conversion? So did they come out of the gate super strong right after you acquired Shift4? Or was it more of a kind of a slow burn? And is there anything new to report with respect to the pace of the conversions? The ones who have yet to convert their desire to still convert or is it just really an awareness campaign? And if I might ask, if there's a merchant that's been offered the conversion opportunity and hasn't yet converted. What keeps somebody on the fence or potentially keeps them from moving forward with what seems like otherwise a fairly simplistic vendor consolidation, simplification of your tech stack and what was more complex to something that's less complex?

Yes. So there's a lot that obviously goes into that. I think we've got a handful of questions there. So first, for the last 3 years, 50% of our production in any given month is going to be a completely net new win. So that's 7,000 software partners, leveraging the software integrations that are already connected to our platform and winning business we didn't have any relation to. So that's a Hard Rock, Virgin Hotels, Wind Creek Resorts, [ Greater Stay-in ] is a good example. So that's 50% of our production. And for the last 3 years, 50% of our production has been gateway migrations. So there's nothing that's changed about it. We pick off a ton of low-hanging fruit in the first 6 months, and now we're just squeezing whatever else we can get out of it. The challenge is for as compelling as a value proposition is, making sure we are putting some sort of an incentive or there is some problem that we aim to solve that happens to be a priority for the organization at the moment. The last 6 months, it's been contactless QR-based payments. The 6 months prior to that, it was pay-at-table, order-at-table when people were concerned about operational efficiencies of their business. Six months prior to that, it was probably EMV readers. And the issue is that the pain point you're solving at the moment is something that the merchant already invested in, even if it was at far greater cost than what we're making the solution available to, it's just no longer a priority for them. So I mean, geez, there's probably 10,000 merchants on our gateway that just bought EMV or chip readers prior to the acquisition of the platform. right? Now that doesn't mean they're not moving to our end-to-end platform. I can -- we think that it's -- the entire need of the base is totally addressable. It just means that's no longer an organizational priority for them at that moment in time. So now we're waiting for some sort of a hardware or a software refresh cycle. But I can tell you like there's no example of a merchant who's on our end-to-end platform saying, "Hey, I want to go back to the old way. I'd rather have 5 people on a conference call when I'm trying to implement online ordering or some business intelligence product like." Those words have never been spoken. We've never lost an enterprise and notable customer under our watch or under our ownership period of the payment platforms. And I do want to emphasize, what is like a massive incumbency advantage it is. We have 1/3 of the hospitality and restaurant market in this country is dependent on some form of Shift4's payment technology, but only a very small portion of it is end-to-end. So when the rest of those customers are out there looking to solve that problem. And if it is QR codes or it is contactless, the easy button is always going to be Shift4. Especially in a pandemic, no one is going to go out and do a brand rip and replace it by payment architecture at a hotel or a restaurant. Like, it's hard enough to get around with traveling with such restrictions. So the fact that we're already there and it's more than a foot in the door, makes us the obvious choice when it comes time to solve that pain point. And when they're ready to do that, there's a very good chance we're going to -- we're going to get the end-to-end processing services at the same time.

That's really helpful. Yes. And I think it's often lost on people. The 50% coming from new production. So it's not just this balance of organic growth plus gateway conversion, but you're getting this new production vis-a-vis the Raiders' Stadium and other examples. So I think that sort of helps fill out the legs of the growth stool a lot better. Digging into the conversions, I think it's often hard for us in the investment community to understand how bringing together the 350-plus software integrations that you guys have plus your internally-developed solutions as a key differentiator. Can you help elaborate on that for us? And maybe, specifically, why some of the largest industry players and the incumbents out there can't necessarily replicate what you guys have despite their relative scale?

Yes. Taylor, do you want to take one? Or...

Yes. Sure. So it does start with those software integrations. And while the gateways were relatively new in the company's history, as you mentioned, we acquired the Shift4 gateway at the end of 2017, recognizing the importance that software plays in a merchant's decision-making is not a new phenomena at all. And in fact, it was one of the first -- we're one of the first companies in payments history to recognize very early on in the mid-2000s that software is, quite frankly, going to be a major decision maker for merchants into the future and that payments is starting to look pretty commoditized. And so what we've done over the past sort of decade or more is think about ways that you can get closer to that software decision and the payments decision. And how can you extract that payments revenue as a result of that? And the reason that we are in the position we are with the number of software integrations we have is because they largely started 30-some-odd years ago as whether it was the Shift4 payment gateway, the merchant payment gateway were being built. They recognized the need to incorporate this software integration into their payment flow and get analytics from it, knot in security layers, et cetera. And as those businesses evolve, all the software that they adopted evolved alongside of the gateways. And so the reason that you find the incumbency factor you do is because while I'm sure a lot of large-scale payment players would say, I'd love to be able to support that hotel, that's a Shift4 customer today. The reality is it would involve recreating software integrations that go back a decade or more. And not just in any one particular vertical. It might be as esoteric as like parking garage software version X and retail store software version Y. And so having that library means you can win like the largest set of opportunities in the hospitality space, and it also creates like a virtuous circle because when a new software entrant comes into the marketplace, they call Shift4 and they say, "I want to be able to sell into your customers. I want to sell into that hotel. I'd like an integration." And it means we don't have to obsess over what the next piece of software is going to be. They're usually calling us.

And maybe just to highlight because we get the question a lot of why can't a Square do what you guys do? And why can't JPMorgan or Global Payments, Worldpay do it and it's -- recognizing these are all part of large organizations. I think you have to appreciate, again, these trends towards these vertically integrated technology platforms, and they are just not easy to replicate. It's almost like asking a similar question of, why can't Global Payments be Square? Why can't Worldpay be Stripe or Shopify? And it's like I think that every organization understands the need to migrate towards an integrated payments offering. And the question is, are you going to burn a lot of energy and resources trying to replicate something that's been invested in for years or potentially, decades prior and try and come from a very distant second or third place? Or are you going to prioritize your efforts to an area that still has opportunity? And you have JPMorgan buying InstaMed. You have Global Payments has purchased a number of ISVs. I think Fiserv has a fantastic strategy with Clover. It's very underappreciated in the market. Those are areas where they do have opportunity and ability to continue to win share versus trying to chase down and replicate an impossible number of software integrations over many, many version histories, as Taylor described.

Yes. That's really helpful. I was going to try to move the discussion. I know you guys, I'm sure, since the time of the IPO right through now, I feel that kind of nothing but COVID-related questions and probably nothing but kind of gateway to end-to-end conversion-related questions. So in an attempt to steer away from that for a little bit. I was curious about the "other industries" that you serve. And really digging into how does shift for who maybe isn't quite necessarily a household name yet, at least wasn't to my wife when the IPO happened, but we'll forgive her. But when you move into a Raiders' Stadium or a UPS store, you've talked about taking the complexities out and helping. But how does a merchant like that come to be aware of a Shift4 in the case of UPS, for example? And If they're a large merchant, an RFP in their business, is it still a very short list of potential players that can provide that solution that they're ultimately looking for? And just high level, kind of how do you win these nontraditional end market-type merchants?

Yes. So I think, again, it's important to realize where we live is where there's multiple different software applications. That's what's driving complexity. And ultimately, the necessity for a solution like Shift4 is able to provide. So we all just think of hospitality because it's really easy in a resort environment. I mean, that's why we made it part of the videos on our website. You've got a golf course. You've get a salon spa. You've got a hotel. You've got a restaurant and retail. Like all totally different, perfect example, but you can move outside hospitality and find these multi software-type environments. So we're actually in a number of universities. And we're doing the bookstore and we're doing the cafeteria and even some of the universities actually have their own hotel on campus. You're in a multi-software environment. So then Shift4 is back into the equation. We're in like a surprising number of hospitals. And we're doing a lot of gift shop, and we're also doing the cafeteria. And then you have examples of specialty retail and UPS store and such. So what brings you in there besides just this natural multi-software environment, which should lend -- which should tilt things in your direction, is they're largely using software that is already integrating into our platform. So to give you an example, and I probably overuse this bunch with our investors, so sorry, but it's easy to follow. Caesars Palace, the Forum Shops, largely uses Microsoft Dynamics 365 software, which means it's integrated to Shift4. Well, when Microsoft approached the UPS Store opportunity, they were going to leverage an integration that already works, and the fact that we're able to deliver a solution that involves 4 or less vendors essentially derisk their proposal to UPS Stores. And that wasn't RFP driven at all, that was just we were there and connected. And then since then, they've actually brought us into other opportunities outside of hospitality and even outside of specialty retail. The same would be applicable for the hospitals. The same is applicable for the university. There's most likely some piece of software in that environment that is already integrated in Shift4 and maybe it found its way into our universe via hospitality, but it has brought us into these adjacencies and actually entirely in a couple of verticals. Raiders' Stadium, using Oracle's software that you would find in Caesars Palace and you wouldn't find in a number of other hospitality environments. But interesting enough, once you're there and you kind of have the high ground, you bring in all the other integrations. And then those take you into new markets. So VenueNext, for example, is the ISV that was not integrated to Shift4 until about 6 months ago, maybe 9 months ago. They make software for in-suite ordering and in-seat ordering in a sports and entertainment environment. Now they had to integrate to us. I mean, it's a great relationship [indiscernible]. But they did have to integrate into us because we have the broader Raiders' Stadium opportunity. But now we can follow them into a number of other stadiums, and we probably have some interesting announcements that will come along the way. And there's a lot of other examples of that. And that's how we wind up in these -- that's how we expand our reach well beyond just hospitality and restaurants.

No, that makes a lot of sense. Those are some great examples, university, hospitals, et cetera. That's very helpful. What I wanted to do next, I know we're getting close to time here, and there's a couple of good questions in the queue as well. The sort of fourth growth vector I want to focus on. So you got COVID recovery, hopefully. We've got the gateway to end-to-end conversion. We've got moving into adjacent verticals and new merchants. And then finally, of course, and then you guys have certainly been no stranger to this, very recently, has been M&A. And so you most recently acquired 3dcart. I think this is clearly a move outside of the obvious kind of lines that you've been swimming in prior. From our perspective, it makes a ton of sense because you're getting into card-but-not-present environment, where yields are historically a little bit higher. You're in a sector that's got arguably better secular growth than many brick-and-mortar channels. And you have the ability to now convert roughly the 15,000 merchants that were on that platform prior and presumably, any new ones that it's attracting over time directly to Shift4. So I was hoping that we could kind of talk about, first and foremost, that I appropriately kind of quantify the virtues of that acquisition. And then secondly, and this sort of ties into the recent secondary, but specifically, the convertible note that you guys just did. What's in the M&A kind of pipeline? And more importantly, kind of where are the guiding principles and strategy behind it? Because I think prior to 3dcart, not that, that was necessarily a household name either, but that wouldn't have been right off the top of people's list when just thinking of what Shift4 is known for up to that point?

Yes. So a lot of questions there. So I'm going to kind of try and take it in the order of finding assets that are maybe unexpected, underappreciated, off the radar a little bit. What are the qualities we look for in order to drive the desired outcome from those deals? And then where are we going now that we have like nearly $1 billion of dry powder available to us. So first, it shouldn't be surprising at all that we find opportunities that are a little bit under the radar and underappreciated. In the last 5 years, we've done 7 acquisitions. Every one of them is a proprietary deal. We've never won an auction. I think you guys stopped sending us sims rather recently. So we got to reignite that a little bit. But we tend to be very disciplined investors. We kind of had, as you know, prior to the IPO, with just our good private equity sponsor, we were carrying 6 turns of leverage. So we had to be very selective in our ability to identify these really interesting and synergy-rich opportunities, which takes us to what are we really after? We are looking for assets that can drive our #1 KPI, which is end-to-end payment volume. And we are very flexible on buying these businesses and pivoting their revenue model and unlocking synergies and probably some not immediately apparent ways in order to achieve our objectives. We announced, actually, 2 acquisitions in the last quarter. One of them, definitely a very sexy deal in 3dcart because it's obviously e-commerce, it's web store. It goes after a huge TAM. You're like you're in Shopify-type land, it's a great capability enhancement. The other deal, like no one even really asked us about, which is MICROS Retail Systems. It's the nation's largest service and support organization for Oracle MICROS products. I mean you know who their customers are, I mean, it's like PacSun and TAO, [indiscernible]. I mean, almost every notable restaurant and hospitality brand this country uses them from a service and support angle. Now think about as we change the revenue model in that business, and they have no technology to do this within at all. They don't have any payments running through their organization. But by transforming their revenue model a little bit, we can accelerate the adoption of our end-to-end platform from our gateway customers, not to mention identify a ton of opportunities from the other 2/3 of the restaurant and hospitality market that is not currently a customer of Shift4. So like incredible synergy-rich transaction, no one really would have ever looked in that direction, but it has an immense ability to move end-to-end payment volume, which, again, is our #1 KPI. So -- and I think if you look at some of our past acquisitions, the software ISVs and the gateways in every instance, we've dramatically shifted the revenue model in order to drive how we pay the bills for 21 years, which is end-to-end payment volumes. And then that really brings us to 3dcart. Well, not -- sorry, the next question on that, what are we going to do with all this money? But prior to that was 3dcart. 3dcart just got a ton of awesome synergies associated with it. We did capture a lot of them. It is a diversification play, but that's -- let's talk about that one last. It's an immense capability enhancement for starters. I mean we have 200,000 customers today, and we have no web e-commerce capability to offer them in the mid-market and the low level, we have some enterprise capabilities. So if those 200,000 customers represent $200 billion in volume that we know about that's on our rails, how much volume exists out there that we don't know about because they all have some sort of a web store e-commerce presence? And even if it's 5%, well, that's a $10 billion opportunity. And we're going to get after that. They have -- 3dcart has $2 billion of volume on their platform already. We can bring that over in a single shot at card-not-present integration versus the complexity we deal with on day-to-day gateway migrations. E-commerce web stores have no third-party distribution models whatsoever. If you look at Stripe and Square -- or sorry, you look at Shopify and Square and BigCommerce, Wix, it's all direct. We have 7,000 software partners engaging in e-commerce every day. They know e-commerce businesses. They've had no ability to tap into. And now we can bring those over to ship to our 3dcart platforms. Meanwhile, 3dcart has like 4,000 affiliates that are out there e-paying, our web designers and hosting companies, and we're going to incentivize them to bring over e-commerce business to us instead of Shopify. And we're going to do it all by like being very disruptive and wiping out the entire subscription and SaaS revenue model of this great business and monetize an entire leasing payments, which should be very disruptive to some of the big guys out there. So once we're done with our facelift and our user experience optimization and a bunch of other things we're accomplishing over the next few months. We're going to dump a bunch of gasoline on this because we can because we bought it for a really attractive price point. It's a very reasonable EBITDA multiple, and we're going to go after the big dog with it and have a nice underdog story. So a lot of attractive elements around that. And then last is, when you're sitting on $1 billion of cash, what do you intend to do with it? And the answer is we're going to create an awful lot of value in line with past acquisitions. And whether that means we're going to do one big transformational deal that gets everybody excited or we're going to do a lot of littles in line with past practices, which could be double downs within our existing verticals today. It could be expanding our reach into new geographies. It could be capability enhancements or moving into adjacent verticals. The enterprise pipe that Taylor's team has built out is super extensive. And we're not married to any one of them. And we really can't be because there's a million stacks running around out there, and we don't want to get bit up unnecessarily.

That makes a lot of sense. We've got a couple of really interesting ones in the Q&A. It could probably be done in a lightning around 1 minute, almost yes-or-no fashion. And then, I assure you guys, I'll let you go. A lot of your competitors have tie-ins and are starting to do other things. Examples would be payroll or working capital loans or things like that. Are those things that you guys are interested in endeavoring into? That's one. Question 2 would be around you've done a number of acquisitions, the desire/ability to actually consolidate the point-of-sale product into a single kind of modern code stack? And then, finally, the sort of internal strategic views on continued basically near, as I understand it, exclusive reliance on VARs and ISVs versus as you grow building more direct sales?

Okay. So The first one was...

Payroll and working capital, yes.

Payroll and capital. The second one was legacy code base. And the third one was our distribution model. Got it. So on the first one, I think it's important to understand what audience you're going after, right? So if you look at our customers, the average customer reporting to Shift4's platform does well north of $1 million a year in payment volume. And if you compare that against, like, say, Square, where the highest quality customer they board does like $250,000 in payment volume, we can appreciate that we are really living on 2 ends of the spectrum in terms of the complexity of our merchants and the quality in terms of the volume we offer. And that's important because the pain points we aim to solve are very different than theirs. Like Hyatt is never going to do a 100% APR capital program ever. And like Hilton or Mandarin Oriental or TAO or Pebble Beach. They're never going to throw away whoever they're using for payroll and HR and use one of our solutions. At the same respect, I guarantee you, you took our enterprise business intelligence and analytics product and dropped it on a Square food truck customer, it would be a support nightmare. So they wouldn't have a clue how to use it. So you got to really understand we're approaching it from different ends of the spectrum. We're all building out our vertically integrated technology platforms and the pain points we try and solve for our customers are going to be different than Square. You can love us both. It's not an either or. That's certainly the case. In terms of the legacy code base, this goes back to how disciplined we are in terms of our capital allocation strategy. Every business we've ever bought is on like a very reasonable EBITDA multiple basis. And on a fully synergized basis, like things we bought for like 10 or 12x or like 2 or 3x. And if you're doing that, you're unlocking a lot of value for somebody like, let's say, POSitouch, for example, no one would ever argue that POSitouch is a super cutting-edge restaurant software. I'd also say there's no other software out there that can ever displace us at Cheesecake Factory, which uses POSitouch. It's the most complicated menu in the world. I think we can all agree with that, right? So the point is, if you have 50,000 merchants and like a $50 billion payment opportunity, who cares if you have 20 people maintaining an old code base? Because it's going to pay for itself about 1,000 times over. Now that said, we have a responsibility to all our partners to ensure they can go out and win in the market 5 years from now as they did 15 years ago. And that means new investments in technology, and we do dedicate a reasonable budget towards research and development. We do have next-generation restaurant point-of-sale platforms. We do make those kind of investments, but there's no reason to hold on to these smaller, older legacy code bases when there's still so much volume or payment volume yet to yield, it would almost be shortsighted to get -- to start sweating like $2 million in OpEx over $100 million of gross profit potential that lives inside those assets, right? And then I think the sales point...

Sales and distribution.

Yes. So we are incredibly passionate about distributing through -- or going to market to economically-aligned and technically-integrated distribution partners. I think there is a misconception that ISVs and VARs all will become ISOs and that some of the struggles that businesses have had or some of our competitors may have had in the 2000s is entirely applicable to today's day and age. It's not like there are a lot of software companies that got into payments. There's a lot of payments companies that bought software companies, and have done a really lousy job marrying the 2. They'll talk about, well we got XYZ attach rate, but we're still growing our software business. The way you find success is when you marry the 2 solutions together. We embed our channel sales managers inside ISVs and VARs, so they can alter the value proposition of their software and be more competitive with an embedded payment offering. You're not approaching it as people in 2 different sides of the street. And considering the fact that we've unlocked in equal parts end-to-end volume from software assets we've built, software assets that we've acquired and software assets we've partnered, all contributing and performing equally well, I think, supports the idea that our model with ISVs and VARs is pretty successful versus some of the alternative direct-only methods out there. So anyway, not to mention it's tons of operating leverage. Can you imagine like if [ Talbooth ] has a printer that goes down on a Friday night or [indiscernible] or something like we have a partner that's aligned in every transaction we want to go there on a Friday night and fix whatever the problem is versus us trying to solve it remotely and probably creating a very frustrated merchant relationship.

Jared, Taylor, thank you guys so much. I understand I'm already nudging us over time here a little bit. Really appreciate all of your time and all the content here has been fantastic. Thanks, again.

Thank you.

Thank you.

Take care.

Bye, guys.