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

Hello, everyone. I'm Jason Kupferberg, the payments and IT services analyst here at Bank of America, continuing on with day 2 of our Electronic Payments Symposium. Very excited to have the leadership team of Shift4 here with us. We've got a 45-minute fireside chat scheduled with Chairman and CEO, Jared Isaacman. He is joined by Taylor Lauber, who is President and Chief Strategy Officer at Shift4. So we're going to run through a bunch of questions, but the audience definitely can submit other questions to me through our portal, if you so choose, and we can ask those questions on your behalf. So with that, we're going to get underway. And thanks, guys, for joining us. We appreciate it.

Yes. Thanks for having us.

Absolutely, absolutely. So I wanted to start just by kind of reflecting back on the Analyst Day in November. You guys outlined some pretty attractive financial targets, 30% plus CAGR for net revenue growth and 50% plus CAGR for end-to-end payment volume growth through 2024. That's a lot higher than the goals that you would set at the time of the IPO just a couple of years ago. So maybe unpack what is driving the acceleration there and kind of how you feel about the visibility because that's a question we get a lot from investors.

Yes, sure. Really good questions. Thanks for pointing out that we've largely surpassed the expectations we said at the time or even just prior to the IPO during our testing the waters, which was even prior to the pandemic, right? I think for really, I'd say, almost 17 years of our 22 years in history, we were predominantly focused on just restaurants. We graduated from just being able to serve the Irish pub on the corner all the way up to some of the largest, most recognizable brands within that vertical. And going into the IPO, we had just begun really to execute on our gateway strategy, which would take us into numerous additional verticals, so hotels and lodgings, specialty retail. So -- and prior to that IPO, we were growing payment volume at 50% year-over-year for several years. In fact, in January and February, just prior to the pandemic beginning in 2020, we've grown payment volumes 55% year-over-year. But since the IPO, we moved into a number of new verticals. So as I mentioned, we've been growing and lodging very, very quickly. We broke it out in our Investor Day recently and again in our fourth quarter earnings to just see how fast that growth is taking place. We've grown in specialty retail now. I mean, good examples are UPS Stores. But actually, if you look at our just quarterly earnings materials, you'll see a number of retailers. We've expanded into sports and entertainment. So we consider ourselves a category leader in that space. There's over 100 sports and entertainment venues now using our software and payments. At the time of our IPO, there was one. We've moved into gaming with BetMGM. We've moved into travel and leisure with Allegiant Airlines. We moved into nonprofits with St. Jude Children's Research Hospital. We moved into eCommerce with SpaceX. So a lot of this is fantastic because you've expanded your TAM and you're ripe to win in a number of verticals, but it's all happened so quickly and we kind of felt obligated at Investor Day to just reset expectations with our investors saying, "Look, this is all that's happened from the time of the IPO -- from the IPO till now. We have a right to win in all these new verticals, and we should set new expectations in terms of the growth associated with it." Now what do you have to believe in terms of achievability? Well, one that not a lot has changed even prior to the IPO since that was kind of our growth rate in our core. You've expanded since into a number of other verticals with a real technological right to win, all anchored by signature merchants that add credibility within that space. And then you've now expanded your reach into new markets through the Finaro acquisition that basically take all of our products and capabilities and integrations that make us special in the U.S. and expand that reach into all these new markets right now largely following a signature customer, which is Starlink. So your high-growth core probably got you most of the way towards that mid-term outlook. And in fact, that's largely what it was delivering prior to the IPO. Now you we can choose your own adventure of how much credit you want to give to any one of these new verticals that we have a lot of traction with, how much of our $180 billion of captive volume on our gateway you want to give us credit for moving over at a more accelerated pace over the next couple of years, and how much international expansion and massive customers like Starlink you want to attribute as well. And the answer is going to be that you largely don't have to give credit to very much of those, knowing what you have in high-growth core and gateway conversion to get to arrive at a comfortable place with that midterm outlook.

And is that midterm outlook purely organic? Or does it assume some modest amount of M&A over time?

So the actual volume like the financial KPIs that go into it are all organic. In fact, I mean, up until this Finaro acquisition, which we haven't closed on, we've never done an acquisition in recent history that contributed our top KPI, which is end-to-end payment volume. So typically, we're buying a capability that either accelerates our growth in our current verticals, gives us a right to win in new verticals that we think are ripe with opportunity are now in the case of expanding our reach into new markets. Now it is absolutely -- like we are absolutely going to deploy capital inorganically in order to achieve our strategic objectives like being able to power Starlink across the world because it's a global customer. And in doing so, that will bring all our other products and integrations into those markets. Whatever EBITDA or volume you're buying along the way is kind of just gravy in that equation. The actual midterm outlook is based on what we think is a reasonably conservative organic growth.

Okay. Okay. Yes, no, that's helpful to understand. So you mentioned briefly about gateway conversions. And clearly, converting that gateway-only volume to end-to-end remains an important part of the Shift4 growth story. So maybe for folks who might be a little bit less familiar with the story, just explain briefly how those conversions work, how much runway is left there? I think if I recall correctly at Analyst Day, you said there's still about $170 billion of addressable volume there. So let's talk about that a little bit.

Well, maybe just give a little bit of history on why there even are gateways for starters because that I think that kind of explains a little bit about how this incredible opportunity came to be. So if you go back on 50 years when the original backbone credit card networks were established, it was all like -- all very simple technology. Either the credit card is approved or declined. And maybe every now and then a voice authorization, and that was it. And it was mostly built around retail transactions. You're going to Macy's or something for that case. Now when the '90s came about, you started to have all these new requirements from industries that did not traditionally take credit cards as a form of payments like education, for example, or like transportation, whether you're going on like a subway or you're driving under an easy pass or how about an industry that didn't even exist at all which is buying things on the Internet with eCommerce. And what happened is these new markets or these new industries, they had unique requirements to it. So in the case of eCommerce, it was, well, let's make sure somebody who claims to be in Virginia but their IP address is in Malaysia doesn't buy this digital camera or this television set. The original credit card backbones were not equipped for that. They just said approved or declined. So what the -- what happened is a whole new layer of technology was established in front of the payment platforms, and they were to solve for all these use cases. So like one great example is Authorize.net. It's now owned by Visa. Authorize.net said, "Look, we'll integrate all these shopping cards. We will whitelist IP addresses. We'll make sure somebody who's ordering something and claims to be in Virginia is actually there and not in Malaysia or some other part of the world, for example." And what they did was they would charge a very small fee, and they would basically power the majority of the commerce transaction. They were adding to value in terms of fraud or shopping card integration and such. And then they would output the transactions to those backbones. Well, this came to be in health care and transportation and in our case in kind of the most demanding portion of the commerce spectrum, which is hospitality, specialty retail and kind of complex restaurants. Now what's so special about this environment? Why isn't it just an approval or a decline? Well, if you can imagine, you're going on a vacation to a resort, you're making a reservation online. That's a card-not-present transaction. You're showing up, you're linking your credit card at the check-in desk. It's now a card-present transaction. You're now going to the lobby bar, the restaurant, the salon, the spa, the golf course. You're continuing to charge transactions back to your room. That original sale or that original authorization continues to be altered until you eventually leave, and you have a single charge on your credit card despite all the various interactions you have with the resort. That requires incremental authorization. So 4 gateways were established to meet that requirement: Shift4; Fusebox, which is part of Elavon; Merchant Link; and FreedomPay. And we acquired 2 of those in the case of Shift4 and Merchant Link. Now once you built out the technology to solve the requirement for those merchants, it attracted hundreds of software companies that were building software to sell in that environment of hotel software, reservation software, golf course software, retail software, right? And the payment platforms, the backbone said, "This is fine." When a customer came to them in a hotel and said, "I want to take payments." They say, "Well, just go to one of these 4 gateways." Now we saw this as a lot of opportunity because it is utterly impossible to replicate the 425 different software integrations that integrate into these platforms in order to meet the unique requirements of these industries. And these software integrations attracted customers. And those customers brought volume, which at one point, the gateway platforms we acquired it's over $200 billion in volume except these gateways are actually being very unfairly compensated considering they're driving the entirety of the commerce experience, basically making pennies per transaction, what are the acquirers and the backbones behind them captured the lion's share of the payment economics. And we acquired these gateways and over the last 5 years, have been incentivizing customers on the gateway to move to our end-to-end platform. And in doing so, it's taking out a lot of parts for the customer. They've one throat to choke, one hand to shake. We're able to provide incentives like QR codes and online ordering and business intelligence and analytics, all sorts of incentives that we make available at little or no cost as an inducement to move away from their legacy backbone provider, their legacy provider to end-to-end. In doing so, it's about a 4 to 5x lift in our annual gross profit, and the customer is actually saving money along the way. Now with over $200 billion in volume, it's probably about $170 billion as like -- $180 billion or so as of a quarter or so ago, moving those customers over to end-to-end represents 50% of our production. The other 50% of our production is just leveraging those same integrations to win net new resorts and hotels and specialty retailers that were never on our platform at all but want to take advantage of our value proposition. So this is like unlike any other payments company where you have such a massive opportunity in volume that's already captive on your rails that really can't go anywhere else, you're providing all the tokenization, the encryption. You're driving that commerce experience. And essentially, it's just an inevitability as they move over to our end-to-end platform. So it's very, very easy to quantify the impact of that opportunity. It's actually -- it works so well, which is really what involved in us to move into all these other verticals that we thought were still ripe for that integrated payments opportunity, knowing what we refer to as our high-growth core is really safe and on a good steady state of conversion.

Okay. So would it be -- so when we think about -- well, actually, let me -- before I go there, let me ask you another question regarding financial targets from the Analyst Day. I know there wasn't specific discussion around profitability targets. The business is already highly profitable last year. Adjusted EBITDA margins were around 32%. This year, you're guiding to around mid-30s, call it. So I guess how would you -- against the backdrop of the significant top line growth that you're forecasting over the next few years, how would you directionally encourage investors to think about the margin trajectory of the business here over the next couple of years, recognizing that there's obviously a lot of growth opportunities for Shift4 to continue investing in?

Yes, sure. So I think it is an important distinction we made in the Investor Day. The core business, that high growth or we talked about certainly contributes incremental margins in excess of 40%, the flow-throughs trade up that business. And as that continues to grow, that's sort of the profile you can expect. What I did -- what we did think important to caution investors on is that we see so much opportunity in these new verticals that we are going to invest in them. And so you should not think of every incremental dollar as flowing through perfectly as we see these opportunities to invest in all the verticals Jared mentioned. It will just moderate the pace of margin expansion across the entirety of the business. I think last year is a pretty good demonstration. We were able to expand margins pretty meaningfully, several hundred basis points year-over-year despite that investment. But what we didn't want to have is investors saying, "Okay, should I be looking for a 40% target, 42% target?" Quite frankly, when we see this kind of opportunity ahead of us, we're willing to compromise on a couple of hundred basis points of margin in order to go pursue it. It doesn't change the fundamentals of the underlying business. It's just the reality that when you see this, you really want to lean forward and invest into it when you can.

Yes. Yes. Okay. No, that definitely makes sense. I did have a question coming in from the audience, which I'll ask you guys. If you can just talk a little bit about your tech stack on the back end. We hear a lot of conversation obviously in the market around how there are some "legacy" players in merchant acquiring and processing that don't have a modern single instance type of stack? And can you give us a characterization of what Shift4's tech stack looks like? And is there further modernization of that to be done over time? How would you characterize it?

Yes. First, I mean, we've -- we fielded a number of questions, especially over the last 5 months as investors were trying to figure out really who's winning and who's losing in the market, who has legacy tech, who's actually growing and taking share. Look, it all comes down to volume growth. To be really clear, we grew payment volume nearly 100% in the fourth quarter. We grew payment volume double digits during the pandemic in 2020 when the majority of our customers were hotels and restaurants. Now I say all this because there is no merchant, there's no business in 2020 during a pandemic or 2021 or 2022 for that matter, that is going to switch from one lousy tech platform through another. Like they're moving because they're solving problems. They are desperately trying to deliver a better commerce experience for their customers clearly. In 2020, it was how do I reengage with my customers so they feel safe? Is it online ordering? Is it takeout and delivery? I mean, we enabled, I don't know, 25,000 or so of our handheld devices that we -- our software was designed for pay-at-the-table. Order at the table, pay-at-the-table. Nobody was going into restaurants to pay at the table in 2020. We took them all into takeout and delivery solutions, and we pushed that out over the cloud, right? And we ended up driving more volume to those handhelds during the pandemic in 2020 than we did in the year prior when they were purely a pay-at-the-table type solutions. QR codes. We were able to remotely push out QR paying and QR ordering during the pandemic to tens of thousands of our customers. Hotels were switching during the pandemic from whether it was Elavon or FreedomPay or legacy acquirer to Shift4. They weren't doing that to save basis points. Nobody is switching any more to save basis points, but that was 10, 15 years ago. Like right now, if you're going to Shopify, you don't care if it's 7 basis points more than Global Payments. If you're going to Square, you don't care if it's 10 basis points more than Fiserv or FIS, but you're making that migration because you believe it's a better solution for your customers and helps you engage in commerce with them better, right? That story is no different with Shift4. Believe me, you're not driving the 100% volume growth because we have all this legacy tech stack, and every one of the customers switching our solutions is an idiot right now. Now where we often get dinged is if you look at those 425 integrations we have, right? Like you look at somebody that's like, wow, there's an Agilysys version from 2007. There's a Springer-Miller version of property management system from 2012, perfect. We'll take all of them, but that's a large portion of commerce. Not every single merchant in this country is on the 2021 version of some piece of software, right? And our customers who use 10 different types of software. If you went skiing this past winter, I guarantee you went to a Shift4 customer because virtually every ski resort in this country is our customer. They have like 15 different types of software, including ski rental software. And that ski rental software is probably not like the latest version of it, which is great because it probably only works on us, which is probably why every ski resort in the country uses Shift4, for example. So the customers we appeal to are on the most demanding end of the commerce spectrum. It's half of Las Vegas strip. They are never going to download one piece of software on an iPad like a Square or like a PayPal that's on a more simplistic end of commerce and power everything. They're going to use lots of different software. Some of that software is new. Some of the software is old. When those software companies make new software because it's not like they're ever going to capitulate in the market, they're certifying that new cloud software on Shift4, too. And this is exactly what gives us the right to win. It's why we're growing volume. And if you're concerned about legacy tech stack, it's usually the companies that stop disclosing volume growth that have a more dated platform.

Okay. When you reported earnings a few weeks ago, it sounded like the business was really seeing a nice kind of post-Omicron recovery. Presumably, that's been driven maybe more so by the restaurant vertical than hospitality. So maybe you can talk a bit about what you're seeing there and just kind of how that plays into your view of where Q1 should land?

Yes, sure. So it's pretty interesting. I think this winter season looked pretty similar to last year, a little bit more maybe exacerbated with Omicron because I think the impact of Omicron as compared to the second wave was a shorter period of time. But what we saw this past year was we saw record volumes coming into about the middle point of December and then a pretty pronounced decline off of that kind of record week in the middle of December. This was -- for many of you, I think you'd recall holiday parties being canceled, things like that as the variant took hold. That persisted until about the middle of February. And that's always been an inflection point in our business kind of virus aside, this is a point where you get out of kind of the holiday hangover. You start to have Valentine's Day. You started to have Super Bowl, a bunch of different occasions that get people out to restaurants and bars. We saw the same trend this year, although a much more pronounced snapback that week from the previous weeks. It was a record week as it was last year during the same week. Now interestingly, when we extrapolated out Valentine's Day week of 2021, it ended up being only about 1.4% of our volume for the year. So when you look at Valentine's Day week of 2022, and you kind of do the same math, you can get pretty excited about what the year looks like from a volume perspective. I think the points of caution we have are number one, March really defines Q1 in a meaningful way, and we're not yet through it. That's when travel first starts to pick up. It can often be 30% or more off of your February levels in March. So we're watching that quite closely. And then I think on the other end, the reasons to sort of be cautiously optimistic are around things like gas prices and what that does to the consumer and how long they stay where they are. So we're still reasonably cautious just given the recent variant and the impact that like a geopolitical level on consumers' pocket books. But all signs are reasonably encouraging for the first quarter.

Okay. Okay. Yes, I mean, I know the company doesn't have any direct exposure to Russia, Ukraine, but are you seeing like any noticeable kind of contagion effects, if you will, in terms of travel in other parts of the world that could have some kind of downstream implications for your hospitality business? Or is that just something you're kind of mindful could happen, but you haven't actually seen it yet?

It's a great question, and we challenge ourselves to think through it all the time. The reality is, in our life as a public company and really throughout our history, we haven't experienced international or business travel in a consequential way. I mean, to Jared's point, we didn't have a single hotel like 2.5 years ago. Now we're exiting '21 with it being about 20% of our end-to-end volume. I mean, that's the pace at which we're winning hotels. And so when we start to speculate on what happens when it normalizes, it's entirely speculation. Now it should be nothing but additive to our performance because we haven't had any of that. But I think it's too soon to tell when it recovers.

Yes, there's so many moving pieces right now to make it a little challenging, right? So if you look at this time period in 2021, you have a lot of stimulus funds out there. You also had a lot of exuberance just from really pent-up demand. That was the first...

Vaccines were kicking in, yes.

That was the first time people went out and really began reengaging in commerce. Now you know that like that, that stimulus boom, that pent-up demand, you're not going to be able to count on that every year at the same time. So you're going to say, "Well, it is going to get offset by business travel will resume, international travel will resume." Like you don't know the implications of this current -- like the current humanitarian crisis in Europe and how much that will spill over in some of the international travel. You...

I mean, yes, I think that's -- the gist of it is March is always going to be really strong off for February. The speculation comes in, how much more would it be, right? We're still seeing record weeks. We're still seeing record merchant adds. So there's no cause for concern, but I think you can't pick up a newspaper and not be concerned about the impact all these things have. And you can't not speculate that people would spend a little more on their night out, how this -- feeling more confident about a return to normalcy.

Yes. Yes, exactly. If it wasn't costing $5 or $6 a gallon to fill their car with gas, yes, for sure.

So it's like you're in it one way. Like, you're seeing record volume that you would have anticipated. You don't know like what the record really would have been one way or the other at this point because of the number of moving pieces you have. And the mix change that's happened within our portfolio over the last 2.5 years.

Yes. Yes. Yes, definitely some cross currents out there. So maybe let's just talk about the guidance for 2022. Specifically, end-to-end volume, $68 billion to $70 billion is the outlook here. So obviously, some really nice growth off the $47 billion we saw last year. And you guys had a nice slide in your earnings deck showing the bridge of how we get from 2021 to 2022. One of the pieces there was, I believe, $8 billion of incremental volume from new merchants. So just curious how much of that $8 billion is from merchants that you've already won versus merchants that are in your pipeline and you still need to sign? Any way to kind of get some visibility on that $8 billion?

Yes. Although I do think it's worth kind of giving a bit of a preamble like that guide was designed to be a little bit provocative. If only because we know we're in a highly skeptical market, we think that views towards our medium-term guidance are facing skepticism. And so we said, why don't we show you getting 1/3 of the way there? Even with some impact of things like Omicron in the first part of the year, let's show you what it takes to get 1/3 of the way to that guide. And I think the first and it's the most elemental is simply annualizing the merchants that joined us last year gets you $8 billion. So those are the ones that's very easy gorilla math to do. It's -- we know their contribution last year, and we know what the incremental volume we'll get as they're here a full year. So that's $8 billion. And then we say, let's assume our merchant boarding pace in the high-growth core continues at the pace it's been at, which we think is reasonable. We think there's always a healthy combination of kind of headwinds and tailwinds throughout a pandemic that compel merchants to join. It's the value prop is very durable in that regard. So let's assume another $8 billion is the partial year contribution of merchants who join your high-growth core: hotels, restaurants and specialty retail. And then the last 2 components of that are really what do we think recovery or same-store sales growth within our merchants is going to be. And again, I don't want to speculate too much, but we put a very modest below even inflation expectations same-store sales growth assumption of $3 billion across our book. And then we said, look, any combination of these 6 new verticals, and let's assume they contribute another $3 billion. And you're basically there. You're 1/3 of the way to that ambitious medium-term outlook. So said much more simply, it's kind of more of the same in the high-growth core. It doesn't assume a radical new adoption of a product. It doesn't assume an acceleration of gateway migration, which we've got a bunch of steps to work on. And it doesn't assume meaningful contribution from either a recovery of travel, business or international or net new verticals, although we do think those will happen.

Okay. So let's talk a little bit about M&A. You obviously had 2 deals to announce at the time of the latest earnings call. It seemed very consistent with the M&A approach you laid out at the Analyst Day. Maybe just take us through the strategic significance of the deals. And then I did want to ask a question about Finaro specifically, which I know was formerly known as Credorax. And I know there's been some media reports about some Russian ownership stake there. And maybe you can just kind of untangle and clarify some of that for us and whether there's anything that we should be aware of related to some of the recent sanctions that obviously have been levered against Russia?

Well, I'll start with that one, admittedly thorny in the current times. There was an individual that was actually sanctioned under the Trump administration, so several years ago, who had lent the business money. And we looked at Finaro extensively a year earlier. This is one of the list of things that we didn't feel entirely comfortable with, and we walked away at the time. We can talk more about that in a second. The way we gained comfort is we effectively said what condition to close is that this has to be resolved to the satisfaction of the U.S. government. So mechanically, it means that they approved the sale, and the money that this individual lent goes into a blocked account in the U.S. as with any kind of sanctioned situation. I will say that probably caused anyone else looking at the business some heartache. It definitely took a small army of lawyers thinking through the potential for it. Although as we thought through the scenarios, we said what's the likelihood that the U.S. government is insight-ed with in any of this legislation. And obviously, the most recent events in Russia have not caused sympathy for Russian oligarchs to rise around the world. So in a somewhat perverse way, it made us more comfortable with the situation that it will be resolved to the satisfaction of the U.S. government who'll put his funds in a blocked account.

Yes. I mean, just this is a non-event. So think PCAOB audits, they would have got IPO-ed in the fourth quarter if the market hadn't closed out, then this one like very minority shareholder/lender is like completely isolated with new organization. Funds will go into like a blocked account. We're completely indemnified against it. We're not going to have like an oligarch in our shareholder base when this deal closes 6 to 9 months from now. So like yes, that's a non-event. But it probably is an example of like, well, why are you so lucky to get a really strong eCommerce asset in Europe that's growing really fast right now. I think like a combination of the IPO markets closing them out in the fourth quarter and this kind of lender challenge is what affords us the opportunity to kind of reattack this deal after we signed Starlink. And that gave us the strategic rationale to sign it up. But like Finaro is a really impressively fast-growing business, is a financial institution in Europe. It absolutely delivers on what we stated at our Investor Day, which is the 5-year strategic agreement with Starlink that will really be the yellow brick road we'll follow for international expansion is more than enough rationale now to finally deploy some of the capital that we raised in order to build out our global platform. Now we spent $1 million on diligence on Finaro a year earlier. We knew the business really well. We had a couple of things we didn't like. We were able to go back and look at it again in the fourth quarter and see that like their growth surpassed our initial expectations at the time. They kind of professionalized their business development team. They got the PCAOB audits, which got us comfortable with the financial institution. And they isolated that one minority shareholder, which made us feel really good. Now the rationale, again, you're not -- you're buying this because you have a 5-year strategic agreement with a customer that could easily contribute $50 billion a year in payment volume over the next 5 years. But in doing so, now we can take our category-leading stadium sports and entertainment software that's growing really fast in the U.S. If you believe people all across the world will want to order a burger and a beer in their seats when they're at a stadium, then they're going to eventually adopt VenueNext software. And in doing so, we'd actually like to capture payments volume, which we otherwise couldn't until we had Finaro acquisition. We'll be able to take SkyTab POS, bring that into Europe. We'll be able to take all of our hotel and specialty retail integration and bring them to Europe. We'll be able to take our eCommerce platform, Shift4Shop entering Europe. And the Finaro platform, the technology is really strong. It's very modern. They refresh it every 3 years, and that will be the platform we'll look to for expanding all across the world because if we're going to solve the needs of a Starlink, and you're going to need to go in the Central and South America, you're going to need to go into Africa, you need to go in the Middle East and APAC, then Finaro is the optimal platform to do that. The Giving Block, that fields off our St. Jude win. So if you were to look at it at Investor Day, you could say, well, St. Jude is a big customer. It's a recognizable brand in nonprofits, exactly why should Shift4 win additional customers in the nonprofit space? Like probably pretty obvious that getting the largest donation in their history that probably was more than a foot in the door to talk about payments. Now what I'll tell you is like we have a real technical right to win in that space. The nonprofit community has the same challenges that hotels and resort do. They have lots of different software on a lot of different versions, and it doesn't really talk well with each other. Nonprofit communities, there's an opportunity to capture donations from people playing Fortnite or streaming on YouTube, they'll do it. And those will be separate donor management systems. So our platform is really good at making a lot of different software talk to each other with common analytics, have like more of a centralized CRM, if you will, security behind it, deliver better commerce experience. So the St. Jude win we announced at Investor Day gives us a lot of credibility in the space. It will give us a lot of software integrations that St. Jude uses, but so do a lot of other nonprofits across a $500 billion addressable market. Now you still would like to build on even more. You'd love more than just a marquee partner or a customer in the case of St. Jude. You'd like more than just the technical needs to integrate in the software, and that's what brought us The Giving Block because every nonprofit is going to want to take crypto. There's no question. Like it doesn't matter whether you believe it's going to -- you're on one end of the spectrum that believes crypto is going to change the world or not. If you're a nonprofit, all you care about is that people have it, it has value, and they want to do nice things and donate it. So if you can facilitate that transfer, it gives you one more reason to win within, again, a $500 billion addressable market. But if you even look to The Giving Block customers today that they are facilitating crypto transfers within, there's $50 billion of embedded traditional payment opportunity just from your existing base of customers. Not to mention, The Giving Block is growing really fast. It's very profitable. So letting it do its own thing is a great thing, raising awareness like we are right now with this largest crypto fundraising initiative ever that we kicked off. That just increases number of unique donors, number of nonprofits on the platform. All those KPIs actually move the needle within the organization. Like it can be a real EBITDA contributor just doing its own thing. Second, you have this cross-sell very similar to a gateway conversion within the $50 billion of embedded volume in the customer base. And now between technical right to win, signature customer in St. Jude and the crypto enablement capability, you have like the real means to pursue a $500 billion addressable market that -- it's super fragmented right now. So it's building on a great win that we announced at Investor Day. And I think it was said before, but I wouldn't be shocked if in the next couple of years, nonprofits probably are the third largest contributor of end-to-end volume to our platform.

Wow, that's a pretty interesting opportunity. So I guess if we look at the balance sheet post these 2 deals, I think pro forma, you said leverage would be kind of low to mid-3s, certainly, a very manageable level. But obviously, we are heading into a higher rate environment. So maybe you can just remind us your debt stack, what you have, fixed versus variable. And then just given where we are in the rate cycle, would we think of Shift4 maybe prioritizing some deleveraging before engaging in material M&A again?

Yes. So a few things. I think the majority of the debt we hold right now comes in the form of converts, both roughly $650 million in each, one at 0 coupon, the other at 50 basis points. So incredibly manageable from a servicing standpoint. We do have a handful of notes that -- it's roughly $450 million that are at 4.62. So that's the entirety of our debt stack. I will say in terms of interest coverage, the business generates free cash flow. So there's not a significant concern around those components. We do think that the highest and best use of the capital we have roughly $1 billion in cash after those 2 acquisitions is towards M&A. Although I will say that there were times over the last 3 months, 4 months that our stock hit levels that we thought we'd be challenged to buy an equal company at those multiples. So we earmarked a small portion of that. The Board authorized $100 million for buybacks, which are ongoing at the moment. But we see M&A as still the primary use of capital especially because we're deleveraging naturally. And then worth noting, both of those 2 acquisitions were EBITDA and cash flow positive as well. So they only add to the mix.

Right, right, right. Yes, yes. So the math definitely works in your favor there. So why don't we talk a little bit about the restaurant vertical? It was certainly a prominent topic at the Analyst Day. This is obviously a crowded space, but would love to just get your high-level perspective. And I know for some of the audience might be a little bit of a reiteration, but just really where you see the points of differentiation because in this day and age, investors are hearing about all kinds of different players that are some combination of software and payments in this vertical. So maybe you can kind of narrow it down in terms of who is Shift4 really competing with most frequently and, for that matter, not competing with where there might be some misperceptions out there?

Yes. I mean, we've been in the payments vertical for most of our existence, which is 22 years now. We've grown volume, revenue every year, year-over-year for 22 consecutive years. We put out a nice -- the 5-year CAGR on our growth within the restaurant space. So say it like we actually know the restaurant vertical really well. So I'll be really clear on this. There are 2 companies that are growing very quickly in the restaurant vertical. It's Toast and Shift4, and that's it to be really clear. Square and Clover are definitely at the bottom end of the spectrum-- those are not sit-down restaurants. That's not table service. We will not see Square and Clover at an Applebee's anytime soon. Those are more kind of your delis, your coffee shops. In terms of the bar and grill that you're going to go to on a Friday night to have a burger or a beer, it's either a Shift4 customer or a Toast customer. And that's totally fine. So we're -- it's not a winner-take-all environment at all. We go to market very differently. So Toast goes to market direct, which obviously had some advantages at time. But what happens is you reach a natural ceiling in the market. So what do I mean by that? If you look at some of our customers like a Tao or a Hakkasan, if a printer goes down on Friday night, somebody needs to be there to solve that problem, okay? So we go to market through economically aligned, technically integrated third-party distribution. We have massive coverage. It provides a lot of operating leverage. So these are sophisticated partners that understand the restaurant vertical. They can be there to program the menu. They can deal with all of the complexity when you add just numerous integration points, whether it's payroll or Uber Eats or DoorDash or Grubhub. So by having sophisticated distribution, we naturally kind of appeal to more of the upper half of the market, again, some of the more demanding customers. And because Toast goes to market with a more direct distribution strategy, they're kind of in the middle to the lower end. Now you can tend to figure this out based on what we call like sizzle features. So Toast has like Toast Capital, Toast Payroll, right? So like a big chain customer is never going to take like 100% APR money. And they're probably never going to convert off of like an ADP or payroll or some other HR system. So who does it appeal to? It appeals to smaller businesses where they don't have a lot of options for capital and one size fits all for payroll is good. Our seasoned products are more mobile-based, pay-at-table, order-at-table, free online ordering, analytics, security products. That's what your kind of higher-end customers are typically gravitating towards, and that's really the restaurant vertical. Now we're in a lot of hotels. We have property management system integrations because about 40% of hotels in this country use some form of our payment technology. And Toast would say they're not kind of moving in that direction. We just made a big move going international with Finaro. You can bet we'll probably take our product over into Europe, where there is no Toast. We tend to own more links in the value chain because we are a payments company whereas Toast would use a Worldpay. But they're a great product. They're growing very fast in their end of the spectrum. I think when investors are kind of sizing up the landscape, keep in mind, Global Payments bought Heartland, which for probably 15 years, had the lion's share of the restaurant market. And it was all nonintegrated. Just kind of dumb VeriFone or Ingenico terminal. So when you're seeing all the great growth that's coming out of Toast, you're seeing the growth come out of us and it's like, well, will one prevail? It's like, actually, we both can do fine because there is such a large market of restaurant customers using less sophisticated, nonintegrated terminals, even cash registers at time that we both can grow quite a bit into it. Yes.

All right. Great. Well, we're right at time here. This was great. We covered a lot of ground. Really appreciate the time, Jared and Taylor. Thank you guys for spending some time with us this morning. And thanks to everyone in the audience who listened in.

Thank you.

Thanks, Jason.

Take care. Thank you.