Good morning and welcome to today's Shift4 Fourth Quarter 2021 Earnings Call. My name is Bailey, and I will be the moderator fir today's call. All lines will be muted during the presentation portion of the call with an opportunity for question-and-answer at the end. [Operator instructions] I would now like to pass the conference over to Tom McCrohan, Head of Investor Relations. Tom, please go ahead.

Thank you, operator and good morning everyone. I'd like to welcome everyone to Shift4's earnings conference call for the year ended December 31st, 2021. Before we begin, I'd like to remind everyone that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact, should be considered forward-looking statements, including statements regarding management's plans, strategies, goals, and objectives; the expected impact of COVID-19 on our business and industry, including with respect to economic recovery, increases in vaccination rates, the reopening of the country, and any volume recovery by us; gateway penetration and spend seen by our gateway merchants; expectations regarding new customers, acquisitions, and other transactions including Finaro and The Giving Block; and anticipated financial performance including our financial outlook for the year ended December 31st, 2022; and the anticipated impact of each of the Finaro and The Giving Block acquisitions on our adjusted EBITDA and end-to-end payment volumes for the year ended December 31st, 2023. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results. Performance or achievements expressed or implied by the forward-looking statements, factors discussed in the Risk Factors section of our annual report on Form 10-K for the year ended December 31st, 2021, and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made on this call. Any such forward-looking statements represent management's estimates as of the date of this call. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. In addition, we may also reference certain non-GAAP measures on this call, including adjusted EBITDA, free cash flow, and adjusted free cash flow, which are reconciled to the nearest GAAP measures in the company's earnings release, which can be found on our Investor Relations website at investors.shift4.com. And with that, let me turn the call over to our Chief Executive, Jared Isaacman.

Thank you, Tom and good morning to everyone joining us. We have a quite a bit to talk about today, but first, I'd be remiss if I didn't bring up the conflict that's ongoing in Ukraine right now and just say that all of our thoughts are with the Ukrainian people during these really tragic times. So, this morning, Shift4 reported another quarter of strong results highlighted by end-to-end volume of $13.4 billion, which is 97% higher than a year ago and nearly 100% higher than the same period in 2019. We've met or exceeded three of our four guidance metrics and built off the momentum we have in our high growth core, as well as making investments in new verticals, including two acquisitions that we announced today, all of which I'm looking forward to discussing further. It's important to call out that our full year 2021 volumes ended up coming in about $10 billion higher than the initial guidance introduced about a year ago at this time. Our high growth core continues to drive market share gains evidenced by the fact that during the fourth quarter, we grew volumes four times faster than Visa and MasterCard. We achieved this industry leading organic volume growth despite our end markets, like restaurants and hotels, continuing to be impacted by COVID. This includes delays in the return of business and international travel, and especially, the Omicron variant which dampened results in the fourth quarter. Our high growth core, which represents domestic merchants in the restaurant, specialty retail, and hospitality industries, continue to represent the primary driver of our growth. As you all know, our gateway and 425 unique software integrations provides us with a captive backlog of volume, something we intend to attack even more aggressively this year, as well as the…

Thanks Jared and good morning everyone. Before touching on the acquisitions, I'd like to provide some additional color on the seasonal spending patterns we've seen over the fourth quarter and into the first. While we raised our guidance several times during 2021 due to outperformance, our decision to raise our volume guidance was based on a slow but linear recovery of travel and leisure spending, as well as a more modest recovery in corporate and international travel. If not for this continued delay in business travel, we feel strongly that our full year volumes would have exceeded our expectations. Nonetheless, we delivered impressive 92% end-to-end volume growth and corresponding 81% gross revenue growth for the full year 2021, which compares very favorably to our peers. Our expectations for full year 2022 remain cautiously optimistic. If you recall, we experienced the similar trend last year whereby the second wave of COVID depressed volumes from Thanksgiving to Valentine's Day. That week, while a record at the time represented only 1.4% of our total volume for the year, as growth recovery in warmer weather caused rapid volume growth across our portfolio in subsequent months. Following that same logic, we're quite pleased with our positioning as we exit February with more record weeks. In fact, we had our first $200 million volume day just yesterday. To help you conceptualize how we construct our full year guidance, we included a volume bridge in our press release this morning detailing the main drivers of our next year's volume growth. In a typical year, the majority of volume growth is actually derived from merchants boarded the prior year, followed by new merchants and gateway conversions boarded during the year. For example, in 2021, we estimate approximately $14 billion of our volume growth was derived from merchants boarded…

Thanks Taylor. So, now I'm going to dive into the numbers for the quarter. So, Q4 revenues -- gross revenues were $399 million, up nearly 90% for the same quarter last year. Gross revenue plus network fees was $147 million, an increase of 65% over last year. Year-over-year growth breaks down as the following; a 79% year-over-year increase in net processing revenues, driven by continued merchant adoption of our end-to-end solution. A 38% increase in our SaaS and other revenue stream, driven by expansion into the stadium vertical and further penetration of our core restaurant hospitality verticals. And finally, a 50% increase in our gateway revenue stream, driven largely by recovery in the hospitality sector over a COVID depressed Q4 of 2020. Spreads for the quarter came in at 74 basis points which is consistent with the spread we reported in Q3 and eight basis points lower than the same period last year. The mix of the book was largely stable between Q3 and Q4, with the only notable change related to a significant year-over-year increase from the recently boarded UPS stores during the holiday season. As we've talked about previously, the year-over-year spread decline is exclusively due to shifts in our mix, as our lodging vertical now represents approximately 19% of end-to-end volume up from approximately 8% for the same period last year. It's worth noting that spreads in our restaurant and hotel verticals were up year-over-year 10% and 6% respectively. For the quarter, we reported adjusted EBITDA of $44 million, which is up 65% over the same quarter last year. These represent -- these results represent a shortfall to our 2021 guidance by approximately $8 million due to the following three factors. First, as Jared mentioned previously, the rejuvenated impact of COVID in the fourth quarter temporary challenged…

Thank you. [Operator Instructions] The first question today comes from Darrin Peller from Wolfe Research. Darrin, please go ahead, your line is now open.

Thanks guys. Congrats on these two acquisitions. Before we get into that, I just want to touch on the actual impact from Omicron, if you can provide us a little more detail in dollar terms on Q1, whether it's ED volume, or it's the revenue and EBITDA contribution that you saw it pullback in January and into February? And then maybe help us understand the exit run rate on weekly volume. And Taylor to your point on conservatism and building bridge for 2022, I think a lot of investors coming in see those numbers as conservative also, we're just trying to figure out the magnitude of what kind of upside you could see from both the existing business you've already signed and obviously the new areas to grow? It looks like there's some real opportunity to be raise as the year goes on? Thanks.

Yes, I'll start that probably warrants a little bit of commentary from everyone. January was particularly depressed. It -- really throughout the entirety of -- we saw a depression in kind of active merchant counts, as well as volume. Now, interestingly, a portion of that shortfall was actually made up in just the past two weeks here in February. So, it does feel quite short-lived. I would say there wasn't -- this is just kind of interesting, there wasn't a notable variance in the performance of kind of one sub-vertical or another. So like restaurants were significantly depressed as were hotels. As we think about the recovery in the year ahead, obviously, restaurants have come a long way from where they were a year ago. I think we all know that. But hotels still have a substantial portion ago. And even at depressed levels, they represented roughly 20% of our end-to-end volume if you recall. So, I think there's a lot of room left to go in the hotel vertical, specifically, inside of the existing merchant base. I think there is some recovery, only just started inside the restaurant vertical, although that tends to happen a lot more quickly, that people can book trips and get on flights. The $200 million a day that I referenced, I think is anecdotal of kind of how we feel about things. Jared, and I were commenting this morning that, it was only two years ago that we were celebrating our first $100 million a day at the same time. So, we feel good. It does anecdotal of the experience we had last year -- you have pretty significant restrictions as a result of that second wave, largely lifting around Valentine's Day. And as the weather got a little bit warmer, people got out and spent on our merchant locations. I think that the unknown and it's got pretty meaningful conservativism inside of it is what does this do for stadiums, because we had some marquee sporting events that were filled up, you definitely didn't have kind of broad base participation from the population and entertainment events across the country. And we had that many more venues signed up. So, I'm particularly excited about that one. Brad, anything you want to add to that?

Yes, I think you hit most of it. Darrin if you think about the impact in January, I do think it was kind of largely offset by February. So, I think in terms of the quarter, it's going to likely wash itself out but you're talking -- think of within a month of call it a $0.5 billion of volume that's kind of shifting around. But what we've seen in February largely mitigated that short that we provided in the in the earnings material.

Okay. All right guys. And then just quick follow-up, Jared when we think about these deals that you're doing, whether it's Credorax or -- forgot the new name, but either way, I mean, when you look at the two opportunities, obviously the growth of these things really should help supplement the international opportunity as you were looking into. I know we've talked about Starlink, can you just really hone in a little more on what that can do for your business when you think about how quickly you can actually leverage that -- those abilities in Europe and other parts of the world now versus what you've been able to do? Are you able to take some of the relationships you have in the U.S. and now leverage them internationally above and beyond things like Starlink and others? Thanks guys.

Yes, I mean, absolutely. So, let's just start with The Giving Block, because we already closed on it and -- I mean, if you think about it, we love that it's the non-profit vertical, because it plays to our strengths of multiple different types of software, that's required to deliver, in the case of non-profits, a donor experience. They don't have one donor management platform, they have like 40, or 50. So, naturally, we're attracted to that, because that's what we do really well in restaurants, hotels, stadiums, is connect a lot of different software together deliver a commerce experience. We started with St. Jude Children's Research Hospital, which is what gave us exposure to all those pain points and now we want to launch off of it. Having a signature partner like St. Jude is a great place to start. Having a technology solution that can solve real pain points across a $500 billion payment opportunity is even better. Non-profits don't really know a lot about crypto, they just know they want to take it and they want to take those crypto funds and apply it to whatever challenges they're trying to address. The Giving Blocks solves it, that they create an awesome two-sided network, a marketplace where crypto donors can find all the various non-profits they want to support, which is 80% of the donation volume that's going through the platform. And then you've solved the pain point for non-profit organizations that again, didn't know how to receive these types of transactions. This is absolutely the solution that we needed to build off of the St. Jude momentum. I mean we're going to be able to cross-sell traditional card payments across $45 billion plus of volume that already lives within the customer base today and we do that…

That makes a lot of sense. Thanks Jared.

Thank you, Darrin. The next question today comes from Dan Perlin of RBC. Dan, please go ahead, your line is now open.

Thanks. Good morning. And it's a lot to talk about, great acquisitions here to expand the TAM. But the question I wanted to go back on Finaro for a second. When we think about the Starlink relationship and I know you had kind of the contractual obligations to the United States, is that similar as we think about the international opportunity? Or is that going to be more of a jump ball that you'll have to compete with Addie [ph] and understanding you're clearly coming at it from a position of strength?

Yes, I mean -- thanks, Dan. I mean, I'm 100% confident, as the agreement itself calls for all Starlink volume, the only obligation was the 120 days to convert domestic volume over and that was because we possess the capability at that time. I mean to the extent permissible during the regulatory process, we're going to be doing integration so that we can be as ready to cut over the rest of the Starlink volume, which is going to leverage largely the same integrations work we've already done in order to capture the first transactions that we're already doing for that for that organization. So, that again, as soon as like -- as soon as approvals are complete and we can close on this, we're going to cut over that volume. So, I have no doubt we're going to power Starlink transactions all across the world.

Got it. That's great. And then just a follow-up on spreads, they've actually remained a quite a bit more stable than I think I would have thought. And you've alluded to the fact that some of these new opportunities that are facing you are potentially coming with higher spreads. So, as we think about some of the years to come this year into next year. Are we -- should we be thinking the spreads are still going to be kind of de-gradating? Or is it possible that there's a lot more stability underpinning kind of all these new opportunities cohorts that you're bringing on? Thank you.

Hey, Dan, this is Brad. I'll take that. I think you should still expect to see it. Mix is still going to change as you bring in some of the larger stadium merchants, et cetera. So we're still anticipating this, call it, three to five basis point decline on an annual basis. There's going to be some quarterly seasonality to that. But over time, I do think you're still going to see that spread gradually decline. And like we said, it's completely due to mix. I think our ability to maintain spreads within the vertical shows a lot of how sticky our solution is. And it also shows how we're continuing to kind of add feature functionality to those solutions that helps us maintain pricing, so we don't fall into the commoditized spread trap that you see in a lot of the traditional acquirers. But I would expect to still continue to see that decline over time exclusively related to mix.

One interesting anecdote, Dan -- this is Taylor. So if you think about kind of our continued march into bigger and better world-class merchants, The giving block has some nice kind of data points inside of it, right? They support about 1,300 charities who would collectively do $45 billion in total donation volume. You layer that against our book and those merchants are all significantly larger than the average inside of our book. So to Brad's point, as we continue to press we think we've chosen spots where our product offering is very differentiated. We can command a premium spread above peers, and we can maintain that spread over time, but just the fact that we keep winning these larger merchant categories gives that pass to say at the aggregate level, expect a little bit of degradation.

Yes. High quality problem. Excellent. Thank you guys. Congratulations on the acquisitions.

Thanks, Dan.

Thank you. The next question today comes from Tim Chiodo from Credit Suisse. Tim, please go ahead. Your line is now open.

Great. Thank you. Good morning, everyone. Just wanted to touch on the bridge that, you provided on slide 14. That's really helpful to get to the 2022 volume guide. There is a nice component there from the new wins and gateway conversions during the prepared remarks, you mentioned some actions that you might take around accelerating gateway conversion for next year. So, I'm assuming, it's safe to say that next year's algorithm might include a slightly greater portion of gateway conversions. And I was just hoping you could put a little bit more context around essentially those actions that you might take and the mechanics behind accelerating gateway conversion, what that looks like in real life?

Yes. For sure, thanks, Tim. So I mean, first, it's important to reinforce that the strategy has been working incredibly well now for close to five years where at least with respect to our high-growth core 50% of our new customer wins -- our customer wins come from just winning in the addressable market, leveraging our integration. And then the other 50% come from customers that are already on our gateway that we're providing all of the technology and value to with the encryption, the tokenization, the business intelligent product, and then we're outputting that volume to what is largely the kind of the legacy acquirer community and not really being rewarded for the value that we're providing. Now, we've had a carat-first approach for the better part of five years. And as a result, again, 50% of our production comes from customers who move from our gateway product or end-to-end platform. And as a result, you get a pretty sizable lift as you know in annual gross profit contribution. We've also been saying the entire time that as a public company that we don't need to be a gateway forever. If you look at, like, again, some of the most attractive Fintech players out there. They don't offer a gateway solution at all, only offer an end-to-end solution. So we have to think about the amount of resources that we have and the organization that are up-keeping connections to who are essentially our competitors, every time there's a new device certified every time there's a new security protocol. So, I guess what we're communicating is the tariff-first approach that we're taking eventually has to transition into something else. One way or the other, we need to capture the majority of the payment economics for powering those transactions. So, we could either do that by just being very well rewarded as a -- for the gateway service that we're providing, or they can migrate over to our end-to-end platform. And I think what we're saying is that, the planning that for some of those measures has gone -- is underway in 2022. And we expect it just to accelerate, what is already very good trends of customers migrating to our end-to-end platform, probably closer to the end of this year and then going into 2023.

Excellent. Thank you, Jared. I really appreciate that context on the gateway conversion. My brief follow-up is on the processing coming in-house. This is more for Brad. Is there an updated estimate on what the gross margin benefit might be in terms of the basis points we might see in terms of the lift related to that move? And when we should start to see that really phase in and start to impact gross margins?

Yes. Hey, Tim, this is Brad. So our estimate on that is around 150 basis points in aggregate on a full year basis. But because of the way we're migrating our merchant base, I think you'll see probably half of that, starting in the -- call it, May, June, July time frame.

Excellent. Thank you both.

Sure.

Thank you, Tim. The next question today comes from Jason Kupferberg from Bank of America. Please go ahead, Jason. Your line is now open.

I appreciate the year-to-date volume number through February, but was just hoping you could maybe give us a little bit more detail on your our full Q1 expectations for volume, for revenue, for adjusted EBITDA, just to make sure we get the models into the right place and then maybe a little bit more just on quarterly cadence of growth. I know, the comps are going to get progressively tougher beyond the first quarter.

Hey, Jason, this is Brad. I'll take that. So we're not explicitly guiding to Q1, but we did want to -- to your point, we wanted to give some context for the year-to-date volume number. There's a couple of things, to your point, trying to calibrate Q1 model that you should expect. And we tried to mention them in my script. You will see some volume acceleration as you get into March. That's a normal seasonal pattern for us, as the weather starts to improve and travel starts picking up the spring break, specifically. But what we wanted to make sure, we were clear of also is the Q1 margins are typically the lowest margins of the year, anywhere between 300 to 400 to maybe 500 basis points lower than what you would see in Q2 and Q3 just because of that seasonality factor. So while we're not explicitly kind of trying to guide to Q1, we hopefully gave enough data points that you guys can start to calibrate better.

One thing just because this is the most interesting quarter for us, it probably helped you a little bit. We talked about that $8.2 billion in volume that we've seen in the first two months of the quarter. A little bit more than half of that was February. So that should drive with this concept of being slow in January as a result of Omicron, and then quite frankly, a really nice finish to the month of February. March typically has a pretty significant step function up month of February, if you recall from prior years. I don't think, we would doubt that's likely to occur again, although, we are cautious on spread margins just because of the way Q1 typically manifests itself vis-à-vis the others.

Yes, I guess, one last thing, I would put into this is, I don't know, if anyone actually recalls like what our updates were like in February of 2021. But we basically were communicating that from Valentine's Day weekend through February. We were setting new weekly volume records every week. So, now we've already said in February that, we saw our first day a daily record of over 200 million in volume that's nearly double the highest volume day from last year in the same month.

Okay. Yes, that's all good color. And then just a follow-up on the volume bridge chart that, I wanted to ask about just as we think about this 46% to 50% guide for 2022, I mean, I know you talked about 50% plus CAGR at the Analyst Day, but it does sound like there's some elements of potential conservatism here. So I was just wondering, as we look at those pieces of the bridge, where some of that conservatism might be most likely to manifest itself based on what you guys know today?

So, I think we all have areas, where we think we're probably being conservative. Mine, in particular, is that contribution of new markets you see that $3 billion number. If you think about some of the marquee wins that we announced. It doesn't take a lot from anyone of those single names to get you most of the way there. I think the one thing that we're just like cautious about is just activation of those marquee merchants throughout the year, put any one of them in good progress, and it could accelerate new. I mean, we don't like to set immediate expectations around acquisitions, because we really like to focus on getting the integration, right, and go to market perfect. But that $45 billion of donation volume across the giving loss charity base is something that kind of business development is laser focused on and they were talking about intensely last night at our closing dinner. So I think there's a bunch of areas inside of inside of it. I talked about the return of hotel travel, being something that could lift this meaningfully. But my particular favorite is contribution to the markets, although, I do expect it's a second half contribution more so than the first half.

And just to pile on to that point. It’s probably a quarter or two ago, now, I guess in the last quarter since we announced St. Jude. The question came up of how big we see gaming contributing to our volume going into the years ahead of which we've said we believe we're -- is well positioned in anyone to win more than our fair share on wagering, especially considering our in venue casino presence. But I also said that I anticipate non-profits being far bigger. I mean, mobile wagering in the U.S. market could be mid to high single-digit billions in volume opportunity, which again, we think we're pretty well positioned to win. We now have a $45 billion cross-sell in non-profits alone, just from the 1,300 customers, we already have, by virtue of The Giving Block acquisition, along with the capability that virtually the entire non-profit sector space is going to need to embrace at some point or another. If we are going to really surprise and shine in this year, my bet would be is it's going to come from the non-profit vertical and maybe even directly from the week fast organic growth that you're seeing inside The Giving Block itself, even before the cross-sell synergies.

Okay. Very helpful, guys. Appreciate the commentary.

Thanks.

Thank you, Jason. The next call today comes from David Togut of Evercore. Please go ahead. Your line is now open.

Thank you. Good morning. With 3,000 customers now on SkyTab POS, what are your expectations for the uptake of this product when it comes out of beta in the second quarter? And when should we expect to see related services like capital and payroll potentially added?

Well, let me just start -- and thanks David for the question. Let me just start with expectations, when our expectations are that we are going to like replace virtually every one of the existing POS customers that we have over in a multi-year period from the Windows based point-of-sale system into SkyTab POS, that's going to deliver more capabilities functionality, a ton of operational efficiencies for the organization. But it's also going to provide a significant SaaS life, because as we mentioned during the Investor Day, the majority of our massive base of restaurant customers are not paying really any or minimal SaaS contribution. So let me clear, like just existing within the company today, there is such a huge opportunity to help all of our existing customers migrate to the next generation of restaurant point-of-sale technology. So if you just think about the size of the base and the volume contribution we get from that base today, it's pretty sizable. Going forward, I think, we have 1,000s of distribution partners that are very educated on the restaurant space, and specifically the power of an integrated payments opportunity. They've really been dying for this kind of next generation Cloud POS solution. So, I mean, the best example of it is we've only released the product in beta to a handful of our more sophisticated dealers to learn from and you can already see the contribution from it. In terms of capital offerings in payroll, I would say by the summer of this year, you're going to have both of -- both those capabilities included in SkyTab POS offerings.

Understood, Thanks. Just as a quick follow-up, you bring SkyTab POS international with the Finaro acquisition, how would that product be positioned in the countries where Finaro is currently doing business? You've -- for example, in its original incarnations, SkyTab POS was very unique in the sense that, had a lot of a table functionality, which tends to be a little bit more common in Europe than in the U.S. But this clearly is kind of a next gen product. So how will it be positioned in some of the key countries where Finaro was currently doing business?

Yes. First, I'd say, there is a huge difference [Audio Gap] bringing the device over the table, you're completing a transaction and all it's doing is maybe closing out the checks in a semi-automated way. Actually having like really full blown ordering reputation management, like our SkyTab product has had for years now and will only be better as part of SkyTab POS. We think is rather unique to our products, and will be a huge -- lift in operational efficiencies for these restaurants. I think the first country we're likely going to put this out in is going to be in Lithuania is a reminder that is a home for a research and development operation for Shift4. We've had that facility for about seven years now. And there's some of our most offers. So the idea will probably deploy them in Europe in their backyard first to gain experience and then expand quite quickly throughout Europe. Our Chief Technology Officer, Mike Russo, and his Chief Development Officer, Dan Drasin both came from Oracle four or five years ago. They have tons of expertise, taking products that were originally designed to serve a U.S. market and deploy it in hospitality and F&B environments all across the world. So you can probably guess we've been ramping up all the various, like localization efforts that are needed on a country-by-country basis, fiscal for tax compliance. And now obviously, Finaro acquisition we have the payment platform to drive those card-present transactions across Europe.

Understood. Thanks very much.

Thank you, David. The next question today comes from Ashwin Shirvaikar from Citi. Ashwin, please go ahead. Your line is now open.

Hey, Jared, Taylor, Brad, good to speak again. Hey, just wanted to pick up on one of the comments you had with -- pertains to cross-selling. Just as you look at just hotels, for example, you have many of these large global chains and franchises, which are clients in the U.S. Could you maybe provide some color on ongoing conversations that you've had with them over time with regards to globalization? And the reason why they've historically not had a global solution, is that because there just wasn't one, or are there other factors to kind of look at?

Yes. I mean, with respect to hotels specifically was no solution provider. So who -- Hilton, for example, would use in the U.S., which as I think we've mentioned previously split between us and Allentown. Once you get into Europe, that's another provider who's -- it's probably a separate gateway, it's probably a separate acquire, it might even be a separate tokenization supplier is different than who they use in the Middle East versus APAC. Yes, there's just -- I mean, right now, you're really only talking about Adyen is the only integrated payment platform that can come close to delivering a global solution, even then their integration library, which can be adequate for retail, certainly adequate for e-commerce would never be as extensive as needed to pursue the entirety of like the hospitality vertical, if you will. So, there's always been tons of opportunity there, I can absolutely tell you through conversations with our hospitality customers that they want a single integrated payments provider across the world. It would make their life easier on business intelligence on their rewards and loyalty products. So that will certainly be one of the past. But I mean, the idea for us is we're going to hit the ground running immediately closing with ideally not just Starlink volume on a global level, or at least to across Europe. But we're going to, I think, our stadium product is one where you'll probably expect to see a lot of announcements out of the gate. It's the category leader in the U.S. So, international stadiums want the same capability. And we already had a lot of conversations on that. So that's one where you’d -- I would certainly expect a lot of out of the gate our restaurant, product, ship or shop for sure. And then I think, there's no question we'll be using this entire regulatory approval period to get all our hospitality customers, and make them aware of this misspending capability.

Understood. And just given the relatively long time for the regulatory approval process takes all of this year, I think. Are there milestones that investors should be looking for with regards to that process? And I guess the add on there, can you guys do something along the way to kind of build capabilities that can then result in a quicker integration?

Yes. This is Taylor. That's exactly the point is that while the regulatory approval takes some time, it is pretty sequence. So we can give you frequent updates on where things stand with regard to that, obviously, the sooner the better because it is a fast growing high margin business, so we're going to get it done as quickly as practical. But interestingly, they're in the business accepting cross-border, e-commerce customers and doing integrations much like Shift4. So a healthy portion of our diligence was actually spent on this concept of common, we mutually support a customer like Starlink. And we can do that on a commercial basis prior to the acquisition closing. So I would expect, a first transaction and quite frankly, the transactions designed to motivate for instances [indiscernible] a first transaction by a customer likes a mutual customer like Starlink could potentially happen before that regulatory approval. Obviously, we've got to take the right steps. But we can support mutually if we choose them.

Understood. Thank you, guys.

Thank you. Our final question today comes from James Faucette from Morgan Stanley. James, please go ahead. Your line is now open.

Morning. Thanks a lot. Wanted to ask just a couple of follow-up questions both around acquisitions and then the recent business. I guess, on the recent business, I'll start there. With the Omicron and the slowdown, it created for you in particular the end of the December quarter and beginning of this year, how did that impact your conversations with clients around conversions and upsell opportunities? And then my second question is, with the acquisitions both sound like very attractive and that kind of thing. I'm wondering how we should think about that impacting both the potential for incremental investment into those areas, into those businesses to continue to drive them kind of beyond the -- and I'm thinking about the investment potential beyond kind of your guidance period. And then also, when you look at new incremental acquisitions, are you feeling fairly sated right now, and kind of being able to -- and prioritizing integrating these? Or can you still be on the lookout for new incremental acquisitions, particularly as valuations may be coming down? Thanks.

Yes, sure. This is Taylor. James, I'll address that. So we put a slide all the way in the back next to the share reconciliation of a table that addresses kind of what the leverage ratios are likely to be. Now, important to contextualize that is like the most conservative scenario you can imagine, which is full cash outlay for both of the transactions, and no, even a contribution, despite what we highlighted what we believe will be $35 million plus in 2023. So -- and the transactions themselves generate growing EBITDA and cash flow. So we think these transactions give us really, really good positioning into these areas that we told investors we want to be in, and we want to focus on, but it doesn't limit us nearly as much as you might expect, when you look at it through that lens. So we're going to continue to keep an eye out. I think the integration of Finaro is a little bit larger, just because it's a bigger organization and it's based outside the US. But we've got time to plan for that appropriately, given the regulatory timeframe. The giving block is a small business, and the way we structured the earnout, you want them to sprint at their objectives and bring one of our business development professionals alongside them as they have these great conversations with charities that are in many cases just reaching out to them because they want to be able to accept crypto donations in a seamless way. So I think we'll be able to achieve what we want from these objectives from these acquisitions, excuse me, with a reasonable amount of dedication from our core team, a lot of contribution from these new teams that are joining us, and it doesn't really limit us from looking at other things. I think it's a little too soon to speculate. We just did two transactions over the past month, but it doesn't limit us financial.

Operator, why don’t we just take one more call.

Okay. Final question today comes from the line of John Davis at Raymond James. John Davis, please go ahead. Your line is now open.

Hey, guys. Two quick ones for me. I think Brad, you called out spreads on apples-to-apples basis being up. I think it was like 10% year-over-year. Obviously, those are holding really, really well considering new UPS drove a lot of volume in 4Q, also international travel not coming back probably, I'm also guessing was a headwind. So just maybe some commentary on the ability to extract more value from your merchants and the success that you're having there on more of an apples-to-apples basis, kind of setting aside the mix issue that you talked about?

Yes, that's exactly right. So we did mention specific about hotels and restaurants, restaurants are up 10%, year-over-year, hotels were up 6%. And it's largely driven by what I mentioned, we had the ability to continue to add products to our total offering, whether it's QR pay, whether it's pay at the table, it keeps our position from pricing very stable, we're not able to be displaced in the market, because it's an end to end solution that provides much more so than most of our competitors are going to. So what you're going to see is that kind of manifests itself and the stability of pricing across each of our individual segments. You're exactly right, I mean, something like a UPS Store is certainly going to come in at a lower spread and we'll see some periodic impacts of those things. But across the whole portfolio, we've seen very stable, if not increasing spreads across all of our verticals. And that's a trend we expect to see going forward, as we continue to kind of add more capabilities, more feature functionality over time. You will see, like I mentioned, I want to make sure we're also clear about this aggregate spread declines over time just due to mix, it's a good expectation as you guys build your models to still incorporate that. But within the segments, there's a digital product and feature capabilities give us a lot of price [indiscernible].

Yes, I would also layer on to just say that, car type mix at these locations matters as well. Last year when there was so much stimulus getting loaded onto basically prepaid debit cards, it actually had a kind of a surprising impact on pulling down spreads in Q1 of 2021. As the years gone by, there's less that stimulus, you're seeing kind of a return to some normal card mix, which is also beneficial from spread. As some corporate or signature reward cards carry with it more favorable pricing than what is maybe some of the most in price transactions, which would be debit and there was considerably more of that probably last year, and especially earlier last year than we've been seeing.

Okay. Thanks. So then one quick follow-up, Brad 35% to 40% free cash flow conversion is percentage of EBITDA, is that the right way to think about going forward? Or is there more room for that to improve, as we go into 2023 and beyond?

No. I think there has been expansion in that. I think that's a solid number for 2022. But I would look for that number to creep up over time.

Okay. Appreciate it. Thanks guys.

Thank you, John. That concludes today's question-and-answer session. I would now like to pass the conference back over to Jared Isaacman, CEO for closing remarks. Jared, please go ahead.

Thank you very much for joining us today. We know we had an awful lot to cover, quite a bit took place for sure in the fourth quarter, but hopefully, after going through everything, it remains clear. We're growing incredibly fast across all of our core verticals, as well as all the new ones that we've expanded into. And we've reinforced that with two acquisitions that are going to just further our right to win in some of these verticals and expand our reach globally. So a lot going on. I would say really, I'm speaking for all the management right now. We've probably never been more enthusiastic about the opportunities that are ahead and appreciate all the support. Thank you.

That concludes today's Shift4 fourth quarter 2021 earnings call. Thank you for your participation. You may now disconnect your lines.