Shift4 Payments, Inc. (FOUR) Q2 2022 Earnings Report, Transcript and Summary

Hello and welcome to the Shift4 Second Quarter Earnings Call. My name is Alex and I will be coordinating the call today. [Operator Instructions] I will now hand over to your host Tom McCrohan, Head of Investor Relations. Tom, over to you.

Thank you, Alex, and good morning everyone and welcome to Shift4 second quarter earnings conference call. With me on the call today are Jared Isaacman, Shift4's Founder and Chief Executive Officer; Taylor Lauber, our President and Chief Strategy Officer; and Nancy Disman. This call is being webcast on the Investor Relations section of our website, which can be found at investors.shift4.com. Our quarterly shareholder letter containing quarterly financial results has also been posted to our IR website. Our call and earnings materials today include forward-looking statements. These statements are not guarantees of future performance and our actual results could differ materially as a result of many important factors. Additional information concerning those factors is available in our most recent reports on Forms 10-K and 10-Q, which you can find on the SECs website and the Investor Relations section of our corporate website. For any non-GAAP financial information discussed on this call the related GAAP measures and reconciliations are available in today's quarterly shareholder letter. With that let me turn the call over to Jared. Jared?

Thanks, Tom, and good morning everyone. So we have lot to cover today. As you may have seen from an 8-K filed last night, Brad Herring, our Chief Financial Officer is pursuing other opportunities. We are really grateful for the time and effort Brad has contributed to Shift4. Since his joining of the company in 2019 we've gone public on the New York Stock Exchange, we've diversified into six new verticals, we've completed several acquisitions and grown our end-to-end payment volume over 200% and all with the backdrop of a global pandemic. So Brad played a key role in all of this and we sincerely thank him for his service. As of tomorrow Brad will be succeeded by Nancy Disman who is both a phenomenal industry executive and a good friend to Shift4. Nancy most recently served on our Board of Directors from which she has resigned effective as of tomorrow. She is also recently the CFO and CAO of Intrado. Prior to Intrado, Nancy served as the CFO and CAO of TSYS Merchant Services following TSYSs acquisition of TransFirst, where she also served as CFO. Nancy has also held executive roles at Cynergy Data Corporation and First Data Corporation and we're really [Technical Difficulty] continue working with Nancy in her new role. So now for the quarterly update, as mentioned in my letter, we are really pleased with our results this quarter including the progress we are making in all our new verticals, although our high growth core continues to be the primary contributor of our overall performance. For the second quarter, we generated 43% year-over-year growth in our end-to-end payment volume and 34% year-over-year growth in our gross revenue less network fees. We continue to gain market share across our high growth core growing from net new wins and gateway conversions and now with our new verticals beginning to ramp meaningfully. We believe we are positioned to deliver consistent profitable growth, even as we continue our expansion into new verticals and new geographic markets in the months and years ahead. As in the past, I will focus my comments initially on our high growth core then speak to our new markets and verticals. But before getting into the components of our business, I want to highlight our current thoughts about the overall economy and its potential impact to our business. In short, we have not yet witnessed the material impact on our overall volumes from changes in consumer behavior. Our full-year volume CAGAR improved from last quarter and our monthly volume trends continue to improve as we approach the seasonally stronger summer months. Having said that, we're also realists, we are aware that persistent inflation headwinds could ultimately influence consumer behavior and this could result in consumers pulling back on some discretionary spending. We are fortunate to have invested in our new verticals, as well as specific levers that are less impacted by economic cycles. In short, we believe that we are prepared to manage our business through all economic cycles. Just like we have done over the last 23 years and we intend to continue growing revenue and volume every year through the best and most challenging of economic times. To this end, we are leaving our end-to-end volume guidance unchanged for this year, while increasing our gross revenue less network fees, increasing adjusted EBITDA and increasing adjusted free cash flow guidance. While we cannot predict consumer behavior in this uncertain environment, we have witnessed early success in our Gateway Sunset strategy, which gives us confidence in our ability to drive incremental revenue and EBITDA above our prior expectations. Our conversations with our gateway only customers are very encouraging and we view our decision to leave volume unchanged, but increasing revenue and adjusted EBITDA guidance as a balanced approach to take during these uncertain times. I want to emphasize our belief that unlike some of our peers, we are not completely at the mercy of the broader economy, our gateway and software-only merchants provide a highly unique asset and that we can grow exponentially without even adding a new customer. I'm going to focus the remainder of my comments on the performance of our high growth core and then an update on our new markets and verticals. So with respect to high growth core, as you can see this quarter, the primary driver of our performance does remain high growth. This -- the high growth core represents the payment opportunities we pursue, primarily in complex restaurants, hospitality and specialty retailers. And as many of you already know, Shift4 has been growing at accelerated rates in this arena by leveraging our unique software integrations and pain point solving technology. We currently have over 450 now unique software integrations and we continue to win share through a combination of migrating merchants off our gateway platform to our end-to-end service, as well as just net new wins in what is a very large addressable market. Our growing library of software integrations results in more links in the value chain to deliver a lower effective cost of service to our customers. Said differently, we are able to offer our customers more capabilities at a lower cost, because they no longer need to depend on a multitude of other costly vendors to attempt to achieve a comparable solution. Throughout the quarter, we signed a number of new resort properties and high-end restaurants, including the soon to be open Noble Hotel in Atlanta, the New Orleans based hotel in Monteleone, the Langham Hotel in Chicago, Manhattan's Gassing Board hotel and Feld Entertainment, which operates Disney on Ice, Monster Jam, Wrangling Brothers and Sesame Street live among others. As a result, during the second quarter, we again organically grew our end-to-end payment volumes faster than any of our peers and faster than Visa and Mastercard. One proof point would be our nearly 42% four year volume CAGAR, including 52% volume CAGAR in restaurants and 170% volume CAGAR in lodging. As a reminder this four year volume CAGAR occurred during an unprecedented pandemic when our end markets have been quite impacted. For the quarter, our volume growth is 307% of pre-pandemic 2019 levels, along with gross revenue less network fees at 243% and adjusted EBITDA at 272% over the same period. It's worthwhile calling out that this growth took place without the benefit of our new markets and verticals, which are now just beginning to ramp. As discussed in the prior quarters, we have just begun removing complexity, the leading parts and increasing organizational efficiencies by executing on our Gateway Sunset initiative and are very confident in our ability to successfully convert gateway only merchants to our end-to-end platform or get paid more in line with the value our payment technology provides. While it's really early, the results are very promising and Taylor is going to go into that in just a few minutes. I did want to highlight a case study on the Gateway Sunset strategy that I believe is emblematic of why we are so confident in this approach. During the quarter, we signed a world-renowned motorcycle franchise that we had historically been unsuccessful converting to our end-to-end platform. We had been soliciting this merchant for nearly five years and despite our efforts it was ultimately our Gateway Sunset initiative that enticed this merchant to engage with us to discuss the merits of switching to our end-to-end platform. We are in the process of migrating this motorcycle franchise to our platform and we are having 100s of similar conversations with other gateway only customers. So I cannot be more excited about the pipeline, the Gateway Sunset initiative is the right strategy at the right time and for all the right reasons. While contribution from our Gateway Sunset initiative was minimal this quarter, we're highly confident the initiatives will result in us getting paid fairly, regardless of clients pay us more to remain gateway only or elect to convert to our end-to-end platform. We expect that it will contribute incremental adjusted EBITDA and adjusted free cash flow and is one of the factors driving our increase to our full year guidance. In restaurants we reached an agreement with Enterprise operator BJ's Restaurant in Brewhouse, a Southern California headquartered national restaurant chain with over 200 restaurants in 29 states. We signed a multi-year agreement with BJ's to provide POS software as a service for all the restaurants across the US. We also reached a similar agreement with one of the world's largest restaurant groups. These opportunities represent a meaningful recurring revenue and EBITDA contribution that we expect to be realized more towards the latter part of 2022 and into 2023. This represents the first of several notable restaurant opportunities we are in discussions with on our restaurant POS offering. Moving to SkyTab POS, I would like to update you on the progress of our next generation POS product that will serve the restaurant market. Restaurants remain a key market for us and that is why we have invested over the last few years in a new cloud-based restaurant POS offering called SkyTab. We are getting rate relief SkyTab POS from beta at the end of this month and it's already installed in thousands of locations. SkyTab is not just designed for restaurants as we are also having early success in selling SkyTab at Theme Parks and Resorts. We also intend to bring this product into international markets. Recall we are uniquely advantaged to pursue over 125,000 restaurants that are already customers using some form of Shift4 technology and many of them are not on our end-to-end platform and even lesser paying any fast charges. We expect that SkyTab POS will represent the migration path for this existing base of restaurants, many of whom are seeking out new capabilities to better serve their patrons in addition to the large addressable market of just new restaurants, SkyTab services the mid to high-end restaurant customer based on a cloud-based Android technology stack built from the ground up and equipped with very modern and purpose-built space aged hardware. We have been going to market with SkyTab through our historic third party distribution channels, but have recently begun pivoting towards direct sales, in the same way we go to market in many of our new verticals. We have found some initial successes selectively in-sourcing some of our third-party distribution partners in the most desirable markets as the opportunity insource distribution becomes increasingly viable with the cloud-based solution. We believe we can improve the customer experience alongside margins without compromising the same high touch support our customers have grown accustomed receiving. So to summarize, our high growth core, we are excited about the combination of our accelerated gateway conversion plan, the launch of our new SkyTab POS offering and the momentum our high growth core supported by our unique integration with over 450 mission-critical software suites. All of this gives us confidence in our outlook and supports our decision to increase our gross revenue less network fees, our adjusted EBITDA and adjusted free cash flow guidance for the full year. So moving on to new verticals. As I mentioned previously, our impressive volume growth has been without significant benefit from our new verticals. For clarity, we consider our new verticals to be sports and entertainment, gaming, travel, nonprofit and what we refer to as just sexy techs. This should not be surprising, it should be challenging to get the attention of software companies and enterprise merchants to complete a payment integration. We often see that software companies and merchants tend to want to invest their time in anything, but additional payment integration, which is why they become so valuable once you've achieved it. We are really pleased with the progress we made in the second quarter. So much of the progress was literally made in the last week of June when the Starlink integration went live. So while our new verticals, contributed throughout the year and into June, they've only really begun to scale meaningfully in July and Allegiant Airlines is not expected to go live until late August. So we added a chart on page eight of our quarterly shareholder letter depicting the year-to-date ramp in monthly volumes for our new markets. And while it has taken a bit longer for our new verticals to contribute to our volumes, we feel really good about how that ramp is progressing, the contributions they can make in the second half of the year, and how these strategic relationships and verticals aligned with our global expansion aspirations. To emphasize these points, we do expect to see a much stronger contribution from these verticals as the year progresses. For example, we are in the process of implementing a number of large NCAA and NFL stadium clients in time for this football season. We are adding more states and capturing more volume from BetMGM, turning on more integrations from our non-profit customers and we're more than halfway through the Allegiant Airlines integration and, of course, Starlink volumes are on an impressive trajectory as they continue to populate their satellite calculation. I am bias, but I believe that we have never had a merchant in our history that is ramping as quickly or had so much upside as Starlink. In gaming, we continue to add new commercial and tribal gaming supplier licenses and BetMGM volume has more than tripled since our last earnings call in May. We continue to build upon our early success with BetMGM and added several states this past week alone. As a result, we expect to see a further significant and sustainable spike in volume before the end of the third quarter, given the seasonally strong sports wagering tied to the football season. In nonprofits, we began processing for St Jude's in January of this year and overall volume continues to ramp. With our acquisition of The Giving Block we've seen impressive results across multiple KPIs that Taylor will talk to in just a minute. Given the nature of nonprofits we do expect the fourth quarter to represent the peak season for donation volume. We are scheduled to complete an integration of Allegiant Airlines by September 1st, and we have signed a European travel agency Kiwi.com as a customer, and expect to begin processing shortly as well. Turning back to stadiums, we signed a number of new professional and college sports stadiums, including the University of Alabama, University of Wisconsin, University of Notre Dame and professional sports teams, including the New Orleans Saints and Pelicans where we also provide ticketing. Our VenueNext mobile commerce technology is the category leader in sports and entertainment venues and our software is now installed in well over 100 stadiums in the US. Our new business pipeline in this space remains very strong, including international stadium discussions. Perhaps the most important competitive win this quarter came from sports focused retailer Fanatics. We will process all of Fanatics in venue payment processing at approximately 50 sporting and entertainment venues, including PGA Tour events and NASCAR races. As a leading manufacturer and distributor of sports related merchandise, Fanatics will be a tremendous partner as we mutually expand our footprint in the sports and entertainment space. Our performance across these new verticals alongside our stated international expansion plan has attracted the interest of many notable customers. Somewhere in the negotiation phase others we have won and in some cases we are not permitted to announce publicly and in others like Fanatics and Time, we have recently selected Shift4 to power their payment strategies. It's worth reinforcing that Shift4 wins because of our ability to solve our client's problems. Merchants are not switching to Shift4 to save a basis point or pennies per transaction, even though in our experience they usually benefit from an overall lower effective cost of service. Instead they switch because we offer complete commerce solutions that enable them to better engage with their customers and patrons' such as QR codes, online ordering, mobile and contactless payments business intelligence and more. This is why despite our continued move upmarket our net spreads have remained stable over a multiyear period and our move up market has been in an unprecedented pace, we've effectively doubled the size of our average merchant since 2019. So before passing things off the Taylor, I wanted to provide you with an update on our recently completed acquisition of Giving Block and the pending acquisition of Finaro. The Giving Block's crypto donation platform continues to sign up new nonprofit customers despite the drop in value in crypto assets. As I write this, a single Bitcoin is still valued at over $20,000 and nonprofits are still interested in accepting crypto currencies such as Bitcoin. Since we closed the deal back in March, the Giving Block has signed up over 400 new nonprofit customers, including the world's largest humanitarian organization, the World Food Program, as well as many other highlighted in our quarterly shareholder letter. The Giving Block has introduced a card widget for nonprofit so they can accept traditional card-based donations and the growth in their client base has resulted in a nearly six fold increase in their SaaS revenues versus a year ago. The team continues to execute on the significant $45 billion cross-sell opportunity and successfully converted several Giving Block customers to our end-to-end platform. We believe our go-to-market offering remains unique in the nonprofit sector and remain highly attractive to what we view as a $450 billion payment opportunity where we now have a unique right to win. While on the subject to be Giving Block, I would like to personally thank those of you that participated in our Caring with Crypto fundraising campaign. We launched this fundraiser in mid-March to raise awareness within the crypto community and I agreed to personally match dollar for dollar every crypto donation made on the Giving Block marketplace up to $10 million. Parts of this fundraising campaign are still underway and I encourage all of you to check out the givingblock.com website for more information. We are also making progress receiving all the necessary European regulatory approvals to close on our acquisition of Finaro later this year. As a reminder, we announced the acquisition of Finaro back in March in conjunction with our year-end results. And for those unfamiliar, Finaro is a European cross border, e-commerce platform with processing capabilities and licenses in Europe and parts of APAC. The two sides -- the two of us are making great progress connecting the payment platform via arm's length partnerships during the regulatory review period and we have successfully tested transactions between the US and Europe. We intentionally structured the earn-out portion of this transaction to encourage both sides to pursue commercial opportunities up until closing and the teams are working together nicely on a number of initiatives. For example, we are beginning to refer each other merchants. Finaro services may -- services many e-commerce merchants in Europe that also have US operations supported by US payment processor. I'm pleased to announce but Denmark based online sporting goods retailer SkatePro has one of the first wins alongside Kiwi.com. SkatePro is an e-commerce customer of Finaro who relied on Finaro for their European e-commerce processing but outsource their US payment processing to a US competitor. Going forward SkatePro will switch their US payment processing to Shift4, effectively consolidating all their global e-commerce payment processing business into a Shift4 Finaro solution. There are many other merchants we are currently in discussion with regarding a joint US EU offering and are pleased that our planned acquisition is yielding synergies in advance of the planned closing date. We do retain significant firepower to pursue additional acquisitions and remain focused on building out our global technology capabilities in the markets to support our signature multinational customer. We have a low pro forma leverage ratio and a ton of conviction around our strategic plan. Internally we remain very focused on operational improvements to make us a much more efficient company consistent with the Shift4 way. This includes investments we have made in our payment platform that has delivered 100% uptime during the quarter despite immense growth and something few of our competitors were able to achieve over a comparable time period. In addition to the executive transition mentioned at the onset of the call, this past quarter we promoted Samantha Weeks to the Chief Transformation Officer role to better align our human resources, learning and development, transformation, project management and mission assurance functions under a single department. Her team will identify and execute on various productivity improvement and we are confident our initiatives will drive productivity, excellent and further margin expansion in excess of what we have already communicated earlier this year. I would be remiss if I did not comment on the current market environment adversely impacting financial technology companies, including Shift4. We strongly believe that there remains a disconnect between our growth and our valuation in the public markets. We have generated superior growth and are on track to deliver over 30% revenue growth and over 50% adjusted EBITDA growth this year and expect to generate over $100 million of adjusted free cash flow. Despite these results and unparalleled performance during a completely unforeseen pandemic we still trade well below what I believe to be our intrinsic value. Some will view these comments as self-serving, but I challenged our company to thoroughly evaluate the cost of being a public company against this backdrop. We view our strategic initiatives, customer wins and operational tactics as highly valuable and even more so during times of economic uncertainty. Sharing them regularly is just one example of the unnecessary headwinds we face. So with that let me turn this call over to our President and Chief Strategy Officer, Taylor Lauber Taylor.

Thanks, Jared and good morning everyone. I will focus my prepared remarks on how we see our volumes trending for the balance of the year, an update on our acquisitions, and then some additional color on our major strategic initiatives, which is primarily our Gateway Sunset initiative. Our previously provided volume guidance for this year assumed a modest recovery in international and business travel and $3 billion of contribution from the new verticals, such as nonprofits, Starlink, gaming and sports and entertainment venues. We are benefiting from the ongoing resumption of travel evidenced by the sequential improvement in our lodging volume CAGR, although the volume contribution from our new verticals had initially been slower to ramp than we would have predicted. This is both a benefit and a detriment. A detriment because we’d always like to see the volume sooner than the benefit because the work is complex and with the complexity comes barriers to entry for our competition. Said more simply, the longer it takes the more confident we are in our competitive positioning. This is all to say that we are optimistic for our success in net verticals, but still somewhat cautious in the macro environment. We did witnessed the typical seasonal uptick in volume throughout the quarter and into the month of July. Our hotel volumes continued to grow meaningfully month over month and we continue to add new hotels at a decent clip. Our volume trends throughout July were consistent with our expectations, but we remain cautious on predicting volume trends for the balance of the year given the uncertainty around consumers reaction to persistent inflation and rising interest rates. We do believe that consumers will ultimately pull back on discretionary spending if food and fuel prices remain high, but predicting how and when behaviors change remains something we believe everyone is struggling with. We are leaving our volume forecast unchanged for 2022 and despite the delay in new verticals we find it very encouraging that the contribution from these verticals is starting to ramp up nicely. Turning to acquisitions, we closed on the acquisition the Giving Block on February 28 of this year and are working through the necessary European regulatory approvals for a fourth quarter close of Finaro. In regards to the Giving Block the ongoing volatility in the crypto space has not altered our initial view that our right to win in the nonprofit space has improved by owning the Giving Block. And going to market with a differentiated offering that includes crypto acceptance provides us with a unique advantage. As you recall, we intentionally structured the transaction with a significant portion being tied to revenue targets in order to insulate the many shocks in the crypto markets. In short, we believe that we are very well protected on our initial investment and the business continues to operate at breakeven. Nonprofits continue to get added to the Giving Block’s platform, all of whom are paying SaaS revenues. The customer count is growing and we remain cautiously optimistic heading into the end of the year as the majority of donations occur during the fourth quarter and in December, more specifically. In the meantime, we continue to execute on the $45 billion cross-sell opportunity and our improving the product every day, including adding the online widget, which Jared mentioned earlier. For Finaro, we are pleased with our ability to deliver a cross-border solution for global e-commerce merchants and have successfully completed testing transactions between the US and Europe. As Jared highlighted, we will begin processing US e-commerce transactions for SkatePro, Kiwi.com, as well as European transactions for Starlink later this year and are in discussions with many more. As a reminder, we are not including any contribution from the acquisitions in our guidance, but do anticipate a positive contribution in 2023. We are leaving our expected 2023 adjusted EBITDA and volume contribution for both scenario and the Giving Block unchanged. As a reminder, for Finaro we anticipate $15 billion of end-to-end payment volume and roughly $30 million of adjusted EBITDA contribution. And for the Giving Block we anticipate roughly $5 million of adjusted EBITDA contribution. As mentioned in May, we embarked on our Gateway Sunset strategy during Q2. You will recall that this strategy is comprised of numerous short and long-term benefits to the company. It is designed to grow revenues, add end-to-end merchants and reduce operational inefficiencies. The pandemic slowed our business in many ways, not the least of which was delaying the implementation of these plans until just now. Our plan involves limiting our gateway only offering, deprecating legacy connections and accelerating end-to-end convergence. Our process has been good having identified roughly $4 billion on such connections and already converted approximately $700 million of that $4 billion. We have also increased pricing which more appropriately assign value for the critical services we're providing as a gateway. Another notable event during the quarter is the increased opportunities with regard to M&A. We've been patient with our capital and suspect that this patients will be well rewarded as we look to execute interesting growth catalysts. As Nancy is in the process of on-boarding to become our new CFO effective tomorrow, I will review the financial performance for the quarter. Q2 gross revenues were $507 million, up 44% from the same quarter last year. Gross revenues less network fees were $183 million, an increase of 34% over the last year. Our revenue growth breaks down as follows. First, 43% year-over-year increase in net processing revenues driven by year-over-year growth in end-to-end volume. Second, a 25% increase in our SaaS and other revenue stream, driven by higher merchant counts in our high growth core and expansion into new verticals. And finally, our gateway revenue stream was roughly flat year-over-year as a function of decreased transaction accounts from the gateway conversion I mentioned earlier, offset by a partial quarter of our recently launched Gateway Sunset strategy. Spreads for the quarter came in at 78 basis points, which is consistent with what we reported for the same period last year. Similar to our discussion last quarter Q2 of ‘21 spreads were depressed approximately 2 basis points because of higher debit mix from the issuance of last year's government stimulus. This is evidenced by our interchange rate, which has increased from 182 basis points in Q2 last year to a more typical 192 basis points this quarter. When adjusting for card mix, spreads in the second quarter of this year declined by approximately 2 basis points year-over-year. This is expected as we continue to expand larger merchants and new verticals. For the quarter, we reported adjusted EBITDA of $66 million, which is up 45% over the same quarter last year. The resulting adjusted EBITDA margin for the quarter was 36%, which represents a 270 basis points of margin expansion over the same period last year. I want to note that we are continuing to invest methodically into our growth strategy, while delivering this margin expansion. Adjusted free cash flow in the quarter was $16.4 million, which compares to a nearly neutral free cash flow position for the same period last year. It's worth noting that Q2 also includes a semi-annual interest payment of roughly $10.4 million, which can distort the quarterly comparisons. And in that regard, it makes Q2 look even more favorable for this quarter. The current quarter result brings year-to-date cash flow to just over $30 million, which equates to a free cash flow conversion percentage of roughly 27%. A full reconciliation of the adjusted free cash flow is available in the appendix of our earnings materials. And then with respect to capital transactions within the quarter between April 1 and June 30, we repurchased approximately 3.6 million shares. Our buyback program has cumulative purchased 4.3 million shares. And as Jared mentioned, we continue to believe the stock is meaningfully below the intrinsic value of the company. You can also see a reconciliation of our shares in the back of our earnings materials. You will note that our guidance reflects both the cautious outlook on the consumer, but also a significant optimism in the performance of our business during the second half of the year. We believe that the Gateway Sunset strategy and early indicators for SkyTab and new verticals warrant a modest increase in our gross revenue less network fee outlook and are increasing our guidance range to $690 million to $710 million, up from $675 million to $705 million previously. We are also increasing our full-year guidance on adjusted EBITDA to $255 million to $265 million, up from $240 million to $250 million previously. Finally, we are reaffirming our previously discussed free cash flow conversion rate of 35% to 40%, but do expect full year free cash flow conversion to land towards the upper end of that range. Lastly, I'd like to welcome Nancy to our first earnings call.

Thanks. Taylor. I've had the privilege of watching Shift4 from my seat as a Board member and couldn't be more excited to join and expands on the great foundation Brad has built in the finance organization. I also look forward to getting to spend time with our shareholders and analysts in the coming weeks.

And with that, Alex, we can turn it to questions.

Thank you. [Operator Instruction] Our first question for today comes from Ashwin Shirvaikar from Citi. Ashwin, your line is now open. Sorry Ashwin, we're not receiving any audio. Your line is now open.

Hey, sorry about that. Can you hear me now?

Yes. We got it. Yes.

I wanted to ask with regards to gateway conversions, are you seeing success maybe in any particular end markets. Now, obviously, you've had this arrow in your cooler for some time. Maybe could you review what's different now in terms of client receptivity and if there is economic weakness would gateway conversions accelerate?

Yeah. I's a great question, and I think -- thank you for asking it, because I think it's worth kind of re-emphasizing exactly where we are in this trajectory, right? While we've had a ton of success adding end-to-end payment volume from restaurants and hotels through the pandemic, the reality is, this is not at the top of restaurant and hotel operators minds during the pandemic. So I think our actions on the gateway have kind of increased the mind share that we have within these merchants minds through the quarter. And I think it's appropriate given where we are towards the end of this pandemic cycle that we've been realizing. In terms of success, now we highlighted a few examples just to show how diversified it is. We won some interesting health-care opportunities, we had our Board meeting at Langham in Chicago, which is a beautiful hotel that we won as a result of these efforts. It's really a function of which connections we've been prioritizing and how we're attacking those. The case study I cited in my remarks was identifying roughly $4 billion on connections, but quite frankly it’s been around very long time and need to be deprecated and winning $700 million of annualized volume through just targeting those connections for discussions in the course of about a month and a half. So we feel good about our success rate. We are approaching it methodically given kind of exactly where we are in the economic cycle. And in terms of the receptivity, I don't think a downturn in kind of the broader economic cycle diminishes this. And in fact, I think it increases our merchants desire to seek out kind of the most cost-effective solutions. I think every business operator we talk to right now is thinking longer and harder about expenses and this is a more efficient solution economically. So we don't think that while the consumer -- slowdown of consumer spending could obviously decreased volume per merchant. We don't think it would slow down this initiative.

Yeah. Hey, Ashwin, Jared here. Just to kind of hone in on the specifics of kind of what verticals in the gateway we're getting traction with. I mean, you can really see it in terms of lodging, right? And that makes sense, because I think, and I'm just going to give some approximate here. At one point in time we communicated that we believe across our gateways that we touch approximately 40% of the hotel lodging volume in this country. But from an end to end perspective, we've also communicated in the last quarter that we’re approximately 10%. So there is a big gap between 10% and 40% that we think is -- it's easily accessible for us since we're already driving that commerce experience. And to Taylor point, when they move over to our end-to-end platform they are generally getting a lower cost of service. Now, hotel customers were not easy to pursue during the pandemic, many of them furloughed their IT departments, they had a lot of other priorities they needed to think about other than migrating their kind of commerce provider. So long way of saying right now that we're having a lot of success winning lodging customers, we have a long way to go. Customers that are again very easily accessible very easy for us to address. So even in the event there was -- there were to be some sort of a slowdown in travel and hospitality. The lift from -- the gross profit lift from that gateway customer moving to end to end is what's going to enable us to grow even if certain economic circumstances were to change this year, which is completely consistent with how we were able to grow during the pandemic when every one of our end markets was incredibly depressed and we still grew end to end payment volume by double digits. So I think lodging is definitely within our high growth core area where we're going to continue to have a ton of traction throughout this year and into years ahead.

Got it. Thank you for that. And then the other question was volume contribution from new verticals. As we think of modeling the rest of the year and maybe a point question on one specific client Allegiant. It's one client, but it is a measurable client, was that in your outlook previously, the specific timing or has that timing also had changed?

Well, so we never gave any real specific customer targets in terms of volume. I mean, we might have given some approximations of what we thought they could represent at the Investor Day last year. We generally in our bridge said in 2022 we're expecting a contribution of about $3 billion in end-to-end volume from our new verticals. So I'm sure, I mean, if you were to look up what Allegiant Airlines represent as a standalone customer relative to that $3 billion, you could say it's a big portion of it. At the same time there is a lot of other customers in there that are monsters. The idea was always that $3 billion target for 2022 and new verticals was to be viewed as conservative, no matter which direction you looked at it from the stadium side, from the Starlink side from Allegiant side. So I guess, probably the real message that we are trying to communicate this quarter is that, integrations take a long time, it's largely dependent on third-party software companies that are powering e-commerce solution or the time that an enterprise customers willing to commit to work through an integration. So it did take a little bit longer, but they have essentially come online with the exception of Allegiant in literally the last week of the second quarter and it's now ramping pretty quickly as you can see from July. So whether Allegiant is delayed a week or not, whether Starlink is more than people would have expected or whether it's NCAA or NFL like they're all going to be pretty meaningful contributors. You kind of just choose your own adventure, which one kind of carries the bulk of the weight in the second half of the year.

Right. Thanks. But basically the $3 billion is still a decent number and we can take that -- traction into next year.

For sure. Allegiant is a big number, but I'd say, I mean, you look at the NCAA stadiums, the NFL stadiums we now have that we didn't have before Starlink. Even we said BetMGM is ramping up significantly, we added several stages this week alone. So I guess I'm saying -- in terms of that $3 million -- $3 billion bridge in new verticals and certainly whenever they represent going into 2023, Allegiant is a nice part of it so as everything else, like they're all really beginning to fire.

Understood. Got it. Thank you, guys.

Thank you.

Thank you. Our next question comes from Tim Chiodo from Credit Suisse. Tim, your line is now open.

Great. Thanks a lot. Good morning everyone. So I think Jared really hit on it in terms of Shift4’s ability to have an idiosyncratic driver, essentially despite the macro. Given all the macro uncertainty I think that investors are even more focused on the gateway conversion opportunity for Shift 4 than ever. So to that point, I think, Ashwin's question really hit on it, but maybe as a follow-up, maybe you could just recap again the various approaches that you can take, so there's this cost that you have to maintain those connections. Of course, one is the sunset approach, but there's also a sort of the quicker price increase, there is the slower price increase and maybe some other initiatives that you're doing to help better monetize overall, even if it's not a full conversion. Maybe you could just provide some additional context on maybe the mix of those approaches.

Yeah, sure. Hopefully, you also picked up on Jared’s comments around us being slightly hesitant to explain our detailed strategies in real environments like this, but I'll give you the broad brushes and you capture the essence of it right, which is that, there are significant operational efficiencies to our organization for simply being less of a gateway and then there are significant revenue opportunities for us converting merchants to end to end and we balance those two approaches all the time. So the first and I would say the softest of the approaches that we limited a series of activities that were related to our gateway only customers. These are services that independent gateways would traditionally provide like moving from one processor to another. We limited those functions and stayed several hundred cycles for our operations team every single month, that's an immediate win. And quite frankly pretty low friction to all of our existing customers. We also identified roughly $4 billion of connections that quite frankly should have been sun setted longer, we had identified these connections in the end of 2019 when we acquired Merchant Link and it would have been in appropriate in our view to do so during the kind of peak of the pandemic. So that compelled a really nice wave of merchants to move over and it simply provide them notice that these connections won’t stick around for a period of time. I think we spoke about them at a lunch you hosted as well. On separate from that we have identified certain categories of merchants that are non-economic and we just won't maintain that relationship in that context. In almost every case that resulted in a nice and meaningful revenue lift from that basket of customers and we'll continue to do that as the initiative moves on.

Yeah. Jared here. I mean there's so much to talk about with respect to the Gateway Sunset initiative. And just the gateway conversion strategy in general, which really affords us a pretty unique right to win relative to others that kind of happy what they go out there. I'd say, first, as part of Gateway Sunset it's probably worthwhile to reinforce that one of our gateways that we acquired in late 2019 , it was a joint venture between two of the largest payment companies in the world. And they intentionally underpriced many of the customers on that platform in order to kind of capture the economics upstream of the gateway at one of those two financial institutions. I mean, almost to a ridiculous level. So just the fact that those agreements, some of them are dated 10, 15 years old, but they are absolutely enormous customers are coming up for renewal. It's kind of a time to have a reset of what actually is the kind of fair value for the service that's being provided and what it's doing, it's stimulating conversations on our end-to-end platform that had we not taken this approach would never -- would never have happened. I also want to go to the complete other end of the spectrum, which is not just kind of the stick base, but care base. The PCI Council out there does a great service for us. Every four or five years they pretty much declared that every EMV contactless device that's deployed in the country is no longer compliant in which case every one of the customers is forced to consider a pretty large capital outlay. Now, we have always leaned in heavy in terms of the inventory we're willing to carry for EMV devices. We have our own PCI validated key injection facility. So we maintain chain of custody of those devices, because we know at any given time you could have a very large several hundred location customer decide to move to our end-to-end platform and we want to light them up rather quick. So constantly hotels, large restaurants, even specialty retailers on our platform are coming up on decision points to replace those devices. We become the easy button. We can just encrypt them, we can deploy them. As you know, we provide them at no cost as an inducement to move to our end-to-end platform. So it lines up saving that customer the initial capital outlay plus the ongoing cost of service is less by moving to our end to end. I just want to reinforce that the tariff that have helped us win and convert gateway customers for five years now are still driving a lot of the -- still driving a ton of the action that's going on in our gateway to end to end conversion process.

Thank you for that Jared and Taylor. And congratulations to Nancy.

Thank you. Our next question comes from Andrew Bauch of SMBC Nikko Americas. Andrew, your line is now open.

Hey, good morning, guys and thanks for taking my question. Wanted to touch upon some of the guidance here, it's suggesting gross profit margins for the full year being at 65% of net revenues, it implies a pretty steep ramp in the back half of the year. So could you just give us additional color on how we should think about that and what are the key drivers there in the line items?

Yes, sure. This is Taylor. I'll cover that. I think the bulk of it comes from what we've witnessed in the early days. Our Gateway Sunset initiatives, as Jared mentioned in his scripted remarks, we're also incrementally positive and quite frankly, notably so on what we've got going with SkyTab POS as well. So those are the two most significant drivers of those two. We've got some contribution from new verticals as well, so that's going to ramp. But I would stick to those first to seeing a lot of starts.

Is that exit rates like a level that we should be modeling kind of in the out years?

I don't -- I think it's too soon to predict that. I think that we feel highly confident in the end of the year. As you know, our success in new verticals can blend down our spread. And quite frankly, that can be augmented by SaaS success and SkyTab POS. So I think it's just a little bit early to predict what kind of the outer year impact of this is will be coming into the back half of this year, we feel really good about margins

Got it. And if I could just ask one more follow-up for Jared. You are getting a lot of questions around some of your comments on your evaluation being a public company. Could you just give us some additional detail on how you're thinking about that?

Yeah. And in fact, let me just also throw pile on Tailor’s point too on just what these new verticals represent. So it's hard for me not to draw on like the history back to the basement days of the company. But for 18 years, we serve incredibly small customers. Your corner restaurants on main street. Every one of those customers contribute a nice amount of volume, but -- and also a healthy service burden too. I mean we have -- 2000 plus employees now are very close to it in the company. You look at an organization like Adyen, which is a company we in many respects aspire to be. Their margins are very, very high, free cash flow conversion is very, very high, their volumes are very high. They're serving customers like Facebook and Microsoft and Amazon where you're actually going to a considerable amount of volume, but your overhead to support that customer is next to nothing. In fact like every bit of incremental volume could potentially fall to the bottom line. We will look at the direction in our new verticals we're going. We said Time Magazine and their digital subscription business that we announced. I mean, obviously, Starlink is enormous, stadiums are enormous. These represent sometimes hundreds or a thousand small and mid-sized customers and the support burden associated with them is just so much less. It's actually surprising, how many employees we needed for our first $50 billion of end-to-end volume and how many we expect to need for the next $50 million of end to end -- a $1 billion of end-to-end volume. So I just wanted to make that point in terms of -- also as we start to look at the margin profile of the business and its free cash flow conversion going forward. My point on valuation and like -- you don't want to whine in an environment where all asset classes have been absolutely pummeled. But when you look at one point and say the Street is now value -- potentially inside of 10 times next year’s EBITDA, actually effectively even less than that when you take into account now our guidance raise. Again, this was week or so ago when we're assembling our materials on this. You're saying, is the cost of being public company worth it right now. And there is obviously the hard cost that we all know and understand when you make a commitment to be a public company, but then there's kind of a harder to quantify cost that comes with just essentially radical transparency. As a private company we certainly wouldn't want to clue our competitors into our gateway sunset strategy, right? I mean that -- you're basically revealing how you're going to convert up to potentially $200 billion of end-to-end volume. Every success we have on the gateway conversion strategy is a pain. It’s pain to every one of our competitors, right? So at some point when value drops to such an extent you do ask the question, is this a cost we're willing to pay, especially with respect to the transparency obligations that come with being a public company. So I think that was what we were trying to communicate.

No. Really appreciate the insight and congrats on a solid quarter.

Thank you. Our next question comes from Scott Wurtzel of Wolfe Research. Scott. Your line is now open.

Hey, guys. It's Scott on for Darrin here. Thanks for taking my questions. First one I wanted to touch on is just on the net yields. I mean even accounting for some of the normalized sort of debit behavior. I mean these are still only down 2 basis points year-over-year, which I guess is a little bit sort of better than what we had expected historically. So I was just wondering if there was any sort of change to your outlook on the trajectory of yields even as you continue to penetrate larger merchants? Thanks

I'm just going to beat the same drum which is that, we continue to grow into larger and larger merchants and so this is something that the degradation of blended spread is something that our investors should continue to expect a little bit delayed in part because I think we were slower in the new verticals than we'd hope to be in the first half of the year. It hasn't changed our optimism, hasn’t changed our long-term view. In fact our optimism is kind of been bolstered seeing kind of the last week in June and some contribution from those verticals. But that if anything is probably the reason that you've seen kind of spread stay a little bit elevated is that, new vertical contribution

Got it. Thanks guys. And then just a follow-up, just on the digital media vertical, it is interesting to see that win with Time Magazine. Just wonder if you can give a little color on sort of how you entered that vertical, and it's one that we should expect the company to continue to go after going forward?

You know I -- if I was the artist behind the materials, I probably would have just lumped that into sexy tech. So I think that -- let me expand on this a little bit right now. So we've announced some really I think exciting wins, some – on our industry Day last year we didn't deserve but became a great opportunity for us to make investments in international expansion, to build out our payment platform capabilities beyond what would just be expected for a restaurant or a hotel or specialty retail beyond where we've been historically. We've started to get RFPs for surprising customers and it's surprising that I don't think a year or two years ago that I ever would have imagine we'd be able to compete for some of those brands, also not surprising in that without us in the mi they really only had two companies or so to send it to. When you think of those large powerful easily recognizable brand, you're sending it to Adion and Stripe, and maybe you send it to JPM or one of the local banks here, but if you're multinational player and you're looking for that single portal with core capabilities, recurring billing, business intelligence, you're really in the Adion and Stripe landscape and that landscape alone. So I think having some signature wins at Industry Day again about nine months or so ago put us a little bit more on the map. And we've had to make investments in our capabilities in order to support those types of customers. So time is one example of it. There is another one that we weren't allowed to -- there is actually two that we weren't allowed to announce that committed to us this quarter as well. So I'd expect more to land in that general sexy techs camp of, hey there somebody else out there that can compete with some of the big voice. Now, we have a long way to go in terms of international expansion. If somebody needs a solution that's going to serve a couple of hemispheres here, we're not there yet. We've got Finaro, but as we mentioned in our capital allocation strategy, our number one priority is to continue to expand our reach and rails all across the world. And we think in doing so we can get a lot more of those RFPs for those kinds of sexy tech organizations and we're pretty excited about it.

Got it. Thanks guys.

Thank you. Our next question comes from Andrew Jeffrey of Truist Securities. Andrew, your line is now open.

Hi, good morning, appreciate you taking the question. Jared I'd love to hear the ambitions and the aspirations to compete with what I think a lot of people would consider the best payment companies in the world. Along those lines, can you elaborate a little bit on how you think about Shift4 evolving into a true global omni solutions company. I think we're seeing this -- I think more pronounced trend Shopify's certainly, Amazon, you're moving offline into physical point of sale, Adyen, I should say. Can you just sort of elaborate on how Shift4 looks from an omni perspective over the next several years and whether you need different assets, need to do M&A, can you develop all those capabilities internally?

Really, really great question. So, I mean first look there is at a very high level I talk to our team about this all the time. I mean you can $1 build trillion organization very, very organically, controlling your product road map right from the start and I look at that as kind of an Apple model. When you can take an Amazon model where you start with some great things and you're not afraid of some M&A. I say on this knowing that Apple does do a fair amount of M&A these days, but kind of like a pure focus on product evolution versus -- Amazon bought awful lot of --lot of domains and a lot of companies over the years to become like a mega retailer. We look at our path as we start from an incredibly powerful card present payment platform here in the US. That is very hard to do. Nobody created a global commerce platform from a strength of card present period. It's just -- it's so much harder. I mean you can take all of the card brands all across the world in a card-not-present arena without having to navigate the pain points of local debit networks through various EMV and PCI and other encryption certification challenges that exist like sometimes by country. You don't have to worry about any of those things in the card present world -- in card-not-present. So building out like an Adion or Stripe platform globally from a card-not-present and APM Focus world is easier. Now we are way behind on when it comes to international rails relative to those two companies. But we do have the strength of our card present platform, we do have 450 plus integrations that have given us a unique right to win and grow in the US, that will be applicable anywhere in the world. We just need to get those rails and those rails are scarce, it's hard and we're willing to do it inorganically in fact out right stating we're going to do it that way. Finaro is the first. It will not be the last. And I do believe with the organic investments we're making into our portal, our business intelligence product, our recurring billing capability, basically making sure the experience that our big, big name customer that we've mentioned before has a comparable experience to Adion in our portals, while behind the scenes we build out our rails is the path to get us there. But yeah, we have a lot of work to do kind of in our -- in either acquiring and/or building out those rails all across the world, but we're -- we got a great strategy and a great path to get there. So I know it was a long answer, but it's one that we spend an awful lot of time thinking about. We definitely think we're coming from a position of strength within the card present world, but we've got work to do in terms of those international rails.

Helpful. Thank you.

Thank you. Our next question comes from Eugene Simone from Moffatt Nathanson. Eugene, your line is now open.

Hi, good morning guys. Thanks for taking my question. I wanted to come back for a second to total end-to-end payment volume growth. So it’s 43% year-over-year and I'm hearing, obviously, there is still a lot of puts and takes and macro impact that are going on, some recovery from the pandemic, some new kind of macro uncertainty and so I am wondering can you give us hopefully quantitative, but if not qualitative dimension on how much of that rate, that 43% that we see in this quarter depressed by the macro uncertainty headwinds versus what's the normalized trend could be?

Great question, Eugene. I think we haven't gotten too much better at answering it, but what I would suggest is that, we feel like our average merchant is quite healthy and let's ignore Q2 and let's talk about July where we were up nearly double digits over June, which is the most significant ramp we've seen in recent years between the two months. So I think consumer spending is quite healthy. This would be supported by a card brand data all over the place. It would be supported by travel data. So we feel like the consumer is healthy. We just -- we also feel cautious as we have for kind of two quarters now about how that translates into the back half of the year when back to school happens, people -- more and more people go back into the office, et cetera. So we're just increasingly cautious on that regard. Now, ballast being our caution is what we know we've got going on in new verticals, which is, Jared mentioned we're installing a ton of stadiums we did in July in preparation for August. So we feel really good about the contribution from that vertical, as well as all the other verticals that really began to ramp and we haven't wrapped up our Allegiant integration yet. So we're kind of balancing all of those. But I think our view on kind of our average merchants and the consumers is that they are quite healthy up and through this morning.

Got it, got it. Okay, thank you. And then my quick follow-up, Jared, you called out I think in your prepared remarks that the M&A -- additional M&A is something you looking at closely given where the valuations have come down. Could you give us a little bit more color on what would be the examples of assets or capabilities or market that you'll be looking to enter with any potential new move?

Yeah. This probably is such as serious point about like a reluctance we want to convey this information. Yeah. I'm good very comfortable saying though that our priorities are quite consistent with what we laid out back in November. So valuations aside, international expansion and capabilities that help deliver some of the things that Jared talked about to support these new verticals is a heavy emphasis of ours.

Yeah. I mean, just -- this is Jared again to really put stop the point, the number one priority is expanding our reach in our rails to the world. People all over the world want fast internet and we want to make sure we're able to power their payments, their subscription payment literally anywhere else in the world. And if we can do that then we can bring all of the products and integrations that have made us really successful in the US to every other part of the world where they should also find success. The number one kind of capital allocation priority for us right now is to deliver on one of the best customers any payment company could ask for that has an ambitions to play at the same level as in Adion or Strike. The number two priority is if along the way we find anything that is consistent with our past playbook that will allow us to accelerate our kind of end-to-end growth within pretty much the verticals we're already in today. I wouldn't expect us to surprise you with any new verticals where we think we applied some creativity, we might be able to win. I think it's about international expansion in support of an awesome customer and I think it's about finding ways that are consistent with our playbook to accelerate growth in our current verticals.

Got it. Thank you very much.

Thank you. Our next question comes from Chris Brendler of D.A. Davidson. Chris, your line is now open.

Hi thanks. Good morning and congrats on nice results. And I just had quick clarification question if you don't mind, when you took the new verticals and the ramp we're seeing in July, certainly exciting stuff. Is the July more the sexy techs? And just from your comments, it seems like sports entertainment may be the bigger opportunity of all these at least in 2022. I just wanted to confirm that was the case. And just another reason to get excited about football season it sounds like, so just wanted to hear your thoughts on how this ramp in the second half?

Yeah. So I don't want to get too specific on the contribution within each one. The one thing I would say about sports and entertainment is it's not as significant a contributor in July and that seasonality of some of the merchants that we cover. So there just aren't as many events at the locations that were installed that. Contrast that the fall is typically a much better time and we're adding a lot of big name brands, where there's a lot of volume. So we feel good about it, but I don't want to sort of comment on the relative contribution. And if I let Jared comment on it, he won't stop talking. So he loves the sexy techs vertical.

That’s right.

Just on the sports side like it feels like the opportunity that you're capitalizing on there, it's happening faster than I would expect, like these are big large deals and you continue to sign up stadiums, you want to ask the other, is there something different about that business that makes it easier to convert or to sign up? Is it the strength of your product or -- it seems like it's a pretty big undertaking for a sports venue to do this and I keep seeing that announced.

Hi, this is Jared. I can take that one. This was a very specific product that we made, if you recall, I don't know, a little over a year ago, maybe 14, 15 months ago. Based on our observations of what was going on in the sports and entertainment landscape. So if you think about restaurants, for example, if you have a non-integrated terminal or cash registers, you're going to move to a point-of-sale system. Once you move to a point-of-sale system, there has been no like radical changes in terms of how you bring up a cheeseburger. So you're probably going to use it for a really long time until maybe the cost of a windows-based system reach a point where you're ready to reinvest in a new system. Stadiums were different. I think we definitely saw from our early experiences in sports and entertainment stadiums, again, call it two years ago, that there is going to be a massive shift towards mobile ordering that everything is going to be run from the phone. You're going to order your Burger in your beer in your seat and you're not going to have to wait on a concession line stand, you want a jersey or some other merchandise, you're going to order that from your seat or your mobile phone. You're going to walk in, and you're going to pick up your jersey and you're going to walk out. You're not going to wait in the line. You want to make a bet, a first half bet or a second half or real time betting or whatever, you can do it all from your phone. Sports and entertainment stadiums are going to introduce their loyalty and rewards programs to mobile application. So recognizing that we didn't bet on a refresh cycle and stadiums that eventually they're going to -- stadiums are going to move from a micro system or an agility system this into Shift4, it was no, we've got to get in there with a mobile application that's going to do all of this and like really pivot away from kind of a prior generation of tech. And that is paying off, every stadium wants this, it's not an optional thing. I mean, once you go to a stadium ones and you've got everything run off your phone, it's going to feel like you're going back in time to go to stadium that doesn't. So every new kind of press release that comes out just becomes an additional form of motivation for the next stadium to want to get on board. Now, there is a kind of an interesting on season, off season thing that goes on, no one switching during -- when they're league is an action, but as soon as league season ends they kind of all want to sign up and there really is no -- there is no one that's in close second at all in terms of the product capabilities we provide with menu next. So yeah, I mean, we're excited about the traction. I'm personally very pumped about the football season coming up, we've got some of the most exciting teams to watch on TV are now Shift4 customers. So even more reason to tune in on Saturday.

Great. And just one more quick one I get a little late here. Any like guide post your milestones on the Finaro regulatory approvals. Are we close because it seems like little bit more difficult just given the international nature and for the other factors at play at Finaro and it sounds like once you get that regulatory approval, you're going to put the switch in Europe. Does it happen that quickly?

Yes, sure. So there are three jurisdictions that we require approval from. And we have it in two of them. I suspect it's two to three more months maybe four. I don't like to bet on the productivity of European regulators, but we feel really good about the pace and it's consistent with what we laid out at the announcement of the transaction.

Great, thanks. Congrats, guys.

Thank you. Our next question comes from John Davis of Raymond James. John, your line is now open.

Hey, guys. I'll make this one quick. Jared, earlier this year when you guys laid out the guide, you kind of gave us a nice bar chart that showed the walk for your volume for the full year. Obviously, things have changed. If we were to add a bar for kind of macro headwinds, so far kind of what you guys think. Was it safe to say that could be a few billion dollars of volume that you'll have macros stay the same if you would have gotten. Just trying to understand the magnitude of the macro headwinds that are kind of baked into the unchanged volume guide?

Yes. I think we really are -- we're really saying right now that we didn't raise our end to end volume guide for really two factors. One, it was a slow start to the year. We knew just from Omnicron from the get go. So we had work to do there. And two, new verticals did take longer. We did think some of those big names that really began firing in the last week of the quarter would have started a couple of months earlier, right? So that's really the heart of it. High growth core is continuing to do its thing. As Taylor mentioned, July is up nearly double digits month over month. So we have a lot of reason to be optimistic. This is really just being realistic. When we sit around the table, we bring up the fact that the restaurant steaks are $90 or $100. At some point or another in less -- inflation starts to come down at a meaningful rate, you have to assume that some consumers are going to say maybe tonight is not the night to go out for dinner. We have not seen that in the data, which I think is exactly what everybody has heard from all the other card brands from the payment companies, but we're just trying to be realistic about it. If the second half of the year is raging and all the new verticals are firing, well, this is why we get opportunities to check-in with you every quarter to reset expectations.

Okay. Appreciate that, guys.

Thank you. Our final question for today comes from Anita Zirngibl from SIG. Anita, your line is now open.

Hi. Thanks for getting me in. I just had a question on total volumes. I'm not sure if you mentioned it already, but if you could just give some color on how sort of gateway plus end to end volumes are trending? Whether or not you've seen any kind of macro headwinds in that kind of overall volume?

Yes. No, we haven't seen any. And you should -- like the gateway is kind of -- it's got a larger concentration of hotels than even our end to end book. So you would expect that that volume is like reasonably robust right now given what's going on in travel.

Super. Thank you. We have no further questions for today. So I'll hand back to Jared Isaacman for any further remarks.

I really appreciate everyone joining in. I know we talk about the Shift4 way of deleting parts to be more efficient. We'll look at doing that with some of the paragraphs of our script for the next earnings report. But I will say thanks -- we had a lot to talk about, so thanks for kind of bearing with us and we're really, really excited to be sitting here around the stable with Nancy Disman, known her for a long time now, known her reputation even longer. Great addition to the executive team and excited for you to hear from her in the weeks ahead. So thanks again.

Thank you for joining today's call. You may now disconnect.