Good morning or good afternoon. Hello and welcome to the Shift4 3Q 2022 Earnings Call. My name is Adam and I’ll be your operator today. [Operator Instructions] I will now hand over to Tom McCrohan to begin. So Tom, please go ahead when you are ready.

Good morning, and thank you, operator. We welcome you to Shift4’s third quarter earnings conference call. With me on the call today are Jared Isaacman, Shift4's Chief Executive Officer; Taylor Lauber, our President and Chief Strategy Officer; and Nancy Disman, our Chief Financial Officer. 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, quarterly financial results and other materials related to our quarterly results have all 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 results of many important factors. Additional information concerning those factors is available in our most recent reports on Forms 10-K and Form 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?

Thank you, Tom. Good morning, everyone. So, we have a lot to talk about today. We're very pleased with the record results and responsible growth we delivered this quarter, especially in an environment of increasing economic and geopolitical uncertainty. I'm incredibly impressed with the Shift4 team that executed so well on a number of important organic and inorganic initiatives, including closing on an international PSP, releasing SkyTab POS from beta, insourcing some of our best distribution partners, and driving substantial volume growth in our new verticals. Not surprisingly, our high-growth core continued to be the primary driver of our performance, but our new verticals and recently released products are playing an increasingly larger role in our growth, which sets the stage well as we close out 2022 and move into 2023. So, for the third quarter, organically, we generated 53% year-over-year growth in our end-to-end payment volume and 33% year-over-year growth in our gross revenue less network fees. We exceeded 20 billion in quarterly volume for the first time in history and we also achieved quarterly records for all of our KPIs, including adjusted free cash flow. As mentioned, our results benefited from continued strength in our high-growth core, as well as a more meaningful contribution from new verticals, which includes Sports & Entertainment, Gaming and Sexy Tech. Our men's gateway conversion strategy continues to be a reliable source of new wins. And during the quarter, we renewed several enterprise gateway customers on economic terms comparable to our end-to-end offering. This is one component of our previously announced gateway sunset initiative. Additionally, our strategy to deliver a unified and global commerce capability is well underway and we expanded our international and e-commerce capabilities this quarter, which I'll speak to in just a minute. And as some of you know, we…

Thanks, Jared, and good morning, everyone. I will focus my remarks on our recent volume trends, an update on our acquisition strategy, and then provide some additional color on our gateway sunset initiative. As a reminder, our previously provided guidance – 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 non-profits, gaming, and our strategic merchant relationship, as well as sports & and entertainment venues. We benefited from the ongoing resumption of travel throughout the summer months and saw a sequential improvement in our lodging volume growth. As expected, hotel volume moderated seasonally in September, but still remains quite strong on a year-over-year basis. In addition, our volume benefited from incremental contributions from new verticals, notably gaming, sports & entertainment venues, and a strategic customer that we disclosed previously alongside of volume contributions from our gateway sunset project. With our new verticals beginning to ramp, the volume trends into the fourth quarter remain highly encouraging and informed our decision to ultimately increase our volume guidance despite continued macro concerns. We are on track to end the year with over 50% end-to-end volume growth. Our work is not complete in new verticals and we continue to execute on complex integrations that will provide important barriers to entry once complete. Some of our new enterprise accounts such as Allegiants have still not begun processing and we anticipate – will begin processing later this month. We believe the combination of new verticals ramping, several material enterprise relationships, international expansion, and of course SkyTab POS sets us up very well heading into the next year to sustain these levels of organic growth. We do continue to believe that consumers will ultimately pull back on discretionary spending if food…

Thanks, Taylor, and good morning, everyone. Before I turn to our financial results, you may have seen that we filed an 8-K on October 21, and will be filing amended financial statements this week to correct a misclassification on our statement of cash flows relating to customer acquisition costs. While unfortunate, this restatement does not reflect any change in the underlying health and performance of our business. This restatement has no impact on any of our previously reported key business indicators, including free cash flow. We hope the contents of the restated filings, the strong performance this quarter, and our positively revised guidance reinforce the strength of the company and our outlook. In the third quarter, we delivered record results while continuing to accelerate our strategic priorities. Total Q3 volume of 20.6 billion, grew 53%, compared to the same period last year. Q3 gross revenues were 547.3 million, up 45% from the same quarter last year, and gross revenue less network fees were 196.7 million, an increase of 33% over last year. Results were driven by the continued strength of our high growth core, the improving economics we are earning from our gateway customers and the increasing contribution of our new verticals. Given the growth in our new verticals alongside disclosure of limitations and competitive sensitivities, we are only providing spreads for our high growth core, which remained very strong at approximately 76 basis points. As we continue to add new enterprise merchants, this spread will continue to compress modestly. For our new verticals, the rapid pace of growth, and sensitive nature of the customers makes quoting spread difficult, although we do expect the spread from these to expand in Q4. The resulting adjusted EBITDA margin for the quarter was 43% representing approximately 580 basis points of margin expansion over…

Thank you, Nancy. Before moving on to Q&A, I just want to reiterate how proud I am of the team's performance this past quarter. So, throughout our 25 plus year history, I've always felt the company performed at its best when times were difficult. This was the case during the Great Recession, during pandemic, and now again as we navigate the uncertain climate ahead. A year ago, nearly all of our revenue and volume was derived entirely from restaurants and hotels within the United States. Now, we are growing very quickly expanding margins and free cash flow, operating successfully now in numerous verticals with processing capabilities in over 40 countries supporting 170 plus APMs. Alongside an incredible team, I feel really fortunate to be playing a role in what is a great shift for a story, [globally forward] [ph]. And with that, operator, let's turn to Q&A.

[Operator Instructions] And our first question today comes from Rayna Kumar from UBS. Rayna , your line is open. Please go ahead.

Good morning. Thanks for taking my question. You gave some really good details on your newer verticals, could you dive in a little bit deeper and discuss the revenue and EBITDA contribution for these newer verticals and how they could trend into next year?

Yes. Hey, Rayna, this is Taylor. Thanks for the question. We tried to throw out a needle here by giving an appropriate amount of detail, but also recognizing that there's some significant strategic relationships and competitive dynamics. So, you'll see some disclosures throughout our upcoming business update materials that talk about the growth in that contribution, but we're not going to be disclosing the explicit volume at the time being. You will see those sequential growth in the materials that you can get a sense for what it's doing on a quarter-over-quarter basis. Jared, I don't know if you want to give some perspective on how you think it will play out in 2023?

Yes, I mean, we did include in our prepared remarks that we do expect our spreads to expand in the fourth quarter within our new verticals and from our strategic customer relationships. So, as Taylor mentioned, I think as new verticals and our strategic customer relationship becomes a bigger contributor to the business, there is greater sensitivity, not just from a competitive perspective, but very confidentiality specifics with respect to certain customers. So, yes, I think the idea is, we want to be able to signal to you the contribution from these new verticals and how it's growing quickly and the fact that the spreads associated with them will continue to expand, but we can't probably go into too many details beyond that.

I'd say, just the last piece is that we do still have merchants that we've disclosed previously that aren't contributing yet. So, our optimism is quite high. If you, kind of followed our narrative throughout the year was slower than we had expected in terms of getting integration work completed and then volume to begin. We're quite pleased with the pace of volume now, and quite frankly even more pleased when you consider the fact that there's merchants that aren't yet contributing.

Got it. And then that's very helpful. And then on SkyTab your sales distribution is 50% direct and 50% third-party, how should we think about that number evolving over time? Do you expect most of this to go towards direct distribution?

I think we're in a pretty good spot now. I don't know if you looked through the earnings or the full presentation that we'll be reviewing later today, which kind of shows you how our distribution coverage evolved over the quarter from 100% third-party to about 50/50. There are still coverage gaps on the West Coast that we're going to look to solve. But I think what you have right now is a pretty good balance. SkyTab is an amazing product. It's going to win – by having a direct sales approach in key markets where we're very confident in the growth trajectory of the business, we're able to eliminate a long-term residual expense that’s going to be associated with those new wins, which really improves our unit economic model and paybacks. But in the more sparsely populated areas of the country, we're less inclined to, kind of take on that fixed cost overhead of a direct sales force like we've done in the more populated markets. In which case, they're able to have success distributing our product and also providing a lot of other services that we wouldn't normally want to offer. So, we think it was like a really great move at the right time to support our product, but we're going to keep evaluating and we're going to keep closing coverage gaps because this is the right direction for this product.

Great. Thank you.

The next question comes from Darrin Peller from Wolfe Research. Darrin, please go ahead. Your line is open.

Hey, guys. Thanks. Nice results. I mean, as you said, there's a lot of items that you have control over to help your volume almost regardless of the macro environment. And so, if we could just take a step back and look at the quarter and the outlook for fourth quarter even, when we think about what drove, whether it's gateway conversion organic wins, what actually drove the success in volume this quarter and what you're seeing into next quarter? And then are you seeing any – and what I mean by that is really if you can parse-out the gateway, the controlled gateway conversions and other variables? And are you seeing any change in the consumer behavior in any of your vertical yet that is something worrisome or is it just – you talk a lot about it in, sort of all merchants merchant acquirers these days about the pending change in demand, obviously? So, what are you seeing there if you don't mind?

Yes. Thanks, Darrin. I mean, good questions. For starters, I mean, the majority of the growth in the quarter was absolutely within the high-growth core. So - and I'd say, that's normally driven 50% by new – just pure net new customer wins leveraging our software integrations in a really awesome addressable market and the other 50% is usually gateway conversion. We do have an active gateway sunset project underway. So, you're getting all the typical gateway conversions you would have otherwise had and then you're probably pulling forward a little bit more as a result of that very targeted initiative. So that for sure is like the lion's share of the quarter. Next, I mean, you've seen new vertical growth each quarter, but for sure, I mean, this was a quarter with a big contribution from our new verticals kicking in, which is great because that is, as I mentioned in our prepared remarks, it's moderating what would otherwise be a seasonal low kicking in from your restaurant hospitality customers. In terms of, kind of the health of the consumer right now, I think that we've taken a position since the beginning of the year, Taylor, especially probably to our own detriment kind of sounding the alarm in the first quarter before anyone else that’s like we don't think the $90 stakes are going to last forever. And I'd say it's not overwhelmingly clear right now that that is the case because you are moving into a seasonal low period anyway within those verticals. What I will say is that we positioned the business very, very well to perform and grow even if there is a slowdown in consumer spending. I think we've demonstrated that throughout our history. That's kind of what we know how to do in challenging times, I think this quarter represents that really well. And the fact that we can always draw upon our existing basic gateway customers or existing base of software customers and the contributions of our new verticals is what's going to help us navigate if that eventual consumer slowdown should be realized.

All right. That's really helpful, Jared. Just one quick follow-up is on profitability. And in the context of the market we're in, which is our focus on both free cash and EBITDA, it's great to see the results on the EBITDA margin side as well as free cash conversion now. So, maybe just remind us, I know there was a little bit of pricing benefit on the gateway side or what are the other key variables that really have been driving the strength you're seeing now and what your view is on sustainability there in terms of levers and operating leverage?

Yes, I think that's a good question. I mean, at the beginning of the year when it became, kind of clear that we were definitely going to be navigating a different climate. I kind of came out and said, look, in 2021 and just a period of immense exuberance in euphoria in the market, it was almost head scratching. We raised a lot of capital. We didn't deploy it because it just seemed like a very unusual time period and this year makes a lot more sense to us. So, I think you achieve this kind of profitability in margin expansion by recognizing the climate you're in. Having been there before, I can't emphasize that enough that we are experienced in good market downturns. And kind of prioritizing your firepower on real needle movers. So, well timed investments in SkyTab POS, a cloud-based solution that allows you to have a more direct sales approach. So that can eliminate some ongoing residual expense and future residual expense. Certainly, you take on a lot of fixed overhead. We increased the headcount of the organization by 15% alongside that initiative. So, not all benefit, you take on some expense along the way. We have a very large population of gateway volume. I mean, I think we previously stated well north of 150 billion in volume. It's a lot of volume that wasn't being properly monetized because it wasn't appropriate to do so during a pandemic. That improves free cash flows and margins. Vertical, we've entered into is predominantly a direct sales effort that doesn't have a big – it doesn't have a residual expense associated with it. And it's also a lower cost in terms of hardware contribution and lower overhead. I mean, it's probably the same one or two support people that maintain 10 stadiums, maintain a thousand restaurants. So, literally everything we've been doing from the beginning of the year has been designed to expand margins and free cash flow is kind of the responsible thing to do going into this climate. We think it's incredibly sustainable.

That's great. Thanks, Jared.

The next question comes from Timothy Chiodo from Credit Suisse. Timothy, your line is open. Please go ahead.

Great. Thank you. A couple of things I just wanted to recap in terms of mechanics. So, in terms of the 268.2 in terms of the residual commission buyouts, the in-sourcing that you were referring to. So, my understanding would be that there is no end-to-end volume impact from that, and no gross revenue impact. However, there would be a reduced pay-away, i.e. the cost of goods sold would be lower, therefore, gross profit higher and EBITDA higher. If you could just quantify and just confirm if those mechanics are roughly accurate and what the impact to gross profit or EBITDA would be either for Q4 or in the out years on an annualized basis? That would be very helpful. And then I have a follow-up on Q4 as well?

Yes. Hi, it's Nancy. You've got that exactly right. I mean, we're not going to, kind of pick that apart as we think about Q4. The one thing I would, kind of add into that mechanics is what Jared just talked about. Obviously, we do have some offset because we just grossed up this wasn't – I wouldn't call this simply a residual buyout mechanism, right? This was really in-sourcing of distribution for us. So, we did see an offset on the SG&A side as we build-out the internal sales force, but generally, I think the mechanics as you've justified them are appropriate.

Okay, great. Thank you. And then two minor kind of numbers ones. The first one would be for Q4. So, for the smaller acquisition, you mentioned the European tuck-in PSP, could you disclose how much revenue is in the Q4 guide associated with that roughly?

No. Go ahead, Taylor.

We haven't disclosed that.

Okay. All right. No problem. And then the last one is, the gateway fees, I know it's a little bit harder to get to this quarter because the spread that you've given on end-to-end is for the core only, it looks like maybe the gateway fees were a little bit different this quarter or maybe there's a mechanical difference. Could you just disclosed what the gateway fees were this quarter and if there's any mechanical change that we should be aware of?

Yes. So, we haven't disclosed the gateway fees in this quarter. And part of this is Jared’s commentary and Nancy's through the scripted remarks around being able to [back into the] [ph] spread. It's just too sensitive to competitive environment to disclose those. What I would say is gateway [fees rose] [ph]. Inside of the quarter, we talked about that pretty extensively even back on our Q2 call with some of the actions that we had during the gateway sunset initiative, but the quantum and how that interplays with the new vertical contribution is something we're not going to disclose this time.

Thank you. Totally appreciate that. Directional is more than helpful and the rise is – it's completely aligned with what you're saying there. So, I completely respect the fact that you can't give that number. Thanks for taking all those.

No worries. Thank you.

The next question comes from Andrew Bauch from SMBC. Andrew, your line is open. Please go ahead.

Hey, guys. Thanks for taking the question. Just wanted to talk about your philosophy around the gateway sunset strategy? And I know that in the past like during the pandemic you had called out a more sensitivity to merchant challenges and maybe taking a more cautioned approach and how you, kind of incentivize merchants to convert to full stack? I mean, as we kind of get into a more challenged economic environment, is there any pivot that you, kind of see on the horizon is how aggressive you do want to go about the sunset strategy?

Yes, I mean, Jared here. Thanks for the question. I'll try and answer that a little bit. I think even aggressive sounds like a pretty strong word. I mean throughout the entire pandemic, given the fact that our gateway customers are phenomenally restaurants and hotels, it was an entirely carrot-first approach. All those carrots remain. I'd say that the reason that we're introducing some sticks and it actually, kind of dates back to the history of these gateway platforms. One of which that we acquired from a joint venture between JPMorgan and Chase was intentionally run at a loss in order to monetize upstream from the JV. These agreements are rolling off their years without any proper price adjustments. And in reality, you're not even being remotely rewarded. You're capturing the smallest portion of the payment economics for what is the bulk of the value, which is the software integration, the tokenization, the encryption, the business intelligence. So, I'd say like the idea is, we are gradually, I mean, can't emphasize enough, feel like in the first inning associated with this, re-pricing those accounts at contract renewals, to more appropriately reward or compensate the company for the value we're delivering through our service. That said, we have all our same standard carrot offerings out there. We wait gateways if you move to our end-to-end platform. We upgrade your hardware to support mobile payments, Apple Pay, contactless payments, we provide our handheld devices to have an improved operational efficiencies and venues. So, all of the carrots remain. It's just we've reached a time period now where we got to take out some of the parts that have existed on these platforms for decades. We have free-up some of our internal resources to invest and build the future payment platform that should take us all over the world and just be properly rewarded for our service. So, I'd say that's all under way, but I would hardly use the word aggressive. I think it's pretty early days there.

No, no, I can appreciate that. Just wanted to touch upon the software side of the business. I mean, another straight quarter of really positive trends in that business. Thinking about it in the medium-term perspective, is there a likelihood that you kind of get to a growth rate within that side of the business that matches what you see on the end-to-end side? Just want to think about the longer-term modeling of that, particularly as you add more functionality with SkyTab and others?

I mean, there's no question that SaaS-related revenues are only going to increase. I mean, one of our acquisitions, the [giving clock] [ph] is predominantly driving SaaS revenue growth as non-profits really all over the world join the platform for accepting, you know, crypto-based donations. SkyTab POS, I mean, as we consolidate four legacy software brands around SkyTab, the only way you get the solution is with a SaaS subscription plus payments, which is pretty meaningful lift considering about 85% of our restaurant customers today don't pay really any SaaS fees whatsoever. All of the progress we're making in our sports & entertainment for sure comes with payments related revenue, but every one of our sports and entertainment venues and theme parks is paying SaaS revenue. So, yes, I mean, I think like end-to-end volume is pretty straightforward and easy to understand. I think across our Gateway business and our SaaS business, you definitely will have a real kind of ARPU expansion dynamic taking place over the years ahead.

Got it. And congrats on a nice set of results guys.

Thank you.

The next question comes from Ashwin Shirvaikar from Citi Group. Ashwin, your line is open. Please go ahead.

Thank you. Good quarter. Congratulations. And, Nancy, welcome. I know you officially came before 2Q, but welcome. I guess one differentiation for you guys has always been the software integrations in the call. Can you [speak with] [ph] how this process is happening in new verticals? Is there a timeline and also an investment cycle that we should think about?

Ashwin, hey, it’s Jared. Thanks for the question. Well, first, let me kind of break it apart between high growth core and our new verticals. So, high growth core, I mean, we're really lucky it is rather easy to continue to add and refresh new software integrations within high growth because I mean, we have a lot of share of the verticals we serve within high growth core. So, every new software company that develops the next cloud-based hotel property management system software or salon and spa software, taking software for – is going to refresh that on our platform. It's how we added about 85 integrations over the last quarter. So, in that respect, that kind of is rather easy. I'll tell you what's really hard is moving into new verticals. I mean, software companies and enterprise merchants would rather do anything other than do another payments integration. So, declaring a year ago at our Analyst Day, hey, we want to move into non-profits because there's a $450 billion payment opportunity there and it's – they use tons of different software that doesn't talk to each other and this is like, kind of what we do really well within the hospitality vertical. It's been hard. And I'll tell you that we had expectations to be delivering volume from our new verticals a quarter ago. And it was delayed and now you start seeing it today. And even as I think impressive as our volume growth was this quarter, we still don't have region or time processing yet. So, I'd say, like, in general, integrated payments is hard, and we are fortunate to be advantaged within our high growth core and we're making awesome progress, thanks to some signature wins, anchored customers, and new verticals that's helping us grow. The nice thing is, once you have those integrations, they essentially become a hunting license within every one of those verticals. Once you get one sexy tech customer it attracts the interest of others and you can reuse some of the integration work, the same with airlines. This is certainly the same with gaming and non-profit. So, really happy with the results in there and actually especially the European PSP we acquired this past quarter. I mean their whole emphasis is on a very strike like integration current billing [BI type layer] [ph]. That in itself is going to help, you know, take a lot of the friction out of attracting new integrations across our various verticals. So, I think we're set up pretty well for it. We certainly don't have any big CapEx budget for a refresh cycle on the horizon because we think we've actually positioned things quite well for our new verticals.

Got it. Got it. And then on the medium-term outlook, you're keeping that, you know at this point and completely appreciate you're increasing the estimates for this year. You have, I would presume pretty good visibility to what next year should look like in spite of macro, but could you maybe lay out the two-year path of, you know, how you get from where we might end this year to that outlook? Because it does imply in-spite of macro relatively significant growth for all the metrics?

Yes, sure. I would say, we'll start with, we've got a big event later today to talk through kind of our progress in all of the initiatives we had laid out a year ago when we set that guidance. So, I don't want to detract too much from that session except to say that I think we've demonstrated through a bunch of ways that the medium-term guidance is quite achievable. We're a third of the way there with our full-year guidance for 2022 suggesting that we feel like we're going to be nicely set up for how we position the next couple of years ahead. One thing I would say is, it's always a little bit varied in how you think it's going to play out versus how it actually does. And I think that was evidenced by a little bit slower pace in new verticals and yet initiatives like distribution and sourcing and releasing our SkyTab products. and the catch up of those new vertical contributions accelerating through the back half of the year. So a lot to dig into as we meet later today, but we still feel really good about that medium-term guidance.

Yes, I mean, Ashwin just to layer on, I mean, we put out the mid-term outlook at our Analyst Day last year. Pretty much everyone said, it's not achievable at all. Maybe we'll get close, but we're one year into it and I think we're ahead of plan in that regard. That said, for sure, like it is uncertain climate ahead. I think what this quarter should demonstrate is, again, we know how to navigate a tough climate and we have a lot of confidence in our ability to do so. We've accumulated some fantastic assets over the years, but I don't think really our investors fully appreciate. Having essentially owning two of the four complex hospitality and restaurant related gateways with them well in excess of 100 billion of volume as an opportunity set is pretty incredible. And I mean, we have a natural foot in the door across a large share of restaurant hotels in the country. We've got great products. And we've done all this over 20 some odd years entirely in the U.S. And now as of this quarter, have a real ability to take these products and services into other markets. So, for sure, there are going to be things that we won't be able to control on the journey ahead. I think reaffirming our mid-term outlook and the performance in year one should signal a lot of confidence on our ability to achieve it.

Got it. Thank you.

The next question comes from William [indiscernible] from Goldman Sachs. William your line is open. Please go ahead.

Hey, guys. Good morning. Nice set of results this morning. I wanted to ask a little bit about a follow-up question on the SkyTab distribution strategy. Obviously a fairly large shift to go from nearly all third-party distribution to 50% in a single quarter. You mentioned the 15% headcount, just how are you thinking about retraining or reeducating of the sales force to have them, kind of going to market with a modern platform? And I guess maybe higher level 50% direct today? How many more of these in-sourcing deals do you guys think could be in the future?

Yes. Well, so good questions there. I'd say, you know, training everybody on you know, for starters I guess, what a quarter, right? I mean, we increased the headcount in the organization by 15% plus. We brought on about 300 restaurant point-of-sale professional service technicians across the country. I think the good news is, they already know exactly what they're doing. I mean, these are organizations that have been successful with us for as long as we've been in the restaurant POS space and many of them have been successful pursuing restaurant opportunities for literally two generations. So, they know what they're doing. They certainly know who the competitor is out there. I mean, it's Shift4 and Toast. They've been up against that competitor for some time. And now they have a product that really hangs with the best. So, I mean their ability to adapt to SkyTab POS and get out and hit the ground running. It's been actually rather easy. They've been waiting for this opportunity. I think in terms of how much more is there to go, I wouldn't say probably a lot. We tried to really get this done to coincide with the formal launch of SkyTab, which I mean the results over two months are pretty strong. Right now, I think it's much more about closing coverage gaps. So, you know, as you can see in one of the slides that we'll review later, I mean, we're still pretty weak on the West Coast. So, we're going to want to sort that out whether that's organically building up direct sales force? If there's a distribution partner there that we think we can build it around, that's certainly a possibility too. But I think it's much more about coverage gap versus being kind of an ongoing initiative.

Got it. Makes a ton of sense, super helpful. And then maybe just one on the gateway price increases. It seems like you're kind of rolling that out in stages, can you just give us an update on kind of what portion of the roughly $180 billion number that you've pointed to in the past on the gateway has actually gone through that process? And what's the timeline like on, kind of rolling out, kind of across the board increases to that customer set?

Yes, sure. This is also one that warrants a bit more time than we have for quick Q&A. But just to sort of give you the thumbnail, there's kind of three distinct ways we're approaching [this] [ph]. There's connections that just don't make economic sense to maintain, kind of regardless of the economics or at fixed economics that adjusting wouldn't be appropriate and doesn't make sense. Those were being a little bit more aggressive about saying merchants. kind of have to move. There's another population that is a price adjustment on a steady basis makes sense. I think the commentary we've made around that Jared mentioned it briefly on this call as well is that we've implemented some price change, really didn't get much acknowledgment at all from merchants. suggesting there's room to go on there. And then there's a portion of enterprise relationships that are much more bespoke in how you need to approach them. They're large. They've got very distinct needs. And we've had success with those as well, but you approach them in a, sort of a sequential way based on what their agreement terms are. So, we've addressed every single portion of that population. We haven't moved price on all of them. And we haven't broken that down on a volume basis just because it's pretty idiosyncratic with regard to the contribution of enterprise relationships in the volume versus SMB, but all of it is on our list and we've had conversations with a portion, and I think it will feed kind of the growth whether it's end-to-end volume revenue and or both for years ahead as Jared mentioned.

Yes. Maybe just to pile on a little bit to that. I mean, one to give you a sense of how much there is to go? I mean, we've been stating for some time now that you get a 4x to 5x uplift minimum in gross profit when a gateway customer moves to our end-to-end platform. And they usually save money and solve a lot of other pain points along the way. So, it kind of tells you how little. And again, some of this was intentionally by design to the prior owners of the gateway platforms we acquired. How little of the payment economics that are captured by the one organization that actually integrates the technology into the commerce enabling software encrypted, tokenizes it, provides all the business intelligence and gets, like I said, what I consider like virtually nothing of the actual payment economics. So, gives you a little bit of an idea across very large 150 billion plus opportunity there is to go in order to be more properly compensated for that service. The real commodity pricing on it that should be getting the smallest portion is the acquirer behind the scenes that's doing literally just settlement, which any of them can do. In terms of like the progress we've made so far, as Taylor said, like it's pretty surgical. You're going in phases and some of it varies based on the gateway connection or who the customer is, but you're talking about like the equivalency of like an independent hotel generating 10 million plus a year in payment related revenue of paying the equivalents of like a Netflix subscription. So, again, just reinforcing how early stage it is and how far we can still go with that initiative specifically, which is also just driving a lot of end-to-end conversions as well, which is actually the optimal outcome.

Got it. Makes ton of sense. Appreciate taking my questions and looking forward to hearing more about all of this later today.

The next question comes from Roberto Suarez from Evercore ISI. Roberto, please go ahead. Your line is open.

Thank you. Good morning. Appreciate Slide 29 with the SkyTab unit economics. Looking at Slide 27, can you quantify the increase in client retention both with the beta and new customers on SkyTab POS?

We haven't done that explicitly. It's fair to say the retention goes up significantly. And there's a few different variables to that. Number one, Android-based software, you can update remotely, you can push out feature set, significantly. We do think that the in-sourcing of distribution and controlling our customers' destiny that much further also increases retention, but we haven't done us at this analysis only because, you know, the product just launched in September.

Got it. Thanks. And just as a quick follow-up. We heard from a number of global airlines that the seasonal summer strength in travel has continued into the fall. Where are you seeing when you look at the beginning of the fourth quarter in terms of hotels and restaurants? Is that theme carrying through to your customer base?

Yes. In hotels specifically, absolutely. So, if you recall, restaurants took a lot of price lift last year. We've seen their ability to take price lift this year diminish. I think we've been saying that since sort of Q1. Hotels, it's that phenomena, like 2022 is their year, right? So, you still had a really, really robust increase in travel as international restrictions lifted as companies called people back to work. We're seeing those trends continue, probably more so in room rate than actual transaction rate. Hotels can charge a lot for those that want to attend them. So, it's continued nicely into Q4. Again, anyone's guess, if you recall, we have had two years in a row of a sudden slowdown in December. So, we're always skittish. And our commentary around that is to be cautious there, but hotels are robust.

Thanks so much.

The next question comes from James Friedman from SIG. James, please go ahead. Your line is open.

Hi. Thank you. It's Jamie. So, Jared, I wanted to get your perspective or Taylor, about – in terms of Slide 20, the sports & entertainment and gaming, you outlined a lot of the progress you made in sports & entertainment and I hear a lot about your progress in gaming. How do you see the overlap of those two verticals at all?

Yes, Jamie, so Jared. Happy to answer it. I kind of alluded to it a little bit in our – in my prepared remarks. We always thought – well, let me maybe just kind of rewind the clock, right? So, up until a couple of years ago, game, like mobile gaming, [sports wagering] [ph] wasn't even legal in the U.S. So, basically, everybody started from zero. And I think you have a handful of payment companies that are all sprinting towards this new and emerging opportunity, right? And you'd have PaySafe as one that would say, we have a lot of APMs in Europe and that's what gives us relevancy and a right to win in the U.S. market. You'd have [New Bay] [ph], for example, that would say, well, we do all the processing via [Safe Charge] [ph] for all the European payments companies. So that gives us a right to win in this space. And Shift4 would say, well, look, I mean, probably 40% of the in venue casinos in this country are Shift4 customers. And we also are the category leader in sports & entertainment. We think people probably will do a lot of wagers in stadiums during football games and baseball games and basketball games. And if you can, kind of marry the experience or at minimum just provide good analytics as kind of customers move from that casino real [indiscernible] environment to sports and entertainment, to mobile wagering, that probably adds value. And I think, kind of the answer is, is all three of us are finding varying degrees of success in that. And plus you have a lot of customers in the gaming world who will never, you know, their volume with a single provider. They'll certainly split it between the three. So, I think it's working out very well. I totally believe that having our strong presence in stadiums and sports & entertainment venues is a differentiator and helps us win within the gaming vertical.

Thanks for that. And then if I could just ask, when you use that term [Stripe Length] [ph], you may be getting into this at 2 o'clock and Taylor, thanks for showing the dev.shift4.com dashboard, because this is helpful. But what exactly do you mean by that straight Stripe Length?

Yeah. So, it's really self-service for whether it's a software developer, or an enterprise merchant that runs their own e-commerce stack, it's the ability to go without asking anyone a question, without pulling out a bunch of documents, learning how to integrate in an hour as opposed to what's traditionally been the case of payment gateways where it's a discussion, it's an NDA, it's a complex API that doesn't come naturally. So, this platform offers really, really ease of integration and then layers on the complexity that a big e-commerce enterprise merchants can need over time, right, like whether it's supporting multiple processors across different geographies and fraud scrubbing and common reporting against them. So, it's an easy put in the door to understand how transactions work and to build things like recurring billing and some of the things that might be relevant to you as the merchant or software provider. And then it releases, kind of the more extensive features that a growing merchant is going to need all over the world in a very digestible way.

Yes. And Jared here, let me just layer on to this. So, to answer your question, there will absolutely be a demo of the capabilities that you're asking about during the update later today. But maybe to just expand a little bit on what Taylor said, I mean, for more than two decades of our history, everything was about in-venue commerce for Shift4. I mean, that's kind of what really separates us from, you know, the [indiscernible] stripes and the other kind of really pure play integrated payments providers is almost all our customers are having in venue commerce, restaurants, hotels, ski resorts, casinos, stadiums, right? And what is a component of in-venue commerce? It's devices. It's hardware, you know, that has to be encrypted and tokenized and integrate with other software. And as a result, it's kind of a lengthy integration process. When a new hotel property management system software company wants to integrate in Shift4, that process can take a couple months. You've got to make sure the devices are compatible with the software or how we tokenize, how we decrypt, how it interacts with other software in the venue. And that's totally normal for that climate. It is totally abnormal for e-commerce customers, for app developers. They don't want to go through, like, a month long process like that because so much is in applicable to them. This is what's made Stripe so impressive and successful is they just make it incredibly easy on developers who only need like eight things to work really, really well. So, the European PSP that we acquired that already has integrations into the Finaro. So that will unlock a lot of synergies when we close on the Finaro acquisition. It's already integrated Shift4. It takes a customer like, again, hypothetically, the boring company, which was a long-integration process for us. It was probably a month or more. They could complete that same integration literally in a matter of hours leveraging our new e-commerce capabilities. So, that's what we refer to when we say, kind of like Stripe like integration capability.

Got it. Thanks for that.

The final question we have time for today is from Andrew Jeffrey from Truist. Andrew, please go ahead. Your line is open.

Thanks. Appreciate you sneaking me in here at the end. Jared, I think you've touched on this a little bit, but I'd love to hear to, sort of an elaboration venues in particular are pretty important growth driver for Q4 and we hear other processors in the market talking about their venue wins. Can you just elaborate a little bit on what you think Shift4’s right to win is in venue and why you think you can be the dominant provider in that space?

Yes. It's a great question, Andrew. And I think 100% we are the dominant provider in that space. So, we completed an acquisition in the summer of 2021 for a company called VenueNext. VenueNext, you know what attracted us to them is, as they describe, it's a fan first mobile experience. Meaning like the entire, kind of commerce experience that's taking place within the venue is happening on the consumer cell phone. So, that's where they're ordering their food and having it delivered to their seat. That's where they're getting their loyalty That's where they're ordering the Jersey from the merchandise store so they can pick it up. That's where they're booking tickets for the next event. That's how they access the VIP suite. And it was very apparent to us during pandemic that this is how it's going to be. It probably should have always been that way before the pandemic. Nobody likes, like waiting on endless lines during half time. So that technology is kind of the key driver of all of our growth in sports & entertainment vertical. Every stadium is going to move towards letting their consumers order a burger and a beer in their seats. And they're probably going to be able to pay for it with the kind of proceeds from a first half wager on the football game. I mean, and they're going to be able to do their ticketing through it. Like, this is all, like, a logical evolution of the industry. So, that's why we're winning. Everybody else, all they did was make a refreshed, nicer version of a concession stand POS system, which nobody wants to use. And we obviously can do that too with SkyTab POS. That's like the easy part. The hard part is cracking the code on that mobile fan first experience. Any competitor of ours needs to use three or four other companies to deliver a comparable experience, which means it costs more. It's more prone to failure. And customers would rather go in our direction, which is, kind of the same story about how we win in hospitality and restaurants too.

That's a helpful distinction. Appreciate it. I'll leave it at that.

This concludes today's Q&A. So, I'll hand back to the management team for any concluding remarks.

Yes. No, we appreciate everyone dialing in. Hopefully, we'll see many of you in-person later today for our SkyTab Showcase and Business Update. We have quite a bit to talk about. Thank you very much.

Thanks.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.