Hello and welcome to the Shift4 Fourth Quarter and Full Year 2022 Earnings Conference Call. My name is Lauren, and I'll be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Tom McCrohan, Head of Investor Relations, to begin. Tom, please go ahead.

Thank you, operator. And good morning, everyone, and welcome to Shift4's Fourth 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 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 SEC's 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 call -- let me turn the call over to Jared. Jared?

Thank you, Tom. Good morning, everyone. We are very pleased with the record results we delivered this year in the face of ongoing economic uncertainty. We ended the full year 2022 with record levels of volume, gross revenue, gross revenue less network fees, adjusted EBITDA and adjusted free cash flow all in excess of our midterm outlook. Our 2022 results were predominantly driven through organic initiatives, including the release of new products and well timed to entry into new verticals. Our high-growth core, which represented the totality of our business at the time of our 2020 IPO, was still the primary driver of our growth last year with an ever-increasing contribution from our new verticals. Shift4 continues to lift the intersection of payments and commerce-enabling software, and we're well on our way to delivering that capability globally. On that note, this past year included several important company milestones and marked the beginning of our European and international expansion, the successful launch of our next-generation restaurant point-of-sale solution, SkyTab POS, including a pivot towards more direct distribution, and we also cemented our position as the preferred technology provider for sporting arenas and entertainment venues across the country. Our entire management team is extremely proud of our employees embracing the Shift4 way, which embodies the core principles and beliefs driving our success. As we enter 2023, our team is very excited about the abundance of opportunities we see ahead of us. Our excitement for the future is viewed through the lens of cautious optimism in light of the uncertain climate we currently operate in. Industry-wide payment volumes moderated during the December quarter, and as such, this informed our internal planning process, including how we constructed our 2023 guidance. That is to say that while we remain confident in our ability to deliver…

Thanks, Jared, and good morning, everyone. I'd like to provide a bit more detail on some of the more interesting trends we saw in the fourth quarter, early views on 2023 and how we are positioning ourselves strategically for the year ahead. As Jared mentioned, we approached 2022 with a deliberate caution given what we viewed as the potential for a slowdown in consumer spending in the face of rising interest rates and broader economic pessimism. While we believe that approach would be highly prudent, it has not manifested itself in our processing volumes. Merchants largely exhibited a normal seasonal cadence with restaurants moderating from the summer highs and our sports and entertainment and other new verticals filling the gap nicely. Hotels performed stronger than usual as travel was not impacted by the large waves of COVID that we had experienced in prior years. As we mentioned during our Q3 call in November, we also began to see some benefit from marking international expansion and alternative payment methods during the fourth quarter, which helped contribute to spread expansion versus Q3. Early indications for '23 are positive. We saw record volume days as travel resumed during President's Day weekend and suspect that Spring Break and Easter travel will create strong month-over-month growth as it has in prior years. As you may recall, we typically experienced our slowest period during January and early February. While that was true, we have benefited from some easier comps when considering the impact of Omicron in January of last year. We're sometimes compared to payment companies operating in a single industry vertical. And I think our performance in Q4 highlights the advantages that our vertical expansion strategy has created. We have large and fast-growing franchises in restaurants, hotels, sports and entertainment, gaming, nonprofit travel and of…

Thanks so much, Taylor, and good morning, everyone. In the fourth quarter, we delivered record results and ended the year exceeding the top end of our previously provided guidance ranges for volume, gross revenue less network fees and adjusted EBITDA, and we also meaningfully exceeded our adjusted free cash flow guidance. Total Q4 volume of $20.7 billion grew 55% compared to the same period last year. Q4 gross revenues were $537.7 million, up 35% from the same quarter last year, and gross revenue less network fees were $199.4 million, an increase of 36% over last year. Our adjusted EBITDA for the quarter was $94.4 million, and our adjusted EBITDA margins were strong for the quarter at 47%. Our quarterly results were driven by the continued strength of our high-growth core, improved economics earned from our gateway customers and higher unit economics resulting from our decision to in-source a large portion of our go-to-market distribution in connection with the launch of SkyTab in the third quarter, shifting from third-party distribution to direct in major markets. As expected, we continue to add and ramp very large enterprise merchants, which is resulting in lower blended spreads. The blended spread for the fourth quarter was 71 basis points versus 74 basis points a year ago and 68 basis points last quarter. We anticipate the ongoing mix shift will continue into 2023 and that our blended spread will continue to decline as we successfully move our market. As we mentioned last quarter, we are not further breaking down the components of the blended spread, given disclosure limitations and competitive sensitivities. However, we did see sequential improvement in both our high-growth core and non-high-growth core spreads in Q4 as compared to Q3, driven by volume mix, new board and international growth. Having an early look at…

Thank you, Nancy. So operator, we're ready to take questions.

[Operator Instructions] Our first question comes from Dan Perlin from RBC.

A lot of good stuff in the results today. I wanted to just -- I just wanted to ask a question around kind of the embedded expectations within guidance. And Jared, I appreciate the fact you don't want to give like the vertical number specifically. But I was just wondering kind of directionally, how do we think about how much contributions ultimately are going to be coming from kind of net new business, some of that being vertical, some of that being other opportunities versus just high-growth core and how that may toggle given some of the macro scenarios you've built into the -- your assumptions.

Dan, and I'm looking around the room just to see if Taylor and Nancy wants to add on. What I would say is that, if we were trying to put a 2023 volume bridge in place, it would look very similar -- approximately similar to what we did last year, if you just took it on a percentage basis of current volume, how much is coming from the annualized impact of 2022, how much is kind of net new from high-growth core and then the balance being all else, which is predominantly new verticals and, to some extent, a very small portion, I'd say, from like international expansion.

Yes, that's exactly right. So the one thing to keep in mind is, as Jared mentioned, annualizing our boards from last year is always the largest contributor inside of the year. We got half a year on average contribution from those merchants, and just getting a full year is a really nice grow-through benefit that we get. One thing to keep in mind is a lot of these big merchants did not contribute a full year last year. So while we surprised, I think investors with the contribution of new verticals kind of serving in Q3 and expanding further in Q4, you can expect that grow-over benefit to help. The one thing I would just sort of maybe caveat Jared's statement with is we were more pessimistic on same-store sales growth in our guidance this year than we were last year. So if you recall, we had a portion of our bridge that was same-store sales growth and travel recovery. I think we're more cautious on that front because I think it's prudent to be so.

Yes -- no, that's great. And then just a quick follow-up. Just any initial commentary around the success you're having in sourcing strategy. The go-to-market strategy here is a lot more direct distribution than what you've had. Obviously, you had a quarter now to kind of see how that's going. So I would just love to hear any kind of initial phases there.

Yes, sure, Dan. So we're really pleased. I mean, I don't know how many people really follow us on -- like on any of our digital marketing or social media spend, but we really spent virtually a year in terms of generating leads for our Skyforce team. And the reason is we wanted to spend really the first kind of 2 quarters just dialing in our operational process. One area of focus is our like literally 5-day turnaround time from when a new customer is signed to having a fully operational POS system in the restaurants. So we wanted to really get that dialed in and working very, very well before we kind of turned on the marketing engine. The reason we've had so much production is because -- and I don't know how many people picked up on this nuance in last quarter, we spoke about it, a lot of the partners that we acquired insource have had portfolios of customers on many of our competitors, whether you call it like Heartland or SpotOn. Some of them even former Toast dealers, so they already had what we refer to as kind of this low-hanging fruit list to be able to go out and knock on doors now that they were part of our team and sign up customers to SkyTab without any real marketing support. And that was part of the plan by design was to use the first 2 quarters, kind of burn down some of that low-hanging fruit, dial in the process before kind of ramping marketing. I think as a result, you end up having like just a ridiculously low customer acquisition cost over the last couple of quarters, but really pleased with how things are coming along. Great balance between our direct team and filling in the gaps with some authorized partners. And we're really happy with the results of the product. It's in some extraordinarily high-volume locations right now.

Our next question comes from Timothy Chiodo from Credit Suisse.

I want to talk a little bit about the ticketing opportunity. So you have SeatGeek. You have TicketSocket. You recently got the Paciolan integration, which opens up a lot of college sports and stadiums there. Maybe you could just expand upon what Paciolan actually does for you in terms of the opportunity and then also, if there's any thoughts around the potential to integrate with Ticketmaster, which I believe remains the only large integration that you have yet to make?

Tim, I'll cover that one. I don't want to talk about any of the names specifically. We are trying to be pretty deliberate in walking back from specific customer names, specific partner names. But the way you should think about a ticketing opportunity, the way investors should is, it's an integration to a software platform that lots of other merchants use, so pick any of those names that you mentioned, getting an integration to the platform means that you're now technically capable of serving a TAM that is substantially wider than the day before you completed that integration. And so economy integration means that you can light up a customer that's using it very, very quickly, but the integration is what takes a lot of time to get done. So we announced kind of our foray into sports and entertainment in a meaningful way with the acquisition of VenueNext in March of '21. We started to win full-stack stadiums and started to have ticketing conversations throughout the end of '21 and into '22. We've kind of completed the bulk of that ticketing integration work, and now it's much faster for us to line up customers, much in the same way we can line up a customer who's using a hotel property management software integration that we already have. And obviously, being able to deliver for that in the really high demand environment of their stadium gives some confidence that we can handle their ticketing volume as well. So you should think about each integration as an instant way to expand our TAM and that the volume comes much faster as a result of having the integration. It's basically a customer saying yes and signing an agreement that allows you to serve them.

Excellent. Really helpful. And congratulations on those integrations. The quick follow-up is around inorganic contributions. I realize they're small from the European PSP a little bit from giving back, but could you just recap what was included in Q4 that was inorganic and the small portion that's included for the 2023 guide for both volumes and revs?

Yes, sure. It's -- suffice it to say, I think we had these comments in November. We were not terribly optimistic around the giving environment at the time, and this is probably pre- some of the other top news in the crypto community. So the contribution from The Giving Block largely came in the form of SaaS from the incremental customers they signed up. It was not particularly meaningful. Although when you think about that customer base being double what it was when we bought it, as the giving environment starts to improve, the donation volumes should come very quickly thereafter. So we're quite constructive on that platform despite the troubles in the Crypto community and the lower donation volume. And I think we have commented in the same call in November that we expected the contribution of our international PSP to be less than 1% of our volume and net revenue for the year. And I think it's landed right where we expected it to be. So reasonably inconsequential in the quarter, although really, really strong technical capabilities.

Yes. I think just to layer on that, pretty consistent with, message is important I think for all investors to understand. It's not uncommon for us at all to acquire assets that we think give us some unique right to win within a specific vertical and then just totally pivot the revenue model around payments. Great example of that is the VenueNext acquisition. At the time we purchased it, I mean, fantastic software. I mean, wasn't a cash-generating business at all. Pivoted it from predominantly SaaS at that point to now being a real contributor from a volume perspective, which is driving a lot of the net revenue, not to mention it's opened up doors for ticketing opportunities as well. When you think about The Giving Block, I mean, right now, the overwhelming majority of the revenue that we take in from nonprofits is coming from major nonprofit brands like St. Jude and others that are giving us traditional card payment volume and many of which we were able to solicit from the 2,200 or so existing Giving Block customers. With respect to the European PSP, we bought that asset to put volumes that we knew we had already with respect to some of our strategic customers into the European market. So I know it's been a question we've been asked since the time of the IPO, what contributions are coming organically versus inorganically. It's almost always organically and then some because you're oftentimes devastating the revenue model of the existing business you acquired to pivot it towards our organic strategy. I think that holds the same with the deal [indiscernible] that we actually did in 2022.

Our next question comes from William Nance from Goldman Sachs.

Jared, I think the company benefited a lot from some of the aggressive actions you guys took. Distribution insourcing, the rolling out of SkyTab, gateway sunset, what's kind of the big needle mover in your mind for 2023? What are the main 2 or 3 things that investors should be focused on to kind of track the next leg of growth for this year?

Yes, what an awesome question. So I mean I think we set the table incredibly well in through 2022. But actually, it all kind of washes off of the Investor Day we had in November of 2021, where we basically told our investors that we're moving -- we're diversifying from outside of just restaurants and hotels into all these exciting new verticals, gaming, nonprofit, sports entertainment. They were all -- e-commerce, international. They were all anchored off of like a significant merchant that was going to give us more than a foot in the door within those specific verticals. We moved into 2022 building on every one of those initiatives. We certainly saw -- or at least were concerned enough that there would be a deteriorating economic climate in 2022, so much so that we decided to move a little bit faster on things like our gateway sunset initiative, rolling out SkyTab POS with a balanced direct and indirect distribution. And we made some real meaningful progress between Finaro, which is still in commercial capacity, and then an inorganic acquisition in Europe to set the stage well. So I think we really set the stage really well in 2022 going into 2023, and we're the needle movers right now. Let's start with high-growth core. Gateway sunset is going to still deliver significant results in the years ahead, years ahead. There is still like an enormous amount of volume on our gateway business, so I know everybody like asks are we in like middle innings, later -- it's still early innings with gateway sunset. So I expect that to be, by and far, the largest contributor to our growth in 2023. All the new verticals we've built upon, and you've got real traction there. We made our investments were really well timed in late 2021. So I expect us still to crush it in sports and entertainment, except now you're going to have [indiscernible]which is huge and comes in at higher take rates than we've had previously. We've got like almost every sport -- a real decent presence in almost every one of the major sport leagues. So some of the like seasonal trends that we saw in prior years in sports and entertainment won't be there anymore. And I think what's most exciting for us is we're making real progress internationally, both inorganically and organically. And that's not just for the benefit of 1 or 2 really strategic customers, but it allows us to bring restaurants and hotels in all these new markets too, as I mentioned in our remarks. So I look at high-growth core continuing to deliver the majority, new verticals moving very quickly and real progress in the international markets in 2023.

Got it. That's super helpful. And maybe if I could just follow up on some of the comments that you had on the gateway sunsetting strategy. You mentioned being in middle innings. I know it's kind of back to the basics with Shift4, but could you maybe provide an update on kind of just general expectations of the pace of conversions going forward? I think you previously talked about something in the ballpark of $8 billion year. It sounds like that's accelerated as a result of the sunsetting strategy. So whether it's full-on conversions or repricing to better economic terms, how much of the kind of growth in the near term do you expect soy to come from that opportunity?

Yes. I mean, just to clarify, I didn't say we're still early innings. So maybe we're in the second inning, I don't know, late bottom of the second, I still expect gateway sunset to contribute a substantial amount of volume like that. We didn't prediscuss what our current gateway-only volume is. Most of us don't actually look at it that often. But you're still talking like well in excess of $100 billion, like well in excess of that in volume there. Like even if we're working 24/7, there's still a lot of volume to move over, and we did say that we're trying to take our gateway sunset initiative, remove the parts, unlock a lot of efficiency and make it not a 10-year initiative or a 5-year like trying to pull that into 3 years. It's a lot of volume to deliver in that period of time. So -- but I'd say it's still like a pretty substantial focus for us. And in terms of getting properly rewarded for the capabilities that we're delivering, which is the heart of the integrated payment solution these customers benefit from, super early innings. I think we mentioned last year, like we effectively added a Netflix subscription to hotels and restaurants doing millions a year in volume. So I'd say that that's still pretty early on as well.

The one thing I'd add on just to help contextualize it is for smaller merchants on the gateway and the B2B merchants doing $1 million, $2 million, $3 million a year in volume, these decisions are typically made by the owner-operator. They happen quite quickly. They happen regular course, and we get hundreds of these a month. And it's really just a function of getting the time with that owner-operator to have the conversation on the benefits and obviously, the pricing actions that Jared mentioned do like slightly nudge the conversation in our direction. Larger operators, and there are many multibillion dollar sort of companies that are using the gateway, take longer naturally to make these decisions. They happen over multiple quarters. So the one thing that Nancy mentioned in our script that we want to be mindful of is, we've had a lot more time to have these big conversations with big merchants. And so as they agree to move over, and increasingly, they are, it creates a little bit of lumpiness in sort of the volume growth in a quarter and the corresponding spread that we deliver in that quarter. So we want to be cautious that we have a good enterprise-level conversation that can make the volume growth in this effective spread a little bit more volatile, all for very good reasons. But that's sort of some color behind the scenes on the nature of the really big merchants and their decision making.

Got it. Appreciate you taking the question. Very helpful.

Our next question comes from Darrin Peller from Wolfe Research.

Listen, I wanted to touch on the international build a little more and the opportunity there. Obviously, when you closed the deal, the Finaro deal, it'll help. But if you can give us a sense in the past -- and what you see as the opportunity in terms of vertical expansion? I know you have obviously your large customer as an anchor that's helping. But what kind of opportunity do you really see that being both in '23 and then maybe a little bit longer term, Jared. And then, Nancy, just a quick follow-up on the financial side. That kind of relates because you're going to have to spend time and money building that out, I imagine. And so when we think about the margin implications of something like that, and I guess if we back out the residuals benefit you have in either last year or this year, it looks like your margins are basically stable with the expansion coming from those initiatives. So what's happening under the hood in terms of investment and what you can do on the margin front as you're building out?

Nancy, why don't you start?

Okay. Starting on the margin side, I would say you're right. Certainly, the in-force distribution helps the margin lift by design, of course, right? And so I think as we're strategically looking at where we want to invest for growth. From an international perspective, a lot of these kind of tuck-in or small technology and product deals that we're looking at provide us a lot of opportunity to create the investments that we need kind of outside of the U.S., right? So we don't really need to use kind of the U.S. platform necessarily to make core investments for that expansion. And when I look at Shift4 and kind of the history at Shift4, I think there was some [indiscernible] planning, but the opportunity here without really cutting into any kind of muscle or really, I would say we're just at like a very first layer of fat level and just really putting better process in place that will generate a lot of that margin expansion from here forward that you're looking at. So for sure, we're going to get an annualization benefit of the in-sourcing. But from there forward, there's just lots of room across every piece of the business to kind of optimize is the way that I would say it. And the investment for growth I think will come alongside these tuck-in acquisitions or partnerships that we -- the ones that we've announced and the ones that have come in the coming year. So I feel very confident, and you could tell from the EBITDA guide that we feel pretty solid about that. And look, you know it's the Shift4 way that we always like to kind of beat these and best expectations. So I would just say there's room there for us to make the investments that we need?

Yes. And I guess, just to layer on a little bit on that -- that point, with every initiative, I was kind of trying to make this point in Q4 of last year when we were interacting with a lot of investors. It's like virtually everything we are doing right now has a margin and has an efficiency benefit, which then translates into margin and free cash flow. So just to give you an example, right. It's actually more labor intense for us to support a gateway customer than a end-to-end one. So when we're -- every day that goes by that we move more customers from our gateway to our end-to-end platform, it makes things easier on our support resources. It's so much different than when we can handle a situation end-to-end versus trying to get a conference call going with, I don't know, Bank of America First Data to try and troubleshoot a situation. Every SkyTab POS system that goes out right now is like 3 or 4x easier to support because it's cloud based, than all of our legacy POS systems. Actually, we caught fair criticism for our first couple of years as a public company. Oh, don't they have a lot of Windows-based POSEOS software? Isn't that previous generation? Yes. And they're like more labor-intense to support. So like every day that goes by, more SkyTab POS systems come in, like we were able to more efficiently support probably the most labor-intense portion of our customer base, which is small restaurants. Last, our diversification into new verticals, stadiums. I mean, a single stadium that may be hundreds of millions a year in volume can be covered by, let's just say, one person with half their time versus that same person might have to cover thousands potentially…

That's really helpful. Just very last quick follow-up is on SkyTab and the progress you're making seem really strong on the location adds. Just maybe a quick update on the expectations for the year ahead.

Yes, we thought it was fair to give you some sense of how SkyTab is moving because I think it's such an important part of the distribution and sourcing story. The expectation is like I think both Toast and Shift4 are going to have -- continue to have great years. And I'm sure both Toast and Shift4 will take our products into international markets. And we'll go and clean up all those legacy terminals and Windows-based POS systems, and I think both enjoy a lot of success. What I don't think we'll do, I mean, we'll certainly give you insights in spreads and volumes. I don't think we're going to every quarter give updates on location count. I don't think [indiscernible] we tend to be way more upmarket than that. You'd rather have like hypothetically 4,000, $2-million-a-year customers than 5,000, $800,000-a-year customers or something to that effect. But yes, I think it's like looking at the competitive landscape, it's a 2-horse race for sure. And there won't be a winner-take-all. Both Toast and Shift4 are going to have a lot of success with our cloud-based products in the U.S. and in other markets.

Our next question comes from Andrew Bauch from SMBC Nikko.

Nice set of results. I just want to tail Darrin's international question there. In the context of the regulatory approvals needed for Finaro, I know that you're not considering anything from Finaro in this guide, but given how important the international expansion and road map is to the Shift4 story right now, is there any kind of changes to how results would shake out one way or another if the regulatory approvals were signed off today versus bleeding the third quarter or even beyond.

I don't believe so. The -- as Jared mentioned during his scripted remarks, we have an arm's length partnership. It's allowed us to complete a lot of the technical work to service customers. So we have -- I think there's been some comments around this previously. We have successfully dated transactions on SkyTab throughout Europe by a combination of platforms on VenueNext as well. We do share a handful of customers today. So while there's modest improvement in economics from having it one quarter versus the next, we're not really thinking about it in those terms. So we want to close it as soon as we're allowed to just because it helps both companies operate with a clearer lens towards the future. But we've spent a lot of time together, the maximum to the extent appropriate on working through these solutions. So it's not hindering the pace of progress inside of our business. And the international acquisition of the PSP that we mentioned last quarter is just another example. So we're kind of operating strategically with this full-speed ahead mentality. The opportunity of owning a bank in Europe is really quite high, that the opportunity cost of that is the fact that these regulatory approvals can take up to 18 months, as I mentioned in my comments. So we're pleased with the progress that we've made thus far. We do expect that [indiscernible] is just a slightly opaque nature, which is I'd say nothing more than mildly frustrating. I don't think it has a significant impact on performance one quarter to the next.

That's good to hear. And then wanted to get a little bit more color around the investment philosophy here. And what are the key kind of macro indicators that you guys are looking for to give you more confidence of, say, stepping on the gas regarding investments. I mean, I really appreciate the commentary in the shareholder letter that said focusing on upgrading talent versus outright adding heads. So maybe if you could just kind of give a sense of investment versus the macro and maybe how -- what areas of the upgrading talent you're really focused on?

Stepping on the gas is an interesting way to phrase it because I think we kind of always feel like our foots pretty heavy down on the gas. The reality is we think about kind of capital deployment or M&A, if you will, through the lens -- through a couple lenses, number one, is there a capability that we need that we don't have that an acquisition accelerates our base into, and I would say that's been a portion of our M&A but not the entirety of it. Another portion is just, is this a customer acquisition cost funnel that is substantially lower than finding them. And I think if you look at things like the acquisition of the Merchant Link gateway, like the acquisition of the restaurant ISV brands that we have before that, that was always to accumulate really, really nice groups of captive customers at a very attractive customer acquisition cost. We monitor for that all the time. I don't think market valuations have a huge bearing on that, and we execute when and where it's appropriate. I think the tougher one is the first thing I mentioned there, which is capability enhancements. You do typically have to pay more for, or you might not get the instant margin accretion from a transaction like that, and you have to be very disciplined on what you're willing to pay for it. We've seen the opportunity to continually progress throughout this [indiscernible] cycle. I mean, you've seen multiples in our industry get pretty battered, and you see good opportunity for expansion, but we also want to be really disciplined. We don't just want to buy a capability enhancer. We want to make sure we're buying what was inherently a good company before we approached it. It needs to be able to operate at a reasonable profit on its own right before we can get confidence that plugging it into our business is the right thing to do. Jared, anything else [indiscernible].

I think I'd just say this is an area that maybe looked a little bit towards our past. Prior to the IPO, going back to really 2015 time frame, we had a fee sponsor in that kept us in at a comfortable 6x leverage predominantly to support periodic dividend recaps. And throughout that time period, we were reasonably active with M&A, which meant a lot of the acquisitions had to be on a synergized basis, essentially deleveraging virtually instantly. Fortunately, our current leverage profile, we don't necessarily have to find those gems, but what I will say right now is that we are looking at deals that essentially, on a fully synergized basis, would be deleveraging inside of 12 to 18 months, which I think Taylor referenced in his prepared remarks so continuing to remain disciplined just given the uncertain road ahead. That said, I think in terms of capital prioritization, Taylor mentioned, international is very important. Like I said, I'm a very big believer in this 3.0 evolution of the integrated payments world. And rails are scarce, really scarce. So there's opportunity to acquire rails in attractive terms to help build out our -- support our global expansion endeavors. It's going to be top of the list. But the other thing I'd say, too, is just the organic investment. I mentioned earlier, there are a lot of reasons why we should continue to become more and more efficient. So if we're able to layer on that volume, keep headcount at -- endeavor to really keep it as flat as possible like getting off of Q4, and it turns out that the economic climate is not as some people fear, then there should be room for us to make some investments in some organic initiatives, whether internal systems or other things to better support our long-term profile.

Got it. Congrats on a really impressive year.

Thank you. Our final question comes from Rayna Kumar from UBS.

This is Anthony Cyganovich filling in for Rayna. I know you commented on it a little bit before, but I was hoping you could kind of talk about kind of the drivers of the really strong EBITDA margin in the quarter. I know you mentioned the in-source distribution, but can you kind of help us better understand if there's anything unusual to call out or kind of the sustainability of that?

Yes, it's Nancy. I'll take that first, and anyone else can jump in here. But for sure, we're incredibly confident about kind of sustaining that margin into '23 as the guide indicates. I think there is the benefits we've already talked about, which is certainly the in-source distribution, the changing model for new vertical support and service delivery, the model and the diversification as the book moved. It's just that service delivery model is more efficient than when we were supporting lots of small kind of high-growth core on merchants and clientele. So that kind of overrides the flow-through, and our discipline around you think about in probably most companies headcount, compensation, things like that, being the biggest driver of SG&A. When you look at our SG&A trends, both on a reported basis and on an adjusted basis, very confident that those exit rates can be sustained going into '23. And it really just comes from disciplined approach across the board being implemented. This whole idea of defending the spend, really thinking about how every dollar is being allocated, that's really the underlying focus of the company. And the new verticals that they gorge, we're really taking a kind of white-glove enterprise approach surge type models to get them delivered efficiently and onboarded as quickly as possible. And I think that flow-through is what you're seeing in Q4 and will continue into '23 and beyond. So just the leverage of every dollar at this point is flowing through at a higher conversion rate. And really, I just don't want to repeat everything Jared just said, but kind of just a kind of exiting Q4 will continue into '23.

Got it. That's helpful. And just a quick follow-up. I was just wondering if you think there's -- the macro conditions are impacting restaurant demand for the SkyTab POS, and how is it impacting demand for SaaS-based solutions or willingness to pay tax fees?

So a few things in there. I don't think like the restaurant, at least if we look at Q4, the restaurant vertical felt very normal, right? It typically does moderate off of the summer of Q3. That's what we saw inside of our restaurant base. It did not have any bearing on our ability to add customers. Now, as Jared mentioned earlier, we tried to stack the deck in that regards. The entirety of our in-sourcing of distribution was not about gross margin economic expansion. It was also about really attractive customer acquisition costs and all the low-hanging fruit that comes with the project. So our ability to gain share is hopefully somewhat dislocated from any macroeconomic impact. We like to have a captive base of customers that we can sell into. It's what's driven our success in the past. So I point that out with regard to the restaurant vertical is something that we've said. Now as we look ahead, I think we've been publicly probably too cautious on same-store sales inside of that vertical and the impact it could have. That caution has been represented in kind of everything that we told the Street. I think it continues to be, and yet we haven't seen it yet. So we're happy to be proven wrong to the extent there's like more resiliency inside of one of our verticals than we anticipate, but we plan for there being some adversity in almost all of our verticals. It just serves our entire operating model for the business well to be a little bit positive.

We appreciate everyone joining our call this [indiscernible] and have a good day.

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