Greetings. Welcome to Shift4 Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Thomas McCrohan, Executive Vice President, Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, everyone [Technical Difficulty] 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. Today's call is also being simulcast on X Spaces formerly known as Twitter, which can be accessed through our corporate Twitter account at @Shift4. A 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 certain risks, uncertainties, and many important factors. Additional information concerning those factors is available in our most recent reports on forms 10-K and 10-Q, which can be found 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 turn the call over to Jared. Jared?

Thanks, Tom. Okay, so we made a lot of progress in 2023 and I'm really pleased with how the year has ended. Every quarter we delivered consistent growth, record KPIs, expanding margins and free cash flow. Last year completed three synergy rich acquisitions, Focus POS, Finaro and Appetize. We successfully unified our sales team around our flagship POS system, which is SkyTab and installed over 25,000 systems and we also signed many notable hotel brands. We began processing for large ticketing partnerships and made investments in internal systems, AI and took big steps on our geographic expansion journey with hotels and restaurants now processing in Europe and Canada. That was all last year and I expect 2024 will be even more dynamic. Turning to the fourth quarter specifically, we could -- we did close on our long-awaited Finaro acquisition, but we also had our hands full with many enterprise go-lives and especially in the sports and entertainment vertical. And other than a few enterprise deals getting delayed and some timing nuances with our gateway migrations, we really delivered a reasonably strong quarter. On that note, our Q4 results were largely in line with our previously provided quarterly guidance. We generated 55% growth in end-to-end payment volume, 31% growth in gross revenue, 33% growth in gross profit and 35% growth in gross revenue less network fees. We also generated $136 million of adjusted EBITDA, representing 44% year-over-year growth, as our margins expanded 320 basis points to 50.5% versus the corresponding year-ago quarter. Our operating margins expanded despite the margin drag from acquisitions of Appetize and Finaro both of which negatively impacted our margins by over 250 basis points for the quarter. We also generated $75.3 million of adjusted free cash flow, which was up 33% versus a year ago. Our blended…

Thanks Jared. As on prior calls I thought it helpful to provide you with a bit of additional color on the trends we experienced in the prior quarter and what we're seeing in the early days of Q1. Volume across our verticals was largely as expected in the quarter with table service restaurants exhibiting slightly negative same-store sales growth offset by hotels having modest growth. Jared mentioned a few enterprise hospitality delays, but we are incredibly proud of the pace at which we've met demand for new installations, as evidenced by the successful opening of Fountain Blue in Las Vegas during the quarter and many others. As our long-term investors will know, Q1 represents a seasonally lower volume quarter for us, even when adjusted for growth. The consumer tends to dine out and travel less immediately after the holidays, with activities typically increasing in March with warmer weather and spring break travel. We expect this trend to be the case in 2024, although we are pleased with the diversification that the merchants across our new verticals and geographies bring. Previous M&A transactions continue to bring us capability enhancements, excellent talent, and a large group of merchants for which we can offer more services. Jared mentioned the recent successes at Appetize and Finaro. We also introduced a new AI powered restaurant website generator from our Shift4 shop team that can create a full featured and personalized restaurant website, including reservations, online ordering, gift and loyalty in less than a minute and at no additional cost. It was launched a couple of weeks ago and 100s of SkyTab restaurants now have a beautiful and functional web presence that uniquely represents their business. As Jared mentioned, it was also a good quarter with respect to our Gateway Sunset initiative, but despite this success, we still have over $120 billion of annualized gateway volume that is currently paying us less than 3 basis points, for which we expect to earn several multiples of in the years ahead. This ability to identify and execute against highly synergistic opportunities with a rigid price discipline is just one of the reasons we can execute against our strategic objectives at the pace that we do. Of course, the uncertain economic and interest rate environment makes predicting consumer behavior difficult. Despite that, we are incredibly pleased with the operating environment. Our record-free cash flow and strong balance sheet provide us with the ability to hire talent, while competitors are shrinking, invest in product capabilities, expand in new geographies, and also maintain an increasingly attractive pipeline of M&A targets. This is the Shift4 way. Nancy will now walk you through our financial results.

Thanks, Taylor, and good morning, everyone. We delivered another quarter of strong and consistent results. Total [Technical Difficulty] volume of $32.1 billion grew 55% year-over-year. Q4 gross revenues were $705.4 million, up 31% from the same quarter last year. Gross revenue less network fees grew 35% to $269.3 million. Our adjusted EBITDA for the quarter was $136.1 million, up 44%, and adjusted EBITDA margins were [Technical Difficulty] businesses. Margins actually expanded more than 250 basis points. Our quarterly results were driven by the continued strength of our hospitality and restaurant verticals, momentum across our enterprise merchants, including new verticals and capturing better economics from our gateway only customers in line with our gateway sunset initiative. The blended spread for the fourth quarter was 64 basis points and averaged 65 bps for the full-year in line with our expectations. These blended spreads benefited from higher spread international volume and ticketing offset by the ongoing mix shift as we add and scale into enterprise accounts and optimize and convert our legacy gateway customers. Spreads across our core business of restaurant, hospitality and specialty retail remain stable. We expect spreads will blend down modestly in 2024 as we progress on the path we have been on in 2023. We will continue to successfully move up market and board large enterprise merchants, resulting in some downward pressure on spreads which will be positively offset by international ticketing, SMB growth, including SkyTab acceleration and revenue expansion from the recent conversions Jared referenced earlier, that will allow us to move from a single corporate arrangement to individual franchise deals. To that end, for the year ahead, we are approaching a floor of 60 basis points. Any deviation from this will likely be a function of volume outperformance. Gateway revenue decreased in the quarter reflecting the success…

Thanks, Nancy. As mentioned in my letter, we are still very much in the midst of a strategic review, which may limit the extent on which we can comment on certain subjects. We will provide a more formal update as soon as it's available. But again, thank you for that understanding. And with that, we'll turn it over to questions with the operator.

[Operator Instructions] I'll leave you to answer the one question from X before kicking off the Q&A.

Yes. Perfect. Thank you very much. Just before we go to questions on the line, we did say we were going to take a question from X. So I want to thank Andre Nicolin for this multipart question related to the sports and entertainment vertical. So question is, regarding the 600-plus Appetize accounts, one, even if 50% of them switch over to end-to-end payments using VenueNext and ad ticketing, how much additional renewal that equal? Second question -- second part, should we assume a higher spread on this revenue due to ticketing? Three, which are some of the objections, if any, you received over the last few months as we make this migration? And four, how long are we willing to accept letting customers remain on the Appetize platform if they're not willing to commit? So one, we didn't quantify specifically the revenue opportunity associated with the Appetize migration other than to say a business that had hemorrhaged cash its entire existence. By the end of year one of our acquisition will represent $15 million of run rate EBITDA, and that's again after year one of a multiyear plan. So I would say we -- I believe we characterized last quarter that the acquisition and contributions from Appetize will be a material contributor to the business. In terms of spread direction, I think it's good in general because people are always trying to figure out all the moving pieces in preteen. And Nancy covered it really well in her prepared remarks. But you basically have your smaller restaurants, your SMB customers card not present in international that helped on the top end of spread. We also have the -- specific to this quarter, very interesting transition of a single corporate customer in the billions range of volume that's going to…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Timothy Chiodo with UBS. Please proceed with your questions.

Great, thank you so much. Following up on that last topic there around Appetize. So if you could just dig into a little bit of the contractual or mechanical elements there in terms of getting those Appetize customers over to end-to-end. Could you talk about what is the -- so they're using the current Appetize point-of-sale system, what does it take to switch them over to SkyTab? Are they using a current third-party gateway? And are they under a contract, in many cases, for their end-to-end processing? And then, of course, what is the contractual element to consider on the ticketing side? I would appreciate that context.

Yes. Thanks, Tim, Jared here. So the existing contracts that these customers are under is now one of the obstacles that we're navigating. I mean, this is really -- it's scheduling. It's trying to get deals done before the start of a sport season, and then just the resources and logistics associated with installing them because, in a lot of cases, you're talking about like 100s of devices. These are customers that were moving to Shift4 VenueNext anyway. I mean we were posting a lot of Ws every quarter prior to the Appetize acquisition. We obviously acquired Appetize under pretty attractive terms. So I think that says something about kind of what was going on inside of the business. So we don't have a lot of objections here. And yes, there are a lot of parties that these customers have. I mean they have a separate merchant acquirer, a processor, they're using a third-party gateway, not dissimilar to like a lot of the hospitality customers that we generate wins from. Like this is the perfect setup of why Shift4 wins. And like whatever penalties they might have with their other merchant acquirer, I mean, these are pretty big sports teams. Like they are -- they don't consider that an obstacle to making sure like their fans can have like a good experience in the stadium. So really, our challenge has just been kind of mustering resources to facilitate installs before the season starts. I mean, the Yankee Stadium is a great example. We had to put a lot of resources on that to make sure we are ready in time for upcoming like spring training. So it's really a logistics and resource exercise, if anything.

Thank you. Yes, that's exactly what I was trying to get at in terms of that penalty piece and how you put it in context there. Thank you. The brief follow-up is more of a modeling question. You mentioned to follow last year's seasonality when we think about distributing the end-to-end volumes this year, just want to confirm, that comment holds despite the fact that Q4 would have had the inorganic contributions that would have boosted the seasonality in Q4. We should still be looking at the overall reported seasonality of 2023.

Yes, that's exactly right.

Thank you.

Thank you. Our next questions come from the line of Will Nance with Goldman Sachs. Please proceed with your questions.

Hey, guys. Appreciate you taking the questions. I'll start with a numerical one and then maybe ask a little bit something more thematic. But the -- following up on that last bit around the seasonality, I just wanted to make sure we're understanding that, right, as it relates to the first quarter commentary around like softer trends. I mean it seems like seasonality last year in terms of percentage of volume you saw in the first quarter would point to volume slightly up. I just wanted to make sure that was the message and not volume slightly down given the earlier commentary? And then, Nancy, if you could just clarify the comment around approaching a floor and net spreads at 60 basis points. Is that where you expect to end the year? Or you're just saying longer term, you don't expect to go below that?

Yes. So let me just break down both because I know it's important for the modeling. So if you think of [Technical Difficulty] Q4 to Q1, we do expect to see some sequential uptick, but we still expect that Q1 to be our lowest point for the year. So when you look at both volume and gross revenue less network fee seasonality, looking at the ‘24 timing and applying that -- the ‘23 timing and applying that to '24 will align best with what we're expecting. And in terms of the spread, yes, I mean, we got this question last year. Obviously, this is giving it out a little earlier than we did last year. But when we think about kind of the guide, it's really for 2024. So just that as looking ahead to this year. And we'll update you kind of obviously probably by Q1, Q2 in terms of more of the near-term guide. But yes, I think as we think about approaching a floor. I think it's good to think about that for '24. And I would use that as at least a basis for kind of your modeling after that.

Got it. That's very helpful. Okay, and then maybe just on the gateway conversion. It sounds like there were some moving pieces there. In the fourth quarter, you highlighted a number of gateway conversions in the shareholder letter. And I think, candidly, there's also been a little bit of chatter about maybe you guys being a bit more aggressive and you've been seeing some churn as it relates to some of the conversion strategy. So just maybe an update in terms of how that progress is going. And if there's been any change in sort of the tactics you guys are using in terms of carrots and sticks to get people to convert over, that would be helpful. Thank you.

Yes. Well, I'm happy to kick it off here, Jared here, and then Taylor is -- that's one of the projects he manages very closely. I don't -- I can't really think of any like notable, like new churn, as it relates to our gateway sunset initiative. Of course, I mean, every quarter, you got a lot of movement. You have some additional locations from existing multiyear customers that, actually add gateway customers. You have some churn of customers that hospitality operators that made decisions to move off the platform five, six years ago before we ever own the gateways. And then you have a lot of merchant conversions that are underway. We've said many times, I think, over the last two years, like we wanted to take like a 10-year strategy and put it into like three or four years. So I do think we are learning and we are kind of optimizing our approach, which still includes carrots and sticks to have more migrations. I think this past quarter kind of illustrates it. One, I would say, iteration of our strategy, where you have some large multibillion-dollar customers that had other priorities. And you cut a deal where your terms are maybe slightly better than what they were paying on the gateway, but creates like a hunting license opportunity across potentially 1,000s of franchisees where you can kind of pull up the revenue at a franchise level rather than a corporate level. And those are worthwhile moves for us to make. So -- and then I just say, look, the balance of the opportunity as referenced in Taylor's remarks, is still huge. Taylor, I don't know if you want to add to it.

Yes, thanks. I think exactly what Jared said, but as evidenced with data, right? We've had a lot of success in gateway conversions over the last quarter and we still have $120 billion of volume to go at really, really low spreads. So whether we continue to raise price on them or whether they become an acquiring customer instantly, we're quite happy with either one of those alternatives. I think the important thing to note though is that we're in kind of the just our third at bat, so to speak, with this effort. If you recall, we begin, it is a major strategic initiative in the summer of '22. And hospitality has gone through two banner summers in a row with regard to the performance of their own business. So our pricing actions were probably not as noticed as we would have hoped. We're entering '24 and '25 with what we think is a more nuanced and better approach, and there's still tons of volume left to go. And I think to the point on attrition, the $120 billion in volume indicates that we haven't experienced a significant amount of it.

Yes, I appreciate all that color. It seems like there's still a lot of momentum. I appreciate you taking all the questions.

Our next question has come from the line of Jason Kupferberg with Bank of America. Please proceed with your questions.

Hey, this is Melissa Chen filling in for Jason. I just wanted to ask how much of the 4Q net revenue underperformance was due to spread compression versus the large customers delaying their go-live dates? And as a follow-up to that, for the implementation delays, is that purely like a timing thing? Or has the scope changed in any of these deals?

Yes. I think really, when we think about what the drivers were of that, it really is more -- not so much overall spread compression. I think spread came in overall net from a net spread perspective, pretty strong at the 64 basis points, but it's really more just the delay of some large customers delaying their go live dates and just an overall reduction in some of the gateway delayed lift that we were talking about from some specific customers. So no overall concern on a mix and spread perspective.

And in terms of those delays, these are outside of our control, which is always frustrating, but it certainly helps Nancy's efforts building a pipeline for '24. We're I think more public than most, and Jared alluded to this, about the customers we win and when and why. And it's pretty easy to see when a handful of large banner resort hotels aren't open yet, that we're not getting the benefit of those economics. But there's nothing that's changed contractually, it's just big projects take a long time.

Okay, cool. And then I have a follow-up. In your shareholder letter and prepared remarks, you mentioned an attractive pipeline of M&A targets. Can you give us an update on the size of the deals you might be targeting? And is the focus of the M&A opportunity still on international expansion?

Yes, sure. So I'll cover that. The range is quite significant in terms of size of targets. And the only thing I could point you to is the historic M&A that the company has done. We are very, very comfortable with small transactions that we think are really attractive customer acquisition cost or give us a capability enhancement, so we view as valuable, all the way up to sort of the Finaro size transaction that adds a continent to us. So I wouldn't want to dimensionalize too much on size, except for that every size level, our M&A pipeline has gotten more attractive. There are more conversations at more reasonable prices that we think have really interesting synergies associated with them. We have an emphasis on international, not just on an M&A basis, but on an organic basis as well. We're focused on international as a major priority for the business. So you could imagine we're spending a lot of time looking at M&A through that lens. But I wouldn't say that the pipeline skews towards international. We challenge ourselves to think about it interesting opportunities kind of regardless of the strategic direction of the company. And at every level of the pipeline, it's quite interesting.

Okay, cool. Thanks for taking my question.

Thank you. Our next questions come from the line of Dan Perlin with RBC Capital Markets. Please proceed with your questions.

Thanks. My question really revolves around like resource allocation and capabilities. So it does kind of, I guess, dovetail into implementation requirements. So you've had a lot of success in signing up a lot of large enterprise stadiums and venues. These are, I'm sure, pretty significant undertaking. So I'm just wondering, as you think about building out your capabilities and this kind of forecast you put in place for next year, like how like compressed are some of the inpatient teams in order to get that done? Or is there kind of a gap that you're giving yourself some leeway?

Well, I would say that as we look to 2024, first, there's probably more budgeted in terms of resources than what we hope to actually do if we're staying in line with pounding the table on relatively flat headcount. I think like any of the people that are -- like any of the bears on Shift4 forward would say like there was legacy software companies. These guys acquired. They had two gateways. And I always go back to that when being asked questions about how do you expand margins, maintain flat headcount and meet the demand. It's because you take out those parts and reallocate those resources to kind of meet the needs of today and tomorrow. So I said this at the time of the Appetize acquisition. You've got a bunch of your team is like, look, we need more people to install stadiums, if we -- especially if we want to get it done before the MLB season, it's like -- then we have a pretty big install team that supported Micros and POSitouch and a lot of enterprise restaurant software that had 100 -- some of these had 100s, maybe 1,000s of locations, why can't we use a resources and trade them on stadiums. It's exactly what we've done. So I'll tell you there's a pretty high bar inside the organization when you want more headcount. As much as we encourage talent upgrades, we are able to demonstrate that you've taken out parts and reassigned resources we already had, before we'll approve like kind of net new heads. And that's exactly how we're approaching the demand with major resorts, which we still have a lot of those that we have to turn live in the year ahead. We -- especially some -- quite a significant one. And then, of course, we have hundreds of stadiums that we have to move over. So I think it's all about just following our philosophies, the leading parts where we can and reallocating resources for the needs of today instead of maintaining the past.

Yes. That's great. Just a quick follow-up on SkyTab. I think you said you installed over 25,000 POS locations this year. I also thought I heard you say the goal for '24 was to 30,000 SkyTabs, and I think you said something like 10,000 new hotels and stadiums. Is that all in Europe, I think, I heard you say? Or is that more like inclusive of both back book and then kind of where you see kind of the implementation cycle? Thank you.

Thanks, Dan. Well, first, I really want to emphasize this, like we are -- we have not begun any active upgrade cycle from our existing customers to SkyTab. Like we don't count those as wins. Like those are -- I mean, there's -- it's at some point, absolutely the right thing to do for the business because it unlocks a lot of operational efficiencies, but that's like a lot of capital for hardware to deploy and not a lot of incremental revenue. So I know I've said it before, if we were doing that, you would know it. So really, these are net new targets that were out there establishing, and I want to be really clear on them. So the 30,000 systems that we want to install for SkyTab is domestic. That is our 2024 domestic restaurant goal. The 10,000 is our goal for restaurants and hotels internationally. So that's specific to Canada and Europe. So those are like the 2 big goals that we've established internally for the year ahead.

Got it. Excellent. Thank you.

Thank you. Our next question has come from the line of Andrew Bauch with Wells Fargo. Please proceed with your questions.

Hey, good morning all. Thanks for taking the question. Just wanted to go back to the volume bridge provided last quarter. I mean they had some meaningful components from $15 billion of Finaro volume, you had $9 billion of international synergies. So maybe if you could just give us an update on what pieces of that bridge you feel more or less confident on as we head into 2024, understanding that the midpoint is largely unchanged.

Yes. I would say our confidence level is largely unchanged in kind of the bucketing each of those outcomes. It's early in the year. And I mentioned this in my scripted remarks, we generally, in the hospitality industry, see a quiet level of spending. And I think there's a lot of speculation around is the consumer healthy or not. Right now is not an adequate time to measure the health of the consumer. So we would start to see that in March when people travel again, the weather gets warmer, et cetera. So I would say there hasn't been a meaningful change in our confidence level across each of those segmentations, except international continues to go well. We're really excited by the appetite for the offering. And so I hope, and it's a hope at this point as opposed to a conviction, that international represents a larger portion of the growth over the next year that is represented by that bridge. But it's just too early to predict the component pieces of those bridges, especially with a slow season for hospitality given the timing of the year.

Got it. And then just a follow-up on the SaaS side of the business. I just want to confirm that the fourth quarter included, I believe, the nine from Appetize. I just want to make sure that that's the right number. And then as we look at 2024, how should we be thinking about the software growth rates for the full-year embedded in the guide?

Yes. We didn't give a breakdown of kind of where Appetize would show up, but certainly it's impacting the SaaS. But I think what's most important here, as you think about subscription now going into ‘24 is that is definitely a growth item for us as we look out. We've got a couple of components in there that are super important that we mentioned in the prepared remarks. You've got the restaurant SkyTab component growing almost 70% within that SaaS number. And you also have a piece of our business that has a SaaS component that's growing really nicely within that portion of the P&L. So I would just expect some continued growth in a really healthy, nice way aligned with the revenue growth that we talked about today.

Great. Thanks for taking my questions.

Thank you. Our next questions come from the line of Darrin Peller with Wolfe Research. Please proceed with your questions.

Hey, guys. Thanks. Let me just double check, though. First on the organic versus inorganic side. I mean when we think about guidance, I think we're calculating the high revenue growth rate backing out things like the -- just the pure inorganic contribution from Finaro and Appetize. Are we about right in that calculation? And then just as part of that guidance discussion, I remember you didn't include same-store sales growth in your bridge. And so I guess I'm just trying to figure out other sources of conservatism given the macro backdrop that might be in that outlook, even how much has already been booked? How much of your customer wins are already in that -- for that bridge, along with it just anniversary-ing stuff from this year as well as into '24.

Yes. Darrin, Jared here. I'll take the first-half of that question on just the organic course inorganic trajectory, and then kick it over to Nancy on some of the same-store sales assumptions that we make. I'd say, look, with respect to 2024, the organic portion of our revenue growth is going to be well north of 25%. I think it's always hard when you look to the fourth quarter, where you closed two acquisitions and our game plan is to break glass like day one, I mean, we go in and intentionally try and pulverize existing revenue models. So it's very hard to like look at it in a quarter like that and try and really dissect it. But I would tell you in terms of our 2024 forecasting, you're well north of 25% on the organic side. And then, Nancy?

Yes. I think, Darrin, just to kind of color that in a little bit. In addition, I think when you think of that kind of guide of on the revenue side, that will come with over kind of 250 basis points of margin expansion. And I feel really, really good about the organic growth going into '24 for exactly the reason that you mentioned. So much of how we build our guide and how we look ahead is we know what the pipeline looks like. So we're not just taking a percentage of a really big book and then applying that to this guide. Most of this growth is stuff that we already have our eyes on. It's either booked. It's being integrated. It has an implementation schedule. So super high confidence. And then on the macro side with the same store, I think you said it in your question, we're going really modestly. So we're actually slightly under in our assumption in terms of what we saw in '23, so certainly not expecting any kind of rebound here. And if you go back to the prepared remarks, I think low to be some kind of further pullback and mid to high is really BAU kind of what we saw in 2023 and what we're exiting at.

That's really helpful, guys. And then just quickly on the international side. Again, it was great to hear some of the color on the international progress you're making. But when we think about the more specifics on verticals, if you can give us a little more idea as to any conversations with multinational hotel chains in Europe, maybe that you work within the U.S. or, again, a little bit further discussion on the opportunities for the restaurant space. What kind of momentum would we expect to see throughout this year?

Yes, sure. So it's every element you've seen of our strategy we intend to implement in Europe. And I think -- and it's really just a handful of days in December that this played out that you can evidence this, right, which is Jared mentioned, an ISV that's integrated to us bringing us a retailer in Europe. We mentioned hotels signing up in Canada on existing integrations that were compatible with Shift4 and now we can process for them. And then in the U.K., specifically SkyTab. So there's always the potential for M&A across Europe as well. So I think you should expect every element of our strategy in the United States is applicable throughout Europe. We're going to be choosy about the countries we operate in first. We're going to be choosy about the payment methods. There are certainly some software compatibility things will work out with SkyTab. But generally speaking, the software that you've known to be integrated to Shift4 is installed all over the world. That's why the international expansion effort was such a key strategic priority for us. We already have customers and we already have distribution partners throughout the entire globe, not just Europe. And Europe is our first kind of major continent within which we have the right to operate as a payment partner. So you'll see every element of those strategies. It is early to predict which one will move faster than others, but we see the opportunity is really, really rich, and we're not going to be biased towards one or the other.

Yes, maybe just to layer on, like we are throttling demand in Canada and Europe. Right now based on the software integration, the hardware it requires and SkyTabs like fiscal compliance. So it is kind of interesting. We never would have set out when we went into Europe and said like, let's leverage one of our retail integrations, because honestly, it's not like -- most people wouldn't think of Shift4 specialty retail as kind of a top vertical. But when you start putting out like awareness, you're testing ISVs that you're moving into a new market, there's always a list of -- especially in Europe and Canada, like what about these accounts in markets that largely aren't very integrated right now and have been waiting a long time for it. We're throttling demand in Canada. The next 50 locations are going to use certain software and hardware that we have there. So like we talk a lot about international and bringing like our capabilities that work for us in the U.S. into those markets because we're seeing the demand.

Got it. Great, thanks guys.

Thank you. Our next question has come from the line of John Davis with Raymond James.

Nancy, I just want to touch on free cash flow, very strong in the fourth quarter. I think you ended the year in '23 about 60% free cash flow conversion. So just a little curious what the drags and why it would be down a little bit. I appreciate it's 58 plus for '24, but any comments on kind of headwinds or puts and takes on free cash flow as we look at '24.

Yes, for sure. Look, there's always going to be some movement here in between. Obviously, we have two quarters, Q2 and Q4, where we have interest payments. So those will always be lower quarters. And that's I'm always super sensitive to kind of talk about this on a full year basis versus quarter-to-quarter. Just as we negotiate, we have a massive focus right now on continuing to improve. Obviously, what has been a great trajectory on free cash flow conversion. And so there's lots of puts and takes with vendors and decisions we make on improving our just AR and AP turns, as you can imagine. So nothing in particular. And so I would really just think about it on a full-year basis and look at the guide and know that we're super confident that there's lots of room here to continue to improve that conversion going into '24.

Okay. Great. And then just a quick follow-up on margins. I think the midpoint of the guide is for 60 basis points of expansion, Nancy, you called out Finaro and Appetize as being margin headwinds. Just curious if you can kind of quantify that or give us any sort of color of what the kind of underlying core margin expansion is embedded in the '24 guide?

Yes, for sure. I think Jared mentioned that as we think about the guide, we're looking at well north of 25% organic revenue growth. And I would think aligning with that comment is organic margins of probably about 250 basis point plus of opportunity to expand into 2024 to match up with that guide.

Okay, great. Appreciate it.

Thank you. Our final question will come from the line of [Joel Rikers] (ph) with Truist. Please proceed with your questions.

Hi, this is Joel on for Andrew Jeffrey. I hope everybody's doing well. As we think about SkyTab in the context of accelerating end-to-end volume conversion, do you think SkyTab can be positioned as a viable migration path for enterprise? In other words, as enterprise customers think about ripping and releasing micros, do you think SkyTab can kind of step in?

Yes, absolutely. So if you think about -- let's just use Micro as an example, because that's one you gave. Our Chief Technology Officer comes from Micro. Our Chief Product Officer comes from Micro. So we own two of the largest Micro resellers that existed across the country. So our knowledge about that product suite, in particular, is immense, and SkyTab has the ability to compete in that swim lane as it does with many others. So if you think about the acquisitions we've done in our history, we own five different restaurant point-of-sale brands, most of the talent from those brands still works at Shift4. All of that informs and is focused on the go-forward development of the product. I think live is a good example of complexity because it's very visible for us, and by that I mean the entertainment venues. You sit around stadiums, you'll see 100s of workstations there, an incredible amount of volume, especially when the Texas Rangers were winning the World Series. You'll see evidence of the platform performance well. And it's one of -- just one of the swim lanes we choose to be sort of aggressively competitive in with the product.

Yes. I'll just layer on too. I mean with respect to gateway conversions, the largest portion -- a large portion of the population of gateway customers are, in fact, lodging hospitality customers. So SkyTab is just a standard part of that offering now is -- when we sign large deals with big property operators is a hunting license to sell SkyTab within those locations. I think we announced that on two or three of our last big deals, including, I think, Sonesta from a couple of quarters ago. So yes, we -- and look, it is the lowest cost of ownership, I think, of any restaurant cloud POS system. So it just makes the overall value prop more attractive, and it's like the juicy lodging volume, which is several times that of what the restaurants themselves would do. And then I'd also say, like we have a very large -- we never talk about it that much, but like what we would call our software-only population of very large restaurant customers that maybe pay us very small SaaS amounts, but no real acquiring or gateway-related volume. Examples would be like Blooming or Cheesecake Factory, like those are all like natural targets for us. At some point or another, they're going to move to a cloud-based solution. We more than have a foot in the door, and you can bet those proposals or for SkyTab.

Okay. Awesome. And then just as one quick follow-up. I mean we've seen a lot of competitors for software integrated POS take price in 2023, like Clover particularly comes to mind. Can you talk to us a little bit about what your pricing philosophy for SkyTab is and maybe where you see any opportunities for pricing across SMB and enterprise? I understand the enterprise is obviously a little bit more difficult, but it would just be really helpful to hear how you guys are thinking about that.

Yes. I mean, look, we're certainly aware that we have the lowest total cost of ownership with respect to our SkyTab offering. Last year was a year where I think we were the beneficiary of a lot of business because of some of the pricing tactics from our competitors. So there's no need to rock the boat in that. But I mean, certainly, your five-year total cost of ownership is like materially south from your competition, that there's going to be opportunities to potentially reprice in the future. I don't think last year was the year to do it, nor do I think like some of the tactics that were used, like pushing things directly on to a consumer, were right either. But yes, there -- I mean, just in the numbers, there's certainly opportunity on the road ahead.

Thank you.

Thank you We have reached the end of our question-and-answer session. And with that, I would like to bring the call to a close. We appreciate your participation. Thank you for joining us today, and have a great day.