FOUR - NYSE

Greetings. Welcome to the Shift4 Second Quarter 2024 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Tom McCrohan, Executive Vice President, Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, everyone, and welcome to Shift4's Second Quarter 2024 Earnings Conference Call. With me on the call today are Jared Isaacman, Shift4's Chief Executive Officer; Taylor Lauber, President; 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. Our quarterly shareholder letter, quarterly financial results and other materials related to our quarterly results have all been posted through 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 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 turn the call over to Jared. Jared?

Thanks, Tom. This is, once again a very busy quarter, and I'm reasonably pleased with our quarterly results and the momentum we have heading into the back half of the year. So as a quick summary, we outperformed our financial KPI goals for the quarter. We closed on 2 acquisitions, Revel and Vectron. We continued our organic international expansion efforts in support of our very large strategic customer, and we won thousands of new hotels, restaurants and stadiums here in the U.S. and internationally. So on to the quarterly results. For the second quarter, we generated 50% year-over-year growth in end-to-end payment volume, 38% growth in gross profit and 41% growth in gross revenue-led network fees. We also generated $162 million of adjusted EBITDA, representing 48% year-over-year growth as our margins expanded 240 basis points to 51% versus the corresponding quarter a year ago. Our operating margins expanded despite the margin drag from the acquisitions of Appetize and Finaro, which together negatively impacted our margins by approximately 250 basis points for the quarter. Now naturally, as synergies are realized, we expect that the drag from those acquisitions to disappear and contribute to our ongoing margin expansion targets. Most importantly, we generated $76 million of adjusted free cash flow, up 18% versus a year ago. Our blended spreads also remained very stable, coming in at approximately 62 basis points despite considerable volume growth. Now with the aim of being a bit more succinct compared to some of my prior prepared remarks, I wanted to share the following highlights. Now starting with our core. Our signature win this quarter is Whistler Blackcomb, which is part of Vail Resorts as well as new hospitality properties, Nobu Chicago and Nobu Toronto. We also signed Pier Sixty-Six Resort, Yosemite National Park, Scott Resort and Spa, Cobblestone Inn and Suites, Amrit Ocean Resort, Deer Valley, Valley Stein -- Stein Lodge, Mount Airy Casino and Resort and the new Live! Casino & Hotel that is currently under construction and scheduled to open next year in Louisiana. I've taken a close look at our pipeline of major enterprise resorts, many of which have never before been on our gateway, and it's nothing short of impressive. So for those that like to poke on our organic or inorganic debate, these wins represent billions in net new volume at some of the most desirable hospitality locations in the country. And if you're paying attention, we cover a list like this every single quarter. So now turning to restaurants, which I feel like at times, we should not even talk about because if we were simply known as the toast of hotels and stadiums, we'd probably be more appropriately valued. But the reality is our SkyTab growth continues to accelerate with nearly 10,500 system installs in Q2, representing 12% increase quarter-over-quarter. Now we attribute our SkyTab success to: a, it's a feature-rich cloud product with strong mobile and online ordering solutions; b, its the lowest cost of ownership with the philosophy not to charge for every single module and feature; strong distribution coverage, though we could always use more between our direct and indirect teams; and a strategy that delivers a low customer acquisition cost through referral programs, lead incentives and intelligent M&A. Now at current Q2 run rates. We will far exceed our 2024 system installation goals. And if you have any doubt about the momentum of SkyTab, just check out our daily posts on X, or Twitter. Some of the more notable restaurant wins, and we post those results like every day on Twitter. So you can really kind of verify firsthand some really awesome restaurants and new start-ups. It's really going well. Now some of the more notable restaurant wins this quarter include Xperience, XRG, which is an operator of 11 distinct Mexican restaurant concepts; Alpaca Chicken!, which is fast casual 16 locations; Stanford Hotels, which will now deploy our SkyTab mobile devices across restaurants at 13 of their locations; Angie's Lobster, which is an Arizona-based fast casual chain; the Casa Cipriani Club located in Lower Manhattan; II Gabbiano Restaurant; Shuckin' Shack Oyster Bar and group, which is converting 18 of their locations to SkyTab; and TLaquepaque restaurant located in California. In specialty retail, we added Turner's Outdoorsman, which is a 13-store hunting and fishing specialty store chain located in Southern California and Arizona; and university bookstores for BYU and West Los Angeles College wildcats. Now turning to some of our newer verticals. In Sports & Entertainment, we had a really strong quarter of signings, including the Miami Heat; the Indianapolis Colts, which also includes ticketing; the Chicago Bears; the Indiana Pacers, which has also got ticketing, the Memphis Grizzlies; the Triple-A team for the [ Open As ], which was -- and the Las Vegas Aviators; and the Lehigh Valley Phantoms, which is the Minor League team for the Philadelphia Flyers. We also signed several college teams, including the University of Houston; Boise State and their famous smurf turf; Indiana University as well as a couple of MLS teams; the San Diego Football Club, the Austin Football Club. Additionally, we signed agreements with New England Patriots to provide fans with a checkout-free concession experience at Gillette Stadium. Now 5 of these sports teams that I mentioned came in with ticketing, but just to reiterate, it's the Colts, the Pacers, Austin Football Club, San Diego Football Club and the Las Vegas Aviators. Now turning to nonprofits. The overall volume contribution from the vertical has ramped up really nicely this year. So in the first half of this year, we processed more volume than all of last year combined. We expect the second half of this year to be even stronger given the typical seasonal nature of donations, including during election cycle that occur typically in the fourth quarter. And we're really on track to deliver a 400% year-over-year volume growth in the nonprofit vertical in 2024, minus St. Jude Children's Research Hospital, which is already a very large $1 billion-plus established customer. Now the volume growth was driven really by just winning a lot. Our strategy and differentiated value prop as the go-to payment processor for fundraising platforms continues to gain traction and market acceptance. This month, we fully moved all U.S. card volume from GivenGain to Shift4 Payments, and we're going to move their non-U.S. volume later this summer. GivenGain supports a variety of high-profile fundraising events. So for example, we're pretty excited to be powering the payments for the Boston Marathon going forward. We also made great progress with our integration with fundraising platform, Give Lively, and we're scheduled to go live with our initial merchants by year-end and we expect volumes from these fundraising platforms to ramp really significantly over the coming months. So outside of the fundraising partnerships, we've also just signed a lot of impressive nonprofit customers like [ Malala ]Fund, Amnesty International, the James Hutton Institute, OSF HealthCare, Micron Health U.K., Centrepoint Soho and World Vision Canada. Now moving on to Gaming. We continue to roll out our SkyTab mobile devices at BetMGM's Sportsbook locations, and we're now live at Great American Ball Park, which is home of the Cincinnati Reds. Next month, we're going live with State Farm Stadium, which is home of the Arizona Cardinals. And by the end of this year, we're going to be live in all 24 sports book -- BetMGM Sportsbooks locations across 9 states, including the locations located within the casinos in Nevada. In Online Gaming, we expand our relationship with Lotto.com for the Massachusetts State Lottery and signed several new gaming clients, including Prime Sports betting, where we're going to offer their platform in the state of New Jersey. We also signed sports wagering platform, JACK Entertainment and lottery courier, YooLotto, for the state of Texas. Okay. Moving on to international. We've made a lot of progress here. So for example, we followed our most important strategic customer into several new markets, including Fiji and our first African country, Sierra Leone. By the end of this year, we expect to organically expand into 8 to 12 additional countries in Africa as well as Moldova and countries located in Asia Pacific, notably Sri Lanka and the Maldives. So we're very pleased with the progress of this important relationship. We attribute a lot of it to the prior Finaro acquisition as we're now able to expand internationally in a very organic way. Now in Europe. We continue our momentum, serving electric vehicle charging stations. We're now processing payments in 12 countries serving this vertical. So our right to win in this market is due to our early mover advantage and integrations with multiple players within the ecosystem. Our investments certifying the most EV-ready devices, including strategic relationships with various hardware providers, and really unique feature functionality to support the electric vehicle use case like incremental authorizations that we use in our resorts. So today, we have a very turnkey EV charging station solution, and it's no wonder why we're growing so quickly within that lane. Now continuing on with our international results. We signed the prestigious Bombay Hotel in Tallin, Estonia; the Italian jewelry and watch retailer, BINDA Group; and German online travel agency, Travelstore, where we'll process transactions for their Holiday Heroes brand in Germany. We also entered into an agreement to process payments for Portugal's PayShop, which is a utility bill payment provider with over 7,000 locations throughout Portugal. We signed KM Air, which is formerly Air Malta. We signed a Danish ski equipment retailer, Eportaler APS; and Danish LED developer, BMD Trading APS. We're also boarding over 300 merchants per month in Germany, the Nordics and soon, Italy, through our partnership with Flatpay. And we continue to grow our wallet share with major European delivery company, Wolt, which is owned by DoorDash, recently adding Albania to the list of more than 15 countries where we power their payments in Europe. Again, these are all newly contracted relationships and the revenue associated with this laundry list of wins that I rattle off each quarter are purely organic. So moving on to capital allocation. So first, we closed on 2 acquisitions during the quarter that are going to deliver very meaningful synergies. So starting with Revel. This is a proprietarily-sourced transaction and very much follows the Shift4 playbook. So the opportunity includes a massive payment cross-sell, the leading duplicative products or parts and reducing associated costs, along with arming distribution to sell SkyTab in multiple markets beyond just the United States. Now the talent from Revel will accelerate SkyTab capabilities in quick service, retail, and they have some awesome enterprise offerings along with localization in several international markets that they've already been serving. So a big accelerant to SkyTab. And as we previously communicated, despite Revel having been a cash burner since the company's inception, we expect Revel synergies to contribute approximately $15 million of adjusted EBITDA in the back half of 2024. Now like Revel, Vectron is another fine example of the Shift4 playbook, proprietarily sourced transaction that we've been working on for some time now. So we recognize this monumental value unlock opportunity in the business. And as I mentioned, we spent 18 months working on this transaction. Vectron software powers over 65,000 merchants, predominantly restaurants and is distributed by 300-plus dealers in Central Europe. The deal delivers a huge installed base to cross-sell payments and eventually, upgrade the SkyTab. We've got hundreds of distribution partners to pursue restaurant and hospitality opportunities across Europe and the talent and infrastructure to approach the market at scale. So unlike Revel though, where we have a more immediate impact on the business, we expect the opportunity with Vectron to develop over time, and this is predominantly because of the longer closing and delisting process in Germany. Now like similar deals in the past, we are definitely going to take several steps backwards to ultimately sprint very far forward over the years to come. So it should be clear, though, Vectron delivers a guaranteed path to scale and distribution and has completely derisked our SkyTab restaurant production goals in Europe. Vectron also positions us to benefit from the anticipated secular shift to card-based payments throughout many European countries like Germany. So as some of you may know, Mastercard just recently called out this opportunity, specifically in Europe just last week during their Q2 earnings call. And we agree. The overall digitization of commerce is influencing consumer behavior throughout Europe towards a more integrated digital payment experience, and we are now positioned very, very well to lead that evolution and benefit from it. Also, as mentioned in my letter, we are not going to sit on our hands and wait for the business to come our way when the opportunity is really obvious. Some of the greatest tech companies were formed by deploying capital intelligently while the market was in transition. I mean there are literally hundreds of examples that can be found inside Amazon, Microsoft, Apple, Meta, Palo Alto. Even payment companies like Fiserv and their Clover products have benefited from intelligent M&A. So we've delivered a lot of winning transactions. We're very good at it. And Revel and Vectron will be winners and there's going to be more like them. Second, we did repurchase over $35 million of our equity since implementing our $500 million buyback authorization last quarter, and we have ample free cash flow to fund additional buybacks and acquisitions. So Nancy is going to talk a little bit more about our leverage and balance sheet in her prepared remarks. Third, while we have many organic investments underway, we've become increasingly encouraged by recent momentum and have begun making incremental investments to accelerate our progress with SkyTab and our international expansion efforts. Further, it's no secret, I would like to see Shift4 become essentially the SpaceX of fintech. We have been funding major internal system initiatives, including our new Mission Control Center, Project Phoenix and AI initiatives where we will endeavor to take the innovation magic and the no fail SpaceX approach and apply it to our operations all over the world. Now in terms of investor feedback. We received a lot of questions and feedback from investors and have attempted to really answer many of them in my shareholder letter, the earnings presentation and throughout our prepared remarks. So for example, this quarter, you should find further explanation of our build by partner strategy to capitalize on what we believe to be a massive opportunity as software and payments converges to deliver a superior commerce experience. You should also find a breakdown of our M&A formula, including how we delete legacy parts, blow up the revenue model, enhance the value proposition and pivot the revenue model towards payments plus SaaS. Taylor is also going to provide further proof points at this point as he walks you through past acquisitions, including VenueNext and Focus POS. And as mentioned in prior quarters, there are many things we can control in our operations. But oftentimes, the timing of enterprise go-live is beyond our control. As such, we have shared our contractual backlog of volume, the majority of which is expected to go live in Q3 and Q4, and we use this to sense check our own projections. Last, we have provided the inorganic contribution to Q2 gross revenue less network fees, along with reiterating that the full year -- the full year of 2024 should be well north of 25%. Now in closing. For the 11th time in 17 quarters that we've been public, we have positively revised guidance. The guidance update this quarter accounts for the overall outperformance from the quarter, the legacy and synergy contributions from Revel and Vectron, as well as notable incremental investments to accelerate the pace of progress with internal systems, AI, international market expansion and SkyTab product accelerates. Now in the face of some economic uncertainty, I'd like to think our guide demonstrates the strength of our diversified business model and our strategy. So consider this. Despite the relentless comparisons, we do a lot more than just restaurants at Shift4. We do not offer capital or funding programs, and we generally target established businesses that have less failure risk. We have focused on an efficient and low-cost customer acquisition model by acquiring overlooked assets and cross-selling our products and services. As a result, we can grow through even the most challenging of economic times and often, without having to win a single new customer. And this is not a believe me story. We have been there before and growing through dot-com, the Great Recession, grown through the pandemic and pull back, and we're going to continue to do so for years into the future. We have the most enviable roster of clients and have consistently announced high-caliber wins each and every quarter since we went public. We intentionally serve complex merchants in challenging card-present verticals where our platform, product and software integrations provide an impressive moat. And as a result, we possess a differentiated right to win and have done a pretty good job identifying acquisitions that either extend our technology capabilities for purposes of entering new markets or just add merchants and distribution capabilities at an attractive customer acquisition cost, alongside equally attractive payback periods. We have a unique playbook and formula that delivers successful results in sharp contrast to our peers. As a result, we are delivering consistently strong growth while expanding our operating margins and generating strong free cash flow. We have a proven strategy centered around software integrated payments, and we are well on our way to replicating our success in the U.S.A. all over the world. And with that, I'm going to turn the call over to Taylor.

Thanks, Jared. As in prior quarters, I'm going to spend a bit of time talking about the current operating environment, but I'd also like to talk about our backlog and provide detailed insight into a couple of recent acquisitions to demonstrate how we unlock value from M&A. . Starting with the operating environment. We do our best during times of economic uncertainty and now is no different. Merchant growth and same-store sales performance was generally within our expectations during Q2. It is important to note that despite the constant comparison to others in the industry, we are well diversified, and we've never relied on same-store sales for our growth. This diversification was a commitment we made at our IPO and has increased our resiliency even while growing our total volumes at a 75% CAGR in the 4 years since IPO. As many of you know, we have been cautious that the $100 stake would not last forever, and it appears that restaurants may be experiencing a mild slowdown. On the contrary, hotel travel, stadium attendance and retail merchants are all doing reasonably well, and we continue to add lots of merchants. These conditions favor Shift4 as we grow by aggressively taking share across -- and cross-selling payments and software. This works quite well as our products are competitively priced and a low fixed cost of ownership, which is attractive to merchants. Our strong balance sheet, free cash flow also allow us the flexibility to grow when others are shrinking. We use these times to invest in our business. Building, buying and partnering at a time when many in our industry are urgently trying to prove they can even achieve a modest profit margin. Jared provided a thorough rundown of the various drivers underpinning the step-up in growth for the back half. And I wanted to highlight our backlog, which is a metric we track internally and helped inform our guidance. Our current backlog is roughly $25 billion in volume. This represents volume that is already contracted but not yet implemented or at its expected run rate. While there can be slippage from time to time, these merchants are either already installed or have an installation that is scheduled in the near term. It is important to realize that this is one of many factors that contribute to our confidence in volume growth for the back half of the year. For example, we signed thousands of restaurants, hotels and e-commerce customers, nonprofits and others that will go live immediately. When you see this number, you should think of sports stadiums and enterprise resorts that have signed contractual commitments, but for a variety of reasons, such as waiting for the season to start or the resort to open, they have not gone live yet. As Jared mentioned, we expect the majority of this volume to be realized this year. Given our recent acquisitions, I thought it would be helpful to provide some insight to 2 of our more seasoned acquisitions, VenueNext and Focus POS, in order to give you all a little better perspective on how the revenue model for these 2 companies evolved over time. In short, both companies experienced a dip in revenue shortly after acquisition. This is planned for and deliberate as we transition their models and bundled payment processing and SaaS. For Focus POS, their legacy revenue model was very dependent on onetime revenue with about 2/3 of the revenue being nonrecurring in nature. As a result, in the first 2 months post acquisition, their gross revenue less network fees declined about 54% as we executed on our typical strategy of blowing up the legacy model and pivoted to a bundled payment solution. Today, Focus POS gross revenue, less network fees, is 95% recurring in nature and is 5x higher than their post-acquisition lows and 3x higher than pre-acquisition levels. Because we are bundling services that merchants traditionally use multiple vendors for, they are often saving money and getting a dramatically improved service experience. It's a win-win. I'm sure you can see the similarities between Focus POS and Vectron. Vectron is a business that will take some steps back in revenue and EBITDA for the remainder of the year, but in the spirit of delivering payments plus software value proposition that should lead to very meaningful revenue, EBITDA and free cash flow growth over the medium term. With VenueNext, we also took a step back in revenue contribution before taking many steps forward. Legacy VenueNext already had a recurring revenue model built on SaaS, although they did also rely on onetime hardware sales. We were able to complement VenueNext superior technology with our distribution and offer this end market a bundled payment solution that was very novel at the time. Post acquisition, VenueNext similarly witnessed a temporary dip in gross revenue less network fees as we transitioned away from onetime hardware sales and towards payments. With VenueNext today, generating gross revenue, less network fees, that is greater than 7x pre-acquisition levels, of which 90% is recurring in nature. It took some time to educate the markets on the benefits of this bundled solution. And today, we are now reaping those benefits. Volume from stadium and entertainment clients was up over 50% year-over-year with a considerable runway to capture additional share of wallet as we cross-sell ticketing to the installed base. We've put illustrations in our latest shareholder letter to help better visualize the trends mentioned here. In both of these examples, as with the majority of all other M&A, we don't settle our businesses with technical debt, layers of bureaucracy, unnecessary parts. Focus POS and VenueNext integrated to our payment platform alongside of 500 other ISVs, go to market with a new SaaS, plus embedded payments offering and win more in their respective markets as a result. While we talked about a small handful of examples, it's worth noting that the broader opportunity set is growing as well. Our pipeline of compelling opportunities is, quite frankly, larger than it's been at any point in recent history, and we are in the enviable position of being very picky about what we spend our time and capital on. Now while we spent a fair amount of time talking about M&A in this quarter, it's important to realize that we don't have to do deals. And we have conviction in our -- in the balance of our build, buy and partner approach. As Jared mentioned, we did not do a single acquisition in our first 15 years in business and grew quite quickly. What we are not content to do is sit back and wait for business to come to us when there is still so much opportunity to accelerate the convergence of software and payments. And with that, I will turn it over to Nancy to discuss our financial results. Thank you.

Thanks, Taylor, and good morning, everyone. We delivered another quarter of consistent and solid results, outperforming our quarterly guidance and demonstrating again our ability to deliver top line growth while continuing to drive margin expansion and strong free cash flow conversion. Total Q2 volume of $40 billion grew 50% year-over-year. Gross revenue less network fees grew 41% to $321 million. Our adjusted EBITDA for the quarter was $162 million, up 48%, and adjusted EBITDA margins expanded 240 basis points to 51% versus the same quarter last year. Excluding the impact of the legacy Finaro and Appetize businesses, margins expanded more than 500 basis points. Our quarterly results were driven by the continued strength of our hospitality and restaurant verticals, momentum across our enterprise merchants, further monetization and conversion of gateway customers and an increasingly larger contribution from stadiums and ticketing. We see the impact in both our payments-based revenue growth and the increased contribution from SaaS-based fees. Organic revenue for the quarter was 24%, and we are reiterating organic growth to be well north of 25% on a full year basis. The in-quarter contributions from Revel and Vectron were immaterial given both acquisitions closed in mid-June. Blended spreads for the second quarter and the first half of the year was 62 basis points. Spreads across our core business of restaurant, hospitality and specialty retail continue to remain stable. Based on our year-to-date performance and the vertical mix and customer size driving our volume, we now expect full year spreads to average no less than 61 basis points for the full year, up from the 60 basis point floor we provided previously. Subscription and other revenue was $71 million in Q2, up 93% compared to the same period last year. The growth in SaaS and other related software revenue was driven by our success across SMB, SkyTab and penetrating the Sports & Entertainment vertical. Growth in subscription and other revenue will not always be linear. This is a good opportunity to remind investors that, as Jared and Taylor discussed, we often blow up the legacy revenue model of our acquisitions and pivot them towards our signature Shift4 payment field value proposition. Our continued success in converting Appetize and other software-only clients [ due ] acquiring will cause subscription and other revenue to decline and offset some of the outsized growth we are achieving. Additionally, the timing of onetime revenue may cause some bumpiness quarter-to-quarter. In Q2, total general and administrative expenses increased 34% year-over-year to $110 million. Excluding the impact of the acquisitions though, completed in Q4 last year, G&A expenses were flat year-over-year. We remain highly committed to a disciplined approach to cost management, while continuing strategic investment for growth. As Jared mentioned, we are making incremental investments in areas we see further opportunity. But overall, our goal of keeping head count flat while investing in talent upgrades remains in place. We are quickly progressing on the overhaul of our operating model, which will further drive efficiency and scalability across our platform. Our second quarter adjusted EBITDA margins were 51%, representing 240 basis points of expansion compared to Q2 2023. As I mentioned, excluding the impact of acquisitions, margins expanded over 500 basis points. We have high conviction in the many opportunities to further improve our underlying margins that are still on the horizon, including the remaining M&A synergies to be realized from our ongoing integration efforts of recent M&A, utilization of AI technology, implementation of new internal systems and ongoing streamlining efforts to enhance scalability throughout our business operations. Our adjusted free cash flow in the quarter was $76 million, up 18% compared to a year ago. As a reminder, Q2 cash outflows include a semiannual interest payment of roughly $10.4 million, which can distort the quarter-to-quarter sequential comparison. Total adjusted free cash flow conversion for the first half of the year is 54%, in line with our expectations. In addition to the timing of interest payments, there will be fluctuations in our conversion rates on a quarterly basis due to the seasonality of our business, the deployment of capital to support growth and normal working capital cycle changes, period-to-period. Overall, the improvement in our unit economics and efficient operating model continue to give us great confidence in our ability to deliver annual year-over-year expansion and our adjusted free cash flow conversion rate, in line with our previous guide of 60% plus. I will talk about the slight drag we expect from our recent acquisitions in just a moment with our updated guidance. And with respect to capital transactions. In May, our Board of Directors authorized a new stock repurchase program pursuant to which we are authorized to repurchase up to $500 million of common stock through December 31, 2025. During the second quarter, we repurchased approximately 230,000 shares for approximately $16 million, leaving approximately $484 million of capacity available as of June 30. To date, in Q3, we have repurchased an additional 300,000 shares for approximately $20 million, and we will continue to be opportunistic. You can find a complete reconciliation of our shares in the back of our earnings materials. We have cumulatively deployed approximately $350 million on buybacks, repurchasing 6.5 million shares at an average price of $54 since our IPO. Of note, cumulative dilution from our stock-based compensation has been less than 2% per year on average. As employees, we are the largest shareholder of Shift4 and are very thoughtful about managing dilution. Net income for the second quarter was $54.5 million. Diluted earnings per Class A and Class C share was $0.58. Adjusted net income for the quarter was $89 million or $0.96 per AMC share on a diluted basis, on 93 million average fully diluted shares outstanding. Our balance sheet remains strong. Our sequential decline in liquidity is due to the cash purchases of Vectron and Revel. Our total indebtedness has a weighted average cost of 1.35%, and we do not have any maturities until December 2025. Our net leverage at quarter end was approximately 2.7x. Excluding the impact of lower cash due to the acquisitions we just completed, net leverage dropped to 2.2x, our lowest level since January 2021. The deleveraging profile has been quite extraordinary. Our strong balance sheet, growing EBITDA and expanding free cash flow conversion afford us many options to fund strategic priorities, opportunistically buy back stock and satisfy year-end 2025 maturities without being punitive to our equity. Now turning to guidance. We are updating our full year guidance to include Q2 outperformance and the contribution from Revel and Vectron, which both closed on June 13. As Taylor just elaborated, we expect to pivot the revenue model of both companies to payments as we cross-sell payment processing to the installed base of merchants. For the full year 2024, we are further tightening our guidance range for end-to-end volume and now expect a range of $167 billion to $172 billion representing 53% and to 58% year-over-year growth. We are increasing our gross revenue, less network fees range, and now expect the range to be $1.35 billion to $1.38 billion, representing 44% to 47% year-over-year growth. We are also increasing our adjusted EBITDA range and now expect adjusted EBITDA to be in the range of $662 million to $689 million. The year-over-year margin expansion remains virtually unchanged from prior guidance, despite the incremental investments we are making in Europe. We are also resetting our adjusted free cash flow conversion expectation to 59% from 60% previously to account for the drag from recent M&A. We estimate this yields $399 million of adjusted free cash flow for full year 2024 at the midpoint of our adjusted EBITDA guidance. We continue to expect organic growth of gross revenue less network fees to be well north of 25% at the midpoint of our full year guide, and are also updating our quarterly breakdown of our annual guidance to help investors better understand the impact of seasonality on our business, which can be found on Page 22 of our shareholder letter. A couple of call outs as it pertains to our guidance. We continue to expect a stronger second half of 2024; a long list of low-hanging fruit cross-sell payments and SkyTab, including from our recent acquisition of Revel; contracted annual volume backlog of about $25 billion that Taylor discussed, that is already contracted but not yet implemented or at its expected run rate. SkyTab system installs continue to accelerate each quarter, and we are way ahead of schedule on our 30,000 goal for 2024. Many of the wins featured each quarter, especially stadiums, ticketing opportunities, major enterprise resorts are seasonally strongest in the back half of the year. Strong progress in Canada, including our signature win this quarter at Whistler Blackcomb and Nobu Toronto. This was previously an untouched market for Shift4. Real momentum in Europe, as demonstrated by the impressive list of hotel and restaurant wins we have shared over the last few quarters. And while it won't be a real driver of the balance of the year, we are really excited about the Vectron acquisition and what it brings. Our strategic e-commerce customer continues to add volume quickly, and we've been expanding organically into several new international markets with, at least, 8 new countries set to go live in the back half of the year. The high end of our volume guide, which we have tightened in light of the delayed Vectron closing and control process and clearly a consumer that is not at peak spending, would imply seasonal trends consistent with prior years. It is also worth highlighting that we would have raised the midpoint of our EBITDA guide further, if not for the anticipated drag from our European strategy. We have provided an EBITDA bridge on Page 23 of our earnings. For even further clarity, even without the recent acquisitions, we would have raised the midpoint of our guidance to account for Q2 outperformance. Before turning the call back to Jared, I want to reiterate that our balance sheet, cash generation and profitable growth position us incredibly well for the current environment of macro uncertainty. With that, let me now turn the call back to Jared.

Thanks, Nancy. So before we go to the line for questions, we are going to take -- well, it's a multipart question from -- that was submitted over X. So Tanner [ Triggs ], you're -- you've got the lucky pull here, and it's actually like 4 really awesome questions. So I'll try and hit it really quickly. . "Now that we've been playing the kind of the carrot-and-stick game on our gateway business for some time now, what is the future organic trajectory of the business look like?" Well, first, I'd say like the power in our gateway goes well beyond just the volume that's on it. It's those 550-plus software integrations that allow us to pursue these verticals that few others can. So great examples this quarter would be like Toronto -- or I'm sorry, Nobu Toronto, Nobu Chicago. They were never on our gateway at all, but they require those integrations. We had the better value proper, the other 2 that could compete for that business, and we won. When you think about it, our whole stadium vertical right now, I mean we acquired the software to pursue that vertical several years ago, but we bundled it with our payment offering and we've bundled it now with our ticketing integrations. All of that is organic growth. So we're taking a lot of products and services like SkyTab, which was in an organic initiative. And we're growing really quickly in the U.S. with them, and now we're able to do it in Canada and Europe. So from my perspective, like the organic growth trajectory of the business is going to be extraordinarily long after the gateway conversion story plays out. You had a couple of other things about how easy it is to take our products and services that work in the U.S. into Europe. And that depends. So SkyTab has been in the U.K. and Ireland for some time right now. There's very little localization or fiscal compliance that's required there versus it takes more time to localize SkyTab in France, for example, or Germany. But those are all efforts that are underway. The software integrations that we have, [ that ] power hotels, for example, say, Oracle or Agilysys. They work in Europe, the same as they do in the U.S. and they work in Canada the same as they do in the U.S. Our VenueNext software for supporting stadiums is pretty plug-and-play in Europe. And I think that goes to the last part of your question, which was specific to stadiums in Europe. Actually, I have a couple of more parts to it. But yes, we're making great progress. I think we posted on Twitter a cool video of our first stadium that went live in the U.K. And we're working on a pretty bad-a** as video for the FC Barcelona go live, which is underway as well. So I don't think the actual go-live process for stadiums in Europe take any longer than they do in the U.S. You just got to wait for the season to end. And here's the last part, which I think is a good one, is that every now and then, we talk about wins that are kind of outside the core of restaurants and hotels and stadiums. You used examples like the UPS stores or Fanatics or self-storage and kind of like what's the trajectory like there? And the interesting thing is these are just businesses that use the same integrations that we use to pursue hospitality customers. So think about big hotels and resorts have retail shops in it, like, I don't know, Caesars Forum Shops and such, and then other retailers use the same software. So we have a lot of ski resorts. Whistler Blackcomb is a great example this quarter. But we have a lot of like ski shops that uses the same software that ski resorts would. And the same retail software that say, customers in the forum shops use, is what UPS stores use -- uses. It might be the same software that Fanatics uses or merchandising shops. So it's actually like not really a new vertical for us. It leverages the same integrations that we use to pursue our hospitality line of business. And I appreciate those questions. We'll go to the analysts.

[Operator Instructions] Our first question is from Darrin Peller with Wolfe Research.

Maybe we could just start off looking a little bit more of the acquisition contribution. And then a little more on the strategy and road map of how -- your plan to really monetize and make the most of those. And so I know you talked about some of the guide increase being $15 million in EBITDA, $35 million from revenue from acquisitions. Can you just explain the margin dynamic there for us from Revel and Vectron? And then more strategically, Jared, can you just hone in a little more on the road map on how to really -- what your expectation on milestones are to monetize those, in terms of moving some of that software over and moving it over onto payments? And some more -- maybe a little more color on the time line of how you could monetize those deals.

Yes. Darrin, Jared here. Let me kind of start out with some of the high-level points, and then I'll kick it over to Nancy to get into any of the specific margin drag dynamics. So I mean, first of all, as we've kind of demonstrated in our earnings reports with the Focus POS and the VenueNext look back, We do take a very quick and deliberate approach to pivot the business model of these type of acquisitions. So oftentimes, it's forgoing hardware, software revenue. Even SaaS revenue will throw away if it accelerates a migration. So keep that in mind, I'd say, especially with respect to Vectron, which probably looks a little bit more like some of the deals that we have done in the past where a heavy concentration of kind of more onetime revenue that can go away very, very quickly when you pivot strategies. Now let's start with Revel right now. So we said last quarter when we announced that deal that we expected $15 million contribution for the back half of the year. You should assume almost all of that is coming from cost synergies. Revel was very much a tech start-up. Big cash burner. We say that we go in very deliberately, we burn the shifts so that we can focus on the future. The future is SkyTab in our world. So that isn't to say that we don't see a huge opportunity from the 18,000 customers that we're going to cross-sell payments and eventually move to SkyTab. But these are bigger chain customers. That's going to play out over some period of time. Immediate move is to say, "Look, we're not actively developing in Revel anymore, and that's some big cost synergies there." That's why I think some people had some questions, "Hey, you've got $15 million of EBITDA coming from this thing, where is the volume associated with it?" Hey, we're not really baking that conversion process in right now that'll play out over a couple of years. Now with respect to Vectron, this is where you're going to definitely take a couple of steps backwards as you pivot the model. This is going to take like -- this isn't going to play out over 2 years or something like maybe a Revel wood. This is a story that's going to play out over 10 years. You have 65,000 customers that are -- they're going to be showing for payments in Europe. You're going to have 300-plus distribution partners that are going to sell SkyTab all across Europe. But that -- this is all going to take some time to play out. We don't even have full control over this company based on just the delisting process. So hopefully, that gives you a little bit of sense of where the puts and takes are, where you get some drag from some of these businesses, where it can even impact a little bit of free cash flow when you go negative on say like a Vectron. But where the opportunity will play out much greater over the years to come. And Nancy, I don't know if you want to any margins.

Yes. I think what I would add is to understand, we certainly spent a lot of time looking at this. And I would say the best property for consolidated gross margin for the year is [indiscernible] I expect on an all-in basis [indiscernible] is very similar to what you're seeing in the quarter with puts and takes of obviously huge drag from Revel and Vectron. And we continue to synergize still Finaro and [indiscernible] last year. So if you think about the synergy process as that will sometimes take more than 12 months. So even though we're lapping Finaro, we are certainly still doing lots of integration work there. So that's how I would think about it as this thing is going to get a little more complicated. Obviously, with our patent acquisitions are kind of [ sometimes ] flowing up 1 bottle and getting [indiscernible] that this is [indiscernible] over. So I think starting to get like a good proxy for what to expect at the back half of the year, Darrin, it's probably looking at exactly what we [indiscernible] it to do.

Okay. That's really helpful, guys. Very helpful.

Sorry, Darrin, I remember it's the first part of a longer question, so I want to make sure we address it. Nancy, do you mind commenting on the -- it was de minimis, and I think we said that, but just further clarification on revenue contribution from Revel and Vectron in Q2.

Yes, for sure. I think that's why we wanted to put out the 24% organic because remember, we only had 2 weeks and we're talking about something completely immaterial for Q2. So I wouldn't even think of them as a contributor for the quarter. And certainly, when you look at the guide grades, we tried to contemplate the benefits going into the back half of the year.

Okay. That's really helpful. And very quickly, the backlog was really helpful to [ get ] guys. Just considering that gives you a lot of idiosyncratic reasons to be confident on the second half. Just any macro conservatism built into the outlook at this point? Or I mean, I know there's some in terms of same-store sales on certain verticals, but maybe just comment on that, and I'll turn it back to the queue.

Yes. Certainly, when we built the original guide, and I think some of the pull down on volume when we tweaked it a little bit, we were thinking about that we knew the global days were not coming. And you know we've been talking about the prices of the states were going to bust up at some point. So the way I would think about it is when we pulled out the high end knowing that we wouldn't have kind of any upside. We definitely consider that in the macro. And generally, when we put our low out to begin with, we had some conservatism there. But generally, coming out of Q2, we had a really solid same-store sales. And while we're seeing some softening maybe in early July, it's definitely offset from like really solid performance across the other verticals. So right now, I think we're just kind of holding steady for now from a midpoint perspective.

Our next question is from Dan Dolev with Mizuho.

Jared, Taylor, really good results here. I have a quick question about the volume. Can you maybe clarify what drove the volume reduction to the full year guide? And maybe give us a little bit of your sense of confidence into the macro in the second half. That would be great.

Yes. I mean I can start that one off. Nancy, she kind of mentioned in her last remarks, but it really was driven in 2 parts. One of which is when we put out our volume bridge last year, we put a big slug of restaurants and hotels in Europe in it. And for as much progress as we are making, we're announcing awesome wins every quarter. we didn't have the 65,000 customer layup that we will eventually have control over in the balance of this year with Vectron. So I think just like there is some delays in getting to the thousands of restaurants and hotels that we were hoping for this year. The other part is as Nancy mentioned, is like just the good times aren't rolling anymore. So when we initially set a volume guide at the beginning of the year, we said the upper end is that the $100 stakes continues. Though we're always cautious that, that will have like real staying power. So I think that's just prudent to just to tighten that up. I will say, generally speaking, on the macro. Look, we have grown double digits in volume and revenue, our entire history of 25 years. And there's been a lot of downturns throughout that period. If you're growing volume at the pace that we are, it's not to say like 3% reduction or something in same-store sales and restaurants isn't a factor to consider. It certainly is. And believe me, if there's a restaurant, I think it's all bets off -- I mean, I'm sorry, if there's a recession I'm sure it's all bets are off for everybody at that point. But from our perspective, like how we're hitting our volume targets is doing smart things like Vectron and Revel, where I guarantee you, it will be a hell of a lot easier for us to predict where our next 65,000 customers are coming from in Europe than it will be, say, for somebody else who's just beginning to enter into that market. And that's how we have like just greater control over the volume trajectory of the business versus trying to underwrite down to the 100 basis points on a same-store sales movement.

Our next question is from Timothy Chiodo with UBS.

I want to hit on the stadiums and ticketing wins. There was a really strong list of adds this quarter. Many of them you noted are already starting with ticketing from day one. And you've mentioned also the ongoing cross-selling opportunity. I think a lot of that has to do with the integrations that you've made throughout the ticketing ecosystem with numerous platforms, I think basically all of the major ones. But the question really comes down to that rough TAM. I believe it's in the $100 billion or so range for the U.S. Maybe you could update or correct that number if I'm off. And giving us a sense on what portion of that you're working with in some way? Whether it's only on ticketing or only on concessions. But how much of that do you think you've already achieved as a part of that, again, let's call it roughly $100 billion TAM. And then if you don't mind after, I have a quick follow-up on mix.

Yes, sure. So Tim, this is Taylor. I'll cover that. I think very important to distinguish the 2 concepts, market share versus wallet share, especially in these like stadium environments, where the revenue centers are very fragmented in many regards. So we feel really good about our market share by -- and these numbers can vary. But whether it's 2/3 or 75% of the stadiums and theme parks in every league in the United States, we have a customer relationship in some way, shape or form. It's a minority of those where we have kind of the Holy Grail, which is the entirety of the stadium plus ticketing, as you mentioned. But that is the most common of the offerings that we go to market with now. It's probably the most common of the offerings that's taken from, let's say, a hypothetical appetite stadium moving over to venue next. So we're really enthused and quite frankly, our customers see a ton of value in giving us the bulk of the revenue center management and ticketing inside of that. I think the harder part is that the volume comes in reasonably choppy when you do that. At least, it takes kind of a year or maybe 2 years to fully season. And the example I would give is we acquired Appetize in the back -- just before the last quarter, of 2023. And we have been installing more stadiums in a month on VenueNext than we have in our busiest quarters in any other year. So pace of installation has been incredible. But from a revenue and volume standpoint, you won't see that until the sport season starts up. And then in the case of ticketing, usually the bulk of ticketing happens after the season when they sell season tickets for the following year. So we feel really good about our market share. We feel really optimistic about the ultimate wallet share. I'd say the choppier part and this has kind of led to a back half weighted volume expectations throughout our guidance through the year. It's just that the cadence of that.

Excellent. The brief follow-up is kind of a pie chart question. So in the shareholder letter, you mentioned that now you're at about 1/3 of volume, 33% from hotels and resorts. If you wouldn't mind, just updating what the rest of that pie chart might look like, meaning, how much of that is restaurants, stadiums, et cetera, based on the existing base of end-to-end volume?

Yes, sure. We love this. It's about 1/3, 1/3, 1/3, meaning that you've got restaurants, hotels and then all other. And all other would include stadiums, but it also includes specialty retail. Things like Jared mentioned, our big strategic customer, et cetera. As I mentioned in my scripted remarks, we made a deliberate commitment at the IPO to diversify the business. And that's, I think, paying some dividends today. . We do see a modest amount of softness, as Nancy mentioned, very recently in restaurants, but we're seeing none of that in hotels and we're seeing kind of continued spending across all these other verticals. And we've got a handful of merchants that are growing really nicely inside of that all other bucket, which is great. It offsets kind of any expectation you'd have in the macro.

Our next question is from Will Nance with Goldman Sachs.

I wanted to ask on -- just on the gateway revenues. I know you guys had discussed kind of like a kind of nonstandard gateway conversion towards the end of last year. And we saw the -- I guess, what we call the gateway revenues in the model coming down over the last couple of quarters. I think we got to like $1 million or so this quarter. So just could you update us on sort of where we are in that journey? And then just like clarifying because those revenues appear relatively low now, relative to the large base of volume. I realize it's really low take rate, but just kind of making sure that we're understanding the kind of the economics as they exist today on the existing gateway volume.

Yes. Will, I'm happy to take that. So there is still a very large quantity of volume that is still there that we make very, very little off of. So these are some very big customers that go back to the First Data JPM JVs, with very long contracts with lots of price protection at very low rates. Because during that JV, they chose to monetize the relationship upstream from the gateway. So we're still working through it. It's a lot of volume. There's certainly a lot of like low-hanging fruit in there still to get smaller customers that we -- that contribute to our growth every single quarter. But there's a lot of big ones in there as well, and there has been for some time. And we are very incentivized to cut deals to get them over so we can start sunsetting connections that we don't want to upkeep anymore. So I think like every quarter that goes by, we are more incentivized to want to delete those old parts. Like we maintain a lot of infrastructure to Heartland, GPN, Fiserv, Worldpay. But yes, it's a lot of volume at like ridiculously low take rates in there. So that should represent some opportunity because literally, any deal that we cut with them should have some uplift. And obviously, it will almost be like 100% flow-through because we're doing a lot of support for those customers.

And Dan, we also try to illustrate this in our shareholder letter. You'll see kind of tags next to a bunch of the different wins that were gateway conversions. As you know, that pulls down gateway revenue, but much to the benefit of end-to-end volume and revenue. So it's been a very consistent funnel for us. I wouldn't try to imply in any way that a reduction in revenue there mitigates meaningfully our opportunity set.

No, that all makes perfect sense. And then I guess the second question is just on SkyTab. It seems like the momentum there is really strong and obviously, adding lots of more opportunity with some of the acquisitions that you just did. So just any color, I guess, in broad strokes, where you are seeing the traction in the deployments? Whether that's through direct sales channels, through the existing indirect channels that you still have as well as if there are any call-outs around some of the acquisitions you've done over the past couple of years. Where are you guys seeing the most success in deploying the SkyTab platform?

Yes. Well, so happy to hit that. I mean it's a -- whether it's direct or indirect, it's entirely a factor of just where you're at in the country. So we already -- back in 2022, summer of 2022, so more than 2 years ago, we already in-sourced all of our partners in the market that we wanted to have a direct presence in. So probably -- we haven't done any in-sourcing in 2 years. So we said those were markets that we were pretty committed to. A lot of production comes from there. And then more on the West Coast and Central U.S., more sparsely populated areas. That's where we have third-party distribution because it's just -- we'd rather have the variable cost in that case than the fixed cost. I'd say in the U.K., for example, in Ireland, we have a small direct team. We also have a couple of partners, and we're just kind of really learning the market there with them. But I mean, you can see the results as we post them on Twitter and X. It's like covers the gamut every day from start-ups to like really beautiful restaurants. So we love the traction. There is no -- in terms of the legacy brands, going back to 2017 that we acquired, like we deleted those parts. There is no future POS production or Harbor POS production or [indiscernible] POS production, like everything is SkyTab and has been essentially for 2 years now.

Yes, makes sense. If you don't mind a follow-up. I guess when you think about those legacy brands and the ones that -- the customers that you've had on the platform for a really long time, I guess, what's sort of the mix of back book conversions versus kind of net new sales?

Yes. I mean, it's almost all net new. So I think we've said a couple of times over the quarters. We're enhancing our Lighthouse product, which is our business intelligence platform to have a -- I don't know, kind of like iPhone 15 upgrade path, "You now qualify for SkyTab and kind of click here, and we transfer your database over." It just has to be done in the most automated way possible. So it's not a lot of manual programming. So we have only, by policy, been doing SkyTab upgrades to the existing base for retention purposes, which represents like a very small -- very, very small percentage in production every single month. The reality is like we do, we do have tens of thousands of existing customers on our other products that we will migrate over the next couple of years. It will just be done like thoughtfully over a couple of years to a relatively automated path.

Our final question is from Andrew Schmidt with Citi.

I was wondering if we can just level set on the restaurant business for a minute. Maybe talk about just where you're positioned? Obviously, there's a lot of variation in terms of assets out there. But QSR versus table service post-Revel, where you guys are positioned on a go-forward basis?

Yes, it's a good question. I mean we've always said for some time that people, I think, are -- I actually think the restaurant TAM might be a little bit bigger when in reality, there's like very -- there's 3 very distinct swim lanes in it. And they have their own kind of competitive set. So -- competitive landscape associated with it. So in terms of your cash and carry, that's your coffee shops, your bakeries and such. That is Clover and Square. And essentially, that is it. Then you have your fast food, which is per Xenial, Revel did play in that lane a little bit, and then you have table service. And that is really just Toast and Shift4. So I would say the Revel acquisition did give us some interesting capabilities where they have some retail functionality in it that we wouldn't have otherwise built. They have really solid fast food and enterprise capabilities. So we are just engineering that into SkyTab. So I mean, we already said like the $15 million of EBITDA that came from cost synergies, we're not building on that product anymore. There will never be another new feature that goes into Revel. We'll certainly upkeep it as we eventually migrate customers over to payments and SkyTab. But all our dev efforts have been towards SkyTab, including the Revel resources and talent that we've held on to. So we are building in those same type of Revel enterprise, quick service and some retail capabilities into SkyTab right now. I think for the next year and change, like you'd continue to expect Revel SkyTab to excel within the verticals that we focus on, which is table service. But I do expect a year from now, we are going to be able to move into some of those other layer.

Got it. And then maybe expand on the -- just the internal systems work. Does that -- obviously, there's an efficiency component, but there's also an office component, in terms of being able to build faster, go to market faster. What does the internal systems work bringing in terms of tying everything together as what?

So much. I mean, this is -- I love this because like look, we're a 25-year-old company that started my parent's basement. Our first CRM, which was largely in use up until a year ago, was homegrown, like it started in access and Sequel, I mean bolted together through so many years. And then, of course, we have done a handful of acquisitions, and some of them have a homegrown system or CRM. And you find your employees just from an efficiency perspective are touching like 8 different systems. It's not a great foundation to work on it. It means you're carrying a lot of extra personnel to do all the things you need to do every day as fast as you possibly can. So we kicked off almost like 3 years ago. We called Project Phoenix. It's like a full rip and replace of all of our internal systems. It's built on Salesforce and Palantir. And it's going well. Like we constantly pump out new modules. Commercial team rolled out with it a long time ago. Now our new ticket system is all being generated from it. And I think it's important, and this is like the foundation for so much more. Now we can run AI solutions for like fast building POS menus. That saves efficiency or that's time to install like time to revenue for getting the systems out in the field but also unlocks a lot of efficiencies. We're building our whole mission control system. So that's like our no-fill operations all over the world. So when you're having go-lives in Europe at the same time as the U.S., it's monitored in a very like proceduralized environment just like I've seen in other industries. So this is an important foundation we must have in it. And I think a lot of this goes to the eventual margin expansion that Nancy talks about all the time is like people probably don't appreciate how much personnel we have. We have 3,500 employees that upkeep a lot of old things. Whether it's old POS products, old internal systems, gateway connections to our competitors that as time goes on, we delete those parts and then can repurpose that talent to move even faster at new business. So it's like this way that we can keep head count flat while accelerating growth and improving margins. It's pretty cool, add on that. Well, I appreciate that question. I'm pretty excited about those 2 projects. But okay, thanks, everyone, for dialing in. I know we'll catch up with some of the other analysts shortly on the next call. But yes, thanks for dialing in and take care.