FOUR - NYSE

Greetings, and welcome to the Shift4 Fourth Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. And it is now my pleasure to introduce to you Tom McCrohan with Shift4. Thank you, Tom. You may begin.

Thank you, operator. Good morning, everyone, and welcome to Shift4's Fourth 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 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 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. We are hosting our Investor Day event today in Las Vegas. And as a result, we unfortunately do not have time to entertain any questions at the conclusion of our prepared remarks. With that, let me turn the call over to Jared. Jared?

Thanks, Tom. So we clearly have a lot of exciting things to discuss today, and we have an afternoon Investor Day to go through it. So despite my past tendencies, and this likely being my last earnings call, I'm going to endeavor to keep this as brief as possible. So as such, we plan to cover a summary of Q4 results, highlights from the quarter, our acquisition announcement of Global Blue, and finally, expectations for 2025. So regarding Q4 results, we once again delivered reasonably strong results that represented records across all of our major KPIs, including end-to-end volumes, gross revenue less network fees, adjusted EBITDA and especially adjusted free cash flow. So with that, our end-to-end payment volumes increased 49% year-over-year to $47.9 billion. Our gross revenue less network fees increased 50% to $405 million. Our adjusted EBITDA increased 51% to $205.9 million, and our adjusted free cash flow increased 78% to $134 million. So all of these results represented quarterly records, as I mentioned before. And despite the doubters, we delivered on the promise of a back half ramp. The back half represented 57% of our full year gross revenue less network fees with the fourth quarter alone contributing 30% of full year gross revenue less network fees. We also delivered positive operating leverage for the year with adjusted EBITDA and adjusted free cash flow both growing faster than revenue growth. We accomplished all of this, while completing several acquisitions and deleveraging with the year-end net leverage of 2.5 times. So when we zoom out and look at the multiyear picture, we ended the year surpassing our midterm -- our medium-term guidance, which, as you know, called for 50% three-year CAGR growth in volumes and a corresponding 30% CAGR growth in gross revenue less network fees. Our actual performance came in at 52% and 36%, respectively. We delivered these 3-year results despite a more challenging economic climate than the one we were operating in back in late 2021. Since then, we experienced both record inflation and record increases in interest rates, the combination of which most certainly caused stress for the average consumer. I'm not sure how many tech or fintechs established a multiyear outlook in November of 2021 and actually delivered, including surpassing expectations on the KPIs that really matter like free cash flow. Personally, I felt this was an important test for the company and the team and would speak to the credibility of the organization, which is especially important going in today where we will establish our goals for the next three years. So let's turn to some of the highlights for the quarter. The team did a great job delivering signature wins across hospitality, restaurants, sports and entertainment and what we're now calling our unified commerce platform and across multiple international markets. So starting with SkyTab in Restaurants, we easily surpassed our initial 2024 goal of 30,000-plus SkyTab system installations. And while we are the second fastest-growing player in the space, we do not like settling for second best. So over the past year, we signed signature wins such as the Casa Cipriani, the Minetta Tavern, Bern's Steak House in Tampa and Balthazar. Outside of the United States, we installed hundreds of international restaurants across Canada, the United Kingdom, Ireland and Central Europe and the broad launch of our payment-led value proposition to Vectron's 300-plus European dealer network in January was very well received with hundreds of deals already signed up in the month of January and a very successful UK, Ireland sales conference in Q1 of this year. In short, we are winning restaurants very quickly in the USA, Canada, Ireland, UK, Central Europe and soon to be in Australia and New

Thanks, Jared. As Jared mentioned in his remarks, it's been our strategy for some time now to build a one integration one platform to power payments all over the world. Today, we're announcing the acquisition of Global Blue for approximately $2.5 billion in an all-cash transaction which further builds upon our capabilities in this area. Global Blue is a market-leading payment platform supporting tens of thousands of luxury brands worldwide including LOUIS VUITTON, Hermès, Valentino, Fendi, Prada, Burberry, Cartier and many, many more. They operate a 2-sided network offering over 15 million consumers, quick and efficient VAT tax refunds when shopping abroad through one of their through their one-of-a-kind mobile application and advanced dynamic currency conversion capabilities. To be clear, we spent many years admiring this business. The combination of their latest capabilities, our growing geographic coverage, Global Blue's existing scale and 2-sided network were all factors in helping us underwrite this transaction with a high level of confidence. Simply put, the business standalone is exceptional before revenue synergies and yet we estimate over $80 million of revenue synergies will be unlocked by the end of '27 due to the material embedded cross-sell opportunity associated with the 400000-plus merchants that are current Global Blue customers. We estimate the aggregate embedded payment opportunity to be over $500 billion. As a reminder, our cumulative cross-sell funnel is over $800 billion today. And with this transaction, it increases our unique advantage across this customer base to over $1.4 trillion. The opportunity Global Blue affords us within unified commerce has also attracted two of the world's largest fintech companies, Ant International and Tencent. Ant International and Tencent have historically collaborated with Global Blue to enable a seamless shopping and refund experience via their mobile applications and wallets. Both these valuable partners have committed to further collaborate with us on e-commerce opportunities all over the world and have also agreed to remain shareholders of the combined business. This is an all-cash deal to be financed with existing cash on hand and proceeds from a $1.8 billion short-term bridge financing that will be replaced with long-term debt and convertible financing following the launch of an offering shortly. We expect to close the acquisition in the second half of 2025 subject to regulatory approvals. And our pro forma net leverage is expected to be approximately 3.6 times upon closing of the transaction and we expect to delever to approximately 3.3 times by the end of the year. This transaction is the largest in our history, which speaks to the conviction we were able to gain as we learned about the business. Despite its scale and unique product offering, it leverages a playbook that we've continued to refine over the last decade at Shift4. Whether it be Revel, Givex, Eigen or now Global Blue we are passionate about identifying critical, but often overlooked businesses that have incredible merchants who benefit immensely from a single comprehensive payment platform. We aim to deliver these merchants what they would have otherwise sourced from five or six different companies and in turn deliver more value and convenience. With that I'll turn the call over to Nancy, who will outline our 2025 financial guidance and other key stats for the fourth quarter.

Thank you, Taylor. Jared provided a summary review of the quarterly financial results so I will just expand on a few additional items. Organic gross revenue less network fee growth for the full quarter 2024 was 26%. This reflects the ongoing strength and momentum across all of our verticals and the monetization and conversion of gateway and software-only customers. Our Q4 blended net spreads were 60 basis points or 61 based on the average blended spreads for the full year in line with our guidance. Spreads across our core business remained stable. Our Q4 adjusted EBITDA margins were 51% and 50% for the full year. Excluding a nearly 270 basis point drag from recent acquisitions full year adjusted EBITDA margins were 53% and we expect to synergize these acquisitions over the next 12 to 18 months. Subscription and other revenue was $115 million in Q4 up 100% compared to the same period last year. The growth was once again driven by our success across SMB, SkyTab and further penetration of the sports and entertainment vertical as well as the contribution from acquisitions completed during the quarter. Our adjusted free cash flow in the quarter was $134 million bringing full year adjusted free cash flow to $399 million up 46% compared to a year ago. Q4 adjusted free cash flow conversion was 65% bringing full year to 59%. We are very pleased with our free cash flow generation as we are one of the few companies that are extremely expense-disciplined and laser-focused on efficiency gains which allows us to generate exceptional cash flow without sacrificing growth. During the fourth quarter, we repurchased over one million shares for $110 million leaving approximately $350 million of capacity available as of December 31 under our current program. You can find a complete reconciliation of our shares in the back of our earnings materials. GAAP net income for the fourth quarter was $139 million and GAAP diluted EPS was $1.44. Non-GAAP adjusted net income for the quarter was $123 million, or $1.35 per share on a fully diluted basis. As a reminder we have not historically added back acquired intangible amortization to non-GAAP net income and EPS, but plan to do so starting next quarter in line with our industry peers. Our total indebtedness now has a weighted average cost of 3.4% and our net leverage at quarter end was approximately 2.5 times. As we had previously indicated the $690 million of convertible debt due in December 2025 was classified as current debt on our current December 31, 2024 balance sheet. However, after the recent financing activity last quarter and the strong cash flow profile of our operations, we are well-positioned to pay it down at maturity. Now turning to 2025 guidance. We are introducing this guidance excluding the Global Blue impact and as follows; volume between $200 billion and $220 billion, representing 21% to 33% year-over-year growth; gross revenue less network fees between $1.65 billion and $1.72 billion, representing 22% to 27% growth; adjusted EBITDA between $830 million and $855 million, representing 23% to 26% growth; and adjusted free cash flow conversion greater than 50%. While we are not providing quarterly guidance today, Q1 is shaping up in line with our expectations for both volume and revenue. We anticipate adjusted EBITDA margins of approximately 45%, which is also in line with historical trends as Q1 is a seasonal low point for margins. We are also absorbing some drag from lower margin M&A completed in 2024, but again anticipate this to be mitigated by year-end. With that, let me now turn the call back to Jared.

Thank you, Nancy. We will be saving questions until after our Investor Day. But since this is likely my last earnings call, please know I leave Shift4 in the very capable hands of Taylor Lauber, alongside a great leadership team those who I have the utmost confidence in and who have been key architects in the firm's growth strategy and overall success over the years. While, I can't predict how the process will go, I hope to be able to offer input to Taylor whenever it is requested. And to the extent it's permissible, I intend to remain Shift4's largest shareholder. As the founder of Shift4 from my parents' basement to the multi-billion dollar public company it is today, I'm incredibly proud of the team and what we've accomplished over the last 26 years. I'm really thankful to my family, friends, the incredible team, our advisers and investors who believed in us and really in this incredible nation that makes stories like this possible. I will always be grateful. Thank you.