Shift4 Payments, Inc. Q3 FY2024 earnings call

• Q3 results: Delivered quarterly records across major KPIs including volume, gross revenue less network fees, adjusted EBITDA, and adjusted free cash flow. Adjusted EBITDA margins were a quarterly record of 51.3%.
• Vertical performance: Strong in hospitality (notable wins like KSL Properties, Las Vegas casino), restaurant POS (SkyTab with over 55,000 installs since beta), sports and entertainment (continued wins with teams and theme parks), nonprofits (Giving Block attracting new customers), gaming (expansion at BetMGM locations), and international (launch in new African countries, progress in Europe with Vectron acquisition).
• Acquisition: Acquired Givex, adding ~130,000 premium customers and ~$300 billion in volume, with gift and loyalty capabilities to be bundled.
• Expense discipline: Synergy realization and expense management led to profitable growth, allowing raised guidance for Q4.

Shift4 reported total Q3 volume of $43 billion, which grew 56% year-over-year. Gross revenue less network fees increased 50% to $365 million. Adjusted EBITDA grew 51% year-over-year to $187 million, with adjusted EBITDA margins at 51.3% (nearly 54% excluding a 250 basis point drag from recent acquisitions). Subscription and other revenue was $102 million in Q3, up 111% compared to the same period last year. The company remains on track to deliver organic revenue growth north of 25% for the full year.

• Raised midpoint of gross revenue less network fee and EBITDA guidance for Q4. Full-year organic gross revenue less network fee growth expected to exceed 25%.
• End-to-end volume for full year expected in range of $164 billion to $166 billion (50%-52% y/y growth). Gross revenue less network fees expected in range of $1.35 billion to $1.36 billion (44%-45% y/y growth). Adjusted EBITDA expected in range of $677 million to $688 million (47%-50% y/y growth).
• Backlog of ~$33 billion, with ~$5 billion converted to actuals in Q3, driven by new wins.

• Consumer spending softening in some verticals served.
• Slower progress than expected in Canadian and European card presence strategies, with ~1,000 unique merchants processing card presence payments in new geographies, short of initial hopes.

Q: Thoughts on softer consumer spending?

A: Mixed trends with restaurants having persistent same-store sales decline since mid-summer, but hotels improved in October and sports and entertainment strong. Diversification paying dividends.

Q: SkyTab progress?

A: Strong progress, with more wins expected in UK, Ireland, and Q4. Talent repurposing from acquisitions aiding velocity, aiming to close gap with competitors in restaurant POS.