Shift4 Payments, Inc. (NYSE:FOUR) Q3 2023 Earnings Call Transcript

Shift4 Payments, Inc. (NYSE:FOUR) Q3 2023 Earnings Call Transcript November 8, 2023

Shift4 Payments, Inc. beats earnings expectations. Reported EPS is $0.82, expectations were $0.7.

Operator: Greetings. Welcome to Shift4 Third Quarter 2023 Earnings Conference. 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 Tom McCrohan, SVP, Investor Relations. Thank you. You may begin.

Tom McCrohan: Thank you, operator. Good morning, everyone, and welcome to Shift4’s third quarter 2023 earnings conference call. With me on the call today are Jared Isaacman, Shift4’s Chief Executive Officer; Taylor Lauber, our President and Chief Strategy Officer; and Nancy Disman, our Chief Financial Officer. This call is being webcast on the Investor Relations section of our website, which can be found at investors.shift4.com. Today’s call is also being simulcast on X formerly known as Twitter, which can be accessed through our corporate Twitter account @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 in 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?

Jared Isaacman: Thank you, Tom. I opened my shareholder letter with some thoughts on the conflicts, the suffering and the humanitarian crisis that are taking place around the world. And I would be remiss not to mention again how sad we are at Shift4 for the loss of innocent lives. We’re a global company now. And while we are small, we will certainly play our part in trying to make this world a better and healthier place. With that turning to the quarter. It’s been busy. So once again, we’ve delivered reasonably strong quarterly results that represented records across all of our KPIs, including end-to-end volume, gross revenue, gross profit, gross revenue less network fees and adjusted EBITDA. Our margins and cash flow continue to improve as we benefited from spread stabilization and disciplined expense control.

I’m especially pleased with Q3. We achieved these results without the help of all of our previously announced stadium and resorts that really didn’t begin processing until essentially Q4, nor did we have any of the revenue synergies that we’ve been accumulating over the last 20 months inside of Finaro. We still generated 36% growth in end-to-end payment volume, 23% growth in gross revenue, 34% growth in gross profit and 24% growth in gross revenue less network fees. We also generated $124.5 million of adjusted EBITDA, representing 46% year-over-year growth as our margins expanded 780 basis points to 51.2% versus the corresponding year ago quarter. Our adjusted free cash flow also improved to $75.5 million, up 69% versus a year ago. Our blended spreads also stabilized at 64.5 basis points.

To be incredibly clear, Q3 did not have any contribution from Finaro or Appetize. This is unfortunate as we have spent the last 20 months working closely with Finaro and some one third of their net revenue is generated from existing Shift4 customers. If you were to overlay an approximately $7 million in achieved revenue synergies from Finaro into Q3, gross revenue less network fee growth would have been over 27% with a very strong Q4 ahead as our numerous enterprise accounts have begun processing as expected. Additionally, our SkyTab POS installs are resulting in higher subscription and other fees in Q3, and that’s a real positive trend that we’re excited to build upon. Continuing on, as many of you know, we’re thrilled to have received the final regulatory approval on our European acquisition of Finaro and the deal officially closed on October 26.

As mentioned above, we’ve already unlocked material revenue synergies at Finaro during the extended regulatory approval process. We are thrilled to finally move on to the next chapter of our international expansion plan, especially with so much of the integration work already having been completed over the last 20 months. Before going into some of the specifics and despite some of the unanticipated delays, we’re obviously really pleased with the results this quarter. We’re excited about the opportunities in front of us, which is why we made some positive revisions to our guidance with respect to EBITDA and free cash flow and we’ve also provided a 2024 volume bridge alongside reaffirming the third year of our midterm outlook. On that note, we are often asked how are we able to sustain growth rates well in excess of industry averages.

It’s our successful capital allocation strategy alongside bold execution. Keep in mind, this is not always an M&A story. We have grown revenue double digits year-over-year for 24 consecutive years even through several downturns. We had no outside capital nor had we completed any acquisitions throughout our first 15 years in business. Examples of organic investments include building our flagship POS product, SkyTab, or back in 2021 when asset prices were out of control we elected to invest organically in new verticals that are now driving substantial growth in eCommerce and travel and gaming and parts of the nonprofit vertical. We continue to make sound investments as we organically expand into Canada and other parts of the world. This is part of our IPO promise to try and always be where the puck is going.

We are also quite good at M&A. And I understand there is some rightful skepticism around M&A. I don’t think many of our peers have executed as well as we have, and now there is a general distaste for acquisitions. That is a mistake. We’re not going to make at Shift4. For starters, the convergence of software and payments into a broader, stickier, more valuable commerce-enabling experience is still very much early days. There has only been one public scaled payments company to get there without M&A. And as recent events have shown, it does not guarantee limitless growth. Second, we’re going to play to our strengths, and we have an excellent track record. We’re very good at identifying differentiated technology assets where we believe we have a unique ability to unlock an embedded payments opportunity.

We can then confidently underwrite those cross-sell synergies and ensure there is a path to leverage those assets to accelerate net new wins and be financially deleveraging inside of 24 months. The acquisition of Shift4 and the Merchant Link gateways many years ago are great examples of this as well as our acquisition of VenueNext and Focus POS. We remain highly disciplined in the prices we pay and sellers are increasingly viewing Shift4 as having the unique skills, the unique skill set to maximize payment-related synergies. And I want to also be clear, we’ve never won a banker auction process. If you do your diligence, you won’t find a banker that says Shift4 is at the top of the bid list. We have our own proprietary pipeline, our own processes and oftentimes bankers are just as surprised by our announcements as the Street.

The recent acquisition of Appetize in the sports and entertainment vertical was really a case in point. Now there are some that believe we possess a degree of sorcery that enables us to compel a major competitor to sell their assets at an incredible discount just in time to fill a hypothetical quarterly hole. And if you believe that, then you should be just as bullish on Shift4 as you would be for the truth, which is we don’t control the timing of when deals happen, but we do ensure the outcome is solid. In the case of Appetize, we already had the best mobile technology in VenueNext that sports teams and venues wanted and we also demonstrated an ability to monetize the embedded payments opportunity within this vertical by bundling the software and payments.

Our leading fan-first mobile technology is the true point of difference that opens the door to provide payments throughout the entire venue, and we are unique in our ability to unlock ticketing volumes through our integrations with major providers such as Ticketmaster and SeatGeek. And similar to how we win in hotels, we own more links now in the sports and entertainment value chain than any other competitor. This provided more ways to profitably differentiate and win. And ultimately, that’s what compelled Appetize to seek out a deal. We are very excited now about the prospect to pursue the significant embedded payments opportunity as we migrate 600-plus Appetize customers over to our VenueNext platform. And as Taylor will go into shortly, we are taking Appetize, which is a business that’s hemorrhaged cash since its inception has overlooked payments and adjacent opportunities like ticketing and turn it EBITDA positive by the end of this year.

And in fact, we expect to exit 2024 with $15 million of run rate EBITDA on a $100 million purchase price with a lot of room to grow from there. Our capital allocation strategy supplements our growth algorithm. Our growth algorithm is very straightforward. It comes down to two things: land and expand and add new merchants. Land and expand involves capturing the existing embedded payments opportunity that already exists in our installed base of merchants, such as converting a gateway-only merchant to end-to-end or capturing, say, the ticketing opportunity associated with one of our sports and entertainment clients. You can think about this as really just ARPU expansion as every merchant is using our software or a unique software integration. The strategy has been working very well for many years, and it represents approximately 50% of our production each month.

We have tens of thousands of software-only customers and additionally over 150 billion of gateway volumes to continue this land and expand approach. And you can be sure we’re going to continue to find ways to keep this funnel topped off. Now as to the other half of our growth algorithm, which is adding net new merchants, that’s simply it. Merchants that are attracted to both our library or software integrations and the various differentiated technology offerings we offer in the end markets we serve. So a great example is VenueNext software, SkyTab software. The result is that we win net new merchants every single day, which represents the other 50% of our production. And we’re going to be spending a lot more time in the months ahead educating investors on our growth algorithm and the sustainable growth rates.

As mentioned above, we’re very confident in our organic growth rate and reaffirmed the third year of our midterm outlook. This quarter, we provided a volume bridge to our 2024 medium-term volume growth target, which Nancy will highlight later in her prepared remarks. But first, let’s review highlights from our core business and new verticals. So starting with restaurants. We have been winning at restaurants for nearly two decades with strong double-digit growth. Our product offerings have evolved from software we’ve built to those that we have purchased, and now we are in the midst of a very successful consolidation into our new cloud product, SkyTab. We have made tremendous progress signing new SkyTab POS restaurants as our lower total cost of ownership continues to resonate with restaurant operators, coupled with our recent promotional activity.

We have installed over 8,250 SkyTab POS systems during the third quarter, which is not necessarily one for one with a location and over 23,000 total installations since we officially came out of beta with SkyTab just a year ago. If you search on Twitter, or X, Shift4 or SkyTab, you’re going to see pictures and posts of installs that are taking place every single day. We are now installing SkyTab POS in restaurants located within stadiums, including Amway Center, which is home of the Orlando Magic and Paycom Center, which is home of the Oklahoma City Thunder. We also signed an agreement with BetMGM to install SkyTab Mobile, which is our mobile solution, and there are over two dozen sportsbook locations across the country and we are installing SkyTab in the Paper Mill Pub, which is located inside Truist Arena, home of the Charlotte Knights, Minor League Baseball team.

Other restaurant wins include Pinstripes, which is the fast-growing chain that combines the experience of eating out with bowling and playing a game of Baci and Stonefire Grill, which is a Southern California chain of family casual restaurants, and several other restaurants chains such as the Great American Restaurants and Hyde Park Prime Steakhouse. It is worth reemphasizing our cost advantages. As a reminder, for a restaurant processing $1.5 million of annualized volume, our SkyTab POS solution is less than a third the cost of our primary competitor, including zero upfront costs. Restaurant operators are extremely focused on cost, especially in this environment and we’re also seeing benefit from our recent promotions that took advantage of the actions taken by one of our competitors over the summer months to push through an online ordering fee that caused a great deal of consternation among their restaurant clients.

We also benefited from one of our competitors that experienced a very prolonged outage. As mentioned above this past quarter, we added thousands of new restaurants. Our shareholder letter includes just a sampling of those restaurants that have selected SkyTab POS, but I really encourage you to search on Twitter or X for many, many more examples. Let’s turn to hotels, so we had a blowout quarter signing new hotels as well as extending relationships with existing clients. We renewed and dramatically expanded our relationship with Pebble Beach Resorts. We also renewed and expanded our relationship with Sonesta Hotels, who has agreed to make SkyTab POS their preferred restaurant POS across all Sonesta managed locations. And we have partnered with SkyTouch Technology, which is a property management system company to promote SkyTab POS to all the restaurant venues across their 7,000 hotel properties.

We also signed a European-inspired chain of boutique hotels, Ayres, that is based primarily in Southern California and several hotels on Nantucket Island, including the historic White Elephant Harborside hotel, The Wauwinet and Jared Coffin House. Other hospitality wins this quarter include the Ocean House Hotel in beautiful Watch Hill, Rhode Island, the Tiburón Golf Club and Resort in Naples, Florida, the host of several PGA Tour events and Spinnaker Resorts, operator of a dozen separated hotels primarily in Hilton Head, South Carolina as well as other states. So as you can see from our shareholder letter, our success in hospitality is a combination of adding net new merchants and converting gateway-only merchants over to our end-to-end platform.

Our land and expand approach affords us the ability to grow our end-to-end volumes without ever having to add a single new hospitality customer. Moving on to new verticals, in Sports & Entertainment, we’re obviously very excited to announce the acquisition of Appetize, where we more than tripled our market share within professional sports. But before getting even into Appetize, I want to highlight some of the other progress we made in the verticals this quarter. So, we expanded our relationship with the Orlando Magic NBA team, where we’re now installing SkyTab throughout the arena, we’re handling all their mobile ordering, their retail and kiosk sales as well, and we will begin processing primary ticket sales for the Orlando Magic through our recently completed integration with Ticketmaster.

For the San Francisco 49ers, we also added primary ticket sales to Ticketmaster and expanded our relationship to add food and beverage payments as well. And for the Miami Dolphins, we will now begin processing primary ticket sales also through our integration with Ticketmaster. We have only just recently completed this Ticketmaster integration, and we’ve already announced three ticketing wins this quarter, the Dolphins, the Orlando Magic and San Francisco 49ers. Now in college sports we added University of Georgia, we’ll be implementing our VenueNext technology solution for mobile ordering and point-of-sale. We also signed up Musikfest, a large annual music festival here in hometown Bethlehem, Pennsylvania, which takes place every summer, and the Palm Springs Aerial Tramway, so the world’s largest rotating tram car, the transports visitors along the desert cliffs of Chino Canyon, which is part of the San Jacinto mountains located in Riverside County, California.

Now with the acquisition of Appetize, we are adding some really awesome venues such as Fenway Park, Yankee Stadium, Madison Square Garden, Dodger Stadium, Busch Stadium, Globe Life Field and Progressive Field. We will be transitioning legacy Appetize venues onto the VenueNext platform and begin the process of unlocking the embedded payments opportunity across their entire portfolio of customers. So this includes mobile payments, concessions, retail parking and as you could guess, especially ticketing. Legacy Appetize’s revenue model was highly dependent on selling hardware and software with very little payments revenue. We are pivoting that model immediately to payments and expect a material portion of the revenue to go away as we will no longer be selling hardware and any other payment referral revenue that they were generating will likely also go away as our competitors turn off those rev share programs.

Despite that transition, it’s a playbook we know really well, and this is a very synergy-rich deal, both from a cost and revenue perspective. We also had an integration to TicketReturn, this is a leading provider of minor league baseball ticketing in the United States and Canada. TicketReturn has a relationship with over 300 venues and facilitates more than 55 million ticket sales annually. They also serve Minor League Hockey, Minor League Soccer, basketball and Lacrosse. In the nonprofit vertical, our momentum continues to build. At the end of September, we announced a partnership with Give Lively, which powers donations for nearly 9,000 nonprofits and is our most important ISV integration in the sector to date. The Giving Block remains the category king of noncash giving in the nonprofit sector.

The focus of the Give Lively integration is to add Shift4 as the preferred traditional credit card processor, and we were able to win this deal because of our unique ability to offer other donation methods such as crypto and stock at other competitors, including Stripe, can’t offer. The Giving Block also secured integrations with Ministry Brands and Endowment, both of which are expected to go live in Q4 ahead of a very busy giving season. In addition to new platform integrations to Power Card, crypto and stock donations, the Giving Block continues to sign additional marquee clients, such as Global Citizens, Habitat for Humanity International, Easter Seals and many more. We are successfully cross-selling our card processing capabilities into the installed base of Giving Block customers.

This quarter, we added Cuddles for Clefts, pediatric cancer, Alma Swim Foundation, Waco Foundation and the Purple Heart Foundation. The cross-sell opportunity within the nonprofit vertical remains very large and remains one of our exciting land and expand opportunities going forward. And in retail, we also signed the Landmark Rewards retail store in Philadelphia. As mentioned above, we did finally complete the long-awaited Finaro acquisition, and this is a much better business as we said many times than it was at the time of our announcement with considerable card processing capabilities, broader geographic coverage in the Eastern Europe and approximately one third of their net revenue coming from existing Shift4 customers. We’ve already unlocked considerable revenue synergies and now we’re really just getting started.

Nancy and Taylor will go into more specific shortly, but we are enthusiastic about the potential to board 10,000-plus restaurants and hotels in Europe and Canada in the year ahead. This is really what we’ve been waiting for. Before handing it off, I want to reiterate that for more than two decades, we have consistently demonstrated an ability to gain share in the end markets we serve. Our initial guidance ranges for 2023 volumes were $100 billion to $109 billion. This range contemplated everything from business as usual with same-store sales growth on the high end to a mild recession on the low end. We expect to finish this year in excess of the high end of our previous range with minimal same-store sales growth in our core verticals and two months benefited from our organic and inorganic international initiatives.

The midpoint would imply 2023 full year volume growth of 52%. What was far more in our control was fighting for flat headcount, investing in automation and AI tools and as a result, we’ve continued to beat expectations, especially on margin and free cash flow raising the midpoint even for Q4. We have further provided a very helpful table on Page 15 of our investor deck that shows how, we as a management, think about a normalized Q4 growth taking into account the legacy contributions of Finaro, and Appetize and Focus POS, the expected synergies that we – expect to realize and then normalize Q4 growth rates, assuming a full quarter of Finaro. As mentioned, a large part of our success is our understanding of the ongoing integrated payments evolution, the competitive landscape and how that informs our capital allocation investments.

It’s also about identifying talent and creating a culture that ensures we have the most motivated athletes on the field, competing to win business every day, while also keeping our existing customers satisfied. Our employees embrace the Shift4 way, including radical ownership and accountability, and I believe this culture of ownership starts at the top of the house, our entire executive team leads by this example and boldly forward. And with that, let me turn the call over to Taylor.

Taylor Lauber: Thank you, Jared. And good morning, everyone. I would like to provide a brief update on the current operating environment, our thoughts regarding the upcoming fourth quarter and how we are thinking about our capital allocation priorities. Our third quarter volumes trended in line with our expectations despite the later-than-expected closing of Finaro. Through that lens, we are reasonably pleased with our results. Same-store volumes were roughly flat across the portfolio, but with variances among merchant groups, which is a benefit of the diversification we’ve pursued since IPO. Hotels continued to see modestly higher same-store volumes with restaurants flat and retail moderately negative. Jared mentioned this, but it is worth repeating.

We did not receive any volume or revenue benefits from the bulk of our international expansion efforts until a few weeks ago when Finaro closed. It is with this backdrop that we are very encouraged for Q4. Unlike many others in our industry, we have known projects and customers that will deliver volume and allow for growth in the face of any economic headwinds. Some examples of this are the numerous football stadiums, the MSG Sphere, Fontainebleau, InTown Suites and others that began processing during Q4. As we round out the second year of our gateway sunset initiative, I thought it important to highlight all the puts and takes that are happening in any given quarter. Our preferred outcome and what happens to the majority of the time is that gateway customers migrate to our end-to-end offering.

This represents roughly 50% of our production and volume growth in any given quarter. In this case, gateway revenue declines, but end-to-end revenue grows meaningfully and the customer gets a better experience and overall lower cost of service. The rest of gateway-only volume will eventually be repriced over a multiyear period to the point we feel like we are receiving a proper share of the payment economics for the value we are providing or, in some cases, the merchant can choose to move on. It is worth highlighting that under our watch, there has been very little attrition to the gateway-only population. And a few examples where we have experienced were very low revenue enterprise customers that made decisions before we own the platform. When we announced the acquisition of Finaro 20 months ago, we sized the business at $30 million of EBITDA that would likely step backwards as we separate it from certain customers.

Presently, the run rate EBITDA for Finaro is over $45 million. More important than the financial performance is the underlying business, which is roughly 13% card-present and growing quickly, this compares to 3% card present prior to our signing. Additionally, about one third of their revenue is derived from merchants of Shift4. We’ll provide a more detailed Finaro contribution for the full year 2024 when we provide year-end results. But as you can see in the 2024 volume bridge, we provided in our shareholder letter, we anticipate legacy Finaro to contribute $15 billion of total volume in 2024. Additionally, we anticipate roughly $9 billion in payment volume from international restaurant, hospitality and e-commerce opportunities. In regards to Appetize, please keep in mind this was a business that has overlooked payments and burn cash extensively since inception.

We fully expect to take a step backwards as competitors discontinued revenue share programs and we intentionally step away from legacy revenue streams like hardware sales. That stated, we are confident in our integration plan and have already had very productive conversations with Appetize customers, who are eager to adopt the VenueNext platform and the numerous other benefits like ticketing integration. We also expect the margin drag associated with the transaction to be short lived and to achieve a run rate EBITDA of $15 million by 2024. The macro uncertainty we’ve been cautious about for over a year has not become any clearer. For investors thinking about the potential impact of various macro headwinds in 2024, I would like to offer the following two examples.

First, annualizing our current adjusted EBITDA and the expected $15 million contribution from Appetize, you will find us to be already within the vicinity of analyst consensus for 2024. Second, if you annualize our Q3 adjusted non-GAAP EPS of $0.82 a share, you are essentially in line with next year’s consensus for non-GAAP EPS. Keep in mind this is with zero growth despite our expectation to continue delivering best-in-class volume and revenue growth. Turning to the immediate future, we continue to expect a strong Q4 in light of many in year enterprise initiatives and stadiums and resorts that will come online in this quarter. In terms of capital allocation priorities, we are prioritizing smaller M&A that could act as an accelerant to our go-to-market strategy for restaurants, hotels, and stadiums throughout Europe.

The discipline we exhibited waiting for selling multiples to come back to earth has resulted in us currently being in a great position to deploy capital at attractive returns. Additionally, our own stock has been punished alongside of the broader fintech market although few peers have such strong financial performance. As such, we remain committed to opportunistic buybacks of our stock with excess free cash flow. As Jared mentioned in his letter, given our track record, we are not compelled to apologize for smart investments, be that Focus POS, VenueNext, Appetize, or even our smaller investments in opportunities like SpaceX that have been both contrarian and deliver attractive returns for our shareholders. And with that, I’d like to turn the call over to our CFO, Nancy.

Nancy?

Nancy Disman: Thanks, Taylor, and good morning, everyone. We delivered another quarter of strong results, including quarterly records for volume and gross revenue less network fees. We continue to balance strong top line growth with disciplined investments, as evidenced by the strength of our adjusted EBITDA margin and our adjusted free cash flow conversion. Third quarter volume grew 36% to $27.9 billion year-over-year. Q3 gross revenue grew 23% to $675 million and gross revenue less network fees grew 24% to $243 million year-over-year consistent with our expectations. Our quarterly results were driven by the continued strength of our core, momentum across our enterprise merchants, including new verticals and capturing better economics from our gateway-only customers.

We also entered the year with improved unit economics with our restaurant channel due to our strategic decision last year to in-source a significant portion of our go-to-market distribution in connection with the launch of SkyTab POS. Third quarter gross profit was up 34% year-over-year to $171 million and our gross profit margin was strong at 70% for the quarter, representing over 550 basis points of improvement year-over-year. The blended spread for the third quarter was 64.5 basis points. We continue to expect our blended spreads to average around 65 basis points for the full year 2023 and anticipate Q4 blended spreads will benefit from higher spread international volume and ticketing. As a reminder, year-to-date spread compression versus a year ago is a function of rapid volume growth from new enterprise accounts.

Blended spreads within our core, including restaurants and hotels continue to remain stable. In Q3, total general and administrative expenses increased 3% year-over-year to $76.3 million. We continue managing toward our goal of keeping headcount flat while investing in talent upgrades, driving further efficiency across our operating model, and demonstrating the scalability of our platform. For the quarter, we reported adjusted EBITDA of $124 million, which is up 46% over the same quarter last year. The resulting adjusted EBITDA margin for the quarter was 51%, representing over 780 basis points of year-over-year expansion. We remain highly committed to a disciplined approach to cost management while continuing to balance investments to support our growth.

Many opportunities to further improve margins are still on the horizon as we harness the productivity of AI tools, implement new internal systems, and continue to take out the parts across the business to further enhance scalability. We are monitoring the Fed updates on the potential reduction of debit interchange, which would also be positive to our business and our overall margin profile. Our adjusted free cash flow in the quarter was $76 million, bringing year-to-date adjusted free cash flow to nearly $200 million. Q3 and year-to-date adjusted free cash flow conversion is 61%, well above our current full year guidance of 55% plus. Net income was $46.5 million for the third quarter. Basic earnings per Class A and Class C share was $0.56. Diluted earnings per Class A and Class C share was $0.55.

Adjusted net income for the quarter was $69.5 million or $0.82 per A and C share on a diluted basis based on 85.1 million average fully diluted shares outstanding. We are exiting the quarter with just over $690 million of cash, $1.75 billion of debt and $100 million undrawn on our credit facility. Our net leverage at quarter end was approximately 2.4 times. Our strong balance sheet and free cash flow profile will continue to allow us to invest in the business, pursue our strategic priorities and opportunistically repurchase shares. Our Board previously approved $250 million of buyback capacity, of which just over $150 million of capacity is remaining. As a reminder, we raised capital when the market supported us to do so attractively. Our weighted average cost of debt is currently 1.35% and we do not have any maturities until December 2025.

Turning to guidance. We are tightening the ranges for all of our KPIs and raising both the low end and high ends of the range of adjusted EBITDA and adjusted free cash flow. Our guidance for the upcoming fourth quarter includes end-to-end volumes of $32 billion to $33 billion, gross revenue of $741 million to $766 million, gross revenue less network fees of $274 million to $289 million, adjusted EBITDA of $132 million to $140 million, and adjusted free cash flow conversion to be at least 57%, up 500 basis points from our initial guidance. There are several things to consider for the fourth quarter. While October trends are in line with the third quarter, it is important to note we remain cautious about the macro environment and have reflected this in our guidance ranges.

The closing of Finaro has removed a major uncertainty surrounding the timing of our international expansion efforts. After 20 months of working closely together, we will immediately realize the benefit of the synergies from Finaro in the quarter. In total, we anticipate that legacy M&A will contribute a total of $25.6 million of gross revenue less network fees to the fourth quarter and $5.8 million to adjusted EBITDA. A complete reconciliation can be found in our earnings materials. These acquisitions will cause a short-term drag on adjusted EBITDA margins, but base margins remain strong at over 50% with further room for expansion. As we discussed last quarter, the fourth quarter will benefit from higher SaaS revenue from the acceleration of SkyTab POS installations, increased contribution from ticketing, and the implementation of several large hospitality and stadium wins we announced previously that are scheduled to go live this quarter.

As we are quickly approaching 2024, we thought it would also be helpful to provide a volume bridge to show the building blocks to get to our medium-term guidance. We anticipate a material portion of our incremental volume to be derived from annualizing merchants already boarded during 2023, as well as continued land and expand execution across all of our verticals. We have a total embedded payments opportunity of over $180 billion of which about 80% is represented by our gateway-only merchants and the balance is represented by converting software-only restaurants and stadiums to our end-to-end platform. We also expect approximately $15 billion of volume contribution from legacy Finaro. 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.

A – Jared Isaacman: Okay. Thank you. Thank you, Nancy. Before going to Q&A, I know this is a long call, but we had a lot to talk about. We did want to take a question from that was submitted over X or Twitter. So from Krishna Mohammed, Shift4 has grown volumes every year, including in previous economic downturns i.e. 2000, 2008. Given there are fears about potential global recession, what areas are management focused on to continue sustainable growth in uncertain economic conditions? So Krishna, thanks for the question. I mean, first, we’re starting from a pretty good place. I don’t know if everyone caught it in Taylor’s remarks, but if you essentially annualize our 2023 – if you essentially annualize Q4 2023, including our adds in 2023 and what we anticipate from Appetize, you’re already at consensus 2024 EBIT estimates.

Similarly, you could also just annualize Q3’s non-GAAP adjusted EPS and you’re also at 2024 analyst EPS estimates. So I guess what I’d say is like you’re starting from a good place in essentially a no growth scenario from here that we can get there. Obviously, like we have grown through downturns many times throughout our history. I can’t imagine any could be worse than what we encountered in 2020, when we were predominantly serving restaurants at that point in time. And from like a regulatory perspective, you couldn’t go out and eat. And we still grew payment volumes double-digit in that environment. I just think people don’t appreciate our advantages in that you have 150 billion plus a gateway volume that’s are – like we’re already providing the commerce experience.

We’re just not getting paid for it. We also have tens of thousands of restaurants using our software, not just in the U.S. and Canada and parts of Europe, that we’re now able to pursue from an end-to-end perspective. So we have more than our foot in the door and a lot of opportunities. You have a massive cross-sell with our non-profit customers on the giving block. We have tons of ticketing opportunities, stadium cross-sells over Appetize. And I just think that gives us the advantage that we can win in obviously great economic climates, but even in downturns as well. Thanks for the question. And with that, we’ll go to general Q&A.

See also 20 Most Popular Rum Brands in the U.S. and 25 Funny Prank Call Ideas for your Boyfriend.

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question is from Will Nance with Goldman Sachs. Please proceed.

Will Nance: Hey guys, I appreciate you taking the question and appreciate all the great detail in the release today, super helpful on the organic and inorganic stuff. On the volume bridge, I found that very helpful. Nice to see the confidence in sort of where Street expectations are aligned on next year. I guess when I’m looking at each of these buckets of volumes. You guys have had lots of commentary in the past about the move up market and the expansion into new verticals and now new geographies. And I think it’s probably worth talking a little bit about the take rates on some of these geographies. Obviously, very different from a core win versus like a hospitality win. But I think when we put take rates across each of these buckets, you can get to some pretty exciting numbers.

But just kind of curious how you would kind of contextualize some of the take rates in these different verticals relative to kind of where the aggregate is, and maybe help us think a little bit about what the flow through and the revenue next year might be?

Jared Isaacman: Hey, Will, this is Jared. I’ll start. And I think this is a question that Nancy and Taylor can also weigh in on, if they like as well. First, I think we’re starting from like a very stable place within our core vertical. So restaurants and hotels have continued to do what they’ve been doing for the last couple of years. So there’s no pressure there, which I think just really speaks to the strength of the value proposition. We wouldn’t expect anything to change within those core verticals, which – if you look at the volume bridge is a pretty healthy chunk of 2024. Now when you turn to some of the newer verticals, that’s where you can have some real monsters from a volume perspective. And we’ve said this from the get-go, that you can’t compare the take rates of a hypothetical Dallas Cowboys or New York Yankees doing massive volume to the Irish pub on the corner.

That said, we’ve got ticketing firing on all cylinders now. I mean, last quarter we were talking and we’re saying, hey, we’re almost there with our last major ticketing integration, which is Ticketmaster. This quarter, we come out and we say, we’ve got the Orlando Magic, San Francisco 49ers, and the Miami Dolphins all on the Ticketmaster integration. That’s big, because those take rates are just meaningfully north of what like a concession stand would be, which should have low take rates, because there’s like no risk in a concession stand purchase. So I think you’ll continue to have that dynamic as we move up markets in our new verticals. And now we got to talk about international and that’s where our research, I’d say, over the last more than years, we start to look at restaurants and hotels is really starting to come into play.

You do have a spectrum. Surprisingly, more in Central Europe, you actually have take rates in the restaurant environment there. That can be upwards of 100 basis points, which would be nice because that is somewhat in line with the smaller restaurants that we board here in the U.S. Hotels are certainly less, which is also in line with what we see here in the U.S. But I think in some markets, they are less, when you see card present take rates in Europe, and that’s where you have to compensate with SaaS, and that’s fine. We’re already getting pretty good at SaaS, if you look at the numbers this quarter from just our SkyTab products. So Canada for sure, you got a lot of interact there, a lot of pin based debit, which is lower take rates. The SaaS pricing will be higher in that market.

You get to different parts of Europe, it’s going to be all over the place, and you’re going to have to vary SaaS in order for that to make sense. I don’t know, Taylor, Nancy wants to go into some more specifics.

Taylor Lauber: Yes. I just feel like giving a shout out to the strategy team, because we’ve been looking at international for three years now beyond the year you mentioned. So we’ve gotten reasonably educated on the overall market, what I would say, makes us most encouraged is not necessarily the take rate that you see existing in those markets today. It’s the fact that the opportunity for value added services and software integrated payments is just immense all over the landscape. So to Jared’s point, you may bundle things slightly differently as you enter those markets, but the reality is take rates are reasonable in our opinion. And that’s before all the value add that we intend to deliver through hotel integrations, through our SkyTab software, through stadiums.

So we are immensely encouraged. I think we’ve mentioned this for the past several months now, we are – all systems go on deploying SkyTab in Europe and it’s a major strategic priority for us. But I do think, Nancy, we probably owe just kind of what the blend of all this means as we think about the next few months ahead.

Nancy Disman: Yes, for sure. And obviously, we’re being a little cautious here. Of course, they lead me to the last of the three comments, because we’re not looking to guide on really further than the volume bridge into 2024. But I think you heard us talk about stabilization of the spreads. I think the takeaway from the commentary you just heard is our mix and distribution of our business, 2023 was really the transition year where we really moved away from what was a traditionally largely restaurant and lodging based, high core growth kind of business. The blend and mix of our business now and kind of where the blend is sitting right now in spreads is more representative of what we will look like moving into 2024 with obviously continued to move up market, but with that benefit of whether it’s ticketing in the new verticals or those international higher spreads coming in.

So I certainly think where we’re sitting now is a good place for you guys to use as kind of a stable spread launching into next year.

Will Nance: Got it. Sounds like there’s a lot more balance to kind of take rate dynamics. So it’s good to hear. And then just, look, I think we kind of understand what’s going on, but maybe bear is kind of double clicking or emphasizing a bit. I mean, the communication on organic and inorganic this quarter was great. And I think it strikes a nice balance of kind of saying, here’s what we bought and here’s what we did with it. But just to kind of put a finer point on it, I think you originally said, Finaro would add roughly $15 billion of volume. That’s what you have in the volume bridge for legacy Finaro. It sounds like the legacy part of Finaro is only about two-thirds of the business today. So it sounds like by your own doing, you’ve kind of contributed something $7 billion or something like that to the volume base.

And that’s kind of what we’re seeing in the $9 billion. Just wanted to kind of confirm that we’re thinking about that the right way. And do you think you could use this as a blueprint for maybe future communications around inorganic growth?

Jared Isaacman: Yes. So, well, I guess, I’ll start with that one. And it’s like, I mean, clearly in this climate, everybody wants the double click transparency on what the inorganic and organic contribution was from these deals. And we provided that quarter. And I think should there be future transactions, we’ll do the same. I think we’re like – we owed with gross revenue, less network fee sensitivity. To give you a picture of, hey, a third of these represent existing customers. I don’t think we’re going to go down and break out volume, especially when some people can predict who those customers are and associated sensitivities with that. But, yes, I think going forward, you should expect, similar to the table we provided, that we would continue, especially if it’s alongside a new transaction to set appropriate expectations and contributions.

Will Nance: Got it. Makes a lot of sense. Appreciate it and thanks for taking the questions, guys. Nice job.

Operator: Our next question is from Darrin Peller [Wolfe Research]. Please proceed.

Darrin Peller: Guys, nice results here. I think when adjusting out, you’re just kind of following on to that point. When you adjust that in organic contribution in fourth quarter, it looks like organic growth for net revenues is 28% in fourth quarter, up from the 23%, 24% range we just saw. So it’s great to see, maybe you could just help us understand what you’re gaining momentum on sequentially, especially in the backdrop of the macro. And it’s not often we’re seeing that. And also just the macro conservative assumptions you’re implying or you’re building into that outlook.

Taylor Lauber: Yes, I’ll start and then I’m sure Jared and Nancy will chime in. Good morning, Darrin. So a handful of things. Number one, the framework for our Q4 guidance is largely taking what we’re seeing in the business today and pulling it through the quarter, which is, as you recall, we’ve now got Finaro closed. We had Appetize closed the beginning of the quarter, and we have much more visibility into a lot of the big installations that we had expected throughout the year and new warrantgoing to happen until Q4. So it’s really just the ability to visualize and see the start dates on a ton of initiatives that we’ve been working on for a very long time. You also are getting some incremental benefit from growth in SaaS, which I think is quite encouraging.

That’s a byproduct of a handful of things, but not the least of which is our SkyTab success. So it’s – I wouldn’t say, there’s a lot of guesswork inside of Q4. To Nancy’s point, we give ranges for a deliberate reason, and especially in times where the climate is volatile. I would say, we’ve been calling out the $100 stakes probably longer than any of our peers, and we’re always cautious about that. But the further you get into the year, the less cautious you have to be that there’ll be like a knee jerk reaction to anything, especially when our guidance, really, ever since Nancy joined, is increasingly hinged on known activities as opposed to I guess at what the macro is going to be. Nancy, do you want to layer into that?

Nancy Disman: Yes. I think that’s a fair point. And look, we’ve gotten a very good look at October at this point, and we’re seeing consistency with what we saw in Q3. So that just gave us further confidence in what to expect for Q4. I think Taylor’s point is the one I would double click on. a lot of things are coming together that we’ve been talking about all year. I think we’ve got a very good balance of discipline when it comes to managing kind of costs, right? And balancing that with investments that are really almost all focus on margin expansion opportunities throughout the year. And so obviously here in Q4, we’re seeing a lot of benefit of even work just done earlier in this year that is coming to fruition. So when you look at Q4 and kind of tightening the ranges that we did, it’s because we’ve got a lot of line of sight.

And obviously, though still cautious around the macro, we’re kind of listening to what everyone else is saying, but right now we’re not really seeing any kind of step change at this point.

Jared Isaacman: Hey, Darrin, maybe just to pile on one point here. I mean, look, I don’t think, I mean, clearly, we didn’t get the right advice very early on in the Finaro process. Had we known that would take 20 months? I mean, look, even the information we had at the time of Q2’s earnings was not perfect. I mean, we did have a couple of different options to get there, which is why we included in guidance. But I’d say all this, because if we could rewrite history on this one, we would have worked out a revenue share during such an extended regulatory approval process. In doing so, like, we would have been receiving volume and revenue in prior quarters. So the comparison of like 24% to 28% looking like a big leap, the reality is, prior quarters have essentially been understated because a lot of effort that we’ve been putting into our global expansion was not reflected in our financials.

Darrin Peller: That’s a really fair point, Jared. I guess to add on to that, and congrats on closing Finaro. But really, more importantly, looking forward now, I mean, there’s been exciting opportunities we’ve been talking about for a while on what Finaro can bring for you guys internationally. So, Jared, just remind us what you see as – I don’t know, low hanging fruit is the right term, because it’s never easy, but what are the first opportunities you see beyond what you’ve already added, whether it’s hotels or stadiums that you can leverage your relationships with and start moving internationally?

Jared Isaacman: Darrin, it’s all three of those things. I think we are less than a couple weeks away from announcing our first European stadium win, but we’re very charged up on restaurants and hotels. I mean, we’ve been saying really from the start that we have an awesome customer and we will follow them all over the world, but not with the aim of winning like the next Hoover or Netflix. It’s with the aim of taking the products and services that have worked for us in the U.S. into those markets. And I’ll tell you, like, the amount of time we spent. Taylor’s point is right. We spent several years looking internationally. But the last year, we’ve been very on site in Europe a lot. And I can tell you, like, what I’m seeing in the restaurant and hotel space in Europe is exactly what we saw in the U.S. in like the days of mercury payments.

I mean, you still have, most of the POS systems have a standalone non-integrated bank terminal next to them, like an EVO terminal, and that’s just as applicable in the hotels as well. So it’s like, this is a total dust off the playbook of what we know we crushed it with in 2017 here in the U.S. and bring it into Europe. So that’s why we put out there. Like, we’re going to get to 10,000 restaurants and hotels in Europe and Canada next year. We’re going to light up a lot of international stadiums. That was always supposed to be the next move once we moved into that market. It’s what we’re doing.

Darrin Peller: Thanks a lot. Congrats.

Operator: Our next question is from Timothy Chiodo with UBS. Please proceed.

Timothy Chiodo: Great, thank you. One on gateway and a quick numbers one as a follow-up. So firstly, also love the bridge on Slide 16 with the volume contributions getting to the 175. I want to see if we could just recap or update on the gateway conversion. So when we look at the $17 billion that includes net new and conversions, safe to assume that some portion of that is from the gateway conversions. Clearly, the absolute number converted would be higher because it would roll in over the course of the year, but still really small in the context of the 180. Totally appreciate that earlier you mentioned that some of these merchants will convert, some of them will be repriced, and some of them will depart. But maybe just recap the go-to-market approach there.

How much of that is being done by third party resellers? Is it your internal teams that are reaching out to them and really the progress being made there on gateway conversion and how hard you can push it this year?

Taylor Lauber: Yes, sure. I’ll cover that one. The game plan continues to be refined, right. So we’re two years into a really deliberate push, which we began sort of when we started to see the pandemic in the rearview mirror. We started to see the health of our hospitality merchants be restored. And so we said, all right, now’s the time to sort of press on this effort more deliberately. The effort is going well, and our tactics get refined modestly, but it’s producing kind of something that we’re happy with, which is a blend of production on end-to-end that results in about 50% being net new and 50% being conversions from the gateway. I would say it’s having incremental success with larger and larger merchants. I mean, this past year, we’ve talked about multibillion dollar gateway merchants converting over.

So that’s really encouraging that there isn’t a population inside the gateway that is not willing to have the conversation. And as I mentioned in my scripted remarks, large enterprises take a long time to make decisions. So the fact that they’re willing to make decisions at this point means our tenacity has paid off. In terms of our approach, we slice it a handful of different ways. We look at the segment, meaning hotel versus restaurant versus retail. We look at the software that merchant is using. We look at the acquirer they’re connected to as a particular means for opportunity. So we approach it a bunch of different ways, and all three of them kind of have equal measures of success. I would say the majority of those efforts, though, are direct.

And why you should care about that is because the vast majority of these conversions don’t come with a residual share that would typically be involved in a third party, bringing us a merchant.

Timothy Chiodo: That’s really helpful. That seems like that’s a little bit different than a few years ago, so that’s really good to know. All right. Thank you, Taylor. The follow-up is on numbers. So when we take the Q4 volume guidance and also appreciating that some of the legacy Finaro is not fully in there for the full quarter. If we just take that, I know the seasonality of the business has shifted a little bit with new verticals coming on, et cetera. Is it still fair to think about the Q1 volumes should be up quarter-over-quarter as they were last year. Is there anything else that you would call out that would in terms of the changing seasonality? Clearly, the Finaro full quarter contribution helps, but beyond that.

Nancy Disman: Yes. No, I don’t think so. I think that’s a good proxy to think about just the grower from having a full quarter of Finaro and then the seasonality that you’ve seen from a first quarter perspective. I’m just thinking we will have obviously the benefit of all the Q4 implementations coming in, so – but nothing that would go the other way.

Timothy Chiodo: Great. Thank you for taking this. Appreciate it.

Operator: Our next question is from Jason Kupferberg with Bank of America. Please proceed.

Jason Kupferberg: Thanks, guys. I too wanted to complement you on the volume bridge chart and just ask a little bit more on it, specifically of those pieces of the bridge which potentially have the most risk or the least visibility as you sit here today.

Taylor Lauber: So I’ll start. And what I want to sort of maybe set tone relative to the volume bridge is we wanted to show a commitment to a medium-term outlook that we set out back in November of 2021 before kind of multiple words and a lot of macro concerns across kind of global economies. We still feel like it’s highly achievable. And I think it’s important to set that framework in everyone’s mind because we weren’t reaching for full potential across any one of these verticals. We were simply saying what’s an incredibly reasonable way to slice up the remainder we have to go. I think international is one I’m personally most excited about. The momentum we’ve had with the Finaro business in signing to get us a healthy portion of the way there and I think we will kind of alluded to that.

And then the annualization is obviously something we can rely on pretty comfortably. Obviously, you have to be cautious about macro, but just getting a full year of merchants that joined you the prior year and only contributed partial is something we can underwrite heavily. Jared, I mean, you’ve always got great insights onto the world ahead. Any comments you want to add [ph]?

Jared Isaacman: Yes. I mean, look, the layups are obviously the annualization of 2023. I would also say like sports stadium and ticketing is going to be pretty easy. I mean that’s a – I mean, I hope people really dig into how awesome of a deal Appetize really was. I mean, we are ushering them right over to the VenueNext product, and the VenueNext product comes with payments, as does our restaurant products too, for that matter. So we’re going to move them over. We’ll capture payments on that. And ticketing we’re having a lot of success in. So I feel really good there. In terms of like our core additions, which I think you were asking about previously, which is conversions and net new accounts. The actual population of like targeted independent hotels and such is more than double what we’ve actually plugged in for 2023 that we would consider like our prime targets for the year ahead.

So that really comes back to Taylor’s answer that where would be the risk aside is, well, you’re going into a new continent going after restaurants and hotels. I just say we have a lot of confidence in it. We already have SkyTab that are operational. We have our Opera and Oracle integrations already operational in Europe right now. So we feel really good about that. But that obviously you got to go out and you got to win restaurants and hotels in Europe, but we’ll welcome the challenge.

Jason Kupferberg: Right. Right. Okay. So we’ve got comfort in the 2024 volume outlook. It sounds like based on the take rate commentary, we’ve got comfort with the 2024 targets on revenue as well. So maybe, Nancy, just turning to margins, just as we think about the moving pieces for 2024, can you just go a little bit deeper into some of the areas of improvement? You touched on them briefly because I know you’re going to potentially have some drag from the recent M&A also, although maybe some cost synergies will be kicking in. Just trying to think how that nets out because I do think directionally, you’re expecting EBITDA margins to be up next year. Thanks.

Nancy Disman: I’ll start with your last point first, which is yes, I think the way that you phrase it is right. The synergy opportunity will be delivered pretty quickly and that’s why we put out the Appetize EBITDA number, right. So really just watching that turn from a drag to pretty quickly turning into an EBITDA opportunity, which is both sides of that equation that Jared talked about, it’s across all opportunities. But then, of course, there’s always expense synergies with any of these acquisitions that come together. I first say, I guess I first want to start with, like, look, I think these margins we’re delivering are best in class. So I want to be cautious again on not putting up too much yet on where we’ll be on a 2024 guide.

But we absolutely think there is margin enhancement in the near term that you’ll see when we do come out with that guide. The growth trajectory it’s just I would say I know I’ve been a little bit of a broken record about this. The union economics model right now that we’re operating under every single dollar of revenue is coming through at a higher margin. And that is what has caused this sequential margin improvement quarter-over-quarter that you’ve seen all year. And so, and I think if you look at where the margins are exiting, certainly that should be your starting point when you think about 2024 and beyond. The opportunity to continue to kind of manage a relatively flat SG&A base like you saw this quarter is really a reflection of every part of the operating model.

I could kind of go through each one again. But it starts with things that are like S&E, where we’re adding on ticketing, we’re not adding in SG&A. When we’re going up market, we have a much – the idea that we’ve consolidated under one SkyTab brand, right. That takes out just so much infrastructure and customer support. So it’s just really every kind of aspect of the growth model right now is producing a higher margin than where we started the year. And that will continue going into 2024. So I would say best in class today with room for improvement that you’ll see coming in with the 2024 guide.

Jason Kupferberg: Well said. Thanks.

Operator: And our final question will be from Jamie Friedman with Susquehanna. Please proceed.

Jamie Friedman: Hi. Thank you for the detailed results and commentary in this immaculate shareholder letter. I wanted to ask. So it looks to me like the math is that the implied blended spread for the fourth quarter at 68 basis points is up both sequentially and year-over-year, right. So 66 in the Q4 2022, if I’m calculating that, right. But more generally, maybe you could help unpack either Nancy or Jared or Taylor, how we should be thinking about why it is that the blended spreads would be rising again after they did fall in the third quarter?

Taylor Lauber: Yes, I’ll let Nancy kind of double click. I would just say we didn’t set an explicit spread expectation, and we do expect our SaaS and another line to grow sequentially quarter-over-quarter. So I don’t know that the pull through on 68 is an explicitly good read. I also don’t want to give one on the fly. So, Nancy, any more color you can give there?

Nancy Disman: Yes, I would think about Q4 as right now, our expectation going into the quarter, excluding the acquisitions, was certainly that Q4 would be a strong blended quarter. Q3 actually came in better than our initial expectations. So I expect Q4 to look similarly to what you saw in Q3. The 65 basis points, you heard us call it out as kind of a stabilizing of the spreads. Unfortunately, which ultimately ends up being a positive, is as we bring on large enterprise merchants quarter-to-quarter, there will be some movement. But I think if you use 65 as kind of an exit rate into Q4, you’d be at a good spot.

Jared Isaacman: And the one thing I want to call out, because we mentioned this in passing, but it’s an important consideration, is we do have to pay attention to exchange rates now with Finaro being a part of the business. So the impact on dollar versus euro is going to be something that can play a role. And obviously, there can be some volatility associated with that. But we’re not seeing any meaningful spread changes on a customer by customer, or vertical by vertical, or even geography by geography basis. It’s just another thing to keep in mind.

Jamie Friedman: Okay. And then for my follow-up, just to try and advance that conversation to 2024. So I realize we don’t have the revenue. We’ve got the volume and the guidance. But in terms of maybe qualitatively, how to think about the inputs for the blended spread for next year, because it sounds like you’re boarding a lot of enterprise activity. I mean, Jared was specific and articulate, enthusiastic about how much going on there. At the same time, Taylor, you’re saying you got international, which I would assume has a higher blended spread. So any way to think about the blended spread trends for next year will be helpful. Thank you.

Nancy Disman: Yes. And we’re really being careful to not go too far into giving anything on 2024 guide. We’ll talk, obviously, the next time we’re together about that in great detail. But I would just answer it similarly to the earlier question which is using 65 as kind of an exit rate right now from a modeling perspective is certainly reasonable. There will be puts and takes and exactly what you just summarized which is continuing going up market obviously comes at lower spreads but with all the international expansion that will be coming in at higher spreads. We also love what we’re seeing in our new verticals as we expand in S&E with ticketing which also brings that kind of vertical lines up from a spread perspective. So I think the blend that we’re at now if we’re putting a stake in the ground, but I would not take this as a guide point. I think 65 is a fairly stabilized blended spread right now for where the business is.

Jamie Friedman: Got it. Thank you. Thank you both.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.