Q3 2022 Shift4 Payments Inc Earnings Call

Thank you for your patience this morning's call will begin shortly please stay on the launch.

[music].

Good morning, good afternoon, and welcome to the ship for <unk> 2022 earnings call. My name is Adam and it'll be about price. It today, if you'd like to ask a question during the Q&A portion of today's call. You may do so by pressing star followed by one on your telephone keypad I will now hand over to Tom Mckernan to begin so Tom. Please go ahead when you're ready.

Good morning, and thank you operator.

We welcome you to shift for a third quarter earnings conference call with me on the call today are Jared Isaac mentioned fourth Chief Executive Officer, Taylor Lorber, our President and Chief strategy Officer, and Nancy discipline, Our Chief Financial Officer. This call is being webcast on the Investor Relations section of our website, which can be found at investors that chip for dot com our quarterly shareholder.

The letter quarterly financial results and other materials related to our quarterly results have all been posted to our IR website.

Paul 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 many important factors.

Additional information concerning those factors is available.

Most recent reports on forms 10-K and Form 10-Q, what can 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 todays quarterly shareholder letter with that let me turn the call over to Jared Jared.

Hey, Thank you Tom and good morning, everyone.

So we have a lot to talk about today we're.

We're very pleased with the record results and responsible growth we delivered this quarter, especially in an environment of increasing economic and geopolitical uncertainty.

I'm incredibly impressed with the shift for team that executed so well on a number of important organic and inorganic initiatives, including closing on an international PSP, releasing sky cab Pos from beta in sourcing some of our best distribution partners and driving substantial volume growth in our new verticals.

Not surprisingly our high growth core continued to be the primary driver of our performance, but our new verticals and recently released products are playing an increasingly larger role in our growth, which sets the stage well as we close out 2022 and move into 2023.

So for the third quarter organically, we generated 53% year over year growth in our and then payment volume and 33% year over year growth in our gross revenue less network fees.

We exceeded 20 billion in quarterly volume for the first time in history, and we also achieved quarterly records for all of our Kpis, including adjusted free cash flow.

As mentioned our results benefited from continued strength in our high growth core as well as a more meaningful contribution from new verticals, which includes sports and entertainment gaming and sexy Tech.

In our men's gateway conversion strategy continues to be a reliable source of new wins and during the quarter. We renewed several enterprise gateway customers on economic terms comparable to our end to end offering. This is one component of our previously announced gateway Sunset initiative.

Additionally, our strategy to deliver a unified and global commerce capability is well underway and we expanded our international and e-commerce capabilities, this quarter, which I'll speak to in just a minute.

And as some of you know, we officially launched our Sky tab P. O S. In September and early indications are very encouraging most.

Most importantly, we delivered on the financial promises we laid out a year ago at our inaugural Analyst day event in November 2021, we're looking forward to meeting with many of you later today during our Sky cab showcase and business update we will provide more specifics on our progress and future growth plans.

It is worth emphasizing that virtually all of our gross revenue less network fee revenue and volume growth. This quarter was achieved through focus and strong execution of our organic initiatives that stated in the last few days of the quarter. We did close our first international acquisition, a European PSP, which brings tech capabilities that will enhance our ability to win.

Tract and integrate new customers consistent with our global expansion strategy. This acquisition is very complementary to <unk> operations in the United States and will be a key enabler for future international expansion and deliver additional synergies upon the eventual closing of scenario on that note. The previously announced acquisition of Monroe is still pending regulatory.

[noise] approve them, but we do expect that to close by the first quarter of 2023.

Given the results of the third quarter and our early look into the fourth quarter, we will be increasing our 2022 guidance across all of our kpis.

And we are increasing all of our guidance ranges for 2022 above the high end of our previously provided ranges again this applies to all of our kpis, including volume and adjusted free cash flow, while we cannot predict consumer behavior. In this uncertain environment. We are not completely at the mercy of the broader economy at some of our peers may be.

The assets, we have accumulated including our gateway and software integrations alongside the products. We have built that we've built afford us a path to exponential growth even without ever adding a new customer.

As mentioned above I do believe the company is performing quite well despite a challenging economic backdrop persistent inflation remains a cause for concern.

We are focused on what we can control so prioritizing the needle movers in our plan to deliver profitable responsible growth in excess of our peers.

Obviously, we are not immune from economic cycles, whereas this quarter demonstrated the decisions. We have made over the past year to invest in new verticals and you embark on various internal initiatives have proven to be the right decisions. We have the experience and expertise to operate in all economic cycles, just like we've done over the last 25 plus years and we hope the results this quarter.

Demonstrating the durability and uniqueness of our model.

Similar to the prior quarters I'm now going to provide more specific updates on the performance of our high growth core and then an update on our new verticals.

So starting with high growth core once again it is the primary driver of our performance for this quarter as a reminder, when we refer to high growth core it essentially represents the company. We were at the time of our June 2020, I T O, which at that time was primarily supporting the complex payment related needs within the rest.

Strong hospitality and specialty retail industries, our right to win in these complex environments is based upon our over 500, plus software integrations, which enables us to pursue a very large addressable market as well as cross sell a large population of existing gateway only in software only customers our unique software integrations alongside.

Technology products, we have built to solve pain points within the high growth core continues to deliver very strong results. We're still in the early innings as the Tam continues to grow as we've added over 85, new software integrations. This past year and the gateway conversion funnel remains very healthy.

During the quarter.

We signed a number of new resort properties and high end restaurants within our high growth core. This includes Chickasaw nation, which operates Winstar world Casino and resort, which is the world's largest casino.

All our resort, which is honolulu's premier luxury resort shiny and in golf resort Papas restaurants, which operates 100 plus restaurant locations across the country and Cocoa Beach Pier alongside Florida space Coast.

Earlier this year, we began a gateway sunset project designed to accelerate growth within our high growth core well, we're really only in the first few steps in this program. The results are impressive and includes some featured wins such as mountain Shadows retreat in Gainesville in both based in California, Taylor will provide some further details on our gateway sunset.

Project in just a few minutes.

We continue to evaluate ourselves relative to our peers when viewed on a four year volume CAGR growth basis, our volumes grew 45% since 2018 compared to low double digit growth at the two major card networks. Our average volume per merchant continues to increase and was 214% of pre pandemic 2019 led.

Oh, it's for the most recent quarter, our quarterly volume growth is 349% of pre pandemic levels, along with gross revenue less network fees of 246% and adjusted EBITDA at 349% over the same period.

Our spreads remained stable across all high growth core verticals, including restaurants and lodging. Despite our continued mix shift up market.

The recent launch of our Sky Tab P. O S provides us with an attractive two part growth strategy not only do we unlock considerable operational efficiencies and revenue opportunities by offering sky Sky tab to our existing base of restaurant merchants the price the value proposition of Sky time is so disruptive we are positioned to win our fair share of net new merchants.

As well. So this includes bringing sky cab into new geographic markets.

In addition to the traditional restaurant and hotel venues Skycap can now be found at the Chicago Symphony Orchestra, Iowa State University, the Los Angeles Football Club University of Notre Dame The Wells Fargo Center, and that's just to name a few.

We are taking advantage of the Sky tab P. O S. Modern cloud architecture intuitive features and market positioning to improve our control over the customer experience and further enhance our unit economics by in sourcing distribution. For example at the beginning of Q3, nearly all of our POS sales relied upon third party distribution.

At the conclusion of the quarter, we are now more evenly balanced and ramping towards 50% direct sales and 50% third party. You'll know now find most of our third party partners operating in the more spot sparsely populated areas, where our well while our direct sales presence in the more desirable markets.

That stated we still have coverage gaps, we're looking to close on the west coast as we build momentum around our new flagship T O S product.

As we have discussed in prior quarters, we remain focused on improving operational excellence by removing complexity, the leading parts and increasing organization efficiencies. So retiring legacy Pos software brands and products and focusing energies on our new Sky cab solution with a balanced distribution strategy are great. Examples of the ship four way.

As a result, we now have a highly motivated motivated and energized Sky force direct sales team and a game plan to target the over 100000 existing restaurants, using one of our many legacy restaurant P. O S brands the opportunity set is tremendous and our internal distribution team is excited to deliver an unmatched customer experience leading edge.

Technology, and a disruptive price point.

As mentioned, we expect Sky's had P O S to represent a compelling migration path for our existing base of restaurants, many of which are seeking new capabilities and key integrations to better serve their patrons.

It's space age hardware also makes it a fun system for direct Sky force team to sell.

Our opportunity set includes both the mid to high end restaurant customer, but also stadiums and entertainment venues and on a very interesting note. We successfully installed our first skycap tof system outside of the United States. This past summer.

As I close out the high growth core update.

It is important to remember that this category represents more than restaurants and hotels are high growth core capabilities also address specialty retail, including notable customers like U P. S stores, the Caesars forum shops furniture lumber and other retailers that require PCI validated and secure integration to their commerce, enabling software.

With that let's move over to the contribution from our new verticals.

We have seen a notable uptick in volume this quarter from our new verticals and strategic enterprise merchant relationships for clarity, we now consider our new verticals to be international alternative payment methods or Atms, which includes crypto donations, along with sports and entertainment gaming travel nonprofit and sexy Tech. It's also very important to them.

Besides we will not be breaking out volumes are spreads across our new verticals or strategic enterprise merchant relationships due to confidentiality requirements with a certain strategic customer in other competitive sensitivities that stated due to the timing of certain new vertical merchants boarding we do expect spreads in our new verticals to expand in the fourth.

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Finally, despite the inclusion of international and Atms, There was virtually no volume contribution from these categories in the third quarter, reinforcing that and Ken volume growth remains organically driven.

As you can see.

Volume from the new verticals accelerated in July and throughout the remainder of the quarter. We're very pleased with the progress we made during the third quarter and the improvement was also without the benefit of Allegiant Airlines, which has been delayed and is now scheduled to begin processing. This month.

The ramp in new verticals took longer than we originally anticipated as you can see it was only a matter of time and we're now on track for new verticals to become a much more meaningful contributor of our overall volume as we head into 2023.

As expected the improvement in new vertical volume contribution this quarter came from implementing a number of large N C. Double a an NFL stadium clients in time for the football season, adding more licenses in states, which resulted in more gaming volume and an increased contribution from our nonprofit costs from customers.

To double click on some of our new verticals, starting with sports and entertainment, we signed the Houston Texans, Los Angeles Football Club University of Colorado, Iowa State University, Villanova University, and the Chicago Symphony Orchestra.

While new stadium in theme park wins have been consistent volume from ticking is really only just beginning for example, our ticketing integration with <unk> is now complete and we will begin processing ticketing. This month with further integration set to go live early next year. Additionally, we entered into an agreement with a leading ticketing provider for aquariums and juice and we also expect.

Go live early next year with our integration with the leading ticketing provider for college sports.

On an interesting note we've.

We've always seen the possibility of combining our strengths in sports and entertainment stadiums with gaming and we have the first examples of this product marriage with two sports teams located in the state of Washington.

Our venue next software remains the market leader and is now installed at well over 100 and twenty-five stadiums in the U S. Numerous theme parks and our win rate and funnel of opportunities remains impressive our.

Our performance in the sports and entertainment vertical and alongside our stated international expansion plans has attracted the interest of many notable customers and we expect to continue to benefit from our position as the only company that really offers the full ecosystem to support the sporting venue.

Moving on to gaming, we continue to add state and tribal gaming licenses with volume more than tripling versus a year ago. We expect this vertical to grow as we add more Atms and international processing capabilities.

With respect to our efforts in nonprofits. Our overall volume continues to ramp and we are currently working with over 2000 nonprofit organizations as a result of the acquisition of the giving block.

As a reminder, the giving block as the leading platform for crypto donations and despite the market turmoil in crypto, we continue to see interest among nonprofits seeking to be part of giving blocks marketplace, which is translating into impressive customer growth given the nature of nonprofits, we do expect the fourth quarter to represent the peak season for donation volumes.

Now in travel the integration of Allegiant Airlines was delayed and we now expect them to begin processing. This month alongside European online travel agency Kiwi Dot Com, we've signed an additional airlines and as a result of our expanding international capabilities, which we hope to announce later this year.

Finally, with respect to our sexy tech vertical we have a very incredibly important strategic customer that continues to grow quickly, which also open up opens opportunities for ship or all over the world. A great example, this quarter would be the signing of the boring company as a customer of which we've already begun processing for the Las Vegas location.

An interesting point and does that it took nearly a quarter to complete that integration of our and as a result of our recently closed European PSP acquisition, we probably could've completed that integration in a matter of hours instead of months.

And the same sexy Tech category, we announced previously we announced fanatics at the end of last quarter for those not aware fanatics is the largest in venue and E Commerce sports merchandising partner with major League and college sports in a short period of time since the announcement, we now processing over 40 of the fanatic in venue locations across the United States.

Including NFL, MLB MLS NHL, NBA and universities and anticipate having the additional sites operational by the end of the year.

The success, we have found in our new verticals. It's still early days there are many announced merchants like time and allegiant that have not even begun processing yet.

That stated our strong momentum in international expansion has been generating interest, including Rfps from multinational merchants that previously you would never have considered ship for them.

So while the contribution from new verticals took a bit longer to ramp than expected. These vertical verticals are well positioned to become a much more meaningful driver of our performance in the months and years ahead.

So talking a little bit about global expansion and before passing it off to Taylor I wanted to provide you a brief update on our global Commerce initiative.

First we do expect to close scenario by the first quarter of 2023 and continue to make progress on the necessary European regulatory approvals in the interim we continue to work with the connect our payment platforms me an arm's length partnership. We also continue to refer merchants to each other and have already achieved several notable wins.

In addition.

We continue to enhance our international and e-commerce capabilities via M&A as mentioned already we tucked in a highly capable European payment service provider or P. S. P. At the end of the quarter. It is already really integrated into both ship for Infinera. We can now offer ecommerce merchants in Europe, and the United States via a stripe like integration capability alongside.

The ability to optimize their conversion and authorization rates and offer both fraud protection and best in class recurring billing payment technology with support in over 40 countries.

We only wish we had been able to close on this platform earlier is it certainly would have reduced the integration time for many of our new vertical customers.

It is worth mentioning that our international expansion endeavors are not just limited to inorganic initiatives towards the end of this past summer, we ignited organic projects to add and settlement capabilities in Canada and throughout the Caribbean.

Strategic merchant relationship is what is fueling our global commerce ambitions, but keep in mind as we add support for new geographic markets. We were then able to bring all the products and services that made us successful in the United States into those markets as well.

Great example, is Canada, and the Caribbean, where we have existing gateway volume and restaurant customers using our Pos software that we can quickly cross sell while primarily serving the needs of our strategic merchant relationship.

So to be clear, we are laser focused on using our low cost capital to seek out payment capabilities throughout the world.

Our landmark deal with an important strategic customer is our yellow brick road as we endeavor to meet their global commerce requirements. Our balance sheet remains strong our net leverage on a trailing 12 month basis when adjusted for the contribution of our recent initiatives is three three times, giving us capacity to pursue other accretive technology assets as we delever quickly.

I look forward to seeing some of you later today in our business update event in New York and with that I'll turn the call over to our President and Chief Strategy Officer Taylor Laura Taylor.

Thanks, Jared and good morning, everyone I will focus my remarks on our recent volume trends and update on our acquisition strategy and then provide some additional color on our gateway Sunset initiative.

As a reminder, our previously provided guidance our volume guidance for this year assumed a modest recovery in international and business travel and 3 billion of contribution from the new verticals, such as nonprofits gaming and our strategic merchant relationship as well as sports and entertainment venues.

We benefited from the ongoing resumption of travel throughout the summer months and saw a sequential improvement in our lodging volume growth as expected hotel volume moderated seasonally in September but still remains quite strong on a year over year basis. In addition, our volume benefited from incremental contributions from new verticals, notably gaming sports and entertainment.

Venues and a strategic customer that we disclosed previously alongside a volume contributions from our gateway Sunset project with our new verticals beginning to ramp the volume trends into the fourth quarter remain highly encouraging and informed our decision to ultimately increase our volume guidance. Despite continued macro concerns we are on track to end the year with over 50%.

Sent end to end volume growth.

Our work is not complete and new verticals and we continue to execute on complex integrations that will provide important barriers to entry once complete some of our new enterprise accounts, such as allegiance I'm still not begun processing and we anticipate we will begin processing. Later this month, we believe the combination of new verticals ramping several material enterprise.

Relationships International expansion and of course Sky D. O S sets us up very well heading into the next year to sustain these levels of organic growth.

We do continue to believe that consumers will ultimately pulled back on discretionary spending at food and fuel prices remain high. However, we also believe our new verticals and international expansion will sufficiently mitigate any pending slowdown.

Predicting how and when behaviors change continues to be difficult, but we believe that our competitive positioning economic model and balance sheet position us quite favorably versus our peers during any economic downturn.

Our acquisition strategy continues to balance accelerating growth in existing verticals alongside our priority to establish global payment rails and supportive of very strategic merchant relationship.

It's a double click on that throughout the quarter, we selectively and sort of several of our key sky tab distribution partners.

In several desirable markets. The result include.

Include a reduction in residual cost of sales a modest increase in opex, but with a significantly superior customer experience and improved unit economic model. We now have a very balanced approach between direct sales and authorized partners within the restaurant vertical.

With respect to international expansion as Jared mentioned, we added some very sophisticated online checkout capabilities with the tuck in acquisition of a P. S. P based in Europe .

This platform offers an incredibly easy self service integration path for software companies and merchants alongside sophisticated recurring billing capabilities as well as multiprocessor fraud scrubbing, the eye reporting and reconciliation tools.

Well, there was virtually no volume or economic impact to this quarter, we do expect to unlock revenue synergies upon the closing of the scenario acquisition.

And we are already able to integrate the technology stack I encourage you all to visit Dev Dot ship for Dot com and create a demo account to check it out.

Our gateway Sunset project is also progressing quite well.

We've been able to sunset a handful of connections that were laborious to maintain and have converted the majority of those merchants onto our end to end platform. We've also implemented incremental pricing on another portion of our gateway only merchant base, which we believe is a small step towards being properly compensated for the critical value of our integrated payment technology provides these merger.

We have also engaged numerous enterprise relationships and a bespoke way to mutually determine the best way, we can add value to them. These conversations have resulted in improved economics, including some relationships that are paying essentially comparable cost or end to end offering.

Along with many committing to move to our end to end over time, which will continue to fuel our growth in the years ahead investors often ask what inning are we in when trying to project predict the trajectory of our growth this quarter should hopefully reinforced that the gateway base offers both near and long term volume revenue and EBITDA growth at significant scale and despite our.

Progress it still feels like we're just getting started.

Lastly, we have added an upgraded talent across the organization as we scale our high growth core enter these new verticals and grow internationally to be in a position to onboard talent at a time when many others in the industry are shrinking is yet another advantage and speaking of talent I'm thrilled to turn the call over to Nancy <unk>, our new CFO to discuss our financial results Nancy.

Thanks, Terry and good morning, everyone before I turn to our financial results. You may have seen that we filed an 8-K on October 21st and we'll be filing an amended financial statements. This week to correct classification on our statement of cash flows relating to customer acquisition costs, while unfortunate this research.

<unk> does not reflect any change in the underlying health and performance of our business.

This restatement had no impact on any of our previously reported key business indicators, including free cash flow, we hope the contents and devastated filings our strong performance this quarter and our positively revised guidance reinforce the strength of the company and our outlook.

In the third quarter, we delivered record results, while continuing to accelerate our strategic priority is total Q3 volume of 26 billion.

53% compared to the same period last year Q3, gross revenue, that's where $547 3 million up 45% from the same quarter last year and gross revenue less network fees were $196 7 million, an increase of 33% over last year.

Results were driven by the continued strength of our high growth cohort the improving economics, we are earning from our gateway customers and the increasing contribution of variety of articles.

Given the growth in our news articles alongside disclosure limitations in competitive sensitivity, we are only providing spreads for our high growth core which remained very strong at approximately 76 basis points.

As we continue to add new enterprise merchants. This spread will continue to compress modestly for a new vertical the rapid pace of growth and sensitive nature of the customers makes quoting spread difficult. Although we do expect the spread for me is to expand in Q4.

The resulting adjusted EBITDA margin for the quarter was 43% representing approximately 580 basis points of margin expansion over the same period last year, while delivering this margin expansion, we are continuing to invest methodically and responsibly to support our growth strategy while closely monitoring.

Entering the macroeconomic environment.

Net income was $46 4 million for the quarter net income per class a N C share with 78 cents and 57 cents on a basic and diluted basis, respectively. Adjusted net income for the quarter was $36 7 million or 44 cents per AMC share on a diluted basis adjusted free.

Cash flow in the quarter was $44 8 million nearly double the adjusted free cash flow, we generated in the same period, a year ago and our adjusted free cash flow conversion was over 52%.

Current quarter results bring year to date, adjusted free cash flow to $90 5 million, which equates to an adjusted free cash flow conversion of 46%.

Full reconciliation of adjusted free cash flow is available in the appendix appendix a of our earnings materials.

In reviewing these materials you will see that we had we have conformed all periods presented to reflect the impact of settlement activity on our free cash flow at <unk>.

Adjusting for net settlement obligations is common across our peer set and for ship for this adjustment reflects changes in our accounts receivable balances, which are our beliefs. Just shortly after quarter end balances will fluctuate based on volume and calendar timing.

With respect to capital transactions within the quarter as Jared and Taylor discussed we deployed $378 million of cash to selectively in certain key distribution partners and we completed a tuck in European P. S. P acquisition and support of our global expansion strategy.

Initiatives represented virtually no contribution to revenue or volume in the quarter. We are exiting the quarter with just over $670 million of cash $1 8 billion of debt and 99, and a half million undrawn on our credit facility.

Our net leverage ratio when adjusted for the contribution of recent initiatives is three three times based on the trailing four quarters of adjusted EBITDA and deleveraging at a rapid pace due to cash flow generation.

Our strong balance sheet and free cash flow profile will continue to allow us to invest in the business and our strategic growth priorities, while we remain disciplined in our capital allocation approach.

Full year 2022 we are increasing our previous guidance for each of our key performance indicators as a result of this quarter's strong performance and our continued confidence in the execution of our internal initiatives.

We are increasing our end to end guidance range to 70 to 71 billion. Our gross revenue range to 195 to 2 billion. Our gross revenue less network fees range to 720 million to $725 million and our adjusted EBITDA range to $2 75 to 280.

Lastly, we now expect our full year 2022 adjusted free cash flow conversion to meet or exceed 46% consistent with levels seen year to date, our 46% adjusted free cash flow conversion level guidance reflects our adjusted free cash flow.

Normalized for settlement activity again, consistent with industry practice with that let me now turn the call back to Jerry.

Thank you Nancy.

Moving on to Q&A I, just want to reiterate how proud I am of the team's performance. This past quarter. So three out of throughout our 25 plus year history I've always felt the company performed at its best when when times were difficult. This was the case during the great recession during the pandemic and now again as we navigate the uncertain climate ahead, a year ago, nearly all of our revenue and volume was derived in.

<unk> from restaurants and hotels within the United States now we are growing very quickly expanding margins and free cash flow operating successfully now in numerous verticals with processing capabilities in over 40 countries supporting 170, plus Atms alongside an incredible team I feel really fortunate to be playing a role in what is a great shift for story bold.

Before and with that operator, let's turn to Q&A.

As a reminder, if you'd like to ask a question today. Please press star followed by one on your telephone keypad now we're preparing to ask you. A question. Please ensure you had said its really plugged in and on mutual locally.

One on the telephone keypad.

And our first question today comes from right now Kumar from UBS. Your line is open please.

Please go ahead.

Good morning, Thanks for taking my question.

Give us some really good details on your in your vertical could you dive in a little bit deeper and discuss the Rodney around EBITDA contribution for these newer vertical than how they could trend into next year.

Yeah, Hey ran a this is taylor thanks for the question.

We tried to thread the needle here by giving an appropriate amount of detail, but also recognizing that there's some significant strategic relationships and competitive.

Dynamic so well.

Youll see some disclosures throughout our upcoming.

Coming business update materials that talk about the growth in that contribution, but we're not going to be disclosing explicit volume.

At the time being you will see those sequential growth in the materials that you can get a sense for what it's doing on a quarter over quarter basis, Darrin I don't know if you want to give some perspective on how you think it'll play out in 'twenty three.

Yeah. I mean, we did include in our prepared remarks that we do expect our spreads to expand in the fourth quarter within our new verticals and from our strategic customer relationships. So as Taylor mentioned I think.

As new as new.

<unk> and our strategic customer relationship becomes a bigger contributor to the business there's greater sense.

<unk> not just from a competitive perspective, but very you know confidentiality specifics with respect to to certain customers. So.

Yeah, I think the idea is we want to be able to you know signaled to you. The contribution from these new verticals and how it is growing quickly and the fact that you know the spreads associated with them will continue to expand but we can probably go into too. Many details beyond that I'd say just the last pieces that we do still have merchants that we've disclosed previously that arent contributing yet.

Our optimism is quite high.

If you kind of followed our narrative throughout the year it was.

Lower than we had expected in terms of getting integration work completed and the volume to begin.

We're quite pleased with the pace of volume now and quite frankly, even more pleased when you consider the fact that theres merchants that aren't yet contributed.

Got it and then that that's very helpful guys happier sales.

Is 50% direct and 30% third party, how should we think about that number evolving over time.

Most of that to go towards that direct distribution.

I think we were in a pretty good spot now you know I don't know if you look through the earnings or the the full presentation that we'll be reviewing later today, which kind of shows you how our our distribution coverage evolved over the quarter from 100% third party to about 50 50, there still coverage gaps on the West coast.

That we're gonna look to solve but I think what you have right now is a pretty good balance you know sky tab is an amazing product.

It's gonna win a you know by by having a direct sales approach in key markets, where we're very confident in the growth trajectory of the business, we're able to eliminate to a long term residual expenses can be associated with those new wins, which really improves our unit economic model and paybacks, but in the more sparsely populated areas of the country.

We're less inclined to kind of take on that fixed cost overhead of of a direct sales force like we've done in the in the more populated markets and in which case, they're able to have success distributing our product and also providing a lot of other services that we wouldn't normally want to offer. So we think it was like a really great move at the right time to support our.

Our product, but we're going to keep evaluating and we're going to keep closing coverage gaps because this is the right direction for this product.

Yeah.

Great. Thank you.

The next question comes from Darrin Peller from Wolfe Research. Please go ahead. Your line is open.

Hey, guys, Thanks, and nice results.

I mean as you said, there's a lot of items that you have control over to help your volume almost regardless of the macro environment and so if we could just take a step back and look at the quarter and the outlook for fourth quarter, even when we think about what drove whether its gateway conversion.

Organic wins.

What actually drove the success in volume this quarter and what you're seeing into next quarter. And then are you seeing any what do you mean by that is really if you can parse out the gateway to control gateway conversions and other variables.

And are you seeing any change in the consumer behavior in any of your verticals yet that is something worrisome or is it just you talked a lot about it in sort of all merchants merchant acquirers. These days about the pending change in in demand. Obviously, so what are you seeing there if you don't mind.

Yeah. Thanks, Darren I mean, good questions for starters I mean, the majority of the growth in the quarter was was absolutely within the high growth core.

So.

And I'd say you know that's normally the you know.

That's normally driven 50% by new just pure net new customer wins, leveraging our software integrations in a in a really awesome addressable market and the other 50% is usually gateway conversions.

We do have an active gateway Sunset project underway. So you know you're getting all the typical gateway conversions you would've otherwise had and then you're probably pulling forward a little bit more.

As a result of that very targeted initiatives. So that for sure is like you know the lion's share of the quarter next I mean, you've seen new vertical growth you know each.

Each quarter, but for sure I mean this was a this was a quarter where the big contribution from our new verticals kicking in which is great. Because that is as I mentioned in our prepared remarks, it's moderating what would otherwise be you know see a seasonal low kicking in from from your restaurant and hospitality customers in terms of you know kind of the you know the health of the consumer.

Right now I think that you know we've taken a position since the beginning of the year, you know Taylor, especially probably to our own detriment you know kind of sounding the alarm in the first quarter before anyone else that like we don't think the you know the $90 steaks, they're going to last forever.

And I'd say, it's not you know overwhelmingly clear right now that that is the case because you are moving into a seasonal low period anyway within those verticals. What I will say is that we positioned the business very very well.

To perform and grow even if there is a slowdown in consumer spending I think we've demonstrated that throughout our history. That's kind of what we know how to do in challenging times I think that this quarter represents that.

Well and the fact that we can always draw upon our existing basic gateway customers or existing basis software customers and the contributions of our new verticals is what's going to help us navigate if that eventual consumer slowdown should should be realized.

Alright, that's really helpful. Just one quick follow up.

Is on profitability and you know in the car.

Back to the market, we're in with such a focus on both free cash and EBITDA, it's great to see the results on the EBITA margin side as well as free cash conversion now so maybe just remind us I know there was a little bit of pricing benefit on the gateway side or what are the other key variables that really have been driving the strength youre seeing now and what your view is on sustainability there in terms of levers and operating leverage.

Yeah, I think it's I think that's a good question I mean, you know at the beginning of the year.

It became clear that we were we were definitely can be navigating different climate, you know I I kind of came out and said look you know in 2021, and just a period of immense.

Immense.

Hubert and euphoria in the market you know it was almost head scratching, we raised a lot of capital we didn't deploy it because it just seemed like a very unusual time period and that this year you know makes a lot more sense to us so.

So I think you know you achieved this kind of profitability and margin expansion by recognizing the climate you're in having been there before I can't emphasize that enough that you know we are experienced in market downturns and.

And as a matter of prioritizing your your firepower.

You know on real needle movers. So you know well timed investments in Sky cab P. O S. A cloud based solution that allows you to have a more direct sales approach. So that you can eliminate some ongoing residual expense in future residual expense certainly you take on a lot of fixed overhead we increase the head count of the organization by 15% alongside that initiative, so not all benefit you.

Take on some expense along the way we have you know a very large population of gateway volume I mean, I think we've previously stated our you know well north of 150 billion in volume. So a lot of volume it wasn't being properly monetize because it wasn't appropriate to do so during a pandemic that improves our free cash flow and margin.

Vertical we've entered into is predominantly a direct sales effort that doesn't have a big.

It doesn't have a residual expense associated with it and it's also a lower cost in terms of hardware contribution and lower overhead I mean, you know it's probably the same you know one or two support people that maintain 10 stadiums maintain you know.

<unk> thousand restaurants, so literally everything we've been doing from the beginning of the year has been designed to expand margins and free cash flow is kind of the responsible thing to do going into this climate and we think it's incredibly sustainable.

That's great.

Sure.

The next question comes from Timothy <unk> from Credit Suisse. Timothy Your line's open. Please go ahead.

Great. Thank you a couple of things just wanted to recap in terms of mechanics. So in terms of the $2 68.2 in terms of the residual commission buyouts. The in sourcing that you were referring to so my understanding would be that there is no end to end volume impact from that and though gross revenue impact. However, there would be a reduced pay.

The way I E. The cost of goods sold would be lower therefore gross profit higher than EBITDA higher if you could just quantify and just confirm if those mechanics are roughly accurate and what the impact to gross profit or EBITDA would be either for Q4 or in the out years on an annualized basis that would be very helpful. And then I have.

A follow up on Q4 as well.

Yeah, Hi, it's Nancy you you've got that exactly right I mean, we're not going to kind of pick that apart as as we think about Q4, but the one thing I would kind of adding to that mechanics, and let jarrod just talked about obviously, we do have some offsets because we just crossed up you know this wasn't a I wouldn't call that simply a residual of buy out a mechanism.

This was really interesting of distribution for us. So we did see an offset on the SG&A side as we build out the our internal sales force, but but generally I think the mechanics as you've just to find them are appropriate.

Okay, great. Thank you and then two minor kind of numbers ones. The first one would be for Q4. So for the smaller acquisition you mentioned the European Tuck in P. S. P could you disclose how much revenue is in the Q4 guide associated with that roughly.

Got it got it down we haven't disclosed that.

Okay, All right no problem and then the last one is the.

The gateway piece I know, it's a little bit harder to get to this quarter because the spread that you've given on the end to end is for the core only it looks like maybe the gateway piece, where we are.

A little bit different this quarter and maybe there's a mechanical difference. It could you just disclose what the gateway fees were this quarter and if theres any.

Mechanical change that we should be aware of.

Yeah. So we haven't disclosed the gateway fees in this quarter and part of this is Jared commentary and nancy's through the scripted remarks around being able to back into the spread it's just too too sensitive a competitive environment to disclose those what I would say is gateway fees rose inside of the quarter, we talk.

About that pretty extensively even back on our Q2 call with some of the actions that we had during the the gateway Sunset initiative, but.

The the quantum and how that interplay is with.

<unk> vertical contribution is something we're not going to disclose.

Thank you I totally appreciate that directional as more than helpful and and the rises it's completely aligned with what you were saying there. So completely respect. The fact that you can't give that number thanks for taking all those.

Alright, thank you.

The next question comes from Andrew Busch from S. N P. C. I'm sorry. Your line is open. Please go ahead.

Hey, guys. Thanks for taking the question just wanted to talk about your philosophy around the gateway Sunset strategy and I know that in the past during the pandemic you had you had called out.

More sensitivity to emerging challenges and you know maybe taking a more cautious approach and how you kind of incentivize merchants, who convert to full stack I mean, as we kind of get into a more challenged economic environment is there any pivot that you kind of see on the horizon is how how Greg.

If you do want to.

To go about this sensor strategy.

Yeah, I mean jaret here. Thanks for the question I'll try and answer that a little bit I think even aggressive Ah it sounds like a pretty strong word I mean throughout the entire pandemic.

Given the fact that our gateway customers are predominantly restaurants and hotels. It was an entirely carat first approach.

All of those carats remain.

I'd say that you know the the reason that we're introducing some sticks and it actually kind of dates back to the history of these gateway platforms.

One of which you.

You know that we acquired from a joint venture between J P. Morgan Chase was intentionally run at a loss in order to monetize upstream from the JV.

These agreements are rolling off they're they're years without any proper price adjustments and in reality, you know you're not even being remotely rewarded you're capturing the smallest portion of the payment economics for what is the bulk of the value, which is the software integration the token as Asian, the encryption the business intelligence.

I'd say like the idea is we are gradually I mean can't emphasize enough you like in the first inning associated with this repricing those accounts had contract renewals.

To more appropriately reward.

Compensate the company for the you know the value, we're delivering to our service that said.

We have all our same standard carat offerings out there are we waived gateway fees. If you moved to our <unk> platform. We upgrade your hardware to support mobile payments Apple pay contactless payments.

We provide our our handheld devices you know to have a you know to improve operational efficiencies and venue. So all of the carrots remain. It's just we we reached a time period now where we've got to take out you know some of the parts that have existed on these platforms for four decades, we have to free up some of our internal resources to.

That's been build the future payment platform that should take us all over the world.

And just being properly rewarded for our service. So I'd say, that's all underway, but I would hardly used the word aggressive I think it's pretty pretty early days there.

No no I can appreciate that and I just wanted to touch upon the software side of the business. I mean, you know another straight quarter of really positive trends in that business.

Thinking about it in the medium term perspective.

Is there a likelihood that you kind of get to a growth rate within that that side of the business that matches. What you see on the Indian side, just just wanted to think about the longer term modeling of that.

Particularly as you add more functionality with the skies have and others.

I mean, there's no question that our SaaS related revenues are only going to increase I mean, you know one of our acquisitions you know the giving plaque is predominantly driving SaaS revenue growth as nonprofits really all over the world.

You know joined the platform for accepting you know crypto based donations.

Sky Cab P O S. I mean, as we consolidated four.

I guess he software brands around Sky tab.

The only way you get the solution is with a SaaS subscription plus payments, which is pretty you know pretty meaningful lift considering about 85% of our restaurant customers today don't pay really any SaaS fees whatsoever.

All of the progress, we're making in our sports and entertainment for sure. It comes with you know payments related revenue, but every one of our sports and entertainment venues and theme parks is playing paying SaaS revenue. So yeah. I mean, I think like you know and then volume is pretty pretty straightforward and easy to understand I think across our gateway business and our SaaS business you definitely will have a real kind of.

Our <unk> expansion dynamic taking place.

Over the years ahead.

But congrats on a nice set of results guys.

Thank you.

The next question comes from Ashwin <unk> from Citigroup Ashwin. Your line is open. Please go ahead.

Thank you good quarter congratulations and.

And I know you're facing became before <unk>, but are there.

Yeah I guess.

One differentiation.

As has always been the software integrations.

And in the core can you speak to how this trial.

The name in new verticals is there a timeline.

So and investment cycle that we should think about.

Ashwin, Hey, it's Jared I think thanks for the thanks for the question.

Well first let me, let me kind of break it apart between high growth core and our new verticals. So hydro with core I mean, we're really lucky it is rather easy.

To continue to add and refresh new software integrations within high growth because.

We have a lot of share of the verticals, we serve within high growth quarters. So every new software company that develops you know the next cloud based hotel property management system software or Salon and Spa software techniques. You know software for us is going to refresh that on our platform. It's how we added about 85 integrations over the last quarter.

So so that in that respect that kind of is is rather easy I'll tell you. It's really hard is moving into new verticals. I mean, you know software companies and enterprise merchants would rather do anything other than do another payments integration.

You know declaring a year ago at our analyst day, Hey, we want to move into nonprofits, because theres, a $450 billion payment opportunity there and it's you know they use tons of different software that doesn't talk to each other and this is like kind of what we do really well within the hospitality vertical it's been hard and I'll tell you that that's you know we had.

<unk> to be delivering volume from our new verticals a quarter ago and it was delayed and now you start seeing it today and even you know as I think impressive as our volume growth was this quarter, we still don't have a legion or time processing, yet so I'd say like in general integrated payments as hard.

And we are fortunate to be advantage within our high growth core and we're making Austin progress. Thanks to some signature wins, you know anchor customers in new verticals that that's helping us grow now the nice thing is is once you have those integrations they essentially become a hunting license within every one of those verticals. You know once you have one sexy tech customer it attracts the interests of others and you can reuse.

Some of the integration work the same with airlines. This there's certainly the same with gaming and nonprofit so really happy with the results in there and actually especially the European PSP. We acquired this past quarter. I mean, there are a whole emphasis is on a very you know strike like integration recurring billing D. I type layer that in itself.

He's going to help you know take a lot of the friction out of attracting new integrations across our various verticals. So I think we're set up pretty well for it I. We certainly don't have any you know big Big Capex budget for a refresh cycle on the horizon, because we think we've actually position things quite quite well for our new verticals.

Got it got it.

And then on the medium term outlook is keeping that.

At this at this point and completely appreciate your increasing the D.

The estimates for this year.

You have.

Zoom pretty good visibility to what next year should.

Should look like in spite of macro.

But could you maybe lay out the two year path of you know how you get from them.

From where maybe you might earn this year to that.

That outlook because it does imply in spite of macro relatively.

Relatively significant let's put on it and make it.

Yes sure.

I would say, we'll start with we've got a big event later today to talk through kind of our progress in all of the initiatives. We had laid out a year ago. When we set that guidance. So I don't want to detract too much from that session, except to say that I think we've demonstrated through a bunch of ways.

Uh huh.

That the medium term guidance is quite achievable, where a third of the way there with.

Our full year guidance for 2022, suggesting that we feel like we're going to be nicely set up.

For how we position the next couple of years ahead.

The one thing I would say is it's always a little bit varied in how you think it's going to play out versus how it actually does and I think that was evidenced by a little bit slower pace of new verticals and yet initiatives like.

Distribution and sourcing and releasing our sky type product and.

And the catch up of those new vertical contributions are accelerating through the back half of the year. So a lot to dig into as we meet later today, but we still feel really good about that medium term guidance. Yeah. I mean, you know actually we just have to layer on I mean, you know we.

We put out the mid term outlook at our analyst day last year pretty much everyone said, it's not achievable at all maybe you'll get close but you know we're one year into it and you know I think we're ahead of ahead of plan in that regard that said for sure like it is uncertain climate ahead, I think what this quarter should demonstrate as again, we know how to navigate it.

Tough climate, and we have a lot of confidence in our ability to do so we've accumulated some fantastic assets over the years that I don't think really our investors fully appreciate you know.

Having you know.

Essentially owning two of the four you know complex hospitality and restaurant related gateways with them.

Well in excess of 100 billion of volume as an opportunity set is pretty incredible and I mean, we have a natural foot in the door.

Across a large share of restaurants hotels in the country, We've got great products and we've done all of this over 20, some odd years entirely in the U S and now as of this quarter have a real ability to take these products and services into other markets. So so for sure there theyre going to be things that we won't be able to control on the on the journey ahead, I think you know reaffirming our mid.

[noise] term outlook and the performance in year one.

You know it should signal a lot of confidence in our ability to achieve it.

Got it thank you.

Yeah.

The next question comes from William Jones from Goldman Sachs. William Your line is open.

Please go ahead.

Hey, guys. Good morning, Nice set of results. This morning, I wanted to ask a little bit about a follow up question on the Sky tab distribution strategy.

Obviously, a fairly large shift to go from you know nearly all third party distribution to 50% in a single quarter you mentioned, the 15% head count just how are you thinking about retraining of Reeducating of the sales force to have them kind of go into market with a modern platform and I guess, maybe a higher level you know 50% direct today.

How many more of these in sourcing deals do you guys think it could be in the future.

Yeah, well so two good questions there are I'd say the hum.

Training everybody on.

For starters, I guess, what a quarter right I mean, we increased our head count of the organization by plus 15 plus percent we brought on about 300.

Restaurant point of sale professional service technicians across the country.

I think the good news is they already know exactly what they're doing I mean these are organizations that have been successful with us for as long as we've been in the restaurant space and many of them have been successful pursuing restaurant opportunities for literally two generations.

So they know what they're doing they they certainly know who the competitor is out there I mean its ship foreign tourists.

They've been up against that that competitive for some time and now they have a product that really you know hangs with with the bad so I mean their ability to adapt.

Adapted to Sky, <unk>, Pos and get out and hit the ground running and it's been actually rather easy they they've been waiting for this this opportunity.

I think in terms of you know how much more is there to go but I wouldn't say probably a lot. You know we tried to really get this done to coincide with the formal launch of sky cab, but which I mean the results over our over two months are pretty pretty strong right.

Right now I think it's much more about closing coverage gaps. So you know as you can see him one of the slides that will review later I mean, we are still pretty weak on the west coast. So we're going to want to sort that out whether that's you know organically building up the direct sales force if theres a distribution partner there that we think we can we can build around that that's certainly a possibility too but.

But I think it's much more about our coverage gaps versus this being kind of an ongoing initiative.

Got it that makes a ton of sensitive for helpful.

Then maybe just one on the gateway price increases.

It seems like you're kind of rolling rolling that out in stages can you just give us an update on kind of what you know.

What portion of the roughly 180 billion dollar number that you've pointed to in the past on the gateway.

Has actually gone through that process and what's the timeline like I'm kind of rolling out kind of across the board increases to that customer set.

Yeah sure. This is also one that warrants a bit more time than we have for quick Q&A, but just to sort of give you. The thumbnail, there's kind of three distinct ways. We're approaching us. There's there's connections that just don't make economic sense to maintain kind of regardless of the economics around fixed economics that you know well adjusting wouldn't wouldn't be appropriate and doesn't make sense those.

We're being a little bit more aggressive about saying merchants kind of have to move there is another population that is a price adjustment on a steady basis makes sense I think the commentary we've made around that Jared mentioned it briefly on this call as well is that you know we've implemented some price change and really didn't get.

Much acknowledgement at all for merchants.

<unk>, there's room to go on there and then there's a portion of enterprise relationships that are much more bespoke and how you need to approach them there, they're large they've got very distinct needs.

And we've had success with those as well, but you approach them in a in a sort of a sequential way based on what their agreement terms are so we've addressed every single portion of that population, we havent move price on all of them and we haven't broken that down on a volume basis, just because it's.

It's pretty idiosyncratic with regard to the contribution of enterprise relationships into volume versus SMB, but all of it is on our list and we've had conversations with a portion.

And I think it will feed kind of the growth whether it's end to end volume revenue and or both.

For for years ahead, as Jared mentioned, yeah, maybe just to pile on a little bit to that I mean, one to give you a sense of how much. There is to go I mean, we've been stating for some time now that you know you get a four to five X uplift minimum and gross profit when a gateway customer moves to our end to end platform and they usually save money and solve a lot of other pinpoints.

Along the way so it kind of it kind of tells you how little and again some of this was intentionally by design to the prior owners of the gateway platforms, we acquired how little of the payment economics that are captured by the one organization that actually integrate the technology into the commerce, enabling software encrypted cocainize is there.

It provides all of the business intelligence and get like I said, what I consider like virtually nothing of the you know the actual payment economics. So gives you a little bit of an idea across you know a very large $150 billion plus opportunity. There is to go in order to be more properly compensated for that service you know the real commodity pricing on it that should be getting the smallest.

<unk> is the is the acquirer of behind the scenes that's doing literally just just settlement, which any of them can do.

In terms of like the progress we've made so far as Taylor said like its pretty surgical youre going in phases and some of it is varies based on the gateway connection or who the customers, but you're you're talking about like the equivalency of a you know.

Uh huh.

You know like an independent hotel generating you know 10 plus million a year in payment related revenue of paying the equivalent of like a Netflix subscription so.

Again, just reinforcing how early stage it is and how far we can still go with with that initiative, specifically, which is also just driving a lot of <unk> conversions as well, which is a fine which is actually the optimal outcome.

Got it it makes a ton of sense I. Appreciate you taking my questions and looking forward to hearing more about how all of US today later today.

The next question comes from Roberto Suarez from Evercore ISI. Please go ahead. Your line is open.

Thank you good morning, I appreciate slide 29, with the Sky Tab unit economics looking at Slide 27 can you quantify the increase in client retention at close with the beta in new customers on Sky tab.

We havent done that explicitly.

It's fair to say the retention goes up significantly and Theres a few different variables to that number one Android based software you can update remotely you can push out feature set cigna.

Significantly we do think that the in sourcing of distribution and controlling our customers destiny that much further also increases retention, but we havent done a statistical analysis only because the product just launched in September .

Got it thanks, and just as a quick follow up we've heard from a number of global airlines that the seasonal summer strength in travel has continued into the fall.

But what are you seeing when you look at the beginning of the fourth quarter in terms of hotels and restaurants is that theme carrying through to your customer base.

Yeah in hotels, specifically, absolutely. So if you recall restaurants took a lot of price lift last year, we've seen our ability to take price lift this year diminished I think we've been saying that since Q1 hotels. It's that phenomenon like 2022 is there a year right. So you still had a really really robust.

<unk> increase in travel as international restrictions lifted as companies called people back to work.

We're seeing those trends continue.

Probably more so than in room rates and actual transaction rate hotels can charge a lot for those that want to attend them.

So it's continued nicely into Q4 again anyone's guess if you recall, we have had two years in a row of all of a sudden slowdown in December so we're always skittish and our commentary around that is to be cautious there.

Hotels are robust.

Good thanks, so much.

The next question comes from James Friedman from SCG changes. Please go ahead. Your line is open.

Hi, Thank you it's Jamie.

So Jared I wanted to get your perspective.

Taylor about.

In terms of slide twinning, the sports and entertainment and gaming.

You outlined a lot of the progress you made in sports and entertainment.

Hear a lot about your progress in gaming how do you see the overlap of those two verticals if at all.

Yeah, Jamie So Jared is happy to answer it I kind of alluded to it a little bit in our in my prepared remarks.

We always thought well, let me, maybe just kind of rewind the clock right show up until.

A couple of years ago.

Game like mobile gaming sports sports wagering wasn't even legal in the U S. So basically everybody.

Starting from zero and I think you'll have a handful of payment companies that are all sprinting towards this this new and emerging opportunity right and you'd have pay safe is one that would say you know we have a lot of Atms in Europe , and that's what gives us relevancy and a right to win in the U S market you'd have new Bay. For example, they would say you know what we we do all of the pricing.

<unk> charge for all the European payments company, so that gives us a right to win in the space.

And chip for we'd say well look I mean, probably 40% of the invent new casinos are in this country or a shift for customers.

And we also are the category leader in sports and entertainment and we think people probably will do a lot of wagers in stadiums during football games and baseball games basketball games.

And you know if you can kind of marry the experience or a minimum just provide good analytics is kind of customers move from that casino real and venue casino environment to say the sports and entertainment to mobile Wagering, you know that probably adds value and I think kind of the answer is all three of US are you know finding you know varying degrees of success in that and plus you have a <unk>.

Customers in the gaming World, who will never keep their volume with a single provider, though they'll certainly you split it between the three so I think it's it's working out very well I I totally believe that having our strong presence in in stadiums and sports and entertainment venues is a differentiator and helps us win within the gaming vertical.

<unk>.

Thanks for that and then if I could just ask when you use it terms stripe like you.

You may be getting into this at two o'clock in Taylor, thanks for showing the Dev Dutch afford dotcom dashboard, because this would be helpful. But what exactly you mean by that straight Blake.

Yeah. So it's really self service for whether it's a software developer or an enterprise merchant that runs their own E. Commerce stack. It's the ability to go without asking anyone a question without pulling out a bunch of documents learning how to integrate in a in an hour as oppose.

Two what's traditionally been the case with payment gateways, where it's a it's a discussion it's an NDA its a complex API that doesn't come naturally so.

This platform offers really really ease of integration and then layers on the complexity that a big.

E Commerce enterprise merchants can need over time, right like whether it's supporting multiple processors across different geographies and fraud scrubbing and common reporting against them. So it's an easy foot in the door to understand how transactions working to build things like recurring billing and some of the things that might be relevant.

To use the merchant our software provider and then it releases kind of the.

The more extensive features that are growing merchant is going to need all over the world in a very digestible way, yeah, and Jared Yeah, Let me just layer onto it so to answer your question there will absolutely be a demo of the capabilities.

Youre asking me about during the during the update later today, but maybe just to expand a little bit on what Taylor said I mean.

For more than two decades of our history everything was about in venue commerce for ship for I mean, that's kind of what what really separates us from you know the Audi and stripes and the other kind of really pure play integrated payments providers is almost all of our customers are having in venue commerce restaurants hotels ski resorts casino ste.

<unk> right.

What is a you know a component of bim venue commerce. Its devices. It's hardware that has to be encrypted and token is then integrate with other software and as a result.

It's kind of a lengthy integration process when a new hotel property management system software company wants to integrate and to show for that process can take a couple of months.

You've got to make sure the devices are compatible with the software how we token is how we decrypt how it interacts with other software and the venue and that's totally normal for that climate.

It is totally abnormal for e-commerce customers for App developers, they don't want to go through like a months long process like that because so much is an applicable to them. This is what's made stripes show impressive and successful is they just make it incredibly easy on developers, who only need like eight things to work really really well. So you know the European PSP that we acquired.

Which was a long integration process for us it was probably a month or more.

They could complete that team integration are literally in a matter of hours leveraging our new our new ecommerce capabilities. So that's what we refer to when we say kind of like stripes like integration capability.

Got it thanks for that.

The final question, we have time for today is from Andrew Jeffrey from trim. Mr. Andrew. Please go ahead. Your line is open.

Thanks, I appreciate you sneaking me in here at the end a Jared I think you've touched on this a little bit, but I'd love to hear just sort of an elaboration venues in particular.

Are pretty important.

Driver for Russia for and we hear other processors in the market is talking about their venue wins can you just elaborate a little bit on what you think shift for US right to win is in venue and why do you think you can be the dominant provider in that space.

Yeah, Yeah, it's a great question, Andrew and I think 100% we are the dominant provider in that space. So.

We completed an acquisition in the summer of 'twenty, one for a company called venue next.

Venue next what attracted us to them as a as they describe it today, it's a fan first mobile experience, meaning like the entire kind of commerce experience, that's taking place within the venue is happening on the consumer cell phone.

So that's where they're ordering their food and having it delivered to see that's where they're getting their loyalty points, that's where they're ordering the jersey from the merchandise stores. So they can pick it up that's why they're booking tickets for the next event.

How they access their the VIP suite.

And it just was very apparent to us during a pandemic that you know this is how it's gonna be it probably should have always been that way before the pandemic nobody likes like waiting on endless lines during halftime.

So that technology is kind of the key driver of all of our growth in sports and entertainment vertical every stadium is going to move towards letting their consumers order or a burger and a beer in their seats and they're probably going to be able to pay for it with the proceeds from our first half wager on the football game I mean.

And theyre going to be able to do their ticketing through it like this is all like a logical evolution of the industry. So that's why we're winning everybody else. All they did was make a refreshed nicer version of a concession stand Pos system, which nobody wants to use and we obviously you can do that too is skycap yours, that's like the easy part the hard part is cracking the code.

On the on that mobile fan first experienced any competitor of ours needs to use three or four other companies to deliver a comparable experience, which means it costs more its more prone to failure.

And customers would rather go in our direction, which is kind of the same story about how we went in hospitality and restaurants.

That's a helpful distinction I appreciate it I'll leave it at that.

This concludes today's Q&A, so I'll hand back to the management team for any concluding remarks.

Okay.

Yeah, Noah we appreciate everyone dialing and hopefully we'll see many of you in person later today for our Sky type showcase and business update we have a we have quite a bit to talk about it. Thank you very much. Thanks.

Yeah.

This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.

Okay.

Yeah.

Okay.

Okay.