Q1 2025 Shift4 Payments Inc Earnings Call
Greetings and welcome to the shift for first quarter 'twenty 25 earnings Conference call.
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Question and answer session will follow the formal presentation.
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Speaker Change: It is now my pleasure to introduce Tom Mccourt.
Tom Mccourt: Thank you Tom you May now begin your presentation.
Speaker Change: Thank you operator, and good morning, everyone and welcome to shift for its first quarter.
Speaker Change: 2025 earnings conference call with me on the call today.
Speaker Change: <unk>, our president and incoming CEO and Nancy <unk>, our Chief Financial Officer.
This call is being webcast on the Investor Relations section of our website, which can be found at investors that shift for dot Com. Today's call is also being simulcast on X spacers, formerly known as sweater, which can be accessed through our corporate Twitter account at shift for our quarterly shareholder letter quarterly financial results and other materials related to our core.
Speaker Change: Early results have all been posted to our IR website.
Speaker Change: Now 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 certain risks uncertainties and many important factors.
Speaker Change: Additional information concerning those factors.
Speaker Change: It can be found in our most recent reports on forms 10-K, and thank you, which can 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 todays quarterly shareholder letter with that let me turn the call over to <unk>.
Speaker Change: Hillary.
Hillary: Thanks, Tom and good morning, everyone. We had another busy quarter and it was great to see many of you at our recent Investor day event in February.
Hillary: This morning, I'll provide thoughts on our first quarter results key priorities that give us confidence in the years ahead and an update on our recently announced acquisition of global Blue I will then turn the call over to Nancy for a detailed review of our quarterly results and our upcoming guidance.
Hillary: Before providing the financial metrics I wanted to provide some grounding on the growth drivers within the business, which are especially important during times of economic uncertainty.
Hillary: We have strong product offerings across several large markets and are generally number one in each with the exception of restaurants, where we have a strong number two we had world class customers in each of these verticals such as Aspen hospitality, the Thai Hotels', Pittsburgh Pirates, Colorado Rockies Formula One Miami Grand Prix and the PGA tour, we all.
Hillary: Also refused to leave our success the chance as such our M&A strategy has afforded us a massive collection of customers whereby we can cross sell our services the Boston Red Sox Herb bakeries, and the Ace Hotel Toronto are just three examples of this strategy in action. Although there are many more and we've highlighted it.
Hillary: Few of them in our materials, which you can find on our website <unk>.
Hillary: Interestingly, though these recent wins will matter more in the years ahead as the largest contributor to our current performance is generally the wins of last year fully seasoning.
Hillary: Those of you who can recall Jared reading what seemed like a yellow pages worth of wins from last year's earnings calls are now seeing the fruits of that in our results.
Hillary: As such we posted strong Q1 results that were largely in line with our expectations and are raising our full year 2025 guidance to reflect our confidence in our ability to execute.
Hillary: Some highlights our volumes increased 35% year over year to 45 billion quarterly volumes were in line with our expectations with year over year growth modestly impacted by the timing of leap year and the Easter holiday, we witness stable volume trends across all of our end markets and continue to monitor trends closely in light of the recently implemented.
Hillary: Trade policies.
Hillary: It should come as no surprise that we never count on an improving economy to drive our success.
Hillary: Gross revenue less network fees increased 40% to $369 million a combination of stable spreads in subscription and other revenue resulted in our net revenue growing faster than our volumes. We are unlocking significant value from our recent acquisitions and I will provide some additional details on that topic in a few minutes.
Hillary: Adjusted EBITDA increased 38% to $169 million, we delivered 46% adjusted EBITDA margins, which were modestly above our guidance of 45%.
Hillary: Nancy will comment on our forward margin profile a bit later during the call and lastly, we delivered adjusted EPS of $1 seven per share.
Hillary: We were pleased with these results and are very excited to execute on our priorities for the balance of the year I think it's important to note that these priorities are not new but rather a continuation of what has made us successful for the past 26 years.
Hillary: Our first priority is to keep doing what's made us so successful in the first place.
Hillary: In the U S. We are focused on adding new merchants, while simultaneously simultaneously expanding our share of wallet.
Hillary: Restaurants, we continue signing up new merchants onto our Sky tab offering and also introduced sky are our latest handheld device that's going to be launching in the next few weeks, it's something we're quite proud of and I would encourage you all to take a look at our shareholder letter for some details on it.
Hillary: I gave a few examples of wins earlier, but the product is scaling nicely across a variety of environments. For example, we signed all U S locations of NAND dose a fast growing quick service chicken chain that is expanding quickly in North America with plans to reach over 500 U S locations over time.
Hillary: This is replicating its enormous success already in the United Kingdom and elsewhere in hospitality, we continue to add net new hotels and resorts, while simultaneously cross selling our payments to hotels operating on our gateway I mentioned, Aspen hospitality and the Thai hotels' earlier, but there are dozens of examples ranging from boutiques like the Nantucket hotel the larger.
Hillary: Resorts, such as the Cooper in Charleston, South Carolina.
Hillary: And stadiums, we were keeping our eye on the ball park et cetera across all major professional leagues and are partnering with organizations beyond the four major sports leagues to that end and I mentioned. This earlier, we've signed a formula one Miami Grand Prix and the PGA tour, but also the red rocks amphitheater.
Hillary: Our second priority is unlocking synergies from acquisitions, such as rebel Givebacks in Ireland, we are already making progress across all of our recent deals with each effectively following the shift for a playbook to a tee.
Hillary: Across just the three most recent acquisitions, we have already achieved more than $20 million in EBITDA synergies in the first quarter.
Hillary: [noise] deals for many years ago also to continue to bear fruit as I cited in some of the cross sells that I mentioned earlier.
Hillary: As a reminder, our playbook is focused on identifying a unique capability critical to the commerce experience, which we then bundle with our payment processing expertise, we are not buying a company simply to do the same thing.
Hillary: And then drive cost synergies by removing overlaps instead, we unlock meaningful recurring payment revenue by bundling our own payment capabilities with a unique and scarce technology capability, we now own.
Hillary: Once we own this new capability and the talent involved in building. It we are inherently more competitive and win more new business. In addition to the embedded cross sell.
Hillary: Some examples of this in action a rebel which we acquired in June of last year rebel already has a robust payments cross sell a funnel with over 7000 locations going live on shift where payments as of the Q1 close of note. Many of these are change which was the segment of the restaurant market that was a unique strength of rebel.
Hillary: We have already incorporated many of these rebel capabilities into Sky tab, which make it naturally more competitive and enterprise.
Hillary: We have also integrated the product teams from IGN into ship four as a reminder, IGN is a payment gateway we acquired in November of last year with a presence in Canada and the United States. We have already cross sold payments to approximately 100 large eigen gateway only customers and are making significant progress on combining the.
Hillary: <unk> weighs into a single one and deleting the IGON part.
Hillary: The talented built I can now helps us execute on our platform roadmap much more quickly.
Hillary: It should come as no surprise that the gift and loyalty capabilities from <unk> are in the process of being fully integrated and sky fab as our default offering.
And we have cross sold payments to approximately 100 give ex merchants since we've officially launched our cross sell efforts just in February.
Hillary: We will also delete a part is give ex gift and loyalty capabilities were far superior to our native offerings. As a reminder, we acquired give actually just a few months ago in November of last year.
Hillary: Last but not least is executing on our near term strategy. While also thinking about the future by taking what has made US successful for 26 years and replicating it all over the world. We can set ourselves up for success for decades to come as we shared at our recent Investor Day. We are currently operating in six continents.
Hillary: Up from only one less than two years ago, We recently unlocked Latin America and are already in the process of signing marquee enterprise clients in that region.
Hillary: In Europe, we're tightly bundled software plus payment solutions are less common we're making tremendous progress signing up restaurants, particularly in the U K, Ireland and Germany. Our momentum has picked up significantly this year and we're now signing up over 1000 restaurants a month internationally.
Hillary: These are the priorities that I believe will ultimately enable us to deliver on our financial commitments. We made to you all and to drive meaningful profitable growth over the medium term.
Before turning the call over to Nancy I thought I'd provide a quick update on global Blue for those of you that possibly missed our February announcement global Blue as a market leading payment platform supporting tens of thousands of luxury brands worldwide, including Louis Vuitton, or Mezz, Valentino Fendi, Prada, Burberry Cartier and many many more global blue operate.
Hillary: The two sided payment network with over 15 million consumers utilizing global blues quick and seamless mobile app when purchasing luxury goods that over 400000 retail stores around the world when.
Hillary: When shopping abroad consumers purchasing these luxury items are eligible for a VAT tax refund, which is facilitated by global blue.
Hillary: Global Blue also facilitates the option to convert purchases into the cardholders home currency, which is something known as dynamic currency conversion.
Hillary: The global Blue business is an exceptional standalone business the luxury VAT tax refund industry has proven to be highly resilient as affluent consumers wheeled substantial economic spending power account for half of all consumer spending and hold an estimated $1 three trillion in excess savings we have high confidence in unlocking.
Hillary: $80 million of revenue synergies from this transaction by the end of 2027, primarily through bundling our embedded payment solution with global blues that tax refund and dynamic currency conversion capabilities, we estimate the embedded payment cross sell opportunity alone to be over $500 billion in volume.
Hillary: In addition, we continue to expect two of the world's largest fintech companies and financial and Tencent to remain shareholders in the combined business and both of these wallets providers have committed to collaborate with us on e-commerce opportunities around the world.
Hillary: We are on track for an early Q3 close subject to regulatory approvals.
Speaker Change: As I mentioned in my shareholder letter, we have a track record of growing volumes during the most challenging of economic times since the company was founded.
Speaker Change: We have successfully grown our payment volumes every year, including during Covid and the great financial crisis of 2008 2009, we have experienced five recessions in the past 26 years and we have grown our payment volumes in every single one of them I hope that by understanding our strategies that I just highlighted it becomes obvious to you.
Speaker Change: All that in many ways, we welcome uncertainty.
Speaker Change: We thrive in times of uncertainty and because it's our operating model product lines unit economics, an enormous cross sell funnel all become more valuable when the future is uncertain.
Speaker Change: Not to say, we operate with rose colored glasses and in fact, it's exactly the opposite we operate out of an abundance of caution and a mindset of paranoia, we're never complacent and constantly finding ways to evolve with that I'll turn the call over to Nancy who will outline our 2025 financial guidance and key other stats for the quarter Nancy.
Speaker Change: <unk>.
Nancy: Thank you Taylor, we delivered another quarter as consistent and solid results in line with our expectations setting new first quarter records across all of our key performance indicators volume grew 35% year over year to 45 billion gross revenue less network fees grew 40% to $369 million.
Nancy: And adjusted EBITDA grew 38% to 169 billion.
Nancy: Our Q1 adjusted EBITDA margins were 46%, we expect our margins to March higher as the year unfolds and we unlock synergies from last year's acquisitions, excluding the drag from these recent acquisitions adjusted EBITDA margins would have been 50%. We will also benefit from higher level levels of operating leverage.
Nancy: As the year progresses, and we add incremental payment volumes from cross selling and working through our existing backpack Eric.
Nancy: Our Q1 blended net spreads were 61 basis points in line with our guidance for spreads to remain stable with 2024 is the exit rate.
Nancy: Importantly spreads across our core business also remains stable and we still expect full year 2025 spreads of approximately 60 basis points.
Nancy: Subscription and other revenue was $93 million in Q1 at 77% compared to the same period last year. The growth was once again driven by our success across F&B Sky cab and further penetration of the sports and entertainment data protocol as well as contribution from recently completed acquisitions the sequential moderation from <unk>.
Nancy: Q4 levels as expected and due to ongoing deprecation of legacy revenue from recent acquisitions.
Nancy: Q1 organic growth revenue less network fee growth was in line with our expectations and we are on track for 20% plus organic revenue growth for the full year.
Nancy: Our adjusted free cash flow in the quarter with $71 million, representing 42% adjusted free cash flow conversion as.
Nancy: A reminder, during Q1, we made our first cash interest payment of $37 million on the debt we issued last August.
These cash interest payments will occur semi annually in Q1 and Q3.
Nancy: Illustrative purposes, excluding this incremental interest payments, our adjusted free cash flow conversion rate for the quarter would have been 64%. We are on track to deliver over 50% adjusted Scf convergent <unk> full year.
Nancy: During the first quarter, we repurchased approximately 686000 shares for $63 million and month to date in April we have deployed an additional $85 million of capital to repurchase approximately one 1 million shares against our meaning if the output capacity.
Nancy: Can find a complete reconciliation of our share.
Nancy: In the back of our earnings materials.
Nancy: GAAP net income for the first quarter with $20 million and GAAP diluted EPS was <unk> 20 per share non-GAAP adjusted net income for the quarter was 99 million or $1 seven per share on a fully diluted basis.
Nancy: Beginning this quarter, we are now adding back acquired intangible amortization to non-GAAP net income and EPS in line with our industry peers.
Nancy: Our total indebtedness now has a weighted average cost of three 4% and our net leverage at quarter end was approximately $2. Four times, we have a strong cash position with $1 2 billion of cash and cash equivalents as of March 31st and we meet we remain well positioned to pay down to 690 million of convertible debt maturing in December.
Nancy: This year now turning to 2025 guidance, we are updating full year financial guidance and introducing Q2 guidance as follows for the full year. We are raising gross revenue less network fees to between 1.66 billion and $1 73 billion, representing 23% to 20.
Nancy: 8%, Chris we are raising adjusted EBITDA between 840, <unk> and $865 million, representing 24% to 28% growth.
For the second quarter, we expect gross revenue less network fees between 405 and $415 million with adjusted EBITDA margins of approximately 50% a.
Nancy: A few items to highlight as it pertains to our outlook our outlook for the rest of the year as Taylor mentioned, we continue to see signs of stable consumer spending trends in Q1 were largely in line with what we saw exiting 2024 with a slight deceleration largely attributable to leap year and other seasonal factors.
Nancy: Mid last year, we have seen fairly stable trends in same store sales with some choppiness month to month within a very narrow band we remain cautiously optimistic on the health of the consumer that our guidance and outlook does not rely on any improvement or recovery from current market conditions.
Nancy: Reiterating with Taylor outlined Schiff four has a proven track record of resiliency in uncertain times, and we are better equipped than ever to deliver strong results with that let me now turn the call back to Taylor Taylor.
Taylor Schiff: Thanks, Nancy before turning it over to the operator for Q&A I thought I would provide a few thoughts regarding the forthcoming CEO transition.
Speaker Change: We are eagerly awaiting the U S Senate to officially vote on Jared nomination to head NASA and assuming approval. The board will execute a CEO transition plan, where Jerry will step down as CEO and from the board and the board will vote on my appointment.
Speaker Change: You should all be aware that the Senate Senate Ethics Committee did not require Jared to divest any of his shift for shares Jeremy will remain the largest shareholder of shift for which were something we're really excited about once the Senate votes on Jared NASA appointment. He will convert all of his b and C shares into class a relinquishing has super votes and owning approximately <unk> <unk>.
Speaker Change: 5% of the outstanding class a shares going forward will have the same one share one vote privileges as all the other shareholders and with that I'll turn it over to the operator for Q&A.
Speaker Change: Thank you well now be conducting a question and answer session.
Speaker Change: Like to ask a question at this time you May press Star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue.
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Speaker Change: For participants using speaker equipment may be necessary to pick up the handset before pressing the star keys one level. Please when we poll for questions.
Speaker Change: Thank you and our first question is from the line of Rana Kumar with Oppenheimer. Please proceed with your question.
Good morning, Gary Nancy Thanks for taking my question.
Speaker Change: Good results here.
Speaker Change: Describe the competitive environment in international markets that you are targeting seems like Theres a lot of UFC payment companies that are focused on my phone rang.
Speaker Change: When do you think can shift point I'll play.
Speaker Change: Yes, Thanks, Rina and it's a great question.
Speaker Change: The honest the international opportunity is something we identified is as far back as kind of I don't know eight years ago.
The phenomena, we experienced internationally is that it looks like the U S did call. It 15, 20 years ago, and what I mean by that is you've got kind of three different industries all evolving in parallel to one another without much convergence and what I mean by that is you have software companies building software to support merchant environments.
Speaker Change: You have hardware companies to help create the fulfillment experience and then you've got like <unk>.
Speaker Change: Largely traditional banks fulfilling the payment experience and none of them have done a lot to help these three things converge for the benefit of the merchant now.
Speaker Change: Why we saw the opportunity is because it's exactly the opportunity that Jared and the team identified 20 years ago in the United States. That's when they created the harbor touch brand that.
Speaker Change: Bundled all these solutions together to make life easier for the merchant and eliminate multiple vendors. So.
Speaker Change: I could give you a long history on some of the technical reasons. It's taken this long to get here, but they really there is no excuse for them existing today. So it's not a surprise to us that if you have the right localized solutions and that means like local settlement accepting local payments methods paired with good software merchants are clamoring for it I think we gave the stat that about <unk>.
Speaker Change: One in four of the merchants joining ship for today are coming from outside the U S and it's simply riding a wave that we saw 20 years ago in the United States.
Speaker Change: To be Frank that's like only a handful of markets that we are actually addressing at the moment the rest of the world.
Speaker Change: There's a long way to go in this regard.
Speaker Change: Yeah.
Speaker Change: Very helpful. Thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Next question is from the line of Darrin Peller with Wolfe Research. Please proceed with your question.
Speaker Change: Hey, guys nice results here can we just touch a little further on what you're seeing in the market more broadly into April what youre, seeing and what youre, including any assumptions for guidance given the conviction you add around your guide here just really passing through the beat.
Speaker Change: And then just remind us I mean same store sales generally I know you don't typically very much in the way of same store sales as part of your outlook for volume, but maybe just remind us if you don't mind the building blocks that give you the conviction in the outlook still despite.
Speaker Change: Pretty uncertain macro times.
Speaker Change: Yeah sure I'll start with kind of the themes that we're seeing and then Nancy you can talk to how that gets incorporated into our forward looking views, but I think it's going to be relatively undramatic, which is that what we're seeing is more of the same and buy more of the same I don't just mean kind of at the beginning of this year continuing through I mean like the last kind of 12 to 18 months of look very consistent.
Speaker Change: <unk>.
Speaker Change: Across our merchant segment and that is to say you've had restaurants with very modest same store sales compression and I mean, like 1% and it's usually bouncing between 1% and zero.
Speaker Change: For over a year now you've got hotels that are generally bouncing somewhere between minus one and positive one or two.
Speaker Change: And then you've got resale, which for US is a smaller segment of the business, but that varies a little bit all within that same bounds. So.
Speaker Change: The fact that even with recent sort of.
Speaker Change: A lot of political rhetoric going on recently, we're not seeing meaningful change in consumer behavior.
Speaker Change: It suggests that it's stay the course from our perspective, but you alluded to this we generally don't spend a lot of time looking at same store sales.
Speaker Change: Put some kind of information in our earnings materials, because I think the capital markets get a little bit ahead of themselves in terms of.
Speaker Change: Trying to predict things like consumer spending when in fact, it's immensely varied across categories, even within restaurants consumers tend to typically go out even in difficult times. They just spend a little less when doing so so we put some some data points and the resiliency. We've traditionally seen in the business, which is that sign ups generally.
Sign ups generally grow during tough times, even if consumer spending is a little bit modest, but we're not really seeing that Nancy if you want to kind of elaborate on how we kind of build the go forward forecast with our with the current outlook.
Nancy: I think <unk> captured it well.
Nancy: I picked it up in my prepared remarks, but the.
Nancy: One point I would emphasize is the volume range that we've shared with you all at Investor day, very little impact in any given year is from what we sign in year right. So we're not dependent on kind of new grabs in the market and.
Nancy: And our win rate so I think thats like supplements that Taylor sat in your achievement of anything we sign this year is the smallest component of any revenue bridge that we do and so much of our embedded volume in annualized <unk> of what we already signed is going to achieve and really inform the forecast for the rest of the year. So again any more.
Nancy: Plus or minus 1%.
Nancy: You can have almost no impact on our forecast going forward right.
Nancy: Okay. That's really helpful. Guys. Just quick follow up would just be where we are on the I mean, it was good to see the synergy update you guys provided but to US it's still more of a cross sell revenue opportunity that really drives your idiosyncratic ability to grow so well in various macro so where are you on whether it's vectren or its rattler others. Just just give us a quick update if you don't mind on what you are.
Nancy: Seeing the most momentum with in terms of.
Nancy: Obviously turning into revenue from what you obviously bought over the past year or two.
Nancy: Yeah sure. This is like a it's like choosing which child is my favorite them. So I'm not going to do it but I will tell you that.
Nancy:
Nancy: We are at varying degrees of of the.
Nancy: Kind of success in pulling the levers across each one largely because of when we started to work with the assets of rebel we mentioned this in the prepared remarks really really nice cross sell of payments into that existing software base.
Nancy: Page two of that plan is that those merchants over time migrate to sky tab, but it's been going really really nicely in the the rebel team has been able to contribute meaningfully to our sky tab development pipeline as you can imagine with kind of the number of customers. We're winning the number of geographies, we're trying to tackle and simply the sheer breadth of customers who are trying to serve within restaurants. The talent is.
Nancy: Incredibly important to us and it's not to be overlooked I think too often in our industry people think about M&A as a talent reduction strategy that is not how we approach M&A, we approach M&A with the purpose of kind of attracting.
Nancy: Attracting good talent towards problems, we were struggling to solve.
Nancy: Before the transaction began so rebels doing really nicely in that regard.
Nancy: Vectren I think you're probably seeing kind of the green shoots of this inside of our international growth statistics that we've shared it took quite a while to kind of get.
Nancy: You know that.
That business, where we wanted it to be for some procedural reasons, we actually don't control the business today, we expect two very very shortly but it is contributing nicely to production today.
Nancy: And then again it is a playbook, we knew extremely well right at $30 billion plus hospitality oriented gateway.
Nancy: But we really didn't close on it until November so all of them are kind of at like the right stage of their evolution with with maybe a modest concession being international has always taken longer than we expected and we're very mindful of that when you try to set go forward expectations and it's not that the playbook is misunderstood as not that execution has its challenges. It just takes longer to kind of get opera.
Nancy: <unk> control into effect the change we want to we want to effect.
Speaker Change: Alright, Thanks again guys.
Speaker Change: Our next question is from the line of Adam <unk> with Evercore ISI. Please proceed with your questions.
Speaker Change: Thanks, guys good morning.
Adam: Quick question for you Taylor, Thanks for all the color here on the 40% <unk> growth in the quarter, what was organic and inorganic the way you guys defined it and then I have one quick follow up.
Speaker Change: Yes, sure and so I think Nancy alluded to this we generally don't provide quarter to quarter, mainly because <unk>.
Speaker Change: Acquisitions provide a lot of noise. There is acquired revenue were parting ways with theirs synergize revenue coming in very quickly I will say, we set the expectation that for the year organic revenue growth would be 20.
Speaker Change: North of 20% we are exactly on track.
Speaker Change: With regard to that that full year metrics.
Speaker Change: Okay cool.
Speaker Change: And just one follow up good to see some some nice wins here in hotels and stadiums are wanted to dig in a bit to the convergent figures on page 16 of the deck a.
Speaker Change: New wins are on the right side of the page and some relatively low but very early initial conversion numbers are in the middle does that imply that youre still selling under different brands. While also consolidating the underlying back book.
Speaker Change: Generally we don't sell under multiple brands and I think I'd encourage folks to go back to Luc gave a really good kind of M&A walked through in our Investor day to highlight the brands, we acquired versus the brands, we go to market with.
Speaker Change: So generally speaking no we don't go to market over multiple brands and in certain cases, where the product is well entrenched.
Speaker Change: And we don't have those capabilities like a vectren in Germany, we are not selling Scotts app in Germany today, we're selling the vector on product and hope to be able to introduce skype to have over time.
Speaker Change: So no generally speaking, it's our payments bundled with.
Speaker Change: Sky tab, it's either our payments platform or it's our stadium software that any of our acquired merchants are being converted into.
Speaker Change: When we when we buy the business and I wouldn't.
Speaker Change: Sort of look at each one of those numbers as homogeneous right. So whether it's a rebel customer being converted over or a <unk> customer or an IGN customers. They're all very different in terms of size of merchant and the number of dollars in effective spread you've got on all of them. So we're very pleased.
Speaker Change: The pace of progress we've made across all of them I don't want to set the tone that we think this is kind of too slow or too fast it feels all very adequate to us.
Speaker Change: Okay, Yeah, that's what I was asking because the presentation at the analyst day was one thing and then I saw these marquee wins on the right, which was a little bit.
Speaker Change: Just wanted to square that so it seems like initially you were still selling under those brands, but they'll go longer term is to consolidate everything. So you don't have to do that and then it makes the conversion easier is that the right playbook to think about.
Speaker Change: So in most cases, it's actually go after the existing customer base. So it's not it's not even a selling against the brand is bundling payment processing.
Speaker Change: Within the customer base, that's been acquired when those sales teams are introduced are going and finding new customers. They introduce exclusively shift for products, but again, it's it's not lost on us that the quickest and most immediate opportunity inside of an acquired business is generally the tens or hundreds of thousands of customers that are using just one piece of the.
Speaker Change: Solution and we can offer the rest.
Speaker Change: Okay, alright, thanks, I'll take this offline so yeah. So it's time for other guys to ask questions. Thanks, guys.
Speaker Change: Great.
Speaker Change: The next question comes from the line of Timothy Chiodo with UBS. Please proceed with your question.
Timothy Chiodo: Great. Thank you very much I wanted to touch on the backlog disclosure of the 35 billion. That's up from the Q3 earnings that was a $33 billion number I wanted to talk a little bit about what's implied in the guidance in terms of the air volumes that will come out of that so I just wanted to see if our logic was accurate we think about that 35 billion.
Timothy Chiodo: As most of it able to be implemented this year, maybe not all because some of it requires waiting for our current contract to expire maybe more on the ticketing side, but if you were roughly able to take maybe $25 to $30 billion of that and have it implemented this year and you think about a midyear convention you can pretty quickly get to sort of.
Timothy Chiodo: Low to mid teens billions of volume contribution for the in year fiscal year 2025 is that a rough way to think about it or is there anything that you would guide us to maybe higher or lower any other nuances to call out. Thanks.
Timothy Chiodo: Yeah, No I think Thats I think thats the right way to think about it generally speaking if you are in our backlog you either have been installed and we're waiting for the annualized <unk> impact or.
Timothy Chiodo: You are highly likely to be installed over the course of the next 12 months. It's the rare exception, although we've had some success in this regard of the multibillion dollar enterprise that takes kind of longer than I'd call. It nine ish months to fully implement although we have named a few of those in the in the in the last few quarters, but yes, I think that number is.
Timothy Chiodo: The number we have confidence coming in.
Timothy Chiodo: Largely throughout the year, although keep in mind those customers still have yet to annualize. The next year right. So we still expect kind of the lion's share of a of an implementation this year to to annualize in the following year if that makes sense.
Speaker Change: Thank you Taylor yeah. It makes a ton of sense in the minor follow up is is it fair to assume that ticketing is a meaningful portion of that 35 billion or if you could just put some context around some of the categories in there.
Timothy Chiodo: Uh huh.
Timothy Chiodo: I don't think its a disproportionate portion by any stretch the imagination I think if you look at the past kind of handful of quarters worth of enterprise wins, you've got more than more than a few that are multibillion dollars just themselves.
Timothy Chiodo: We obviously have one ticketing.
Timothy Chiodo: This will be a big year for <unk> ticketing, that's for sure because we've activated a lot of ticketing customers in the in the last year, we had the contribution of of appetite as customers and those customers are seasonal or seasoning and will give us a full year and 25, but I wouldn't say, it's a disproportionate amount of the backlog.
Timothy Chiodo: Okay. Thanks helps a ton thank you Taylor.
Speaker Change: The next questions are from the line of Jason Kupferberg with Bank of America. Please proceed with your question.
Speaker Change: Hey, this is mostly tried on for Jason. Thanks for taking my question I wanted to ask about international as well.
Speaker Change: It's still kind of early days, but can you provide any color on the current revenue split between U S and international and where you see that mix evolving by the end of the year.
Speaker Change: And also just given the number of countries right now which market outside of the U S is your largest in terms of revenue contribution. Thanks.
Speaker Change: Yes sure.
Speaker Change: I know you have some disclosures around international revenue contribution which is largely the.
Speaker Change:
Speaker Change: Largely comes in the form of E Commerce business that has seasoned for a little bit plus all these sites, we're adding I'll say and I made this comment in my prepared remarks, the contribution of merchants added in Europe tends to be less significant because they give you by definition on average about half a year's worth of revenue.
Speaker Change: So we're not expecting a meaningful contribution although we do think this is a meaningful priority for the business. So that three to five years from now where cap we have sufficiently kind of planted the flag to capitalize on this software plus payments conversions, that's going on in the rest of the world.
Speaker Change: Kind of two flavors, it's taking on at the moment there is enterprise customers that were enabling in lots of different geographies.
I mentioned this that recently, but.
Speaker Change: I love to repeat it because I think it just speaks to the speed within which we can operate when we have conviction that ship for we were in one country like 18 to 20 months ago and now we're facilitating.
Speaker Change: Facilitating payments and over 50 for certain customers. That's one element enterprise customer enablement all over the world and then the other is.
Speaker Change: SMB product plus software plus payments bundling that we're delivering in a handful of markets that we think are really ripe for that and expanding the markets. Much more methodically. We are a joke called beer drinking countries before wine drinking, but I think it helps allude to the markets. We're operating in and kind of an elegant way, which is like U K, Ireland and Germany are all <unk>.
Speaker Change: Really strong for us at the moment and then we expect to expand into those wine drinking countries, Italy, Spain, France.
Speaker Change: When products are better localized for them.
Speaker Change: Okay cool thank you.
Speaker Change: Our next question is from the line of Andrew <unk> with BTG. Please proceed with your question.
Andrew: Hey, Thanks for the question and nice results.
Speaker Change: That's great to hear how consumer spending is holding up okay. I guess can you talk to us a bit about how growth is balanced between net new and cross sell but then I guess, if we think about a scenario where macro does become a bit more challenged how much harder can you press on the cross sell cross sell funnel thinking about kind of a stick versus carried approach here.
Speaker Change: Yeah sure I'd love to tell you that there's like a a scale we have in the in the back office and that we've waited. According to net new wins are cross sell when it's most important for US. The reality is it just simply doesn't work that way M&A tends to give us a very quick access to lots of customer customers.
Speaker Change: And in all honesty would likely not answered the phone if a payments company or a software company, we're calling them with a solution they'd likely to say hey, we're content and Theres No reason to look at this right now so M&A gives us access to a wide swath of customers that is incredibly valuable at all times. It also gives us capabilities that when bundled.
Speaker Change: Tightly and we get to delete all these parts and deliver a single cohesive solution makes us more competitive on a net new basis I would say in the most.
Speaker Change: And the most normal of times, meaning modest economic growth notwithstanding the uncertainty you tend to have a mix of about half and half where lots of customers who are joining us off the street, but there's also this cross sell when times get tough.
Speaker Change: I'll answer the phone far less frequently and we tried to give evidence to this on our resiliency page we put in our earnings materials and the cross sell becomes invaluable. These customers are only going to listen to the vendors are already working with or actively looking for ways to consolidate make life simpler save money et cetera.
Speaker Change: Again, I want to be very specific we are not predicting the economic environment ahead, we feel quite content with our ability to operate in a variety of economic environments, including those that are less rosy from a consumer spending standpoint.
Speaker Change: It's that cross sell funnel that to your point does become more valuable when times get tough, but it contributes as do net new wins are very consistently when times are are less tough.
Speaker Change: That's helpful. Thanks, and then nice to hear the commentary on spreads.
Speaker Change: To be consistent around 60 basis points for the year.
Speaker Change: You look at the chart on page six it looks like Theres actually some expansion in the restaurant vertical I guess is that related to sky tab success or any details you can share there.
Speaker Change: Yeah, I think it's a little bit of everything we've got Greg had success. We've got just the mix based on size of merchant central always blend into that spread and really a lot of stability around that legacy base.
Speaker Change: We keep talking about so I think it's it it's really the combination of all three that has allowed us to kind of maintain and ensure that spread.
Speaker Change: Spreads in that category.
Speaker Change: Thanks, so much and nice results again.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Andrew Jeffrey with William Blair. Please proceed with your questions.
Andrew Jeffrey: I appreciate you taking the question today.
Andrew Jeffrey: I wanted to see if we could drill down a little bit on global blue recognizing that the deal Hasnt closed I guess a couple of questions. One one of the things you've heard from investors is just work.
Andrew Jeffrey: Questions are around sort of the goodness of fit the existing business as well as your confidence in the ability to cross sell into that base 500, plus billion dollars of captive volume base and more pointedly, perhaps the $80 million in a.
Andrew Jeffrey: Run rate synergies by 2007, it feels like it's related to a or assumes a relatively low.
Andrew Jeffrey: Proportion or percentage of that.
Andrew Jeffrey: <unk> volume is monetize could you talk to both of those things.
Andrew Jeffrey: Yes sure.
Andrew Jeffrey: I can understand kind of the.
Speaker Change: The juxtaposition theyre in the questions. It raises among investors maybe just to help clarify the set of capabilities that global Blue possesses are extremely rare for the merchant verticals. They serve and they are very valuable.
Speaker Change: And so we see a tremendous opportunity and owning that set of capabilities and again, having just a much wider offering with a lot of components that very few people possess being able to deliver it into merchant categories.
Speaker Change: With that being said it is a phenomenal standalone business and we actually don't need to count on much in the way of revenue synergies for it to be an incredible pro forma contributor to ship for.
Speaker Change: What we deliver to the street in terms of expectations or you can actually.
Speaker Change: You can forecast a modest degree of deceleration in their core business and replace that with incredibly modest cross sell synergies and still feel really good about the combined business. So that's the those are kind of the facts right. You can feel good about our ability to execute against this business and that the capabilities are exceptionally rare.
Speaker Change: There and the merchants they serve would highly unlikely ever answered the phone if someone called them.
Speaker Change: To try to approach them with the net new solution and now we have this incredible foot in the door and Thats really really valuable. It also underpins all of our international expansion.
Speaker Change: I would think maybe the subtext to all of this is we wouldn't deploy the kind of capital we did which is the largest transaction in our history.
Speaker Change: Without having incredibly high conviction that we can do better than that set of circumstances that I laid out.
Speaker Change: So I think you should look at the dollars, we deploy it as kind of our conviction in the theme and you should look at the expectations, we set financially as.
Speaker Change: Even a really modest to poor execution against our game plan yields a pretty damn good result.
Speaker Change: Okay, and just specifically on the revenue synergies any implications for sort of the percent of global Blue volume that you are converting or how do you come to that number I guess might be the yes sure. So we segmented the customer base and we basically took.
Speaker Change: The largest customers instead assume we went less than 10% across the merchant population and in some cases less than you know.
Speaker Change: Four 3%.
Speaker Change: In other cases, we said like their SMB population, we think we can do.
Speaker Change: Yeah.
Speaker Change: A third very very comfortably and that's still a modest expectation. So hopefully you're calibrating. We've traditionally done a really good job of cross selling into into these businesses were not trying to set an expectation for ourselves inside of this we're simply saying below average execution against the shipboard playbook against this world.
Speaker Change: <unk> base of customers yields a result, like $80 million and that could even account for some softness in luxury retail, which we have no reason to believe we just like to be conservative in that regard.
Speaker Change: So again very modest conversion expectations across that base set to the street, but I think the dollars deployed means that we think we can do better than that.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Andrew Baum with Wells Fargo. Please proceed with your question.
Andrew Baum: Hey, Thanks for taking the question and nice set of results here I just wanted to double click on the software and other revenue line.
Andrew Baum: Downtick slightly in the first quarter relative to the fourth quarter I would assume some of that is attributable to the leading to parts, but if you can give us a sense on where that line kind of trends through the remainder of this year would be super helpful.
Andrew Baum: Sure and you really hit on it in your question you know when you look at kind of that T cell.
Andrew Baum: Is from blowing up the legacy models.
Andrew Baum: And from a guidance perspective to give you. Some idea we will still see growth as the year goes on but it will be accelerating if our plans kind of holds with blowing up the legacy models, we're definitely going in on some of these new deals with a little bit more of a stick approach then it took us on the gateway.
Andrew Baum: So I would say that's what you should expect an over over the course of this year, if everything trends the way that we.
Andrew Baum: We anticipate.
Got it and then just my follow up.
Andrew Baum: On the EBITDA side.
I'm getting some questions. This morning knows that the right idea to tick up.
The guidance is mid to macro, albeit.
Andrew Baum: Your ability to navigate the macro is obviously better than most but maybe if you can just give us a sense on like what manifested in the quarter to kind of give you that added confidence.
Andrew Baum: Yeah sure I would say the quarter played out largely within our own expectations.
Andrew Baum: And.
Andrew Baum: Despite kind of the.
Andrew Baum: The ton of noise, we're hearing on a macroeconomic basis, we're seeing very little impact to consumer spending. So it would seem imprudent not to kind of continue to forecast the business on the pace that we have.
Andrew Baum: That's not to say, we haven't kind of thought through the impact of tariffs and we haven't thought through the impact of kind of tariffs within our merchant base on a merchant by merchant analytical suite.
Andrew Baum: Point of view, we spent a lot of time on this we're just not seeing it in the data and I understand that that can be confusing because there's lots of different data points that we see out there, but generally speaking.
Andrew Baum: Day to day spending across our merchant population and throughout kind of spring break and everything else looks exactly as we would've expected it yeah and I would just add to that.
Andrew Baum: We continue to be incredibly focused on expense management and so on.
Andrew Baum: Our our stay flat kind of culture within the company, it's still going very strong and we have a really detailed line of sight to the synergies that are left to be realized within that with the acquisitions. We completed last year, so that certainly informs EBITA.
Andrew Baum: As we look ahead for the rest of the year.
Speaker Change: Great. Thanks, Andy.
Andrew Baum: Yes.
Andrew Baum: Thank you.
Speaker Change: Next question is from the line of Dominick <unk> with Redburn Atlantic. Please proceed with your question.
Speaker Change: Hello, Tyler Nancy Tom Sasha Forex bonds internationally is there any material difference in take rate versus U S merchants.
Speaker Change: Trying to understand the pulse so reaching your 60 bps net take rate or blended spread target by year end and you also expand into the U S. Enterprise motions were a little bit lower take rate and then just a quick second one for international growth.
Speaker Change: Has there been any challenges in terms of like educating the local sales partners any thought for markets that maybe are not used to sell and integrate the software and payments. Thank you.
Speaker Change: Yes, it's a great question and I will say spreads very sort of very much country by country. So we would expect in the international markets and this was kind of alluded to the second part of your question.
Speaker Change: That youre kind of you have to ascribe value to multiple pieces of the chain all at once because merchants have traditionally had to buy each one of these things individually said differently you might have a little bit more on software a little bit less on payment volume. The reality is youre selling a bundled products. So you are not you don't care as the delivery of that product, but <unk>.
Speaker Change: Merchant, Sir kind of more attuned to look at one line versus another.
Speaker Change: And so to your point, yes, you have to educate the market you have to educate the market on at the enterprise level by the way when we were first doing this in hotels six years ago. It was this isn't just the conversation with the CFO about payments Reds. Its also a conversation with the CTO about the gateway and the implementation costs of connecting all the software in your environment.
Speaker Change: And the hardware implementation et.
Speaker Change: Et cetera, So yes, theres certainly education that has to be done although the value prop is screaming very loudly to the salespeople that they can win a heck of a lot more when they're delivering these types of solutions. So.
Speaker Change: This is a little bit before both your and my time with ship four but 20 years ago, Jared was introducing the payments ISO community to this software called Harbor touch and explaining that will take care of the technical aspects of the sale, but if you can introduce this product to a merchant you're going to attract higher quality merchants.
Speaker Change: We're going to stick around with you longer theyre going to ascribe a heck of a lot more value to it than they would've payment terminal alone So education as a part of it but I think.
Speaker Change: The early kind of green shoots of that are.
Speaker Change: 1000, plus merchants a month in.
Speaker Change: In particular geographies very very quickly so it's.
Speaker Change: It's something that we're used to and it's something that.
Speaker Change: We predicted the market would the markets would embrace.
Speaker Change: That's great to hear and if I can maybe just also a quick one on this Scott.
Speaker Change: Which sounds Super interest central restaurants, I mean, how do you guys see this position versus maybe other major competitors all that I do see this as a material driver in some of the new restaurant wins well.
Speaker Change: Will it help it may be less churn and is it going to be charged directly or bundled within payments.
Speaker Change: Yeah sure so.
Speaker Change: We consider this an extension or kind of the next evolution of everything we've been doing in restaurants for a very long time keep in mind. These Harvard such examples I cited a few times on this call. They go back to the mid two thousands.
Speaker Change: And that's really when our presence in restaurant technology began so we're very proud of Skype bear we think restaurant operators are going to love. It. It is by no means the first wireless handheld we've introduced into the restaurant environment. It's a new form factor. It's sleeker, it's easier. It's battery lasts longer are charges faster, it's got more Pos functionality inside of the device then preview.
Speaker Change: Versions.
Speaker Change: It's got a lot more cellular redundancy than previous versions. So we're incredibly excited about it we think it will keep us winning at the pace that we're winning at I will say, though international markets tend to favor the handheld.
Speaker Change: More so than the workstation, it's just the nature of it it would traditionally be priced.
Speaker Change: As per our per software device per month, and it does cost less in the workstation generally speaking so we expect it to have a lot of receptivity, but international is probably.
Speaker Change: I guess would be the international restaurants, picking more wireless and fewer workstations in their implementation than in the U S.
Speaker Change: Great. Thank you everyone.
Speaker Change: Okay.
Speaker Change: Our next questions come from the line of Matt Oneill with Ft Partners. Please proceed with your question.
Speaker Change: Yeah, Hi, thanks for taking the questions.
Speaker Change: Just curious I recognize the global Blue deal is by no means closed yet or contemplated in the guide, but I think given some of the.
Speaker Change: The changes are elimination of guidance from airlines and some other.
Speaker Change: Macro dynamics I'm wondering if you could just give us a view on kind of how the global Blue Business's Ferring.
Speaker Change: In Q1, and maybe into a into April.
Speaker Change: Yeah sure so.
Speaker Change: Keep in mind it is a business dependent on international travel, but it's pretty.
Speaker Change: Well diversified inside of that meaning that.
Speaker Change: When one country when travel from one country weekends, it tends to favor another country that fills the gap so not not huge.
Speaker Change: Not huge changes in the way they are thinking about the business inside of global Blue and I think there is some international.
Speaker Change: Travel trends that look reasonably promising through the summer I will say FX rates play.
Speaker Change: Quicker impact on their business, meaning that if one.
Speaker Change: If one FX rate pair changes meaningfully it does change the way the consumer in the store thinks about how much they're willing to spend typically to the benefit of another FX payer somewhere inside the business and then there are some offsetting effects given the fact that they've got their own dynamic currency conversion product that operate somewhat differently reasonably though so.
Speaker Change: This is evidenced by the way by the fact that they've had kind of a multi year history of some some reasonably large shocks to the business whether it was the UK, leaving whether it was the Russian traveler kind of sidelined or whether it was the Chinese traveler not spending as much as they would in historic periods Global look kind of grew throughout all of that so we <unk>.
Speaker Change: Feel good about the business, but these are certainly trends, we're trying to get our arms around.
Speaker Change: As we prepare to take ownership of the business it will largely manifests itself in.
Speaker Change: Will the U S traveler.
Speaker Change: Spend less time traveling abroad, and therefore more time traveling domestic and how does that play through.
Speaker Change: <unk> will the Asian traveler kind of fill that gap or not these are kind of the questions, we're asking ourselves but.
Speaker Change: And the team have run that business exceptionally well through much bigger shocks than what we're seeing today.
And so we feel really good about it.
Speaker Change: Thanks, Taylor and maybe a quick follow up for Nancy.
Speaker Change: I believe you had alluded to this at recent conferences, but the timing of interest expense on the $1 billion plus a new node. So we saw that in Q1 here and I believe that's a semiannual send outs.
Speaker Change: <unk>.
Speaker Change: <unk> is that is that right Andy.
Speaker Change: Yes, that's exactly right.
Speaker Change: Great. Thanks, so much I appreciate it.
Speaker Change: Our next question is from the line of Jamie Friedman with Susquehanna International. Please proceed with your questions.
Jamie Friedman: Hi, good morning.
Speaker Change: And you look smart in retrospect, the way you structured the guidance I think that needs to be said.
Speaker Change: So I had two questions I'll just ask them upfront.
Speaker Change: I realize you said in your earlier response that you don't have the scale in the back room to weigh the contribution of the funnel looking at page 15, though when you when you look at the $900 billion between the $1 four trillion of total photo in the fiber to $1 billion of cross. So I'm. Just wondering can you hope share how you think about that.
Speaker Change: At layering into the three year guide was there anything contemplated about the conversion funnel in the three years and then my second one just as upfront.
Speaker Change: Any call outs about Canada, because a couple of your competitors and peers are discussing in Canada macro. Thank you both.
Speaker Change: Yeah.
Speaker Change: Yes, sure Canada seems to be a controversial place these days, although I'm not I'm not sure why.
Speaker Change: It's been a it's been a solid contributor for US keep in mind, you had us first developing our payments capabilities in Canada.
At the beginning of last year.
Speaker Change: And then we acquired <unk> and <unk>, both with meaningful merchant populations up there. So it's been a good contributor for us.
Speaker Change: Obviously, the contribution of Canada is accelerating but I think thats, a byproduct of us not really being in the market. So we don't spend any time thinking about kind of average merchant locations spend or spreads or anything else, we're simply trying to sign up the customers.
Speaker Change: That are trying to give us the business in terms of thinking about the contribution.
Speaker Change: The $80 million of revenue synergies that we called out at the announcement of global Blue that is explicitly within our three year expectations. Although it also contemplates and not because we're smart about this we just think it's prudent it contemplates some slowdown in there.
In their stand alone business.
Speaker Change: As as a result, as a result of us just not being good enough to predict it so yes, we contemplate.
Speaker Change: The $80 million of revenue synergies from the business I will say I think that's conservative although I think it also assumed some volatility in their end markets, which is just prudent where a new steward of this business and so I think it's important.
Speaker Change: To set that expectation in terms of the rest I mean, this very sincerely, we don't think about them on an individual basis, what we do when we acquire one of these businesses now is we simply say restaurant. Okay. What is the value proposition, we can deliver to a restaurant and I don't really care, whether that restaurant came from IGN or givebacks or rebel et cetera.
Speaker Change: Similarly, with hotels now with with luxury retail and e-commerce.
Speaker Change: Thank you.
Speaker Change: The investment community quite frankly, just gets itself too wrapped up in predicting an individual's success rate against every single deal versus looking at the big picture and saying Wow, even something like shift for that they acquired back.
Speaker Change: Back in 2017 is still contributing gateway wins that means the strategy works.
Speaker Change: The obsession over was this a new net new or was this the gateway win I think it's a little just overdone given the fact that our cross sell funnel is so big that if there were never in that new win we do just fine and vice versa. If it were nothing but net new wins.
Speaker Change: We would be doing just fine.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Our next question is from the line of Jeff Cantwell with Seaport Research. Please proceed with your question.
Jeff Cantwell: Great. Thanks for squeezing me in a couple of follow ups first quick question on your guidance for gross revenue less network. Please use the mid point you raised the full year to 25, 26%. So my question is what's changed in terms of how you guys are thinking about growth for the full year by vertical amongst restaurants hotels, and entertainment et cetera, because the guidance range.
Jeff Cantwell: For your pleasure state confident despite the macro uncertainty here so wanted to get a sense of where youre seeing more spirit amongst the different verticals I should think about how you see your revenue playing out over the course of the year I was hoping you could maybe underlying that for US. Thanks, Yeah sure.
Jeff Cantwell: I'll I'll hit this we're not predicting any real change in the.
Jeff Cantwell: Economic health of our sub verticals that we serve we obviously have increasing confidence on the international contribution to the business. We are just signing up lots of customers there.
Jeff Cantwell: I will say, where I think kind of the street has it wrong is like a <unk>.
Jeff Cantwell: Disruption of international travel or international travel, becoming more expensive is not a bad thing for the shift for business. We saw this by the way in the pandemic, where international travel was basically prohibited.
Jeff Cantwell: Prohibited and what happens everyone traveled more domestically and so the imbalance of Av.
Foreign travelers payment coming in was was balanced by domestic travelers not leaving the country. So.
Jeff Cantwell: I think it's certainly too early to tell what the medium and long term impacts of some of the tariff.
Jeff Cantwell: Commentary.
Jeff Cantwell: And implementation is going to be but we don't see any immediate trends across our business that we haven't seen over the past 18 months.
Jeff Cantwell: And there's no one vertical that's like incredibly robust <unk>.
Jeff Cantwell: Impacted by what's been going on.
Speaker Change: Got it got it and another follow up this is a global blue on Matts question.
Speaker Change: Could you elaborate a little bit about the level of companies got in terms of the outlook for global Blue related revenue just given all the macro uncertainty is there anything about global but you're kind of more cautious on it and maybe on the flip side you can save yourself, becoming more positive about versus back when you gave us your initial thoughts on global move back to the Investor day.
Speaker Change: Thinking about certain corridor, Chicago like China into Europe, even maybe a bit higher there could be potential upside. There just curious if you could walk us through how you view global Blue and the puts and takes there given obviously much these things with respect to macro since we last spoke with us. Thanks.
Speaker Change: Yeah.
Speaker Change: No.
Speaker Change: The more time, we spend with the team there's like a ton of cultural alignment between how the team at global Blue thinks about running their business and how we've traditionally run ship for which is there are things within their control and there are things outside of their control.
Speaker Change: Can't control, how many diners visit a restaurant, we can certainly control how many restaurants, we sign up and they feel by the way the same way about international travel versus enhancing the product experience. So the emphasis on their business over the past five years has been a incredible focus.
Speaker Change: On digitizing the consumer experience, so that more refunds happen, because it's easier to effect a refund and the.
Speaker Change: The results of that strategic approach has been that the business is balanced at some of the largest shocks you could contemplate whether it was the U K, leaving the VAT or the.
Speaker Change: The Russian travelers being sidelined or the Chinese travelers spending less and traveling last that I mentioned earlier, so very much like ourselves global Blue is really really good at knowing what they control and focusing exclusively on that and the results of that are that in really tough times. They do a heck of a lot better than expected I think we tried to give.
Speaker Change: Evidence in our earnings materials here that didn't really tough times, we thrive.
Speaker Change: Signing up merchants is something we do really well predicting the day in day out volume and our merchants not something we actually got it.
Speaker Change: Spend a lot of time on in that respect. So culturally I think they are very aligned to kind of how we think about winning youre going to win on customer sign ups and product competitiveness.
Speaker Change: And I will say and this is kind of what compelled us to pursue acquiring the business.
Speaker Change: Very recently is that there's a heck of a lot more balanced inside of the business than anyone would guess looking.
Speaker Change: From the outside in evidenced by their performance through some of these idiosyncratic shocks that they tend to just plow through and do a good job and produce a good financial result, despite that so we're incredibly excited we hope that in early Q3, we will have a closing and we can march towards like a combined offering in a combined team.
Speaker Change: But we got to let the regulatory lasers do their thing.
Speaker Change: Great. Thanks, very much congrats.
Speaker Change: Thank you.
Speaker Change: Our final question is from the line of Andrew Schmidt with Citi. Please proceed with your question.
Speaker Change: Yeah.
Andrew Schmidt: Hey, Taylor, Hey, Nancy Thanks for squeezing me in hopped on a little late here sorry. If these have already been asked but just first one just on pricing.
Maybe just give us an update in terms of just the pricing environment, what you're seeing across the segments and then.
Speaker Change: The corollary to that question is if we do see obviously, there's more economic uncertainty out there.
Speaker Change: Is your expectation on the enterprise side, sometimes you see some belt tightening when these contracts come up for renewal and things like that just curious to get your thoughts on on that front. Thanks. So much.
Speaker Change: Yes sure.
Speaker Change: I'll put enterprise aside because I think they are very consistent in how they operate they demand a heck of a lot of value for the from their vendors and we endeavor to deliver that so when we engage with an enterprise merchant it's typically.
Speaker Change: On a new basis, it's like no don't look at your payments and ways to look at like the six or seven other invoices that are involved in facilitating the experience and that will all come to you in the form of a take rate we think is attractive.
Speaker Change: And one throat to choke via our delivery model and Youre going to eliminate a heck of a lot of administration and expense as a result of that so putting enterprise side, where I think we're priced competitively for what we're delivering but we're delivering something that is of more value than most of our peers.
Speaker Change: In the SMB segment of the marketplace keep in mind, we do try to.
Speaker Change: Have a more variable cost model for our merchants than a fixed cost model. Our SaaS is very very low compared to others in the industry. Our spreads are generally the same if not a little bit above that and that's the trend. We've lived with for 20 years. So there's nothing new.
Speaker Change: With regard to how we're approaching the environment I will say and I think some competitors of ours made headlines.
Speaker Change: A year or two ago with their pricing moves that.
Speaker Change: When times get tough pricing is something merchants focus on a lot.
Speaker Change: And our model I think serves us well in that regard I won't say that.
Speaker Change: <unk> or paying merchants are focused on price.
Speaker Change: Prudent way that they have been for the last few years, but I wouldn't say, it's been an overwhelming portion of any of our discussions with merchants.
Speaker Change: Yeah.
Speaker Change: Got it Super helpful. Thank you for that Taylor and then.
Speaker Change: Maybe just the question on capital allocation Taylor coming to the CIBC Gerrick for some time I have had a pretty successful M&A strategy, but any tweaks to that in terms of cadence intensity I'm. Just curious how you think about just balancing capital allocation here.
Speaker Change: Yes, no so Nancy alluded to buybacks I think we couldnt ignore the price of our equity in the past and the past few months. So buybacks became a larger portion of how we think about capital allocation.
Speaker Change: Really we love to deploy capital into.
Speaker Change: Into R&D and into M&A targets that give us both the capabilities that would otherwise take R&D <unk> customers to cross sell into and sometimes geographies.
Speaker Change: What we will lose a large transaction. So we're focused on getting that one done that's not to say we've taken our eye off the ball on opportunities and I think.
Speaker Change: Everyone should expect that when you have something like global Blue suddenly. It gives you a couple of dozen more countries within which to think about M&A inside of.
Speaker Change: But we're focused on getting global blue done.
Speaker Change: <unk>.
Speaker Change: And <unk>.
Speaker Change: Outside of that no meaningful changes to our capital allocation strategy.
Speaker Change: Perfect. Thanks, so much.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Finally, I'd like to turn floor back to tell Robin for closing remarks.
Speaker Change: Thank you all for joining the call look forward to catching up with you all in the coming days and weeks.
Robin: To go into the details of our quarter, which we're very happy with.
Robin: This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.