All right, everyone. Thank you for joining us. My name is Michael Wolfe. I'm a Managing Director here at ICR, so welcome to the ICR conference. And we're thrilled not only to have you today, but to welcome the Chief Executive Officer of Shift4, Mr. Taylor Lauber here. Taylor, welcome.
Thanks for having me.
Thank you. So for the benefit of the room, I know many of you may be familiar with Shift4, but for those who aren't, it's a fairly complex business, is the best way to put it. So let's start with the absolute basics. So what is Shift4, and what specifically do you provide to your customers on a big picture level?
Yeah, sure. So Shift4 powers the commerce behind all the great experiences in your life. And so if that's hard to find a tangible value to, it's because whether it's that great family vacation, whether it's buying a luxury good for a loved one, whether it is watching your team in the Super Bowl, or just that night out with friends that lasted way longer than it should have, Shift4 powers the commerce behind all of those in-person experiences that you know and love. Now, we've been doing this for 27 years. And so, as you could imagine, the technology landscape has evolved tremendously throughout that time frame. So what used to be something as simple as a payment terminal on a countertop 27 years ago has evolved into everywhere you pay for something at the New York Yankees.
Imagine buying your ticket online, going to the event, parking, beer in the stands, jersey for a loved one, the steakhouse at the end of the game. All of that is something that Shift4 connects to and delivers an experience to the New York Yankees and to the fan that is cohesive throughout that environment.
So you're talking about a lot of different verticals here. You're talking about restaurants, hotels, venues, luxury retail. Is there a thread that runs through each of these businesses and each of these verticals that makes it unique to Shift4?
Yeah, it is. You're physically there in most cases. So as a business that 20 years ago was trying to figure out how we evolve in commerce, we focused on environments where people are going to be physically there and paying for something. So we actually don't spend as much time on vertical applications as you might think, despite the fact that we have about a third of the table service restaurants in the United States as customers. We have 40% of the hotels in the United States and 75% of the stadiums in every sports league in the United States use Shift4. But by focusing on that in-person experience and embracing the complexity that a lot of our merchants have to deal with and bringing as many pieces under one roof, we've found that the solution really has no upper bound.
Again, I think the Yankees is a good example, but so is the Wynn Casino Resort in Las Vegas, where it's multiple resorts, thousands of places to pay. Managing that used to involve a lot of different technological providers. Shift4 can do virtually all of that under one roof.
So it's, in essence, the "proverbial one-stop shop" for that.
Correct.
OK, good. Now, some of you in the room may be aware that the co-founder of the company, Jared Isaacman, recently stepped away to go lead the charge at NASA. As you've taken the reins, here we're introducing everybody to Shift4, but I think we want to introduce you as well. What's going to stay the same under Shift4, under your leadership, and what do you expect to change?
Sure. So I want to spend a little bit on kind of my vantage point inside the business, because I think it informs the answer to the question. I worked in Jared's parents' basement when he founded the company, and when we were teenagers, I was the idiot that left and went to college, so he told me not to. He told me this opportunity was better, and I didn't trust him, and for about 18 years, I said no to rejoining the business. I had a career on Wall Street that I really liked, and quite frankly, I was skeptical of this emerging industry that seemed to have a lot more luck than skill inside of it, and so if you put yourself back at what was going on in the late 1990s, early 2000s, getting a business to accept electronic payments was innovative enough.
We were getting sent credit cards in the mail to our attention as 16-year-olds, and yet most businesses hadn't yet had the capability to accept them. So there was this gold rush of payments acceptance in our industry that made a lot of companies really successful. And it became hard to differentiate skill from luck. Now, I got proven wrong basically every one of those 18 years, because Jared and the team kept winning. And they kept winning despite the rapid pace of innovation that was going on in the industry. So I'd say, in short, we don't want too much to change.
This is a business that for 27 years has generally predicted the big changes in technology innovation and where we needed to be to continue to serve merchants who care a heck of a lot more about the software that helps them run their business than the payment processing at the other end of it. So we don't want to change that ambition. I think the fact that our founder, his second job in his history, apart from running this company, is running NASA, is a pretty good example of the ambition that lives inside of our organization. We generally try not to put too many constraints on ourselves. Now, what has to change? A lot has to change. We are a company that is in 75 countries that we weren't in two years ago. So the growth at the company is tremendous. We have 6,000 employees.
That's more than double what we had probably 18 months ago. So the growth is tremendous. We're operating in dozens and dozens of new markets around the world. We have to have an organizational structure that can pursue that effectively. But the ambition can't change at all, because that's really been the hallmark of what we've done.
Yeah, so that's change, but there's also consistency of change.
Oh, of course.
Yeah.
He's our largest shareholder. Despite his new role, he still owns 25% of the company. I think if we took a radical departure from his ambition, it wouldn't necessarily be fun.
For sure, no, but at the same time, I'm trying to picture this. You assume the reins for the company, and the co-founder of 27 years leaves, and you immediately make the decision to go to your board and request that you buy a $2.5 billion tax-free shopping business in Europe. OK, that's kind of a bold move, so that business, Global Blue, is now under Shift4. Tell me a little bit about the decision to do that, how that process went, and how the combination is going.
Yeah, sure. Well, so one of our mottos inside the company is boldly forward. So we do try to think in as forward-thinking a capacity as possible. But this one was a lot more logical than I think you'd expect. We constantly look at the value chain that our customers deal with and the complexities inside of it and say, what are the pieces that they really care about? What are the pieces that they don't care about? What are kind of the commodities that to them feel like paying a utility bill, but actually might have a lot of monetary value to them from the vendor's perspective? And what's our role to play? And in retail, we struggled for quite a while at what our point of difference would be in the retail vertical. It is a fiercely competitive environment. The software providers that serve retail are incredibly fragmented.
The retail service model is varied all over the world. And so, as we said, what technology could we bring to the table that a retailer really cares about? This tax-free shopping piece really stood out. So, for those that aren't familiar with it, in countries where there's generally a high VAT tax, most of these countries will offer a refund if the traveler is from a foreign country and bringing that good outside the country. So, it's incredibly prevalent at the Hermèses and the Louis Vuittons of the world in Paris that you're going to buy this handbag. And when you leave the country, you're going to go through a process and get several thousand dollars off the purchase price. It's immensely valuable to these large luxury retailers to have the ability to deliver this.
And there's kind of only two companies in the world that do that at scale, with Global Blue having a roughly 85% market share. So for us, as students of commerce and really trying to understand how to make the complex easy for big merchants, this piece of providing tax-free shopping services for the largest luxury retailers in the world is immensely valuable. And it's very scarce. There's only, again, two of them. So we pursued the acquisition for on and off six years.
Wow.
At one point, it was too big. At another point, it was too expensive. And fortunately, we grew to the point where $2.5 billion wasn't quite as much as it used to be. And just everything aligned. So while our founder happened to be leaving, our board wasn't surprised that this opportunity that we'd talked about on and off for six years became available. And what's interesting about it is it's a phenomenal business. So yes, we buy it with the ambition that we're going to add payment processing services to all of these customers. We're going to give them a better solution. The reality is the Global Blue business was growing kind of high teens, 20%, even without us. So it puts us in a new vertical, puts us in a lot of different geographies, but with a playbook that our board understands perfectly well.
In essence, it's a bold move, but one that actually fits neatly. At least the board saw this as a way to expand within the commerce space without rocking the boat.
Yeah, and you know what I'd say is it's very typical of Shift4 in that when we announced the transaction, we found ourselves explaining to all of our largest shareholders what this business does and how it's connected with commerce. And yet at the same time, the head of most of the international payments businesses around the world were calling us, asking us, hey, what do you intend to do with this combination of these two things? So from an industry perspective, everyone kind of understood pretty quickly this is a really interesting and important business. And from an investor perspective, we're going to educate on why these two things work so well together.
Yeah, it makes sense, and obviously, we're speaking to an investor audience today. You mentioned brands like the Yankees and the Wynn Hotel. Why should investors? What should they take note of in terms of the types of clients and customers that you're serving? Is there anything, again, uniquely Shift4 about working with entities like those?
Yeah, well, I'd start by saying there was a strategic bent going back as far as 20 years that if you can download a piece of software on an iPad and run your business, we want to be as far from that competitively as possible. Because there will be new pieces of software popping up all the time, and we don't want to compete on a hand-to-hand combat basis with whatever might pop up when the barriers to entry are download an app and run your business. What we want to do is we want to fulfill that same experience for merchants that are going to have 70, 100, 1,000 revenue centers, all managed by lots of different software. Because when you can connect all those things together for the benefit of some of the merchants that you mentioned, the air is very thin from a competitive standpoint.
So I think not to call out those two customers specifically, but you could use them or any other example. The reality for them is that when they needed a commerce solution for their environment, there was kind of only two phone calls that could be made: ourselves and one incumbent. And different, by the way, because one's stadiums and the other is resort hotels. But that's where we try to position ourselves, that we have technical solutions that are table stakes for the merchants that we serve, like tax-free shopping and luxury retail. And at best, there's one other phone call you can make. Because despite the fact that they are really demanding and complex customers to serve, the competitive air is quite thin. And we know very distinctly how to differentiate ourselves from that one competitor.
Speaking of differentiation, I've noticed, and maybe you can tell me whether it's true or not, I've noticed that the Shift4 name has become a bit more visible at retail, actually. Is that a deliberate brand strategy? Is there some thought behind that, or am I imagining it?
No, it is a deliberate strategy. And for those P&L-focused in the room, please don't get concerned. But we are investing heavily in the brand experience. So one thing that I would have critiqued us on over the years is that, generally speaking, if we were part of the commerce solution, we didn't care what name was on the screen. We didn't care what name was on the hardware. It was about delivering a solution to customers. And yet we are and have a footprint that's far bigger than what most people would expect, because we generally live under the covers in a payments experience. I think that's a shame.
I think the fact that we are in 50% of the Power 4 colleges from a payment experience and all of the stadiums that I mentioned, all the restaurants and all the hotels and luxury retail, the brand should be front and center, because that brand will give the confidence to the next customer to sign up. So we are trying to tell a more cohesive everything Shift4 story and get the brand out there front and center. It doesn't mean a dramatic departure from kind of our marketing spend and everything like that, but making sure that where you pay, you understand that this is a Shift4 experience is something that's really important to me.
OK, that makes sense. Going back to Global Blue, but just your acquisition strategy in general, you've bought a lot of companies over the years. Tell me a little bit about your philosophy of when to buy versus when to build and why purchasing companies actually improves your competitive position. You've clearly made that decision over the years.
Yep.
Tell me a little bit about how that decision-making process works?
Sure. I'll start by saying the payment platform that we run is connected to over 1,200 pieces of software. So if we think about buying a piece of software in the stadium space, the actual technical aspects of managing an extra integration on top of 1,200 are very little. And our company is built to know how to do that. So whether we own it or whether we're partnered with it, we manage 1,200 plus software relationships at any given time. We do not get deterred when there's an interesting software asset that we could own if we could control our own destiny as a result of it. But I'd say more importantly, the ability to access customers who are using five or six different solutions to make commerce work via M&A has something we've been uniquely good at.
And so you can contrast us to any of our competitors in any of the verticals we serve, and you'll see that we grow as fast as any of them. But the real differentiation is that the capital intensity of that growth is far lower. So in certain examples, we generally spend about a third of what our largest and best competitor spends to acquire a customer in the restaurant vertical. It's not to say we don't invest in organic sales capabilities. We obviously do that. And we win lots of customers like the ones that you've mentioned. But if we can buy a sales team that is proven to be successful in a particular geography and then enable that team with our products, it's just a lot easier to bet on success. I was speaking to an investor recently who said, "I liken your strategy a lot to Netflix.
And what I mean by that is, why should I care whether you make a movie and produce the entire thing yourselves or if you go to Cannes and you buy one? Intuitively, I think you're going to be much lower risk buying the movie that's already been produced now that you've seen it, as long as you pay the right price than making one from scratch. We tend to skew towards that. But make no mistake, we've got industry-leading products in a bunch of different categories that we've built ourselves where there wasn't a solution to buy.
The Netflix of commerce solutions, is that what we're going with?
For now. We'll see.
OK, we'll see how that goes. OK, good. Thinking about some of the things you've said over the last year and thinking globally for a moment, especially with Global Blue still so fresh, you've said that many markets are still doing business like the U.S. did, I mean, upwards of 15-20 years ago. So when you think about accelerating this kind of technology adoption and the shift toward these types of solutions, what makes Shift4 uniquely positioned to take advantage of those shifts? And how do we empower them, in essence, if the world is somewhat behind?
I'll start by saying we were the first to do it. And that is largely how all commerce is conducted in the United States today. So a little bit of a provocative statement, but let's sort of break this down for you all. 15-20 years ago in the United States, there were three cottage industries. It was payment processing, largely driven by bank relationships and highly undifferentiated terminals that sat on a countertop. There were software companies that were emerging, trying to solve vertically specific problems for one customer or another. And then there were hardware companies that tried to kind of make it all work. And our founder said there's absolutely no reason these should be three different industries. The software works better when it's on hardware that's purpose-built for it.
The payments work better when they're tightly coupled with the software, and there's no longer a misunderstanding between what was purchased and how much money hit the bank account, and so 20 years ago, we were combining these industries and delivering a cohesive product, and that's what drew the early stages of our growth. Now today, every software company goes to market in this strategy, so obviously, it was a highly valuable strategy. Interestingly, when you go to markets around the world, it still looks like the U.S. 20 years ago, as you mentioned. You can go to some of the most established economies in the world. I'll pick a pub in London as an example, and there's still a countertop terminal, largely unconnected to the software, and they punch in what you owe. If that seems inefficient, it is.
And if you ask the hardware and software and payments companies why it works that way, they give you the same example or same answers that we heard 20 years ago in the United States. So I don't want to say this is even that bold. This is just something that we know will change. We know that for the same reasons a small restaurant uses more software today than a large hotel did 10 years ago, that businesses around the world are going to embrace software. It simply makes their lives easier and helps them to conduct more commerce. And we're going to shepherd that at the expense of kind of a lot of these incumbent industries that aren't delivering more innovation or a better solution.
Yeah. Any particular verticals internationally that you think are worthy of more focus than others?
Our products obviously lend themselves to restaurants, to hotels, to retail. We're going to lean on those first. I would say this is likely to mimic the success we had in the United States, which is it starts with small merchants because they get the highest ROI on this innovation. Over time, we deliver into the larger and larger merchants throughout the rest of the world.
Which is exactly what's happened here.
Yep.
Yeah, OK, so that path is followed. Now, as you know, we can't specifically talk about financials here. Let's expand a little bit more on vision and your specific vision for the company. Anything you can share about how you're going everything that you've discussed today, obviously, is thinking a little bit about the future. But expand a little bit more about what people can expect without talking too much about financials.
Yeah, sure. So what I would start with is our playbook is quite mature. We understand how to combine technologies up to the most complex merchants in the world. That is not a vertically specific strategy. We weren't in a single hotel when I joined the company eight years ago, and we're in 40% of the hotels in the United States. And yet very few outside the United States. The growth opportunities there are tremendous. We weren't in a single stadium probably four years ago. And now we're in 75% of the stadiums in the United States. And sports is not a U.S.-focused phenomenon. It exists all over the world.
This playbook of studying commerce, finding the most valuable pieces, and doesn't really matter you build, you buy, or you partner, whatever it takes to deliver the best solution will bring us undoubtedly into more verticals and most certainly into a lot more geographies. Now, how does this flywheel sustain itself? We weren't in a single country outside the United States in any form of consequence up until two years ago. If we've been able to replicate this playbook over and over again across different verticals and grow the quality of merchant tremendously and the quality of the business the way we have in the last 10 years, imagine now that we have a physical presence in 75 countries around the world that we didn't have two years ago. That will undoubtedly drive lots more growth.
And quite frankly, I think the market conditions, I'm going to set aside economic growth for a second. I think the market conditions in a lot of these places are much better, meaning merchants are generally using antiquated solutions that are undifferentiated and are begging for the kind of playbook that we have, which is combining them with solutions that actually help them run their business.
So in the couple of minutes that we have remaining here and the risk of sounding repetitive based on what you just said, if you could leave investors with one thought that you want to make sure they understand about what the future of Shift4 will look like, what would it be? I know that's a lot of pressure in two minutes, but.
No, I think it's relatively easy. This is an industry that's under an immense amount of skepticism. Payment processors have generally done a bad job of educating investors on how they win. They would tell you stories like, if this giant company and that giant company mash together and save merchants a fraction of a penny, that merchants will see value in that. And what has happened since? All those merchants have slowly and sometimes more quickly migrated to solutions that actually help them run their business. So why do the Shopifys and the Toasts and the Shift4s and the Squares exist? It's because we're delivering a heck of a lot of value. And the legacy payment processors struggle to adapt to that and struggle to deliver value and therefore are competing on price.
We have the ability not only to deliver value substantially in all these large verticals that I mentioned, but a playbook that helps us expand in an incredibly capital-efficient way. So yes, we've acquired companies, but our margins have generally grown towards 50% on EBITDA. That shows you how innovative or I'm sorry, how capital-effective it can be when you're really focused on finding customers at the lowest cost possible and delivering them a solution that they traditionally would have used three or four vendors for. And that's, again, largely been a U.S. story. And now we've got incredibly the rest of the world to go conquer.
Yeah, very, very exciting times ahead, no doubt. All right, thank you very much, everybody. I appreciate your time, and hopefully, you'll have an opportunity to speak to Taylor at breakout sessions and such, but thank you for your time.
Thanks very much.
Thank you for attending.