All right, up next is Shift4. We've got the whole team here today, Jared, Taylor, and Nancy. Thank you all for being here. Really excited.
Thank you.
Maybe can we kick it off, Jared, with a look back on Q4 performance since the IPO? What, what's happened since then, and how has the company evolved?
Thank you. Another beautiful day in payments paradise. It's been an awesome journey since our IPO. I mean, you know, at the time of the IPO, I mean, the overwhelming majority of our customers were restaurants, which if you recall, like in, you know, March, April of 2020 wasn't a great time to be a restaurant when, you know, from a regulatory perspective, you weren't allowed to go out and eat. But ultimately, we wound up growing payments volume double digits in 2020, which was obviously much more a factor of taking share, which has largely been the Shift4 story for more than 24 years. We've always grown revenue every year for 24 consecutive years, more than double digits, and we did that even during the pandemic.
But we did say to ourselves, if we are lucky enough to pull off an IPO, which at the time, we were the first back in the to be allowed back in the New York Stock Exchange to even ring the bell, we were going to diversify, become, you know, kind of exit this, you know, crazy time in the world, better and stronger organization. So, you know, diversifying to more pandemic-resilient industries like hotels, which has been one of the fastest growing verticals for us since. I think we touch about 40% of the hotels in the country right now. It was probably something around like, you know, from, like, an end-to-end processing perspective, sub 5% at the time of our IPO. We moved also into stadiums and other, you know, pandemic immune vertical.
But we went from one stadium at the time of our IPO to now, like, well in excess of 150. And that will continue to play out. I think we are the hands-down category leader in that vertical. It's this cool dynamic because the pain point we're solving within the stadium environment is like the whole mobile experience, and not having to wait online at halftime to get a burger and beer, but be able to order it from your seat. And when you win that, you also win the concessions. You also win the VIP suites, you win the parking, the merchandise and retail, and then eventually ticketing, which is awesome because that volume is well in excess of actually the transaction volume that happens at the stadium itself.
But here's the cool part, is that, you know, when you have nice rivalries in one stadium, you know, like if the Baltimore Ravens can do the mobile fan experience, but their, the opponent they're playing cannot, then they come home from the game and they're like, they want the same thing too. And that's why for several years now, you continue to see us pepper our earnings reports with various stadiums. So the story's been awesome. We've been growing really effectively since the IPO in the U.S.
I mean, pretty extraordinary rate, over 50%, but also we're now on the cusp of expanding for the first time in our 24-year history outside the United States, with like an imminent closing on our Finaro acquisition, and now we can bring everything that's made us successful here in the U.S. over this time period into new geographic markets. So pretty awesome.
Awesome. Well, in 2021, you set a modest goal of growing the business at a 50% CAGR for the next three years, and we've been holding you to that since then. Can you talk about how we get to that level of growth? What are the building blocks, and what's the composition like?
Yeah, I mean, I think, you know, for late 2021, of setting a midterm outlook that had 50% volume growth, 30% net revenue growth, I got to imagine, like, we're the only company that actually delivered on it. You know, we delivered on it in 2022. We've been delivering on it through this year. You know, you look at where our guide takes us out, we're very confident, confident in our, our year two ability to achieve. And I want to point, like, those are, those are like some of the hardest years. Like year one, I mean, the time we set out our midterm outlook with 50% volume growth, we were predominantly just serving restaurants and hotels.
We said, we're going to move into airlines, we're going to move into nonprofits, we're going to move into e-commerce with this, you know, global e-commerce merchant that we didn't deserve to win, but we have it, and we're going to follow them all over the world. We're going to have to expand internationally, but we had no international payment assets. Like, when we set our, our, you know, our midterm outlook, there was a lot of like: What do you have to believe in order to deliver on it? And we have delivered on all of them. We've achieved all those integrations. We, we're, you know, actually monetizing our customer relationships within those, within those verticals.
And again, we've been able to do it even without international expansion, which was obviously a key component to our strategy, but that box is about to be checked. So like, I think, like in terms of, you know, achievability of what was a, you know, I think a pretty bold midterm outlook back at the time, the hardest years are probably in the rearview mirror. So yeah, I'm pretty good about it.
Then how do you think about macro? I mean, you've been cautious on the outlook. You've been talking about $50 steaks for a while. Is there anything to call out in terms of what you're seeing in the near term, any verticals outperforming, underperforming?
Yeah, and I do also just want to hit that as much as like holding us to the 50%. If you actually looked at probably the prior three years of our business, we were probably, you know, on a normalized level, we were probably growing at that point, as well. We certainly were prior to the pandemic, right at that 50%-55%. I think January of 2020 was a 55% year-over-year volume growth month. So that was kind of like a very long-term growth trajectory of the business. Even like when you're growing like double digits in 2020, that on a heavily depressed year, it probably would have shaken out about that. So, like, past has been generally pretty in line, you know, indicative of what the future performance will look like.
In terms of the macro, like we've been, you know, Taylor and Nancy have been, you know, raising the flag for some time now that, you know, the $90 steaks can't last, you know, for so long. And I'd say, like, actually, they just instead of, like, retreating, they just leveled out. You know, restaurants are essentially flat. They're holding the line on those $90 steaks, which is pretty incredible. And somehow, hotels are still experiencing same-store sales growth, which is pretty mind-boggling, considering how much they took up room rates over the last couple of years. So, there's definitely probably, you know, parts of the country that are, you know, not travel destinations where you know, not having, like, a boom time anymore. There are certainly parts of the country like, you know, Florida, you know, Vegas, that are. There's still some exuberance being displayed.
Got it. So it sounds like, it sounds like things are broadly holding in well. I mean, Nancy, anything to call out in terms of, you know, what the guidance scenarios contemplate relative to some of the recent trends?
Yeah, I think if you look at guides, certainly for the rest of the year, we're really just expecting macro to run out as we're seeing it today. So there's no concern about a downturn really beyond what we're seeing. Certainly, we don't have any baked-in upside assumed for the rest of the year. So if we see some resilience, that'll all be kind of upside to what we've got out there right now.
Understood. So maybe if we switch gears, talk through some of the components of the business. You know, you've talked about the high growth core, you know, the core of the business in restaurants. The growth has been very strong, and you've called out on the last few earnings calls a combination of, you know, signature net new wins, accelerating gateway conversions, more recently, the next gen POS platform, SkyTab. Maybe starting with SkyTab, you know, you've seen some pretty robust growth out of the gate with that platform. You know, is the product resonating like you expected?
Yeah. I mean, let's touch on a couple of things, just like, you know, how you build up, the various growth drivers of the business. We are incredibly advantaged in that we touch so many customers that only use a portion of our services. Like, sometimes that can be, like, misconstrued in other ways, like, you know, the gateway conversion strategy. Like, it's too easy for them to win, so it's somehow like a lower quality W. In reality, it's all just a giant ARPU expansion story. Like, we have, you know, $150 billion worth of payment volume that's on our gateway that gives us $1,000 a year and is paying, you know, way too many customers for, like, a suboptimal experience that move over to the end platform.
You know, we have a four or 5x uplift in gross profit. The customer is happier. They have one throat to choke. Like, that is half our growth, that's happening across predominantly hotels and restaurants at any given time. Then you also have a large population of just software customers that are using our restaurant product, but actually were never on our gateway or N10 product, which is like we just have this natural foot in the door to move them over to our end-to-end platform. And these are all, again, just, you know, a, a broader like ARPU expansion story that's embedded within the Shift4 universe. Which is great because we can achieve very high growth targets without actually having to go in, you know, and win a net new customer.
But we also do that, which represents the other, call it 50% of our production every in any given month. Now, we've been winning in restaurants for a really long time. You know, we have awesome distribution coverage that can be there locally to identify pain points for restaurants in a world where it's getting immensely more complicated for restaurants. Like, even the smallest, you know, restaurant, like on the corner, has got probably a dozen different software applications now. Like, think about all the interfaces, Grubhub, Uber Eats, DoorDash. These are all pain points. Take somebody kind of local in the field to, you know, bring that all together in a new and better experience for them and probably save some money along the way. SkyTab is our cloud-based product that's doing that.
You have this natural migration of customers on legacy-based point-of-sale systems, you know, older Windows solutions or terminal merchants that are going to move to SkyTab. And then you have our own customers that are naturally going to migrate towards that product, which unlocks a lot of operational efficiencies. And I'd say the landscape is super nice in that because it's really just Toast and us, and it's just a big TAM, and they're going to make their way to both of us at some point or another.
You mentioned Toast and some of the competitive dynamics. I think specifically in the gateway, you know, there are some interesting competitive dynamics there with you and FreedomPay, maybe one or two others. What are the competitive dynamics there like, and how should investors think about, you know, some of the recent announcements from Toast getting into the hospitality space?
I mean, first of all, like, we only put out announcements that directly drive our number one KPI, which is payment volume, which I believe makes up a pretty large portion of the revenue of Toast as well. So like, you know, it's a big announcement for a customer that they can't win payments on. They had to, like, immediately clarify that it actually belongs to Chase, which plays really nicely into our value proposition. I mean, we've been winning for a very long time based on the idea that we could provide...
You know, we own more links to the payments value chain, so therefore, you get that kind of one throat to choke, one hand to shake at a lower overall cost because you have just essentially less mouths to feed, and it's still very, very reasonable margins for us. That's how we win in hotels all the time, is that a customer is migrating away from a separate gateway, separate processor, separate acquirer, like separate equipment vendor. Shift4 does all of that. You have a lower overall cost of ownership, you know, and a better, and a better overall experience.
So they literally outlined in the press release how it requires Toast plus FreedomPay, plus J.P. Morgan, plus equipment vendor to deliver that experience, which essentially is just a hunting license without a contribution from, like, one of their, I think, their largest revenue contributor, which is payments. So from our perspective, like, you know, it's kind of relatively an empty press release. Like, we don't put out press releases on our software-only customers, and they're pretty awesome names, even though eventually, like, we would expect them to move to payments at some point. So in any case, like, we don't think it changes any of the, you know, the dynamics within, you know, the hotel vertical, which we are continuing to win at a, you know, pretty accelerated pace.
Then in terms of just like Main Street winning restaurants, it's awesome having one really great competitor in Toast. And I think the way that we've been competing of late has actually put more distance between us and those that were in, like, kind of third and fourth place because it, like, it just makes it harder for them to compete with the two of us, and it's just a big TAM, and we'll both take our products into Europe and other markets, which are 10, 15 years behind, you know, the restaurant technology environment that exists in the U.S., which is a lot of opportunity.
So you've talked about, you know, taking out a lot of the middlemen in the restaurant space with the SkyTab offering. Last year, you know, you did a series of deals that kind of took out a lot of your indirect distribution and brought a lot of it in-house. You know, could you maybe talk, you know, a postmortem on that deal? You know, roughly $300 million for a 10-point uplift in gross margins. Has the deal worked in the way that you envisioned when you set out?
Yeah, I mean, 100%. I mean, this is like if you get really familiar with the Shift4 story, we had a very, you know, I think we had a very atypical journey to being a, you know, multi-billion-dollar public company. Like, we was a basement startup. We never had a Series A, B, or C. We never had any outside capital for the first 14 years in the company's history. Like, all of the growth came from our own, our own cash flows. You know, the only time we actually even took outside capital was just we saw the convergence of software and payments across multiple verticals, and we wanted to seize the opportunity on that, and that required bringing in a PE partner.
In doing so, I say all that, it's like we were incredibly disciplined, and we've had to be over our years in order to, you know, continue to drive, you know, strong growth throughout our years. And like, part of that is, you know, like how we choose to allocate capital for lower customer acquisition costs or improving our unit economic model. Like, these are things that have been part of our existence for like 24 years, that almost any one of our peers never even had to think about until, like, the zero interest rate environment disappeared. So to look at it, like, in a time period in, you know, 2022, when like, we all thought the world was going to fall apart and say, "Hey, we're migrating from like a, an on-premise solution, which required more labor, to a cloud-based solution.
This lets us take out an awful lot of parts, become more efficient, and we have 15 years of data to know which markets we're going to be successful at within our product. Why don't we insource these partners that we've, you know, basically been, you know, the second largest expense of the company, which reduces our payback period from a customer acquisition cost perspective? It's a massive unit economic enhancement. Why wouldn't we put capital to work in that environment when there's, like, uncertainty in the world? And as a result, massive lift up in the financial profile of business, huge, you know, huge margin enhancement, huge free cash flow enhancement, but strategically super valuable because now every new customer we're signing up for SkyTab no longer has that ongoing third-party revenue share expense.
You were able to, like, justify all of this because of the migration from an on-premise to a cloud-based solution. So yeah, it's been working out incredibly well, and our production for SkyTab now has only accelerated every, every quarter. So like, I think, you know, with Q3, that will essentially be one year from when SkyTab came out of beta. Like, we'll give you a nice chart of like what that, what that install trajectory has looked like over the last year with that product, and it's being driven by an in-house sales force now versus a third-party distribution force that was a year ago.
Got it. I mean, a lot of your comments today have focused on ARPU expansion opportunities within the business, whether that's software-only customers, whether it's distribution, whether it's the gateway. The gateway is obviously a very large one, roughly $150 billion of volume, you know, that's still not running over your rails. So maybe can you remind us of a few of the strategies that are in place to convert that volume, and how do you think about the cadence over the next couple of years?
Yeah, sure. What I think is important to understand is that every customer on our gateway is using a third party for payment processing and merchant acquiring. So when we talk about this cross-sell opportunity, it's not an incremental service that you're trying to compel the merchant to use. It's compelling them to consolidate services under a single vendor, and the gateway is the critical component of technology inside of their footprint. It is what connects every piece of software in their merchant environment to common security, common tokenization, common analytics, and a common, quite frankly, a consumer experience as they're navigating their way through, you know, a large hotel like this, for example. So, you know, they're critically relying on the technology. It's just that given the way the evolution of the industry work, they would typically route these transactions to a bank.
We saw this opportunity and said, "Hey, we can deliver a much better experience by compelling these merchants to keep all their transactions with us as the merchant acquirer, as the merchant processor, and as the gateway." So the merchant gets a phenomenally better experience. This is a, you know, not an insignificant component of how we could grow during incredibly challenged years. It's because we had this large embedded base of customers. Now, what's the challenge to the value proposition? The challenge is if you're a hotelier that's selling out all your rooms at triple the room rate, changing your merchant processor is nowhere near your priority list of your problems to solve. So we've got a variety of ways that we tackle this problem.
Interestingly, you know, throughout the pandemic, it was always carrots because these are merchants that, you know, were under a significant amount of, you know, industry duress, and you needed to give them really compelling reasons to help them do more business. We've started to implement some price increases just to realize the value of the service that we're providing, to say, "Hey, this is the critical component of technology. We expect to be paid for it, whether or not you want to route your transactions to a third party." And then inevitably, throughout the cycle of that business, there are circumstances that compel them to want to embrace this change, whether that's a software upgrade that they're going through anyway, whether that's, you know, the cost savings value proposition that exists the whole time, et cetera.
We just converted a really large number of hotels on the island of Nantucket because this was their time to get around to a technology discussion, as they approach their off-season, and that's very typical of how this, this program has worked. Now, what has changed is there are a lot of enterprises on the Gateway, and increasingly, enterprises are willing to have this conversation. I think as every business starts to think about their cost structure in a more with a more critical eye, as it thinks about what normalization after the pandemic means for them as a business, you know, this is an obvious win for them, where they can save costs, get better service, and simplify their lives.
And so, you know, we've seen an acceleration, actually, even at the highest end of enterprise, multi-billion dollar customers saying it's now's the time to do this.
Yeah, maybe if I, if I can, because I think it's such an important part of understanding the Shift4 story. The gateway is obviously a large portion of it because it's, you know, $150 billion worth of volume that we can move over, and it's, you know, dramatically over time, will continue to change the financial profile of the business. But look, if you indulge me on this analogy a little bit, winning customers in almost any line. It's a battle, right? It is very hard to do it. And who's winning? Like, the winning is, like, you're growing payment volume, and you're actually talking about your payment volume growth.
If you're losing that battle, you're not even talking about payment volume at all anymore, which should be scary for a payments company. But how you fight that battle matters, too. Like, there's some people that think it's more glorious to, like, line up shoulder to shoulder and just get, like, blown away, which to me is like the equivalent of just spending, like, hundreds of millions of dollars on, like, Google Ads to build brand and maybe win customers that your product can't fix if their pizza sucks, right? Or that you could do it with a more ambush-based approach, which to me is like what we do, which is like acquisitions, like our gateways over time.
Which Merchant Link, for example, which probably represented over 100 billion of gateway volume and narrowed the competitive landscape within the hotel environment to, like, two or three competitors. It was a $60 million acquisition to have your foot in the door of essentially, like, a captive 100 billion volume base, which now, probably four years since that acquisition, and you, like, fully synergize that down, probably represents, like, a quarter-turn of EBITDA, right? Like, so, I mean, it's glorious to line up shoulder to shoulder and spend a lot of money in a zero interest rate environment, but where we're at today right now, like, you want organizations that can be creative, whether it's in our restaurant vertical or hotel vertical, to identify more attractive uses of capital, lower customer acquisition costs. Focus POS is another great example of that.
It was a $40 million acquisition we announced, like, two quarters ago, represented 10,000+ accounts, maybe $15 billion in annual payment volume for $40 million. That will be, you know, inside of a year, probably synergized down to sub one turn .
Super helpful, and, you know, I'm sure we could spend all day talking about SkyTab and the high growth core, but I want to maybe pivot to stadiums, where you guys have also had a lot of new wins. I think in the most recent quarter, you talked about Carolina Panthers, Texas Rangers, Charlotte Hornets, a large park operator, and, you know, a lot of these are coming from the VenueNext acquisition, which I think you bought for $72 million in 2021. So, you know, what are you doing differently that's allowing you to win all of this net new business?
It's a variety of different things. First, it is a critical understanding of what the merchant experience is like in that environment. You know, you've heard every payments company talk about buying software, building software, partnering with software, and no one talks about doing all three, depending on the environment you're serving. We looked at the stadium environment and said, "This is ripe for Shift4. It's a merchant using tons of different software." It doesn't feel very different than walking into a large hotel where you have concession stands, you have suites, you have ticketing, you have retail, you have nightclubs and restaurants in some of these. So, the merchant has to find a way to stitch all this together and have a common fan experience and drive more commerce, in very small windows of time. And who's helping them do this?
Where are they most likely to partner up? VenueNext was a business we saw doing this exceptionally well. They were enabling mobile ordering at a time where stadiums were worried about how many millions they were going to have to spend on new hardware. They would go in and say, "Hey, your fans are going to bring in better hardware than you can ever afford. I can give them a great experience. They'll never wait in a line, et cetera." We saw that opportunity.
We saw the opportunity within their existing customer base and the fact that we were uniquely positioned to not only deliver that software to merchants, but also cooperate with all the other software they need to collect revenue and deliver, you know, a what you'd experience in a hotel from Shift4 in an entirely new vertical. So we acquired that business and quickly said, "Your value proposition is no longer mobile ordering. It's mobile ordering plus everything else." And that was highly unique in the environment. So I think Jared mentioned this, we had one stadium at the time of our IPO. It was a little bit of a thought experiment with a software partner.
Now we have over 150, and, you know, it's one of the fastest growing verticals simply because they're so little technical competition inside of the vertical. I'd say the kind of really interesting spot is we hadn't always contemplated ticketing, which had largely lived entirely outside of the ecosystem of a stadium. Fans bought the ticket on Ticketmaster, SeatGeek, et cetera, and showed up at the game, and as we started to have these conversations with teams and venues, they said, "This is a major component of my revenue that I want under the same roof and under the same analytics package and under the same platform as Shift4." And so we've been able to complete integrations to now all the major ticketing providers and can deliver exactly what you'd see in a hotel operator.
You see the entirety of your revenue experience, common tokenization, analytics. You can follow your fan through the entire experience, and any way that the team wants to sort of engage in commerce with their fans is something that we can enable for them really, really quickly. So, totally underserved market, really interesting and underappreciated asset that was delivering more value than just about anyone else in the value chain that we identified, paid a very reasonable price for it, and bundled it all together in a way that these, you know, purchasers of these services have never seen before. And obviously, that leads to really interesting growth.
Makes sense. Can you talk about the process of getting that ticketing volume now that you have all three of the ticketing vendors? What does that upsell look like, and what does the conversation go?
Yep. So, again, I'm hesitant to use the word upsell because every one of these teams is using a ticketing provider. So this is more about consolidation and delivering a better experience than it is about convincing them to do something they haven't done before. But it's really just what we do every day, which is you have to integrate to the software platforms those teams are using to sell their tickets. So this is like a little bit of a awkward experience as fans, as we think about buying a ticket, but the team that or you know singer that you're buying a ticket to their event, they choose the ticketing platform they want to use, and there's a payment provider on the other side of that.
We have been negotiating with every single sports and entertainment company that we've engaged with over the course of the last 18 months and said, "If we can technically facilitate your ticketing payments, you know, will you give us that business?" And overwhelmingly, the answer has been yes. So we've had this incredible pipeline of signed wins, we hadn't always had the technical means of fulfilling that, because you've got to do work with SeatGeek, you've got to do work with Ticketmaster. We're now at the phase where we've completed integrations to SeatGeek and Paciolan, which are two of the largest, and then the largest in Ticketmaster is being completed imminently. So we've got a really nice pipeline of wins that go live the second the technical work is done.
We've seen a handful of ticketing volume throughout this year, but when you unlock the technical means of working with the largest ticketing platform, your TAM has now expanded really, really nicely. Any, you know, any sports and entertainment franchise using Ticketmaster is an opportunity for us when this technical work is done. That wasn't an opportunity, you know, even just, just months ago.
Maybe just to put some to this point, like, the reason ticketing is so important. I mean, you're talking, like, several times the payment volume of the stadium itself, and there's no relationship. Like, the stadium doesn't know who's behind Ticketmaster or StubHub or SeatGeek or Paciolan. Like, those vendors have separately chosen whether it's Braintree or Chase or somebody else, that effect. So but we are deeply embedded in that stadium environment. Like, it doesn't, when you're the fan ordering that burger and a beer from your seat, it doesn't say Shift4 or VenueNext. It says, like, the Orlando Magic app or whatever, the, you know, Baltimore Ravens app. So it's our people that are physically on site, especially now as the season's opening.
Like, we have our people at, like, you know, whatever, 12 different stadiums a weekend right now. So, like, we're – it actually becomes like a very... It's an easy ask and it's an easy give. One, it's been a default in our contract for more than a year that you'll just give it to us, so it's not even, like, a negotiated point. But other than that, when it's like: "Hey, we need new hardware," they always – like, we will give that as, like, an in-kind sponsorship. Like, but we also want the ticketing. It's just not a – it's not like a challenge because they don't even know or have any relationship with whoever's ultimately fulfilling it today anyway. And the ticketing provider doesn't care, like, whether that's SeatGeek or Ticketmaster.
I wanted to hit on international expansion. I think I'm sure a lot of people in the room would like to hear an update on the Finaro timeline, but would also like to hear, once that deal does close, you know, what sort of goes into motion that you guys haven't been able to do up until now?
I think, I think everyone's going to be really, really pleasantly surprised when we actually, you know, set the full expectations, which clearly we didn't do this past quarter. Then we were telling you, like: "Hey, it's going to happen pretty... You know, it's imminent." Like, we are on the shot clock, so, like, when you are considered application complete, they have to decision it within a certain period of time. So, like, we have been on that timeline, so that's why we think it's like. I think we think that this is going to close before we would have had an opportunity to get in front of you again, which would have been, like, our November's earnings. So, that's progressing well.
I think, I know we've said it a bunch of times, but, like, this prolonged engagement period prior to getting married has afforded a lot of benefits. You know, Finaro is a way better company now than we signed that. Way better! Like, it would have been 0% card-present, you know, 100% e-com. There were customers that we had to get rid of. Like, now it's going to have, like, a very meaningful percentage of card-present business when it, when it closes. The number of customers that are going to be contributing to the volume and revenue versus, like, what was standalone Finaro at the time we signed the deal versus now, based on, like, our pre-existing customers we've contributed to it, is pretty—it is material.
So like, I think, like, when we, when we actually, like, get together in, you know, I guess in November, and set some expectations associated, I think people are going to be like: "Wow, it's like a much, much better business now." Now, what it will allow us to do? It allows us to go after restaurants and hotels in Europe. That's our-- that's right now our biggest focus with respect to Europe. Like we have-- we said it during this last earnings, our focus now is solving our distribution strategy for going out and winning, like, 10,000 restaurants in Europe next year and a bunch of hotels, and we've got live, you know, locations now on it. Like, we've been making good use of this prolonged engagement period.
So yeah, we're really excited, so much so, like, it's now looking at what's the next geographic area. We've got our wait list live on our website for Europe and Canada, for restaurants and hotels, for new partners that are looking to sign up. It feels good. We've been waiting, you know, a couple decades to go into Europe, so excited.
There's a lot of other questions I could ask, but maybe, in the interest of time here, Jared, you always have good perspective on the industry, and there's been a lot of conversation recently around the competitive dynamics in e-commerce, particularly in North America. Realizing you're not a big North American e-commerce player, but, you know, what do you think is happening in the industry? How does it affect Shift4?
I think we go through like a, like a roller coaster cycle, like, every four or five years, where the same panic surfaces and then diminishes and... Like, it's a, it's a great industry. Like, right now, I mean, it's like, again, every four or five years, you've got, like, Bloomberg and Wall Street Journal that'll come out about how evil Visa and Mastercard are from a fee perspective, and then that'll go away for four or five years and such. Look, I think that this was not a surprise to us at all. What we only obviously have one, what we would call Adyen-like customer. So, you know, it doesn't... Like, we already did know that the U.S. was hands down the most competitive global e-commerce market for a long time now. There's no FX in the U.S., there's no 3D Secure.
Like, nobody's using that. So, like, basically, everyone can do, you know, card not present e-commerce in the U.S. without requiring a lot of the bells and whistles, and as a result, the pricing is very low in the U.S. Like, Adyen's advantages, immense advantages, are is its ability to deliver that kind of single, that single platform experience in markets all over the world, and the U.S. is like, you know, the easiest, easiest one. So you should expect that like, you know, the take rates would be under the most pressure here. But, like, I, I don't think this changes anything that all of a sudden, like, this is just a commoditized industry.
Like, I think the mega consolidations of 2018, 2019 proved that that's not the case, because those guys are largely losing share with their scale advantages to much smaller players like... you know, whether you would call it like Toast, Square, or Shopify or whatnot. So, like, I still believe that there is a big share taking event that's going on that is not under take rate pressure the way you would think, for those that add value beyond an approval or decline, that are providing a broader commerce-enabling experience, and merchants are migrating there very, very quickly, and those that are still in that approval or decline category are losing share, and that is certainly not where Adyen is.
Got it. Super helpful. Maybe on that note, I'll ask a myopic question on spreads. Nancy, you know, you've been pretty transparent about, you know, the expectation of spreads moving lower over time. Could you talk about some of the near-term take rate dynamics and, you know, any updated thoughts on what that might look like?
Yeah. I'm very comfortable with what we've already put out there. You know, expecting about 65 basis points on a blended basis for the year. Obviously, first half was a little bit higher. Some of this can... You know, I think we've been really open to say there's some choppiness based on when some of the big wins start ramping. You know, so quarter to quarter, you'll see some movement. I think, you know, spent some time making sure the guide we've given is clear, certainly for the rest of the year, and I would point out that, you know, kind of Q3 will look similar sequentially over Q2 than it did last year. So, you know, expect some kind of pull down and then back, you know, increasing kind of into Q4.
But I would use the 65 as a general measure for this year. And I think looking ahead, you've got two dynamics at play. You've got, hopefully, continued up-market wins. Ticketing actually helps us just based on where those spreads come in. And obviously, international expansion comes, you know, largely with higher take rates. So we'll be super transparent. I think we learned our lesson early in the year about not, you know, trying what we thought was kind of giving you historical spread rates. I think now we've got a new normal, right?
Like, I, I think as we, as we head into 2024, I think 2023 sets the base for a new normal of what the blended business is, and, and, you know, the business is just so much more diversified, both by vertical, vertically and, and on size of merchant, that this is a good kind of launching pad. But with Finaro coming in and, and just obviously some of the big wins that we've announced and some of the ones we know are on the horizon, we'll continue to be transparent. But 65 basis points for the year feels like the right jump-off point, as we go into 2024 as well.
Got it. Very clear. Maybe we'll just end on capital allocation. You know, Jared, I think you've recently been talking about capital out. You know, obviously, acquisitions have been top of mind for you guys and kind of the number one priority, but you were speaking more specifically around distribution deals related to SkyTab in Europe. Could you maybe flesh that out or what that might look like?
Yeah, I think that, you know, there's obviously a lot you need in order to be able to go and pursue certainly restaurants for sure in Europe. A little bit less so with hotels, because you can rely on your third-party integrations, but you got hardware to provision, deploy, install. You've got to be able to provide support in a number of different languages, and then coverage. Like, it's a big continent, and you're gonna want people in a lot of markets that are able to, you know, identify older generation or non-integrated systems in order to replace for SkyTab. So are there easy buttons that we can pursue to do that, that we know draws upon a playbook that's worked, you know, perfectly here in the US over the last 15 years?
And that's pretty important because Europe is totally where the U.S. market was from an integrated payments perspective 15 years ago, so it gives us a lot of confidence in the playbook. But I'd say in Europe, you have a great authorization and settlement platform in Finaro. We've got a great product in SkyTab that will have a lot of demand. So what's just the right way to approach, you know, distribution within the European market is one of the priorities we're looking at, as is just continued geographic expansion. The integrated payments 3.0 world we're in right now is about, you know, a commerce experience and making it easy across multiple geographic regions.
You know, North America and Europe is awesome, and we're doing some great organic expansion alongside of that, but there are certainly other geographic areas that are of interest to us as well.
Great. Well, guys, I really appreciate you being here today. Really enjoyed the conversation.