Shift4 Payments(US:FOUR)2022-05-05 17:16Financial Data and Key Metrics Changes - Q1 gross revenues reached $402 million, a 68% increase year-over-year, while gross revenue less network fees was $149 million, up 53% from the previous year [54] - Adjusted EBITDA for the quarter was $44.3 million, representing a 100% increase compared to the same quarter last year, with an adjusted EBITDA margin of 30% [57][58] - Adjusted free cash flow for the quarter was $13.7 million, showing a $22.4 million improvement over the same period last year [60] Business Line Data and Key Metrics Changes - Net processing revenues increased by 70% year-over-year, driven by continued merchant adoption of the end-to-end solution [54] - SaaS and other revenue streams grew by 30%, attributed to expansion into new verticals and deeper penetration in core restaurant and hospitality sectors [54] - Gateway revenue saw a 16% increase, largely due to a modest recovery in the hospitality sector [54] Market Data and Key Metrics Changes - The hospitality sector now accounts for 21% of end-to-end volume, up from 12% in the same quarter last year, indicating a significant shift in market dynamics [56] - The company reported that its end-to-end payment volume is 288% of pre-pandemic Q1 2019 levels, with gross revenue less network fees at 224% and adjusted EBITDA at 215% over the same period [13] Company Strategy and Development Direction - The company is focusing on converting gateway-only customers to its end-to-end service, which is expected to significantly increase gross revenue opportunities [51] - The introduction of the new SkyTab POS platform aims to capture the mid to high-end restaurant market, with a 158% increase in total merchants operating on the platform compared to the previous year [28] - The company is pursuing acquisitions, including The Giving Block and Finaro, to enhance its service offerings and expand into new markets [38][41] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the macroeconomic environment, including inflation and consumer sentiment, which influenced the decision to maintain full-year guidance despite strong Q1 performance [42][44] - The company remains optimistic about its growth initiatives and may revisit guidance as the year progresses [42][84] Other Important Information - The company repurchased approximately 302,000 shares at an average price of $56.78 per share during the quarter, continuing its buyback program into April [59] - The company has over $1 billion in cash and a low pro forma leverage ratio, positioning it well for future growth and acquisitions [42] Q&A Session Summary Question: Can you provide real-world examples of accelerating conversions from gateway to end-to-end? - Management explained that they are sunsetting legacy connections to encourage migration to the end-to-end platform, freeing up resources for new customer acquisition [69][70] Question: How do you distinguish between the volume from ticketing and other services in sports and entertainment? - Management clarified that all announced wins include payment volume, but the contribution varies based on the type of service provided [74] Question: What assumptions are built into the maintained guidance despite record volumes? - Management indicated that while current performance is strong, macroeconomic uncertainties warranted a conservative approach to guidance [82][84] Question: Can you elaborate on the trajectory of free cash flow conversion? - Management confirmed a positive trajectory for free cash flow conversion, projecting a 35% to 40% conversion rate for the year [88][90] Question: What is the impact of the blended spread improvement? - Management noted that the blended spread improved due to a favorable mix shift and solid spread behavior within verticals, with expectations for continued maintenance of spreads [93][96]