Shift4 Payments, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the shift for payments fourth quarter 2020 earnings call. At this time, all participants on a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Sloan-Bullen Investor Relations. Thank you. Please go ahead.

Thank you. I'd like to welcome everyone to ShiftForce fourth quarter 2020 earnings conference call. Before we begin, I'd like to remind everyone on this call that it will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding management's plans, strategies, goals, and objectives, the potential annualized gross profit related to the conversion of gateway-only merchants, our acquisitions, and their ability to bring us into a high-growth vertical, the expected impact of COVID-19 on our business and industry, and anticipated financial performance, including our financial outlook for the first quarter of 2021 and the full year 2021. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results. Performance or achievements expressed or implied by the forward-looking statements, factors discussed in the risk factors section of our financial perspectives filed with the Securities and Exchange Commission, PURSUANT TO RULE 424B4 ON DECEMBER 4, 2020 AND OUR OTHER FILINGS WITH THE SEC COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY THE FORWARD-LOOKING STATEMENTS MADE ON THIS CALL. Any such forward-looking statements represent management's estimates as of the date of this call. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. In addition, we may also reference certain non-GAAP measures on this call, which are reconciled to the nearest GAAP measure in the company's earnings release, which can be found on our investor relations website at investors.shiftforward.com. And with that, let me turn the call to our Chief Executive Officer, Jared Isaacman.

Thank you, Sloan. And good morning, and thank you all for joining us today. For our agenda this morning, we will take you through the business performance, payment and merchant trends, and strategic initiatives. And we're going to save a bit of time for the fun stuff at the end, which is the road ahead. To begin, and as I mentioned some of these points in my shareholder letter, we just concluded a very challenging year. The economic, social, and political issues did not spare anyone. Despite these extraordinary circumstances and having exposure to highly impacted verticals like restaurants and hotels, the team at Shift4 performed incredibly well. And I'd like to highlight some of our 2020 accomplishments. So for the year, we grew every material KPI, including number of merchants using our platform, the volume they process, and the revenue it generated. This marks our 21st consecutive year of year-over-year revenue growth. But mostly it reinforces that Shift4's value proposition is compelling and it's winning share during the best and, you know, during the most challenging of economic circumstances. We also completed multiple capital market transactions to strengthen our balance sheet, diversify our base of shareholders, and provide capital to fund organic and inorganic growth initiatives. We also completed two great acquisitions, including the 3D card e-commerce platform, which we now call Shift4Shop, which has greatly expanded our e-commerce capabilities and significantly expanded our TAM. We also released several products like our new generation online ordering products, mobile payments for takeout, delivery and curbside ordering, and QR code-based ordering and payments, all of which were quite timely given the pandemic and we think will continue to feel growth in a post-pandemic environment. We owe our 2020 performance not just to these reasons, but also the dedication of our employees, the support of our software partners, and the perseverance of our customers. It's during these challenging times that they make me most proud. As to the fourth quarter specifically, we delivered another reasonably strong quarter given the circumstances. As previously shared, we celebrated the highest volume month at the time in October, which slowed in November, and then significantly so in December. We attribute this entirely to COVID requirements on social distancing and cold weather that was not conducive to travel and outdoor dining. Despite these realities, Q4 end-to-end payment volume grew 12% from the previous year to 6.8 billion. Our ability to grow merchant count and volume while serving some of the hardest hit industries is a testament to our technology, our business model, and most importantly, our people. To make no mistake, this is a quarter that included some really rough business conditions. While volume growth is nice to see during a tough quarter, we also look at active end-to-end merchant count, which grew 4% quarter over quarter. This continued growth in our merchant base makes us incredibly optimistic as we look forward into 2021. This end-to-end volume growth drove 5% growth in gross revenue less network fees, which resulted in adjusted EBITDA of $26.7 million for the quarter, which is up 10% from the prior year when normalized for our change in accounting for leased equipment. It's also worth reinforcing that virtually all of Shift4's merchants and all those that we have been adding throughout 2020 are operating at substantially below normal levels, which we anticipate is becoming quite the coiled spring. As previously announced, we also acquired two businesses in the latter part of 2020, each very unique in serving different verticals and increasing both our capabilities and our TAM. The Shift4 shop acquisition has significantly expanded our capabilities to serve online merchants, and dramatically expanded the market we are capable of addressing with our services. Taylor will provide some additional color on our month-to-month trends, but as I noted at the onset of the call, December volumes declined meaningfully as weather became colder and COVID cases accelerated, resulting in stricter social distancing requirements across the country. And we'll speak to the uncertainty that still exists from COVID, but what is clear to us is that our nonstop innovation and unique value proposition continues to win across a growing range of merchants and market segments. For those of you who are new to the story, we hope you see Q4 as a perfect example of our business model. We offer innovative solutions to merchants across a broad range of industry categories. Our technologies go far beyond traditional payment acceptance and often give us an incumbency advantage versus other payment providers. We use these advantages to offer a vertically integrated solution at a lower total cost of ownership than the competition. And lastly, we don't sit still and are constantly looking for new industries and geographies as evidenced by our acquisition of Venue Next, which Taylor's going to talk about shortly. As we spoke about on our last quarter's call, and I described in my initial letter to shareholders at the IPO, our philosophy is to drive change where we see inefficiency and incremental value for our merchants, and to ensure Shift4 is always positioned in the direction the puck is going. So as you may recall, during 2020, Shift4 became the official payments partner for the Las Vegas Raiders, the first sports and entertainment venue in our history. Within a few months, we have found significant successes across what was a pretty neglected vertical, supported by multiple expensive vendors and lots of legacy technology. We have found that our strength in serving some of the most complex and demanding environments in commerce has made us well-suited to solve problems and deliver a better fan experience in sports stadiums, theme parks, and other similar venues. This is why we're so excited to talk about our most recent acquisition of Venue Next, which again, Taylor will discuss shortly. On the same note, we just announced today that Staples Center will be using Shift4 payment technology. We believe stadiums and theme parks will contribute meaningful incremental end-to-end volume in the months and years ahead. It was just a few months ago that we announced the acquisition of 3D card e-commerce platform, which, again, we now call Shift4 Shop. Our entry into e-commerce came as a surprise to some, but I think it's worth reiterating. This is textbook Shift4. We observed an industry category like e-commerce that is massive and growing quickly, yet unnecessarily complex and with multiple layers of fees. Taylor will speak about our go-to-market strategy with regard to shift for shop in a few minutes, which I also believe will drive the new layer of growth for a business. These are two new markets that are quite meaningful from a TAM perspective and were largely foreign to shift for at the time of our IPO just nine months ago. Despite having operated this business for over 20 years, I can't recall a time when I was more optimistic about the road ahead. Our merchants are back to experiencing healthy volume growth with a very strong start to 2021. We continue to win share in our core markets and also find new exciting verticals enter. We also have an impressive capital position right now that affords us the ability to invest in growth accelerants for which I thank all of you again. And while I have the mic, I feel compelled to share a personal project and a call to action As some of you may know, I am fortunate to command the first all-civilian mission to space later this year, which will be a personal achievement beyond my wildest childhood dreams. And in reflecting on the significance of it, I couldn't help but think about all the children who don't get a chance to live out their dreams. It's for that reason that I've made St. Jude Children's Research Hospital my co-pilot on this mission. We've begun a very ambitious, even for us, fundraising campaign, and I would urge you all to consider donations. and you can still visit inspiration4.com to learn more. And with that, let me turn the call over to Taylor to discuss our fourth quarter operating results in more detail. Taylor? Thank you, Jared, and good morning. I'm going to take a minute to give some additional detail on volumes through the fourth quarter and then also provide an update on what we've seen to date in 2021. First, we included a monthly snapshot of the quarter to give you all a sense for the reasonably pronounced impact the pandemic had on end-to-end volume throughout the holiday season. We are pleased to report that this decelerization was isolated to December. January, for example, represented a nearly 10% increase in end-to-end volume from the prior year. Seven of our eight highest volume days in our history occurred during just the last two weeks of February. These volume trends are quite positive when considering many of our merchants in large states like New York and California are operating at less than 50% capacity, and several states, including Texas, were without power during this time period. This ability to grow at a pace exceeding many payment leaders, despite a merchant base that continues to be heavily impacted by COVID and occupancy and travel restrictions, reinforces the power of our value propositions and the clear competitive advantages we have in our core markets. Jared mentioned the 4% sequential growth in active merchant count during the quarter. Hotels represented a larger than typical percentage as we won several large hotel groups, including Sonesta and their acquired brands to our platform. I do want to note that this Q4 activity does not reflect the impact of our 3D cart acquisition, now branded as Shift4Shop, as we've used the majority of the time since acquisition to reposition the business for what we believe is a highly disruptive go-to-market strategy. If you recall, the 3D card platform was a mature, feature-rich web store builder, largely reliant on SaaS revenue. The platform was the driving force behind billions of dollars in payment volume, and yet sending this volume to third parties, for which merchants were paying yet another vendor for. We've recently launched a shift core shop, a platform that is entirely free for any merchant using shift core payments. Competitive platforms charge as much as $300 per month and actually more for enterprise and B2B features and still rely on third-party payment processing. This investment isn't simply a branding and marketing exercise. We also repackaged the platform to make it highly intuitive and created a payments enablement process that is second to none. We also introduced Facebook and Instagram integrations and count fraud detection at no extra cost for our merchants. On that note, in the brief time we've owned and operated Shift4Shop, we've accomplished many of the integration and branding goals for our first year of ownership. We've also increased the number of web stores by roughly 8,000 or 54% since acquisition, which we think is the appropriate way to measure success this early in the integration process. We also have an exciting roadmap for Shift4Shop that we believe will continue to impress merchants and help them grow. Make no mistake, we believe this platform will compete successfully among the best e-commerce businesses in the world and believe we can double the pre-acquisition site count by the end of this year. While the depressed volumes are real in the fourth quarter, what is masked is the upside potential that Shift4 has across a broader set of merchants than when the quarter began. While there is uncertainty on the pace of economic recovery and consumer spend in 21, our growth should compound as that activity recovers given our expanded share. Before I turn it over to Brad, I wanted to close with providing you an overview of our acquisition of Venue Next. Venue Next is a best-in-class provider of mobile ordering and point-of-sale solutions for sports and entertainment venues. Their technology began as an in-seat ordering app envisioned and seeded by the San Francisco 49ers and has evolved into a full-stack solution, including point-of-sale for concessions. Their applications have been proven in every major sporting category, including the NBA, MLB, NFL, NHL, and MLS. and also power mobile ordering at some of the nation's largest theme parks. In a story that should be familiar to you by now, Venue Next was competing very successfully to win these marquee clients, but the integration of payment providers included a web of gateways, merchant acquirers, and hardware providers. We took an approach of partnering with Venue Next to offer a more streamlined solution and quickly won several world-class merchants, including the Staples Center in Los Angeles. We've discussed our enthusiasm towards this channel in previous calls, but now own the entirety of the stack and believe our solution will be incredibly competitive. The mobile technology also has applications in adjacent verticals and will have applications far beyond stadiums. We believe that VenuNext's best-in-class technology will attract $2.5 to $3 billion in incremental volume by the end of 2023. We've published a summary of the transaction on our website and have included a chart to illustrate how through these two transactions, our TAM growth has doubled since our IPO, which was just nine months ago. Now I'll hand the call over to Brad to walk you through our financials.