KBW FINTECH ECOSYSTEM CONFERENCE - SHIFT4 PAYMENTS INC

Financial Performance:

• Reported 14% payments-based organic growth in Q3, demonstrating resilience across the business.
• Achieved a record adjusted free cash flow (FCF) quarter of $200 million.
• Q4 guidance variance attributed to a $20-25M travel disruption impact, $6M negative FX impact, and $25-30M impact from subscription/other revenue mix shifts and timing.
• Current pro forma net leverage stands at 3.7x, with a strategic threshold to remain below 3.25x on a sustained basis.
• Synergy realization for the Global Blue acquisition is on track, with $50 million in annualized synergies expected by year-end, progressing toward a $70 million target.
• Paramount acquisition (not yet closed) is valued as a Rule of 40 business at a fair price, with earn-out dynamics designed to reduce the effective multiple over time.

Guidance and Future Outlook:

• Provided a forward outlook framework of mid-to-high single-digit growth for FY27 GRL&F, assuming the Q4 subscription/other revenue step-down is temporary.
• Projected payments-based revenue to drive low double-digit growth, while subscription/other revenue is expected to remain flat with quarterly volatility.
• Expects to return to historical EBITDA margin levels in the low 50s within the medium term, with incremental margins targeting mid-60s.
• Anticipates modest, steady margin expansion rather than a step-function recovery, due to ongoing investments in product, platform, and international market expansion.
• FY27 guidance will include a full breakdown of the Paramount acquisition contribution once closed and integrated.

Business Segments and Product Lines:

• Shift4.1: Successfully launched in 15 countries, providing a foundation to introduce other products and drive long-term payments revenue growth in the tax-free shopping sector.
• Shift4 Dine: Secured the largest restaurant win to date with Kahala Brands and is expanding presence in complex environments like hotel resorts (e.g., Altera); strategy focuses on meeting merchants on their technology journey from legacy to modern POS.
• Global Blue: Integration is delivering revenue and cost synergies; the transaction creates a unified payment and tax-free shopping platform.
• Paramount Acquisition: Enhances capabilities in "bank rails" (account-to-account) and payouts, addressing a gap in non-card payment modality and expanding use cases for tips, refunds, and high-value transactions.

Market and Competitive Landscape:

• Views the current restaurant POS competitive landscape as "rational" compared to historical volatility, citing the exit of several unicorn competitors.
• Maintains a leadership position across the "experience economy" (Shop, Dine, Stay, Play) with diversified exposure to SMB, enterprise, Americas, and global markets.
• Identifies Europe (France, Italy, Spain) and the Nordic/German markets as high-opportunity regions for tax-free shopping growth due to luxury consumption density.
• Observes a resurgence in fintech M&A activity after a prolonged hiatus, driven by converging financial profiles and the blurring lines between consumer and B2B fintech solutions.

Risks and Challenges:

• Macroeconomic & Geopolitical: Travel disruptions and civil unrest in major European capital cities (Paris, Milan) have necessitated the deferral of commercial initiatives in Q4.
• Currency Risk: Continued strengthening of the U.S. dollar negatively impacts translation of non-U.S. dollar revenues.
• Investment Cycle: Current margin pressure is a function of heavy capital allocation to international expansion, product development, and acquisition integration.
• Strategic Trade-offs: Deliberately trading lower-quality legacy revenue (hardware, gift cards, perpetual licenses) for higher-quality recurring payments revenue impacts near-term top-line metrics.

Management Commentary and Tone:

• CFO Chris Cruz expressed a "dichotomy" of excitement regarding strategy execution but maintained a "cautionary tone" regarding external expectation setting due to macro curveballs.
• Emphasized a "Rule of 40" approach and "owner's mentality," prioritizing compounding free cash flow per share over short-term growth at all costs.
• Demonstrated confidence in the "Shift4.1" global platform and the long-term value of the Paramount acquisition despite capital allocation constraints.
• Adopted a measured pace for capital return, utilizing a perpetual buyback authorization to allow for flexibility amidst the balance sheet leverage constraints.

Analyst Questions and Answers:

• Q: Durability of Q3 growth? A: Resilience is proven by diversified revenue streams and record FCF; mid-teens payments growth is considered durable.
• Q: Q4 guidance variance drivers? A: Broken down into travel disruption ($20-25M), FX ($6M), and timing/strategic revenue mix shifts ($25-30M). The latter two are viewed as temporary deferrals.
• Q: Global Blue synergy timeline? A: No delay to 2028; on pace to deliver $50M by year-end and $70M eventually, with the remainder of 2027 dedicated to execution.
• Q: Paramount rationale vs. buybacks? A: Paramount fills a critical "bank rails" and "payouts" capability gap, creating cross-sell opportunities in high-value and international markets not covered by card acceptance alone.
• Q: M&A pipeline? A: M&A in fintech has been on a surprising hiatus; current activity reflects a correction in valuation volatility and convergence of business models, making the sector attractive again.

Other Key Points:

• Shift4.1 is now live in 15 countries, enabling a unified integration point for merchants across diverse geographies and payment modalities.
• The company is actively "trading away" non-core revenue streams (e.g., hardware, legacy licenses) to secure long-term contracts aligned with payment volume growth.
• Capital allocation strategy balances organic investments, inorganic acquisitions, and shareholder returns while strictly adhering to leverage covenants.
• The "bimodal" payment capability (pay-ins and payouts) is a key differentiator, particularly in gaming and tax-free refund scenarios.