$FOUR：Shift4按6.5倍EBITDA交易，有机增长真实吗？| Emeth Value Capital

Today, my friend Andrew Carreon is on the podcast for the first time in a long time. He talks about Shift4, ticker FOUR. I want to add his second-quarter letter. I've had investor friends recommend Shift4 for years, and I have been studying Shift4 for many years.

His second-quarter letter is a 25-page masterpiece of background work, valuations, and everything else about Shift4. It's a really interesting, exciting company with an interesting structure. I mean, look, pick your own bargains. This is a cheap company. There is a share buyback, and there are some questions about management because they have withdrawn their target guidance. They made some acquisitions that one person I spoke to while preparing for this podcast said were self-defeating, but they have a great acquisition history. It's a cheap company with dislocation in a payments sector that has been destroyed—just all sorts of interesting things.

1. Sponsor: Trata

But first, a few words from our sponsors, and I'll just get to reading. Today's sponsor is Trata, trata.com. If you've been listening to this podcast for a while, you know that I love Trata. If you like this podcast, you'll also love Trata. Trata is two buy-side investors who take an anonymous call and just talk about stocks they own or stocks they follow, whether they're bulls, bears or whatever, and they talk about the main issues they see in the company. And I think you'll like it if you like this podcast. If you don't believe me, go to trata.com/4 and you'll see a sample transcript that I used to prepare this podcast, where people talk about the real issues that come to mind when they think of Shift4. So if you like this podcast, and I mean both the general Another Value podcast and Shift4's approach, check out trata.com/4. This is trata.com/4 so you can see for yourself. Hello and welcome to another podcast about value. I'm your host, Andrew Walker. I'm glad to be with you today. It seems like this is the third time. For the first time in a long time, my friend and fellow New Orleans native, Andrew Carreon, is here. Andrew, how are you?

I'm doing great, Andrew. Thank you for inviting me to participate.

Yeah, the last 2 were energy presentations, so I come back to firmly state that I am not just an energy analyst.

Well, that was a long time ago, and it's about as confusing. It's about as confusing now as energy is, I think, in 2018, but we'll get to that in a second.

First, a disclaimer: Nothing in this podcast constitutes investment advice. There are caveats in the show notes, and there is a disclaimer at the end of the podcast, so you can watch it if you're interested.

Andrew, the company we're going to talk about today is Shift4, ticker FOUR. This is a company that I'll let you explain, but it has attracted a lot of value investors. Your description, which was in your second-quarter letter, is the best description I've seen of it. In fact, when I pasted it into ChatGPT and added some other notes, it said something like, “That's definitely the best description of it.” So ChatGPT really likes your article.

You had a great letter, again, and I'm really excited to talk about it today. I'll just hand it to you. What is Shift4, and why are they so interesting?

2. What Shift4 is: restaurants, hotels, stadiums, luxury retail

Yes, thanks for all that, Andrew. As you mentioned, it's probably not like the 2 companies that we talked about earlier. It's a company that I think a lot of people are probably familiar with, but for those who aren't, Shift4 is a vertically integrated payment processor.

In particular, they have some very strong verticals, one of which is restaurants, where in the US they are the second-largest restaurant POS provider after Toast. I'm sure we'll discuss this further, because unlike Toast, which has 1 core product, Shift4 is a kind of Frankenstein made up of many different things. I think this theme will be repeated across all of their verticals.

I think that's 1 of the reasons why there's so much controversy and 2 sides to many debates about Shift4. They are a vertically integrated payment processor with some very strong verticals. Restaurants are 1 of them. Hotels are another, where they have software and process payments for 40% of hotels in the United States.

Stadiums and event venues are another, where they are the payment processor for 75% of professional sports venues. Recently, they have added a vertical in luxury retail, which seems like a strange niche, and we can discuss what led them to that category.

Unlike Global Payments, Fiserv, or some of the other really big payment processors, like Adyen, Shift4 is a little bit different. Those companies have $250 billion in payment volume, whereas Shift4 is much smaller and has deep expertise in a few very specific verticals. We can look at them 1 by 1, or start whichever way you want.

3. Payments has been a value investor graveyard

Well, I'd actually like to start with this. Again, with Shift4, we'll talk about valuation, all the verticals, and anything else. I would encourage people to read the letter. You have a really deep history going back to when the founder and CEO was a teenager and started this business, so you have their whole history, all their verticals, and everything else. We'll talk through them.

I guess I want to start with this: Payments in general have been a focus for a lot of investors over the last year, and it's been a graveyard for investors focusing on this over the last year. This applies not only to investors. I was preparing for this, and the CFO was at the Goldman conference, I think, a week ago. At the very end, he was talking about capital allocation and said, “Our stock—we think our stock price is a gift.”

But then he expanded on the topic and said, “Payments have just generally declined,” despite steady incomes and volume and so on. I just want to start at a high level. Payments were cut, and Shift4 was cut. Is your Shift4 thesis more about Shift4, or is it more about payments in general? I understand it's a little bit of both, but to the extent that it's just a reduction in payments and you were a value investor looking at this compared with Shift4 in particular, it's a super-unique opportunity.

That's a great question. I think that, for Shift4, the whole process of de-rating payments and completely de-rating software was just 1 layer of the pie of this thing that went from $120 a share, literally 18 months ago, to 1/3 of that price now.

I think it's a throwback because, as they say, nothing affects sentiment like price—and, of course, vice versa. It's easy to be where we are today, in 2026, and say, “Oh, payments are terrible.” But not too long ago, you went back and all these companies were maybe not beloved—that's the right word—but they certainly had fair prices and pretty high expectations.

I think there were some very industry-specific situations that cast a shadow over the entire payments space. You had the Fiserv fiasco and a lot of issues—not all of them public information—that they're being sued over, along with transparency and reporting issues and some other issues. Specifically for Shift4, I think that has carried over to the whole payments space for some reason.

I understand this more for Shift4 than for others, but layering the SaaSpocalypse on top of an already wounded payments industry sent the whole industry even lower. It's a little confusing because, in my opinion, if you're talking about something like this, there's a lot of software involved. This whole idea of integrated payments is software-initiated payment volume for Shift4. It doesn't apply to some legacy payment processors.

In my opinion, being an integrated payment processor as a so-called go-to-market software proposition is 1 of the most justifiable, easily understood positions, as opposed to something that can actually be hard-coded. That tension has eased a bit.

4. Isaacman leaves for NASA. Is the magic gone?

For me, I think it's more about the fundamentals of the specific verticals that they operate in. I'm sure we'll talk about the performance of that team if you really go back and understand the full history of the business before we get to today.

Let's get to the team, if that's okay. I've been mentioning Jared Isaacman for years. He is now, I believe, the head of NASA. He may not be known by name to everyone, but he is the head of NASA. He leaves the company in 2025 to become the head of NASA.

His team is actually taking matters into its own hands, right? It seems that his co-founder, who is also his brother, is now CEO and chairman. It's the same team, but the kind of visionary who started this company when he was 16 and grew it into a multibillion-dollar company is gone.

As you mentioned in your letter, this company was built through acquisitions, and they just made their largest acquisition in history. I think it was Global Blue in 2025. You have to wonder: When the person who built this company and effectively owned half of it—he still owns about 1/3 of the company—is gone, what happens next?

I think 28.6% is an accurate figure. When he's gone but the team is still in place and they're using his scheme, is some magic gone? You know, the Bulls without Jordan were still very good. They might have won in 1994 or 1995 if Scottie Pippen hadn't had a migraine, but they weren't the Bulls who went 6–0 in the Finals.

If he's gone, will some of the magic be gone? And won't you just start to distance yourself from reality? So, how do you feel about the team after Jared?

Yes, that's a very fair question. I think my comfort in this comes from what Jared himself said when he signed off on his farewell at Investor Day in 2025, when he said, “Taylor's coming in as CEO, and I'm stepping down as CEO, but Taylor knows that he's losing a boss and gaining a very active shareholder.”

I take great comfort in knowing that Jared is not disinterested in this. This is his extremely large personal active holding, and he's still actively adding to the stock earlier this year, when prices fell.

But I think, going back to what I said, nothing changes the mood like price. If you look at the actual execution, the company has achieved a lot since the beginning of 2025. There haven't been any obvious obstacles, other than things that were left over from when Jared was still there. They had a certain sequence of things.

If you tried to piece by piece imagine what got us to this approximate stock price that we're at now, I think a lot of it started with the forecast they gave at the 2025 Investor Day: that there would be $1 billion in free cash flow at the end of 2027.

Right before the Global Blue acquisition, they were trading at over $100 a share and putting out this really inflated forecast, but ultimately had to back off of it, faced with the very challenging broader payments landscape and then the SaaSpocalypse. It was just an endless stream of bad things from a sentiment perspective, but if you look at how the business actually performed, I think it performed pretty well.

5. Card present, card not present, and what integrated payments means

Let's get down to business, shall we? They have a lot of different verticals and a lot of different things. I mean, I think the main thing is that if you go to a stadium, for example, I think I was at MetLife recently, and it seemed like all the terminals were Shift4. Then there are these PAR guys, and sometimes Toast. When I see them, I'm like, “Oh, this is a public company.” I always laugh when I see them there.

6. SaaSpocalypse, AI, and why payments has not bounced

One of the things—and this is just my personal problem, and maybe it's because I'm getting older and all my thoughts are focused on talking about GPT—is that when I see a payment company, I always read the 10-K, nod my head, and say, “Okay, I understand what they're doing.”

Then, if you were to ask something like, “Andrew, tell me the difference between PAR, Fiserv, Global Payments, and Shift4. What are they doing? Where exactly in the payments ecosystem are they?” I don't know if I could tell you. So what does Shift4 do?

Maybe I don't want to go into the details of its differentiation versus each individual company, but if I were to look at Shift4 versus Visa versus Fiserv, for example, what are the differences, and what exactly does Shift4 do?

Yeah, I mean, I tried to lay out some of those aspects in the letter, but I think the ones that people will be most familiar with and probably consider the gold standards—I would say those are definitely the gold standards of the industry.

One of the simplest points of differentiation you can think of is: what is Shift4 compared to some of the other payment processors? One kind of spectrum would be having a card present versus not having one present. So you have your Stripe and Adyen of the world, which, again, I would say are probably the gold standards of the industry.

Definitely, yes, definitely great businesses. The genesis of these payment processors goes back to how the world actually works. It still works this way in a lot of places, but when e-commerce became a reality, you had traditional payment processing, which was a bank-acquiring process.

What used to be just accepting a card using a physical terminal became different when you had an e-commerce website, because there was no physical terminal. So how do we accept cards as an online e-commerce business? That's when you created a virtual payment gateway.

Over time, people like Stripe and Adyen were saying things like, “Why does it make sense that there's a gateway and there's a payment processor? It has to be the same thing. Why do I have to get a gateway and then a payment processor? Can I just get one solution?”

To simplify drastically, Stripe and Adyen took 2 separate things that were pretty outdated in the e-commerce world, where Amazon is taking over the world, and said, “Here's payments in the form of an acquirer and a gateway in one, and that's your solution.”

But again, their genesis is that the card is not present. In e-commerce, you enter your card details. They're great at it. Shift4, if you look at almost all verticals, the card is present. You eat at a restaurant, you go to the stadium, you shop at a Hermès store—you physically touch your card. There are some important differences here.

The other vertical I would say is really important is what is a very overused term: integrated payments versus non-integrated payments. I'm sure you've been at a restaurant where they would take your order, and then at the end of the day they would take a little handheld terminal, enter what your sale price was, and then hand it to you to tap.

This physical, dumb payment terminal is not integrated with anything in your system. It's very easy to do something wrong, and the data doesn't necessarily go to all of your accounting software. It's not integrated with anything.

Unlike, for example, Fiserv or Global Payments, where there are very often non-integrated payments, Shift4 literally does programmatically integrated payments.

And so, if I'm in a coffee shop and I order a large coffee, the guy types it in, adds whatever tip I wanted, and then turns the terminal back to me and I put my card in—that would be integrated, if I'm thinking about it correctly.

That's right. That's right.

Can I ask you 1 quick question? You mentioned Stripe as a non-card-present product, right? As far as I know Stripe as a consumer, when I go to a food truck or something like that, the guy has a little white Square that he plugs into the top of his phone, and then he swipes. It seems like the card is present.

Or is it just—so, I know them that way, and of course I know they're bigger, but if someone were to listen to this and say, “Oh, well, it's Stripe, it's a gift card. How does this compare to Shift4?”

You might be thinking about Square.

Oh, it's Square. Okay. Yes, that makes sense.

Square definitely has a strong presence in the card space, and it's also a little bit different in that it obviously has a very, very big connection to the Cash App consumer.

Yes, there are many of them. And they have this Tidal acquisition. Maybe they'll dominate the music business someday.

Yeah. I think all these points, like payments, are really complicated. One of the things that I think is really attractive about Shift4 is that, unlike Global Payments or Fiserv, you can take this very challenging, difficult-to-understand landscape and boil it down to, “I understand why we win in certain verticals.” If we continue to do well in these particular verticals, it's very underrated.

So I think that's part of the appeal.

7. Restaurants: how Shift4 assembled the vertical

The verticals I probably know and think about best are restaurants, partly because of your article and partly because I had already looked at PAR and worked on Toast a little bit. So restaurants, and then a little bit of stadiums, I would say.

Maybe we could just break down what Shift4 does into “Let's do restaurants,” because that's the broadest and people are most familiar with it. What Shift4 does, why they have the right to win—everything is so different. I think people can figure out the rest of the verticals from there.

Of course. Yes, restaurants are a really important vertical. If you look at the business today and how they define an important revenue metric for the entire business, call it $2.5 billion in gross revenue minus network fees, approximately. The restaurant vertical is about $1 billion of that $2.5 billion.

It's a very, very profitable business. My numbers are somewhere around $450 million of EBITDA from the restaurant business. This is a restaurant business that, when they went public in 2020, in the heart of COVID, was over 80% payment volume.

Going back to how this company was formed over time, they compete with companies like PAR and Lightspeed. Obviously, Lightspeed is another public company. There's also SpotOn and Toast, obviously.

There are many different restaurant POS systems. Shift4 really established itself in the restaurant business by acquiring 3 very large local restaurant POS systems in 2017. When you think about Toast and SkyTab today, they’re typically running on an Android device with software from the cloud. You don’t have a server in your back office next to where you make pizza or something; this is cloud-based software that runs on an Android device.

The same goes for your handhelds and any other devices you may use, from players like SpotOn, Toast, and SkyTab. SkyTab is now called Shift4 Dine. Several groups simply couldn’t transition from a local POS terminal to a cloud product, and as a result, they suffered very, very much. Not only were they unable to make that leap, but it was also right around the time that Square came along.

Square was the first group to make software plus payments a real business model, before Toast came along. Restaurant Manager, Future POS, and POSitouch brought Shift4 a really large number of merchants—about 80,000 restaurants. The whole point was to take these restaurants that use POS software and tie payments to it. That’s really, really attractive because when you tie payments to what was an on-premise POS software, where the bulk of your revenue was from the initial sale and your service fee was pretty low, the revenue increase you get from tying payments is what I call a 50- to 80-basis-point spread.

It’s like a 10-fold increase in your revenue—well, not from your income, right? That’s a 10-fold increase in your profits, right? The revenue may be small, but it’s the extremely high gross margin you get. Essentially, both increase because the margin is extremely high. All I’m saying is that they bought stores with gold, and this restaurant cohort still exists.

8. Shift4 Dine: the balance sheet line nobody is watching

This became a scenario where there were 3 original POS systems and software in restaurants that they bought in 2017. They bought Focus POS in 2023, Revel Systems in 2024, and now they’re replicating that scenario internationally. But the most important thing about restaurants—and I’m sure we’ll get into this more—is that in 2021 they launched their first native POS product. That’s what Shift4 Dine is now.

One of the realizations I came to as I was really ramping up my work here is how quickly this product is being implemented and how many people don’t notice it. Partly, that’s because they don’t necessarily give you their segment breakdowns off the top of their head. But if you look at Shift4’s balance sheet, the easiest way to break it down is to see that they have a line for gross equipment on lease.

The net amount is on the balance sheet, but you can get the gross amount by going to the footnotes. It’s quite clean. Before Shift4 Dine POS launched in 2021, there was a $40 million nominal-value line from their original Harbortouch POS systems. To give you a little bit of a year-over-year basis, it was about $70 million in 2021, $110 million in 2022, $180 million in 2023, $250 million in 2024, and $340 million in 2025.

Now we have a run rate of $400 million by mid-2026. You can walk away thinking, “Okay, I know that, roughly speaking, each Shift4 Dine POS system costs Shift4 $2,000 per unit.” I know that each workstation costs, pick your number, roughly 300,000 to 350,000 Australian pounds per workstation. Choose your spread number; I use 80 basis points. Then there’s $29 per month for a workstation.

I’ll leave it to the listeners to calculate it themselves. But this progression from $70 million in 2021 to the current sales pace of $400 million—a quadrupling in a fairly short period of time—results in significant economies. I think people don’t really appreciate that, for the first time in a long time, Shift4 has a really strong organic, native product.

It’s not just about buying old POS systems and hoping to further tie in payments. This is a real organic growth story.

9. PAR, Toast, and the competition pushback

Let me ask 2 questions about this. When you lay it out, it sounds great, but again, I did a separate podcast about PAR Technology, and I’ve gone through it a few times, and it’s a little different. It was more about, “We’re going to beat McDonald’s back to back, you know, we love it.” It wasn’t so much about growing organically from existing customers.

When I look at Toast, Toast must have disappointed the stock market. I don’t follow it that closely, but I just look at the past year. Last year it was $40; today it’s $15. I don’t know at what price it IPO’d, but I’m sure it’s gone down significantly since the IPO. I think it IPO’d in 2021 at around $80. Oh no, sorry, that’s the PAR stock chart I’m looking at. I need to be better prepared.

But anyway, I don’t think Toast succeeded either. For both of them, the pitch sounds very familiar. The 2 things I would push back on are, number 1, I’ve heard this proposal before and it sounds great, but it just didn’t really work out. It could be that all these guys—again, PAR, starting at a much higher multiple—are going to do it. Maybe so, or maybe we’re facing a back-end SaaS apocalypse.

The other thing I’d say is, “It seems like there’s really a lot of competition here.” As you write in your letter, you detail how someone who uses Toast, if they switch to Shift4, can save about $40,000 over 5 years. I think that’s the cost-saving strategy you’re laying out, and I’m like, “That’s great.” But doesn’t that lead to a competitive response where Toast protects its customers, and you run into a growth wall because everyone is cutting prices?

I’ve told you a lot, but it seems like this is a competitive industry. I’ve heard this before, and it seems like competition always comes up, and these stories just didn’t work.

Yes, that’s fair. I believe there are many differences between PAR specifically and Shift4. I don’t have all the answers, and there are a lot of very smart investors who own PAR, so I want to say that I’m very open to being corrected, and I’m sure I will be.

One of the fundamental problems with PAR is that they try to go after these corporate accounts, which is great, but PAR also doesn’t really get monetized through payments. My understanding is that they have a little bit of payment monetization, but it’s actually a gateway.

When you sign up at Wendy’s, or anywhere, part of the problem with these customers is that they’re just not going to go into a restaurant POS terminal where they don’t have full flexibility to change their payment processor. Because of their scale, they’re going to negotiate this payment spread to such a low rate that they need a gateway that’s neutral to the switch and allows them to go to Chase Paymentech, Fiserv, or Global Payments and just say, “Give me the lowest rate.”

When you’re PAR and you’re trying to get those kinds of clients, or when you’re a QSR that’s doing phenomenally well, I would say that the main problem with PAR is the QSR. Both are aiming for enterprise-scale customers, so you can’t monetize payments. That’s problem number 1. PAR is just not comparable.

Toast is doing phenomenally well. I would say it’s expensive to me, but I think it’s a phenomenal company. They’re doing very well. They add a lot of net new locations every quarter, and it’s a very sticky product, so it’s hard to argue with the fundamental KPIs they achieve.

If you think about POS terminals for dine-in, the real players are Square and Toast. Square is definitely something to worry about, and they’ll play at the lower end of the spectrum. Then there’s Toast. If you took Shift4 Dine POS, Square, and Toast, I would say all 3 of those groups are winning pretty heavily right now.

The question is, where does that growth come from? I think people don’t realize that Shift4 Dine POS now has, so to speak, 50,000 locations. Toast is much larger, with 160,000 locations. I’m going back to a similar 50,000 restaurant locations in the U.S. for Square. Together, that gives you 260,000 locations, but there are 800,000 restaurant locations in the United States.

Many of these locations are still using the old Oracle RES 3700 POS system. Many of these groups still use the old NCR system. A lot of these groups use TouchBistro or HungerRush, which is part of the reason why Shift4’s M&A strategy has worked so well in restaurants: the world is really fragmented.

I know you’re in New Orleans, and I’m from New Orleans. Whenever I think about these things, I think about the fact that when I go to a local restaurant, a new chain restaurant, or somewhere else in New York, there’s always a handheld, right? But when I go to some of the nice New Orleans establishments, you often walk in and your server shows up with a processor with a little piece of paper on top to print the checks. They still have old systems, and you think, “Oh, you have to dial a phone number to get a card?” They still exist, and that’s where all these conversions are coming from.

Yes, it is. When you think again about the specifics of the U.S., that creates its own challenges and opportunities. There are 800,000 restaurants—that’s 50,000 new openings a year. Every year, you have a cohort of 50,000 that’s ready to be captured.

That’s also kind of a problem because, obviously, those 800,000 restaurants experience deaths as well. There is restaurant failure.

10. Credit card surcharging and the 0% processing pitch

Let me ask you a small question. This is so far afield, but I have to ask. I get angry when I go to a restaurant and all the restaurants have a 3.5% fee if you use a credit card, right? They try to pass it on, and it’s really grown in the last 3 years, I would say.

I’m not going to say right now whether this may prove or disprove the thesis, but it’s true. This is a business that receives partial payment depending on the volume of payments. If everyone is pushing you to cash, I think that’s wrong, because I think restaurants overestimate the cost of just carrying cash, security, and all that. But if everyone is pushing you to cash, and Visa and Mastercard are always using their oligopolistic power and setting prices, is that a risk in the long run? Or how does it affect the thesis at all?

Oh, that’s a great question. I had to cut myself off on the letter, but I think this is actually a significant positive for Shift4. One of the reasons I would say that is because what you call a credit-card surcharge is a very common phenomenon that is becoming much more common.

When you’re at Chateau Café here in New Orleans—

Oh, my God. You just said my mom’s favorite restaurant. Andrew, can I let you in on a secret? I hate Chateau Café. Le Petit Café is 2 blocks from downtown and is much better. I hate Chateau Café.

Well, you know what? They use Shift4 Dine POS, so that’s where I go.

When you go into Chateau Café and they take credit cards, they say, “Why are we paying this 3% credit-card fee? Let’s just get rid of it.” This trend that you’re talking about is really gaining momentum.

People like Shift4 have taken advantage of this. Through their distribution channels and internal sales reps, they are essentially positioning and advertising Shift4 Dine as a 0% payment-processing-fee solution. They say you can pay 0% for payment processing because, with our solution, we’ll set up your credit-card surcharge so that it automatically passes through.

And, by the way, we don’t charge for our equipment either. You just get it. Do you want to pay $5,000 for Toast and not have a credit-card surcharge, or do you want us to set it up for you? With Toast, you can obviously also do a credit-card surcharge, but there are still a lot of different systems that don’t have that configured as a basic function.

The reason I say that is that I think it’s a significant positive, because now you have kind of a convenient middleman dynamic. If you’re Chateau Café, and you implemented this credit-card-surcharge process a year ago, and Andrew Walker’s mom still comes in for coffee every day, and you see from your numbers that you haven’t lost any customers, what incentive do you have to push Shift4 on its payment-processing spread? You actually have no incentive.

What incentive do you have if Square comes to you and says, “I can save you 10 basis points on payment processing”? What’s the point? I’m already skipping all of this.

I actually think that this transfer of payments away from credit cards is a very significant positive. It is worth noting that this is not legal in every country. Shift4 Payments is currently in the process of expanding internationally. They just launched in Spain and Australia, and they have been operating in the U.K. and Germany for some time now.

That was partly another reason why, when you mentioned that it’s a very competitive field with all these systems that we all know about, part of what reassures me is that the numbers I put out for gross deployed assets for Shift4 Payments POS are all mostly U.S. deployments. You can pick whatever numbers you want to assume for international payments, but they’re just starting to work there.

I think the fact that credit cards charge fees is a positive thing.

11. International: buy the sales team, do not build one

Let me ask you a quick question about international payments. I don’t want to go too deep into international. It’s already been 40 minutes, and I have so much more to ask you, but just on international business: when you have a business—and I’ve turned down a lot of businesses where, if you’re a financial investor, part of the problem is the local regulatory burden, right?—this can be quite extreme.

When I think about Shift4, all these restaurants that you sell to require a local sales force and local specialization, as you point out. You have to know whether or not you can process credit cards, taxes, and all that. There are already people in foreign markets who have that knowledge.

You’ll have to hire a sales force and engage in this turf war to capture accounts. I understand that everyone wants to develop, and there’s a certain amount of technology spending and all that. But I think my question is only about the international market, because I don’t think you’re saying, “Hey, if international business doesn’t work, this thesis is ruined.”

But I hear people talking about the international market as a free call option. Apparently, they just completed the acquisition of Global Blue, and they waste time on it. I look at the international market and think, I don’t know why we have the right to win here. It seems more like empire building. I would prefer that they just focus on the core market.

I just love asking you these questions about the international market.

Yes, that is very fair. This will also touch on various aspects of Shift4’s mergers and acquisitions, because part of what they said was, “There are a lot of companies that have tried to go international, and it hasn’t worked. If you look at how we work internationally, it’s completely different.”

If you look at the history of Shift4, all the way back to its founding in 1999 and up to its IPO in 2020, the business was almost 100% made up of external sales representatives. They worked through 7,000 different external partners, all these very small ISOs and VARs that served exactly the kind of clients like Chateau Café, where they had a local portfolio of 40 different clients that they were helping with IT.

That’s how Harbortouch and all these other products for Shift4 initially came to market. I’m sure we’ll talk about that later when we get to some of those acquisitions.

When they went to the U.K., Germany, and some of the other countries, they intentionally used the same approach: a sales team working through a local distribution partner, a local ISO, or a local VAR. Until you reach the right density, there’s no point in building your own internal sales team in a specific country until you’ve really increased volume.

Compare that to Australia, where they bought SmartPay instead. SmartPay is one of the things they said they definitely don’t want to do again. Basically, when you get down to it, what they said didn’t work for people who tried to go international and failed was building their own sales team from scratch and thinking it would work in any reasonable timeframe.

So they’ll either work through a VAR, where their operating costs are variable, or they’ll buy a sales team that’s already in place and essentially just implement their own products. When they bought Vectron and SmartPay, those acquisitions had their own EBITDA and revenue, but mainly, they were buying a local sales team that already knew how to sell in Australia, was already productive, and had already proven itself. Then they could just give them a better product and say, “Go and sell.”

12. Is organic growth about to hit a wall?

Let me move on to the next topic. I’ve considered this company a few times before. I know many friends who have been doing this for a long time, and I know many friends who gave up on it.

I wrote to some friends when we were talking about Shift4 and asked why they had turned it down. I also had some great calls to Trata and very interesting discussions. They're sponsoring this episode, so I'll joke around a bit too, just to give the sponsor a say. Let me tell you about the 3 most interesting types of resistance that I’ve received from other people, because I find them really interesting.

I think the most common objection I’ve gotten from people is, “Hey, we’ve talked about this. We haven’t discussed the valuation yet, but it’s trading pretty cheaply.” You can tell me if I’m saying something wrong, but maybe 6 to 7 times EBITDA for a company that says its organic growth is now about 11%, right?

That’s right.

I think they believe they can maintain that rate. You can tell me if you feel I’m wrong. The most common response I get from the bears is, “Hey, the easy gains from market share that you were talking about—taking away mid-sized restaurant groups that use super-old local servers—are gone.”

They say, “The organic growth rate is going to drop really quickly, and once you do that, you’re going to start fighting the customer churn that you’re talking about.” All of a sudden, you start seeing organic growth of 2% to 3%.

I think a lot of people who avoid it are saying, “I just don’t want to be there when the organic growth rate really starts to decline,” because they think there’s a wall in the way of that organic growth rate.

You mentioned something like, “Hey, the big 3—Square, Toast, and these guys—have 250,000 of the 800,000 restaurants.” It’s a long road to growth, but once you start counting the churn, you start talking about a pretty rapid slowdown.

Yes, these are all valid questions. Specifically, I think you phrased it correctly: 6.5 times EBITDA, and the company is talking about 11%—let's say 10%–11%—organic growth. I think part of the reason some people are wrong is that they have claimed higher rates in the past, and so on. We can come back to that later.

But I would say that I think there's some misunderstanding here about how these old POS deals work. One of the things that I think surprises people is—you can ask the company, but you can approach it your own way—that the vast majority, let's say over 80%, of the Shift4 Dining POS installations are 100% new merchants who have switched to Shift4. This is not a transition from old POS systems, and I think people don't quite understand that.

Part of the reason for this is that you go to, again, Chateau Cafe—or wouldn't that be a good example? You go to one of these older retailers that use POSitouch, that use Future POS, and you go behind the counter and see this essentially 20-year-old software, and you're like, “What are you doing with this thing?” But you see the Shift4 logo for payment processing.

For almost all of these cases, the goal was to take a software-only customer and attach payments, not transfer them to Shift4 Dining POS. If they want to upgrade, that's fine, but your goal is not to move them to new hardware, because then you'll incur the cost of a whole new piece of equipment that you didn't need to have. In fact, you only need to link payments.

And if you talk to a lot of these groups that are still—to be clear, 60,000 restaurants are still using all the legacy systems that Shift4 has—they'll say, and I'm summarizing between a lot of different requests, “Why would I switch to Toast? Why should I switch to Shift4 Dining POS? I pay $0 per month for my software. I bought this license somewhere in 1999. We're still having fun.” I have a computer literally sitting right here, and it works. Sometimes it breaks, and my ISO guy comes in, turns on the button, and it works again.

So why would I sign up for a monthly payment if my system is working perfectly fine? Shift4 actually takes these groups and says, “That's fine. But add our payments to that, because you're using Fiserv. You used Fiserv, and they charge you $70. We will charge you $50.” They can do that because they have these 7,000 ISO relationships where they just incentivize them to add payments to all these shots on goal.

Anyway, when people say, “Oh, there's this narrative that they need to fill the sales funnel of these POS terminals because without these transitions from old POS terminals to SkyTab, the growth rate is low or something,” the vast majority of people who come to SkyTab and Shift4 for Restaurants are 100% new to Shift4. They didn't come from the old POS terminals. So this is the most important point.

And then this is probably not the answer people want to hear, but a price of $42 a share solves a lot of problems. When you're at $90 or $100 a share, you really need to figure out the most common thing I hear: What is organic growth? I don't know if organic growth is 5% or 10%, maybe 12%, and I can, vertical by vertical, explain why I think it's actually double digits. I think you're paying for zero or less now.

13. Do you trust this management team?

Well, that's not true. I can tell you that for sure. Let me get to that, because I think it actually brings me to the next question. This is probably the question I've been asked most often. Organic growth comes to mind, but you said, “I don't know if it's organic growth—5% or 10%. It could be 12%, right?” The company is planning 11% organic growth in the second quarter. This does not mean that this is a long-term or forward-looking forecast, but that is exactly what they suggested.

I've heard it when I've talked to people, and I understand it, and I think people will hear it from you, too. I've heard from many people who simply don't trust management. I've heard a lot of people say, “Global Blue was a mistake they made for themselves.” The company, as you said, developed a medium-term cash flow forecast and then canceled it. And I hear, essentially, a lot of distrust in management. In the second quarter, they buy back shares, and then they significantly reduce the share buybacks.

And then, as I said before, the CFO says a week ago, “Our share price is attractive. This is probably a gift. We are going to buy back shares. We couldn't buy in the second quarter because we had all these temporary cash flow hurdles, and we want to stay within our leverage targets.” But I just feel a general distrust of management, and it's a little scary when you have a company that's organically growing in the eye of the beholder, and I don't really trust management, and all these integrations are happening at the same time. It's a little scary.

So, again, I've been hitting on you a lot, and it's hard to say whether you trust the management, but I feel like this is the most common case that people turn to when they talk about the downturn.

No, that's fair. I think, to draw attention to one point, there's no doubt that I think Global Blue will be targeting the same economics that they've had in other past acquisitions. It seems almost impossible, because they had some acquisitions that, as you detailed, they bought at a price that was above 1 turn of EBITDA after synergies. So if that's the limit, then yes, you can't always do that.

They paid quite a lot, optically, for Global Blue. They paid about 12–13 times, depending on how you look at it. But in my opinion, what they have planned is very similar to reality. There is nothing far-fetched about the $80 million in synergies they expect to achieve next year on top of Global Blue's performance.

They are all based on a similar Shift4 cross-selling scenario, right? Global Blue, for those who are not familiar, is tax-free shopping—the largest provider of tax-free shopping. So when you go to Paris and buy a handbag, there is VAT charged there, 20% VAT. If you are coming from the US or a country outside the EU, you can reclaim this VAT when you leave the country.

Global Blue has 70% of the duty-free market, and it's a very, very, very flexible product because you integrate with customs and tax authorities, and you have clients like Hermès and Gucci who are very, very sensitive about how their end customers are treated. So the main idea behind Shift4's purchase of Global Blue was that you have this cool app with a lot of market share. How can we reach all these merchants and effectively tie payments to this cool software?

I think we'll have a better way to evaluate this in 12 to 18 months than we do now. But this is very important. Getting back to your point about whether I trust management: yes, that's the answer to that question. There's nothing that affects sentiment like the stock price, that's what I mean. It's easy to have a really bad story when the stock price is going down, and vice versa.

I think the reality is that part of it may have been the fault of the current leadership. Part of it, I think, could be attributed to Jared, or it could just be the result of overoptimism, but I really think a lot of it came from that billion-dollar free-cash-flow exit-rate forecast that had to be scrapped. If you look at it before, they never missed a prediction.

That was kind of a mistake, and now you have a situation where everyone who was once skeptical of Global Blue now has the war in Iran creating some obstacles and saying, “See, I told you so. It's like it was a mistake to buy.”

My thought, at a very, very high level, is that you would be absolutely crazy—and, again, I think maybe this is a little bit of an exaggeration—if you looked at their track record since inception and said, “Hey, these guys have grown EBITDA 15 times since the acquisition in 2020.” In terms of per share, this is 12 times. They increased EBITDA per share by 12 times over a 7-year or 6-year period. Do they have the right to the presumption of innocence? My answer to that would definitely be yes.

And, by the way, the share buyback: they bought back 10% of the shares over the last 3 quarters. I like it. I think this is a great idea. There was this situation recently where people were wondering why they didn't disclose exactly what the acquisition was that they signed up for in the second quarter, and wondering if they were hiding everything. People came up with all sorts of crazy suspicions, but I understand it. It's always scary.

When you start to doubt yourself, you just think, “We've talked about SaaSpocalypse a few times now, right?” SaaSpocalypse, I think, will peak in March, and IGV will drop by about 50%, and it's gone up quite a bit since then. Payments are falling wildly over the same period of time. The only difference between SaaSpocalypse and payments is that the software has been significantly repriced, while payments have not.

This applies to payments in general, but it surprises me a little. I was working a lot on software at the time, and you said, “Nothing affects the narrative like price,” and I think price made a lot of people think, “Hey, all these software companies are terminals with zeroes on them.” But, as you mentioned, it's harder for me to imagine AI displacing payments just because it's a lot of local restaurants.

Are you telling me that the local restaurateur, who you said is still using a computer in 1999, is suddenly going to start using AI to manage all of his payments? This seems pretty crazy. There are a lot of legal and tax obligations, all of that. What is the argument for AI in payments, or simply, what argument for doomed payments is creating so much bearish sentiment among all of these?

This is a very good question. You're right that they definitely haven't recovered that much. My overly simplistic view of it is that there are some, like Fiserv, that have idiosyncratic issues that maybe prevent them from going to this investor day, laying out all the points, and then the CEO literally leaving the business in the middle of a flight next month. I mean, madness.

I recorded a Fiserv podcast, and I remember one time a couple of people said, “Is the CEO a psychopath?” “Oh, I think it had to do with the fact that we weren't going to make an acquisition, and then they made an acquisition, but people wondered if he was a psychopath, and that's always fun.”

I think within payments, there are some idiosyncratic reasons why things haven't taken off with software, but at a high level, it's also about payments, which are generally a little more sensitive to the business cycle. People look at the rate hikes now and oil at $106, and they say, “Oh my God, everything... Yeah, all these payments are consumption-driven, consumer-driven. Why should I own that?”

I think that's probably a simple approach, and my point is that it's up to you. Even if sales at one restaurant might be plus or minus 2%, whatever it is, when you have 50,000 new installs, it trumps anything in terms of same-store sales at those restaurants. It's a nonessential factor.

It matters whether you're Global Payments or Fiserv and you live and die by whether it's going to be 2% growth or whether it's going to be negative because of costs. But when you're Toast or Shift4 and you have that many new installs, it doesn't matter.

Customer additions have jumped a little bit, but again, it's hard to equate that because it's such a phenomenal business, and it's hard to equate what's going on there. That's my point. I think people tend to look at payments in a broad sense and say, “Payments are impacted by consumer spending, rates are going up—bad.”

14. The M&A history, and the bids they turned down

Let me change the subject again. I think it's more about management, but that's all I'll do, and then we can sort of wrap this up, because you've been generous with your time. It's been almost an hour at this point, but let's talk about the history of M&A here.

In late 2024 or late 2023, they said they were launching the process. There were a lot of reports that a lot of different strategic parties were looking at it. I think in early 2024, Bloomberg reported that Jared, who was still CEO at the time, said, “Hey, we just don't think any of the offers are a fair valuation for us, and we're going to reject all of them and go our separate ways.”

In Q1 2024, they called and said, “Look, we have a high valuation for the business. You can look at the analyst targets. We're on the high end of the analyst targets. I think that would mean a sale price of $120 to $140. Nobody has achieved that, so we remain autonomous.” Then in 2025, they went the other way and actually bought Global Blue for a pretty significant amount, with the prior synergies.

With this story, and also another thing I'll mention—we talked about the share buyback. Jared bought some shares. He bought about $16 million worth of shares when the shares were around the $80s, and he's buying about another $20 million when the shares were around the $40s earlier this year.

How do you think the company thinks about its fundamental value, its strategic value, and its path to growth when I look at all of that? Are you okay with that?

Yes. Maybe a little bit differently than the founder-owner, Jared. I think he said, quite frankly, “When I think about my kids' future, I don't think about them running Shift4. I don't think that's going to happen.”

Well, he's not running the ship anymore. So unless he's going to do this activist campaign and then reestablish himself, I don't know. It's not going to be in my family legacy forever, as a business founder.

I think he's very commercial about his business. To some extent, that gives me some optimism because at $40 a share—$42 a share right now—with Jared owning 28% and then buying back a bunch of shares, I think he bought $36 million earlier this year in the $40s. His point about being an activist shareholder is that he's absolutely in the game.

If we sit here and we're at $42, in a year or 18 months, I think you can definitely expect him to come out to the board and say, “Listen, guys, it's time to do something here. It's time to lock in this price.”

Look at the history of every quarterly earnings call that he's been involved in since they went public. He's not shy about voicing his opinion on whether the company is worth something or not, and he's also a pretty aggressive person. I think that's more of an option for those involved in this, but I think that an acquisition or a forced reshuffle is absolutely possible here if the situation doesn't resolve itself.

It's funny because I don't really know how the head of NASA works, but I would assume that in 2028, if there's a change—well, there's a change of administration, because if we don't get a third-term president, there's no third term—I would assume that he's going to step down as head of NASA.

I kind of thought, “Hey, is there any catalyst in 2029 when he steps down as NASA chief? Maybe he owns 35% of the company through a stock buyback, and 2 months after he's fired, you get a 13D report that says, ‘Hey, I'm partnering with a private-equity firm, and we want to take this company private.’” I kind of thought about that in the back of my mind.

Yeah. I mean, Starlink—they're doing this, they're doing this—it would be an easy acquisition for Starlink. I would assume that Starlink and SpaceX, at that valuation, could acquire pretty much anything, right?

That was great, Andrew. Again, I can't tell you—I learned so much from that description, just in terms of the fact that we're not going to get ISOs, but in turn, there's a conflict of interest when they come out with a better product that's cheaper and the ISOs are like, “Well, we're going to get paid less for it.” There are so many interesting details.

I'll put a link in the show notes, but is there anything that you think we should have touched on that we didn't get to?

Maybe just as a very general point about organic growth, because I think it's important for people. One of the things I would say to people who want to go down that rabbit hole is that today, more than ever before—probably in the history of business—you have as much transparency as you've ever had about creating your own organic-growth metric.

Take about $1.1 billion of EBITDA in the business. Global Blue, before they acquired it, was a completely standalone business. It was a publicly traded, standalone business. You can look at any number of Global Blue data points and come to your own conclusions about what you think is a fair or unfair rate of organic growth for that part of the business.

The management team will tell you, and Global Blue's history will tell you, somewhere in the high single digits or low double digits of EBITDA growth per year. Finaro was a very large acquisition that they made that actually gave them the European rails to run their payments business internationally.

A lot of people don't know that Finaro still publishes its own separate financial statements. That's about $30 billion of the $250 billion of payments volume, and you can see the exact growth for that particular segment. I'm happy to point people in the direction, but you can see that it's growing very quickly. You can get the organic growth rate of Finaro.

Going vertically, there's usually a way to get to organic growth. Using something like, “Oh, they're doing M&A,” is probably a lazy way of dismissing what, in my opinion, is a really, really good business.

It's great. Let's see. Okay, I think we've got it all. I would just ask one more question, if I may. There's a pretty high interest in short positions. I don't want to say it's crazy, and they have convertibles, which I haven't looked at. I think they're way out of the money, so I doubt anyone is really hedging them with convertibles. But about 25% of the free float is short.

Yeah. Look, I think I've looked at everything: the distrust of management, the issues that will arise, and the fear of AI.

Is there anything that you were shorting that explains why the interest in shorting is so high? Again, you have a great public paper, and I'll put a link in the show notes.

So I think when they bought Global Blue, it was a $2.6 billion acquisition. They have a $1 billion convertible that converts into 9.8 million to 12.2 million shares in 2028. You can actually see that increase in 2025 when they issued that convertible. Pick your number, but my number is probably 6 million to 7 million shares.

And when you go down below the $80 threshold, that means you're issuing 12.2 million shares. When you go up above $100, you get to 9.8 million shares. And so, when you actually go down, you have to hedge more on this convertible position. It's not really known what that number is, but I think whether it's 8 million shares actually shorted or 7 million, it's hard to know. It's not 25%, that's for sure.

Okay. But I haven't heard a really big short thesis or resistance. I certainly haven't heard anyone talk about it. I think you're asking a lot of questions that I don't know the answers to: What's the actual organic growth rate? Do people worry that Global Blue is not going to be the same acquisition as the historical stock? But I think a lot of those issues are being addressed by the valuation at this point.

That's understandable. Again, I was just looking at the 2027 conversion, which I think is pretty bad, and it's 12.2 million shares. I thought, "Oh, the stock is at $40." You see this high short interest in the conversion. Sometimes it's a conversion, but I'm like, "Nobody's converting, hedging against a 12.2-million-share conversion at $40." But I didn't know that about Global Blue's stock.

Yeah, it's a mandatory $1 billion conversion in 2028 for Global Blue.

And that explains some of the questions that my GPT was having in the chat when I was preparing for this podcast. I was like, "Convert, convert, convert." I was like, "So, prefer, prefer." I was like, "Okay, whatever." Cool.

Andrew Carreon, you were great. I really appreciate you coming. Please don't go to Chateau Cafe anymore. Le Petit Cafe is where it is. But I look forward to seeing you. Talk to you soon, buddy. Thank you very much. A little disclaimer. Nothing in this podcast should be construed as investment advice. The guests or the host may have positions in any of the stocks mentioned in this podcast. Please do your own research and consult a financial advisor. Thank you.