Shift4 Payments, Inc. (FOUR) Earnings Call Transcript

Hello, and welcome, everyone, joining today's Shift4 Q2 2026 Earnings Call. [Operator Instructions] It is now my pleasure to turn the meeting over to Tom McCrohan, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone, and welcome to Shift4 Second Quarter 2026 Earnings Conference Call. With me on the call today are David Lauber, our CEO; and Christopher Cruz, our Chief Financial Officer. This call is being webcast on the Investor Relations section of our website, which can be found at investors.shift4.com. Today's call is also being simulcast on expasis, which can be accessed through our corporate ex account at Shift4. Our quarterly shareholder letter, quarterly financial results and other materials related to our quarterly results have all been posted to our IR website. Our call and earnings materials today include forward-looking statements. These statements are not guarantees of future performance, and our actual results could differ materially as a result of certain risks, uncertainties and many important factors. Additional information concerning those factors is available in our most recent reports on Forms 10-K and 10-Q, which you can find on the SEC's website and the Investor Relations section of our corporate website. For any non-GAAP financial information discussed on this call today, the related GAAP measures and reconciliations are available in today's quarterly shareholder letter. With that, let me turn the call over to. Taylor? .

Thanks, Tom. Good morning, everyone, and thank you for joining us today. I'd like to acknowledge the entire Shift4 for delivering strong quarterly results, including powering payments flawlessly at many of the World Cup matches, This tournament was a great unifying event and an unparalleled showcase for Shift4 ability to help merchants deliver the moments that matter on one of the sports world's greatest stages. Shift4 technology can be found at every match in both the U.S. and Canada and of course, across the broader experience economy of restaurants and hotels. . It was especially rewarding to have the finals in our backyard and hosted by a great Shift4 customer, MetLife Stadium. Kudos to our team for demonstrating once again our ability to operate in demanding high stakes environments such as the World Cup final. Believe it or not, this was not even our busiest quarter for Sports and Entertainment despite the well-attended matches across so many of our customer locations. While there were clear signs of increased spending across restaurants, hotels and other locations in host cities, our stadium customers are quite accustomed to hosting large crowds, whether it be NFL, MLB, concerts or even events like Formula One. We are with them for all these events, and I think the World Cup was another healthy demonstration of that. I'm proud of our results this quarter. They demonstrated resiliency despite ongoing travel disruptions and validated our deliberate diversification across the experience economy. With that said, 3 themes will guide how we talk through our second quarter results. First, the durability of our diversified business continued to show through, delivering resilient growth even as the operating environment stayed challenging. Second, our international expansion continues to scale and compound, and I'll share why we're increasingly confident in its trajectory shortly. And third, I want to spend some time on what I call the heart of our story. Our position across the experienced economy isn't by accident. Many have asked about our competitive positioning in one vertical or another, but miss the big picture. We are exceptionally well positioned to handle in-person payment experiences from SMB to the largest enterprises. What we've learn from decades in restaurants is brought to hotels and then to sports and entertainment and most recently, luxury retail. We choose these growth paths, not because they're different, but to the contrary, they all demand a high-touch in-person experience that we are uniquely positioned to provide. And of course, we challenge ourselves to build new capabilities in areas like Unified Commerce, but with a capital discipline that demands results before risk. Diving into Q2 results, we delivered Q2 results above our previously provided guidance, including plus 34% year-over-year growth in gross revenue. plus 51% year-over-year growth in gross revenue less network fees, plus 39% growth in adjusted EBITDA and $21 million of adjusted free cash flow versus our $10 million guide. Adjusted for acquisitions, our organic gross revenue less network fees grew 11%, which is consistent with last quarter. We believe there is further room for expansion as we continue delivering our market-leading products to new geographies around the world. The performance we delivered this quarter in our payments-based revenue streams is a testimony to our durable growth. Total payments based revenue less network fees grew 27% in Q2, with the Americas-based revenue less network fees growing 19% and worldwide payments base revenue less network fees growing at 53%. I'll repeat that our most mature Americas market grew in the high teens, and our growth markets grew over 50%. As can be the case, this quarter was not without some challenges. The Middle East conflict remained a headwind and weighed on inbound travel to Europe and across several Gulf Coast countries. However, the overall impact on our Q2 results was slightly better than we had forecast. Said differently, we were able to absorb some of the travel disruption impact from strong U.S. to Europe travel strong performance in Asia and overall better-than-expected trends in same-store sales for both restaurants and lots. Chris will provide more details when he reviews our guidance, but we do anticipate continued travel disruption in the upcoming quarter, and our guidance now reflects that. Regardless, our Q2 results coming in above our guided KPIs speaks to the resilience of our diversified portfolio and our ability to operate through factors beyond our control. I also want to address same-store sales directly since that's been a recurring topic on these calls. As a reminder, we experienced softer trends in recent quarters among restaurants and SMBs in the Americas. This quarter, as Chris will highlight, same-store sales trends in restaurants and lodging were slightly better than our expectations consistent with what we saw in Q1 and a further sign that the trend is encouraging. That said, our full year outlook continues to assume a neutral impact on same-store sales, and we are not forecasting any material recovery in the back half of the year. We think that, that's the right posture given what we deem to be arguably stable trends in consumer spending despite higher gas prices. The bottom line regarding Q2, we delivered better-than-expected results relative to our guidance in a quarter that provided some modest benefits from the halo effect of the World Cup, offset by ongoing travel disruptions in [indiscernible]. Chris will provide more details on our full year 2026 guidance in a bit, but the bottom line is that we are tracking to deliver 24% to 27% FX neutral year-over-year growth in gross revenue less network fees this year. Moving on to international. We delivered another quarter of over 50% growth in worldwide payments based revenue less network fees as we continue to scale our business internationally. Some highlights in the quarter included -- we introduced our restaurant POS products, which is Shift4 Dine in Spain and Australia, and we are rapidly attracting restaurants to our platform. We continue to globalize all of our products for international markets and expect to introduce Shift4 Dine in many more international markets in the months and years ahead. Shift4 One continues to resonate with retailers in Europe, and we are now live in 12 countries, well on track to surpassing our annual goal of being live in 15 countries by the end of 2026. As a reminder, our Shift4 One product combines payments, dynamic currency conversion and tax-free shopping into a single device. This quarter, we added numerous retail cosmetic and jewelry merchants across Spain, Italy and the Czech Republic. You can find them in our materials we provided this morning. Merchants understand the value immediately, and I expect that we'll be adding thousands of merchants per month in the near future. In hotels, we continue to win excellent resorts and hospitality customers. This quarter, we added Massa Newton Resort, the Nora Hotel West Palm Beach, Wafford Bridge in Hotel, Radisson Hotel Winnipeg, just to name a few. Again, there's more in our materials. And our sports and entertainment capabilities remain unmatched. This quarter, we signed the Buffalo Bills and Texas A&M, along with new venues, including Tom Benson Hall of Fame Stadium and Splash Way water park. You'll continue to see us processing ticket sales for LA 2028 as well. Finally, in luxury retail, we signed several brands to our tax-free shopping solution, including Ralph Lauren, Burberry, Patagonia and Jiangxi in Japan. In an increasingly digital world, consumers are demanding more meaningful in-person experiences. As I mentioned earlier, we are uniquely positioned to address all aspects of the experience economy. We are beginning to see a meaningful amount of capital being invested in this concept of sporting events, driving commerce in the surrounding neighborhood with some interesting new concepts beginning to break ground, such as Miami Freedom Park and its surrounding retail and restaurant shops. We expect the same halo effect we benefited from this quarter at the World Cup to repeat itself with several other upcoming sporting events such as the 2028 LA Olympics. The second way we benefit from our position in the experienced economy is the daisy chain of relationships that leads to net new business. For example, our existing relationship with major casino resorts contributed to us winning many restaurants across the country. the ownership groups of these hotels often own restaurants and other entertainment venues and as such, wants to deliver the same experience to their guests. We are increasingly aligning ourselves with the operators who share our vision of connecting consumers with experiences and having a shared vision goes a long way towards creating differentiated products and capabilities supporting the growth and vision of our customers. Our competitive differentiation across hospitality and sports and entertainment is unique, and it continues to widen the gap between us and peers who either narrowly focused on a single vertical or only offer a point solution. We are the connective tissue behind the entire consumer experience, the same fan like grab dinner, catch a game, buy a jersey, check into a hotel in 1 night or the point of sale they're interacting. In the U.S., we still have meaningful market share to capture an incremental services to offer, and our DCC offering is live and has been well received by our first few customers. Before closing, I want to talk a little bit about the technical investments we've made recently. Our story as a public company has often been about the proof points. The customer is one, the verticals conquered the geographies open, but none of this would have happened without meaningful investment and innovation. To that end, this was a record quarter for technology investment and product development. We released the next-generation payment terminal application, internal management software, which includes dynamic currency conversion, as well as multi-location enhancements and a totally new quick service feature set within Shift4 Dine. I mentioned Shift4 One being live in 12 countries, which, as you can imagine, requires meaningful language in local feature customization, and we have integrated AI-powered propensity models across our TFS platform, which will continue to enhance the customer journey and allow for more refunds processed. Despite this, the disciplined approach we have towards managing expenses hasn't changed. We continue to maintain a relentless focus on driving incremental operational improvements and preserving our advantages in regards to minimizing customer acquisition costs relative to others in our industry. I'm of the view that there is always room for improvement. And while we already deliver margins that are commendable relative to peers, I do see a path to 50% margins as we scale our international operations and continue to better leverage the resources that we have across the global organization. Let me close on a theme I keep coming back to it this group because the data keeps backing it up. We can grow meaningfully without adding a single new customer, and we can drive real margin and free cash flow expansion just by continuing to do what we do well, integrating our business and deleting the parts we no longer deep. This quarter was another proof point volume of $61 billion, up 22% year-over-year, gross revenue less network fees of $624 million, which was up 51%. 11% of that was organic. Adjusted EBITDA of $284 million, which is up 39% and at a 46% margin. And our updated full year '26 guidance calls for plus 25% to plus 28% gross revenue less network fee growth or plus 24% to 27% growth on an FX-neutral basis. The macro environment remains dynamic, and I'm not going to pretend otherwise. but the diversification of our business, durability of our growth and caliber of the team we've built continue to give me genuine confidence on the road ahead. Our long-term numbers are the clearest evidence of why this model works. To remind you, gross revenue less network fees have compounded over 35% annually and adjusted EBITDA of over 40% annually since 2019, all achieved with cumulative equity dilution of roughly 15% during that time frame. said much more simply, we x the business with only 15% dilution in 7 years. I'd encourage everyone to dig into the prepared materials for the additional detail. And with that, let me turn it over to Chris.

Thanks, Taylor. Q2 2026 delivered record Q2 financial results that exceeded all our guided metrics while our growth algorithm remains intact or ahead. All of this performance is underpinned by the continued execution of our durable model, rapid integration and disciplined capital allocation. while continuing our strategic priority of diversifying both geographically and serving more of the experience economy. This diversification has afforded us the resilience to offset some of the travel disruption we continue to experience due to conflict in the Middle East. Gross revenue of $1.29 billion came in well above our $1.17 billion guidance and was up 34% year-over-year. gross revenue less network fees, or GRLNS, of $624 million grew 51% year-over-year or 11% organically, excluding contribution from acquisitions. . Adjusted EBITDA of $284 million grew 39% year-over-year, delivering a 46% margin and adjusted free cash flow of $21 million exceeded guidance as well. Now let's unpack this further. Volumes grew 22% year-over-year to $61 billion, while delivering blended spreads at 65 basis points. The Q2 volume mix was largely in line with our expectations, while same-store sales in the Americas trended slightly better than our expectations. Turning next to the disaggregated categories of revenue that make up the Q2 GRLNF. Beginning with our North Star on growth, payments based revenue less network fees that was $402 million, growing 27% year-over-year. This category consists of an Americas region that grew 19% year-over-year and worldwide, excluding Americas region, that exceeded our expectations, growing 53% year-over-year. The next category of subscription and other grew 8% year-over-year. And although on a year-to-date basis, we are exceeding the original growth algorithm outlook we expect this category to moderate in the back half, resulting in a low single-digit growth for the year. Finally, the category of tax-free shopping or TFS, grew 8% on a pro forma year-over-year basis. an improvement from last quarter's 4% growth. TFS results continue to be impacted by travel disruptions in the Middle East, but the overall revenue impact came in modestly better than our prior expectation of a $20 million headwind. Overall, we are encouraged by the resilience of the business that this growth performance expresses. Our growth algorithm remains intact or is ahead across all areas, and we delivered a consecutive quarter of low double-digit organic GROF growth. As a reminder, TFS was not part of our organic growth this quarter. but given we just celebrated the 1-year anniversary of the acquisition closing in July last year, TFS will roll into our organic growth calculation beginning next quarter. Adjusted EBITDA margins were 46%. And while an improvement from the first quarter, it is worth noting that we continue to scale our international operations and are continuously making investments in both product and internal initiatives. The encouraging outperformance we continue to see in the worldwide region validates all of these investments. Non-GAAP EPS came in at $1.32 per share. Adjusted free cash flow in the quarter was $21 million, which exceeded our guidance of $10 million, and on a non-GAAP per share basis, this results and $0.23 of adjusted free cash flow per share or 17% conversion from non-GAAP EPS. And when combined with Q1, this translates on a combined basis to a 52% free cash flow per share conversion for the first half. And now on to quarterly guidance. For the third quarter of 2026, we are introducing guidance as follows: GROF of approximately $650 million which embeds an approximate $25 million impact for travel disruption due to the continued Middle East conflict. Adjusted EBITDA of $310 million. and $180 million of adjusted free cash flow. As a reminder, we raised an incremental $1 billion of Term Loan B on July 8 to prefund the August 2027 maturity of our convertible notes. As such, adjusted free cash flow revisions are largely the result of the net interest expense impact with the balance resulting from the flow-through of the aforementioned earnings revisions. Additionally, gross revenue for the quarter is expected to be $1.3 billion. We are also introducing Q4 guidance ranges as follows: GRO&F range of $661 million to $711 million, adjusted EBITDA of $327 million to $352 million, and adjusted free cash flow of $176 million to $186 million, reflecting approximately 53% to 54% conversion. Similar to last quarter, we are only forecasting potential travel disruption from the Middle East conflict for the next 60 days. And thus, our fourth quarter guidance does not assume any impact from this. This all translates into full year guidance ranges as follows: GRO&F of $2.48 billion to $2.53 billion, up 25% to 28% year-over-year adjusted EBITDA of $1.15 billion to $1.18 billion, up 19% to 22% year-over-year, adjusted free cash flow of $465 million to $475 million, representing approximately 40% conversion of adjusted EBITDA and non-GAAP EPS range of $5.15 and to $5.35 per share. Again, both the EPS and the adjusted free cash flow revision or majority of the result of the incremental net interest expense resulting from the increased term loan B to prefund the August 2027 convertible notes and the flow-through of earnings revisions. Just some color on guidance. Although we now have an outlook that will favor the low end of our original guidance range, we are proud of the durability and resilience that the business is exhibited by absorbing the travel disruptions associated with the Middle East conflict in the first half of the year. However, given the duration of the conflict, incorporating an estimated $25 million impact to Q3 and updating the outlook for approximately $20 million of FX translation impact seems prudent to acknowledge and comprises the majority of the $40 million midpoint guidance revision. On an FX-neutral basis, our GRO&F guidance now reflects 24% to 27% year-over-year growth compared to an FX-neutral growth of 24% to 29% in our prior guidance range. Said differently, the midpoint of our GRO&F growth range has only been reduced by 100 basis points on an FX-neutral basis. And now last, on capital allocation. Every allocable dollar must compete for the best use and is subjected to rigorous process, while the output that guides us is return on invested capital and adjusted free cash flow per share. In Q2, we repurchased approximately 650,000 shares at an average price of approximately $38. We were intentionally conservative this quarter given current leverage levels and the cash consumptive quarter we were in. Cumulatively, we have deployed $625 million against the $1 billion share repurchase authorization announced 3 quarters ago and this has resulted in an approximate 11% reduction in non-GAAP share count for the authorized period. On debt capital structure, our Q2 2026 pro forma net leverage was 3.7x and and we maintain our view that we do not intend to exceed 3.75x pro forma net leverage on a sustained basis. Based on performance trajectory and guidance, the business is expected to delever by year-end to our long-term average net leverage level in the low 3s. As mentioned on July 8, we extended the maturity of our $550 million revolving credit facility, which remains undrawn and raised an additional $1 billion of Term Loan B at the same terms as our existing term loan B. with proceeds principally to address the August 2027 convertible note maturity. The net result is that we have successfully termed out our capital structure to 2031. Before turning the call back to Taylor, I want to thank our colleagues for their flawless execution at 1 of the world's grandest events of the World Cup and every venue you tirelessly executed to ensure that our customers could deliver the moments that matter in the most demanding environment. With that, let me now turn the call back to Taylor.

Thanks, Chris. And operator, we're ready for questions. .

[Operator Instructions] We'll take our first question from Dan Dolev with Mizuho.

Lots of good things here. I hope people pay attention to that as well. Chris question for you. Has anything changed regarding your capital allocation priorities? So for example, how are you thinking about buybacks, acquisitions and leverage here?

Yes. Thanks for the question, Dan. Yes. So I would start with the overarching phrase that our capital allocation framework remains unchanged. I think we have the benefit of having a few different value creation drivers within that framework, and we have to be prudent about how to balance it at all times, given how focused we are on driving return on invested capital, and so when you think about where we are, though, in this past quarter, I think it's fair to acknowledge that we had to approach things with a little more conservatism and that was very deliberate. . So the execution against the share repurchase in the quarter was certainly impacted by the fact that we acknowledge where we are on our pro forma net leverage level at 3.7x, and we acknowledge where we are -- where we were in a second quarter that is a seasonally cash-consumptive quarter. You take those 2 things together and the strategic decision was to be intentionally conservative at the time. Obviously, the cash flow generation seasonality changes in the back half of the year. And then in general, from a liquidity standpoint, we're in a much more improved position in light of the recent financing. Maybe 1 other thing I would say about it, though, is that as we think through the cash flow generation in these coming quarters, and the growth that we anticipate, I think it's fair to reiterate that within that capital allocation framework, it's not just about repurchases, it's also about making sure we continue to invest. I think something that we like to highlighted the fact that this was a record quarter for us in terms of investment into product technology platform as well. We continue to believe that there are a number of interesting opportunities to strategically enhance or accelerate some of our strategic initiatives by looking at tuck-in M&A as well. So I would say, overall, no change in the way we think about the framework but very much intentional in how we look at it, given some of the seasonality dynamics. I don't know if there's anything else you wanted to add Taylor.

No. I think you said it well. We've invested meaningfully in technology. We continue to see lots of interesting M&A opportunities. I would sort of categorize them in the tuck-in category. But keep in mind, we're in many dozens of countries that we weren't in just a few years ago. And in most cases, with a single product. So the ability to deliver the rest of our product whether that's been buying a local sales team is something that we're incredibly focused on. So nothing's changed with I think Chris' caveat that Q2 warranted a little bit of caution, but Q3 less so.

We'll take our next question from Rayna Kumar with Oppenheimer.

Chris, so you raised to the Term Loan B during the quarter. Can you just talk about the uses of funds and how you're thinking about your balance sheet here? .

Yes, sure. Thanks for the question, Ren. So we -- on July 8, we successfully executed a combination of extending our revolving -- our revolver maturity into a new 5-year and take that out to 2031 and also raised $1 billion of Term Loan B on essentially fungible terms or the same terms as our existing term loan. The primary use of proceeds there was to prefund the August 2027 convertible note maturity so that we could successfully term out the entirety of the capital structure into the 2031 territory. And actually, 2032, if you think about where there's -- where there actually is funded debt because the revolver is undrawn. And that's the primary purpose of that capital. I think the other dynamic within it is to acknowledge that -- within that, we also have some general corporate proceeds that went to the balance sheet improves liquidity. And all the while, I think it was fair to say that it was a well-received offering in general. ratings remained affirmed and unchanged as well the debt markets really do view us as a seasoned issuer and we're very supportive of the transaction given the fact that you could see the terms that came through are probably really amongst the market best for our BB rating -- our BB corporate rating. So overall, really satisfied with the transaction outcome and like where our balance sheet is right now.

That's really helpful. And just 1 quick follow-up. You were on some pretty big wins in retail. And I think your initial expectations were like signing smaller retailers. So just like are you surprised by the bigger wins? And should we continuing to expect that type of traction with large retailers.

So there's a lot of receptivity across kind of the larger retail base. This is a group that Global Blue has had a marquee product offering in for quite some time. Increasingly, as the tax-free shopping sort of product adds new geographies, those retailers were the default for those retailers in those geographies. I would say I wouldn't want to challenge the sales motion that we have now, which is a lot of the SMBs that we would reference in the materials, these are same-day decision makers. This is a walk in, get a meaningful enhancement from a product perspective and adopt the product quite quickly. Any of the enterprise retailers we work with require deep and sophisticated customizations and take longer to board, et cetera. I think as has kind of always been the case we Shift4, and it's kind of interesting to use in the context of the World Cup, like you win the MetLife so that it helps substantiate why all the local businesses around the MetLife should be doing business with you, and that continues to be the case in Europe. .

We'll take our next question from Timothy Chiodo with UBS.

So I think a lot of investors appreciate the Shift4 approach, which, as you mentioned earlier, results often in lower customer acquisition costs. One of the hallmarks of that over the years has been the gateway strategy. And of course, there's many other means of doing this in conversion. But specific to Gateway, there was originally the Shift4 Gateway, there was a merchant link gateway. More recently, that opportunity has been somewhat replenished with age and even more recently, Bambora. I was hoping you could give a little bit of an update on what remains in the -- specific to the gateway conversion opportunity. and maybe a little bit more specifically on the 2 more recent ones in terms of Egan and Benbora.

Yes, sure. Well, I'm glad you categorized as the way that you did, which is to say that the hallmark of the M&A approach that we've taken over the years is that in every case, it gives us an embedded base of customers to go cross-sell to. So institutionally, we don't think about the ability to migrate a give gift card customer over to our payments radically different than we think about an and gateway customer. I would say gateways have been -- it's a no place like home M&A move for us. That's really what we call them in our M&A tracker because the playbooks seasoned, it's understood across the entire company, practically speaking. iGen has been an awesome proof point for us. We've got 1 of the largest airport operators, concessionaires in the world has switched over. That was largely a result of the gateway conversion, many hundreds of merchant locations as a result of just that merchant moving. iGen's been great. And they all kind of follow the same pattern, which is to say the newer the gateway, the less progress we've made through it, but again, a really seasoned motion. I will say though, we don't challenge our sales teams to prioritize 1 opportunity or the other. We basically bucket all these merchants into pain points we believe we can solve. So our restaurant team goes after all the restaurants. in our acquired book. Our hotel team does the same. Just now, our luxury retail team does the same with that. So we try not to sort of put a prescription on moving 1 versus the other. I would say highlights for us recently have been a beginning of conversion of Rebel merchants over to Shift4 Dine, which is quite exciting. [indiscernible] the kind of upper bound of that product is nonexistent, meaning we're attracting lots of awesome institutional customers to that product, and that product is compelling payments conversations. And again, no place like home. I would put Bambora in the same category.

We'll take our next question from Nate Svensson with Deutsche Bank.

I appreciate all the details on the Middle East, but I do want to follow up on that just given how dynamic the situation is. For 2Q, I know you said the headwind came in lower than expected, but maybe just wondering if you can give more specifics on where that number was relative to $20 million in kind of the strength you saw offsetting that? And then just as we think about the $25 million headwind that you're baking in for 3Q. So I get that there's seasonality that's a higher travel quarter relative to 2Q. But given the results you saw in 2Q and some flight data that does look like it's improving. Just wanted to hear the assumptions underlying that $25 million?

Sure. I'll take that, and thanks for the question. Yes, so look, well said, the right word is dynamic, right? It's been -- it's definitely been a dynamic on like the travel disruption that has resulted from it has made forecasting a challenge specific to the corridors that are impacted. And when I say the corridors, I mean the dynamic of the consumer's origin point is an origin point largely in the GCC or Southeast Asia coming into Europe, right? That's the corridor that we're focused on. And I'll answer the question around the commentary that relative to the $20 million Q2 sort of number that we had baked in as far as kind of like a headwind. The $20 million, it did perform modestly ahead not a meaningful amount, but modestly ahead of what we had expected within our forecasting at the time. More than anything, though, the overall TFS category, I think, outperformed across other areas that demonstrates its kind of balance and resilience as a whole. So for example, 1 of the themes that we had mentioned outside of that affected corridor of sort of GCC, Southeast Asia consumer coming into Europe, outside of that corridor, there was like nice pockets of strength. The U.S. consumer into the European corridor continued to perform well. We continue to see nice strength there. and we saw nice strength coming from the inter-Asia area, so travel into Japan for tax-free shopping, so when you balance out TF as a whole, it actually was pretty resilient and demonstrates it's kind of the benefit that it has by being as kind of geographically diverse as it is. But in short, to come back to your question around specific to the $20 million, it was modestly ahead.

That's very helpful. And I hear you on the challenges, especially Asia to Europe [indiscernible] So I appreciate the color there. Just for the follow-up on free cash flow. So get the points on the guidance this year sounds like mostly from the term loan being made a little bit from these Middle East headwinds. But just as we think about free cash flow conversion into next year and beyond, beyond the higher interest expense that will be flowing through, is there anything going on across the business that changes your confidence or kind of visibility into what free cash flow conversion should look like in future years. just trying to get our models in the right place as we think about next year and beyond? .

Yes. No, it's the right question, and it's definitely something that I think -- the Street has done a good job of getting acclimated to through the balance of this year is sort of free cash flow modeling. So we appreciate that. I would say that as I think into next year, it's obviously 2 large caveats, right? The story of this year, a combination of capital structure, given that we had maturities in '26 and a convertible maturity in '27. That's now out of the way. I think there was some questions even in last quarter, as to how we might address the '27 convertible and how to think about that within models, hopefully, now that's fully off the table in terms of how to model it. And then the -- obviously, the travel disruptions that we experienced this year have been the other big factor on free cash flow, and corresponding or maybe connected or maybe disconnected like there has been FX volatility as well. So when you take into those if those are not part of what we have to contend with in '27. The answer is no. We don't see anything fundamental. If anything, something that we would reiterate from earlier in the year is that the incremental free cash flow conversion that should come through into the business, it should expand over time, given overall operating leverage that exists. Even when we think about record levels of product investment that is all still well within the well within the normal and ordinary course of what the business can deliver. So I think the short answer is there should be anything incremental to the aforementioned things that we were facing this year and the capital structure point that you brought up.

Yes. One thing I want to layer into it because fully acknowledged Global does a little bit of a different opportunity than we've had in the past. Typically, whether it's any of the cross-sells I described in Tim's question, it's almost an immediate incremental revenue opportunity on an existing customer, and that revenue is like nearly 100% flow through to the bottom line. On a net to EBITDA basis. One thing that's different about Global Blue is we are deliberately investing in meaningful sales build-outs across all the countries that they operate in that we see opportunity. That's because they're not just going to go after Global Blue retail customers, Global Blue SMB customers, they're going to offer all of our other products in those countries. So while this early cross-sell motion is great, we're seeing great momentum. some of the costs associated with that mask, what a typical cross-sell might look like. It's all for the right reasons, and that's kind of why when we even first signed and announced the Global Blue transaction, we talked about meaningful little synergy benefit in '27. It's because this is -- I think it's very balanced, but it's an investment year to make sure we have the -- all of the infrastructure we want in these countries. And as much of our full product suite available as possible.