$FOUR: Shift4 at 6.5x EBITDA. Is the organic growth real? | Emeth Value Capital

Andrew Carreon (0:00)

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Andrew Walker (0:32)

You're about to listen to the Yet Another Value Podcast with your host, me, Andrew Walker. Today, we've got a really great one for you. Why? Because there are two Andrews on the podcast. My friend, Andrew Carreon, is on the podcast for the first time in a long time. He is talking about Shift4, the ticker there is four. I mean, his Q2 letter has, I've had Value Investor friends pitching Shift4 to me for years. I've looked at Shift4 over the years. His Q2 letter has a 25-page just masterpiece of background work, valuation, all this sort of stuff on Shift4. I'm going to include a link to the show notes, but we're going to dive into everything he talks about. Really interesting, fascinating company, interesting setup. I mean, look, pick your poison. It is a cheap company. There are share buybacks. There's some questions about management because they've pulled targets. They've done some acquisitions that I think I had one person when I was prepping for this podcast said self-inflicted wound, some of the acquisitions they've done, but they've had a great history of acquisitions.

Cheap company, allocation, payment sector is destroyed, just all sorts of interesting stuff. So we're going to get there in one second, but first, over from our sponsors, and I'll just hop into that read. The sponsor today is Trata, trata.com. If you've been listening to this podcast for a while, you know I love Trata. If you like this podcast, you will love Trata too. Trata is two buy side investors who are hopping on an anonymous call, and they just talk about stocks that they own or stocks they follow, whether they're bulls, bears, whatever, and they talk about the underlying issues that they're seeing in the company. And I think you're going to love it if you like this podcast. If you don't believe me, go to trata.com/fourf-o-u-r, and you can see a sample transcript that I use to prep for this podcast of people talking about the real issues that they're looking at when they're thinking about Shift4. So if you like this podcast, and I mean that both in the general Yet Another Value Podcast way, and I mean that in the Shift4 ways, go check out trata.com/four, that's trata.com/four to see it for yourself.

All right. Hello. Welcome to Yet Another Value Podcast. I'm your host, Andrew Walker. With me today, I'm excited to have on for, I believe it's the third time. It's the first time in a long time. My friend, my fellow New Orleans native, Andrew Carreon. Andrew, how's it going?

Andrew Carreon (2:34)

I'm doing great, Andrew. Thanks for having me on. Yeah. The last two were energy pitches. So I'm coming back to firmly establish that I'm not an energy only analyst.

Andrew Walker (2:47)

Well, those were a while ago, and this is about as hairy.

This now is about as hairy as energy, I guess, in 2018 would have been. But we'll get there in one second. First disclaimer, remind everyone nothing on this podcast is investing advice. There's a disclaimer in the show notes. There's a disclaimer at the end of the podcast. You can see those if you're interested.

Andrew Carreon (3:04)

All right.

Andrew Walker (3:04)

Andrew, the company we're going to talk about today is Shift4. Ticker, there is four, F-O-U-R.

This is a company that I'm going to let you explain, but it's attracted a lot of value investors, and your write-up, which your Q2 letter had, I think, the best write-up I've seen on it. Actually, when I put it in ChatGPT and put some other notes and stuff, it was like, oh, this is so far and away the best write-up on it. So ChatGPT is a big fan of your write-up, but you had a great write-up. Again, I'll include a link of the show notes for people to go check that out, but I'm really excited to talk about it today. So I'll just toss it over to you. What is Shift4? Why are they so interesting? We can go from there.

Andrew Carreon (3:42)

Yeah. Thanks for all that, Andrew.

Yeah. Like you mentioned, this is definitely probably unlike the two companies we talked about before. This is a company that I think a lot of people will probably be familiar with, but for those that aren't, Shift4 is a vertically integrated payment processor, and specifically, they have a couple of very strong verticals, one being restaurants where in the US, they're the number two restaurant POS behind Toast. I'm sure we'll get into that because unlike Toast, who has one core product, Shift4 is really a Frankenstein of a lot of different stuff, and I think that's a theme that will be repeated really across all of their verticals. I think it's a reason why there is so much controversy in two sides to a lot of the debate for Shift4, but they're a vertically integrated payment processor. They have a couple of very strong verticals. Restaurants is one. Hotels is another where they have one piece of software, another touching 40 percent of hotels in the United States.