Q3 2020 Earnings Call
In light speed fiscal third quarter 2020 earnings call.
At this time all participants are in listen only mode and after the speakers presentation. There will be a question and answer session.
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Thank you operator, and good morning, everyone welcome to like beats fiscal third quarter Conference call joining me today or death to Silva like these founder and CEO Brendan.
<unk> Chief Financial Officer, JP, All day President of Lightspeed. After prepared remarks, we will open it up to your questions will make forward looking statements on our call today that are based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected we undertake no obligation to update these statements except <unk>.
Required by law, you can read about these risks and uncertainties in our earnings press release issued earlier today as well as on are falling with Canadian Securities regulatory authority.
Also our commentary today will include adjusted financial measures, which are non or ask matters. They should be considered as a supplement to and not me substitute for IRS.
Financial measures reconciliation between the two can be found on our earnings press release, which is available on our website and finally not the because we report and U.S. dollars. All amounts discussed today are in us dollars unless otherwise indicated with that I will now I'll turn the call over to decks.
Thanks, Chris and thank you everyone for joining us today.
We're pleased to announce another quarter of progress and solid execution as we continue our journey of building a global leading cloud based omni channel Commerce platform for complex Smbs in retail and hospitality.
Hi, letting our topline growth during the third quarter total revenue grew by 61% versus last year.
And talk to $32 million to exceed the high end of our guidance range.
Just under 90% of this space consists of recurring software and payments revenue, which grew 50% during the third quarter.
We believe the complex SMB seeking a recognized global market leader for the solutions we provide.
As we approach the one year Mark since we became a public company. We're extremely proud of how far we've come in in our journey to be known as that go to player.
[noise] hi, letting some of our most compelling proof points to underscore that success and IPO. We served around 47000 customer locations.
Through strong organic growth and select emoney, including the recent additions from gas for fixing Europe. We're now it over 74000 customer locations globally.
A year ago, our business was heavily weighted to retail in North America.
Today or customer mix is much more balanced hospitality, comprising approximately 45% of total locations and international customers, making up roughly half of our overall footprint.
At I.P.O., our customers are processing approximately $13.6 billion in G.T.V. for the 12 months ended December 2018.
That LTM figure has grown to almost 20 billion a year later and effective gauge of a healthy growing customer base that is finding increase access to partnering with light speed.
As further emphasis to this point results from our 2019 year and review revealed that retailers in the U.S. powered by light speed grew their G.T.V. more than four times faster year over year in the industry average retail G.T.V. during the first 10 months of the year.
A year ago loyalty and payments for brand new module offerings from light speed.
Day, thousands of light speed customers leverage both solutions as a mission critical component to their business operations.
When we set out to do or I.P.O., we did so with the ambition of creating a category leader for the highly fragmented complex SMB space.
Thesis was that the additional exposure afforded us by the public markets would yield tremendous opportunities to further our brand extend our reach and facilitate some <unk> how many opportunities we saw at the time.
Just one year later, we believe we are demonstrative Lee further down that road.
Our brand recognition has never been stronger our technology stack never more advanced in our geographic reach never further.
And we're still just scratching the surface of our overall growth potential.
We took a calculated risk a year ago, when we rolled out a sophisticated payments offering to our U.S. retail customers in the public guy, but let's see payments has continued to be the notable new product success story for us in 2019.
Is gained considerable traction with customers and today, we have several exciting updates to share on our progress and payments furthering our position as the leading cloud based end to end solutions platform in our space.
First attach rates wrapped higher during the most recent quarter nicely exceeding 50% on the back of strong demand and some smart adjustments to our marketing strategy.
Overall for the month of December after we initiated this new program, we had our most successful month, yet in terms of customers signing up for payments.
Furthermore, and for the first time since payments went live monthly payments sign ups from our existing base exceeded well, we signed up from net new customers.
We've been deliberate and learned a lot during the past 12 months about our ability to forecast sell support and grow the payments business.
Drawing upon this experience we've never been more confident that payments will be an important long-term growth driver for light speed and we're really excited for the additional payments capabilities, we announced today in three main areas.
Number one for a U.S. retail customers, we announced improvements to the overall customer experience such as an expanded lineup available acceptance devices enhanced reporting capabilities and it faster checkout experience.
We believe these upgrades will dry further improvements to attach rates.
Rescue customer experience has been in beta with approximately 450 locations for the past two months and we received really positive customer feedback.
Secondly, today, we also announced the availability lacy payments to Canadian retail customers.
This customer segment represent nearly 10% of our G.T.V. for the last 12 month period, and we believe is poised to embrace payments in a meaningful way.
And third we announce the initial availability of Lacey payments for our restaurant customers in the U.S.
We believe this integrated offering greatly facilitates our ability to lead the hospitality segment in North America.
We're very pleased to meet teaming with stripe as our new payment processing partner for these additional payments capabilities.
[noise] are aggressive emoney strategy ensures that we moved decisively to achieve our vision to create the world's leading cloud based P.S. provider to S.M.D.'s.
How many arguments are strong organic growth foundation by <unk> by bringing together the best of breed players in the space, whether these talking to accelerate our progress in specific verticals or by a geographic expansion.
Finding the that the best companies in the World with the best mines, the best Technology, and the best customers want to join forces with light speed.
Last quarter, we talked about our ability to accelerate the growth of these businesses once we folded them into light speed.
<unk>, new business grew by over 100% and the first six months or the fiscal year versus over 50% a year earlier as those synergies run locked.
I can to was the second acquisition we completed.
Integration has progressed well in the six months since bringing this European cloud based P.Y. system for hospitality onboard.
Pertains to I can choose business operations, we successfully rebranded the product is lightspeed converged the product road map for our developers fully integrated into our marketing and sales funnel management and rolled it out into large high priority markets like the U.K. and France.
In conjunction with all of this heavy lifting.
Achieved growth in recurring revenue of greater than 40%.
Next up was counter a rapidly growing leading cloud bayes hospitality point of sale system in Australia, New Zealand, serving over 7000 customers across that region.
We will wait to provide a more thorough integration update on a future quarterly call, but I can attest the facts. The we're off to a successful start and leveraging counts as experience and relationships and the energy region and implementing our go to market methodology is.
Most recently, we announce the acquisition of gaster fix the leading cloud based pointed sale provider in Germany, and our largest purchase to date.
At the premiere hospitality system in Europe's largest economy gastro fix represented an important chess piece for light speed.
This is a timely acquisition, helping to solidify a clear leadership position for light speed across Europe as a cloud based point of self provider of choice for complex retailers in restaurants.
As Europe undergoes further regulatory changes pertaining to pointed sale. Some upgrades, we are very well positioned capitalize on these market tailwinds going forward.
We're working diligently to fully integrate gas topics and our other acquisitions into light speed and believe there are substantial growth synergies civil stem from these activities.
We look forward to sharing our progress with you.
[noise] Lightspeed continues to enjoy strong women to him from complex retailers and restaurant owners in North America and around the world.
Many of whom continued to select like speed, given our ability to manage their omni channel business needs seamlessly.
Customer such as the high end Danish sound equipment brand banging Olsen.
Spanish Gourmet Burger brand Goyko gourmet and a popular sneaker store in New York coal up N.Y.C., all selected light speed in the quarter.
To sum up I'm extremely proud of the entire lights b. team for their relentless spirit, and then and enthusiasm around our vision.
Gratifying to see their hardwork pay off with these quarterly results [noise], we have a team division and the technology becomes clear leader for complex as and B.'s globally.
I'll now turn it over there Brandon to provide greater detail around the financials for the quarter as well as to provider updated outlook for fiscal 2020 Brandon.
[noise]. Thanks, that's our third quarter results or reflection of the solid progress we continue to make across all of the important areas of the business.
Turning first to some of the key metrics, we use to tracker progress.
Entering the recent acquisition of gas for effects, which brought us approximately 8000, new customer locations.
We now have over 74000 customer locations on lights beat around the world All pulled that's an increase from 47000 locations a year ago.
<unk> expansion is important let's look for us and we saw that continue to grow by double digit percentages and our core business person as a year ago.
Total G.T.V. process by our customers during the third quarter was $6.2 billion up 63% from a year ago and approximately 30% excluding the impact of I tend to encounters G.T.V.
On an L.P.N. basis, we process just under 20 billion for the year ended December 31st 45% from the earlier and 31% when excluding these acquisitions.
With respect to likes me payments, we saw continued strong overall customer receptivity, because it's important long term girl driver to our business.
In the quarter always further momentum and new customer adoption of payments with greater than 50% of new U.S. retail customers contracting lights made payments at the time purchasing like to be in score software discontinued upward trend is a positive long-term sign for us.
<unk> mentioned with today's release of new capabilities for lights, the payments that our existing U.S. retail market as well as the initial availability for our Canadian retail and U.S. restaurant customer segments. We believe we are well positioned to see this line of business continue with rapid growth trajectory.
As we have proven with our U.S. retail roll out over the past year old pick a disciplined approach to rolling out these new markets as well, ensuring we deliver on the needs of our customers.
Consequently, we will remain conservative on or near term revenue outlook from these new markets.
Maintain full confidence in the mid to long term growth opportunities.
Turning out over all financial results for the third quarter, we saw accelerating revenue growth again this quarter revenue for the quarter was 32.3 million up 61% from the same quarter, a year ago and ahead of our guidance of $31.5 million to $32.0 million.
Software on payments revenue was $28.4 million, representing just under 90% total revenue.
58% in the corner.
When excluding approximately 2.5 million of like into encounter revenue during that period or software and payments growth rate was 45%.
Total gross profit was $20.6 million up 46% from the prior years corridor.
We're all gross margin was 64% of revenue this corridor.
Just leave it I lost for the quarter was 5.3 million as compared to 3.4 million a year ago and landed within our guidance range <unk>.
The increase loss from a year ago reflects the incremental costs and G.N.A. being a public company.
And the purposeful investments during the year to drive grader brand awareness greater payments adoption.
That lost for the quarter was $15.8 million compared to 71.1 million a year ago.
Last year was laws did include a sizable 52.5 million dollar accounting based charged earnings to adjust our pre I.P.O. preferred shares to their fair value.
Cashiers and operations and Q3 with 7.9 million, excluding 1.9 million and transaction related costs as well as 1 million of stuff based compensation expense.
Compares to three and a half million a year ago.
As discussed by dogs in light of continued success, we've seen in lights being payments roll out we've updated or go to mark his strategy to further encourage payment adoption rates. We've seen good early success from this initiative. However, it did result in more of our customers electing to take monthly payment plans during their contract term alongside take.
Lightspeed payments.
Disaffected cash from operations by approximately $2 million in the corner.
This effect will start to normalize as as as this transition matures and we believe these short term implications are castle, we'll have the long term benefits associated positioning us even more favorably as a preferred solution provider in the marketplace.
We ended the quarter with $127 million in cash on the balance sheet.
That's mentioned on January 7th we completed the acquisition of gas Perfects, a Premier club based on the channel solutions provider based in Germany.
Closing consideration consisted of approximately $60 million in cash, including an amount for the settlement Castro fixes liabilities.
Approximately 44, and a half million worth of lights beat shares.
An additional amount of $4 million in cash and $3 million in shares is payable over the next two years provided key members of of the Castro fix management team meet certain milestones.
Gastro fixes 2019 estimated revenue in accordance with I.F. or X.
It was $10.6 million.
Well now conclude my prepared remarks by discussing discussing our financial outlook as a quick note on currency our guns does not consider any potential impact with foreign exchange gains or losses, as we do not try to estimate feature movements and foreign currency raids.
Well, we are quite bullish on our success over the long term in the new payments markets. We announced today, we are assuming very little impact in this initial a corner.
Also argue for revenue arrange reflects a cautious view of the season really slow G.T.V. One some january through March and the impact of that lower purchasing activity on our payments revenue potential.
For the final fiscal quarter ending in March we expect between 35.0 and $35.7 million total revenue, bringing our full fiscal year to approximately $120 million in revenue.
Represents annual growth of approximately 55% versus our fiscal 19 revenue and compares to our preliminary guidance of $107 million to $110 million issued last may.
Which represented in 40 per cent growth at the midpoint.
Turning to adjusted EBITDA, Our recent acquisition of Gastro fix does bring an incremental loss and liquor quarter.
We expect that to be eliminated on a runrate basis within 12 months.
During this n. for two four are we expecting adjusted the but the loss of approximately $7 million, bringing the full year lost to approximately 22.5 million.
With that we are now ready to take questions operator.
You know if there's time I'd like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.
It's for a moment, while we compiled the q. and a roster.
And your first question comes from the line of Josh back with Keybank Go ahead. Please your line is open.
Yeah. Thank you for taking the question team.
You know I wouldn't have to understand it sounds like you made some tweaks to the marketing strategy around payments. So could you may be just give us a little deeper view on some of the changes that you've made and then what some of the early signs of success or.
Yeah. So I'll take this one <unk> on the phone, but as you know we about a year ago. We we were very new into payments and so we'd been this is being kind of a learning process the entire year and so we tried to apply a number of marketing strategy, but what we're realizing is that.
Optimize the attached rates on payments and we're very pleased with with the success. We've had here where we're above 50 per cent now we've had to have customers sign annually, but pay monthly because that's kind of a trend inside of the payments and so what we realize if we want to optimize the attach rates of every customer buying payments and improve as we go forward. We we are and.
Now going to expect more customers, who are gonna be paying monthly.
But again, that's again, what we're trying to do here is we're trying to ensure that as many customers as possible attach payments and that's what he'd be in one of the big changes in our marketing strategy.
[noise], great and you know it also looks like you formalized partnership with stripe <unk>.
What are some of the I guess expected customer you know benefits that you would.
Expect from that and are there any you know notable changes to the way that we should be thinking about who you were unit economics payments as a result of this new a relationship.
Yeah. Just this is tax here just to you know speak to the strike partnership I think we we've spoken in the past about use cases, which we we couldn't too even the U.S. retail where we first rolled up payments you know the new the new partnership allows us to expand our upgrade our capability in you.
S retail so new new device you you modern device types.
As well as it has reporting capability and and a much faster and more streamlined check out experience. So that's across you know across new customers that are coming out the payments, but we've also been able to add Canada retail as well as a U.S. restaurants, or you know where we're we're eight we would.
Been able to sort of extends all these areas that we've been wanting to get through for awhile. The partnership spin a been a fruitful one we've we've had about 450 customers and beta for the last couple of months, Yeah, and we're looking forward to to you know to getting to build on that on the unit economics I'll pass it on T.V., Yeah, Hey, Josh It's brand and don't expect.
Much change on the unit economics other than has decks mentioned, we're really see this partnership is.
As a lever to increase attach rates, even further given we think we can satisfy more and markets and then lore and customer cases, but in terms of kind of the underlying.
We expect from stripe, they're going to look very comparable to learn insisting processing relationship.
And then maybe just to answer to be here. The question around you know what can customers expect as an example, we we can now do mobile check out and you know a lot of our our our story is run mobility and enabling retailers in restaurants are it's would be mobile and check out customers wherever you want in the store and here with stripe now we we can detach herself.
I'm, just a counter top terminals and we have a lot of mobile capabilities, though.
Very helpful like everybody.
Question. Our next question comes from the line of Richard C. with National Bank Financial go ahead. Please your line is open.
Oh. Thank you. Thank you guys had quite a bit of strength on the hardware silent business I know that that's not really what you want to focus on going for but <unk> was there a concerted effort here on that side of the business to have actually help the payment side.
[noise], Yeah, Hey, Richard it's it's not hardware as much as it is kind of another one time fees. Some small some small amounts of came in in the quarter really pretty positive thing actually because he's reflect fees that.
From some strategic partnerships that a big companies that I think are recognizing the asset were building here at light speed and they've come to us.
To try and find a new ways to bring innovation to the market and as a result, we are and some some one time fees in the corner or soon some of those.
Okay. That's helpful. Thanks.
So so you guys have made a a few acquisitions here no doubts help to diversify that business quite a bit. If we look ahead. What do you think how how we should look at acquisitions here in terms of Ah how its contribution of growth is going to be you know it wasn't going to be something on the pace that you've had so far are sort of just one off and they come up.
Over the course of the year.
Yeah, So maybe I'll start and Brendan you can maybe jumping on the finances of this but so generally speaking we we have three types of acquisitions, we need to do and we're looking at the first one is really looking at the technology enhancements. So we have a core core platform and we're always looking at ways to make.
It's not for more successful the second type of acquisition, we do is really around geography and penetrating into new markets.
And and and they're I think we've we've made a lot of thrives.
Then the so as we're moving forward what I'm, what I'm here to save you can expect to see more of these because we believe this is a huge market I mean, this 47 million potential buyers. We have 74000 customers. So there's a lot of white space and there's a lot of room for growth until you can expect to to continue to see C.D.'s as we move forward now when when we think about.
The performance of these acquisitions, we we we are looking for good assets that that are high growth assets and and hear what we do is we normally implement our methodology in terms of go to market and and all of our tools and and and our ways of being until here. The expectations is as we do acquisitions, we should accelerate the growth of these acquisition.
Because we'll bring in our methodology nor blueprints.
Okay. Thanks, and the last one for me you guys had a strong it's or new merchandise in the corner as well maybe give us some color in terms of you know where those new merchants are coming from let's say legacy vendors versus you know sort of brand new companies versus some of the incumbent.
Do you guys who are fairly new.
Yeah and.
There'd be no change I think you know when you look at the market what what what you have to look up is that the majority of the market is on the legacy platforms and these platforms are old antiquated on premise and here, there's a kind of a big trend here, where people are adopting more and more clout. So on that front, we've we've always had.
The same blend and the blend is really net new so these are people opening you restaurants are opening you retail stores and I think anyone today opening something you would would go with the top platform and the other one we have is which hurts and these are people coming from the old legacy and so here, we haven't seen any change in and what we see actually use an acceleration from the legacy.
People, who were switching from legacies one to get into cloud more and more so here for us. That's the that's really I mean, when you look at the new locations. We signed it's pretty much. The same format. We're very pleased with I mean, we're in line with with what we thought we would be in terms of new adds a new locations and actually the other thing we look at his clothes rates. So we look at how many people come to the pipeline and.
And here, we can see or close rates have improved over the quarter. So we're we're feeling good about this but I think here what you can expect as we move forward is what we're seeing is you.
They're they're more established businesses now who are going towards cloud based systems and we feel this is a really strong market for us as we go for it.
Okay. That's great. Thank you.
And our next question comes from the line of Daniel Chan with T.D. Securities Go ahead. Please your line is open Ohio. Another question on on in a there's less payments opportunity in Germany. So what is the big opportunity here with gosh effects because previous acquisitions. You made there was a a big payments opportune with them, whereas maybe.
The one with gastric so just your thoughts around the the opportunity there.
Yep, Hey, Dan.
It's true that electronic payments and how much of those happened in Germany versus say North America look a lot different there's still a great opportunity. There you know electronic payments continue to be growing source of.
Payments in that country. So yes, the opportunity in the near term may not be quite on par with with what's in North America still a great opportunity.
It really what's happening in this market here in a little bit from docks and J.P. you know the distinction between kind of the core point of sale software and the traditional processing relationships and capabilities.
Markets are merging the emerging quickly and you know the need to have both sides of that is becoming increasingly important to win and be a leader. So you know yes to answer the question just in a nutshell the are who per customer may not be quite the same injury.
<unk> this year, but still a great opportunity in something strategically that's very important for us yeah trying to that.
So yeah, I I think to emphasize <unk> friends point electronic payments is the is the biggest trending payment pavement type in Germany. There's also a compelling event in Germany as detailed before which is government regulation. That's coming in this year that will that will that will see a big change over M.P.L.Y. systems chicken.
Why with new tax regulation. So you know, we see that as a as a as a as a big big opportunity for for like speech be well positioned as that transition happens.
Yeah, and maybe just have to attack. The thing is just looking at market size pure market size. When you look at a number of S.M.B. East, Germany is by far the largest market in Europe and.
And so if you look at it this way we are now the largest cloud bass player in Germany in the largest market in Europe that is undergoing a complete transition in terms of U.S. because of regulations. So we felt the market was really ripe for us and then add on top of that transformation of payments an electronic payments that are gaining a.
Way more traction in Germany, and it's going to be we we think a very lucrative market for us as we move forward.
Okay that makes sense very hills. Thanks.
And then just one more fall on on on payments any use so we're seeing like significant consolidation payment processors in the region as you're thinking about rolling out <unk> internationally for your payments solution any impact on your pricing power. Your negotiations with some of these payment processors as they can see continue to consolidate.
<unk>.
So I think maybe I'll start on the first then we can but generally speaking the question is why they consolidating and their consolidating because.
Software companies like ours that provide real business value or integrating payments. So that means if I'm if <unk> if I'm in payments company and all I do as a payment terminal.
Going to see more and more consolidation there because you're going to see more and more companies like ours, we're going to actually monetizer payments element and attach the payment element to the to the software that creates the value. So I think that's what you're seeing it that's why you're seeing globally, you're seeing new players in payments that are coming out like stripe that are actually taking oh, yeah models with us or with companies that are software company.
And then you'll see all the more traditional payments companies, who are consolidating forget her because there's there's a lot of pressure from from the vendor, who who really feels more value in associating payments the software and so that I think validates our strategy now when you think about payments for off in Europe.
There are a number of players who who provide capability for us than just we are now the payments company in the eyes of the customer like speed and all we do now is we rely on payments companies for the plumbing, you know to to strip the money around and deposited the funds, but so here, we we will.
Work with the more modern vendors as we move forward in Europe, and there are a number of vendors, who who are pan European and actually are taking the same approach. We are which is just providing a technology component inside of a software. So I don't think it'll it'll create any issue for us and again I think maybe the last point, which is on the rates.
There is <unk> a lot of competition going on on the rates for the non integrated payments companies, because again, there's less and less value and actually it is way more value in having payments integration with software and so these these let's say traditional plate payment players are now having to compete with the rates, but what you're seeing is.
The software companies are much more transparent or getting fixed rates and here. When you actually look at the the actually revenue portion of payments, you'll have a way less competition when that broke.
That's very helpful. Thank you very much.
[noise]. Our next question comes from the line of <unk>. Please your line is open.
Good morning can you clarify what these stripe relationship means for your existing relationship with world pay I will payments be exclusively powered by stripe for any new merchant going forward or will you still use world paper certain types of customer segments.
Mm.
<unk>, Yeah, <unk>, we will have multiple partnerships that that we leverage for late fee payments, especially as we start to rule out Lacey payments around the world. So yeah, you know I I don't think that changes our relationship with with World. We are we're working with multiple vendors to to be able to meet all use cases.
Great and now that you've been offering payments for a year how have a your economics on payments track relative to your initial expectations as far as pricing and margins any surprises on that front or has it been consistent with what you'd expect it going in.
Yeah.
Yeah, I know actually really really consistent which has been quite encouraging for us I think you know index mention it is prepared remarks that we've kind of role this thing out in the public Guy and I think spend a great success for us for seen attach rates of cassette recorder.
In the economics hold now launching into new markets were really optimistic about.
The future opportunity for it as well so training pretty well.
Great and then finally, a movie charity initial Oh, sorry.
Go ahead, you have certain kind of going back to the initial theory is the are the net or pooper customer pretty much doubles when they attach payments.
Right.
Okay, great and if we they affect your organic growth across a restaurant versus retail in North America versus Europe can you provide some color on the relative growth across those segments are they relatively consistent or any differences you'd call out there.
Yeah, I think I think are relatively consistent they also don't the one peel back that onion too much or the second too too much but I think we're pretty lazy, but how we're performing and all those things you know we're continuing to gain sharing your up North America.
Fatality in retail so.
Nothing nothing to notable that a little highlighted there.
Great all up outline thanks.
[laughter] in our next question comes from the line of U.N. Sync Wang with J.P. Morgan go ahead. Please your line is open.
I think so much I think you mentioned that you're.
Conversion of existing customers improved I think I heard that correct me, if I'm wrong and if that's if that's the case, how you doing something different too.
Replace the income meant from from my pricing perspective, just curious on the acquisition cost there.
Absolutely and so you remember the beginning I said to be without the more and more month. Please.
So here and actually we again, it's it's been a year a a year of learning for us and how do we do it and I think we've finally got the go up the groove going on the on the upset with customers, but here when you think about it at the point of renewal that's the best moment to get the customer and that's what we've we've realized now and on here, what we tend to do.
We tend to attach payments with software and that goes back to what what I was saying around they have annual commitments, but monthly payments. So we try and help them moved to lights be by going monthly with the annual commitment rather than paying the entire renewal Indians or Europe fronts. So that's one in the second thing is we've tested a lot of technology.
That to help us do a lot of good off cell within the product and those are are paying off finally.
Okay got it makes sense given to change and you know this beta what stripe rolling out further shall we assume that the attach rate should improve from 50 per cent from here or any guidance on on that in the short term.
I think that certainly the goal we've we've always highlighted that.
We're pleased with the progress, we're making I always see opportunity comes to see that continued to improve I think what stripe helps us achieve that is.
A greater number of them customer use cases, and so that's certainly intend to this relationship for sure.
Okay last one of them on a hog recall just interchange adjustments made by visa recently been getting questions about that any early thoughts on <unk> what that means for your.
For your for your business and then any any new update on on target breakeven date I'd make sense. He got should keep doing.
<unk>, but just curious if there's a a change their thanks.
Yeah still digesting the interchange news and so trying to see what that means for our customer base and you know we price on a fixed fee basis.
For our customers to to remove that.
Complexity from their standpoint.
So so so trying to understand what that means within our our specific customer segment, especially as we're going to.
Into new markets now.
So we'll record back then in the future a quarter on that and on the pastor profitability. I think we've always said you know we know are bringing on pauses profitable customer relationships, that's foundational to this business for us.
I mean, you that economics continued a trend in the right direction. We are seeing this market accelerate in terms of the pace of change, we're pretty pleased with our own position in our own execution in that market.
So you know we know we can.
Path to profitability is quite clear for us, but what's also very important for us is to make sure. We we capitalize on that leadership position. So we'll give.
More formal guidance for next year next call, but that continues to be the way, we think about that specific question.
Yep makes sense. Thank you.
And again I was reminder, if you'd like to ask a question. Please press star one on your telephone keypad and our next question comes from the line of Gus Papageorgiou from P.I. Financial go ahead. Please your line is open.
Hi, Thanks, just on the our <unk>.
So <unk> acquisitions, and they put downward pressure on your our pool. So a couple of questions. One how what's the probability you think you can get the acquisitions up to your <unk>.
Base, our pool, you know probability of doing that and timeframe.
And second granted I know you said the your your Ganic aren't too from your existing customer base was up double digits year over year.
I'm just wondering if she'd give us a sense of how much of that was increase adoption software features and how much was payments.
We'll start with a ladder I think it's you know payments is going well for us it's still a small overall portion of our total business. So the airport expansion in the core is mainly driven from software, though payments as I as a clean.
Contributor to that as a as well no.
On the acquisitions, you know I think when we've we've talked about those these are growing businesses, adding locations doing doing really well on their own and they really haven't started in one kind of that or who expansion journey that I'd like to be enjoy.
<unk>.
You know with both Calcutta and I can too.
Those additional modules are just now kind of being rolled out inside their customer base.
And it's early days, but we're seeing good success there.
Obviously, then you know as we think about how to leverage payments more fully in those markets that's going to be a big contributor also so well put a timeline on when we bring those things up to our our level. It will take some time, but those those wheels are low emotions. He ended early success.
Yeah, and maybe just <unk> complementing what brand in the thing is just keep in mind, we acquire companies that tend to be singled points solutions that are P.L.S. is the real value of light speed is that we we are not just the P.O.F., we have a full breath of capabilities and so here as part of these acquisitions to strategies for all of our modules to become available to these customers.
One by one and that's what Ben create success from the vendor and which also creates <unk> expansion. As you may have heard you know, we're very pleased to say to the analysis, we do them on on this fiscal year is like speed customer group between four and six times more than industry average and it depends on the territory, but that that just there but.
That's what we do if we we tend to start them on the P.O.S., which is all these acquisitions in our core business and then over time to expand they they acquire more module from lights from light speed, which makes them more successful.
So we're gonna fetus, probably with time with all the acquisitions we've done.
Great <unk> on stripe give being and you kind of payments vendor can you can you discuss is that going to help you perhaps launch new services like like a lending service or instant deposit service.
Mm.
Yeah, that's certainly.
Certainly one of the attractions of the partnership is the innovation curves that get to ride of stripe and of course, they do have a capital solution.
So that's one of the things you, but attracted us the partnership obviously.
And you know I think as we've we've talked about in the past we do think we've got a merchant base that.
You know like speak capital solution would make sense for so that continues to be something that we explore overall, it's to the best path forward on that.
Yeah, I think financial services as well as you know just innovating in terms of device types form factors I think you know we've we've we've had great expansion in it with U.S. retail without having some of these things we're quite excited about the the the future road map in terms of what we're going to be able to do with with a nimble partner.
Mm.
Great. Thanks for answering the questions.
Our next question comes from line of taught Coupland with C.I.B.C. go ahead. Please your line is open.
Yeah, good morning, everyone.
What now that you have to strike.
Onboard a what percent of your locations or G.T.V. now can can take payments they choose.
Yeah, I don't know who's trying to figure out a best answer that though it's a candidate was about 10% of the G.T.V.'s Hmm.
Hello.
U.S. retail was always our largest customer segment.
Overall in terms of G.T.V. and now we're we're starting the roll out hospitality as long you us.
Or hospitality business as we've talked about is stronger in Europe.
See the the payments potential as I'm walking or greater overall growth for us in terms of new location that <unk>. So.
Yeah.
Specific number they're taught but.
Further along or.
90 days anymore.
And I think if you if you're setback why's stripe because it expands our ability to up so.
Base.
Yeah, that's that's certainly been clear with other software platforms and straight.
Can can you just talk about how we should.
You hospitality and restaurant will allow it over the next few corridors maybe put it in context of your approach to retail retail was I guess a little bit slower.
Initially and then took off [noise] with those learnings would would you expect to have those that initial slow slow slow role and then I'll pick up in a few quarters or just you just talk about how we should should get think about.
Fatality will.
Yeah, I do think we're going to take that same approach toward I think that's.
The prudent thing to do hospitality is very different in terms of the work clothes and payments means. So you know we know we now have the benefit of a year of experience in terms of selling in terms of how we package and how we how we engage customers how we operate all those.
Benefits or.
Be able to leverage for sure.
But it is very different market you know in terms of the workload payment capabilities and so we will take that that.
Plan discipline roll out starting kinda customer sub segment by customer sub segments.
As we gain confidence or open the valve a little further.
Okay.
<unk> I thought you mentioned the <unk> the March quarter, we'll have some seasonality can you just talk about what what that might look like per cent down or at least some qualitative color on on the difference quarter to quarter. Thanks a lot.
Yeah, I think we're you know I think or overall hopefully as you can tell quite pleased with the performance of the business certainly with payments. It's been a great. Great overall success story for us as we built it over the or.
You know get is we're seeing it had trades improved quarterback quarter. So many adjustments in to go to market approach. This corduroy encourage for adoption rate sled some of the best best months ever for the business in terms of payments and now we get to chase new markets.
As well so all very encouraging for us we're not factoring any of those new markets into any any of our key for guidance. So really you know that the the payments revenue stream and keep for those ones that we're planning on his U.S. retail Lee.
And that's that's easily slow quarter. We are learning you know as we go here what seasonality means for this.
For this part of our business it certainly based on our our best guesses here, it's certainly a steep.
<unk> from.
The holiday season of November and December.
But yeah. That's that's something that we're trying to just be cautious of conservative on as usual from us as we think about the outlook for the fourth quarter.
And you know as we look forward and have a greater balance of payments you know that seasonality mixed has been a change website into star unlocking those new markets, but for now it's it's mainly a retail.
Revenue stream for us.
Right create the answers thankful.
[noise] Center next question comes from the line of Suzanne schooner from eight capital go ahead sees your line is open.
Community guys accused signal what you guys you see from then on me Channel perspective, I was adoption look like for your E. commerce offering and what's been some of the feedback you'd be getting from your customers and how do you expect is offering to evolve going at especially given to the strike partnership.
Enhanced mobile capabilities.
Yeah, So maybe I'll start with the only channel has always been core to what we do and and mobility actually has a good example, and selling across channels. There's always been kind of a key priority of old customers bike from like speed. So not fronts. When you think about our segment, which is you know the the more sophisticated S.M.B. that have multiple locations that.
Sell online that you know need mobility within I think it's always being the core of life feed and and why they buy from us on that front, we haven't seen any changes the only change were things that people want more and more to sell across channels. So we are looking at you know potentially deploying new kinds of technologies there.
As we we go into next year that old support this a bit more I think what we're seeing is that we're seeing bigger and bigger customers, who are adopting cloud a needle from the channel and slightly evolving needs, which is good I mean, <unk> Oh goodness.
So yeah, we're we're feeling good good about all the channels were feeling good about this what we're what we're seeing is that it's old driven by the consumer and the consumer now. We we know is an only child consumer that might you know do an initial purchase within a store and then might you know do the following purchase online we also see that.
Restaurants space, where only child, becoming more and more important than the consumer now you know starts online gets to the to the restaurant eats and then reviews on line. So these are very poor to all of our all of our road maps and and our attention span and we know this is one of the real drug is why our customers should adopt I could be.
Yeah, we're going to be able to you know leverage you know this <unk> payments partnership to be able to transacted all of those touch points you know definitely when we see a lights lightsey customer come on board with point of sale E. Commerce is typically you know one of the initial modules that that's adopted and now with all the fees you.
You use cases being covered off by our expansion with this partnership you know increased mobility with device types is is is is is going to be very appealing, especially as as retailers do innovative new types of formats like pop ups or a word or temporary store. So no. These are these are.
Or we're actually just go mobile within the store so that I think he's going to to add more dynamism too lightspeed like speed installations, you're already seeing like to feed inflation's grow it four times to six times the industry average and we expect a these new capabilities to to continue to to light up. These these customers.
Yeah.
Think that's that's helpful and second question you guys design.
You don't you <unk> sales and marketing front, then just given the increasing scale of your business actually think about investments in your sales organization going forward with respect to direct sale or or using partners.
It's a very good question.
So I think maybe just just if we step back the for off the the most important thing inside of our businesses to have a cactus L.T.V. to make sense and to ensure that on the units economic the customers that we acquire are required at the ride rate and that we don't have that we have a sustainable business and it goes back to everything we just discussed on this cool. So I think that's the main driver.
What we're doing now here, what we're seeing is that as we deployed payments as an example, and as we have a patch rates on payments that that are increasing this means that if we want to keep those ratios. We can spend more money uncac, which should ultimately mean as we move forward that we will have increased adoption I'd like to be I think so here again, just coming back to the new.
Use of of of the day, we're now deploying payments into Canada deploying payments into the U.S. inside of restaurants. This means that we will be able to double down on the cat because the L.T.V.'s going to be higher out of these customers adopt payments and we'll do the same as we also overtime deployed payments throughout all geography, so here, but I I think if you.
Just for US the most important as if you go back to the market. We're really looking at one I mean, an incredibly large market 47 million potential buyers. We feed if there's a transformation happening and for us. The most important to stages. We can be sure that we acquired the customers at the ride ratios, but that we we continue to accelerate or both.
Yeah.
Okay.
Thanks for the colors guys that <unk>.
And there are no further questions about this time I'd like to send the call back over to our presenters.
They they they can.
Look Florida.
Again.
And this conclusive days conference call you may sound disconnect.
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