Q4 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the light speed Pos fourth quarter and full year fiscal 2020 earnings results Conference call.
This time all participants are in listen only mode. After the speakers presentation will be a question and answer session.
Good question during the session you need to press star one on your telephone if you require any further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker today, Chris Smith. Please go ahead.
Thank you operator, and good morning, everyone welcome to like be fiscal fourth quarter, and we're 2020 results conference call.
With me today, our debt they'll buy like its founder and CEO, Randy Nazi Chief Financial Officer, Indeed, each all day President of Lightspeed after prepared remarks, well open it up 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 could differ materially from those.
Got it.
We undertake no obligation to update these statements except as required by law.
You can read about these risks and uncertainties in our earnings press release issued earlier today as well as in our filings with Canadian Securities regulatory authorities also.
Commentary today will include adjusted financial measures, which are non I F. R. S measures you should be considered supplement to and not a substitute for iron ore as financial measures reconciliations between the two can be found in our earnings press release is available on our website and see dark dot com.
Finally note that because we reported U.S. dollar all amounts discussed today are in U.S. dollar unless otherwise indicated with that I will now turn the call over today.
Thanks, Chris I want to begin today by acknowledging the courage of those on the front lines. The cobot 19 pandemic from our healthcare workers to be essential staff restocking grocery stores delivering a good during the day and our dinner at night, we are grateful for your heroic work.
You've been a lifeline to the independent businesses that we love and support and Lightspeed.
As we navigate the implications of cobot 19 importance of community and the greater good has never been more pronounced.
Similarly, our mission as a company has never been more clear.
For 15 years, Lightspeed empowered the small and medium sized businesses at the heart of our communities.
We've been their technology partner, enabling them to evolve and reinvent themselves to meet the changing needs of their customers.
Yeah, the social and economic backbone small towns and bustling cities alike.
Inspired by their results and how do you have turned this unprecedented moment in time and the future full of unknowns into a showed resilience and an opportunity for growth.
Let's see to help longtime physical retailers have built ecommerce site overnight.
Others are seizing this moment to expand the boundaries of customer service to greater omni channel reach.
Our hospitality customers from fine dining to fast casual are using our technology to redesign menus optimized for home delivery.
Our golf course owners are enabling our online booking services to eliminate physical point of contact on the course.
These are not temporary changes.
What is clear is be commerce economy has changed and everlasting ways.
Like seed merchants are well established innovative industry leaders ready to evolve with it.
Aspire to amplify their sales channels and eager to use technology to future group their business for these increasingly digital and virtual reality.
I've been incredibly proud to see lightspeed employees pitching from every corner of the company.
To rapidly onboard these businesses for the sense of urgency and genuine care.
Enable them to sell online and adopt delivery capacity in record time.
Thanks to an amazing team rising to the occasion in a moment of great disruption and anxiety in their own personal lives.
We are supporting record adoption of Lightspeed E commerce and payments offerings.
Such that GTV process by a north American retailers through like TD ecommerce is up more than four times from February twentytwenty levels.
I'm also proud to report at approximately three quarters, where customers are actively trading in some capacity despite dealing with widespread government mandated shutdowns.
Likes its commitment to putting the merchant first has been further amplified by or late fee local initiative.
Program was launched to reimburse employees and our 14 global hubs on purchases made from any lightspeed retail or hospitality customer.
Well go through E commerce shopping meal takeout or home delivery.
We've received numerous heartfelt thanks from local restaurants and retailers could the support they received from legs Peters during this time.
Reminding us all why we come to work every day.
The krona buyers pandemic has made it clear to these merchants to the cloud based omni channel solution like he provides there's no longer simply competitive advantage the business imperative as we move forward.
Our merchants have demonstrated that they are the thought leaders double redesign the retail and hospitality experiences of the future to shore up the economies and livelihoods, what the communities that loved and appreciate them now more than ever.
These are uncertain times in our industry, but it is clear to me that lightspeed will be a momentum company coming out of this.
Legacy system to continue to represent the majority of the market share or simply no longer sufficient and the moved to cloud and the move to omni channel will only accelerate in our view.
Fortunately this inevitable shift is happening at a time when product innovation at Lightspeed is accelerating.
On the retail omni channel front, we streamlined our E commerce, Onboarding and rent scalability to meet the increased demand, we're seeing for digital channels its upcoming improvements towards digital checkout experience. Our retail Pos out also saw further upgrades to its CRM and payments capability.
All of this builds upon the inventory management and went to fill upgrades, we rolled out throughout this past fiscal year to solidify our status as the premier solution and cloud based retail Pos.
In this regard no other retail system operates with the tower depth and sophistication that feature said required by our segments of merchants further appealing also to merchants that may have few requirements at the outset wants to do more with technology to differentiate their business in this environment.
We will be redirecting spend higher new teams in retail omni globally.
Doubled down on our strengths and extend our advantage within both physical and digital channels as Brendan will cover in his section payments had a very strong quarter with north American verticals, hitting general availability, continuing with accelerated onboarding through April and May.
On the restaurant front, we made great strides converge the efforts of our hospitality engineering teams globally onto our flagship restaurant product, which launched in the Swiss and you keep markets during the quarter.
Livery tools and integrations were also made widely available in response to demand with early onboarding occurring on upcoming order ahead capability.
We expect more rapid innovation ahead from light speed in the hospitality vertical.
Finally yesterday, we launched omni channel loyalty.
Operating on our hospitality product as well as across retail and E. Commerce, our newly launched customer engagement tool is the ultimate Lacey technology to help businesses foster personalized targeted relationships cohesively, what their clientele across channels in a moment, where this means more to business success than ever.
We will be investing through this period to ensure our technology remains the best in the industry and that we remain the clear leader for our focus market segments.
The importance of our work has never been more crucial and the opportunity for Lightspeed has never been greater.
With that I'll turn it over to Brendan to review the quarter and discuss some of the more recent business trends and other indicators, we have been seeing more recently.
Thanks, Alex I'll start by quickly reviewing the solid momentum in our fourth quarter before the impact of Cobot took center stage, well then outline some of the trends we saw ones cobot began to impact our market in mid March and share some of the positive signs we're now seeing post our quarter end.
Recapping the fourth quarter. We ended the quarter was revenues of 36.3 billion up 70% from a year ago.
The head of our guidance of 35.0 to 35.7 million.
Software and payments revenue was 70% higher than a year ago at $31.8 million when excluding our recent acquisitions of gastro effects counter and I can to software and payments revenue grew by 42% from the fourth quarter a year ago.
Revenue for the arrows 120.6 million up 56% from a year ago that EBITDA loss for the quarter was 6.2 million.
Better than I've guided loss of approximately 7 million for the year EBITDA was negative $21.7 million.
We ended the quarter with approximately 76500 customer locations NRG TV for the year was R $22 billion up by more than 50% from a year ago and approximately 30% organically.
Better than 60% of are eligible new customers contractor to lightspeed payments alongside their software subscription in the fourth quarter, an improvement from prior quarters, and we saw another record quarter on conversion from our existing base.
Well payments has been a great success for us during its first full year of availability. We saw a much runway ahead and remain excited about the potential upside to provide just.
Looking at some of the performance indicators, we share annually, we achieve positive net dollar retention rates again in fiscal 20, and the number of core lightspeed customers using more than one light speed module grew from 33% a year ago, 40% at March 31st 2020 led in part by record adoption of our E.
Congress offering in March these are encouraging metrics for us.
We achieved all this in the quarter. Despite the slow down in the back half in March that affected our ability to add new customers affected our churn rates are payments revenue in our GTV said differently, the strong quarter would've been even stronger.
So looking at the initial impacts of cold the 19 like others, we began to see the impact during the week of bar change primarily in our European markets to start.
We saw our usual, 30% plus growth rates and GTV began to slow that week and deteriorate further as a corner progressed, maybe under March our weekly GTV was approximately 50% lower than the same period a year ago.
Much like reported numbers from others, you've likely see we saw this decline led by a restaurant segment, which fell by more than 80%.
Our customers were forced to close their doors.
Our retail customers fell by approximately 35%, but this look quite different segment by segment verticals like bike home and garden and hobby perform decently well others, such as apparel gift shops in electronics saw declines of up to 70% or more.
Of course during this period, we also saw an impact on our lead volumes and in turn or new customers marches typically our best month of the year and while the first half was trending above their internal plans, we saw new business volume slowed considerably in the background for the month.
As you heard from docs are teens quickly doubled down to help customers navigate this uncertain time, we focus the vast majority of our resources on or existing customers help with by government relief programs the share best practices and help them adopt new business strategy. So they could continue generating sales.
We empowered our employees to help our customers however, as we possibly could.
And that's when it started to get interesting.
In March we saw more E commerce subscriptions than ever before by the end of the month, we're seeing the increase in E commerce sales by our merchants approaching 400% as compared to the prior year was further momentum continuing into April.
We also sold more payments than in any other month of the past year in March with many of our existing customers, making relief as a way to save money from the minimum fees charged by our legacy competitors as well as to take advantage of our promotions designed to help and streamline their operations.
On the restaurants side, we saw a large uptake in lightspeed delivery, enabling some of our customers to retain their previous volumes.
Subsequent to the quarter, we've seen those trends continue as the impact of these various initiatives. That's helped offset the overall toll cobot 19 is taking on the customer base.
As retailers pivoted more of their business to online channels or overall retail GTV in April grew more than 50% from March lows, and then last week of April or back to being higher than the prior years level not all verticals are recovering that same pace of course, but overall this has been a positive trend.
We had a record month in April for revenue generated by Lightspeed payments. This was despite lower GTV per merchant on a year over year basis, and driven by the traction we are seeing online the impact of new merchant adoption and the good performance in some of our verticals like golf home and garden bike and Pat.
Our restaurant customers are continuing to face challenges overall, but signs of recovery are beginning to show in countries like Australia, where we've seen an increase of close to five times home delivery volumes in April with steady week by week growth in GTV as their economy attempts to reopen.
As a reminder, our hospitality revenue stream is largely unaffected by underlying customer volumes that is concentrated in countries like Australia, Germany, Belgium, France, Switzerland, and the UK.
Of course, we're watching churn closely knowing full well that we will see some business failure in or client base, we've seen elevated levels of churn in March and April.
Got to continue also so distant take measures are in place.
We're also being impacted by our ability to add new customers. During this time, but we've been encouraged by what we are seeing there.
Needed by our virtual sales and marketing model, we've been successfully adding new retailers, new golf courses, new Midmarket restaurant customers. During this time.
So netting it all out we finished April with over 75500 customer locations down only slightly from March of this we do have less than 5% of our customers on pause plans, reflecting active customers on a much reduced subscription plan, while they are forced to close their doors.
So quickly summarizing we're pleased with our fourth quarter results announced today that reflect strong fundamentals of the business.
Well covered 19 has undoubtedly affecting our customers and in turn lightspeed, our diversity across geographies across various retail and hospitality verticals their abilities sport Omni channel models for these customers has mitigated the impact considerably.
The lows we've seen in March of rebounded in April, particularly for retail E commerce customers and we're processing more through lightspeed payments than ever before.
Overall, net adds losses and customer locations fared reasonably well through April where we finished at 75500 customer locations down slightly from her all time high of 76500.
March.
I'll conclude my prepared remarks today by sharing thoughts on cost management.
Our internal noninterest sensors, all began its been to embrace our customers protect our people and preserve our balance sheet.
If you will talk shortly about how well we feel we are positioned in the long term if we can accomplish these things.
So on the balance sheet, we ended the quarter with cash on hand on 220 million U.S. of which 210 million is unrestricted.
And access to a further 25 million by way of credit facility.
Despite having the sizable cash position, we move swiftly to manage our cost in many ways. Once we began to feel the impacts of coated 19.
We revisit or hiring plans quickly recalibrated go to market spending in line with new activity levels.
Renegotiated with vendors and attack all of their vectors of discretionary spending.
We further pursued the various available government relief programs in the many markets we serve around the world.
Our intention and doing all this is to ensure we can preserve our best asset or people.
In a manner that leaves us confident in our bank account balance.
The benefits of this cost management exercise will allow us to redirect spending to the product side of the business. This year to ensure we continue to make the investments needed to lead our customers through this period.
As you will hear from JP. We believe this is a transformative moment for an industry.
One, which we believe will benefit lightspeed competitively in the long term.
We have the balance sheet to not only whether short term uncertainty, but to leverage it as a strength to create further momentum and set us up well on what we expect to be a meaningfully changed competitive landscape.
We are running multiple internal scenarios that reflects various assumptions around the duration of cold in 19, and its impact on new business GTV and churn.
Under each of these scenarios our intention is to manage the business with a view to maintaining strengthen our balance sheet to capitalize on the opportunities we see ahead.
I'll, let J.P. way in now and how are viewing those.
Thank you Brenda and good morning, everyone on the call before we open it up to questions I'll provide my quick thoughts on the Big picture.
To start the fundamentals of our market opportunity have now been accelerated almost overnight. It has no evidence that our cloud omni commerce solution offering is now must have foreign market.
More than 70% of this market continue to be served by legacy systems, and we believe cobot 19 has accelerated market adoption of our solutions by many years.
There are millions of merchants around the world, who will be seeking a modern system to help them manage their business has a better ways to keep up with evolving needs of their customers.
Second our value proposition.
A one stop shop for our customers no more important than ever.
The complexity that you must know managed to sell through multiple channels bundled payments reach customers have increased even further and is likely but they'll be seeking a single vendor to manage all of these things.
Lightspeed has always been ahead of the market the aim of helping our customers simplify their operations and adapt to changing customer behavior.
For instance, we introduced a cloud based Pos circuits for six years ago, and we launched omni channel retail solutions five years ago, We've delivered an omni channel loyalty programs help our customers further engage customers analytics to help them run their business better and payments to save time and money.
Third the scaling diversity of our business has served us well and sets us up even better for the future.
We have customer locations and over 100 countries globally with a bounce customer mix between retail restaurant hotels and golf courses.
This diversity has helped manage risk and focus on growth area to offset other than I've seen pressure.
We believe that scale and diversity matter enormously in our business as we look to solidify our position as a global leader for our segment of the market.
Focus it's always been the complex retailers and hospitality merchants.
[laughter] beat intentional our core customer with a greater and $600000 of GTV per year on average is one that have the ability to adopt a border solution set and succeed in a changing world and given their more established or less susceptible to churn and have a greater ability to weather short term disruptions.
Of course higher GTV presents a greater opportunity like you payments you heard from Brandon Despite overall pressure in our customers.
Steven Phil had a record month in April this is because our customers are adopting this solution at an increasing pace in order to takes time and money and realize the better user experience with filled so early into our role, though the tremendous white space in front of Oh, regardless of our near term vote. The opportunity you made for us to continue to.
Grow the starting a business.
And that's more of our economy migrate faster to electronic payments as a byproduct with pandemic, we expect the need for modern integrated payments solutions to only increased from here.
And lastly, we have always took behind the benefits provided by our virtual go to market and customer Onboarding mall.
Well ordered in our industry pursued expensive feet on the streets sale and installation mobile and have been forced to lay off employees, we simply recalibrated, our spend dials and maintained our CAC to LTV ratios.
Our team seamlessly shifted to work from home environment, and immediately began helping three hours, but our customers Verizon.
Meanwhile, our virtual Onboarding model enabled us to quickly and remotely help customers adopting technology they need to run their business.
To wrap it all though we compete in a highly fragmented markets and I don't believe that any other competitor that can make all of these claims.
We expect to encounter a much different competitive environment as we emerge from this crisis, one that strongly favorites like speed.
We have to balance sheet and the business fundamentals to capitalize on a permanently altered commerce economy and to take advantage of strategic opportunities that we expect to emerge.
With that I'll turn it over to the operator.
And it up for questions.
At this time I'd like to remind everyone in order to ask a question. Please press star and the number one on your telephone keypad.
Your first question comes from the line of Dan Ellis Moschopoulos from BMO. Your line is open.
Hi, good morning I.
I know you don't disclose your software ARPU.
But can you give us some color on how that's been trending you said less than 5% or on POS plans in terms of the other 95% its higher module adoption on one hand, I need to hand, I think you've had some pricing promotions and just on that net how should we think about the trends in soccer ARPU in subsequent quarters relative to what would've seen starkly.
Yes.
Hey that us it's Brendan here.
I think your writer you're hitting on the right things. We've seen we've seen ARPU continued to grow historically double digit see here that was true through too far as well.
As we look into Q1.
You know, there's there's kind of two competing things overall, we do have some customers on reduce subscription plans and offsetting that we've got you know increased.
Module uptake of things like delivery in E commerce, and so on as well that's helping to.
Offset that so.
A lot of moving pieces, obviously inside the business right now, but I wasn't things that are or are there are affecting things right now longer term you know.
Maxim JP.
During the call.
We think a longer term all of these trends, we're seeing bode well for you know certainly ARPU as a as more and more customers that dropped a adopt a broader portion of the solution side.
Okay and can you clarify in terms of the current revenue mix on a run rate basis I'm, just very broadly speaking what the split looks like between retail hospitality.
Yeah, the customer mix is pretty close to a balanced 50 50, the revenue mix as little more skewed to retail just because though you know, we're driving and payments revenue answered retail.
And our yet doing so through through the majority of our resto product offerings.
So.
Yeah.
Call. It two thirds of retail one third dress, though from a revenue perspective.
Great and in terms of payments and the payment economics, given that you have for our retailers doing a lot more E commerce.
With a lot more card not present transactions art economics looking much different than you normally what.
So ecommerce our pricing a little higher for online much like most people.
And.
So that helps as more and more volumes in the bottom line. We did run some promotions I think everyone has seen.
For net new customers onto the payments, we did a discounted rate for.
You know a short period of time, so that'll impact kind of the immediate quarters.
But yeah, those two things are more or less offsetting themselves at the moment.
Great I think I fly.
Your next question comes from the line of Daniel Chan from TD Securities. Your line is open.
Hi, Good morning, Good you mentioned that 75% of customers are still processing transactions on your platform do you know how many of them are still processing transactions to through the physical Pos and I'm just trying to get a sense for how many of your customers physical stores are still open.
I don't have a I don't I missed out on that then you know I think the way our customers manage and.
Pre tax of JP can keep me honest here, but I think they manage the business through our software entirely so anything that we that they are processing wall will make their way through our platforms, but I don't have a sense as to how much is in person versus.
What percentage of those is as physical versus online okay. Yeah. The omni channel system will record everything in the and the database and we'd have to dig a bit further to together.
Fair enough do you have any metrics on whether these customers have been able to offset sales loss from brick and mortar volumes with higher online sales.
Yeah, I think we gifts stat safley folks on the retail.
We do it came through on the call Smith.
Retail and E commerce and omni is fairing.
Oh, sorry, better right now then resto overall.
But on the retail E com side of the business that weaker we sort or trucking along fine through the early part of margin on a you know things change pretty quickly and we saw you know as economies close we saw that deteriorate as the as we ended the month.
In March and then.
Since then we've seen you know, we said 50% a improvements.
April from March lows for retailers.
That's continued on through today, we've also seen in the last week of April a retail on the overall is now back to being above prior years levels. So you know your perspective of coal that we're not quite aware worried we used to be but you know these merchants are are generally speaking leveraging tool.
Tools to a.
A fair pretty well through this.
On the retail and omni side.
[noise] and considering that retail is about half your customer base.
Was that growth in GTV enough to offset any GT GGB declines so that your total GTV through April and may be the well we've seen in may So far has continued to grow.
No I think you know the other side of the restaurants side of business. You know we're not we're not unique in this I think you know lots of public stack up there as to how that segment of still fairing, you know there's still down considerably.
So.
The good news is.
We outlined.
Our revenue in restaurant is.
You know because we don't payments there is software subscription revenue that you know, it's largely unaffected by those volumes.
And likewise, you know dark customer concentration is in countries that or maybe a little further ahead and opening up their economies. So we're seeing some encouraging signs there.
But it's still early and all that that remains.
Those volumes remain below prior year for sure to this point.
Great and maybe if I could just.
What we've seen.
I mean, a nice to be expected, but a lot of our customers.
Because of Kogut on the retail side or just rushing towards ecommerce.
Because they need to sell through multiple channels than what we're seeing on the restaurant side is a lot of our customers are not moving as quickly as possible to our module you know order ahead and delivery because governments or you know having them close so it's a transition we're seeing I think we can expect to see that a as we continue into the year has done a lot of.
Demand for all the kind of digital products from like speed.
Thank you.
Your next question comes from the line of Paul Treiber from RBC. Your line is open.
Thanks, very much good morning.
I was hoping you could bridged to comment at between 75% customers are currently trading versus GTV being up 50% April versus March slows.
Now how should we think about that increase in GTV, even though 70% of customers or office at 25% of customers I'm trading you know the 25% typically in a smaller customers is lower GTV or you're just seeing a GDP per customer inquiries.
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Hey, Paul Oh, well take that one.
I think its that's there's a few things there so 75% customer trading stat, that's across the whole base includes all the restaurant customers as well the 50% improvement that we're seeing a that was a retail specific comment pretty Tom a specific comment.
Where are we seeing you know that side of our business said pretty well.
As they've embraced the E commerce tools that we offer.
So that's a that's a difference there and for sure we are seeing signs that you know.
The early signs a inside any churn or pause plans or so on tends to be the smaller customers in the basin. The larger ones of are underway that kind of keep keep.
Keep moving along and we certainly see Mad men and the payments revenue, which you heard was ER in April all time high for us so.
Alright, Thanks, that's got to understand the and then in terms I think maybe just a comment there and I think it's worth saying is that there's very little correlation between our revenues.
And GTV levels, because a lot of our revenues or subscription based.
Customers are on or off so I think that's where we've we've done fairly well I think in this period is if you want to even just you know do delivery or if you just want to sell online.
Your subscription is on that so unlike other vendors who have their revenues that are really a correlation between GTV.
And on a percentage of 50 GTV being revenues like speed is just the subscription or maybe a subscription which helped us quite a bit and then took the other side the portion that is.
A percentage of revenues is doing really well because weve on boarded so many new customers that those on boarded customers have offset the decline of of every single customer GTV, which means overall volumes are higher than they were and we've had a record month in April.
I mean things like clarification.
When you look at adoption that more than one module, how is that tracking and through April and should we expect you know the adoption.
Trajectory to accelerate here or are there any structural.
You mean limitations that prevented at rising above a certain level at a certain point in time.
That's very good question I think so we've seen adoption go to 40% from 33, I think so and mainly in the last few months and I think this was two things payments.
I think generally speaking what we're seeing is.
Because of the Coca crisis people are starting to narrow the number of vendors and because we have a very broad portfolio. We're seeing a lot of customers you know move to our E com move to our payments move to our loyalty. So I think you can expect adoption to of modules to increase I.
And I think maybe the other big two trends that I already mentioned earlier on is if I'm a retailer today.
I mean, the only way I'm going to preserve my revenues going online. So we're seeing a ton of demand there for all of our customers. If they hate turned on E commerce and I want it now and so we've seen really incredible adoption through March and April and then the other b pieces, if I'm a restaurants are.
You you don't need a client server old system, you need a platform that connects online and can connect to delivery and so they're also we're seeing a lot of demand for order order ahead and delivery services for restaurants, and then finally I think loyalty is one that's been doing well because.
You know when they're hard times, each engage with your customers across channels, which is the benefits of our loyalty program. So you can expect that the you know the percentage of customers that have more than one module is going to accelerate growth next 12 months.
And just one last one from me.
Me strategically you know, what's your thoughts on bringing lightspeed hospitality or restaurants.
Into other regions at this time in a couple of your competitors in that segment and announce large restructurings in the seem to be retrenching, yeah now the time to try to gain share in new markets.
Yeah, happy you're saying that because I think this is really.
Again, I I think the first thing it comes to mind, but with your question is the majority of our revenues or not a percentage of GTV. It's a subscription you know you're on a year or so here are we've done really well throughout the throughout the pandemic because you know the majority of our customers are paying subscriptions and our revenue.
Having just decline drastically overnight.
The second thing that comes to mind is really our go to market model, where you think about the lightspeed go to market mall, we've always been virtual so we've always sold you know from a distance we don't have people with put on the ground and I think there or again, we adopted to the to the new world very very rapidly and we just dialogue you know the right correct.
LTV. So we're in a strong position so I think our perspective here.
Is that scale matters.
Our business model. It is it's worked out very well for us and we think there's a lot of opportunity now to gain market share a into new regions. I think were more in that offensive mode, where were now we think the market.
It's going to need more and more platforms like ours, we think that you know the disruption of the legacy systems is going to accelerate in the coming years and so we want to be short if we can penetrate as many markets as possible, but always keeping in mind that you know cocktail TV matters for us and it's not growth at all costs, but you know sustainable growth.
Thanks for taking my questions.
Your next question comes from the line of Josh back from Keybanc. Your line is open.
Thanks for taking the question and really impressive what a with the team has done for your customers and then from a product perspective, but I really wanted to ask a little bit about.
How all of these these trends aggregate youve certainly given a lot of details I really appreciate that about what's happening with they.
Retail and how the end of April or had a really nice recovery and payments in E commerce, how they've done well.
Offset certainly by what's happening with hospitality. So I'm just wondering if you wrap all of these trends together is there any way to give us a sense of baby how April revenue or some other aggregated metric was tracking just to help us to through setting.
Our new estimates and such.
Yeah, Hey, Josh we've obviously, specifically a decided to not give guidance given all the the uncertainty and you know despite.
Say being encouraged through you know.
April and into May so far we're just on now you know kind of that.
The duration and.
Hi, this is going to let country by country in markets that that we serve so.
I guess I'll leave it at that you know I think we've tried to give as much.
As much indicators as we're seeing a hopefully them you know we're pretty good sensors I think you do as to what the drivers of the business are and how those might translate into a model but.
For the time being anyway, we're going to.
Oh, even at that.
Okay, that's not a that makes sense.
Yeah, I was referring to the fundamental that the restaurant business. It's it's very very close to what's happening in retail what we're seeing is if I have a leg I mean first of all the majority of the market or legacy systems and in restaurant. When you think about the new World Post Covance.
It's really around adopting very rapidly to the online world to how am I going to make myself visible how am I going to sell online I'm not going to provide curbside pickup or delivery and so the world has become extremely complex.
I think wait more complex than just cooking a good a good good dish and I think right. Now this is really favorable to lightspeed given the breadth of what we offer and we actually think that and again, we don't know with Oh. This is going to add but when it does and we don't believe that you know the restaurants are going to keep their legacy systems, It's got accelerated adoption for sure.
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Okay really helpful and then so little bit of a follow up on that point.
You seen some customers come to light speed.
And what to start you know maybe the journey on the E Commerce side and certainly no. One is probably not a lot of people are opening stores right now, but they might have that in their game plan and they can get started online and then it would be very easy for them to transition to install overtime. So I'm just wondering if youve.
Seen any you know proof points of people more interested in the.
E commerce or delivery solutions first.
Yeah, I think that's really the strategy. We're seeing is we have a lot of customers or new customers coming to us just for a digital offering you know E commerce site or just even a delivery platform.
But then I think that's actually the wonderful case scenario, where we have to Trojan horse, where now they're using a piece of the platform and overtime. We will get you know the cold and legacy systems in the PEO. So we're seeing and I think what's interesting is we're seeing that in restaurant and retail. So we're seeing restaurants are actually overnight turning to grow.
Resorts because they have very good ones they want to so because they have a ingredients that they you know with specific supplier at that they want to be able to sell so we're seeing kind of your typical restaurant actually overnight go okay. I want to now start selling additions and the ingredients on line. So here just adopting our E commerce engine.
And then we're seeing a lot of restaurants.
Who are fine dining restaurants, who narrowed down there, they're menus and start to selling online and without touching for now the Pos but just using a cell phone line, but I think finally, the retail stores, we have a number of initiative, even with the city of Montreal's as an example, where.
Where we are we're hoping basically everybody adult E commerce or the first step knowing very well that the importance of omni channel. It is is it kind of a medium term important but this logic of having a joint inventory joint view of your customers. So we're seeing a lot of very creative in it.
Drifting model pop up right now.
I think that's why we're.
When we look at the future, we think that the adoption of systems like like ours is going to accelerate because people who have legacy platforms, which is.
The bulk of the market cannot adapt to all these new workflows.
[noise] really helpful. Thanks, Dave.
Your next question comes from the line of attention from JP Morgan Your line is open.
Hey, Thanks, so much appreciate the time I would a question on on the expense that first just with R&D being up a little bit too.
A quick would build up these products for the benefit of the merchants that that makes sense is that level sustainable here in the short term or could we see a little relief there and they know the comment around your so your fixed variable cost below the gross profit line. Thanks.
[noise] Yeah, no we're not a wont be releasing the R&D line as you heard some tax we're going to use this period of time to.
I continue to invest in this given the trends, we're seeing an or on our belief that.
You know this legacy Pos market has now firmly up for grabs so I'm not line.
We don't intend to you won't see anything we've done.
Some of the others, you know like within sales and marketing.
No. We've always had this virtual sales model you heard a little bit from GDP the benefits of that or we have a lot of dialysis. We can kind of turned that just quickly aligned with what our expectations are there in new business.
So letters out on that line, we do expect.
Amongst.
Other things like canceled events and some other things there will certainly be some relief or seeing through that line in the near term.
And we've done a lot other costs scrubbing throughout the other lines of business.
Just anything discretionary and someone to make sure that we can fund.
Those R&D investments in a manner that you know keeps they overall expense line a intact.
That makes sense.
Gotcha Gotcha, and then Brendan anything on the transaction loss or bad debt side, we need to be.
Mindful of here [laughter].
Transaction losses, we continue the farewell.
So nothing to speak of their spending you mean on the payments processing side on bad debt. We did we did take an additional provision that here and you find done and are in our filings at a million Bucks. So nothing overly significant but we did take.
Increased provision just you know.
Given that the broader macro environment.
But.
That was felt to be though prudent thing to do.
Okay No for sure for sure lesson from me just on the on the Big picture side I'm curious not to.
Always carry with it not to celebrate the pandemic or turn into a positive in any way, but just you know once we rebase here what do you guys. Most excited about is it the potential for more unit growth is it upselling modules place to be payments could it be M&A could we see more things become available to buy here.
And then any comment on that thank you.
Yeah, I think yeah, what do we excited about I would say pretty much everything when you think about the long term business you know we've been.
I mean, we'd be increasing for years omni channel and it wasn't the habit everybody's like Oh, yes, some goods that one day. This is those bigger over so I think that's that's what's exciting exhausted the.
The I think the market fate of our offering is is stronger than ever and the relevance of our solutions are stronger than ever because this is not a nice to have it.
I think the.
Second thing we're excited about is a payment option I mean, when you look at and and the fact that the markets are going to favor having one vendor that does the integration of old complexity.
I think there where you know we're very well equipped we pretty much have everything we need.
To take the market I think the third one you mentioned very.
A very accurately this is a highly fragmented global market.
And here, what we see is a lot of the countries. We operate and have some scale you know smaller Pos point solution vendors and I think there we will see.
Ton of opportunity for for M&A at a much more reasonable cost.
I think there.
This will be the tied for us to grab that markets and and and again, we think that scale matters in size matters and we've seen it through the pandemic. So I think here will continue going through plowing through our strategy, which is a mix of organic and M&A and the strategy of having one global brands.
A recognized in every single country I think there there there's a ton of auctions.
And I think it was mentioned earlier that.
Digital products like E Commerce a delivery.
Loyalty. These are these are real these are things that people are adopting to to adapt to this moment and these are real Trojan horses for us to be able to expand our footprint with those customers and start unlike speed solutions and grow a you know with a with a single vendor.
Yeah, no glad to hear guys. Thank you.
Your next question comes from the line of Gus Papageorgiou from P.I. financial Your line is open type. Thanks for taking the question I'm, sorry, I think some of these modules like ecommerce and loyalty and delivery I think you're giving goes away for free for a certain timeframe can you just can remind us.
As long as the free period and <unk>.
Based on what you're seeing.
What's your confidence that the customers maintain these modules and what kind of financial impact can they haven't and when do you think we'll see it.
Uh huh.
Okay got you Okay. Yeah, maybe started and then docs are brand if you want to jump into so the promotions or or are we are really around our ability or our customers' ability to immediately south on line and I think what's happened overnight to.
This is necessary for for customers to do well.
So we wrote the idea here with say during the pandemic, we will and while this closure because a lot of the country's workloads for business, we will help our existing customers. So across digital channels. So we went out and he said, Okay, Hey, I will give you three month free but the reality of that is most of our.
Our customers have signed up for 12 months.
And they are there, they're basically paying nine months I'm getting three months free so I think here. The majority of the customers are not page views and then if you ever want to pay pay for it it's like Hey, let's go through a contract to 12 months and we'll give you the first few months.
Three months for free to help you through a kind of them the more difficult times and I think for US. The most important thing is to get them to a transactional level.
And Weve. So we've re geared the entire company and to go to market teams on on helping those customers quickly adopt ecommerce quickly get going and quickly be transactional mining as Brendan mentioned, we've seen a huge pick up in the volume of transactions on on the E. Commerce site. So we're pretty pretty excited by this and we think that actually.
Again long term. This is a real good thing for us because customers are are not going to turn off what works.
And sorry branded how does that accounted then I mean do you do just recognize nine months ratably. After the first three months or do you rectitude average it over 12 months.
We would averaged over 12 months and the case of a committed 12 month contract.
Great. Thank you very much.
Your next question comes from the line of two cents up from eight capital. Your line is open.
Good morning, guys I'm can you. Please talk about your plans to accelerate your you POC in most instances someone like what capabilities, but looking to pull forward and what that the new pieces, a new use cases, I mean looking to introduce.
Yes, you know as weak as we've spoken about.
Omnichannel is accelerating in terms of adoption and so you know where we're doubling down on all the fee both physical and the digital workflows all of the new kinds of things that a new interactions that a that that customers.
I want to be able to that merchants want to be able to do with their customers I'm. So that means things like omni channel retail a multichannel resto integrated payments that single product focus we were going to see a big migration away from legacy on Prem systems to the cloud.
And omni channel Pos it's a this has been accelerated by several years.
So that I think it not that I think is a it it's an important trend that we have to to to invest behind.
I think when a fee a great example is what we what we launched yesterday omni channel loyalty to be able to track rewards across multiple channels. Just gives just gives our customers are our merchants much more ways to interact with a with their clients.
You know whether its physically in store or <unk> or in a or <unk> in the digital space. So lots of a lots of new nuts lots of new models by which merchants can differentiate.
Well that accelerates that will accelerate our results overall this markets up for grabs and having a broad set of tools are the people can can use across physical and digital channels.
Is key.
And maybe if I could just ER docs is.
No we've always been very strong in specific verticals.
And and we believe that's the strength, we talked about bikes about jewelries about pets and and so here. We obviously want to also invest quite a bit in going much deeper into verticals and to and to getting we more of the you know way more value from from all of that so you can see as docs mentioned all of the digital travel but also working.
Upstream with suppliers does a lot to that we're investing there.
Great and I think that's helpful and I wanted to.
Touched on earlier comments on under changes that you've been seeing the competitive landscape.
Hey, if he could Peters adapter strategies with respect to go to market, a product and and hope that creating an opportunity.
Okay, Yeah. So.
There are few categories.
I think.
First category as you know I'm, especially in the restaurant space a lot of our competitors have put on the ground, even the new school vendor. So I think what we're seeing from those is our competitors are really just reciting themselves and trying to adopted Disney World that is what was not their natural DNA and I think here.
For us is a real opportunity because.
Yes, it's kind of business as usual and the way we sell them. We installed we never you know physically meet customers. So I think that's that's one we're seeing is that we're seeing kind of the more traditional sales model shift towards kind of the more lightspeed model, which is completely virtual.
Then we're seeing.
In the market as I said, it's a very fragmented market. So we're seeing a lot of subscale point solution. So as an example, if I'm today only providing a point of sale.
Platform within the restaurant retail space, it's kind of hard times four for those companies because they don't have the breadth. We do so they can just pivot overnight and start selling digital strategy. So I think what we're seeing from those that they are basically laying off you don't even in some cases in Europe some of our competitors in Germany.
I have a point of sale solution have have laid off almost our entire workforce. So we're we're really in a very strong position there and I think there's a there's a big market up for grabs than I think this whole message around keeping our employees ensuring that we're here to support our customers providing digital strategy I think though is a good opportunity and then I.
The third kind of.
Buckets were seeing is we're seeing quite a few me twos or companies were trying to quickly adopt a digital solutions.
And and try and go into our segment, which is okay, because quite frankly, the market is so broad and so fragmented that there's room for more than one player.
But I think overall again going back to our thought process around omni channel, which we'd be preaching for five years or thought process around.
Virtual sales teams and enabling customers to use our platforms without ever meeting up.
And then this whole logic around one vendor.
Can provide a broader scope of solutions you think is the right thing.
Your next question comes from the line of Richard Tse from National Bank. Your line is open.
Yes. Thank you JP you refer to 70% of market being legacy would you includes a somewhat larger they incumbents in that category.
Yeah, Micros, NCR I think when we refer to legacy.
We refer to client server systems that have on premise databases and that have custom hardware and so you know again, it's a lot of countries are different vendors, but you know the de micros as of the world. Because you know just going back to a conversation I had with whatever are good customers. A few weeks ago is if I.
On using those platforms just.
Just trying to imagine how complicated it is to connect these.
Proprietary model databases that are not in the cloud to cloud based systems for delivery and pick up in all of that so I think and that is yeah 70, plus because of the market are those platforms and I think now I don't think that it's a you know one company is going to take the entire market, but we were pretty certain.
That those who you know survive Cove, it will not want to keep those platforms simple things you can't even have access to your reporting without being physically in the store. So there's a.
A lot of kind of reasons and.
That make us believe that this transition from those on premise systems to the cloud based platform, it's going to accelerate Oh after code.
Okay, and then I think you talked about having had some wins that even during this last down.
I'm Odyssey I'm guessing it's against legacy systems.
Well, they those whether it be against some of these large and commence or some of the smaller independents.
No no it's the larger and actually what we're seeing is those who are financially stable and you know have multiple locations actually those are actually using kogut to accelerate their deployments and say, okay look now that we're seeing that quite a bit in hotels also you know this dismissed south UK workloads.
Take this time to actually equip ourselves with a better system.
And then and then I mean, we're seeing a as we said earlier on that.
When you look at the smaller customers many of them are reaching out to us because they have an immediate need for E commerce or an immediate need for for delivery and we will start there and then work our way back to the to the Pos, but we're seeing I would see it's incredible to see the different dynamics and to see how resilience our customers can be.
Through this and how crazy if they become.
Your next question comes from the line of Todd Copeland from C.I.D.C. Your line is open.
Hi, good morning, everyone.
I wanted to ask your question about churn if I could thousand in a month seems pretty low relative to the total customer location. What is your opinion of the remaining customers in terms of their health and with the slow things that you're seeing in the different regions or would you.
Would you expect that churn rate to ER to slow.
Hey, Todd.
We're certainly modeling churns going and you know for sure.
For the foreseeable future until you know social distancing measures are relaxed everywhere that we.
Our operating you know, having having said that so far I think we've we fared quite well and I think that's a testament some of the things you you've heard today around you know the type customer we serve the characteristics of that customer being more established a little more evil.
Whether the.
The storm here, but.
I don't think I don't think that I don't think we can sit here today and.
Forecast with any degree uncertainty that or you know the worse is behind us or not yeah. I think we just see on this plays out.
But rest assured we're watching it very closely on a daily weekly basis right now.
And then just structurally Oh, no restauranteur hospitality business post Cove it.
Do you have an opinion on.
What kind of churn is necessary in that segment of the market in terms, if you know restaurants, having to operate at reduced capacity. So there certainly will be a some inevitable churn there that.
That builds establishment won't be able to get through or survival with.
Third or 50, or 75% capacity given customers need to be spread out just just talk about your thinking on that thanks.
Oh.
Yeah, So maybe I'll start Brendan and you can Ah I think weight when you.
So first of all it is survival of the fit. So you know are the customers are going to need to adopt to be able to thrive.
So you could argue that.
The importance of being able to do order ahead and delivery.
Is it kind of one of the only way out of this when you think about it and so with that in mind, we think the man for those products, it's going to go up and we've seen actually.
Those of our customers, who adopted quick beat to that.
I've been doing well.
And so here again, nobody can predict predict what's what's happening, but our mindset is.
This is not a nice to have it some uh huh.
And our mindset is if you were running a business and you were not connected online or not using delivery systems or and you were kind.
Kind of.
Insulated in your World of Hey, I'm in my neighbor than like people are coming through my restaurant I think that world has turned upside down and I think there.
We.
We think that the restaurants are going to reach out as quickly as possible to get delivery platforms, whether they can compete.
But I think if you for the restaurants, the restaurants that are doing well with lightspeed are those with quick be adopted and those who have understood. The importance of having a good website, having a good platform where you can you can order Pritchard credit card and from pickups are back at the you know the tobacco the restaurants so I.
Anyway depend I mean, you can see the glass half full or half empty, but we certainly believe that we're better equipped than anybody else in the market too.
Actually conveyed that story and enable them to succeed in this new world.
Brandon do you want to add anything.
Oh, I think were exactly what I said it well.
Yeah, and I think it's it's not just yet as James mentioned earlier in the call. It's not just a delivery I admit many restaurants are pivoting to use our retail tools as well in order to you know sort of groceries or as they say in material pithree.
And that's been in effect. So it's it's an effective use of all of our all of our tools plus layering loyalty to engage with customers and let the no. But you offers let them know, but weekly menus. So we're seeing very creative use where tools in them and that's a that's what what's what's reflected in summer fee adoption numbers that were seeing here.
Especially in restaurant I mean, I know a per our case a that a newly opened restaurant transition completely to delivery and open the second location a more downtown in Vancouver, and is all delivery model and a and as a is.
Adopted that and as having strong strong momentum with that.
This is all the time, we have today for questions. So this concludes today's conference call you may now disconnect.