Q2 2021 Lightspeed POS Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to today's Lightspeed second quarter 2021 earnings call.

After the speech presentation, there will be a question and answer session.

Good question during the session you.

He would need to press star one on your telephone keypad. If at any time you need assistance. Please press star zero I like I like to turn the call over to Gus Papageorgiou head of Investor Relations. Please go ahead.

Thank you operator, and good morning, everyone.

To Lightspeed fiscal second quarter 2021 conference call.

Joining me today are Dr. Silva like speeds founder and CEO Brendan do see she.

Chief Financial Officer, and JP survey President of Lightspeed after.

After prepared remarks, we will open it up for questions. We 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.

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 the U.S. and Canadian Securities regulators.

So our commentary today will include adjusted financial measures, which are non IRS measures. They should be considered as supplements to and not substitutes for high after rest financial measures reconciliations between the two can be found in our earnings press release, which is available on our web site on SEDAR dot com and on the Fccs.

Your system and finally note that because we report U.S. dollars all amounts discussed today are U.S. dollars unless otherwise indicated.

With that I will now turn the call over to docs.

Thank you guys and thank you everyone for joining today.

Nearly nine months after the outbreak of COVID-19 small and medium sized businesses continue to face challenging conditions.

In addition, we've experienced rapid changes in consumer behavior, necessitating a reinvention of commerce could the retail and hospitality industries.

Right. These challenges like she'd had one of its strongest quarters yet.

Results exceeding our expectations characterized by a growing customer base, expanding our cool and increased adoption of our ever growing service offering.

He was founded on the belief that the resilience and entrepreneurial spirit small and medium size businesses is a key ingredient vibrant cities and communities.

In the case of persistent challenges, mostly keep merchants have continued to sell and serve keeping stuff employed antibody innovative means social engagement in a world of good feels increasingly isolated.

We are proud to be the technology partner of choice for many of these smbs they adapt to their new realities and reinvent their business models fighting bracing Lightspeed modern cloud based platform.

Strong omni channel presence once considered a nice to have for Smbs is quickly becoming a necessity.

Such independent businesses are increasingly abandoning legacy systems, and embracing lightspeed solutions, a trend that accelerated this quarter.

As a result like you saw a year over year GTV growth of 56% and saw from humans growth, 62% aided by a growing customer base increased ARPU and the acquisitions of counter industrial Capex.

We had a very busy quarter with many notable initiatives, but I would like to highlight four key themes.

The continued innovation of our platform the strengthening of our board of directors, our NYSE listing and finally, our pending acquisition of Shopkeep.

First on innovation.

As our customers scrambled to adapt to the new reality like she doesn't busy delivering new solutions to help them reach an ever more demanding and concerns consumer.

So last quarter, we announced three new product initiatives the.

First is E com for restaurants designed to legacy restaurants to seamlessly transition their business is online and integrate new revenue streams become for restaurants, let's let's see merchants display their money's online lead to delivery systems and integrate into open table for bookings and Instagram for social media.

That's restaurants worldwide have injured willing soldiers and their dining rooms, and online presence and frictionless delivery and she's got experience have provided a crucial like flying.

The second reason innovation its order had a cost efficient online ordering platform designed to be able to take out order had integrates into income for restaurant, putting a powerful digital hub the needles restaurants provide a completely contact list customer experience.

On orders appear direct cleanup leasing platform and customers can tractor orders from start to finish with real time status updates by text message. Finally, we introduced like speed subscriptions and new module that allows local north American retailers, who likes to be paid to collect recurring revenue through their Pos subscription should appeal to mute.

Target verticals, such as health and wellness by allowing monthly membership capabilities.

We're also hopeful it will increase payments penetration.

Subscription should help retail customers develop its stable recurring revenue stream and build a loyal customer base, while seamlessly integrating into their existing platform.

Dynamic market focused innovation is a key part of our culture and strategy, particularly relevant in the current commodity environment. Our strong service offerings have allowed us to run several notable customers and partners this quarter, including Ultimate course of though which operates an award winning selection of ultra luxury hotels.

That was sponsored clinics and private residences located in the most exclusive destinations around the world.

Then lease Petstuff, an all natural pet food store with over 50 locations in the mid Western United States, showing natural pet food pet care Centrals toys grooming products and treats for your cut.

Seven cents botanical high quality line, especially designed body and skin care products made with essential oils in CBD. The finest gifts nature has to offer with over 50 locations in the U.S.

Capital, we would call located on the popular I went to Maui and home to the P.G. towards century tournament. The champions coupled to a golf mean seems to have the most majestic golf courses in the world the plantation and be courses.

And finally landscape golf management, which operates 30 golf courses throughout the United States.

These high profile customer wins demonstrate our leadership in the complex SBC market as well as our continued leadership in select verticals such as coal.

Additionally, Anheuser Busch global drinks drilling company with 630 beer brands in 150 countries, well partner with light speed to market, our solution to restaurants and bars in Belgium, Anheuser Busch mid teens over 70 direct sales representatives and this market will be trained on the like speed solution.

Finally, we are proud to partner with a new block in our home market Qubec.

He has developed the popular conducted online market offering over half a million products from over 2000 conduct these merchants.

Many of these merchants will be processing their transactions through like the payments. We believe this initiative will go a long way in helping local merchants capitalized on the busy holiday season, and that is likely to see increased customer desire to buy from and support local merchants.

Next strengthening the board of directors.

Believe maintaining a strong board of directors is an important part of demonstrating our commitment to our shareholders. We had thus far in our history had the good fortune of maintaining a highly effective board with incredible depth breadth of experiences in the technology and retail sectors.

This quarter, we further enhance the strength of the board with the addition of Merlene Centerville.

He has over 20 years of experience as a technology leader business executive at organizations, such as speech with Yahoo and people.

She is an experienced board member and has received numerous accolades during her career most recently being named one of women Inc.'s most influential corporate board directors.

Most importantly, the mean has demonstrated a passion and commitment to the success of our merchants I.

I look forward to working for lean in the years to come.

Our NYSE listing drink.

During the quarter, let's see completed a successful listing on the New York stock exchange a major milestone in the company's history. It.

It is a great privilege to be one of the 2300, leading companies listed on this 228 year old execution.

We issued approximately 11 million shares raising gross proceeds of $332 million. Our York listing an equity issue should help the company gained a broader investor base and the key west market increased liquidity for all of our shareholders or use our public profile improve the recognition of our platform and not.

Least of all allow us to continue to pursue our growth strategy.

That group strategy includes acquisitions and I'm happy to say that our efforts to date have delivered strong success. Okay.

All four of our recent acquisitions krona Gulf I can't to cancer, and gastric fix delivered their strongest quarters, yet demonstrating our ability to integrate enhance the operations of our acquisition targets.

I'm also happy to report to the integration of these acquisitions into our flagship hospitality platform continues at a rapid pace, but the majority of the developed resources now directed towards the converged effort.

We've also made excellent progress on rebranding the various web sites and integrating the go to market teams to achieve the growth acceleration we have shown.

Finally, our proposed acquisition of Shopkeep.

We are happy to announce that late fees entered into a definitive agreement to acquire one of the leading cloud commerce platform providers Shopkeep for a total estimated consideration of approximately $440 million shock.

Shopkeep powers over 20000, you, killing restaurant location for the United States and with this acquisition firmly positions like feed as a category leader not highly fragmented market.

The combined company will have over 100000 customer locations globally, and approximately 33 billion in GTB.

Shopkeep will help bring scale and a seasoned management team to our U.S. presence along with a highly developed capital business, which we hope to leverage.

And we will bring a broader solutions portfolio, such as lakes be payment loyalty commerce analytics, and multi location capabilities to shop keeps customer base.

So he can provide the customer base with all of the capabilities required by a growing business removing the need for them to re platform as they grow.

We're excited about the many synergies we see with this combination I think this will be a landmark combination in our space Brendan will speak further on the details of this acquisition in his remarks before.

Before I conclude I want to thank the entirely to be team for their commitment and dedication over the last quarter.

He's remain challenging times for each and every one of us, but we have much to celebrate this quarter.

I want to take a moment to acknowledge that our success comes due to the grid resiliency will be entirely to be team their commitment to like Youve merchants worldwide is unmatched and unwavering.

And with that I will pass it on to Brad.

Thank you to access.

Today, we reported one of the most exceptional quarters in the company's history. This.

This quarter demonstrated not only that the business model is working but also the long term potential that it has.

In the face of a global pandemic that has created significant disruption in our end markets.

We grew our net customer location count to over 80000 at September 30.

This was driven by a surge of gross new customer location additions, which increased by 68% when compared to the same quarter a year ago.

As I mentioned last quarter. This metric is the most encouraging thing we can see as we firmly believe the replacement cycle of legacy systems is accelerating and moving towards solutions like ours.

Our customers collectively processed approximately $8.5 billion of volume in the quarter up from 5.4 billion in Q1 of this year it was over 56% higher than the same quarter a year ago.

This indicates that despite the many new restrictions placed on these customers they've been able to adapt and thrive.

Our strategy of using our privileged position as a core software provider for these businesses to expand into new areas such as payments also continues to pick up momentum.

Payments uptake remains strong and we are now processing better and 10% of our GTV sort relates be payments in U.S. retail with momentum continuing to build in the new markets in which we have launched.

As a result of payments and continuing to up sell customers new software modules, our ARPU per customer location during the quarter grew to better than $170 per month.

And finally as Docs mentioned, our recent acquisitions are thriving giving evidence that this aspect of the strategy is working as well.

The cumulative results of our execution on these key drivers are that we grew our overall revenue better than 60% year over year and up 26% sequentially.

We are really proud of these exemplary results, but of course globally, we still face many uncertainties surrounding COVID-19, and its resurgence and I'll speak to that shortly.

So recapping the second quarter in greater detail total revenue was 45.5 million up from 28 million a year ago.

Representing growth of 62% and well above our guidance of $38 million to $40 million.

Software and payments revenue was 62% higher than a year ago at $41.1 million.

Excluding the impact of counter.

Gastro effects, which were not included in last years numbers, given the timing of those acquisitions.

Software and payments revenue grew 42% versus the same quarter a year ago.

Adjusted EBITDA loss for the quarter was $2.8 million compared to 5.1 million loss from a year ago.

And as mentioned our GTV for the quarter was $8.5 billion over the past 12 months, our GTV was over 26 billion.

We ended the quarter very well capitalized with unrestricted cash on hand of approximately 513 million.

Looking deeper at some of the specific business trends, we saw in the quarter within our overall GTV, we saw retail grow almost 34% versus the prior year and restaurant increased by approximately 97% compared to a year ago.

Retail GTV was aided by continued success of E commerce, which is up over 80% versus the prior year.

And from strong performance in some of our seasonal verticals.

Well E Commerce has been an important tool for our retailers, we saw strong resurgence in physical transaction volumes in the quarter as lockdowns eased globally over the summer months.

Our restaurant segment recovered nicely in the quarter from the lows seen in March April and May as a reminder, the majority of our restaurant customers are currently in international markets outside of North America.

On the back of the strong GTV laws, we saw customer churn rates improved from the first quarter's levels.

Churn remains slightly elevated versus our typical levels. However, we continue to be encouraged by the resiliency of the customer base.

Looking at light speed payments a continued its rapid growth trajectory once again in the corner overall lightspeed payments revenue grew by over 300% versus a year ago.

The back of strong customer demand from both new and existing customers, an industrywide move to electronic payments and away from cash.

An outstanding performance from some of our end markets like golf and bike.

A portion of new customers contracting for payments alongside their core software subscription remained steady in the quarter at our recent levels.

And overall penetration of lightspeed payments as a percentage of GTV was over 10% U.S. retail in the corner.

We're also seeing good early momentum and recently launched new markets with better than 4% penetration in Canadian retail and over 3% in the U.S. restaurant.

So turning now to our Q3 outlook. The performance achieved in Q2 leaves us very confident in our business in the long term.

However, we are mindful in the near term outlook, but the effects of the pandemic remain weak.

We are now seeing a resurgence in case counts and subsequent government lockdown measures and some of the markets we serve around the world.

Leading on the experience gained in dealing with these lockdowns in the spring we have confidence that our customers will fare better than the broader industry.

We will continue to gain market share during this time.

However, we have to expect that Lockdowns will increase customer churn will impact purchase decisions by our prospects and we will affect our customers transaction volumes.

Our outlook also incorporates our expectation that the seasonal nature of some of our verticals will slow down in the fall and winter.

And while we typically also expect the holiday season of November and December to be strong in many verticals that this year will be an uncertain one given the situation we face globally.

So with all that in mind, we expect Q3 revenue in the range of 44 to 47 million. We expect Q3, EBITDA it'd be a loss of approximately eight to 10 million.

Oh, he once again at the prevailing macro uncertainty will decline to give a full year outlook at this time.

One quick note our adjusted EBITDA outlook reflects the impact of our new NYSE listing and its associated incremental compliance costs include.

Including higher cost associated with the you know liability insurance, which saw a significant increase in premiums to approximately $10 million annually.

So while we continue to take a cautious view of the near term results given the many uncertainties right now we feel very good about the company's position for the long term.

This quarter's results demonstrate the power of the business model and the results we can drive in a normalized market environment.

I'll wrap up by discussing the acquisition of Shopkeep that we announced today.

The guidance Ive, just spoken to excludes any impact from shopkeep in the quarter as a closing date for this acquisition is not presently known.

Purchase agreement with Shopkeep is for 145 million in cash on closing plus the issuance of approximately 9.5 million shares of light speed for estimated consideration of approximately 440 million.

Shocks keeps trailing 12 months revenue is approximately $50 million and they bring over 20000 customers and approximately $7 billion of GTV to this combination.

That going back to his comments, we see many synergies with this combination and are excited by the potential future together.

We believe this is a landmark acquisition for our space and the resulting combination bring a company with the resources scale and momentum to lead complex retailers and restaurants to just period of rapid transformation and beyond.

With that we'll turn it back to the operator for your questions.

Okay, and any time, if anybody would like to ask a question. Please press star one on your telephone keypad.

And that will be star one on your telephone keypad if.

Our first question comes from Raimo Lenschow from Barclays. Your line is open.

Hey, Congrats on these great numbers and Oh two questions from me first.

If I think about the the combination of Shopkeep and you like how do you try a how do you envision just to kind of work out in terms of product or customer overlap, maybe you could give us a little bit more detail. There and then asked me a that's first question and the second question on on the restaurants, you mentioned and you don't have that much or not.

The Northern American exposure can you just kind of talk us through a little bit just kind of where that exposure issue that we tend to have a better idea how to think about it. Thank you.

So Brendan you want to go or you want me to take that yeah.

Go ahead, Jason shutdown.

Got you.

[laughter].

Yes, so maybe that's just you know this is.

Step back and think about Shopkeep. This is our strategy. It's part of what we announced which is consolidation of the market.

And I think we've proven that we can you can do some acquisitions and get some good returns and so here for Shopkeep. If you. If you. If you look at the company. They were one of our biggest competitors in the U.S., we have a very similar.

Profile of customers. If you look at the industry and they also have a mix of a restaurant customers in retail customers. So for US. This is very much in line for the other types of acquisitions, we've done and with that in mind, we have a strategy to get to one product like we did with all the other than one grant so what we'll be doing is is.

Within the coming weeks, we'll be working on on an months getting getting to one product and getting everybody.

Behind one solution, which is a mix of all growth and I think if you look at what we've done in the U.S.

We haven't done an acquisition so far but if you look at Europe.

Exactly what we did with all the brands that we acquired there now all under Lightspeed and we're not pushing one product globally.

I'll take the second part of that question Raimo I'm, a restaurant distribution are largely outside of North America countries, like Germany, Belgium, Netherlands, UK and.

In Australia would be where we have the largest concentration so customers [noise].

Okay. Thank you well done.

Your next question will come from sadness lots and lots of Lewis from BMO capital markets. Your line is open.

Dennis are you on mute.

Sorry about that I think working rapidly acquisition. It's my understanding is that shop people struggling for growth at the last couple of years Ah first of all can you confirm that and secondly, if that was the case can you comment on that dynamic I wasn't missing some key capabilities that you can now offer or was there something else going on.

Hey, then also Brandon no. The company was growing a pre told that a tool you know isolate I suppose as me as we think about that the known the company had a nice organic growth very similar views are approaching the market as as lightspeed and as Joe.

You mentioned you know we would.

We would see them regularly in the market and similar types of customers similar verticals.

And shopkeep that done a nice job and that team has done a nice job of positioning multiple multiple software offerings for those customers and we're.

We're we're achieving some nice growth again for a cold that came along so you know as we take a look at this and we think we share very similar views though.

You know how this market will play out in the long run.

And just like all the other acquisitions, how we can bring you know the increase functionality that lightspeed offers the increased the breadth and depth. These are these customers.

Think where you know, we really see a opportunities as well as our joint customers now continue to grow or how they can leverage some of that increased functionality from lightspeed overtime.

Okay and am I understanding that they had a relationship with first data and we're offering it software on our platform can you speak to whether coal front first data were significant channel and how that relationship might change going forward.

Yeah. They they shopkeep operated a again as many of the acquisitions that we look at in the space.

You know they they operated by referring customers the payments opportunities over to several partners one of which was from this first data.

And Ah you know I think as we go forward.

You know, we have lightspeed payments of course.

But.

Long term strategy there remains unchanged with how we approach.

Conscious market and how we see these two things coming together naturally over time.

Yes, we think so.

Oh, I'm, sorry that the same relationship they had as lightspeed had before we launched like prepayments. So they have a number of partners for the the payments and so our strategy is exactly that its going to be similar to what we did was like to be.

Okay, Great and finally, your gross margins went up sequentially, which is interesting given that your payments revenue is ramping can.

Can you comment that dynamic is that reflective.

Reflective of the strength in the software business in new and higher ARPU in the quarter or are you also seeing some improvement in that European margins based on your current scale.

Yeah, I live a little bit of all of the above I mean, obviously you guys given the growth in customers.

Yeah. So some a nice increase in the subscription line churn starting to come back towards normal again, which helped a lot.

Some of the discounting measures that we had in place you know those all start to roll off and also as you know.

We do continue to kind of look for ways to drive incremental margin and payments and I guess the other aspect to the overall gross margin is.

As you know we do have some legacy came at her for all revenue streams and sales volumes are covered in the quarter as well what would have been incremental to margin.

Great. Thanks, guys.

Your next question comes from Josh back from Keybanc. Your line is open.

Yes. Thank you a team for taking the question you know I was looking at the chart that you had included in the presentation and I don't know if I may be reading too much into it but it certainly looks like.

You S. hospitality and Canada retail.

I have a steeper ramp of the payments adoption. So you know I don't know if it's just you know early don't get too excited about it or if you've been able to apply maybe some of the learnings from U.S. retail just anything that that's noteworthy on about slide.

Yeah, I think as we've always said you know we expect that won't get better at this overtime just in how we package position. So we do believe these markets.

Increasingly come together software and payments into an integrated solution I think we're just seeing that generally speaking play out.

We also do expect restaurant too to have higher attach rates and retail to market. We think is a little more conditioned to buying integrated software and payments than maybe in the retail market. So.

I think that's what we're seeing play out in the early in the early days here Josh.

Okay. That's really helpful and you know the commentary on restaurants really stood out to me positively.

Certainly there's been quite a resurgence of probably faster than many would have expected three to six months ago. So any other.

Color, obviously, you've done a lot of innovation for them with you know things like E. Commerce for restaurants that order ahead. So have they really quickly embraced that that's what's helping the resilience there just would like to hear a little more context on that.

Yeah I think this is a this is a big quarter for for innovation from Lacey for hospitality sector, you know, especially with with as you mentioned you comp restaurant sales, which gives you know those are those businesses on digital hub, which brings together reservations or or or social media.

All the different all the different pieces that are they need as well as.

The order had the order had capabilities tightening as well and I think that.

Delivery. These are these are all tools that are that are coming out a couple of things that are helping these restaurants adapt business models for.

For this particular moment.

And we're seeing that we're seeing the option you know you know.

Really really atens businesses and I think they continue to help these businesses transform even post cold and and have new revenue streams.

Yeah, I think maybe just caught me lets not forget the majority of the market is on legacy systems and in the context of coated legacy systems are really not there I mean that they are under serving the markets. So there's a big transition there are people who want to move into the you know the new world. So that they can adapt and they can they can thrive hopefully.

In this environment.

Okay and the last question for me the the number of gross new customer additions certainly seemed like a distinct positive I mean are you seeing.

Seeing some of these businesses set up and maybe a online first model and then look to open up a store as well as maybe some of the restrictions views just would be curious to.

Here any other context or around that development.

Yes, so I think I mean going back to what we had talked about last time, we still see the same.

Ambition, where we'd be talking about omni channel for five years, and now everybody is coming to us and and you know they want it they want it now so we're still seeing that same trend of people needing to adopt digital platforms and to serve their customers and different views and.

I think that's not going to slow down and I think the other reason why we've seen such strong adoption of new customers is.

It's just scale I mean, the strategy is working you know our brand recognition is stronger and I think you know to this ambition we have being one global brand is really helping us when you think about the intake of new customers.

Great. Thanks, Steve.

And your next question will come from Andrew Jeffrey from Travis Securities. Your line is open.

Thank you. Good morning appreciate you taking the question.

Maybe the it's been a follow up on John's question with regard to.

New customer growth can you talk a little bit about how much of your customer growth this quarter and maybe trend wise, it's coming from that new merchant creation versus competitive takeaways.

I think there are the blend hasn't changed and I think that's a surprise.

We had is that there are still new businesses being created in the space and don't forget my speed as you know.

Global so we have businesses.

Around the globe in some countries are.

I don't are not seeing the impact of Covance like Australia and other countries in the like the U.S. are staying open while Europe. You know it is maybe having more difficulty. So I think I think they are we've we've seen at a macro level. The same thing as usual, where it's a it's a healthy blend of people graduating all.

You know kind of less powerful cloud based platforms, then, but the second big bucket is really net new businesses, we're opening and Nida Nida system and obviously, we're probably you know one of the the chosen few and then the third category, we still see or people moving off legacy systems.

And and again just try to imagine somebody on the legacy system in the context of Kogut, they need to they need to change to be able to adapt.

So I think I can blame we've we've always seen.

Okay. That's helpful. Thank you and then.

Follow up.

With regard to a vertical markets.

Talk a little bit about it a couple of things one I guess do you need to think about.

Difficult compares in bike and golf for example, as we look out to next year.

You know in terms of maybe an easing of the pandemic hopefully.

Given.

Given what might have been a bullish this year in those in those categories and and it too you know around some of the B to B ambitions you might have I wonder if you could offer an update.

In terms of progress or how we might think about the roadmap for new product introduction and in your key verticals.

Yeah, well, there's always going to be some season to see.

Seasonality in the business you know in the summer months, we do have golf bike Oh.

Home and Garden, you know sporting goods, where we have we have really strong retail numbers.

But we'll we'll also have you know a strength and then in other verticals during during the holiday season.

And so on.

But no regarding regarding products from B to B, we've been we've been ramping our are.

Our tools for suppliers.

We're going to be talking about that more in the coming quarters, but that's a that's that that I think is a an area where we.

We did we did talk about a one of the partnerships that were.

You know that we in ours in the earnings call with Anheuser Busch, where we're now speaking with with partners across retail and hospitality, whether its bike or whether it's a you know.

Can be and starting to integrate more deeply with and work more deeply with our partners to work with our merchants.

Okay, great. Thank you very much.

Your next question will come from Richard Tse from National Bank. Your line is open.

Yes. Thank you when it goes the legacy players like what areas of weakness do you think coal that is really amplified in terms of the challenges that they had before.

Yeah, So maybe I'll take it but just to pick up the legacy players those are client server platforms. They have proprietary databases their on premise most they've done or not in the file.

So.

Just look at a work flow with Kogut, you know you're thinking about order had you're thinking about online delivering you think about curbside pickup and it's very difficult for a platform that is the client server platform to be able to engage cloud services and so I think that's really the biggest shortfall because I think the legacy systems were good at math.

Managing let's say one work so with one channel, which is a physical channels, where people go into a store or restaurant I think they were doing it okay drop there, but I think the world of Cove, It now and even thinking about payment it's all around.

The connection between the physical world and the digital World and this means ultimately on the technology standpoint that it needs to be you know services talking to services in the cloud. So there. This is really the biggest shortfall I'll just give you a few examples you know.

If I did not permitted to go if I'm up store owner I can't go to my store well my restaurant disclosed and I have you know I have a legacy system, even reporting needs to be done on premise. So.

Here again, the the need to be able to virtualize. The infrastructure. It is important so I think there's a number of fronts, but I think really the bulk of it is that these old legacy systems are really just good for one channel and when you think about the cobot in the new world its multi channel interacting with.

He charters across multiple digital channels. So they're just not adapted for that kind of that kind of work flow and then you did you would barton.

Right and if they decide to sort of try to make that pivot is that like a you think like a two three year after on their part or just trying to get a sense of like that leaves me guys out here.

Ben If you go one layer underneath it's not the same technology, it's not the same developer it's not the same codebase. So for them. This would this would mean a rewrite and you know it's interesting because like you. We had a product that was on premise and and the listing is extremely heavy so what we have to do was redevelop complete their cloud platform.

Next to it and this will take at least 345.

Five years to get to that level of functionality needed within those businesses. This is either big solution to develop so we're not too worried about that and actually if you look at the evolution of technology throughout time, it's very rare that a company.

Managers to reinvent themselves and then I think the last piece or the business settlements. These.

Platforms are sold with upfront payment.

There are no clouds, so even their cost structure no.

Not adopted for this new world.

Okay, and just one last one for me when it comes to acquisitions what are the key attributes you're sort of looking for here is that it.

And geographic reach an opportunity to upsell existing products you have into that basic technology people just trying to get an understanding of what your sort of prioritizing when it comes to do acquisitions.

Yeah, and so weve never change our strategy there we have three categories in which we acquire but I think even before we go into those categories first of all the DNA of the company needs to be like like.

This means that needs to be a high growth company via cloud based system. So we wouldn't acquire legacy platform as an example.

And we need to be sure that kind of culturally speaking. We're you know we're very aligned now one. This is you know once we pass stops that there are three categories. We first we look at technology. So here you know overtime, we need to grow our portfolio because our customers want to buy more and more from my seat. So.

He will do acquisitions within the vertical of expanding our capabilities and here I think is a good example of what we did in the past with like the loyalty or analytics, where it when we see technology to our base wants to acquire we integrated the second category is really geographical expansion. So here I think.

A very good example would be counter or would be gastro fixed before to two deals. We were we had zero presence in Australia oldest and almost no presence in Germany.

And then the third category is Verticalization, which means we need to there are a number of verticals, where we want to go much deeper and there I think a very good example is critical where we you know golf courses do have retail stores. They do have a restaurant bucks chronicled brought us a set of functionality.

Enabled us to go much deeper into the golf industry and so we're going to continue pursuing those those acquisitions within those three categories and again, we want to acquire companies that have very similar DNA to ours that are high growth.

And again, if its cloud it makes it so much easier than to reuse services between the platforms.

That's really helpful. Thank you.

And your next question will come from Todd Coupland TRMC happy She your line is open.

Hi, good morning, everyone.

I had a couple of questions I first wanted to macro question calcified Toby Lukas talks about.

Overall ecommerce told that being 10 years.

The first quarter that you called out at power powerful pull forward trend sort of sales. They upgrade cycle I'm. Just wondering if you could put some context around that that pull forward. How powerful is it on D.C.D. actually creating lots again recently lot count is talking about.

Dynamics please.

Yeah, So oh my.

Good.

Well, maybe starting with the go to market and what we're seeing so I think we have the same perspective on on POS We think that cobalt has an accelerator obviously, it's going to be choppy you know as as markets are forced to close but ultimately this is a this is an accelerator to adoption is like beat and I think this is.

What's driving our strategy and so here what do you when we think about a acceleration of adoption. We also need to think about acceleration of road maps and so that's why we'd be we've really been accelerating our roadmaps on digital and E. Commerce on curbside pickup on on delivery methods, because the market needs. It now and I think we.

Very very similarly to our competitors. We we thought we had you know maybe three to five years for the market to need the functionality they need today and and just Cogut is architected. So now were.

We announced a I think at the last earnings call that we were you know increasing our development capabilities because if the market adoption that exists is accelerating we need to accelerate our roadmaps to to be in line with this and we've done tremendous progress. If you look at the products we'd be launching in the last few months.

And here you can expect us to continue we need to we need to be sure that the product market fit is perfect for like beep and because the market is just accelerating we need to accelerate the roadmap.

Yeah, we've been saying.

You know we've been preaching omni channel for the past five years, and we think omni channel than brought forward three to five years.

No longer a nice to have it done must have and it's a it's a crucial lifeline, if you're if you're a business small business.

Retail restaurant.

In order to continue to work with your customers continued to serve your customers. So it's it's.

It's a bigger than E commerce I think it it all these different models things like order habits, it's it's curbside pickup mobile contactless experiences.

It's a wealth of things I can promise is one part of the puzzle of this omni channel approach and it. It also includes you know the the physical experiences to and how those are going to change and.

And so we think that this all fevers lightspeed incident acceleration towards our vision for how we're going to see commerce in retail and hospitality a completely completely reinvent oh.

The next couple of years.

Thanks Snacks I had one follow up question on payments you had a nice nice rhythm and paying the last couple of quarters in the past you've talked about payments attach being the majority of your locations.

With the experienced thus far how long do you think it will take to get to that plus 50% attach rate is just talk about the path to that thanks a lot.

So yeah, so maybe if we step back on payments we've.

No we very intentionally started payment on retail in the U.S. and then then we moved to Resto U.S. retail, Canada and now we're expanding and we have plans as you know to continue deploying a payments across all geography between now and the end of our fiscal year and adopt plan is it moving forward.

So, but I think so.

So just to be very clear, we have more than a 50% attach rate on the regions, where we've launched a life to be payment and I think now for.

What were drunk well, we just need to do is we need to continue deploying in all the countries, where we operate and what we've seen also is as Weve you know Weve launched and restaurant and then we've launched a retail Canada. We've seen the exact same adoption of attach rates in those geographies. So we're very confident in payment and we're very confident.

We continue to deploy payment globally.

That we will have similar attach rates that are.

Well north of 50%.

Thank you.

Your next question will come from should then should come or from <unk> capital. Your line is open.

Good morning, guys and congrats on a strong quarter and congrats on the acquisition.

My first question is on Shopkeep. The company appeared to have an integrated payments offering, which I think based on your earlier commentary suggested it was two or more of a referral model, but they all kind of capital offering and market as well can you touch on their progress to date in terms of.

Penetration with respect to payments and capital on and secondly, what you're able to leverage whether it be kind of capabilities, a go to market or or even just learnings from the acquisition.

Yeah, Thanks, and thanks for the question in terms of.

There are integrated payments offering yeah, you're spot on and just to make sure we clarified that some of the earlier comments.

They operated under or for a model.

To this point.

They as I mentioned earlier. This team has done a nice job of kind of been a rounding out a solution set for these customers and.

One of those things as you mentioned was capital and so they're much further along than lightspeed and ER.

On their capital offering and that's one of the synergies we see is leveraging.

Their experience and their results 'cause it did drive some really nice results on capital.

Costs are customer base, we look forward to.

Seeing how we can leverage that here.

Lightspeed across a broader customer offerings.

Okay, great. Thanks, and then.

I do want to clarify sorry.

And you Wonder if the draft the customer learning I think for me. Please.

Just their work we were.

Amazed with this this deal is that we have almost similar customer journey wait when you think about how they acquire customers how they qualify the customers how they convert to customers and you look at all of the the rates, they're very very close likely to the learning was that.

In the way we operate on the go to market standpoint.

These are very very or similar prophecy.

Okay. Good.

Okay. That's helpful.

And then just last one from me guys I just wanted to touch on your technology build and I know you got to meet a significant progress on the integration front really bringing key capabilities really quickly to your merchant base and in this time of need.

Looking ahead, you guys see any new use cases, you ski areas.

To invest in or perhaps gaps in your merchant experience that you guys are uniquely positioned to address sun and ended the shopkeep.

Bring it unique and different for you guys to leverage as well.

Yeah, you know I think you know internally, we look at a growth flywheel Uh huh.

Providing tools for merchants are so all of the things that are part of our core omni channel offering.

I live process and what is their profitability picture look like I saw the revenue number obviously, if you can give us anything there that'd be great and then just when your business relocation go to pick up nicely as you called out I'm curious have you done any further thinking around customer acquisition costs and.

I know it's difficult in the pandemic to benchmark that but do you think there's a different.

Learning here and what customer acquisition might look like coming out of the pandemic.

Thanks.

Yeah, Yeah, I'll take the first one and maybe J P. You can take the second on the customer acquisition task, but yeah.

Think what we're finding changes overall is just as merchants.

Excellent someone taxes earlier comments.

<unk>.

Given everything they're forced to deal with and and the rest of the replace legacy systems, we are finding.

A lot of <unk>.

A lot of activity in the space right now so without comedy specifically on whether it was a competitive process. Let's just say we are seeing a lot of interest in in the broader space of.

Uhm, the cloud based software platforms in our market and and what that means for the long term in terms of the opportunity it like that and Mister replacement cycle with integrated payments.

So I think that answers that the the the company was roughly breakeven without getting too specific and you know we'll luck too obviously drive a lot of synergies from how we how we leverage our combined go to market Prowl us now that that won't be happening.

The scale and can align those resources.

And and so on but this is very much about creating a lot more scale and our biggest market with just the U S and how we move more quickly together rather than than fighting each other along the way.

Do you want to comment on the customer acquisition, Gus Yeah, and maybe I just want to make off with comments on on on <unk>.

As we've always said, we know the market well.

And you know, it's a very fragmented market there are companies out there.

<unk> not as well run a stroke keeping our eyes. We always said we want a team with companies that are well run that have similar D. N. A that are not you know burning a lot of cash and so I think for US. It was it was.

Regardless of a competitive bid or not this was a very planned move and you know it has been in discussion for for quite a while now and I think the timing is not right, especially given the dynamics on the market and Covid. So just wanted to say a word on that now what did you think about customer acquisition cost uhm.

Uhm, our our plan has always been very very simple when you think about it as we deploy payments into markets and verticals.

And you know every customer who comes onto lightspeed payments, we double the lifetime value of the customer give or take so I think for US here. When you think about how we run the business and how we look at the dynamics, we just need to ensure that our catalog T V as strong and what what we know is out in a market where like the payments is deployed.

The the the economics are incredible, but I think for us it's more about now combining.

Forces with one of our competitor than the U F and and then put on top of that the fact that we fully don't slightly payment in the U S. For restaurant then for retail and now we have a real opportunity to go and acquire at a faster rate the customers, but with a very strong units economics uhm.

Uhm now we have seen with Covid kind of the cost of acquisition softening because a lot of the competitors are spending less money on Google and digital platforms to acquire customers, but what we've seen throughout summer. We've we've seen those customer acquisition costs go back to normal and so I think what we can expect.

Now it with a little bit of a slowdown happening and they're coming in the next month with with the market clothing will see cost of acquisition go down slightly again, but I think again for all the way. We look at this is long-term there is a replacement cycle. We have the best platform in the market for the segment in which we're going officer and and we have a lot of flexibility.

Now to acquire customers that are great units economic because we don't like the payments and because of a consolidated market.

Your next question will come from Paul Japan from Army Saint Your line is open.

Alright, thanks, very much good morning, I, just congratulated corner just wanted to follow up a little bit on your one of your last comments, but and I'm just ask a couple of questions here that what address it could you speak to the linearity of G. T V gross add insurance for the corner and then also in particular, what you're seeing so far.

October and then just in regards to your last comment you mentioned the possibility of a slowdown and you also mentioned that in regards to guidance is it have you seen any of that to date or is it just conservatism as you look forward.

Hey, Paul Yeah, you know the linearity question I think if we could go back to our last our last call. When we started to speak about how you know we saw ever improving trends, culminating in June where G.

G T V in customer location ads, and so on or or were quite strong in June and we just saw that more or less continue throughout the the full corner here.

Uhm, where you know.

We saw.

Continue to start to normalize <unk> gross customer location additions be strong threats quarter and.

We saw those G T V trends.

Kind of continue from what we first started to say on my last column June all the way through the September quarter.

We look forward you know I think it's just we've we've always tried to be cautious and conservative and I think that's what we what we need to do now J P mentioned earlier that you know.

The near term is just something I think we have to deal with what we saw in the second quarter here, though we reported is just the.

When we're in a more normalised environment and can see all aspects of the business model working just the the results that we can drive.

But certainly there's lots going on and the various countries we operate in around the world and I think it's just we're going to continue to be conservative and cautious as we as we provide outlooks.

Given getting some of this uncertainty.

Just a second question long run, we feel really obviously well positioned here.

Okay. That's that's great in terms of you know the the the the <unk>, forming that you're saying with with customers and the increased priority. There could you speak to the the switching costs or maybe the <unk>. The the challenge of these that'd be customer switching a platform in the midst of.

Pandemic and is there anything that you are doing there to make it easier for them to switch over to a <unk>.

Yeah, maybe I'll I'll I'll take that one so.

I think this is uhm, let's step back to think about light speed.

Our model from day, one has always be we got to make this simple and so when you think about our customer journey.

Even before Covid everything was done virtually so we had a centralized sales for centralized installation team centralized customer success and so we're very quaint, it's taking a customer and bring them on and Onboarding session, which of the zoom session and generally speaking within a within a matter of.

Hours, maybe days the platform, it's completely up and running so I think brought there. This is a very strong differentiator for Lightspeed is we've managed to take a world of that's a very complex solutions and make it simple and make you on boarding simple. So I think for us doesn't change much and I think we what we're seeing as we have.

We have the velocity to bring those customers on I think the big change, we've seen and as I said at the beginning of the call is.

Historically people would come to us and they would want to start with the back of it and the P. O S and they would say hey, I want to be able to manage in store and I I need to manage it well. So what we did it we had workload where people would just get a platform installed and store the big change we've seen now with the pandemic.

Is regardless with restaurants or the retailer the majority of the customers are now coming to us and if I'm a retailer and think hey, I wanted to tell online I wanted curbside pick up if I'm, a restaurants or I Wanna have delivery services I Wanna have so I think that what's changed if we get them started as quickly as possible digital platforms before the P. O S. I think this is a.

Big change, we have to adapt but this being said.

Because we've always operated virtually uhm covid doesn't change much and how we can onboard customer going in the simplest thing, which we can onboard customers.

Okay. Thank you.

I'm afraid I think we have time for one last question.

Okay and our final question will come from Gavin Fairweather from Carnac. Your line is open.

Hey, there good morning.

So you wanted to start on on shop keep can you just expand on kind of their experience for Kobe I mean, given that the payment small that was on a referral model I'd imagine that the revenue mixed use more towards subscription so yeah potentially more insulated than than some of the period that they're just hoping you could could expand on their experience.

This year.

Uhm, yeah, with or without getting too specific to have and I think you know for.

Or any company in in your broader space you know, we all generally suit the same thing's happening they have they started pretty well through covid, but certainly you know what the near term.

It does get a little choppy and.

Is lockdowns happen then it affects our ability to try new customers a customer volumes and all that sort of thing and certainly some of that was evident affected them as much as it affected anyone else in this space, but overall uhm I think the team there did did a great job of navigating through.

At least the first phase of of color.

Cause I know trying to call back to our presenters Christian closing remarks.

Okay. Thank everybody for joining today uhm, if if anybody has any follow up questions management will be available feel free to reach out thank everybody and have a great day.

Thanks, everyone.

Thank you have a.

A good day bye.

Thank you everyone. Just about conclude today's conference call you may now disconnect.

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