Q2 2022 Lightspeed Commerce Inc Earnings Call
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Good day, and thank you for standing by.
Welcome to the Lightspeed second quarter 2020 earnings conference call.
At this time all participants are in a listen only mode.
After the Speakers' presentation there.
It will be a question and answer session.
I ask a question during the session you will need to branch star one on your telephone please.
If you require any further assistance please press star zero.
I'd now like to hand, the confidential radio speaker today Ms. Sherri good puppet charge Hill. Please go ahead.
Thank you operator, and good morning, everyone. Welcome to Lightspeed fiscal Q2, 2022 conference call. Joining me today are Dax Dasilva, <unk> founder and CEO, Brendan Murphy, Chief Financial Officer, and J P. <unk> President of Lightspeed. After prepared remarks, we will open it up for your questions. We will make forward looking.
On our call today that are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
Certain material factors and assumptions were applied in respective conclusions forecast and projections contained in these statements. We undertake no obligation to update these statements except as required by law you should carefully review these factors assumptions risks and uncertainties in our earnings press release issued earlier today, our second quarter 2020.
<unk> results presentation available on our website as well as in our filings with U S and Canadian Securities regulators also our commentary today will include adjusted financial measures, which are non <unk> measures. These should be considered as a supplement to and not a substitute for <unk> financial measures reconciliations between the two can be.
Found in our earnings press release, which is available on our website on SEDAR dot com and on the SEC's Edgar system.
In addition, our commentary today will include key performance indicators that help us evaluate our business measure our performance identified trends affecting our business formulate business plans and make strategic decisions.
Such key performance indicators may be calculated in a manner different from some of the key performance indicators used by other companies.
And finally note that because we report in U S dollars. All amounts discussed today are in U S dollars unless otherwise indicated.
Before I turn it over to Dax I wanted to take this opportunity to remind everyone that <unk> will be hosting its inaugural capital markets day at the New York Stock Exchange on Tuesday November 23rd from eight a M until noon.
Please go to the events and presentations section of our IR site Register we look forward to hosting as many of you as possible in New York City.
I will now turn it over to Dax.
Thanks, Scott Good morning, everyone and thank you for joining us today.
As you'll see from the press release, we issued earlier today.
<unk> had another strong quarter with revenue and adjusted EBITDA performance exceeding previously established guidance.
Quarterly revenues CTV customer locations and our payments penetration rate all reached all time highs.
At the same time, we continued to make progress on integrating our acquisitions expanding the availability of lightspeed payments and launching our flagship hospitality offering lightspeed restaurants.
But before I move on to discussing these items in more detail I would like to take a moment to address a short report that was recently issued on lightspeed.
As we stated in our press release on this matter. We found the report contains important in accuracies and Mis characterizations and also that it was misleading and clearly intended to benefit the author.
I would like to note that lightspeed has made a genuine and consistent effort to establish a trusted and transparent relationship with the investor community and we are always open to engaging with serious investors acting in good faith.
Given the inaccuracy in this report I want to address directly some of the key criticisms raised.
First since becoming a public company, we've always been consistent in how we account for revenue.
Second we've been transparent with the definitions of our key performance metrics, including <unk> CTV and customer locations throughout our history as a public company.
We firmly believe that our kpis allow investors to measure our operating performance and identify trends in our core business that may not otherwise be apparent with relying solely on the IRS measures.
Third our organic growth rate, which we disclose remains a positive driver of our overall business.
Organic subscription and transaction based revenue growth came in at 58% this quarter.
Any suggestion that our business lacks organic growth is categorically false and finally, we are proud of the acquisitions we have undertaken.
They've brought us talented management teams and industry, leading technology, which we are integrating into the core platform and in the case of our hospitality solution has already shipped.
In addition, these acquisitions have granted us scale, which helps tremendously in negotiating with our payments partners investing in sales and R&D and.
In attracting strategic partners, such as Google and open table and finally do you have given us access to a large and growing GTD, which creates opportunity for our payments offering.
That said I will move onto our latest quarter.
<unk> had another strong quarter with total revenue of $133 2 million up 193% year over year with organic subscription and transaction based revenue up 58%.
The company now maintains approximately 156000 customer locations, including approximately 3000 brands brought on by New order.
<unk> more than doubled from the same quarter last year coming in at $18 8 billion organic <unk> growth was 39%.
Payments penetration continued to increase during the quarter with our payments penetration rate at 11%.
We had several key customer wins in the quarter within hospitality, our newly released flagship platform Lightspeed restaurant secured a contract for over 200 restaurant locations in Germany, which includes both the Pos and payments.
The original Pancake house, which signed on for 10 locations with secured thanks to the Lightspeed analytics functionality.
Indigo Road with 18 locations in South Carolina.
And we also added the law Carnal film Festival in Switzerland. The annual film Festival that has been running since $19 46.
Within retail we secured the Australian football club with all Asl clubs now using lightspeed Cocomat the luxury mattress company, we'll be running it's three stores in New York City, using lightspeed retail and payments.
And last but not least group CAH with 16 locations operates all of the Montreal Canadians official retail outlets along with large events such as the Montreal Jazz Festival group C. H will be using lightspeed retail analytics payments and ecommerce.
In golf, we secured an additional seven locations with pinnacle golf through North Carolina.
The country golf with six locations in the San Raphael Golf course, and yield desired Quebec.
We also continued to extend the number of suppliers on our network with brands, such as Crocs, Susi, Elia and Augusta and this theater.
In addition to continued strong operations in the quarter. The company also advanced some key strategic initiatives.
First and foremost after the quarter likely launches integrated hospitality platform Lightspeed restaurant.
<unk> available in Europe, Lightspeed restaurant made its north American debut recently, and we will be rolling it out globally over the months ahead.
Lightspeed restaurant combines the best of breed for multiple acquisitions to deliver an industry leading solution.
Second in October we closed the acquisition of equity as planned and I would like to welcome the equity team aboard.
Headless Commerce solution will allow <unk> to offer no compromise omnichannel experience that will not only help us attract new customers, but also help our existing customers become more successful with their omnichannel strategies.
And finally, lightspeed undertook a successful financing raising gross proceeds of $823 5 million and issuing just under $8 9 million shares.
On the Companys operations and growth.
And it's going to take you through the numbers more thoroughly.
I wanted to touch on a few topics beforehand, specifically the official launch of our core hospitality platform Lightspeed restaurants, the integration of equity as our core E Commerce solution and the continued growth of our payments offering.
First off like food restaurants.
There is no better evidence of integrating our acquisitions, then shipping product and after the quarter, we announced the availability of our flagship hospitality platform Lightspeed restaurant.
Offering brings together the best features of Lightspeed observed astrophysics counter and I can too.
Delivering industry, leading platform, which we believe second to none but in addition to industry, leading analytics reporting inventory management and ease of use Lightspeed restaurant was engineered with payments at its core.
Adding payments greatly enhances the data insights of lightspeed restaurant, allowing restauranteurs to determine which menu items to drive the highest guest retention and helping them differentiate between new and repeat customers in order to better tailor the experience.
We believe the added insights the payments brings to the restaurant platform will make adopting payments with lightspeed restaurant, an easy decision.
As I've mentioned in the past <unk> has no interest in maintaining a portfolio of brands and solutions all.
All of our acquisitions will be merged into two core flagship offerings like seed restaurants, unless food retail with the restaurant offering launched we expect our integrated retail offering to be made available early in the new year staying.
Staying with retail last week, we announced that the <unk> solution is now fully integrated into our retail offerings, our new and improved E. Commerce was launched less than three months. After the equity deal closed and is now available to legacy customers around the world.
Like for the ecommerce will give our customers a no compromise e-commerce experience, allowing them to extend their channels.
<unk>, social media platforms, like Facebook, Instagram and integrate into popular digital marketplaces.
Also announced a direct partnership with Tic Toc, allowing lightspeed merchants to seamlessly access core functions of tick tock for business ads manager without leaving our platform.
E Commerce has evolved beyond being just a web site and lightweight easy to use headless commerce offering allows merchants to reach consumers wherever they are maximizing the reach while reducing business complexity.
Payments had another great quarter with transaction based revenues now almost half of our overall revenues and our payments penetration rate at 11% versus 5% for the same quarter last year and earlier. This week, we announced the availability of payments in Australia addressing the last major region that was not covered by payments.
We've committed to launching payments and all of our major international markets before the end of calendar 2021, and we are well on our way to meeting that goal.
As a reminder, our international footprint is biased towards hospitality customers with the availability of payments now in all of our key geographies and the newly launched hospitality solution. The deeply embeds payments functionality, we expect to see adoption of payments increased considerably in our markets outside of North America.
Before I hand, it off to Brandon I wanted to thank our dedicated and extremely hard working employees at light speed.
Past 12 months period has been the most transformative in the company's history with five acquisitions, several new product launches and a string of strong quarterly results not to mentioned weathering a global pandemic, our success would not be possible without their efforts and with that I will hand, it over to Brad.
Thanks, Dax and I Echo here earlier comments overall it was another good quarter of progress.
Our revenue for the quarter was $133 million up from $45 million a year ago.
And as compared to our guidance of $120 million to $124 million.
This represents overall growth in revenue of 193% year over year.
As we typically do we also provide our organic growth rate to help the market understand our performance without the impact of recently acquired businesses.
Panic growth rate for software and transaction based revenue was 58% in the quarter.
As a reminder, when we calculate organic growth we do so by excluding the impact of acquisitions that occurred since the end of the prior comparable period.
You will find this definition and the others mentioned by me today, and our filings on SEDAR and Edgar.
Accordingly, the revenue contributions from new order then shop, keeping up serve are not included in our organic growth calculation in the quarter.
We continue to be pleased overall with the progress across the main business model drivers.
Continue to grow our customer base expand our <unk> and increase our payments penetration walk through the building blocks now.
First is our customer locations and we provide the number of customer locations using our solutions instead of the number of unique customers.
This represents the primary driver of revenue for us since our software is typically priced on a per location per month basis.
As outlined in our filings.
We define the customer location as one billing merchant or in the case of new order a brand with a direct or indirect indirect paid subscription for which the terms of services have not ended or with which we are negotiating a renewal contract.
A single unique customer can have multiple customer locations, including physical and e-commerce sites.
As mentioned, we will typically pay for each of those separately.
For clarity, we have consistently defined customer locations in this way since our 2019 listing on the PSX save and except for the amendment made this quarter to better and closer to the customers of new longer.
Our customer locations grew to approximately 156000 in the quarter from a 150000 at the end of last quarter.
Please note that this now includes approximately 3000 customer locations from our recent acquisition of new order.
We saw the following trends within customer locations in the quarter.
Most new customer locations added were up 57% year over year and up 19% on an organic basis year over year.
So a good ongoing demand for our retail offerings in North America and hospitality in the Europe.
Economies continue the reopening and those are the markets.
We also saw an overall return to more normalized levels in many markets. After a large increase last quarter driven by dorman businesses coming back to life.
However, owing to renewed lockdowns in the quarter and Asia Pacific in particular, where we now have better than 25000 customer locations. We saw increased churn and subscription pauses in those markets, which served to offset some of the gains just mentioned.
But at the end of the quarter, 62% of customer locations were in retail and 38% and hospitality further 53% or in North America, and 47% outside of North America, our diversification continues to serve us well.
Lastly, please note that customer locations do not include any locations from our recently closed acquisition of <unk>, which closed today after our quarter end.
Moving on to <unk>, we saw our average revenue per customer location increased to approximately.
So a $270 per month overall, an increase of 59% from $170 a year ago.
Please note that we calculate <unk> as our subscription and transaction based revenue.
By the number of customer locations for the period.
As a straightforward calculation available all of our publicly reported numbers.
Please further note.
Always excluded hardware revenue from our <unk> given hardware as a nonrecurring revenue stream and <unk> is intended to reflect the amount of recurring revenue per customer.
Within our clearly the contribution from subscription based revenue was almost $130 per month and was up 19% over the prior year.
The remaining <unk> of almost $140 came from transaction based revenues, which were up.
And 11%.
Expanding our <unk> is an important part of our long term plans, we believe that our customer segments like a one stop shop for the core things needed to run their operations and our solutions put us in a privileged position to deliver this for them.
An increase in <unk> per customer location is one good indicator of our progress there and at 59% year over year growth in the quarter, we're pleased with our progress.
Certainly, we'll look at our <unk>, which represents the total dollar value of transactions processed through our cloud based SaaS platform in the period net of refunds inclusive of shipping and handling duty and value added taxes.
CTV does not include any of the order volume processed by new order between the brand and retailer customers. We've excluded that <unk> volume until such time as we have a more well defined payment solution for that order volume.
Aside from this clarification too.
<unk> was $18 8 billion in the quarter up from $8 5 billion in the same quarter last year and $16 3 billion in the first quarter of this steady TV for the quarter.
<unk> increased by 39% year over year.
He was up 115%.
Year over year and on an organic basis it increased 38%.
Total hospitality ATV, particularly in Europe increased significantly in the quarter as economies continue the reopening in those markets hospitality <unk> was up 131% and up 40% on an organic basis.
For a period of over performance throughout Covid certain segments like bike and home and garden began to moderate in September and more closely follow historical seasonal trends, while difficult to predict we will assume that seasonality continues into the winter period.
And our guidance reflects this assumption.
However, as mentioned in our discussion earlier Lockdowns in Asia Pacific served to offset some of these gains are GTT in the hospitality segment and Asia Pacific fell by approximately.
As a result of these lockdowns.
Our payment solutions processed 11% of our <unk>.
<unk> in the quarter up from 5% in the same quarter a year ago.
We call this our payments penetration rate and it was defined as the total dollar value of transactions processed in the period through our payment solutions in respect of which we act as the principal to the customer.
Divided by our GTD.
We think payments penetration rate is a better measure of progress in the number of customers using our payment solution as payments penetration rate best represents the potential that lies ahead without distortion from deferring individual customer transaction volumes.
Payments penetration rate in the quarter was influenced by <unk>.
Ongoing strong adoption in North American retail and North American hospitality, where our payments penetration rate is now over 20%.
Our recent launch in Europe for hospitality, where more than 800 customer locations in that market contracted for a payment solution.
The majority are not yet transactional and we expect that we will have growing pains as we launch a new international markets.
Early success is quite encouraging for us.
So we're pleased with the ongoing success of payments processing, 11% of our $18 8 billion in <unk> in the quarter.
From 10% of $16 3 billion and GTE, just three months ago shows the ongoing growth for our payments offering.
As compared to the previous quarter light speeds faster GDP growth in areas with lower payments penetration, such as hospitality and Europe versus areas with higher payments penetration rates, such as north American and in retail.
Ultimately, an increasing GTD has a great long term indicator of opportunity for us.
Particularly now that we have our payment solutions available in more geographies and with more of our customer base.
So all of this results from the revenue reported today at $133 million and as Youll see in our disclosures $124 million is recurring subscription based and transaction based revenue, which grew by 203% overall.
<unk>, 58% organically.
Ascription based revenue and transaction based revenue were $59 4 million and 65.0 million respectively.
Transitioning down the income statement, our gross margin for the quarter was 49% as compared to 61% a year ago.
The shift is driven by the success of our payment solutions, which generally carry.
The lower gross margin.
This trend is not an unanticipated and in fact is encouraging.
The stronger the success of our payments rollout more gross profit dollars per customer location, we earn higher gross.
Profit per customer is what leads to leverage in the business model and the long term.
We are already seeing that in our model with only 11% payments penetration rate as evidenced by sales and marketing as a percentage of revenue falling from 43% to 39% over the past year.
So our gross margin percentage may fall with the ongoing rollout and success of payments. We are focused on the expanded gross profit dollars, we earn per customer location.
The only 11% of our GTD being processed by our payment solutions last note on margins, we've always felt that scale matters in this business.
Scale, and the resulting brand recognition supports our ability to attract new customers and prospects.
Scale.
Oh influences the spread we take home on our payments offerings.
Processing volumes increase we expect to be able to realize improved gross margins overtime on payment solutions and many of our existing contracts are already structured to achieve this.
Finally, then adjusted EBITDA loss for the quarter was $8 7 million ahead of our guidance of approximately $12 million.
This represents approximately 6% of our revenue.
I'll transition now in the long term growth drivers.
The tender offer and penetrate our payments.
However, we're also Mike.
Mindful of certain market dynamics that are outside of our control.
It keeps us cautious on the impact.
Two our near term results.
Namely the.
But the impacts of COVID-19, we remain in many of our important markets.
Ongoing supply chain challenges.
In many parts of the global economy.
And the effects that may have on our customers' ability to have sufficient inventory to meet consumer demand as.
As well as on our own ability to secure hardware to meet our own customer demand.
Which affects our own hardware revenue.
Economies normalize the return of historical seasonality to many of our end markets such as bike home and garden et cetera, whereby Q4, we will see.
Really slower GTE and payments volumes during the slower months of January and February and March.
Some of these factors we remain confident in the core drivers of the business and expect our ongoing rollout of payments and our ability to continue to win market share will continue.
So factoring all of this in we expect Q3 revenue in the range of $1 $40 million to $145 million representing.
Representing growth year over year of approximately 143% to 152% with an adjusted EBITDA loss of approximately $10 million to $12 million.
As we look at the full year, we are updating our annual guidance to $520 million to $535 million in revenue.
And for the full year, we are updating our adjusted EBITDA guidance to be approximately a 40% to $45 million loss.
This loss reflects the impact of our acquisitions of new order in <unk>, where we've accelerated some of the integration efforts some of which you saw from recent announcements such as that goods product already being integrated with our retail solutions further reflects incremental investment in bringing our new hospitality product to the market.
In the U S. We.
We feel these incremental investments are prudent given our strong balance sheet and the significant opportunity that lies ahead.
This adjusted EBITDA loss would represent approximately 8% of revenue at our midpoint of our revenue guidance has improved from prior year levels of 10% with that we'll take your questions.
Thank you.
As a reminder to ask a question. Please press star one on your account level and Keybanc Billy Joel Your question right the balance sheet.
<unk> level when you compile take anyhow.
Alright first question comes from Dan Perlin from RBC.
<unk> Your line is open.
Hey, guys good morning.
Just had a question on guidance I know, you've just kind of walk through.
Seasonality and Covid uncertainty.
So I'm, just trying to understand a little bit better.
At quarter end.
And.
And fourth quarter here.
Hi, Dan it's Brandon here.
I think the things that are under our control we feel really good about that we're going to continue to grow the customer base penetrate payments. As you mentioned, we are now available in new markets and it's off to a good start in Europe, where we recently launched.
Theres, just a lot going on in the macro environment right now.
We're just being cautious in how we.
How we build that outlook.
Supply chain challenges affecting retailers that are really important.
Period of time for retail.
And as we look into Q4.
We've got a growing pie.
Part of our business now and transaction based revenue and those are seasonally slow months January February March.
Our low points for both hospitality and retail and given the transaction mix in our business now.
Okay.
Factoring all of that data.
We're quite we're quite confident in the core drivers in our ability to execute.
It's just some of these macro things.
Did you see that shifted down as we went into the September quarter, maybe just help us walk through what were some of the the nature moving parts between say the June quarter in September and maybe not quantitatively, but just how we should be Ah the remainder of the year. Thank you.
Yeah, So I'll I'll take this on J P. Good.
Good morning, So I mean organically store count has grown by 19%.
If you look at the gross take we were very pleased with the quarter with one of our strongest quarters, but as you know we do have some business in Asia Pacific and mainly in Australia, and New Zealand and those are being really affected by the lockdowns.
And we've seen this actually when it happened in Europe and in the U S. There's kind of temporary churn that happens because the stores shut down during the during the pandemic and then they reopened licenses when the markets reopened so I think again, just going back to what Brian was saying under what we can control we are very happy with the results.
Organically, where we're fairly happy with the progress there.
In terms of store count and also in terms of.
Added M R.
[noise] very helpful. Maybe just a quick follow up obviously really.
Pleased to see the launch of the flagship Platt.
Platform within the hospitality industry, maybe just help us understand what are some of the early learning does it really kind of full on.
Go to market now with that product just would love to hear a little more color there. Thank you.
Yeah. So maybe just going if we step back you know when we did all these acquisitions, we always mentioned that their components that we we liked from each one of those acquisitions. We also have the strategy, which was to actually put the majority of our developers on one product and build the future and that's what we did so we started by launching a few countries in Europe now we've launched his.
Completely across Europe. So every country's now are on the new class three D. A full blown kind of build from scratch platform and hospitality and as you you you've seen in the announcements of the last few days, we've now launched.
Did in beta in the us and we have customers transacting with it and.
And for US this is a really big milestone and we're very excited about how this is going to spend.
Spat out in the coming months and yes. This is a.
Arguably one of the best platform is out there for hospitality and we are now launching it into the U S. So the focus for us is.
Next next quarter get everybody and go to market excited around this in the U S and go off in the market.
[noise] excellent.
Yeah.
Our next question comes from management, Jeffrey France, really sticky Vacates, Angela and I appreciate you taking the call.
I guess I'd I'd like to understand now that you have.
To order.
Under your belt, and I don't Wanna steal any thunder from the animal style necessarily but can you offer some thoughts around.
Like <unk>.
Supply chain is b.
Being somewhat disruptive to some.
Some of your customers and important vehicles on another hand, it feels like light speed has the ability to.
Alleviate some of these challenges with your solution. So I kind of wonder about the interplay there and whether this is sort of an air pocket from a supply chain standpoint in terms of what you can control.
Yeah, I think it's sorry to ask here.
But what this current experience has shown US is that we do want to bring our our merchants closer to their suppliers give them greater inventory visibility give them.
Just the ability to discover new.
Suppliers and discover new supply and so our focus on bringing.
The order into our supplier network strategy.
The first priority is to get that experience right in our party is going to beat the rollout and features like inventory visibility as well as virtual showrooms to all of our 12 vehicles and retail.
After that product is right. We can answer capitalizing on all the DDB opportunities on payments will be a priority, but yeah, given given the importance of supply chain and supply to retail and later to hospitality. It's it's important that that.
That this is a key part of the platform and it's gonna be a big driver for light speed and driver for relocation growth in the future.
Okay, Yeah, I look forward to seeing color on that I guess.
Rhyming is going to be important for for the numbers and for for Investor sentiment and then brand and I just wanted to pick up a little bit on the commentary about.
Sort of mix.
New.
<unk> growth in markets Warren in Gino's or vehicles were payments attaches a little bit lower is that how much of that is COVID-19. How much of that is timing I just want to understand again, what you can but the company can control in terms of.
Maybe driving that mix, because it's such an important.
Component of your <unk> expansion.
Yes, it's quite quite simple Andrew it.
European hospitality, where we have.
A good base of customers across the continent.
Continues to to.
Grow considerably volume there is these those economies reopen.
So we just launched our payments there last quarter as I mentioned 800 customers in the hospitality segment in Europe contractive for payments.
We weren't able to capture.
Getting all of them live necessarily in the.
The period, so it's not hitting the numerator of that payment's penetration rate equation, but.
Quite simply all that's happening is the hospitality segment of our business continues to show.
Really good growth in G. T V and we're we're just getting going on payments. There. So it's it's good for us for the long term.
For sure.
Okay, and how you just sneak a quick one and just on the.
On the potential for a terminal shortage my understanding of the most of your business runs on.
Android rather than vertically integrated tack is is that mostly with acquired businesses or what what are you seeing in terms of any journal shortages.
Terminals, we were working through our partners and that's that's an area, where they've they've helped us secure inventory and and.
Meet demand there the rest of our hardware solutions are.
Things like ipads and.
Eric Third party devices and.
Obviously supply on those things as tight at the moment.
Okay. Thanks.
Shortly.
Thank you good morning, and thanks for taking the question I wanted to touch also on the ninth 19% organic location.
Ads, but not so much on the near term, but more about the longer term comments that you've made generally talked about that organic location add should be sort of into 15%, maybe 15 to 20, depending on the quarter, but that's a fair way to think about it over to call. It the medium term I think it would be helpful. For investors. If you could just flesh out a little bit the location.
In addition strategy in terms of marketing, whereas the online content. The telesales the new locations that could be driven to you via the supplier network and just the path for maintaining that call at 15% to 20% organic location growth ahead. Thanks a lot.
Yeah, So maybe I'll take this one so look if you step back the majority of the market is on legacy systems. Okay. And these are kind of on premise terminals. So I think everybody in this market knows the replacement cycle is up and so I think for US. It's it's very straightforward we have a very good.
Marketing engine, where we have a blend of.
Word of mouth organic paid for we triangulate basically consumers and we get them to try the software and then from there we bring them into a a complete sales cycle. So I think this year nothing has changed the only thing we've seen that has changed in the year is that the kind of the cost of a lead has gone back to normal because of the demand.
It's gone back to normal so I think for there we just readjusted the dials the good news with light speed is because of payments and <unk> expansion. We can now keep a very good unit economic and still accelerate the growth. So I think that's the fundamental of this of course, we do have content driven strategies I mean, I think we have a very strong.
Hundred 60 team in terms of marketing now longterm and going back to what taxes talking about with suppliers, that's where we get very excited what we know is that the industries, where we have a full integration between the suppliers of stores and the consumers and sports. We noted in those verticals. The suppliers are the ones that are selling like.
Speed because the value for them is to get the sell through within the network.
And also the values for them to be able to expand reach within the Lightspeed network. So that's where we get really excited with the integration of new order and light speed is we want to as you know go very deep into the vertical is that matter for us and within those verticals as we go deeper than we integrate basically we call it the golden triangle at a <unk>.
Flywheel between the supplier sourcing consumers, what we do feel that the cost of acquisition goes down and actually intake of customers go up and that's obviously because everybody gains and there's a ton of values are here I think for US. What you can expect moving forward as you can expect us to focus on the 10 12 verticals, where we're strong and you.
You will start to see a strong integration between new order and lightspeed with regards to suppliers that are generating a lot of demand for lightspeed and and there when we do this right. What we see is LTV overcast going re in the right direction and we see the cost of acquisition going down and didn't take of customers growing up.
That's excellent. Thank you so much and a quick follow up and I apologize I'm sure. Many of US are juggling a few different calls this morning.
May have given this context, but in terms of the whole supply chain issue or potential issue I just want to clarify is it something that is actually you.
Impact location additions over the next few months.
Yeah. So it is not impact.
I think at the moment the only thing we've done at the moment is we've we've stocked ahead of time to be sure.
We could get through this.
So I don't think it's going to be so much a problem for us and our sales.
Ability I think the issue that we are questioning is with our merchants. So will our merchants have the merchandising for Christmas where they have a strong retail month will and that's the non predictable part of this so it's not so much about our ability to sell and ignite our customers. It's really about our customers. We noted normally Chris.
MS for them is like you know, it's the strongest month of the year for retailers and so I think we're very conservative and our views of is this going to do the usual hockey stick or is this going to be more difficult for them because they will not get the supplies they need.
Okay, that's great contacts in terms of your hardware.
I appreciate that thank you.
Okay.
Our next question comes from Josh via Fran Morgan Stanley Hilton.
Great. Thanks for the question I wanted to focus on the flagship Lightspeed restaurant platform.
What are the best parts of the platform and how do you think that it's competitively differentiated and maybe focusing on North America or the U S. Can you talk a little bit about the competitive environment and how your position there. Thank you.
Yes, a very good question. So it's been the focus of light fee for the last 18 months. So.
Look.
The first comment I want to make is we are interested in complexity. So we're not that interested in coffee shops, and we really wanted to serve kind of the established restaurants that have most of them have cable service have multilocation and I think what what what this version does really well is that it handles the depth and a.
Simple way and what do I mean by this is that it really has everything you can expect with ingredient management routing rules that are very complex on printers. It also.
Managers, all the Multilocation kind of this logic of having one menu that's across multiple locations and the last piece of does incredibly well it triangulates the consumer with the consumption and payments. So I'd say one of the key things as customers grow in restaurants to become bigger they really need a lot of data and I think now.
When we look at what we've taken from up serve and what we've done would likely payments and.
Packages with our core ingredient management and workflow capabilities of the platform. I think this is what makes it unique so I think what you'll see is that customers will scale very easy with us and we will provide him data that they do not see with other platforms right now.
Alright next question comes friend, Daniel Chang from 80 to communities Angel.
Hi, good morning.
I know you mentioned that the supply chain constraints went impacting you know, but can you quantify how much you kind of factored into your guidance.
No specific number there then.
J P. I think J P articulated it really well you know the primary concern is.
What we're being cautious on as well our customers be able to secure the inventory that they need to meet consumer demand. This holiday season.
With respect to our own hardware.
We've taken a.
And Ah Ah cautious and conservative forecast in the mind as well, but the primary impact as how we're just being careful on what our customer G television. It looks like in this holiday season, and how that translates into our own payments revenue.
Okay that makes sense, maybe sticking with the splashing challenges.
Cause I have driven any increased interest in the supplier network are you getting more inbounds.
Well, what we're getting a lot of and I think we were kind of expecting this is a lot of the brands that are on the supplier network are now kind of pushing us to connect to the P. O S. Because they want to have consumer insights they wanna see fell through so.
Then.
Within SMB I mean, it is kind of a broken supply chain today in the brands do not see anything about what's selling in real time at what discounts and what are the consumers buying so I think what we're getting a ton of is a lot of suppliers now are willing to work with us in your order so that they can get sell through with small businesses and.
So I think that's very exciting because.
It actually shows that.
It's the right move I think for US now the real question is how fast can we launch a product that has an incredible experience and so that's what our teams are working hard on right. Now is is really integrating very tightly new order with light speed so that someone.
Within Lightspeed can order inside of the new order marketplace and vice versa someone orders in the marketplace of new order that when they show up inside of the lights ppos that all of the description of the images everything is loaded without them having to do anything until.
All this to say, we're very excited about it but we need to know work harder getting the products together exactly as we did with K theories and the hospitality launch. It I don't think it's a magical overnight. There's a lot of work to do to get this product out.
The good news Nobody's done this before so we will be ahead of.
Head of the market's if we can.
If we can get this out fairly rapidly.
Great. Thank you.
Our next question comes from Reinwald Lanchow from Barclays Angela.
Hey, this is rather <unk>. Thanks for taking my question today. So you mentioned the subscription contribution to <unk> being up 19% year over year I was wondering if you could take us through how customer use of modules has progressed and maybe also touch on where that could go as we look ahead, given some of the new product introductions you mentioned today. Thank you.
Yeah, So I mean.
Maybe just going back in time.
The strategy of light speed as we started with the P. O S. And then over time, we built a number of modules.
That create value for the customer so.
I think maybe a good way to look at it as kind of the Apple's strategy you start with the iPhone and then you you buy more products and they are so well integrated with within each other that there's more value in buying more from the same and that's exactly our strategy. So what we've seen over time and I think this is really what helped us during the pandemic is because we had the capability for in.
Store the capabilities for online the advanced analytics engine. The loyalty platform now we have payments and we basically what we're seeing over time as our customers that just buying more modules from us and this has never changed never stopped and I think here when we look back at a quarter as usual more customers bought more modules and adoption of.
The payments with strong.
And so that's why we're just excited about.
Where we're heading is we don't see kind of our Cooper location slowing down.
And then just even look with payments.
11% is our payments penetration so there's a ton of runway there to to sell to the rest. We just launched payments in Europe, We just launched payments in Asia.
We are about to launch.
But we've started onto the payments would vent and we're going to have it released by the end of the year. So it just gives a ton of opportunity for us to to just continue upselling when maybe one last point here is equity.
We acquired echoed because we wanted our customers to have the best.
Capabilities with Commerce, and we worked really hard and now equative fully available to our customers.
Within our retail products. So there again, what we can expect is.
For our customers to buy more from us and follow the trend so I.
I don't know how much more you want but I think that's pretty much our view is that.
Who is going to continue expanding customer's going to continue by more modules from like.
Perfect and is very helpful and maybe telling off that last plan accurate.
I know that we didn't have a big sales team, but they did have a lot of self serve and have a big funnel customer. So maybe you could you talk to us about the potential synergies. There is you a layer on some of your asking them efforts.
Yeah. So that's typically what we do with companies that have good tech and not call. It strong go to market. So we're working hard now that the product is integrated we're now kind of beefing up all of our teams globally and I think.
And what do we bring to the table Lightspeed has local offices in every.
Major country in Europe, we have local offices in Australia. So we can be hyper local in our go to market.
Once the product is integrated which it is now so the focus is going to be OK, let's get now.
This product in the hands of all our sales guys globally, and let's let's continue selling it.
Perfect. Thank you so much.
Alright next question, contrary sadness Metropolis friend BMO capital on like it's essentially.
Hi, good morning.
Five points on a new restaurant platform you alluded to the tech antibiotics functionality.
So is that something that would represent an up sell to existing customers migrating from.
Current platforms or is that included in any software.
Now this is going to be a an option where we're going to have a tiered approach, but I think maybe just being clear with the analytics. The full power of analytics come if you use lightspeed payments.
And so that's why we're very happy about this is that customers who want to have the advanced analytics need to buy payments. So it's going to create.
I mean, our view is that it's going to create a much stronger per customer and per location. Because we're we're triangulating basically multiple products together to create the value.
And can you stick to the generator you mentioned that churn was.
A pack, but hesitant send another geography's last parting set of rules in your record lows does that remain the case or with any thing about there.
Pretty normal quarter, otherwise, they're announced return.
And just as JP mentioned.
What we saw happen in Australia, and New Zealand as what we've seen happen as.
As we've gone through this.
The various ways of this over the past 18 months or however, long, it's been so otherwise pretty normal corner on churn.
Alright.
One.
With sadness.
Alright next question CONTRAN Recharging National Bank financial Angela.
Yes. Thank you.
As you guys get bigger today.
I'm just wondering if you can maybe give us some perspective on a competitive landscape.
That sort of growth and scale as it serve increased year when rates and kind of changed in any way I am market the brand going forward.
Yeah, So I think.
Few things.
I mean of course the brand now has a lot of.
Visibility people know lightspeed. So the organic portion is doing well now this being said, it's offset by the fact that paid for since the end of the since everybody's going back to normal as going back to the previous previous here. So we're happy I mean, I think we're very confident that our growth rates will remain the <unk>.
Shame.
Now going back to your question on clothes rates, we've seen close rates.
Maintain we haven't seen any kind of degradation. So I think the you.
You say, we're doing a good soup and we know the ingredients and I think for me nothing has changed on that front. The soup is still as good and we control the metrics well.
And then the last piece when I think about competition is do we have one single competitor showing up somewhere a bit more often and the answer is no. We I think we remain very consistent I would argue that with what we're doing with K series and the new launch of hospitality and all the work we're doing now with the new launch of our our retail platform.
Following the shop, keeping event acquisitions I would argue we are in a stronger position that we've ever been in terms of competitive advantage and I think now for us what we're seeing is that the reopenings are also playing very strongly in our favor and we have a very strong on premise platform. So.
No feeling really good about the competitive landscape and the value that we bring in the market.
Okay, Great and just one other quick one for me and the transaction based revenue beyond payments, which obviously I think is probably the bulk of it what would be the next sort of service that you offer there in terms of the next based in size.
Beyond payments over the capital capital is in its early.
Early stages still Richard we did give some some disclosure on that in the press release itself. So it is growing.
We've extended capital now to more of the customer base in this past this past quarter. We're seeing good uptake still think this is going to be a nice driver of growth for us.
In the long run.
A good profitable driver of growth.
Good value add to the customer as well, but that would be the next the next in line for sure.
Okay great.
Maybe maybe just to give a bit of clarity there what with the <unk>.
Session now is to embed this very tightly inside of the products.
And inside of the entire product portfolio. So we can make it available to as many customers as possible.
Our next question comes from Andrea Vouch for M. S N B C Nico essentially.
Hey, guys. Thanks for taking my question I mean, how should we think about the cadence of payments penetration AIDS can I change throughout the rest of this year and into 2022, when you really start getting in all of these markets and and how does kind of capital provide that incentive to convert to the platform.
Great question.
Yeah, it's tough to tough to give you a precise answer to how payments penetration will get a quarter to quarter. As we go we gave it a bit of color on within one quarter in in Europe, basically now with our hospitality 800 customers took it we gotta know make sure they get transactional we've got to make sure we continue to attach.
New customers in that region.
Now entering hospitality in Australia as well.
So we're gonna go through the similar exercise and we also integrated.
The payments platform, our payments platform with the band.
Product as well.
Starting with the U S customer base there.
So all those things I mean, those are big chunky.
Parts of our G television and how our G television builds up.
Just the initial launches of these things while we are we get smarter and better with every time, we do it they're going to be lumpy or going to you know have growing pains, especially in new markets.
But we did publish something last quarter about.
A 50% CTV penetration rate.
And we still feel good about that given how how.
We have.