Q4 2022 Lightspeed Commerce Inc Earnings Call
Good morning, My name is Rob and I will be your conference operator today.
At this time I would like to welcome everyone to the Lightspeed fourth quarter and 2022 fiscal year end conference call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one.
Thank you Gus Papa Giorgio head of Investor Relations you May begin your conference.
Thank you operator, and good morning, everyone welcome to Lightspeed fiscal Q4, and full year 2022 conference call. Joining me today are J P. Solvay, CEO , Brendan Murphy, Chief financial and operations Officer, and Ash about shiny our incoming CFO . After prepared remarks, we will open it up for you.
Questions.
We will make forward looking statements 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 respect of 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 fourth quarter and full.
Year 2022 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.
Conciliations 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 and finally note that because we report in US dollars. All amounts discussed today are in U S dollars unless otherwise indicated.
With that I will now turn the call over to J P.
Thank you, Jeff and welcome everyone.
For joining us this morning.
Before I get started I want to welcome some of our new members to our executive leadership team.
Ronnie Hammond, who has recently joined <unk> as Chief people Officer, <unk> <unk>, who has been promoted to Chief Financial Officer, and Brendan Murphy, who has also been promoted to chief operating officer.
<unk> to be working with such brilliant executive team.
Great companies are built by great people and I am confident that together, our senior executive team and our thousands of dedicated employees, we will continue to make lightspeed and extraordinary company.
And now onto the quarter.
Lightspeed reported another strong quarter today and closed off another year of solid growth in the quarter Lightspeed delivered revenues of $147 million.
Head of our previously established outlook, we experienced an overall revenue growth of 78% and GTD growth of 71%.
This was our 13th quarter as a public company and I am proud of the fact that lightspeed has been able to meet or exceed our revenue outlook and every quarter.
Brendan will discuss the financials in greater details, but I want to address top three matters on my mind.
Number one the prospects for lightspeed as we enter a post pandemic world number two the continued launch and success of our flagship offering lightspeed restaurant that lightspeed retail and finally, our path to profitability.
With the world returning to in person shopping and dining we are seeing increased demand for Omnichannel solutions.
Our results. This March we have the strongest months ever for new business and customer locations and.
In hospitality I was excited to see the following customers adopt lightspeed restaurant platform Hawaiian tow cable with 27 locations in Belgium.
Two Michelin Star restaurant in Paris ranked by Forbes as one of the top 10 coolest restaurants in 2021, and $18 58, Cesar Bar Toronto based brand with three locations with payments.
And Lightspeed retail we were happy to sign the following customers all with payments simply turn with 46 locations are U S based fashion apparel retailer.
Five location chain of jewelry stores in Virginia with estimated annual sales volume of over $40 million goal.
These locker room with 21 locations in Wisconsin and Minnesota.
We continue to see strength with mid market customers.
We are generally larger more established customers that tend to carry higher <unk> TV.
It's far less churn and deliver superior lifetime value.
Our E Commerce solution also saw strong traction recently partnering with France's largest mobile carrier Orange that will act as a distributor of the solution to potentially thousands of SMB customers in France.
And we continue to expand our supplier network, adding brands, such as Reebok, Eddie Bauer and intermix as partners and customers.
As I look to big year ahead, I see several trends that are really encouraging.
I think the most important of these is the return to in person shopping and dining.
We performed well during the pandemic, because we were able to help our customers thrive online, but our solutions are primarily targeted for brick and mortar and with the world reopening merchants, who are ready to open new locations develop new concept and invest in our technology.
There is nothing more encouraging for me to see customers back in stores and restaurants.
Today Omnichannel strategies are no longer optional.
Yes consumers are again gathering in stores and restaurants, but they are not going to forget the habits. They developed during the pandemic, we believe trends like buying online and picking up in store ordering ahead for restaurants are here to stay.
Consumers have become more demanding in the past two years at our merchants have to adapt and.
And we are in an excellent position to help them do so.
And then Nick reinforce the notion that physical retailers need digital strategies and this is an environment, where lightspeed can really shine.
And finally, there is a global rollout of payments when we began our fiscal 2022 payments was available in North America, and seeing strong adoption with our retail merchants.
A year later lightspeed payments is now available in all major markets in both our retail and hospitality offerings in both card present and digital channels.
We are one of the very few companies that have rolled out a global physical and digital payments solution and.
Im very encouraged by the early signs, we're seeing in international markets for our payments offering.
In Europe , the proportion of new customers that contract for payments alongside their core software subscription is now similar to the rates, we see in North American retail.
Delivering on these trends takes a strong product offering, which I'm thrilled to dive into with more detail, but first let me remind everyone of our strategy here.
Lightspeed has no interest in maintaining multiple brands and product offerings, our goal, which will be substantially recognized this year is to be in all markets with these two core offerings Lightspeed restaurant and Lightspeed retail earlier. This month, we announced the release of our latest retail offering lightspeed retail, bringing together the best aspects of Lightspeed.
<unk> and <unk> to our new flagship retail offering.
The new Lightspeed retail expands our availability to the Android platform also the truly headless commerce experience completely re imagined to user interface and of course maintain industry, leading multi store inventory management.
Although our position in retail is very strong we are far from being done.
By integrating our supplier network into the offering we will transform how smbs work with their suppliers I'm very excited about our progress here and look forward to making some announcements on this initiative in the not too distant future.
And hospitality, we're continuing to see strong momentum with the global rollout of our new flagship Lightspeed restaurants.
Accounting for more than half of new customers in March our momentum continues to build and are encouraged by how this product is also driving payments uptick.
Finally, I want to touch on our path to profitability Brendan International will discuss our outlook for the year and we'll provide more details because as you will see we expect to achieve our target organic subscription and transaction based revenue growth of 35% to 40% in fiscal 'twenty, three and reach adjusted EBITDA profitability for the following fiscal year.
Getting to profitability starts with strong unit economics. This has always been a priority for this company and the trends we are seeing in the business are very supportive.
Good momentum in the mid market, our flagship offering are showing strong evidence of boosting software <unk> and global payments adoption is growing.
Spanning software <unk> and growing payments penetration is very supportive of improving unit economics.
When we went public we committed to making payments a substantial portion of our revenue stream in fiscal 2022, the transaction based revenues almost half of the total revenue I believe that we have delivered on this commitment.
Pursued an aggressive strategy with the goal of consolidating the best players in the industry and bringing game changing technology to our customers.
With our new flagship restaurant offering launched last year on time, and the new retail Omnichannel flagship recently, making its debut slightly ahead of schedule I believe we have also delivered on this commitment.
It is very important to me that we do what we say, we're going to do and continue to drive value for our customers and shareholders at the next two big goals for me are the commercial availability of supplier network and getting to profitability. We have the team operating discipline resources and ambition to make it happen and now I will pass it over to <unk>.
Brent.
Thanks J P.
He was a tale of two quarters in Q4.
January and February saw the effects of omicron disrupt our selling efforts and our customer volumes.
But as restrictions eased we saw our best month ever in March in terms of new locations added in new business brought into the company. This gives us optimism as we look ahead to a post pandemic world.
For the quarter, we saw the GTD processed by our customers grow organically by 39% so.
So we saw a shift in consumer spending behavior across a couple of vectors.
First I'll move back to the physical world and away from E Commerce and online ordering in our hospitality business.
And second a shift away from certain consumer durable categories, such as bikes sporting goods and <unk>.
Improvement in towards hospitality fashion, and apparel and others.
These shifts are the latest in macroeconomic factors that we faced over the past two plus years.
We stated previously that one of the strengths of this business is our diversified global customer base. The strength has allowed the business to perform well even with these macro factors at play.
When Covid began our retail segment performed far better than our hospitality segment aided by consumer spending and verticals, where we have good market penetration that.
That helped to fuel our growth through the pandemic and we've now seen those verticals cool off.
But now hospitality is back and other retail segments, such as fashion and apparel are faring better.
And because of our diversity, we were able to deliver another strong quarter, even with these changes.
Ashley will talk you through our outlook for fiscal 'twenty, three shortly but it goes without saying that the macro environment carries uncertainty around how consumer spending will trend this year.
However, we are fortunate to have the diversity of customer base and available growth levers that will help us continue to grow our business.
Our gross leavers are unchanged and remain growing our revenues through the combination of location and <unk> growth.
Expanding our payments and financial solutions across the over $70 billion of GTA V. Our customers collectively process.
As you've seen by now we don't need all leavers to be hitting concurrently as the opportunity for each remains compelling.
Before discussing those growth levers in more detail I will note that this quarter's results, which we reported 48% organic growth in software and payments now fully laps are easier comparative periods as well as two of our largest acquisitions by revenue shop, keeping up serves.
Hopefully easing any concerns about the businesses ability to deliver strong organic growth, while integrating our acquisitions.
So digging deeper into our results reported today overall revenue for Q4 was $147 million ahead of our guidance of $138 million to $142 million.
For the full year, we delivered $548 million of revenue up 147% from fiscal 'twenty one.
Software and payments revenue for Q4 was $137 million, representing 93% of total revenue and grew by 48% organically.
For the full year software and payments revenue was $512 million and grew 153% in aggregate and 62% organically.
As a reminder, our Q4 is seasonally slowest for our customers and the volumes they process with transaction based revenue now approximately 50% of our overall revenue the seasonality plays an important role in the quarterly profile of our results.
Additionally, as previously disclosed we had a onetime pickup of approximately $5 5 million in Q3 of this year and our transaction based revenue line.
Our sequential revenue growth profile.
Gross profit dollars grew by 58% in Q4 from the same period, a year ago and for the year gross profit grew by 112%.
As a percentage of revenue gross margin for Q4 was 48% as compared to <unk> 53 last year.
Owing to a greater portion of our revenue now coming by way of payments, which carries a lower gross margin.
Provides us an important incremental gross profit dollar per customer location.
Adjusted EBITDA loss was $19 7 million and in line with our guidance.
This loss was higher than a year ago, reflecting the impact of the adjusted EBITDA losses from our recent acquisitions of <unk> and new harder.
Adjusted EBITDA results in the quarter also reflect the impact of seasonality discussed earlier and our typical higher sales and marketing costs during the final quarter of our fiscal year.
So the full year adjusted EBITDA loss was $42 million or 8% of our revenue, which is improved from 10% last year. We believe our path to adjusted EBITDA profitability is clear and you'll hear more from US just shortly on our commitment to getting there.
Turning to some of our additional business indicators customer locations, excluding those standalone e-commerce customers brought on through the echoed acquisition grew.
<unk> grew to 163000 from 159000 a quarter earlier these.
These customer locations provided our pool of $270 per location, which is up from just over 200 a year ago.
Growing the customer locations and <unk> remains a core part of our plans and we continue to see opportunities to do both.
Our focus is to optimize the mix of these meaning we will continue to target an privilege customers that drive solid underlying unit economics, <unk> and generate an overall software and payments revenue that fit our strategic goals.
It's important to reiterate that we will be focused on growing our business with the right customers, which may lead to variability quarter to quarter on this one metric.
As mentioned location adds in the quarter were slower in January and February owing to omicron effects on our end markets. However March was our best ever for customer location additions, allowing us to reach this growth and overall locations.
Customer location churn rates when excluding equity overall were largely unchanged in the quarter from our typical levels.
Noting that within mass, we're seeing some ongoing churn from customers brought on from some of our acquisitions and non core verticals typically carrying a lower <unk> than our overall average and typically have a lower ATV profile as well.
To be clear this isn't new or unexpected, but it does reflect the mix change in our customer base and serves the slowdown overall location growth stats.
Again, our focus is on growing our customer base that has good long term value for the business and our strategy.
As mentioned overall RPM in the quarter was approximately $270 per location and was up from just over $200 a year earlier software only <unk> was $132 up from 113 a year earlier.
Both of these exclude the equity Standalone ecommerce customer base, which does carry a significantly lower ARPA.
Looking at our <unk>, our customers processed $18 4 billion in the quarter.
Up 39% organically and 71% in total and for the year, we processed over $70 billion of GTA V, reflecting the scale of the business.
Within overall GTP, we saw retail growth slowed somewhat reflecting overall industry trends.
As mentioned some of our best performing verticals during the pandemic further slowed in the quarter.
Despite this overall retail <unk> still grew 17% organically and 74% in total.
Fatality GTD more than offset this as consumers resume spending on travel and dining out in their communities hospitality GTD grew 67% in the quarter organically and we saw this growth in all geographies and saw a really strong month of March in Europe in terms of customer volumes new sales.
Looking at our payments gross payment volume was $2 2 billion in the quarter up 132% from last year and flat with our Q3. Please.
Please recall that our Q4 is our seasonally slowest quarter for processing volumes for both our retail and hospitality segments show a slowdown from the busy holiday season in Q3.
That our processing volumes were flat quarter to quarter sequentially. It was actually a very positive sign of progress overall, given the seasonal impact.
All told it was another quarter of progress and another quarter of meeting our commitments, despite new challenges being thrown our way.
I'm proud of our execution to date and I'm optimistic for the future.
And as I now formally turn over the CFO role to Asher ill, let her take you through our outlook for the year ahead.
Gotcha.
Thank you Brandon.
As we look forward to fiscal 2023, we believe there are several reasons for optimism given the trends we're seeing in markets reopening our increased scale. The success of our integration effort and the launch of our two flagship products and last but not least the opportunity that still lies ahead in payments and financial.
Sandy.
For Q1, we expect to achieve revenue in the range of $165 million to $170 million and adjusted EBITDA loss of approximately 16 million.
The adjusted EBITDA loss in the first quarter includes cost associated with our annual sale customer and partner summit, which we moved to a virtual format during COVID-19 and which we are now bringing back to in person this year.
Looking beyond Q1 fiscal 'twenty three we remain confident that we will continue to drive organic growth in subscription and transaction based revenue of 35% to 40% and we will continue to realize lower adjusted EBITDA losses as a percentage of revenue on a year on year basis.
As J P mentioned driving a path to adjusted EBITDA profitability is a priority for us.
For the full fiscal 2023 year, we expect revenue to be in the range of 740 million to $760 million and adjusted EBIT loss of approximately $35 million to $40 million or 5% of revenue at the midrange of our guidance, which has improved from 8% this year.
As we look beyond fiscal 'twenty, three we're committed to achieving adjusted EBITDA profitability in the subsequent fiscal year. This will be a very natural progression for us moving from 8% adjusted EBITDA loss in the year just completed.
5% loss based on our guidance for fiscal 'twenty, three and then set up a breakeven or better year in fiscal 'twenty, four while still achieving organic growth on the software and payments line at 35% to 40%.
We believe this balanced approach to growth and profitability is the right one given the opportunity. We see ahead the strength of our balance sheet.
Desire to run a disciplined long term debt.
As a reminder, the guiding this outlook, we expect seasonality to continue to have an impact on both our revenue as well as our adjusted EBIT performance as Brendan mentioned earlier, whereby Q3 will be our seasonally strongest quarter and Q4 seasonally weakest quarter.
Furthermore, as we complete our integration and rollout our flagship offering we will realize ongoing synergy, which we plan to reinvest in core areas of the business.
Allowing us to invest in growth areas, while remaining flat on operating expenses throughout the upcoming except for Q1, where we had the higher adjusted EBITDA loss than our in person sales partner and customer summit I mentioned earlier.
We expect transaction based revenue to grow faster than subscription revenue year over year as merchants make greater use of our financial service offering and as we attract a greater mix of higher GTD customers.
We expect our gross margin to reflect this revenue mix.
Our focus will be to grow our overall revenue through an optimized mix of software and payments.
Goodbye.
We ended the quarter with just under $1 billion in cash on hand, and almost no debt.
We're in a strong cash position, which bodes well for us in today's volatile market.
With that we will now take your questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from the line of Dan Perlin from RBC capital markets. Your line is open.
Yeah.
Thanks, Good morning, everyone and a nice quarter here I wanted to just jump in on this path to profitability really happy to see that.
Announcement by you guys.
I'm, hoping maybe you can just tease us a little bit with some of the underlying assumptions beyond what you're what you've just described.
Talk a little bit about why you have confidence in achieving the 35% to 40% organic growth and then if we think about the I guess the cadence within that fiscal 'twenty. Four would you expect to reach profitability early in the year or kind of as an exit rate.
<unk>.
Hey, Dan it's Brad.
And in here.
Look the path to profitability, it's always been important to this team.
We've.
We've always talked about the need for balancing growth the market opportunity in this path hopefully our operating results are showing that.
From I think we were minus 18, a couple of years ago to minus 10 to minus eight and minus five in this current year. So it's been an ongoing.
The thing that we've always prioritized and felt was important to to run a disciplined long term business.
As we look at the assumptions, we're coming into a year, where youre seeing us launch our flagship offerings.
Seeing us.
<unk>.
Integrate those acquisitions fully and so we're starting to realize the synergies across those as you heard from Asia.
That doesn't mean, we don't invest in the growth areas.
<unk>, allowing us to continue to put operating expense into the things that are going to grow while maintaining flat opex overall throughout the year.
So those are some of the underlying opex assumptions on the revenue line.
Hopefully you got a clear.
Clear message from US we continue to see despite the uncertainty in the market good opportunity to grow their customer base with the right mix of.
<unk> and <unk>.
And the type of customer we want to bring on.
Along with just this.
Still largely on top untapped financial services opportunity to grow payments.
The world now that we have that solution everywhere. So yes, we are.
So we're heads down we're continuing to operate in.
We are committed and hopefully you heard that from us here today.
On getting to that profitability point.
Yes, loud and clear.
Which is great and the second quick quick follow up is.
You highlighted in the prepared release, you think Youll Cheyenne kind of in this environment as consumers start to kind of pivot back to in person shopping and dining.
But can you be a little more specific about maybe some of the exposures.
Of overall mix that we should be mindful of that that will help.
And support that is a tailwind and then just Conversely again.
Act would play in that narrative. Thank you.
Yes, so I'll take this one good morning.
Simply put I mean.
<unk> was not.
Our environment the majority of our <unk> is in the physical world.
What we've really seen in the last few few months is a strong return to physical everywhere and that means I mean restaurants are fully booked <unk> are back to normal.
We're seeing a lot of the shift from e-commerce back into physical so all of that is really good news for us.
And even in the context of the uncertainty you compare that to a world of Covid.
Our customers were asked to shut down in and to stop operating all of this is really good news scenario. So I think thats deep down to how we're looking at this I think the other big reality is most of the businesses that are shut down during COVID-19 and those three spaces are now just creating a multitude of new concepts and new restaurants opening.
And I don't know of any restaurants here, who would use the legacy system.
They will go towards platforms like lightspeed, so as they open their operations. So feeling really good there and then the last piece of all of this is we've always said at a customer using lightspeed payments has double the <unk>. The net <unk> of a customer without and now payments has launched globally in every region, where we operate so that means with <unk>.
Strong attach rates. So now that means if you look at this as our CAC to LTV or LTV over CAC is very strong and again that helps with our path to profitability and strong growth in the coming years.
That's great. Thank you so much.
Your next question comes from the line of Timothy Shadow from Credit Suisse. Your line is open.
Great. Thank you for taking the question. Good morning, everyone I wanted to dig into the locations. So this is not necessarily new messaging you've been talking about a focus on larger higher quality quality.
LTV locations for some time now and you recently expanded with feet on the Street sales force. So this is all very much aligned also the locations. This quarter as you mentioned, we're a little bit better at 4000, and you said that March was a really strong exit rate, giving you some confidence for the year, but specifically in terms.
Of modeling should we start thinking about the return to call. It 5% to 6000 location adds per quarter should we be still thinking about that 15% location growth and again being cognizant that all locations are not exactly the same to your financial model.
Hey, Tim.
Yes, we tried to give a little more color in our prepared comments on this.
We've got.
As I tried to say isn't new its not unplanned it wasn't unanticipated by us.
But some of the customers who come in by way of acquisition.
They are in categories that are like convenience stores are there.
White label OEM.
Our relationships and we're seeing some of those naturally churn off as we continue to focus on attracting the type of customer that we think has the right attributes for the long term strategy here we're.
We're not stressed over that but that is sort of playing into.
The overall.
Location metric.
You are all staring at.
If we kind of put that to the side.
We're achieving the growth that we always have.
<unk> talked about on the locations that line, we're quite comfortable that.
We are attracting.
The right customers to continue to meet our goals.
And that's where our focus is going to continue.
Okay, great. Thank you Brandon My brief follow up is if you could give us some context on what the payments penetration rate is that is implied in the achieving EBITDA profitability in fiscal 'twenty four.
Thank you.
Yes, I don't think we have a specific number for you there Tim we're going to continue to rollout payments, we're quite happy with how this has gone well.
We've got more than double our customers year over year on this solution driving more than the 130% of processing volume.
<unk>.
As J P mentioned, we're seeing good success in international markets.
That's the metric we're going to stay focused on is our <unk> and our and our revenue growth on on this line.
And Youll just continue to see that overall penetration rate continued to grow.
Grow in line with that.
Excellent well that sounds great. Thank you so much Brandon.
Your next question comes from the line of Andrew Jeffrey from Truest Securities. Your line is open.
Hey, good morning, all I appreciate you taking the call.
If these results in this outlook.
Finally quiet some of the noise around your stock I'm not sure what's going to.
Yes.
JP I really like the focus on unit economics, I Wonder if you can elaborate a little bit I think you talked about a couple of the drivers.
Software attach as well as payments in terms of improving your LTV to CAC, but can you expand perhaps a little bit with your new retail and restaurant solutions, perhaps the increment.
Unit economics that seem to have your pretty excited.
Yeah.
Yes of course, so look I think.
First of all we're we're really proud of the two last releases we've done.
Everybody was questioning or you're going to get to real go to market products that are going to be.
Very competitive and and reaching all regions and this is job done for US we have.
Our restaurant product is out with all of the great features in our in our retail product X series is now out and it includes all of the Headless commerce. It now goes into Android, which is a huge market for US we were only.
Operating on Apple until now so that's a big big lever for us It has.
Of course, all of the workflows for.
Omnichannel to pick up in store and then finding incredible webhooks on the API. So we're really proud of the work and and we really feel those products are extremely competitive.
No.
This being said the most exciting part about these products is.
Is the attach rates on payments are very strong.
And what we're seeing is that as our customers buy these products, our <unk> growth and again thats ultimately going back to our strategy here, which is lifetime value is important. So I think just a way of summarizing the strategy is we need to push as hard as possible of these new products, but we need to put it to ensure that we're not everything for everyone.
And that we go after this segment that is really valuable to lightspeed and I think on that front. Those two products are incredible and and we're seeing higher <unk> better attach rates on payments so super excited about that.
Okay, that's terrific terrific to hear thank you and maybe just.
The key question, but I think it's important I was just looking at the MBNA and <unk>.
You mentioned that.
And perhaps moving more to.
Monthly contracts any any comments on how that might affect churn. It sounds like some of these bigger customers will churn less but anything we should think about in terms of the difference isn't.
Between monthly and <unk>.
An annual contract terms.
Yes.
So that's been an ongoing journey for US I think we first introduced.
Started to make some comments around this almost two years ago.
With the release of payments and launch of payments started to adjust some of our go to market strategies around this we.
We still attract.
Subset of customers prefer to pay us annual.
Though we are seeing that continue to.
Two months lease.
But to answer your question over the past few years those are the questions we were asking ourselves as we.
Made this shift and we really haven't seen a noticeable increase in churn.
Expect that not to as we look forward as well, it's just simply.
What we think is the payment terms change for the customer.
Maybe just to add to this I mean, if we do this right.
Monthly customers are paying a high a higher fee than annual customers. So we're keeping a close eye on churn and churn is actually in the good direction.
We're getting higher <unk>. So again this goes to our strategy and where we are well I think we're balancing in the right way monthly versus annual and churn rates on those so very happy there.
Helpful. Thank you very much.
Your next question comes from the line of Raimo <unk> from Barclays. Your line is open.
Hey, Thanks for squeezing me in.
Two quick questions first as we are.
All living in.
Slightly newer world uncertain World.
Can you just remind us how we need to think about some of the changes that are coming through in the economy in terms of.
Inflation et cetera is that just kind of driving higher <unk> or something like that since we haven't had inflation for so many years I don't know.
If there are more aspects, we need to think about but that's my first one and then I had a follow up.
Yeah, So maybe I'll.
Yeah.
When you look at inflation in and even you look at potentially the economy not going in the right direction.
Way, we look at this well first of all is we're a high growth company.
So what we're seeing here is payments and specialties payments.
The deployment of payments globally will offset we think any slowdown from from from the GMB.
The second Big thing is when you think about inflation and you think about.
Again, a recession or.
This is all good for lightspeed, because what we do is we help merchants basically up optimize how they operate have way less manual processes and operate with fewer employees. So I think that also will drive well into into lightspeed.
Until I speeds direction, and maybe the last thing.
We're thinking about is.
As as Covid lifts and people go back to the physical World. This really has a strong impact on lightspeed.
Any kind of a recession.
Nothing compared to what our merchants have seen through the times of Covid. So we're feeling really good about this and we actually think that as merchants need to automate and do more we're going to be in a really good position here.
Okay perfect. Thank you that's very clear and then.
And.
Supply network supplier network could you just remind us a little bit in terms of.
Where we are in that journey and how meaningful this could become like in terms of the <unk>.
Top line driver for the coming quarters. Thank you.
Yes, so maybe just again.
For me this is probably the most exciting project light speed right now.
As you know we acquired.
A company that provided us the technology, we've been working hard in integrating this and.
We will be announcing in this quarter, some really exciting exciting new products coming out, but again what is the value here of the supplier network. We're trying to create network effects within the verticals, where we operate and here what we're doing this by connecting suppliers and brands with stores and consumers and at the center of this is data and <unk>.
<unk> services and so we have this strong belief that if we want to help our merchants do better we need to go upstream and see how our merchants work with suppliers and here really we're trying to do with nobody else has done which is trying to connect.
To have a completely integrated supply chain for the verticals, where lightspeed operates and and again more to come on that front and it's been a huge effort for us.
We're very excited about what's ahead and how this is really going to help our merchants.
Again drive more profitability.
Thank you.
Your next question comes from the line of Daniel Chan from TD Securities. Your line is open.
Hey, good morning, guys.
Just the payments penetration rate continues to take higher by about one percentage point every quarter. Just wondering if that's consistent with your expectations and how was adoption in Europe tracking relative to your prior rollout in North America.
Hey, Dan.
Yes look payments continues we will continue to be very pleased with how we're doing here.
As I mentioned customers more than doubling year over year, our process volumes of 132% of revenue line growing.
To 90%.
It continues to go well.
Well J P mentioned the attach rates in Europe are now rivaling sort of what we've been seeing in North America. So all told very pleased.
The thing that's out of our control a little bit and again, we focus on the things we can control that.
We are seeing consumer spending shift categories right now called some of that out in our prepared comments areas, where we've been traditionally very strong like bike shops, and sporting goods and consumer spending is shifting and it's moving towards hospitality in fashion and apparel and some.
Categories like that.
We're not as well penetrated just yet.
Not not overly concerned we continue to sell well.
And that ultimately is an opportunity for us as we look ahead. So all told.
Continue to be quite enthusiastic about how the payments rollout is going.
Okay. Thanks for that Brendan.
Second question is two parts, just wondering how attracting and retaining retaining talent, whether thats been impacted by just the share price.
And whether you have any plans to change your comp structure to address it. Thank you.
Yes, I mean look it's been well documented how tight the labor market has been and of course.
The.
As you mentioned.
What's happened in the broader stock market and the downstream effect of that.
Lightspeed has certainly not been immune to that.
Having said that we've been pretty pleased with.
Our ability to attract and bring in new folks.
Got it brought in some.
Really strong new leaders in marketing and sales.
Talk about our new CTO Ronnie.
So we've been pretty.
Pretty happy with how how.
We've been able to bring in new folks but.
The ongoing pressures of the talent market in compensation.
That's just something we're dealing with and have been dealing with and we expect we'll continue to have to deal with.
Okay. Thank you.
Your next question comes from the line of Eugene <unk> from Moffat Nathanson. Your line is open.
Well, thank you guys.
For taking my question.
First question I wanted to ask a bit on the competitive landscape. So obviously.
<unk> always been very intense competitive landscape in this industry I was hoping you can comment a little bit on what you're seeing out there and maybe compare and contrast, the U S environment, maybe with what you're seeing in the European and Australian markets and as a result, what are you seeing in the pricing environment.
Emotional environment and how you are navigating that.
Yes, so maybe maybe I'll take this good morning.
Look ultimately the way we look at the competitive landscape as we look at our close rates and we insure and we basically look at who we lose against them and are we competitive there and then we listen to our customers. So for me, it's very clear in my mind that the new offerings, we launched our extremely competitive.
And they're arguably the best products, we've ever had on the interface front on the user usability front on the workflow fronts on the complexity front. So I think again when we look at light speed today, we're very happy with it when we look at our close rates theyre doing extremely well.
So I think there is no reason for us.
To believe that we're not ahead of the game and continuing to lead this market.
For me the Big thing when we think about competition.
We want to lead in the segments that are interesting to us.
And.
I always said I am going to go back to the 46 million restaurants and retailers on the planet and on those 46 million there are $6 million to $7 million that are in our bullseye, which are the more sophisticated the more established less prone to churn and we have.
The physical space of 163000 out of $7 million. So this is a huge market and the bulk of this market is on legacy systems and so for US that's really what we're focusing on and in that segment. We're extremely happy and we've progressed a lot I think the last piece in my mind. There is you mentioned Europe .
The U S versus Australia, and New Zealand, Yes, we are a global player. We have we have the same solution set for the globe and I think that sets us apart also when you look at some of our customers who need to sell globally.
But feeling really good about this.
And certainly feeling really excited about what we're doing with suppliers because thats going to ring fence any other competitor in our segments and it's going to accelerate our adoption within the verticals that matter for us.
Got it got it very helpful and then yet maybe pick back.
Speaking on what you were just talking about the supplier services and just broader subscription services.
One way we're looking at is kind of your subscription services revenue yield as a percentage of GTA V. It looks like that continues to take comp year over year, which is good to see can you talk a little bit about kind of what's driving even relative to the merchant side.
What's really driving that.
Our pool of your subscription services and what are the opportunities. They had how quickly can it continue to grow.
Yes, I think it's.
I mean I've been in this company 10 years and it's almost every quarter. The <unk> continues to grow.
And it's very simple what we have as a platform with multiple modules and so customers normally start with one or two modules and overtime.
As they see the value they buy more from us. So I'll just give you a few examples you might start with your core commerce platform in Pos and then Youll move on to.
Your omnichannel and especially now with our headless commerce arguably this is a really good module and then youll move onto analytics, who will move on to loyalty you will move on to integration with accounting platforms. He will move on to payments. So this is the core strategy of Lightspeed is basically providing a platform with multiple modules and.
And as you buy from Lightspeed you become more successful. So that's really what's driving all of this in both industries hospitality and retail we have a number of modules that our customers can buy from us and it's really the story of we integrate with everyone. We want to be a fair player on the market, but the integration with our products are always greater than what you have.
The rest of the market so overtime people buy more from us.
Got it okay, well, thank you very much.
Your next question comes from the line of Dan who is from Scott Lewis from BMO capital markets. Your line is open.
Hi, good morning.
Hey, guys, if we look at.
Attach rates in our North American retail, which is your most established markets for payments are you starting to bump up against the ceiling on your payments attach rate for new customers or is there still more runway on that.
Within retail and I think we're pretty pleased with the attach rates overall.
As we've talked about there's always categories that we're in.
I'm not going to be able to onboard.
So on so yes, I think within retail we've got that in North America, we've got that fairly well optimized.
Opportunities for us across the board.
As we enter hospitality more deeply in international markets more fulsomely.
But pretty pleased with how things are going in North America retail.
Yes antenna so maybe if I could add on the product strategy. We are just trying to add more value to customers, who attach payments. So we're making it more and more natural.
We do analytics engines that are based on payments. We do we do everything we can basically and actually if you look at this world of omni channel with the customers going online and offline and now, especially with the new Headless Commerce. We've launched there is real value, which is not just about.
You are right there is real value in attaching lightspeed payments and I think it's becoming more and more natural for our customers to bundle in payments as they biologically.
And sort of a related question you called out a couple of larger payments wins and I was kind of surprised I didn't think you'd be competitive prepayments for that kind of customer size. So.
That new does that reflect maybe.
More of a concerted effort to go after larger payments customers or has that always been part of the strategy.
It's always been the strategy, we I think we have an extremely good flow and we.
And our go to market, we are distinguishing the big customers from the small ones.
And everybody is.
Turning in the right direction and again for me.
It's the value we bring to customers, even the large customers, having a fully integrated reporting where you can see exactly.
What hit to your bank account versus what was sold is always going to be simpler than having a payment provider completely.
This integrated from the core platform. So I think again for me. This is a natural move I think as we go forward more and more customers are going to need this and we're certainly focused on creating more value for customers, who buy payments. So that it becomes a natural step of the buying process.
Great. Thanks best of luck.
Our next question comes from the line of Richard <unk> from National Bank Financial Your line is open hey, Thanks nice quarter guys.
You guys are obviously have become one of the most global players in the market here today.
Obviously, it breaks probably some strategic synergies, including diversification does it bring any operating synergies relative to your competitors that you can use.
Okay.
I mean, yes I'm.
Trying to think of the right way to answer that for you Richard certainly on as we think about.
How we get.
Leverage across our development teams.
We've got development centers in Germany, and the Netherlands.
Obviously here in North America, Australia, and those are.
Those are helpful in a tight labor market for us.
Sure.
Be able to bring in talent.
And realize that benefit where we're not just chasing talent in one specific country.
But the benefits of scale I think we've always talked about.
The more <unk>, we are driving the better economics, we're going to get more value that Scott as we look forward to our supplier network and things like that as well. So no. We're huge proponents of scale for sure.
The matters a lot.
Our market.
Yes, I think also it out a few.
Obvious ones, but when you think about our relationship.
Performance marketing, where we can centralize the performance and have much better rates because of the volumes that we're doing there.
I think we are becoming a go to brand globally, which also helps when you look at back links and you look at how the performance of organic growth. So again, it's much easier when you have more customers than fewer to define synergies and obviously operating and all in all regions brings us more customers in.
And better intake of business. So we can then leverage the ton of or our suppliers.
Okay. That's helpful. Thanks.
And this question sort of related to the hardware piece I know, it's not sort of the focus but it is sort of part of the offering and with these are challenges in the supply chain and you know chip shortages like was there any.
Impact.
In the quarter and.
How do you think about that sort of going forward just to make sure that <unk> got enough.
Inventory on that side that is not an issue here.
So we've been I mean.
We've been managing through this for a few quarters now we haven't had an impact.
On an se business activity of selling and so on.
It does have an impact on our hardware margins youre seeing that show up.
As we go to secure inventory to meet our growth rates were just.
Having to pay more to secure that inventory in some cases, so that does show up in the margin line and then Youll just see the inventory balance on the balance sheet has been growing as we as we look to make sure that we.
Uh huh.
We have sufficient inventory to meet our our own growth. So that's certainly something thats. There as you mentioned is a huge part of our business, but it's something we needed to manage through.
Okay. So it hasn't had any impact or is it sort of the bottom line the way I hear it right okay.
Not the selling activity or anything like that alright, okay. Appreciate it thanks guys.
Yes.
Your next question comes from the line of Josh Baer from Morgan Stanley . Your line is open.
Great I appreciate the question I wanted to ask on payments really what what's it going to take to get to that 50% of cash level.
And specifically just wondering like the hurdles to overcome the timeline and also the trajectory.
And if we should expect steady increases or more of an S curve like with the broader availability of payments now should we be expecting an inflection in that percentage of GTP process through lightspeed payments. Thanks.
So yes, thanks, Thanks, Josh.
Again, we're going to stay focused on our process volumes Thats, what we can control. The most the penetration rate is subject to some variability as consumer spending shifts around it.
And so on I think that metrics are very good one from an opportunity perspective.
Our progress perspective, we think that the.
PV payments volumes R.
Are the right measure I don't think youll see it be linear.
This is.
Not perfect science necessarily but I do think.
Seasonality will play a role in certain industries, and then as we unlocked markets and get meaningful.
<unk>.
I think youll see that line steepen at certain points.
Rather than just be a linear extrapolation, but a lot kind of goes in there.
Should we get to the 50%.
That's going to be.
A very great outcome, I think for the business and the shareholders. We continue to see opportunity to get there in the past there will.
Yes, and won't necessarily be linear I think youll see periods of time, where that line steepens.
And maybe if I can add two things one is we have a high volume that's outside the U S. This was recently launched and the exciting news is we're seeing really good attach rates and similar attach rates in North America. So everything for US says, we're going to of course, that's going to drive a ton of a ton of dream.
The PV.
So so feeling really good about that and then I think when you look at the last pieces on them.
The global environment. When you look at the attach rates on new customers and you look at how churn works in Smbs, we are going to get there no matter how.
How are we skin. This when you look at attach rates that are really strong new customers. We are getting into that direction. So again not concerned not worried we are where we wanted to be on a <unk>.
And yes feeling.
Feeling really good about payments.
Great. Thanks for the context.
Operator, I think we have time for one last question.
And your final question comes from the line of Josh Beck from KBC M. Your line is open.
Excellent.
Thank you for the question and congrats Brandon and nausea on the expanded roles.
I wanted to ask about.
The go to market with the flagship platforms, you've obviously had the restaurant product in the market for a while youre just really out of the gates on the retail side, what have you learned maybe from.
The restaurant flagship.
Launch and how are you applying that to the retail launch.
Yes.
Again Ed.
Everything is very much in line or ahead of what we expected on that front.
So we launched retailers launched sooner than we thought set up two very exciting, but what did we learn I mean simply put it's a it's a blueprint. It's a sequence there is a a very strong sequence, we're going market after market and as we deploy the new product. We are we are monitoring very carefully attach sorry, <unk> and.
Close rates and so.
Just.
Being very clear if we were to launch and we didn't see an increase in <unk>, we didn't see.
Good close rates or at least the same level of close rates, we would've pause, but we haven't seen any of that for now maybe just sharing one data point.
More than 50% of all of our hospitality deals globally now are on the new platform. So that tells US okay. We're heading in the right direction. The next steps for us are fully launching the U S.
For the hospitality, which is going to happen before the end of summer and the second step for US is launching is launching hospitality in Australia, and New Zealand and that is well on track we have our first.
Alpha customers. So feeling really good there also so I think for me there is no real surprises I would say there is a strong operational focus here on launching these products and we're satisfied with where we are.
Retail.
I mean retail we took the other routes. So we've launched now in Australia, and New Zealand, we've launched it in Europe and now the final loan trust as the U S.
It's the largest market for us.
And on that front, we're going to be going every every quarter, we're going to be deploying into new verticals and we're gonna be checking those close rates and we're going to be ensuring that our booth higher attach rates on payments are good and close rates are good.
And we've started in the first vertical now and we're seeing really really strong signs. So we're very excited about it.
Yes, Greg.
<unk> here and maybe just to close out with a <unk> question I think it was up about $100 year over year to $2 70 level. You, obviously have a very comprehensive platform at this point.
It spans back office Omnichannel niche services.
Office et cetera.
Just curious like maybe if you look at.
Your highest our two customers or maybe what a customer would be paying if they're adopting all the services how should we think about a little bit the ceiling in terms of where that metric can go.
Yes, so I think I'll just start by when you look at adoption of modules, we are very very far from the ceiling.
And.
I remember I was sharing a lot of data about this.
At the earnings the earnings day.
But for me, there's at least room to.
Multiply by 345 easily this number if customers are fully penetrated with all the modules and payments. So there's a lot of room for growth. There is a lot of greenfield.
We don't see any ceiling anytime soon on that metrics.
Great. Thanks J P.
Yeah.
Okay, I think we'll end it there thanks, everyone for joining us today again, if there's any follow up questions. We are around so please feel free to reach out and we look forward to speaking to everyone again in the near future. Thanks, everyone.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
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