Lightspeed Commerce Inc.

Operator, and good morning, everyone. Welcome to Lightspeed's fiscal Q1 2022 conference call. Joining me today are Zach DeSilva, Lightspeed's founder and CEO, Brandon Nussie, Chief Financial Officer, and J.P. Chauvet, President of Lightspeed. After prepared remarks, we will open it up for your 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, forecasts, 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 first quarter 2022 results presentation is 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-IFRS measures. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website on cedar.com and at the SEC's Edgar system. In addition, our commentary today will include key performance indicators that help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Such key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies. And finally note that because we report in U.S. dollars, all amounts discussed today are U.S. dollars unless otherwise indicated. With that, I will now turn the call over to Dax.

Thanks, Gus. Good morning, everyone, and thank you for joining us today. Before I get started, I just wanted to welcome everyone from New Order to the Lightspeed team. Together, Lightspeed and New Order are going to redefine how suppliers and retailers interact with each other and revolutionize supply chain management in the industry. I could not be more excited about the opportunity that awaits us all. Welcome aboard. As everyone has likely seen from the results released earlier today, Lightspeed had an exceptional quarter, delivering revenues and adjusted EBITDA well ahead of street expectations and better than our previously established guidance. Total revenue was up 220% year-over-year, with organic software and payments revenue up 78%. The company now maintains over 150,000 retail and hospitality locations globally. GPP was strong, growing 203% year-over-year to $16.3 billion. Organic GTV growth was 91%. Payments penetration continues to increase with approximately 10% of our GTV processed through our payment solutions. Some notable customer wins in the quarter include SpaceX, the American aerospace company founded by Elon Musk, has chosen Lightspeed Restaurant, Lightspeed Ordering, and Lightspeed Payments to support its hospitality operations at its California headquarters. Telluride Ski Resort, The world-renowned Colorado ski resort has chosen Lightspeed as its core commerce platform. Telluride will use Lightspeed retail, Lightspeed e-commerce, and Lightspeed payments to help run its vast resort activities. And finally, Restaurant K. K is the first Paris-based Japanese restaurant to secure a three-star Michelin rating, in addition to acknowledgments from Les Grands Tables du Monde and Gault and Milo. K will be using Lightspeed restaurant to run its award-winning establishments. In addition to the strong execution this quarter, we managed to advance some key strategic initiatives. LightSeed launched payments in the international markets, starting with the UK, and earlier this week announced five more European launches, including Germany, Switzerland, France, Belgium, and the Netherlands. We closed the acquisition of Vend in the quarter, with that group delivering better than expected results. We established a partnership with the leading restaurant reservation platform, OpenTable, And finally, we announced definitive agreements to acquire New Order and Equid, which will help transform Lightspeed into a one-stop commerce platform. The New Order transaction was closed last month, with Equid expected to close by the end of this quarter. As economies reopen around the world and new business creation accelerates, we believe Lightspeed's one-stop commerce platform remains a crucial lifeline for independent businesses. Our goal is to help them simplify their operations, provide them unparalleled opportunities to scale, and equip them to deliver exceptional customer experiences. As they step into a new world of commerce forever altered by the COVID-19 crisis, both the traditional challenges they have faced as well as the new customer expectations they will seek to meet will be best solved by Lightspeed Solutions. From the customary complexities of supply chain management and accounting to the new demands of online ordering and contactless payments, LightSuite is the technology that will ignite businesses everywhere. Following our customary routine, Brandon will take you through the details of financial results, but I wanted to first highlight some key business themes this quarter, including the benefits of economies reopening, the exceptional performance of payments, our early but promising success with LightSuite Capital, And finally, the ongoing integration of our recent acquisitions. As economies begin to reopen, we are seeing a very positive impact on our overall business, not just from new customers, but also increased demand from existing customers. Our hospitality business saw very strong performance this quarter, which helped drive great results in EMEA. Hospitality GTB was up 380% year-over-year, and new location additions were by far the highest we have ever had. France, Germany, and Belgium showed particular strength, greatly exceeding expectations. And although we did see growing demand from new customers, demand from existing customers was also strong, with our order ahead and loyalty offerings showing continued strength. LightSeed also maintains a strong partner network that helps drive adoption of our offerings. During the depths of COVID, our partner channels were relatively subdued, but this quarter, we saw them come roaring back. Payments, of course, continue to be a major source of growth for our company. Transaction-based revenues were up over five times from last year, thanks largely to payments. Payments benefited from the strong growth in GTV, as well as increasing adoption by our customer base. Currently, our payments business leans towards retail, and although GTV growth here was overshadowed by the resurgence of hospitality this quarter, omnichannel retail GTV growth still increased 139%. European adoption is off to a strong start with the total number of active payments customers growing strongly from last quarter. And while Europe still only represents a very small portion of our total payments customers, we believe this number will grow rapidly as we launch the solution in five more markets in that region. Overall, approximately 10% of our total GDP was processed through our payment solutions, giving us plenty of runway in the months and years ahead. I would also like to call out our capital business. LightSuite Capital had its best quarter by far, and we are starting to see numbers that are becoming meaningful. Almost 430 capital advances were made in the quarter, with revenue from capital growing 68% from the previous quarter. We continue to maintain two offerings here, LightSuite Capital, where we leverage our payments partner, Stripe, and the ShopKeep Capital business, which we inherited when we acquired ShopKeep. This quarter, we are expanding the ShopKeep Capital model to up-serve customers and have already seen some initial success there. For now, this remains a small but highly profitable business for us, with revenues still under $1 million quarterly. But given our growing customer base and expanded availability, we believe capital can become a very meaningful driver of growth and especially profitability in the longer term. We also believe that with the addition of new order, we have the potential to extend capital services into the B2B side of our network. Finally, I want to provide an update on the integration of our latest acquisitions. We continue to integrate management from our acquisitions into our own senior executive team. Michael DeSimone, the former shopkeep CEO, was recently named our chief business officer with responsibilities for retail, hospitality, golf, and payments. And Anna White, the former Venn CEO, is now our general manager for retail. From a product perspective, we continue to drive towards one core solution for retail and one for hospitality. In hospitality, we are busy integrating UpServe's industry-leading analytics engine into our core hospitality offering and expect that to be completed by the end of the summer. We are also working diligently on integrating the Vend offering into our retail solution, which is one of the many reasons Anna White now leads that business. The shopkeep integration is even further advanced, with that offering now fully part of the core Lightspeed retail solution. We recently closed the new order acquisition and will be turning our attention to unlocking their potential within our broader network. Once integrated into Lightspeed, we will be able to give brands real-time sell-through information from their SMB customers, a feature that we believe none of our competition can match and one that we hope will make the Lightspeed supplier network indispensable to all suppliers in the verticals on which we are focused. In closing, I want to stress again what a strong quarter this was. From new customers to higher ARPU to greater payment adoption, the company really fired on all cylinders. When COVID first hit, Lightspeed was able to help our customers pivot their business models and adapt to a new omnichannel business reality. As we emerge from the crisis, we believe Lightspeed can help these same customers take advantage of the economic rebound to scale their businesses and simplify their operations. And in the longer term, we continue to see great opportunities. Payments adoption can go higher. Delivering a unified solution in retail and hospitality should allow for greater software adoption amongst our customer base. Our capital business is still very much in its infancy, and the potential from the B2B side with New Order and our supplier network has not yet even begun to impact our top line. And finally, once we close our proposed acquisition of Equid, we believe we can help our SMB customers to fully recognize the potential of omnichannel commerce. There remains a lot of heavy lifting and long hours ahead, but the potential for Lightspeed as a true one-stop commerce platform has never been greater, and the probability of success has, in my mind, never been higher. And with that, I will turn it over to Brandon.

Thanks, Dax. Really pleased with these results today. As you heard from Dax, what we are seeing is a strong uptick in our customers' volumes, strong new customer demand, and continued adoption of our value-added offerings like payments. The combination of these factors produced some terrific financial results for us this quarter and keep us quite enthusiastic about the future. As usual, we'll look at the building blocks of our business, and everything starts with customer locations, which grew to over 150,000 at June 30, from over 140,000 on a pro forma basis last quarter. Our hospitality business, particularly in Europe, performed great this quarter as economies reopened. And retail continued to perform well also. It ended as a record quarter for new customer location additions, which were over 60% higher than a year ago organically and over 90% higher in total. We saw some of the lowest churn rates we have ever seen in the quarter, and a number of customers come back after pausing or shutting down operations during lockdowns. Combination of this improved churn with record new location additions led to the healthy growth in customer locations we reported today. But we're even more encouraged by the volumes driven by our customers. We're optimistic that as economies reopened, our customers would be beneficiaries, and we saw that happen this quarter. GTV was an outstanding $16.3 billion, up from $10.8 billion just last quarter, and was 203% higher than a year ago. On an organic basis, GTV grew over 90% from last year's depressed levels. We're thrilled to see our customers and the communities they serve come back to life. Within GTV, our omni-channel retailers continue to do really well with 64% organic growth in that segment. We saw more business shift back to physical in the quarter, with the portion of our retail GTV driven through physical locations growing three times faster than online. As mentioned, hospitality roared back to life as economies reopened. Organic growth in GTV was 164% in the quarter and was up 380% overall. This wonderful performance by our customers translated into our payments revenue performing well above our plans. Volume increases with expanding payments availability around the world and strong ongoing customer demand led to overall transaction-based revenue growing more than 450% year over year. Really encouraged to see all this come together for our customers and for Lightspeed. All told then, we reported $115.9 million of revenue, up 220% over last year and well ahead of our guidance of $90 to $94 million. Excluding acquisitions completed in the last 12 months, revenue grew by 81%. Subscription and transaction-based revenue was 92% of our total revenue at $106.4 million and grew by 218%. On an organic basis, software and payments grew 78% year over year. As mentioned earlier, this growth was fueled by transaction revenue, which was $56.4 million, up from $10.2 a year ago. Gross profit grew by 154% in the quarter, with overall gross margins of 50%. The growth in gross profit was driven by higher ARPU, which grew 44% over $230 in the quarter, up from $160 a year ago. The decline in gross margin year over year reflects the growing impact of our payments business and lower hardware margins achieved this year due to various incentives we extended to our customers to encourage adoption of our solutions as economies reopen. Adjusted EBITDA loss for the quarter was $6.0 million, ahead of our guidance of approximately $10 million, and represented 5% of our revenue. This has improved from prior year levels and continues to exhibit the leverage we see in the business model as more and more of our customers grow their business with light speed and adopt more of our solution footprint. And finally, adjusted EPS loss was $0.05 in the quarter. All told, some outstanding results reported today that we're really encouraged by. We will remain conservative in our near-term view as we are seeing some pockets of challenge as the Delta variant forces some countries back into lockdown. These results today reaffirm to us that the long-term outlook is in good order, and I'll share some thoughts on that there shortly. On the back of today's results, we're updating our guidance for the full year and introducing Q2's outlook. For the second quarter, we expect revenue in the range of $120 to $124 million, with adjusted EBITDA loss in the range of $12 million. These numbers incorporate some caution around ongoing or reinstated lockdowns and reflect a full quarter of new orders operations. As is often the case as we absorb newly acquired companies, they come with a near-term increase in EBITDA loss until we integrate more fully, and this is incorporated into the near-term outlook we have provided here. For the year, with the assumption that we closed the equity acquisition on or about October 1st, we now expect between $510 and $530 million of revenue and an EBITDA loss in the range of $35 million. This EBITDA loss would represent approximately 6% to 7% of revenue guidance and has improved from 10% last year and 18% two years ago. As we look beyond fiscal 22, we're encouraged by the progress we're making, the macro trends we are seeing, and our improving market position. You'll see in our investor deck posted on our investor relations website that we've provided our preliminary views on a longer-term operating model. We believe we are well-positioned to continue increasing our market share and As the Lightspeed brand continues to gain prominence, given our best-in-class solution suite and rapid adoption of cloud-based solutions. We further believe that we will be able to grow our software ARPU for new and existing customers as our customers adopt more of our solution footprint and we introduce new functionality to our customers. We also believe that payments penetration will continue at the pace we are seeing today, such that 50% penetration of our payment solutions into our customer base is achievable in the foreseeable future, which should continue to contribute to the strong organic growth rates over this period. As a reminder, our payment solutions result in higher contribution margin when sold to our customers that are already using our cloud-based solutions. As our payments penetration increases, we expect more revenue per customer to contribute to our bottom line profitability. So as these business dynamics occur, we believe it will support strong operating leverage and drive profitability. To that point, over the long term, we anticipate expanding our software gross margins and expect a decline in operating expenses as a percentage of revenue. And we're already seeing that happening in our results now. We further expect our increased scale over this period will allow us to realize better economics for our payment solutions and capture a greater opportunity within financial services for our customers and their suppliers more broadly. Consequently, this should help drive our overall EBITDA margins, and we believe that 20% margins are achievable over time. While we expect to remain active in M&A, we have not factored any new M&A opportunities into this outlook and what their impact could be. With that, we'd like to open it up for questions. Operator?