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spk11: Good morning. My name is Angela and I'll be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's 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. I would now like to introduce Gus Papagorgiou. I do apologize for your name. You may now begin your conference.
spk12: Thank you, Operator, and good morning, everyone. Welcome to Lightspeed's fiscal Q1 2023 conference call. Joining me today are J.P. Chauvet, Lightspeed's Chief Executive Officer, Brandon Nussie, Lightspeed's Chief Operating Officer, and Asha Bhakshani, our Chief Financial Officer. After prepared remarks, we will open it up for your questions. We will make forward-looking statements in 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 2023 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-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 on the SEC's EDGAR system. 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 JP, I would like to remind everyone that we will be hosting a webcast on our new flagship retail offering, Lightspeed Retail, scheduled on August 30th at 2 p.m. Eastern Standard Time. Please go to our IR website to register. With that, I will now turn the call over to JP.
spk03: Thank you, Gus, and welcome, everyone. Thank you for joining us this morning. Lightspeed reported another strong quarter today, our 14th as a public company, delivering revenues of $174 million, which was ahead of our previously established outlook of $165 to $170 million. Overall revenue grew 50% and GTV grew by 36%. Revenues were strong this quarter as the return to in-person shopping and dining drove demand for omnichannel solutions. We continue to see success in our target markets of complex SMBs, especially among higher GTV customers. And thanks to our strong travel market, Our European region, which is heavily slanted towards hospitality, also had a strong quarter. We saw GTV of EMEA growing faster than any other region. In hospitality, we signed several multi-location and marquee customers, including Panos, one of the leading bakery groups in Belgium, with 100 locations, which will adopt Lightspeed's flagship restaurant platform. The Parker Palm Springs in Palm Springs, California, one of the premier independent luxury hotels in North America, which will adopt Lightspeed's flagship restaurant platform with payments, and the Holland Group in Covington, Kentucky, secured using our outbound sales force, which will use a host of Lightspeed's offering in their five locations, including payments. In retail, we were happy to find the following customers. Kaloa Ranch in Hawaii, where many of the Jurassic Park movies were filmed, they will adopt our retail offering in addition to e-commerce, analytics, and payments. Longstanding Lightspeed Footwear customer, The One, will be adopting Lightspeed payments across their 40 locations in Australia. And within Lightspeed B2B, we were happy to add a world-renowned luxury brand, Michael Kors. We were also very encouraged by the reception of our new flagship product this quarter. I believe we have the most compelling products in the market, particularly for our target customer base. Lightspeed Retail and Lightspeed Restaurant are the result of thoughtful integration of some of the leading solutions in the market built by developers with extensive experience in hospitality and retail software. Lightspeed Retail and Lightspeed Restaurant are both modern, modular software platforms with advanced APIs which allow for expanded features that can either be developed internally or through our development partners. Our new products are fast, stable, and easy to use, and I believe this is why we are seeing strong reception from our end customers. I recognize that, like ourselves, many of you are concerned over the macroeconomic environment. As you'll have noticed from our press release and as Asha will outline in greater detail, we continue to be confident in the annual outlook which we provided at our earnings goal last quarter. We are not immune to macroeconomic conditions and are not downplaying the risks. However, I believe it's important to emphasize that the return to in-person shopping and dining are positive influences for Lightspeed that should at least partially help to offset any challenging macroeconomic conditions. With an increased focus on execution, and because of the various growth levers at our disposal, we believe Lightspeed can maintain strong growth through challenging conditions. Even in the scenario of an economic downturn, our approach to market does not change. We will remain focused on adding higher GTV locations of complex SMBs that can take full advantage of our comprehensive software platform and adopt payments. These customers generally deliver higher ARPU, lower churn, and superior lifetime value. And in addition, they're in a much better position to weather any economic downturn. I will also remind investors that the proportion of our GTV that is going through payments remains in the low double-digit range. With payments today available to the majority of our customer locations, our focus is to get as many of these locations onto our payment solution as possible. Brandon will discuss this shortly. In addition to executing our payments opportunity, I believe Lightspeed is benefiting from two other strong trends in the industry, which is currently dominated by legacy systems. The first is that merchants are turning to technology to help them do more with less. With supply chain issues and labor shortages causing disruptions in every industry, Lightspeed's technology can help merchants automate and simplify their operations, better manage their inventory, and improve their profitability. Lightspeed can help merchants and their employees become more productive so they can better serve their customers and drive growth for their businesses. The second is that we believe merchants are increasingly looking for a one-stop shop for all of their needs. And this will likely become more important if economic conditions deteriorate. If merchants are relying on separate vendors for their POS, e-commerce and payment solution as an example, they can create unnecessary complexity in their operations lose valuable insights because of siloed data, generate extra work to reconcile these disparate systems, and can end up paying more for them. Lightspeed can deliver a comprehensive platform where the shared data can deliver valuable insights, remove the need for manual reconciliation of these systems, simplify operations, and generally do so for a lower price. We are increasingly seeing both new and existing customers come to us for this reason, and again, I believe this is part of the reason we are experiencing solid demand for our software solutions. I will now pass it over to Brandon to take us through some operating highlights. Asha will then take us through the financials and outlook, and I'll wrap it up before we go into Q&A.
spk17: Thanks, JP. I'll speak briefly about some of our main operational focuses as we look to see progress on our core drivers continue. As you heard from JP, we remain cautious on where our customers' GTV heads from here, given the backdrop, and have set our plans with this cautiousness in mind. With that said, our focus is on the things we can control, and one of the biggest opportunities we have is to drive payments adoption. Payments continues to trend well for us, with our GPV in the quarter at $3.3 billion, almost doubling year over year. But with over $22 billion of GTV across our business in the quarter, we have plenty of opportunity still ahead. We've made good progress in making our payment solutions available to the vast majority of our customer base outside of Ecwid. And with that in place, we're now doubling down on our efforts to drive payments uptake across our install base, along with as many new customers globally as possible. We have a number of strategies in place to achieve this that incorporate incentives for customers, adjustments to our selling and onboarding processes, and ongoing support from our partners in this space. The timing is right here. With uncertainty looming for our customers, having payments and POS together in a streamlined workflow becomes more compelling to them, helping them to save time and money and freeing them up to focus elsewhere. With ongoing good execution on this opportunity, We believe it will help serve to offset any weakness that may lie ahead within our customers' volumes and aggregate should they face a toughening macro economy. We also remain focused on growing our share of this significant market opportunity. With 166,000 customer locations, excluding standalone e-commerce customers brought on through the equity acquisition, we believe we have substantial opportunities still ahead. And as we've said before, our main focus is on finding and winning the customers with the best long-term value for us. That means more established customers that are less susceptible to churn, that drive good GTV volumes, and that eventually will play an important role in our networked supplier strategy. The customers highlighted by JP earlier are good examples of this. This quarter, we added approximately 3,000 net customer locations as we continue to target these customers that meet our desired profile. We saw our overall churn remain in line with our historical trends. However, I want to provide some further context to this number as we integrate our various acquisitions and get closer to having a single flagship product for both retail and hospitality. With some of our acquisitions, we inherited a base of customer locations that are not representative of our desired profile. Examples of these are customers that have been sold through white label OEM relationships where we will not be able to monetize the GTV, customers in non-core verticals such as concession stands, convenience stores, and food trucks, or customers using a small standalone product with little opportunity for upsell. These customers typically have a lower ARPU than our average, have lower GTV, and do not represent a compelling fit for our supplier strategy. Moving customer locations acquired through ECWID, we estimate that between 1,000 to 2,000 customer locations are churning per quarter in these categories, and we estimate that we have up to 10,000 more that we expect will continue to churn over the next six to eight quarters. This category of churn is incorporated into our plans, and despite this, we expect we will continue to grow our customer location base at healthy levels given the opportunity that lies ahead. provide this context to be helpful for those who are tracking our overall customer location stat and our related progress on that. And finally, with respect to our acquisitions, I'll speak quickly to our progress on our integration efforts. Our primary focus to date has been on integrating the underlying technology and ensuring a seamless go-to-market effort with the acquired resources. We're pleased with our progress here. Our flagship products are now on market for both retail and hospitality. in most of our markets around the world. With that now largely complete, we can finalize our brand transitions, which is important to ensuring we are getting the maximum benefit of our increased scale. This effort, internally called one light speed, is expected to be complete by the end of this calendar year. Other integration efforts we are focused on relate to internal systems, production environments, and customer support centers. We're tracking well on these thus far as well. And lastly, one of the primary benefits from our acquisitions has been the addition of some of the industry's most talented people. With the integration of these teams and the broader light speed now largely complete, we're seeing the output of this effort in our product velocity and on delivering value to customers. These synergies are important as we continue on our path to profitability, will allow us to redeploy resources into areas of growth and innovation while keeping our overall costs in check. I'll pass it over to Asha now to take you through the quarter's numbers and our outlook.
spk01: Thanks, Brandon. It was another strong quarter from the business. Our omni-channel balance has proven to be well-positioned to accommodate the ongoing shift from e-commerce to in-store, and our hospitality presence is benefiting from the rebound in restaurant spend globally. As you heard from JP, we were able to deliver $173.9 million in revenue, ahead of our outlook of $165 to $170 million, with subscription and transaction-based revenue up 38% from last year on an organic basis, and total revenue up 50% overall. First, I'd like to address a few observations about what we saw in the quarter, both positive and negative. Then, I'll get into the financial performance for the quarter, including a discussion around our key metrics. Finally, I will end with our outlook for our Q2 fiscal 2023 and for the full fiscal year ahead. The first observation is that the diversity of our business continues to serve us well. And by this, I mean our diversity in vertical geographies and revenue streams. Our expanded payments availability in both the EMEA region and for hospitality customers helped boost overall growth this quarter, whereas in previous quarters, we were more reliant on retail customers and primarily in the North American region. We expect to continue to diversify our revenue base by putting more of our customers on payments, by expanding our international retail customer base through our new Lightspeed retail offering, and by further increasing our North American hospitality presence through our new flagship hospitality offering. We continue to benefit from multiple growth levers, growing our revenue through the combination of location and output growth, and expanding our payments and financial solutions Across the almost $80 billion of GTV, our customers collectively processed in the trailing 12 months. As you have seen by now, we do not need all levers to be hitting concurrently, and the opportunity for each remains compelling. Secondly, I would like to discuss the trends we are seeing in GTV. For the quarter, we saw GTV grow organically by 25% and 36% overall, with hospitality showing stronger growth than retail. and EMEA showing the highest GTV growth of any region. In the quarter, our customers processed over 22 billion of GTV. Within retail, we are seeing some of the end market growth decelerate. For the most part, it appears as though the sectors that benefited during COVID, such as bike and home and garden, are seeing lower growth, while end markets, such as apparel and footwear, that generally saw more challenging conditions under COVID, are performing better. We also believe that factors such as rising interest rates and persistent inflation are impacting retail more than hospitality as consumers prioritize spending in areas such as travel and entertainment. Despite this, overall retail GTV still grew 15% organically and 32% in total. Hospitality GTV more than offset this as consumers resumed spending on travel and dining out across the globe. Hospitality GTV grew 40% in the quarter organically. And although we saw a particularly strong uptick in Europe, hospitality GTV remained at healthy levels in all regions. We remain cautious in terms of GTV growth as we believe rising interest rates and higher inflation will impact our end markets. But as Brandon mentioned, increasing our payments adoption, which is largely under our control, can offset any challenges we face in GTV growth. Finally, I will note that this quarter's results, in which we reported 38% organic growth in subscription and transaction-based revenues, now fully lap our easier comparative periods that were heavily impacted by COVID, as well as all of our acquisitions except for new order and equity, illustrating the business's ability to deliver strong organic growth while integrating our acquisitions. Going deeper into our results reported today, Overall revenue for Q1 was $173.9 million, ahead of guidance of $165 to $170 million. Subscription and transaction-based revenues for Q1 was $165.1 million, representing 95% of total revenue and growing 38% organically over a year ago. Gross profit dollars grew by 35% in Q1 from the same period a year ago. As a percentage of revenues, Gross margin for Q1 was 45% as compared to 50% last year, owing to a greater portion of our revenue now coming by way of our payment solutions, which carry a lower gross margin but provide us important incremental gross profit dollars per customer location. Our gross margin percent was impacted by increased hardware subsidies in the quarter, which we are addressing and which we expect to taper down to more normal levels through the rest of the year. Adjusted EBITDA loss was $15.6 million, in line with our outlook of $16 million. This loss was higher than a year ago, reflecting the impact of the adjusted EBITDA losses from our recent acquisitions and includes costs associated with our annual sales, customer and partner summit, which we moved to a virtual format during COVID and which we brought back to in-person this year. Turning to some of our additional business indicators, customer location, excluding those standalone e-commerce customers brought on through the Ecwid acquisition, grew to approximately $166,000 from $163,000 a quarter earlier. These customer locations provided ARPU of approximately $320 per location, which is up from $230 a year ago. Subscription-only ARPU was $136, up from approximately $113 a year earlier. Both of these exclude the Equid Standalone Ecom customer base, which carries a significantly lower ARPU. As you heard from Brandon, net location ads were impacted by the turn in our non-core customer categories, and given our continued focus on the type of customers we onboard, we are pleased with the quality of customers we have successfully added this quarter. Looking at our payments, gross payment volume was 3.3 billion, up 96% from last year, and up 48% from our Q4. Although our Q4 is historically our seasonally slowest quarter for processing volumes, and this sequential increase was expected, the fact that we were also up 47% from Q3 of our fiscal 22, which is historically our seasonally best quarter, is actually a very positive sign of progress overall. Our cash position in the quarter declined to $915 million from approximately $954 million in March. This was a result of operating losses in the quarter, certain working capital movements, and an increase in cash advances deployed for Lightspeed Capital. Subsequent to the quarter end, we've paid off the $30 million of debt arising from the loan drawdown made in connection with the acquisition of Gastropix in January 2020. I view our strong balance sheet as a source of strength in the current environment and will continue to ensure we remain in a strong cash position. As we look forward to the remainder of fiscal 2023, although we remain optimistic on the things under our control, we believe there are several reasons for caution given the trends we're seeing in consumer spend, inflation, foreign exchange exposure, and the overall macroeconomic backdrop. While impossible to predict the severity of any recession, we have stress tested our forecasts based on various economic outcomes. And while we do expect inflation and continued softness in consumer spend, will continue for the rest of the year. Given our multiple growth levers, the diversity of our customer base, and the payments opportunity ahead of us, we are confident in our ability to meet our previously established revenue outlook. In addition, we continue to focus on finding efficiencies across the business through continuous integration of previously acquired businesses, as Brandon mentioned, and we continue to remain disciplined and intentional on operating expenditures, reducing spend in lower priority areas. For Q2, we expect to achieve revenue in the range of $178 million to $183 million and adjusted EBITDA loss of approximately $10 million. For the full fiscal 2023 year, we maintain our previously established outlook on revenues at $740 to $760 million and adjusted EBITDA loss of approximately $35 to $40 million, or 5% of revenue at the mid-range of our guidance, which has improved from 8% last year. we remain committed to adjusted EBITDA profitability in our next fiscal year. As a reminder regarding this outlook, we expect seasonality to continue to have an impact on both our revenue as well as our adjusted EBITDA performance, whereby Q3 will be our seasonally strongest quarter and Q4 our seasonally weakest quarter. Furthermore, as we continue to realize ongoing synergies, we plan to reinvest in core areas of the business, allowing us to invest in growth areas while improving EBITDA performance throughout the upcoming year. We believe our balanced approach to growth and profitability is the right one, given the opportunity we see ahead, the strength of our balance sheet, and our desire to run a disciplined long-term business. With that, I'll hand it over to JP for closing remarks.
spk02: Thanks, Sasha.
spk03: There is no question that the economic outlook has grown more pessimistic in the last few months. And again, I do not want to downplay the situation, but we believe Lightspeed will continue to perform despite these challenges. Our new flagship offering, Lightspeed Retail and Lightspeed Restaurant, are the best products we've ever delivered and I believe the best in the industry. Lightspeed Payments is now available to most of our customer base and our go-to-market teams are more experienced than ever in selling that offer. And finally, what I cannot emphasize enough is that we believe the return to in-person shopping and dining is by far the biggest macro influence on this company's success And here, I'm very encouraged of what we are seeing. Before we go into the Q&A session, I want to take a moment to recognize all of the employees at Lightspeed and the incredible job they're doing. In the last two years, we were able to digest five acquisitions, launch two new flagship products, roll out payments globally, and continue to deliver strong growth throughout. It's because of them that I remain confident in our ability to execute and optimistic in our prospects.
spk02: And with that, we will take your questions.
spk11: At this time, I would like to remind everyone in order to ask questions, please press star then the number one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. We will now take our first question from Dan Perlin with RBC Capital Markets. Your line is now open.
spk04: Thanks. Good morning, everyone. I just wanted to drill down a little bit on your commentary around payments really driving the offset potentially of clients' weekends. You talk about doubling down to drive that opportunity, and you talk about incentives for those customers and easier onboarding. I'm wondering if you could go into a little more detail in terms of what that means from an incentive base, what you're doing specifically, and is this a function of going back into your existing book and getting clients, or are you just finding that there's more success as you bring on new clients?
spk17: Hey Dan, it's Brandon here. Yeah. You know, we've given the macro backdrop, of course, you know, we're, we're, we're cautious on where customer volumes go from here. So that creates a lot of focus internally on the things we can do that are under our control to make sure we offset that. So we've done a number of things of just, you know, areas of focus around making sure that right from the upfront selling process that we We've got the right incentives. We've tried a few things for our customers. We've tried a few things for how to make sure we incentivize the sales team, all the way through to how do we make sure that customers get live more quickly. We've seen in the quarter that we made good headway. Some of these early initiatives have borne fruit already. That's what gives us confidence as we go through the rest of the year, that those will have a cumulative effect and
spk04: and uh helped offset any any uh you know macro weakness that we see uh across the industry no that's great definitely saw in the quarter i'm wondering um just as a follow-up if you have um or you'd be willing to share kind of any kind of recent trends that you you saw in particular through um you know through july and anything that you would be able to indicate in terms of you have a bit of a cautious outlook on the consumer. I'm just wondering, are you actually seeing that materialize through July? And are you maybe seeing hospitality accelerate? Thank you.
spk17: Yeah, important to remember that our mix of customers, we started talking about some of the consumer spending shift happening last quarter. So on our last quarter call, we started to see consumer spending shift at a certain retail categories level. into other categories like hospitality and so on. That continued into Q1, as you heard from Asha earlier. July, we've actually not seen anything any different, really. If anything, July looks a little more stable from some of the trends we've seen in those retail categories previously. Yeah, that's just important as we think about our customer base. A lot of what everybody's worried about in the macro on the retail side, we've actually been dealing with that for a few months now.
spk02: Okay. Thank you so much. Appreciate it.
spk11: Next, we have Andrew Jeffrey with Truist Securities. Please go ahead.
spk13: Hi. Good morning. I appreciate you taking the questions. I wanted to ask a little bit about, Brandon, appreciate the color on the customer focus. One of the things that I think about in this industry, given the competition and the way that Lightspeed continues to try to differentiate itself, is what the TAM can be. And it's certainly a huge market, especially given your international footprint. Can you just maybe frame it up in the context of the customers you're going after, which seem to be more and more specific, which makes sense to me, but I'm just wondering, some of the questions we get is around the TAM, given your very focused customer profile.
spk03: Good morning, I'll maybe take this one. So we've shared a number of times the TAM, and so our view of the TAM, there's roughly 46 million retailers and restaurateurs on the planet. and as you know, we're focused on the more established ones, the ones that have higher GMV, and our direct addressable TAM, if you look at the industries where we operate, is about 6 million. So there's a lot of room to grow, and I think the good news about this addressable TAM is that when you get a customer, you basically get them forever, and they are not prone to churn because there's much limited business failure. So a very large TAM, and I've said that a number of times, but the majority of the market is on legacy systems. It's very simple. Look at streets around the world and you look at the businesses in those streets. The vast majority are still on legacy systems. And I think that's the beauty of what we have to offer today, especially in the post-COVID world. The restaurateurs and retailers are focusing again on technology for in-store, but they still have at the back of their minds Oh, there is also the omni-channel world. And I think that's where we fit perfectly is workflows that bridge online and offline. And in the segment where we operate, there are not a lot of companies that have the capabilities that we have. And I would argue that the latest products that we released are more competitive than they've ever been. And I think they're very much aligned with what the market needs today.
spk13: Okay, so no change in your TAM or no modification based on this, you know, very kind of focused customer profile, it sounds like.
spk03: No, no, absolutely. You know, we know our strategy. We know, you know, the segment we want to own, and we're doubling down on that and attracting the right profile of customers.
spk13: Okay, and then also just sort of a corollary, one of the things that I think Lightspeed has talked about in the past is the ability to accelerate growth of acquired businesses. And it sounds like because of the nature of some of the customers in the companies you've acquired in the last year and a half, maybe the churn is higher in those businesses than it might have been in past acquisitions. Can you just talk about maybe a same-store sales metric or something for those merchants that you keep from acquired businesses? Just some sense of how those their shopkeep, upserv, et cetera, businesses are doing after you've bought them and have integrated them?
spk03: Yeah, so that's where you have the growth ads and the net ads and how we're presenting that ad. If you look at the reality of the business, and Brandon shared a little bit of color on that, we basically have customers that are core to what we do, but every time we do an acquisition, They come with a fair share of customers that are not valuable to us. And I'll give you a few, you know, Gastropix in Germany came with a lot of very nice customers that are in line, but they came also with a number of customers that we were not interested in, tiny retailers. Same thing happened with Venn. Of course, the majority of the customers were in line with what we needed to do, but they all come. So I think every one of them came with a segment that we were not interested in. And that's where we see the highest churn within the company. And it's good for us because, again, we want to double down on the segment that's really interesting to us, like grocery stores or this is not interesting to our business. And so we're going to let them churn. And that's why what you're going to see is you're going to see heightened churn in the segments that are not interesting to us from the acquisition. And then you'll see us really double down on the customers that are very strong to us. So if you look at churn, I mean, churn is very much in line with what we had expected, a fairly good level. But within that churn, if you look at the customers that are interesting to us, the churn is much lower.
spk02: And when you look at the churn of the segments that are not interesting to us, they're much higher. Appreciate the color. Thank you.
spk11: Your next question comes from Josh Beck with KeyBank. Your line is open.
spk16: Yeah, thank you for taking the question. One thing I wanted to ask about was the pace of penetration and payments. It seems like sequentially it was one of the bigger jumps that we've seen. So anything to read back into that, maybe with respect to the impact of the flagship platforms or other, just curious if there's any call-outs there.
spk17: Yep. So we talked a little bit, Josh, about some of the things that we've been doing that are under our control. And that meant sort of, you know, focusing on top end of the funnel to make sure we attach well. Flagship products in retail and hospital, we see really strong attach rates there. You're seeing that show up in our landed ARPU or our new store ARPU. And then, you know, all the way through to our aggregate ARPU as well. We've also, you know, we just have this tremendous opportunity inside our existing base of customers, and we've taken on a number of initiatives to bring focus to how we convert those, how we do it quickly, and how we make sure they get transactional quickly as well. So, yeah, some good progress in the quarter on that. Obviously, a lot more to do, but I'm pretty pleased with the early outcomes on some of those initiatives for us.
spk02: Maybe, Brendan, do you mind if I add a comment here?
spk03: You know, we recently launched Europe and Australia on payments, and there's always a delay between the moment you start selling well and then you control the whole flow of customers. So I think here what you're seeing is a result of just the company globally selling and onboarding and processing and delivering payments at the right pace.
spk02: And so I think that for us, that's why we're very encouraged by the progress here. That makes a lot of sense.
spk16: And then I also wanted to follow up on the organic growth. I believe it was 38%. Obviously, that's right towards the middle of your longer-term model. I think in the quarter, I think it was around 11% location growth, so that would imply a little bit better than mid-20s growth on the ARPU side. Is that the right algorithm for us to think about. I don't really expect the guidance, but just kind of curious on how we should be framing that up moving forward.
spk01: Hey, Josh. Yeah, totally. That is the right way to look at it. We've committed to 35% to 40% organic growth in the year. And given the payments initiatives that both Brandon and JP talked about that we've launched and we see continued success so far, we are confident in that annual 35 to 40% guidance. And that 38%, you know, is right in the middle of that. One thing that we should be wary of or we want to remind the public of is we had a very strong Q1 last year. We had an exceptional quarter last year, you know, with strong uptick for the verticals where light speed is strong. And despite that, we were able to grow 30%, 38% year over year on an organic basis. So,
spk00: that's definitely the right way to look at it.
spk02: Thank you. Thank you.
spk11: Next question comes from Andrew Botch with SMBC, NECO Securities. Please go ahead.
spk08: Hey. Hey, good morning, guys, and thanks for taking the question. Just wanted to touch upon the B2B network and some of the early feedback that you're hearing from clients. And Thinking about this in the full context of the years, can we consider any contributions from that in the full year guide? Or when does that, you guys anticipated to kind of start gaining more traction?
spk03: Yeah, good morning. So I'll maybe address this one. So as we said, when we did our forecast this year and for next year, by the way, we are not expecting a lot of revenues from the B2B network. The B2B network for us is a, is an investment where what we're expecting to see is, again, a much more competitive platform, if you will. And what we're expecting is that over time, we're going to start building revenue. So here, just being very clear on the launch, what we did for now is we've integrated New Order into the Lightspeed platform. And now for the luxury brands that are on New Order, we enable anybody to do an integrated ordering from the storefront, which is pretty game-changing. We enable the stores also now to have an automated descriptions and videos and pictures of the items they order instead of doing it manually. And then on the flip side of that, what we're doing now is we're enabling the brands to access sell-through on a consolidated basis for small businesses. So what we're enabling them to do basically is to sell through an SMB network have the same level of feedback as if they were selling directly to consumers so that's the first step for us and this is really now for now focused on the key brands within new order and and we decided to take that approach so that we can learn and we can iterate and we can we can create value and what we're seeing so far is that there's a ton of value for the for the store owner because for them it just saves them time and it makes the automated view and the real value for the brand is the sell-through now for us this is a step one but then as we go forward in this year and you'll hear more about other verticals we want to deploy verticals that are strong to light speed not just luxury brands but we want to try and deploy outdoors and sports and do some service repair so we are right now building the plans now that we have the plumbing that's done we have the first few customers that are using it and we have the feedback we're now going to start building a plan on what verticals we tackle when and you can hear more from us in the next quarters where we'll be progressing there. But again, being very clear, we are not expecting anything. This is an investment zone for us and within horizon of probably 24 months before we start seeing some material revenues. But we think it's game changing because if we do this right, we are gonna solve a really big problem for our customers.
spk08: Yeah, absolutely. And could definitely be a solution that drives more stickiness in the platform. I know it's a really small piece of the business right now, but the $9.4 million in cash advances up 49% quarter over quarter. Where do you guys see that going over the next year as your base may need additional working capital to kind of keep things afloat in uncertain times?
spk02: Yep, that's an important question.
spk17: Part of the portfolio for us, we've had great success there. We get wonderful feedback from our merchants. It helps make the whole platform more sticky. We've seen solid evidence of that. So far, our loss ratios have been very, very low, reflecting the more established customer base that we've launched this into. So we're going to keep growing this. We expect it to continue to grow at a very healthy clip. But still, of course, be mindful of running this part of the business quite prudently.
spk08: Of course. Thank you for the detailed answers.
spk11: Your next question from Richard Say with National Bank Financial. Your line is open.
spk18: Yes, thank you. With respect to the payments over the next, call it 12 to 24 months, do you expect it to continue increasing at the same pace or actually accelerate given the number of initiatives they have underway now?
spk17: The things that we can control, Richard, we expect to accelerate. The macro economy and what that means for baseline volumes inside our customer base, that's tough to predict. You heard from Asha that we're taking a pretty cautious view of how that looks through the rest of the year. But on the things that we can control in terms of the number of new customers that we onboard, the amount of our existing base that we convert, we're confident that we'll see that continue to accelerate.
spk18: Okay. And then from a competitive landscape perspective, obviously, you're becoming much bigger. How is that sort of... kind of changed, I guess, the profile of your business, meaning, you know, has your pipeline increased notably in the win rates and how the competition has responded?
spk03: Yes, I'll take that one. Look, as you know, we have this strategy to one product. So one product in retail, one product in hospitality. We've now launched, you know, most products, but now we're tackling the biggest market for us, which is the U.S. And so if you look at our retail platform, We are launching this in the US. We launched a few verticals. And what I can tell you is the verticals that we launched are doing extremely well. We see better close rates. We see higher ARPU. We see better attachment payments. And that's obviously because we've mingled the core software and the core payments very well in the new platforms. So I think for me, the way we look at this is we've never been more competitive with the products. The gap between us and our competitors has broadened, and we see better close rates on the new products when we launched it.
spk18: Okay, just lost a quick one here. You're still talking about breakeven EBITDA next year. Where is most of that sort of operating leverage going to come from when it comes to the OPEX line?
spk01: Hey, thanks. Thanks, Richard. Most of that operating leverage really comes from the integration of our different acquisitions that we've made over the past few years. As you've heard from us, we're being very rigorous and disciplined in our spend, but at the same time, we have so much opportunity as we integrate all the different companies that we've bought over the last two years. Integration leverage comes from not only teams and integrating our people, but also from contracts. When you think about things like AWS and Google Cloud infrastructure contracts where all of these companies had their own separate contracts. As we consolidate those and we get volume, you know, we get more volume, we get much better rates. And so as we continue those integration efforts, we're starting to see more and more of that operating leverage.
spk02: Perfect. Thanks for the color.
spk11: Next up, we have Daniel Chan with TD Securities. Please go ahead.
spk14: Hi, good morning. I just want to get some color on the full year guidance. The Q1 revenue came in above the high end of your expectations. So just wondering what you're thinking about for the rest of the year to keep it flat despite the Q1B.
spk01: Right. So, you know, thanks, Dan. We're obviously being cautious, you know, with respect to everything that's going on in the macro environment. And as you've heard from Brandon, there are things that we can control. which is how many customers we migrate on to our payments platforms, how quickly we get customers transactional. Those things that are under our control, we feel very good about. We have these initiatives that we've launched recently, and we're continuing to see success with those initiatives. However, things like retail spend from an average GTV perspective, things like hospitality spend, how inflation will impact consumer spending, these things are out of our control. And for those reasons, we want to make sure that
spk00: you know, we're cautious in our guidance and that we put guidance out there that we're very comfortable in achieving.
spk02: That's helpful. Thank you.
spk14: And I appreciate the color you guys gave around what you're seeing with consumer spending and your caution around there. Any color on the willingness of merchants to adopt or invest in new technologies given the macro uncertainty? Just any change in KPIs you can share with us, such as inbounds, conversion rates, et cetera, would be helpful. Thank you.
spk03: Yeah, so I think for me, it's very simple. As we go into a recession, potentially, we have scarcity of hiring people. The vendors basically need platforms that can do more with less. And so I think there's, That's exactly what Lightspeed is about, doing more with less. So I think here what we're seeing is we're seeing demands for platforms really strong like ours. The second thing we see is that vendors want to consolidate onto one. So you might have vendors that have an e-comm and then have Lightspeed and maybe have a payments provider and then they might have a loyalty provider. What happens when there's a recession, you normally try and and bundle more platforms with one vendor at a lower cost of acquisition. And again, here, we're very aggressive on bundling and proposing discounts based on bundles so that people buy the platform. So I think for me, and as we said, we're cautious, but there's a lot of green fields and there's a lot of people who need platforms like ours.
spk10: Thank you.
spk11: Quick reminder, if you would like to ask a question, please press star one on your telephone keypad. Next question comes from Thanos Moschalopoulos, if you'll apologize, from BMO Capital Markets. Please go ahead.
spk07: Hi, good morning. Can you speak to the headwind you're seeing from FX? You obviously have significant European exposure, so have you been implementing any pricing adjustments in some of the geographies to offset FX? Or is it more the fact you've got other levers like Bain and Tramp and module add-ons that have been offsetting that?
spk01: Hey, Thanos, thanks for the question. So FX for us, you know, at the end of the day, a strengthening USD is great for Lightspeed, just from the fact that the majority of our revenues are in USD, whereas the majority of our operating expenditures are in currencies outside the USD, such as the Canadian dollar and the euro. So overall, strengthening USD is helpful for light speed. Of course, to your point, there's an impact on the revenue line, but we need to keep in mind that the majority of our revenues are still U.S. dollar denominated. And so given that fact, the strengthening USD against other currencies cause 1% to 2% impact on our revenue overall. So really not a huge deal for us at this time.
spk07: Great. And then for JP, you've talked before about your push into the U.S. hospitality market on the back of the new hospitality platform and building out an in-person sales presence. So maybe just update us in terms of where you are in building out the local sales teams and whether the macro backdrop has influenced your plans and timing because of those investments at this point or not.
spk03: Yeah, so as we mentioned last time, we were trying with salespeople with food on the ground. And so we started that initiative, a couple of handfuls of salespeople. And I'm happy to report that the actual LTV over CAC is better with the outbound for the profile of customers we're going after. So we have decided to double down on that. So we are now going to move the needle and double the size of the team. and continue pushing on that front. So we're adjusting the model. For now, we're happy with what we see, and we're seeing better unit economics on our own outbound than when we do performance marketing.
spk02: Great. I'll pass the line. Thanks.
spk11: Next, we have Josh Baer with Morgan Stanley. Please go ahead.
spk15: Great. Thank you. Just wanted to ask, on the one light speed that brand transitions, expected to be complete at the end of this year, are all those transitions going to the flagship platforms or also other legacy versions of Lightspeed?
spk03: Yeah, so I think, again, that goes back to, it kind of touches also on what Ash was saying on cost saving. So what we're doing here and synergies, we're bringing everybody to one flagship product and everybody's going to be brought to the Lightspeed brand. So as we're deploying the flagship products everywhere in the world, and we're getting them ready, we're porting the brand. So the next one you'll see is the UpServe brand in the US. Now that K-Series is out or our hospitality, what you're going to see in the next quarter is we're going to completely, you will not have UpServe anymore and everything is going to be under Lightspeed. And all of the salespeople are only going to sell the new Lightspeed platform. After that, the last step in this journey for us is to move to Australia and New Zealand, which we've already done now on the retail front. but for the hospitality. So yes, the short answer to your question is yes. As we go to one light speed, that also means going to one product for hospitality and one product for retail.
spk15: Okay, that's great. And then outside of the brand transitions, just like thinking about the total customer base, what percent of your total base is on the
spk03: know one product the flagship versions today and and where can that go by the end of the year yeah so i think we were very clear on the steps step one for us was was to get all go to market for new customers on one platform and then from that moment we will then focus our account management teams on building conversion utilities and getting the base onto onto the new platform and And here, I think there's enough new functionality and enough new features that we're going to see a natural progression of those customers moving over. We haven't shared any data for now on this, but this is going to be, I mean, top of our mind as soon as we have the one brand everywhere in the world.
spk02: Okay, thank you.
spk11: Your next question comes from Todd Coupland with CIBC. Your line is now open.
spk06: Great. Thanks, and good morning, everyone. We've seen quite a few tech layoffs and share price reductions impacting stock-based compensation. I'm just wondering how you guys are thinking about that macro headwind and how it's impacting your hiring plans, if you have any, if you can share them, and any issues around compensation with the share prices down. Thank you.
spk03: Yeah, so I'll address this one also, and Brandon and Asher, if you want to jump in. Look, for me, it's very simple. We are not a pure e-commerce or a pure digital company. The strength of Lightspeed, 90% of our GMB is physical retailers and restaurateurs. And so this return to the physical world is creating a lot of demand for us. We have a forecast that we are committed to hitting 35 to 40% growth this year. We are being cautious and the way we forecast it is a very cautious way. So we are confident we're going to hit our numbers. And for us to hit those numbers, it means that we need to continue hiring. We need to continue investing. We need to continue bringing people who can deliver to customers and deliver an incredible experience to our customers. So we're not in that mindset for now. We are more in the mindset of, hey, let's really focus on getting payments, getting more customers, ensuring that customers have a higher ARPU and delivering on the numbers we gave to the markets.
spk02: That's great.
spk06: And then as a follow-up, you performed really well in Europe in the quarter, citing hospitality and people traveling. As we think through this summer and these macro headwinds that you're talking about, some concerns on Europe, is there anything for us to think about for that region into the fall?
spk03: I think, again, for me, the answer here is light speed is well-balanced. You know, we work in retail and hospitality and golf. We work across all continents. And we've seen that even through COVID when one area was not doing well, the other one was doing well. Golf was not doing well. You know, hospital was doing well. And so I think for now, maybe the short answer is we're seeing a ton of demand in Europe for platforms like Lightspeed right now. We're seeing strong GMV in the hospitality front. And I mean, yeah, the growth rates are good and the demand is good. And what's really interesting is, you know, we launched now also our X series product, which is our retail product in the UK and some regions of Europe. And we're seeing a really strong demand there for the new platform. We think it's much more competitive than the previous one.
spk02: Great. Appreciate the call. Thanks a lot.
spk11: Next question comes from Tim Chiodo with Credit Suisse. Please go ahead.
spk09: Great. Thank you, everyone. Good morning. I just want to circle back real quick on the guidance and the FX impact. Asha, I completely appreciate that most of the gross revenues are more North America-based. I think when we go down to gross profit or net revenue, it still holds, but maybe to a lesser extent. Just with that context, could you maybe just give some context on what was the FX impact in in the original guidance for revenue for the year and what is the fx impact in the guidance today so just so we can get a sense of how much incremental fx impact that you're working in and still able to maintain the revenue guide uh hey tim thanks for the question um you know just like i mentioned earlier um on a net revenue basis you're right uh the the
spk01: Mechanics are slightly different, but overall, at the end of the day, the majority of our payments revenue is still coming by way of North America. So even though we are diversified, the majority of the net revenue is still U.S. dollar denominated. And so given that, when we look to our guide and we have factored in FX, it's really in a very small percent range, 1%, 2%, 3% range, not more than that.
spk09: Okay. All right. That's really helpful context. Thank you so much. And then my brief follow-up is I just want to confirm, I think the math suggests this is a yes, but if we were to back out the roughly, I think you said, 1,000 to 2,000 of incremental churn from some of the legacy, non-core, smaller, lower ARPU type of locations, that for the core business, let's call it ex-gastrofix, ex-shopkeep, that the location ads are roughly trending in sort of the mid-teens, maybe even slightly higher. Is that a fair characterization?
spk02: Yep. Okay. All right, great. Thank you so much.
spk11: Our last question comes from Clark Jeffries with Piper Sandler.
spk05: Please go ahead. Hello. Thank you for taking this question. One brief one for me. Has there been any change in the approach to integrated payment partners, the partners that you negotiated rev share agreements? As I try to foot light speed payments, GPV to typical take rates, Seems like there's a pivot happening there, but maybe you could help me out with any other dynamics playing out in the non-light speed transaction revenue.
spk17: No, nothing new there. I think you know our core partners, those remain the same, and all of the incremental business basically flows through to those core partners. We do have the legacy, call it referral line, uh from prior to our launch of lightspeed payments and of course that revenue line continues to decline and we expect that to continue so that might be what you're seeing is you know well while our overall payments and our overall gtv is growing uh we do have this um this declining line that's within that uh that overall transaction based revenue line and perhaps that's what you're seeing perfect and then if i could maybe squeeze one in and
spk05: You know, any update to how you're thinking about the approach and go-to-market in the macro environment? I know you were investing in direct or field sales initiatives as part of the flagship releases. You know, does that change in any way as you look to the rest of the year, or have you seen good kind of feedback or receptivity in those initiatives?
spk03: Yeah, I think the foot on the ground for us is only in the U.S., only for hospitality. And the reason why we're doing this is, of course, Toast, you know, and our competitors are doing that in the hospitality space. On the retail space, we're very happy with the model that we have. You know, I always said it's a very predictable model. We really understand all the economics very well. Close rates are very well monitored. So for us, it's almost, you know, I always say internally, it's like doing a soup. We know the ingredients. So if we want to grow more, It's a fairly simple step of getting more into marketing and generating more customers. But again, for us, the balance is important because we are seriously committed to making EBITDA break-even or profitable next year. And because our payback is more than 12 months, if we decide to grow too much on the new customer front, that'll generate losses within the first year. So we're trying to take the most balanced approach to getting the right profile of customers, but there's no change expected there in our go-to-market. And actually what we see, and we've seen actually in COVID, is in the context of recession or difficulties with our customers, they normally want to buy more than one product. So I think here we're geared towards bundled pricing, towards doing everything we can to associate payments to every product you know, to every new customer and to have, you know, kind of more of the previous telecom operator approach where the more packages you buy from Lightspeed will give you a, you know, a bundle discount. And I think that that should work well in the context of the potential recession.
spk02: Appreciate it. Thank you very much.
spk00: Thank you for your participation. This conference has concluded.
spk11: You may now disconnect.
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