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Lightspeed Commerce (LSPD) Q1 2023 Earnings Call Transcript | The Motley Fool

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Video Lightspeed earnings

trading at the speed of light (lspd -0.10%)q1 2023 earnings call Aug 04 2022 8:00 AM m. et

content:

  • prepared remarks
  • questions and answers
  • call participants

prepared remarks:

operator

Reading: Lightspeed earnings

good morning. my name is angela, and i will be your conference operator today. [operator instructions] now i would like to introduce gus papageorgiou. I apologize for your name.

You can now start your conference.

gus papageorgiou – director of investor relations

thank you, operator, and good morning everyone. welcome to lightspeed’s fiscal 1st quarter 2023 conference call. Joining me today is jp chauvet, CEO of lightspeed; brandon nussey, director of operations at lightspeed; and asha bakshani, our financial director. after prepared comments, we will open it 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 important factors and assumptions were applied with respect to the 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 news release issued today, our first quarter 2023 earnings presentation available on our website, as well as in our filings with us.

and Canadian securities regulators. in addition, our commentary today will include adjusted financial measures, which are non-ifr measures. These should be viewed as a supplement to, and not a substitute for, the financial measures in IFRSs. Reconciliations between the two can be found in our earnings press release, which is available on our website, at sedar.com, and on the SEC’s Edgar system.

And finally, please note that because we report in the us. uu. dollars, all amounts discussed today are in US dollars. dollars unless otherwise noted. Before I pass the word to jp, I’d like to remind everyone that we will be hosting a webcast on our new flagship retail offering, Lightspeed Retail, scheduled for August 30 at 2:00 PM. m Eastern Standard Time.

please go to our go website to register. With that said, I’ll now pass the call to jp.

jp chauvet – president

thank you, gus, and welcome everyone. Thank you for joining us this morning. lightspeed today reported another strong quarter, the 14th as a public company, generating revenue of $174 million, which was above our previously stated outlook of $165 million to $170 million. overall revenue increased 50% and gtv grew 36%.

Revenue was strong this quarter as a return to in-person shopping and dining fueled demand for omnichannel solutions. We continue to be successful in our target markets of complex SMEs, especially among the taller gtv customers. And thanks to our strong travel market, our European region, which is heavily tilted toward hospitality, also had a strong quarter. we saw emea’s gtv grow faster than any other region.

In hospitality, we signed several prominent multi-location clients, including panos, one of Belgium’s leading bakery groups with 100 locations, to adopt lightspeed’s flagship restaurant platform. The Parker Palm Springs in Palm Springs, California, one of the leading independent luxury hotels in North America, to adopt Lightspeed’s flagship restaurant platform with payments. and the holland group in covington, kentucky, secured the use of our outbound sales force, which will utilize a host of lightspeed offerings across its five locations, including payments. In retail, we are pleased to find the following customers: Kualoa Ranch in Hawaii, where many of the Jurassic Park movies were filmed, will adopt our retail offering in addition to e-commerce, analytics, and payments.

long-time lightspeed footwear customer, the one will adopt lightspeed payments at its 40 locations in australia. And within Lightspeed B2B, we were pleased to add a world-renowned luxury brand, Michael Kors. We were also very encouraged by the reception of our new flagship products this quarter. I think we have the most attractive products on the market, especially for our target customer base.

Retail and restaurants at the speed of light are the result of careful integration of some of the market’s leading solutions created by developers with extensive experience in hospitality and retail software. lightspeed retail and lightspeed restaurants are modern modular software platforms with advanced APIs, which will offer extended functionality that can be developed in-house or through our development partners. our new products are fast, stable and easy to use, and I think that is why we are having a great reception from our end customers. I recognize that, like us, many of you are concerned about the macroeconomic environment.

As you may have noted in our press release, and as asha will describe in more detail, we remain confident in the full-year outlook, which we provided on our last quarter earnings call. We are not immune to macroeconomic conditions and we are playing the risks. however, I think it is important to emphasize that a return to in-person shopping and dining are positive influences for the speed of light that should help, at least partially, offset any challenging macroeconomic conditions. With an increased focus on execution and due to the various growth levers at our disposal, we believe that lightspeed can sustain strong growth in challenging conditions.

even in this scenario of economic recession, our approach to the market does not change. We will continue to focus on adding higher GTV locations of complex SMBs that can take full advantage of our comprehensive software platform and adopt payments. These clients typically offer higher ARPU, lower churn, and superior lifetime value. and furthermore, they are much better positioned to weather any economic downturn.

I will also remind investors that the proportion of our gtv that is growing through payments remains in the low double digits. payments will be available for most of our customer locations. our focus is to get as many of these locations as possible into our payment solution. brandon will discuss this shortly.

In addition to running our payments opportunity, I think 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 across industries, lightspeed technology can help retailers automate and simplify their operations, better manage their inventory, and improve their productivity. cost effectiveness. lightspeed can help merchants and their employees be more productive so they can better serve their customers and drive business growth.

The second is that we believe merchants are increasingly looking for a one stop shop for all their needs, and this will likely become more important if economic conditions deteriorate. if merchants rely on separate providers for their payment, e-commerce and point of sale solutions, for example, they can create unnecessary complexity in their operations through valuable information due to siled data, creating additional work to reconcile these disparate systems and they may end up paying more for them. lightspeed can offer a comprehensive platform where shared data can deliver valuable insights, eliminate the need for manual reconciliation of these systems, simplify operations, and generally do so at a lower price. we are seeing more and more new and existing clients coming to us for this reason.

And again, I think this is part of the reason we’re experiencing strong demand for our software solutions. Now I’m going to pass it on to brandon so he can walk us through some of the highlights of how it works. asha will then explain the finances and outlook for us, and I’ll finish it up before moving on to Q&A.

brandon nussey – chief financial and operations officer

thank you jp. I will briefly discuss some of our main operational focuses as we look to continue progress on our core drivers. as you heard from jp, we remain cautious about where our customers’ gtv goes from here given the context and have set our plans with this caution in mind. That said, our focus is on the things we can control.

And one of the biggest opportunities we have is driving payment adoption. payments continue to trend well for us with our gpv in the quarter at $3.3 billion, almost doubling year over year. but with more than $22bn of gtv in our business in the quarter, we still have plenty of opportunity ahead of us. we have 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 redoubling our efforts to drive payment adoption across our installed base, along with as many new customers around the world as possible. We have a number of strategies in place to achieve this that incorporate customer incentives, adjustments to our sales and onboarding processes, and ongoing support from our partners in this space. the time is right here with the uncertainty ahead for our customers, having payments and pos together and a streamlined workflow becomes more attractive to them, helping them save time and money and freeing them up to focus on something else. With continued good execution this time around, we believe it will help offset any future weakness in our clients’ aggregate volumes should they face an increasingly tough macro.

We also remain focused on growing our share of this significant market opportunity with 166,000 customer locations, not including independent e-commerce customers acquired through the ecwid acquisition. we believe that we still have substantial opportunities ahead of us. And as we’ve said before, our primary focus is finding and winning the clients with the best long-term value for us. that means more established customers who are less susceptible to churn that generate good gtv volumes and will eventually play a big role in our network provider strategy. the clients highlighted by jp above are good examples of this.

This quarter, we added approximately 3,000 net customer locations as we continue to target these customers who meet our desired profile. we saw our overall turnover stay in line with our historical trends. however, I want to provide more context to this issue as we integrate our various acquisitions and move closer to having a single flagship product for retail and hospitality. with some of our acquisitions, we inherit a client location base that is not representative of our desired profile.

examples of these are customers who have sold through white label oem relationships where we will not be able to monetize the gtv, customers in non-core verticals such as food stalls, convenience stores and food trucks or customers who They use a small standalone product with few upsell opportunities. these customers typically have lower arpu than our average, have lower gtv, and do not represent a compelling fit for our supplier strategy. Excluding customer locations acquired through ecwid, we estimate that between 1,000 and 2,000 customer locations are moving per quarter in these categories, and we estimate that we have up to 10,000 more that we expect to continue to move over the next six to eight quarters. this category of abandonment is incorporated into our plans.

And despite this, we expect to continue to grow our customer location base to healthy levels given the opportunity that lies ahead. I provide this context to be useful to those who are tracking our overall customer location statistics and our progress related to that. And finally, regarding our acquisitions, I’ll quickly talk about our progress on our integration efforts. our primary focus to date has been to integrate the underlying technology and ensure a seamless go-to-market effort with the resources purchased.

We are pleased with our progress here. our flagship products are now on the 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 ensure we get the most benefit from our increased scale. this internally called lightspeed effort is expected to be complete by the end of this calendar year.

Other integration efforts we focus on relate to internal systems, production environments, and customer service centers. we are tracking these well so far as well. And finally, one of the main benefits of our acquisitions has been the addition of some of the most talented people in the industry. Now that the integration of these teams into broader lightspeed is largely complete, we are seeing the result of this effort in the speed of our products and the delivery of value to customers.

These synergies are important as we continue on our path to profitability and will allow us to redeploy resources into areas of growth and innovation while keeping our overall costs under control. Now I’m going to pass it on to asha so she can explain the numbers for the quarter and our outlook.

asha bakshani – CFO

thanks, brandon. It was another strong quarter of business. our omnichannel balance has proven to be well positioned to adapt to the ongoing shift from e-commerce to the store and our presence in hospitality is benefiting from the uptick in restaurant spending globally. as you heard from jp, we were able to deliver $173.9 million in revenue, above our outlook of $165 million to $170 million, with revenue based on subscriptions and transactions, up 38% from last year on an organic basis and revenue total up to 50% total.

First, I’d like to address a few observations about what we saw in the quarter, both positive and negative. I will then go into financial performance for the quarter, including a discussion of our key metrics. Finally, I will end with our outlook for our fiscal second quarter 2023 and the full fiscal year ahead. The first observation is that the diversity of our business continues to serve us well.

and by that I mean our diversity in verticals, geographies and revenue streams. our increased availability of payments both in the emea region and to hospitality customers helped drive overall growth this quarter, whereas in previous quarters we were more reliant on retail customers and primarily in the north america region. We look forward to continuing to diversify our revenue base by putting more of our customers into payments, expanding our international retail customer base through our new lightning speed retail offering, and further growing our hotel presence in North America through our new flagship hotel offer. We continue to benefit from multiple growth levers, increasing our revenues through the combination of location and ARPU growth and expanding our payments and financial solutions by the nearly $80 billion GTV, which our customers collectively processed in the last 12 months.

As you’ve already seen, we don’t need our levers to be hitting at the same time, and the opportunity for each is still attractive. secondly, i would like to comment on 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 clients processed more than $22 billion of gtv.

Within retail, we’re seeing a slowdown in end-market growth. For the most part, it seems that the sectors that benefited during covid, such as bike and home & The garden is experiencing slower growth, while end markets such as apparel and footwear, which have generally experienced more challenging conditions under covid, are doing better. We also believe that factors such as rising interest rates and persistent inflation are affecting retail more than hospitality, as consumers prioritize spending in areas such as travel and entertainment. Despite this, retail gtv overall grew 15% organically and 32% overall.

hospitality gtv more than made up for this as consumers resume spending on travel and dining around the world. gtv hospitality grew 40% organically in the quarter. and while we saw a particularly strong uptick in europe, gtv hospitality 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 affect our end markets.

but as brandon mentioned, increasing our payment adoption, which is largely within our control, may offset any challenges we face in growing gtv. Finally, I will point out that this quarter’s results in which we reported 38% organic growth in transaction and subscription-based revenue now completely outperform or easier comparative periods that were heavily impacted by covid, as well as all of our acquisitions. , excluding new orders and capital, illustrating the business’s ability to deliver strong organic growth while integrating our acquisitions. digging deeper into our results reported today. First quarter overall revenue was $173.9 million, above the forecast of $165 million to $170 million.

Subscription- and transaction-based revenue for the first quarter was $165.1 million, representing 95% of total revenue and growing 38% organically a year ago. gross profit in dollars grew 35% in the first quarter compared to the same period of the previous year. as a percentage of revenue, gross margin for the first quarter was 45% compared to 50% last year, as more of our revenue now comes from our payment solutions, which have a higher gross margin low but they provide us with a significant increase in gross profit dollars per customer location. our gross margin percentage was affected by increased hardware subsidies in the quarter, which we are addressing and expect to gradually reduce to more normal levels over the remainder of the year.

adjusted ebitda loss was $15.6 million, in line with our $16 million outlook. this loss was higher than a year ago, reflecting the impact of 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. Going back to some of our additional business metrics, customer location, excluding independent e-commerce customers acquired through the ecwid acquisition, grew to approximately 166,000 from 163,000 the previous quarter. These customer locations provided an arpu of approximately $320 per location, which is up from $230 a year ago.

subscription-only arpu was $136, up from roughly $113 a year ago. both exclude ecwid’s standalone e-commerce customer base, which has significantly lower arpu. As you heard from Brandon, location net additions were affected by churn in our non-core customer categories. And given our continued focus on the type of clients we add, we’re pleased with the quality of clients we’ve successfully added this quarter.

As for our payments, gross payment volume was $3.3 billion, up 96% from last year and up 48% from the fourth quarter. Although our fourth quarter is historically our seasonally slowest quarter for throughput volumes and this sequential increase was expected, the fact that we are also up 47% from the third quarter of our FY22, which is historically our best seasonal quarter , is actually a very positive sign of progress in general. our cash position in the quarter decreased to $915 million from approximately $954 million in March. This was the result of operating losses in the quarter, certain working capital movements and an increase in cash advances deployed to lightspeed capital.

following the end of the quarter, we paid off the $30 million of debt that arose from the loan drawdown made in connection with the gastrofix acquisition in January 2020. I see our strong balance sheet as a source of strength in the current environment and will continue to ensuring that we remain in a strong cash position. As we look ahead to the remainder of fiscal 2023, while we remain optimistic about things within our control, we believe there are several reasons to be cautious given the trends we are seeing in consumer spending, inflation, currency exposure and the overall macroeconomic situation. background. While it is impossible to predict the severity of any recession, we have tested our forecast based on various economic results.

And while we expect inflation and continued weakness in consumer spending to continue through 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 stated earnings outlook. In addition, we continue to focus on finding efficiencies across the business through continued integration of previously acquired businesses, as Brandon mentioned, and remain disciplined and intentional in operating expenses, reducing spending in lower priority areas. for the second quarter, we expect to achieve revenue in the range of $178 million to $183 million and an adjusted ebitda loss of approximately $10 million. For the full fiscal year 2023, we maintain our previously stated outlook on revenue of $740 million to $760 million and an adjusted EBITDA loss of approximately $35 million to $40 million or 5% of revenue in 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 and adjusted EBITDA performance, so the third quarter will be our seasonally strongest quarter and the fourth quarter our seasonally weakest quarter. In addition, as we continue to achieve ongoing synergies, we plan to reinvest in core areas of the business, allowing us to invest in growth areas while improving EBITDA performance over the next 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 business for the long term.

with that, I’ll pass it to jp for closing comments.

jp chauvet – president

thank you, asha. there is no doubt that the economic outlook has become more gloomy in recent months. And again, I don’t want to downplay the situation, but we believe that lightspeed will continue to function despite these challenges. Our new flagship offering, Lightspeed Retail and Lightspeed Dining are the best we’ve ever offered and, in my opinion, the best in the industry.

lightning speed payments are now available to most of our customer base and our marketing teams are more experienced than ever selling that offering. And finally, what I can’t stress enough is that we believe the return to in-person shopping and dining is by far the biggest macro influencer on the success of this company. and here, I’m very encouraged by what we’re seeing. Before we move on to the Q&A session, I want to take a moment to acknowledge all of the Lightning Speed ​​employees and the amazing work they’re doing.

In the past two years, we’ve been able to digest five acquisitions, launch two new flagship products, roll out payments globally, and continue to deliver strong growth all the way. it is thanks to them that I remain confident in our ability to execute and optimistic about our prospects. And with that, we’ll take your questions.

questions & answers:

operator

Reading: Lightspeed earnings

[trader instructions] we will now answer our first question from dan perlin with rbc capital markets. your line is now open.

dan perlin – rbc capital markets – analyst

thank you. good morning to all. I just wanted to dig a little deeper into your comment about payouts actually boosting potential compensation if customers go weak. you talked about doubling down to drive that opportunity and you talked about incentives for those customers to follow through with your onboarding.

I wonder if you could go into more detail in terms of what that means from an incentive basis, what specifically are you doing? and is this a function of getting back to your existing book and given clients or are you just finding that there is more success as you attract new clients?

brandon nussey – chief financial and operations officer

hi dan. it’s brandon here. yes, we have given the macroeconomic context, of course, we are cautious about where the client volumes go from here. that creates a lot of internal focus on things we can do that are in our control to make sure we compensate for that.

so we’ve done a number of things, just focus areas to make sure that from the initial sales process we have the right incentives. we have tried some things for customers. we’ve tried a few things from how to make sure we incentivize the sales team to how we make sure customers get up and running faster. and you will have seen in the quarter that we made good progress.

Some of these early initiatives have already borne fruit. And that’s what gives us confidence throughout the rest of the year that they will have a cumulative effect and help offset any macro weakness we see in the industry.

dan perlin – rbc capital markets – analyst

nope, that’s great. I definitely saw in the room. I’m wondering, just as a follow-up, if you have, or would you be willing to share any kind of recent trends that you’ve seen in particular during July and anything that you might indicate in terms of – you have a bit of a cautious perspective on the consumer. I just wonder, are you really seeing that materialize until July? And you may even be seeing hospitality pick up steam? thanks.

brandon nussey – chief financial and operations officer

yes. And it’s important to remember that our customer mix, we started talking about some of the changes in consumer spending that happened last quarter. so in our last quarter call we started to see consumer spending shifting from certain retail categories to other categories like hospitality etc. that continued in q1, as you heard from asha before.

July, we haven’t really seen anything, really different. If anything, July looks a bit more stable from some of the trends we’ve seen in those retail categories previously. so yeah, that’s important as we think about our customer base, a lot of what everyone is concerned with on the macro of the retail side. in fact, we’ve been dealing with it for a few months now.

dan perlin – rbc capital markets – analyst

ok, thank you very much. I appreciate it.

operator

Reading: Lightspeed earnings

next we have andrew jeffrey with truist values. go ahead, please.

andrew jeffrey – truist securities – analyst

good morning. I appreciate you answering the questions. I wanted to ask a little bit about brandon. I appreciate the kind of color in the customer approach.

One of the things I think about in this industry, given the competition and the way lightspeed continues to try to differentiate themselves, is what can the tam be? and it certainly is a huge market, especially given its international footprint. can you frame it in the context of the customers you’re targeting, which seem to be getting more and more specific, which makes sense to me? but I wonder if some of the questions we get are related to your very specific customer profile.

brandon nussey – chief financial and operations officer

good morning. maybe I’ll stick with this one. so we have shared the tam several times and our vision of the tam there are approximately 46 million retailers and restaurateurs in the world. and as you know we focus on the more established ones, the ones with higher gmv and our direct addressable tam, if you look at the industries we operate in, there are about 6 million.

so there’s a lot of room to grow and I think the good news about this – this addressable tam is that when you get a customer, you basically get them forever, and they’re not prone to churn because there’s a lot of limited business failure, so that a very big tam. and I’ve said it multiple times, that the majority of the market is in legacy systems. It’s very simple, look at the streets around the world and you will see the businesses on 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. restaurateurs, retailers are focusing on in-store technology again, but they still have in mind, oh, there’s also the omnichannel world. And I think that’s where we fit right in as workflows that bridge online and offline. and in the segment where we operate, there are not many companies that have the capabilities that we have.

And I would say that the latest products we launched are more competitive than ever, and I think they are very much in line with what the market needs today.

andrew jeffrey – truist securities – analyst

good. so there is no resizing or any modification based on this kind of customer focused profile it seems.

brandon nussey – chief financial and operations officer

no, no, absolutely. we know our strategy. we know the segments we want to own, and we’re doubling down on that and attracting the right profile of customers.

andrew jeffrey – truist securities – analyst

good. and then also a kind of corollary. one of the things that i think lightspeed has talked about in the past is the ability to accelerate the growth of acquired businesses. And it appears that due to the nature of some of the customers of the businesses it has acquired in the last year, year and a half, perhaps the turnover is higher in those businesses than it might have been in previous acquisitions.

Can you talk about maybe a same store sales metric or something for merchants that prevent them from acquiring business? just an idea of ​​how those maintenance, upgrading, etc. businesses are doing after you bought and integrated them.

jp chauvet – president

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yes. that’s where you have the gross additions and the net additions and how we present the net additions. if you look at the reality of the business and brandon shared a bit of color on that, basically we have customers that are core to what we do. but every time we make an acquisition, they come with a fair share of customers who are not valuable to us.

and i’ll give you one: gastrofix in germany came with a lot of very nice customers who were in line, but also came with a number of customers that we weren’t interested in small retailers. the same thing happened with vend, of course, most of the clients were in line with what we had to do. but they all come so I think each one of them came with a segment that we weren’t interested in and that’s where we see the most turnover 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. grocery stores or this is not interesting for our business.

and we’re going to let them drop out and that’s what you’re going to see, you’re going to see more churn in segments that are not interesting to us from the acquisition. and then you will see that we really double down on customers who are very important to us. so if you look at the churn, I mean the churn is very much in line with what we expected, at a pretty good level. but within that churn, if you look at the customers we’re interested in, the churn is much lower.

and when we look at the rotation of the segments that we are not interested in, they are much higher.

andrew jeffrey – truist securities – analyst

appreciate the color. thanks.

operator

Reading: Lightspeed earnings

your next question comes from josh beck with keybanc. your line is open.

josh beck – keybanc capital markets – analyst

yes, thanks for answering the question. one thing I wanted to ask was the rate of payment penetration. looks sequentially, it was one of the biggest jumps we’ve ever seen. so is there anything to read on that, maybe regarding the impact of flagship platforms or others? just curious if there are any calls out there.

brandon nussey – chief financial and operations officer

yes. so we talked a little bit, josh, about some of the things that we’ve been doing that are in our control and that meant focusing on the top end of the funnel to make sure we were sticking together well. our flagship products in the retail and hospitality sectors, we see very high adherence rates there. you’re seeing that show up in our landed arpu, our new store arpu, and then also in our added arpu.

We also have… we have this tremendous opportunity within our current customer base. and we’ve taken a number of initiatives to focus on how we convert them, how we do it quickly, and how we make sure they’re also transactional quickly. so yeah, good quarterly progress on that. Obviously, there is a lot to be done, but I am quite pleased with the first results of some of those initiatives for us.

jp chauvet – president

maybe brandon, a comment here. we recently launched europe and australia in payments. and there is always a delay between when you start selling well and when you control the entire flow of customers. so I’m thinking here, what you’re seeing as a result of the company globally, selling and onboarding and processing and delivering payments at the right pace.

And I think for us, that’s why we’re very encouraged by the progress here.

josh beck – keybanc capital markets – analyst

that makes a lot of sense. and then I also wanted to track organic growth. I think it was 38%. obviously, that’s right in the middle of your long-term model.

I think in the quarter there was about 11% growth in location, which would imply a little better than the mid-30s; sorry mid 20’s growth on the arpu side. is that the correct algorithm for us to think? I don’t really expect guidance, but I’m curious how we should frame that going forward.

asha bakshani – CFO

Hi, Jose. yes, totally, that’s the right way to look at it. we have committed to 35% to 40% organic growth for the year. And given the payments initiatives that both brandon and jp talked about that we’ve launched, and see continued success so far, we’re confident in that 35% to 40% annual guidance.

and that 38% is right in the middle of that. one thing that we have to be careful about or that we want to remind the public is that we had a very strong q1 last year. we had an exceptional quarter last year with a strong uptick from verticals where the speed of light is strong. and despite that, we were able to grow 38% year over year on an organic basis.

then that’s definitely the right way to look at it.

josh beck – keybanc capital markets – analyst

thank you. thanks team.

operator

Reading: Lightspeed earnings

The next question is from Andrew Bauch of SMBC Nikko Securities. go ahead, please.

andrew bauch – smbc nikko securities – analyst

hello. Good morning, guys, and thanks for answering the question. I just wanted to touch on the b2b network and some of the early feedback you’re hearing from customers. And thinking of this in the full year context, can we consider any contribution from that in full year guidance or when do you anticipate it starting to gain more traction?

jp chauvet – president

yes. Good Morning. so maybe I’ll tackle this one. So, as we said, when we made our forecast for this year and next year, by the way, we don’t expect much revenue from the b2b network.

For us, the b2c network is an investment where what we hope to see is, again, a much more competitive platform, so to speak. and what we hope is that, over time, we will begin to generate income. so here, being very clear at launch, what we’ve done for now is we’ve integrated a new order into the lightspeed platform. And now for luxury brands that are on a new order, we allow anyone to do an integrated order from the front of the store, which is quite revolutionary.

We enable stores to now also have automated descriptions, videos, and images of the items they order instead of doing it manually. and then, on the other hand, what we’re doing now is allowing brands to access direct sales on a consolidated basis for small businesses. so basically what we’re allowing them to do is sell through an smb network and have the same level of feedback as when they were selling direct to consumers. so that’s the first step for us, and this is really now, because now it’s focused on the key brands within the new order.

and decided to take that approach so we can learn, iterate and create value. and what we’re seeing so far is there’s a lot of value to the store owner because for them, it just saves their time and makes the view automated and the real value to the brand is the direct sale. now for us, this is step one. but then as we go into this year, and you’ll hear more about other verticals, we want to implement verticals that are strong at the speed of light, not just luxury brands, but we want to try to implement outdoor and sports and do some service. repairs.

so now we’re building the plans now that we have the plumbing ready. we have the first customers using it and we have the feedback. now we’re going to start building a plan for which verticals we’ll tackle and when, and you can hear more from us in the coming quarters where we’ll be making progress there. but again, being very clear, we’re not expecting anything.

This is an investment zone for us and with a horizon of probably 24 months before we start to see some material income. but we think it’s a game changer because if we get it right, we’re going to solve a really big problem for our customers.

andrew bauch – smbc nikko securities – analyst

yes, absolutely. and it can definitely be a solution that generates more rigidity in the platform. I know it’s a very small part of the business right now, but the $9.4 million in cash advances, up 49% quarter over quarter. where do you see that over the next year, as your base may need additional working capital to keep things afloat in uncertain times?

brandon nussey – chief financial and operations officer

yes. that’s an important part of the portfolio for us. we have had great success there. we get great feedback from our merchants.

helps make the whole platform stickier. 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 let’s keep growing this.

we expect it to continue to grow at a very healthy rate, but still, of course, take care to run this business, this part of the business, quite wisely.

andrew bauch – smbc nikko securities – analyst

of course. thanks for the detailed answers.

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your next question from richard tse with the national financial bank. your line is open.

richard tse – national financial bank – analyst

yes. Thank you. Regarding payments over the next, call it, 12 to 24 months, do you expect it to continue to increase at the same rate or accelerate given the number of initiatives you have underway now?

brandon nussey – chief financial and operations officer

Things we can control, richard, we hope to speed up. the macroeconomics and what that means for benchmark volumes within our client base, that’s hard to predict. You heard from asha that we’re taking a pretty cautious view of what that looks like for the rest of the year. but in the things that we can control in terms of how many new clients we bring on, how much of our existing base we convert, we’re sure we’ll see it continue to accelerate.

richard tse – national financial bank – analyst

good. and then from a competitive landscape perspective, obviously you’re getting much bigger. How has that kind of change, I guess, changed the profile of your business, that is, as your portfolio of projects grew noticeably, your win rates, and how has your competition responded?

jp chauvet – president

yes, I’ll stick with that one. look, we – as you know, we have this strategy for a product. therefore, a product in retail, a product in hospitality. we have already launched most of the products but now we are tackling the biggest market for us which is usa. uu.

and if you look at our retail platform, we’re launching this in the us. uu. we throw some verticals. and what I can tell you is that the verticals that we launched are doing very well. we see better closing rates, we see higher arpu, we see better payouts attached.

and that’s obviously because we’ve combined the core software and core payments on the new platforms very well. so I think for me, the way we look at this is that we’ve never been more competitive with products. the gap between us and our competitors has widened, and we haven’t, meaning we see better close rates on new products when we launch them.

richard tse – national financial bank – analyst

good. And just one last quick one here. you’re still talking about breakeven ebitda next year. where will most of that kind of operating leverage come from when it comes to line opex?

asha bakshani – CFO

hello. thank you ricardo most of that operating leverage really comes from the integration of our different acquisitions that we have made in recent years. As you have heard from us, we are being very rigorous and disciplined in our spending.

but at the same time, we have a lot of opportunities integrating all the different companies that we bought in the last two years. integration, the leverage comes not only from the teams and the integration of our people, but also from the contracts. when you think about things like aws and google cloud infrastructure contracts where all these companies had their own separate contracts, as we consolidate them and get volume, we get more volume, we get much better rates. And as we continue with those integration efforts, we’re starting to see more and more of that operating leverage.

richard tse – national financial bank – analyst

perfect. thanks for the color.

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next we have daniel chan with td values. go ahead, please.

daniel chan – td securities – analyst

hello. Good Morning. I just want to get some color in the orientation of the whole year. first quarter revenue exceeded their expectations: the high end of their expectations.

then I wonder what you are thinking about for the rest of the year to keep it stable despite the q1 pace.

asha bakshani – CFO

great. so thank you dan. obviously we are being cautious about everything that is happening in the macro environment. and as you’ve heard from brandon, there are things we can control, namely how many customers we migrate to our payment platform, how quickly we get customers to transact.

those things that are under our control, we feel very good. we have these initiatives that we’ve recently launched, and we continue to see success with those initiatives. however, things like retail spending from an average gtv perspective, things like hospitality spending, how inflation will affect consumer spending, these things are out of our control. and for those reasons, we want to make sure that we are cautious in our guidance and that we provide guidance that we feel very comfortable achieving.

daniel chan – td securities – analyst

that’s useful. Thank you. And then I appreciate the color that you’ve given to what you’re seeing with consumer spending, your caution in that regard. Any color in the willingness of merchants to adopt or invest in new technologies given the macro synergy, the uncertainty? any changes in kpis that you can share with us, such as tickets, conversion rates, etc., would be helpful.

brandon nussey – chief financial and operations officer

yes. so I think for me, it’s very simple. As we enter a recession, we potentially have a shortage of hiring people. providers basically need platforms that can do more with less.

And I think there is, that’s exactly what live streaming is all about, doing more with less. so I think here, what we’re seeing is we’re seeing really strong demand for platforms like ours. the second thing we see is that providers want to consolidate into one. so you might have providers that have an e-com and then they have lightning speed and maybe they have a payment provider and then they could have a loyalty provider.

what happens when there’s a downturn, you typically try to bundle more rigs with one vendor at a lower acquisition cost. and again, here, we are very aggressive in bundling and offering package based discounts to people on the platform. so I think for me, and like we said, we’re cautious. but there are many… there are many new areas and many people who need platforms like ours.

daniel chan – td securities – analyst

thank you.

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[trader instructions] the next question comes from thanos moschopoulos of bmo capital markets. go ahead, please.

thanos moschopoulos – bmo capital markets – analyst

hello. Good Morning. can you talk to the headwind you’re watching from fx? you obviously had significant European exposure. so have you been implementing price adjustments in some of the geographies to compensate for the fx or is it more due to the fact that you have other levers like the payout ramp and the module plugin to compensate for that?

asha bakshani – CFO

hey, thanos. thanks for the question so fx to us at the end of the day a strengthening usd is great for light speed just because of the fact that most of our revenue is usd while most of our operating expenses are in currencies outside of the usd, such as the canadian dollar. and euros. so the general strengthening of usd is useful for light speed.

Of course, to your point, there is an impact on the revenue line, but we have to keep in mind that most of our revenue is still us. uu. denominated in dollars. And given that fact, the USD strengthening against other currencies had a 1% to 2% impact on our revenue overall. so it’s really not a big deal for us at the moment.

thanos moschopoulos – bmo capital markets – analyst

See also : Investing in Clubhouse

great. and then for jp, you talked earlier about your push in the us. uu. hospitality market on the back of the new hospitality platform and building an in-person sales presence. so maybe just update us in terms of where you are in building local sales teams and whether or not the macro context has influenced your plans and timing in terms of those investments right now.

jp chauvet – president

yes. so, as we mentioned last time, we were dealing with down-to-earth sellers. and so we started that initiative, a couple of handfuls of vendors. and i am happy to report that the actual ltv over cac is better with the output for the profile of clients we are looking for.

so we’ve decided to double that. so now we’re going to move the needle and double the size of the ltv and keep pressing on that front. so we are fitting the model. For now, we’re happy with what we’re seeing, and we’re seeing better unit economics in our own output when we do performance marketing.

thanos moschopoulos – bmo capital markets – analyst

great. I’ll pass the line thanks.

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next we have josh baer with morgan stanley. go ahead, please.

josh baer – morgan stanley – analyst

great. Thank you. just wanted to ask about the speed of light, the brand transitions are expected to be completed by the end of this year. Are all those transitions going to the flagship platforms or other legacy versions of lightspeed as well?

jp chauvet – president

yes. so i think again that goes back to… also touches on what asha was saying about cost savings. so what we’re doing here and the synergies, we’re bringing everyone to one flagship product. and everything – everyone is going to be brought to the lightspeed mark.

so we are rolling out the star products around the world and we are preparing them, we are carrying the brand. so the next thing you see is the upserve brand in the usa. uu. now that the k series is out or our hospitality. what you are going to see in the next few quarters is that we are going to complete the – they will no longer have an upserver.

and everything will be at the speed of light. and all sellers will only 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 have already done now on the retail front, but for hospitality. so yes, the short answer to your question is yes, as we’re going at lightning speed, that also means going to a hospitality product and a retail product.

josh baer – morgan stanley – analyst

okay, that’s great. and then outside of the brand transition, just like thinking about the total customer base, what percentage of your total base is in one product, the flagship versions of today? And where can that go by the end of the year?

jp chauvet – president

yes. so I think we were very clear on the steps. the first step for us was to get the entire go-to-market for new customers on one platform. and then from there we will focus our account management teams on building conversion utilities and bringing the foundation to the new platform.

And here, I think there’s enough new functionality and enough new features that we’re going to see a natural progression of those clients moving on. We haven’t shared any data yet on this, but this is going to be, I mean, top of mind as soon as we have a brand all over the world.

josh baer – morgan stanley – analyst

good. thanks.

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your next question comes from todd coupland with cibc. his line is now open.

todd coupland – cibc capital markets – analyst

great. thank you and good morning everyone. we’ve seen quite a few tech layoffs and stock price declines that affect stock-based compensation. I wonder how they’re thinking about that macro headwind and how it’s affecting their hiring plans, if they have any, if they can share them and any issues around compensation with stock prices down. thanks.

jp chauvet – president

yes. so i’ll refer to this one as well and brandon and asha, if you want to participate. Look, for me, it’s very simple. We are not a pure e-commerce nor a pure digital company.

the strength of like 90% of our gmv is physical retailers and restaurateurs so this return to the physical world is creating a lot of demand for us. we have a forecast that we are committed to achieving 35% to 40% growth this year. we are being cautious and the way we forecast it is a very cautious way. so we’re sure we’re going to hit our numbers.

And for us to reach those numbers, it means that we have to keep hiring, we have to keep investing. we need to continue to bring in people who can deliver on customers and provide an amazing experience for our customers. so we’re not in that mindset right now. we’re more in the mindset of hey, let’s really focus on getting paid, getting more customers, making sure customers have higher arpu, and meeting the numbers we gave to the market.

todd coupland – cibc capital markets – analyst

it’s great. And then, as a follow-up, it did very well in Europe in the quarter, citing hospitality and people traveling. as we think about summer and these macro headwinds that you’re talking about, some concerns about europe, is there anything we can think of for that region in the fall?

jp chauvet – president

yes. so I think again for me the answer here is that the speed of light is well balanced. We work in commerce and hospitality and golf. we work on all continents.

and we’ve seen that even through covid when one area was not okay the other was okay. when golf was not going well, the hospital was doing well. and i think for now, maybe it’s a short answer, we’re seeing a ton of demand in europe for platforms like lightspeed right now. we are seeing strong gmv on the hospitality front.

and there, I mean, yes, the growth rates are good and the demand is good. and what’s really interesting is that now we’re also launching our x-series product, which is our retail product in the uk and some regions of europe, and we’re seeing very strong demand there for the new platform. we believe it is much more competitive than the previous one.

todd coupland – cibc capital markets – analyst

great. appreciate the color thank you very much.

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The next question is from Tim Chiodo of Credit Suisse. go ahead, please.

tim chiodo – credit suisse – analyst

great. thanks to all. Good Morning. I just want to quickly get back to orientation and impact fx.

asha, i fully appreciate that most of the gross is based more on north america. I think when we go down to gross profit or net income, it still holds up, but maybe to a lesser extent. Just with that context, could you maybe give some context on what the impact of the exchange rate was on the original revenue guidance for the year? And what is the impact of the exchange rate on today’s orientation? just so we can get an idea of ​​how much incremental fx impact you are working with and can still maintain income guidance.

asha bakshani – CFO

hi Tim. thanks for the question as i mentioned earlier, based on net income you are correct, the mechanics are slightly different. But overall, at the end of the day, most of our payment revenue still comes from North America.

so even though we’re diversified, the majority of net income is still us. uu. denominated in dollars. and since when we look at our guide and we’ve taken into account the fx, it’s really in a very small percentage range 1%, 2%, 3% range, no more than that.

tim chiodo – credit suisse – analyst

good. it’s okay. that’s really useful context. thank you very much.

and then my short follow up is that I just want to confirm, I think the math suggests this is a yes. but if we were to roughly go back I think you said 1,000 to 2,000 incremental churn from some of the legacy, non-core, smaller, lower arpu locations than for the core business, let’s call it ex-gastrofix, ex-store adding location they tend to be roughly in their mid-teens, maybe even a bit older. Is that a fair characterization?

jp chauvet – president

yes.

tim chiodo – credit suisse – analyst

good. great. thank you very much.

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our last question comes from clarke jeffries with piper sandler. go ahead, please.

clarke jeffries – piper sandler – analyst

Thank you for answering the question. short one for me Has there been any change in the approach of the integrated payment partners, the partners with whom you negotiated revenue sharing agreements? as i try to adjust payments to lightning speed gpv to typical acceptance rates it seems like a pivot is happening there but maybe you could help me with any other dynamics that play out in transaction revenue other than a the speed of light.

brandon nussey – chief financial and operations officer

no, nothing new there. I think you know our core partners are — they’re still the same, and all the incremental business basically flows through those core partners. we have the legacy, call it, baseline prior to our launch of lightning-fast payments. And of course that revenue line continues to decline, and we expect it to continue.

so that might be what you’re seeing while our overall payouts and our overall gtv is growing we have this declining line that’s within that overall transaction based revenue line and maybe that’s what you’re seeing.

clarke jeffries – piper sandler – analyst

perfect. and then, if I could squeeze one. Any update on how you’re thinking about the marketing approach in the macro environment? I know you were investing in direct or field sales initiatives as part of your flagship launches. Does that change in any way as you look ahead to the rest of the year or have you seen good feedback or responsiveness to those initiatives?

jp chauvet – president

yes. I think the foot on the ground for us is only in the US. uu. just for hospitality. and the reason why we’re doing this is, of course, and our competitors are doing it in the hospitality space.

Regarding the commercial space, we are very happy with the model we have. I always said that it is a very predictable model. we really understand the whole economy very well. closing rates are very well monitored.

So, for us, it’s almost, I always say internally, it’s like making soup. we know the ingredient. So if we want to grow more, it’s a pretty simple step to get more involved in marketing and generate more customers. but again, for us, balance is important because we are seriously committed to making ebitda profitable or profitable next year.

and because our return on investment is over 12 months, if we decide to grow too much from the new customer front, that will result in losses in the first year. therefore, we are trying to take the most balanced approach to get the right profile of customers, but no changes are expected in our go-to-market. and in fact, what we see and we really see in covid is in the context of recessions or difficulties with our customers, normally they want to buy more than one product. so i think here, we are geared towards bundled pricing to do our best to match payments to each new customer and have more of the previous telecom operator approach where the more packages you buy from lightspeed you get bundled discount. .

and I think that should work well in the context of the possible recession.

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[operator signature]

duration: 0 minutes

call participants:

gus papageorgiou – director of investor relations

jp chauvet – president

brandon nussey – chief financial and operations officer

asha bakshani – CFO

dan perlin – rbc capital markets – analyst

andrew jeffrey – truist securities – analyst

josh beck – keybanc capital markets – analyst

andrew bauch – smbc nikko securities – analyst

richard tse – national financial bank – analyst

daniel chan – td securities – analyst

thanos moschopoulos – bmo capital markets – analyst

josh baer – morgan stanley – analyst

todd coupland – cibc capital markets – analyst

tim chiodo – credit suisse – analyst

clarke jeffries – piper sandler – analyst

more lspd analysis

all earnings call transcripts

Source: https://amajon.asia
Category: Other

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