Earnings Call: Q4 2019

May 30, 2019

Good afternoon. My name is Jason, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lightspeed 4th Quarter and Fiscal 2019 Earnings Conference Call. All lines have been muted to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. Mr. Maimoni from Investor Relations, you may begin your conference. Thank you, operator, and good afternoon, everyone. Welcome to LightSpeed's fiscal Q4 and full year ended March 31, 2019 conference call. Joining me today in Montreal are Dax da Silva, Lightspeed's Founder and CEO Brandon Nutley, Chief Financial Officer and J. P. Chauvet, President of LifeBeat. After prepared remarks, we will open it up for your questions. We will make forward looking statements on our call today that are based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements except as required by law. You can read about these risks and uncertainties in our earnings press release today as well as in our filings with Canadian Securities Regulatory Authorities. 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. And finally, note that because we report in U. S. Dollars, all amounts discussed today are in U. S. Dollars unless otherwise indicated. With that, I will now turn the call over to Dack. Thanks, Chris, and thank you everyone for joining us. We are very excited to be hosting our first earnings call as a newly public company. I want to start by extending special thanks to our new investors for their confidence in our team and company. We are pleased with our results for the Q4 and full year 2019. Total revenue grew by 36 percent to $77,500,000 in fiscal 2019. Approximately 90% of this base consists of recurring software and payments revenue. While we're extremely pleased with the overall pace of business expansion during our final year as a privately held company, we're even more excited for the next phase of this journey for Lightspeed, our employees, our customers and partners around the world. This transition is an important one for us as we continue to execute on our mission of helping complex SMBs thrive in a world with rapidly changing consumer expectations. Our core belief is that cities and communities are built on the success of local SMBs and our work as their key technology partner is more important than ever. Running an SMB is highly complicated, particularly as today's consumer demands a delightful in store or in restaurant experience. Consumers expect to engage with SMBs in an omnichannel manner and they expect personalization and simplicity delivered in a modern way. Most SMBs do not have the IT personnel, financial resources and in many cases the required knowledge to piece together multiple solutions to meet these advanced consumer expectations. Small businesses must engage a trusted vendor to handle the core functionality needed to serve their customers across multiple channels, develop meaningful relationships, run their operations efficiently and importantly accept payments via all the various form factors consumers have come to expect. Before the advent of Lightspeed, legacy based on premise point of sale systems were the only option for these small merchants. The limitations of these legacy based systems are glaring when stacked against the need for SMBs to deploy modern cloud based omni channel solutions into their increasingly complex operating environments. This is exactly what Lightsea provides for our customers. We offer the industry's most complete suite of functionality that encompasses what complex SMB retailers and restaurants need to engage their customers in an omnichannel experience, manage inventory, run loyalty programs, get comprehensive business insights, get paid and ultimately grow and succeed. There are millions of SMB retailers and restaurants operating in our core markets spanning the United States, Canada, Europe and Australia. With nearly 50,000 locations now using Lightspeed solutions, we're just scratching the surface of our total addressable market. We believe the complex SMB is seeking a recognized global market leader for the solutions we provide and we're pleased with the progress we're making to be known as that go to player. Finding and selling to these complex SMB customers in an efficient manner continues to be a core strength of Lightspeed and our execution to date bears that out. Our data driven sales and marketing teams are world class in what they do. As we look forward, we will continue to grow organically in 3 primary ways: attracting new merchants, entering new markets and expanding our group. 1st, continuing to attract new merchants within our existing core markets. Our market is vast and underserved by cloud technology solutions and we will leverage our growing global brand to attract an increasing number of new merchants to the Lightspeed platform. In fiscal 2019, approximately 8,000 net new merchant locations joined the Lightspeed ecosystem And we are well positioned to continue this trend while simultaneously generating solid underlying unit economics. Our second organic growth avenue is to selectively enter new markets. Leveraging our sales and marketing expertise in our core markets, we believe new countries and new end markets all represent a compelling opportunity for us. Just under 35% of our revenue comes from outside North America today. And we see ample opportunity to continue to grow that overall contribution over time. And the 3rd way we grow organically is through ARPU expansion. We have amassed the industry's broadest set of functionality for our customers. Approximately 1 third of our customer base is now paying for more than one Litespeed product. As helpful context, this figure has grown from just 6% of customers buying more than 1 LightSpeed product 3 years ago. Given our current roadmap, we have a tremendous opportunity to expand our cross selling efforts further. In the Q4, we rolled out Lightspeed Payments and Lightspeed Loyalty and we are already seeing strong adoption. In addition to these 3 primary organic growth vectors, we believe a targeted and opportunistic approach to M and A is also important to solidify our leadership position globally. We are extremely thoughtful and strategic in our M and A approach and adhere to several criteria when evaluating acquisitions. For example, we look for targets that will accelerate our product roadmap. We also look for targets that will increase our market penetration in a way that doesn't slow us down with complicated integration efforts. And of course, we look for targets for that significant value for our shareholders. Today, we announced one such tuck in deal that checks all of these boxes. KonaGulf is now a part of the Lightspeed family. KonaGulf is a long standing Lightspeed partner, leveraging light speed retail and restaurants and has built a growing roster of clients with more than 500 golf course operators, primarily in North America. Crono Golf brings us the ability to continue to expand our retail and restaurant offerings to directly serve a market sub segment that is currently dominated by legacy systems, features a high average GTD customer base and has complex operations with high value inventory and hospitality requirements. It also ties in well to further our success in the hotel segment as many resorts also run golf courses. We know the Montreal based KonaGulf team will fit seamlessly into Lightspeed, having been a large software partner of ours for several years. We know their people and their products lead very well and believe they will further accelerate our execution as we gain access to their expertise. Lastly, I'll share some of our most exciting recent customer adds and product developments that further our position as the leading cloud based platform in our space. A record number of new customers signed with LightSpeed in the quarter, driven by strong customer momentum from complex retailers and restaurant stores in North America and around the world. New customers signed in the quarter include a large outlet store chain spanning several dozen locations. Continued success in the bike segment with Brompton Bicycle Limited, a significant franchisee of the 5 Guys restaurant chain with multiple locations and several Michelin Star restaurants such as Aquavit in London and Restaurant De Lotel Imperator in Southern France. In addition, continued momentum was seen with Lightspeed products integrated into hotel operating systems with several 5 star and luxury hotels signed in the quarter such as Hacienda Natchemina in Ibiza, Powersports in Ireland and Fife Arms located in the Scottish Highlands and many others. I'll now share more detail around our 2 most recent new product launches, which greatly enhance the value of the Lightspeed ecosystem for our customers. During the Q4, we rolled out Lightspeed loyalty to both our retail and restaurant clients in North America and Europe. Loyalty was the top requested functionality from our customers and I'm thrilled we now have this offering available to virtually our entire customer base. Our new loyalty offering provides SMBs with a comprehensive suite of customer engagement services that track customer spending habits and create customer rewards and marketing programs. We've seen rapid early adoption in customer locations using LikeVee loyalty to engage their consumers more intimately and to grow their businesses, further validating our strategy of being the one stop shop for our customers. As we look forward, loyalty offers us many new and exciting ways to engage our clients and their consumers. We look forward to providing more details about our new loyalty offering in future calls. We also rolled out legacy payments during Q4. And I can tell you that this was one of the most ambitious undertakings the company has ever done. Lightspeed Payments was made generally available to our U. S. Retail client base as of January 30, 2019. Payments is compelling to us for several reasons. Number 1, processing payments for our customers vastly improved their user experience versus dealing with 3rd party providers, which require a separate contract, support line, onboarding procedure and sales reporting and reconciliation processes. Our payment offering streamlines and simplifies this entire experience for our SMB customers, thereby allowing them to focus on running and growing their businesses. Number 2, our customers processed more than $14,500,000,000 in GTV in aggregate last year, representing an annual growth rate of 36%. Before Lightspeed Payments, we were shortchanging our ability to fully participate in our customer success utilizing LifeSeq's platform, handing over much of the economics from each purchase transaction to 3rd parties. And finally, number 3, becoming the de facto payments processor for our customers, we position ourselves to provide more financial products and other value added services aimed at helping them further grow their business. Brandon will provide further details during his remarks, but I'm excited to share that LightStream is off to a great start in terms of customer sign ups, with the majority of early adopters already processing live transactions successfully by the end of March. Our early success this year serve as welcome validation that this is the right strategy to deploy. To that end, our teams are working diligently to now make payments available to our platforms throughout the year. And I look forward to sharing with you more of the details around this rapid product velocity, which is an absolute hallmark trait of Lightspeed in future earnings calls. To sum up, I've never been more excited about the future for our business and I'm really proud to see the hard work from all Lightspeeders translate into stellar results. We have the momentum, the team, the vision and the technology to be the clear leader for complex SMBs globally. I'll now turn it over to Brandon to provide greater detail around the financials for the quarter year as well as to provide our outlook for 2020. Brandon? Thanks, Bax. I'll begin today by providing a brief overview of how our business model works and then I will discuss our 4th quarter and full year results and finish by sharing our outlook for the Q1 and full fiscal year ending March 2020. Approximately 90% of our revenue is earned through recurring subscription and payments revenue streams. Our subscription revenue is priced on a per location, per month basis with rates that increase as customers adopt incremental functionality offered by Lightspeed. As customers open new locations or adopt new modules, our subscription revenue grows. We also generate recurring payments revenue, which is earned as a percentage of the underlying transaction value to date mainly from payment referral partners. With the introduction recently of Lightspeed Payments, we now have the ability to earn a much larger portion of transaction value and this will become a growing portion of our revenue over time. Turning to some of the key metrics we use to track our progress. Total customer locations grew to over 49,000 as at March 31, 2019, up from approximately 41,000 a year ago, representing growth of approximately 20%. With addition to the new customer additions, approximately 1 third of all Lightspeed customers have adopted multiple modules of our offering. The accelerated rate of customer additions, combined with continued progress on module adoption, is a really encouraging sign that our land and expand go to market strategy is succeeding and is demonstrating our ability to grow our average revenue per customer. Total GTV processed by our customers for the year ended March 31, 2019 was $14,500,000,000 up from 10 point $6,000,000,000 a year ago. This is an important measure for us as we roll out Lightspeed payments more broadly. And importantly, we continue to see our product resonate well with our customers and achieved another year of positive net dollar retention across our customer base. We're very pleased with our continued progress across all of the important areas of the business. Turning now to overall financial results for the 4th quarter and fiscal year ended March 31, 2019. Revenue for the quarter was $21,300,000 up 36% from the prior year quarter. For the full year, revenue was $77,500,000 also representing an increase of 36% from a year ago. Software and payments revenue was $18,700,000 or 88 percent of total revenue, up from $14,000,000 in the prior year quarter. For the year, software and payments revenue was $68,600,000 a 34% increase from the prior year. Gross margin for the quarter was 67% of revenue, down slightly from 69% a year ago. And for the year, gross margin was in line with the prior year's levels at 70% of revenue. Adjusted EBITDA for the quarter was negative $4,100,000 and for the full year was negative 13,100,000 dollars Net losses for the quarter the year were $96,100,000 $183,500,000 respectively. Note that net income was impacted by $132,000,000 in the quarter and $191,000,000 for the year. We recorded an increase in the fair value of the company's preferred shares to the date of our IPO. Upon IPO, these shares were fully converted on a one to one basis into common shares. This expense was non cash in nature and is non recurring, giving the underlying preferred shares are now converted. As a growing SaaS company, we believe cash flow represents the best indicator to our path to profitability. Cash from operations was negative $200,000 for the quarter, which included $500,000 of costs incurred as part of our IPO preparation. Excluding these costs, cash from operations was a positive $300,000 in the quarter, improved from negative $900,000 a year ago. For the year, cash from operations was negative $7,600,000 and when excluding costs incurred for our IPO preparation was negative $6,900,000 improved from negative $10,000,000 a year ago. We ended the year with $207,700,000 in cash on the balance sheet and no debt. We'll now discuss Lightspeed Payments in greater detail. We view Lightspeed Payments as an important long term growth driver for our business and objective is to be transparent with our progress on rolling out this new offering. Lightspeed Payments was rolled into general availability on January 30, 2019 to our U. S. Retail customers after an initial pilot phase. So far, the system is working very well with the majority of new customers who signed up for Lightspeed Payments already processing live transactions with us by the end of March. With respect to our eligible new customers, more than 40% attach Lightspeed payments in conjunction with purchasing their Lightspeed software subscription. We view this level of uptake as very encouraging given how early we are into our launch. The teams are working diligently to extend payments to our U. S. Restaurant customers as well as retail and restaurant locations and other Lightspeed geographies over the next couple of quarters. We've configured the pricing model for Lightspeed Payments such that we receive an average of roughly 2.6% of the gross non cash transaction volume and a normalized rate of approximately 65 basis points net of direct processing costs. When you consider the LifeSeed has only been earning around 25 basis points under our previous referral stage program for payments, you can start to see why we're so excited about the potential here. To date, our actual experience has been largely in line with these estimates and we believe these remain good planning assumptions for the platform. To summarize, we're pleased with the customer receptivity thus far to Lightspeed Payments, evidenced by initial attach rates at greater than 40% and strong early adoption inside our existing customer base. However, we can't stress enough that Lightspeed Payments remains a new endeavor for Lightspeed and one in which we continue to learn more about each and every day. As a result, we remain cautious with our guidance for payments during this initial rollout year. As Dax mentioned, on May 6, we acquired Cronobel. The purchase price for the company was approximately $10,000,000 in cash on closing, plus a small equity component to some key employees tied to their ongoing employment with FlightFeed. Additionally, dollars 1,500,000 in future consideration is payable if certain financial milestones are achieved by December 31, 2019. We do not expect a material impact to our financials in the current year as a result of this acquisition. I'll now conclude my prepared remarks our financial outlook. As a quick note on our currency, our guidance does not consider any potential impact with foreign exchange gains or losses as we do not try to estimate future movements in foreign currency rates. For the Q1 ending in June, we expect between 23 $0,000,000 $23,500,000 in total revenue. And for the full fiscal year ending March 2020, we currently anticipate between $107,000,000 $110,000,000 in total revenue. This represents annual revenue growth between 38% 42% compared to our fiscal 2019 revenue. Turning to cash flow. Given the positive customer momentum exhibited by the overall business since our IPO, as well as the encouraging early signs we have seen with our new loyalty and payments offerings, we believe it is appropriate to lean into some purposeful investments in the upcoming year that will drive greater brand awareness and incremental lead flow. Factoring in these growth oriented investments, we expect operating cash flow to be a total use of approximately 6,000,000 dollars and an adjusted EBITDA loss in the range of $6,000,000 to $7,000,000 for the Q1. And for the full year, we expect operating cash flow to be a total use of approximately $7,500,000 to $9,000,000 and an adjusted EBITDA loss in the range of $16,000,000 to 18,000,000 We are confident this level of investment in the business is prudent given the many opportunities we see ahead. And with that, we're now ready to take questions. Operator? Your first question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Your line is open. Good afternoon and congrats on your Q1 as a public company. Maybe starting off on the payment side, you mentioned that you've been getting some traction with payments within your installed base. I think most of us have been conservative in modeling any uptake there. Can you expand a little on the level of pushback that you are seeing or not seeing as you speak to existing customers about adopting Lightspeed Payments? Thanos, it's Brandon here. Yes, no, we're pretty encouraged across the board right now. 40% attach rates on net new customers to Lightspeed to be that far ahead of where the 35% we saw historically with our referral partners. We're pretty encouraged by that. And existing customer uptake has been decent as well out of the gate here. We've signed a couple of 100 of our existing customers already in the quarter as well. So all told, I think we're off to a good start here with payments. And we'll still remain cautious in our outlook until we get this fully baked, but pretty pleased across the board right now. And that 40%, were you hitting that pretty quickly out of the gate or is that going to ramp up from that level in more recent weeks? Yes. Hello, Thanos, it's JP. Well, I think we're just when we look at the customers, there's a need. And as you know, in our business, they want to buy from 1 vendor. So obviously, it's getting better as we're going forward and we're getting our people trained and we're starting to understand exactly how to convert the customers. But no, I think the reaction was strong out of the gate and it's going to get better. And then any update in terms of when the launch will be for other geographies and for restaurant or should we just assume sometime later this year? I think that Thanos, this is Dax here. The goal is to have a rollout in all regions where we operate in the fiscal year. The next step will be for the restaurant product. Okay. On the EBITDA front, the EBITDA loss for 2020 is a bit larger than some of us were looking for. You alluded to making investments. So should we assume that the Delta primarily goes into the sales marketing line for customer acquisition? A couple of fronts Thanos. I mean, we're seeing good customer attraction into the business right now just in terms of net new location adds in general. Obviously, we're encouraged by payments here. We're encouraged by things like loyalty and how that adoption has gone. So I think you're going to find the investments in twofold. We think it makes a ton of sense given the firmness of the initial demand for payments for us to kind of remove any barriers there for net new customers to join Lightspeed Payments. So that might entail some things in the gross margin line around hardware and things of that nature. But then the bulk of it to your point is going to be in the sales and marketing line where since the IPO we've just seen a lot of interest in Lightspeed in general. And we just think it's really wise right now to capitalize on that and continue it here for the time being. Okay. In terms of customer acquisition costs, have those been trending pretty consistent with recent quarters? Or has there been any discernible change there? Aside from the dynamic you highlighted regarding maybe some incentives to switch people off of their existing payment provider? No. They've been pretty good. And with increased brand recognition brings an improvement in customer acquisition costs. But part of this investment looking forward is with us attaching payments the way we're attaching it with some of the loyalty expansion we're seeing, it just gives us more ARPU, gives us greater lifetime value. And so we not invested in sales and marketing, we do anticipate to kind of eke up CAC a little bit, but really in line with the overall ratios we've historically run the business at, if not better. Okay. One last one for me. The Colonel Golf acquisition, what was the revenue associated with that business? Pretty small Thanos. This isn't a large business we're acquiring here. This and as you can probably appreciate from our earlier comments, this is a longstanding partner in Lightspeed. They were they built some really interesting functionality to help drive Lightspeed products into this sub segment. So we are capitalizing some of or capturing some of that revenue already ourselves. And I'll tell you, it's not a huge revenue impact in the near term, but we're pretty excited about some of the potential here with these are bigger, stickier customers. We've already converted one of them into Lightspeed Payments. See lots of potential there with this higher GTV base. And it's a pretty compelling sub segment that right now just has a lot of legacy and we think we're going to do pretty well. Great. Thanks guys. I'll pass the line. Thank you. Your next question comes from the line of Richard Tse from National Bank Financial. Your line is open. Yes. Thank you. So with respect to light speed payments, I'm just kind of curious to see whether you had any sort of positive or negative surprises since launching it? Or has it been pretty much dead in line with what is expected here? Yes. Good question. So JP again, I think it's very much in line with the expectations, if not slightly better. Our assumption when we went in there was to say, okay, we'll at least have the same attach rates as our previous partners and we're already kind of above those attach rates. So I think it all goes together with the investments we're putting in marketing and kind of our view of having the majority of our customers as we move forward selecting Lightspeed Payments and providing us with a much better lifetime value. Yes. It seems very encouraging that you're even getting some of the legacy base converting to that. Is there sort of a certain tact that you're taking from a marketing perspective to make those conversions? Not really. So it's again, just look at the segment of our customers. They would want they would rather buy everything from 1 vendor. I mean, that's been our strategy and it's paying off. But if I'm a restaurant or a retailer, I'd rather work with Lightspeed for everything than have to deal with multiple vendors. So here what we see is that it's just the natural step for them is to attach a likely payments. And I think as we move forward, we'll see more and more customers kind of attach payments with the POS purchase. And we've also signed a few 100 customers from our existing base who are now converting to the platform. So we're pretty good. So I've kind of noticed over the past few months that the landscape has certainly become more active even competitively. I'm just kind of curious to see whether you guys have changed the way that you go to market here or potentially go to market over the course of 2019 2020 in light of that? Yes. So I think I'll address this one too. This is one of the largest markets. There's I think 47,000,000 restaurants, stores and retailers across the globe. We are spread out across geographies. And so we haven't seen any change in our close rates. We haven't seen any change in our ability to attract the customers and make them successful. So for now, we're just doubling down on our strategy. We'll continue to expand globally. We're actually going to continue doubling down on marketing and spending slightly more now to accelerate hopefully that growth. But we what we look at is when we look at opportunities and we try and see, do we see a lot of segmentation with always the same vendors and there's not one single vendor that represents more than 5% of our opportunities. So we're not concerned and we're pretty excited by the offering. Okay. And are there certain geographic markets where you're more excited than others? Well, I think the other way to maybe look at this is we see similar growth across all geographies across all products. So I think we're just very excited globally. I think the market is extremely large. There's a lot of disruption going on. People are moving away from legacy platforms and that's really what we see happening is people moving away from legacy platforms into cloud based POS systems and within our segment again, which is the complex restaurants or the complex retailers with deep inventory. Yes, we have a very competitive solution and we're pretty much the only vendor that's global. Okay. And just one last one for me. The guidance for next year for revenue seems quite robust, certainly ahead of our expectation. Is there any way you can sort of parse out where that growth is coming from, particularly payments? Is that really the big driver here of that incremental list? Or is it from something else? Yes. I think we're firming up our outlook on payments for sure. The initial attach rates are encouraging for us. Still want to remain cautious, still want to remain careful on this. But as JP just mentioned, kind of everything is going pretty well right now. We're seeing good net new adds. We're seeing expansion of other modules. And as we harp down here, payments is off to a good start. So, I think just generally speaking, Richard, we're pretty encouraged across the board. Okay, great. Congrats on the Q1 of Alligator. Thanks, Richard. Thanks, Richard. Your next question comes from the line of Tien Tsin Huang from JPMorgan. Your line is open. Thanks for taking the question. Congrats on the IPO from me as well. Let me ask first on Lightspeed Payments. I know you've taken a lot of questions there already. I'm curious, any surprise in the quality of the merchant that you're bringing on, on the payment front, your approval rates, the pace of onboarding, that kind of thing? It sounds like it's tracking well. Just curious if that's been different than what you expected, just the quality side of it. Yes. No comment on the quality. I think that's been uneventful, I suppose, in terms of no material losses, nothing in that direction. I think we are learning as we go here. Certainly, the time it takes between signing a merchant and when we see them processing live transactions varies from whether they're existing customer to whether they're a net new customer. So there's things like that from the onboarding that just being new into this that we're learning as we go a little bit and that's what keeps us wanting to remain cautious on our near term outlook here. Yes. Okay. Maybe if I could just add also what we're very excited to see is that when you look at across all of our merchants, we've signed smaller merchants, medium sized merchants and even larger ones. So the solution seems to suit the entire base pretty much. So that's very exciting. Okay. So it's broad. That's healthy. So on the investments for growth and lead flow, is that more about driving branding and awareness to get higher unit growth and higher ARPU? Or would you consider investments in pricing, for example, to try and maybe catalyze growth for either unit growth or ARPU as well? Just curious what that would cover. I think it falls into a couple of buckets. First bucket is just removing barriers to entry. So if there's an existing customer, they've paid for hardware, you can assume we're going to make that an easy transition for them because we're seeing the demand from the product, we're seeing the uptake strong. And a few $100 for a device recovers pretty quickly. There's a pretty simple ROI there for us for a long term stream of revenue. So that's bucket 1, where it's just, hey, let's just remove the barriers to adoption here everywhere we can. And then bucket 2, maybe I'll flip it over to JP, but it is more around brand awareness. You probably have already seen, just a few online, you might have tripped across more and more light speed things online. But it's we are broadening our position tactics as part of this. Got you. And then one more for me. Just I know, Dax, you mentioned adding targets like ConocoPhillips makes sense. I'm just curious from a valuation standpoint, given that there's been so much consolidation both small and large, has that changed your appetite or the pipeline of deals you would consider? And should we expect more of this kind of model of putting in an earn out and going after customers where you already have pre existing relationships? I'm just curious to how you're thinking about M and A and how that might have changed with the IPO? Yes. M and A does fall into a few buckets for us. There's a this is one where we're going deep into a vertical. It's a vertical we believe that going vertical by vertical is an important strategy for us. We can have influence we can work across the supply chain. We have big payments opportunities in each of these verticals. So that's where this particular acquisition is positioned. There are others where they have regional where they're a regional play or a competitive play, and some are capabilities. I think this is one where it's capabilities and a vertical. So it checks a few boxes for us. Understood. Thanks guys for the time. Thanks Vincent. Your next question comes from the line of Daniel Chan from TD Securities. Your line is open. Hi, guys. I just want to clarify on the investments on removing barriers to entry for the hardware side. Are you essentially just going to subsidize some of the hardware so that people adopt it faster? Yes. You make it sound so much simpler than me. No, that's good. Or it could be also that some customers have a contract where they have a breaking clause, where they'd have to pay money to break their existing contracts. So we would also buy that back. But we're talking about always a couple of $100 to get the customers. And when you compare this to a typical cost of acquisition of a customer, it just makes sense. Okay. And that's not and you're not doing that right now. This is something that you're going to implement over the coming months? Oh, no. We've already started that. I mean, it's not a huge you don't see it in Q4 because it's pretty nascent. But no, those are techniques we've kicked off for sure. Okay. And then we've also seen some consolidation in the payment processing space this week. So as some of these payment processors start to consolidate, how is that what's a read through to you guys, if any? Yes. I think it just validates some of the things that we believed in. We think this segment of the market is looking for the one stop shop. They're looking for the folks that run their business with software to take on more of the commoditized service around payments. We don't expect an impact to our business. In fact, we just see it as tactics that those other folks are undertaking to try and figure out their own strategies going forward. But we think all of those really kind of value the Lightspeed of the world from the value add we provide to them. But in terms of kind of how that impacts Lightspeed directly, we don't see much of an impact there. Okay. And then I think in the press release, you said that you guys have about 1500 loyalty customers now. What's that growing from? And what would you say is the biggest driver of that success? Yes. So it's growing from basically 0, if you think about it. And I think for me, that is also one of the very exciting pieces of the new product we've launched and how well this resonates with our customers. But ultimately, loyalty is a very important piece of the business of our customers because it's around generating more revenue with existing customers and getting repeat business from these existing customers. And it was the number one request from all of our customers was for us to offer loyalty. So very pleased to say that the acceleration of loyalty is probably the fastest we've ever seen in any product we launched. One of the other interesting things about loyalty is that it's now available across all our geographies for all of our products. And so that's why I think we've had a lot of uptake as well. When you acquired the company that brought you these loyalty capabilities, do they come with a customer base as well? And did they also have a large geographic footprint? Or is that something that you guys had to work on to kind of customize it for these specific markets? So it was they had a few customers, but it was a I mean, it was a tech talk and it was a very small company and we spent basically the 1st 6 months ensuring that component was very well integrated into ours and ensuring that it was ready for a go to market. So that's what we did. We launched it with our base and there was incredible reception. So no, I mean, this is all generated by Lightspeed and by our abilities to market it to our customers. Sounds good. Thank you very much. Great, Dan. Thank you. Your next question comes from the line of Todd Coupland from CIBC. Your line is open. Good evening, everyone. I wanted to know if you were going to be calling out the total number of merchants that are actually on payments at the end of the quarter? It's several 100, Todd, that we signed in the quarter. It's still pretty early on. So, yes, less than 1,000. Okay. Sorry, less than 1,000 new merchants added in the quarter or less than 1,000 on payments? Added in the quarter. So then it would be the U. S. Piece and retail would be a subset of that? Sorry, say that again, Tom. I missed that. So the 40% data point you quoted would be on a subset of that less than 1,000 because it's U. S. And it's retail, not restaurant? Yes. Sorry, maybe I misinterpreted your first question, Todd. Net new adds from in aggregate in the quarter? Yes. That wasn't I'm interested in that question, but I was wondering if you were going to disclose the total number of merchants that are actually on payments at the end of the quarter. Okay. It's not just yet Todd. We added somewhere less than $1,000 in the quarter that represents 40% attach rate and net new. You heard from JP about between 200 300 existing customers as well took Lightspeed Payments. So it's off to a good start. It's only been a couple of months and we're watching it closely and we're off to a good start though. And do you I know your business is somewhat seasonal, but given you're in a new product area, do you expect it to continue on a sequential basis or will this be impacted by any seasonality as we go through the year here? So there's no seasonality on payments. I think what the one driver of payments is the number of new customers we bring on board. And I think the way we're looking at it is we're currently at 40%. Obviously, we're gunning for much more. As we get into the year, we're going to be deploying payments into more products. The next one is going to be restaurants in the U. S. And as we move into the year, that will just have an impact on the tax rates that are going to grow, which will have an impact on paying number of payments customers that are growing. I think we just want to we just want to be very cautious in how we're going into this and being sure that as we get into new markets and get into new customers that they're all successful and happy. Yes. Okay. That makes sense. And then if I could just sort of step back from the 2 months and the next quarter and all that, has the initial attach rates changed how you're thinking about how deep in your base you could get with payments over time? Just talk about your thoughts on that. No. So I think we are exactly in line with what we expected to have. So I don't think it changes in time. And our expectation is over the years, we're expecting for payments to represent at least half of our customers. Here again, we know where we're heading. We don't know how quickly it will grow. We don't know the trajectory quite yet. But for now, it's exactly in line with what we expected. Okay. That's great. One last question for me. I don't know if I missed this, but did you disclose the acquisition price? About $10,000,000 on closing. Todd, there is a very small earn out as well, financially oriented or hitting certain targets over the next year or so. That's great. Thanks very much guys. Appreciate the color. Thanks Todd. Thanks Todd. There are no more questions at this time. I'll now turn the call back over to Dax D'Silva for closing comments. Thanks everybody for joining us for our 1st quarterly earnings call. I'm sure we'll see all of you look forward to seeing a lot of you as we hit the road and have meetings. And we look forward to sharing more with you. We're excited about progress in this Q1 and for the year and look forward to sharing more with you as we move forward. Thanks everyone. That concludes today's conference call. You may now disconnect.