Ladies and gentlemen, thank you for standing by, and we'd like to welcome you to the Lightspeed fiscal third quarter 2020 earnings call. At this time, all participants are in a listen-only mode, and after the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I'd now like to turn the conference over to Chris Mammone, Investor Relations. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to Lightspeed's Fiscal Third Quarter Conference Call. Joining me today are Dax Dasilva, Lightspeed's Founder and CEO, Brandon Nussey, Chief Financial Officer, and JP Chauvet, President of Lightspeed. After prepared remarks, we will open it up to 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 issued earlier today, as well as in our filings with Canadian securities regulatory authorities. 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 on our earnings press release, which is available on our website. Finally, note that because we report in US dollars, all amounts discussed today are in US dollars unless otherwise indicated. With that, I will now turn the call over to Dax.
Thanks, Chris Mammone, and thank you everyone for joining us today. We're pleased to announce another quarter of progress and solid execution as we continue our journey of building a global leading cloud-based omni-channel commerce platform for complex SMBs in retail and hospitality. Highlighting our top-line growth during the third quarter, total revenue grew by 61% versus last year and topped $32 million to exceed the high end of our guidance range. Just under 90% of this base consists of recurring software and payments revenue, which grew 58% during the third quarter. We believe the complex SMB is seeking a recognized global market leader for the solutions we provide. As we approach the one-year mark since we became a public company, we're extremely proud of how far we've come in our journey to be known as that go-to player.
Highlighting some of our most compelling proof points to underscore that success, at IPO, we served around 47,000 customer locations. Through strong organic growth and select M&A, including the recent additions from Gastrofix in Europe, we're now at over 74,000 customer locations globally. A year ago, our business was heavily weighted to retail in North America. Today, our customer mix is much more balanced, with hospitality comprising approximately 45% of total locations and international customers making up roughly half of our overall footprint. At IPO, our customers were processing approximately $13.6 billion in GTV for the 12 months ended December 2018. That LTM figure has grown to almost $20 billion a year later, an effective gauge of a healthy, growing customer base that is finding increased success through partnering with Lightspeed.
As further emphasis to this point, results from our 2019 year-end review revealed that retailers in the U.S. powered by Lightspeed grew their GTV more than four times faster year-over-year than the industry average retail GTV during the first 10 months of the year. A year ago, loyalty and payments were brand-new module offerings from Lightspeed. Today, thousands of Lightspeed customers leverage both solutions as a mission-critical component to their business operations. When we set out to do our IPO, we did so with the ambition of creating a category leader for the highly fragmented, complex SMB space. Our thesis was that the additional exposure afforded us by the public markets would yield tremendous opportunities to further our brand, extend our reach, and facilitate some terrific M&A opportunities we saw at the time. Just one year later, we believe we are demonstratively further down that road.
Our brand recognition has never been stronger, our technology stack never more advanced, and our geographic reach never further. We're still just scratching the surface of our overall growth potential. We took a calculated risk a year ago when we rolled out a sophisticated payments offering to our U.S. retail customers in the public eye. Lightspeed Payments has continued to be the notable new product success story for us in 2019. It has gained considerable traction with customers, and today we have several exciting updates to share on our progress in payments, furthering our position as the leading cloud-based end-to-end solutions platform in our space. First, attach rates ramped higher during the most recent quarter, nicely exceeding 50% on the back of strong demand and some smart adjustments to our marketing strategy.
Overall, for the month of December, after we initiated this new program, we had our most successful month yet in terms of customers signing up for payments. Furthermore, for the first time since payments went live, monthly payment sign-ups from our existing base exceeded what we signed up from net new customers. We've been deliberate and learned a lot during the past 12 months about our ability to forecast, sell, support, and grow the payments business. Drawing upon this experience, we've never been more confident that payments will be an important long-term growth driver for Lightspeed, and we're really excited for the additional payments capabilities we announced today in three main areas. Number one, for our U.S. retail customers, we announced improvements to the overall customer experience, such as an expanded lineup of available acceptance devices, enhanced reporting capabilities, and a faster checkout experience.
We believe these upgrades will drive further improvements to attach rates. This new customer experience has been in beta with approximately 450 locations for the past two months. We received really positive customer feedback. Secondly, today we also announced the availability of Lightspeed Payments to Canadian retail customers. This customer segment represented nearly 10% of our GPV for the last 12-month period. We believe is poised to embrace payments in a meaningful way. Third, we announced the initial availability of Lightspeed Payments for our restaurant customers in the U.S. We believe this integrated offering greatly facilitates our ability to lead the hospitality segment in North America. We're very pleased to be teaming with Stripe as our new payment processing partner for these additional payments capabilities.
Our aggressive M&A strategy ensures that we move decisively to achieve our vision to create the world's leading cloud-based POS provider to SMBs. M&A augments our strong organic growth foundation by bringing together the best-of-breed players in the space. Whether these tuck-ins accelerate our progress in specific verticals or via geographic expansion, we're finding that the best companies in the world with the best minds, the best technology, and the best customers want to join forces with Lightspeed. Last quarter, we talked about our ability to accelerate the growth of these businesses once we folded them into Lightspeed. For Chronogolf, new business grew by over 100% in the first six months of the fiscal year, versus over 50% a year earlier as those synergies were unlocked. iKentoo was the second acquisition we completed.
Our integration has progressed well in the six months since bringing this European cloud-based POS system for hospitality on board. As it pertains to iKentoo's business operations, we successfully rebranded the product as Lightspeed, converged the product roadmap for our developers, fully integrated it into our marketing and sales funnel management, and rolled it out into large, high-priority markets like the U.K. and France. In conjunction with all of this heavy lifting, we've still achieved growth in recurring revenue of greater than 40%. Next up was Kounta, a rapidly growing leading cloud-based hospitality point-of-sale system in Australia and New Zealand, serving over 7,000 customers across that region. We await to provide a more thorough integration update on a future quarterly call, but I can attest to the fact that we're off to a successful start in leveraging Kounta's experience and relationships in the ANZ region and implementing our go-to-market methodologies.
Most recently, we announced the acquisition of Gastrofix, the leading cloud-based point-of-sale provider in Germany and our largest purchase to date. As the premier hospitality system in Europe's largest economy, Gastrofix represented an important chess piece for Lightspeed. This is a timely acquisition, helping to solidify a clear leadership position for Lightspeed across Europe as the cloud-based point-of-sale provider of choice for complex retailers and restaurants. As Europe undergoes further regulatory changes pertaining to point-of-sale system upgrades, we are very well positioned to capitalize on these market tailwinds going forward. We're working diligently to fully integrate Gastrofix and our other acquisitions into Lightspeed and believe there are substantial growth synergies that will stem from these activities. We look forward to sharing our progress with you.
Lightspeed continues to enjoy strong momentum from complex retailers and restaurant owners in North America and around the world, many of whom continue to select Lightspeed given our ability to manage their omnichannel business needs seamlessly. Customers such as the high-end Danish sound equipment brand Bang & Olufsen, Spanish gourmet burger brand Goiko Gourmet, and a popular sneaker store in New York called UP NYC all selected Lightspeed in the quarter. To sum up, I'm extremely proud of the entire Lightspeed team for their relentless spirit and enthusiasm around our vision. It's gratifying to see their hard work pay off with these quarterly results. We have the team, the vision, and the technology to become 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, as well as to provide our updated outlook for fiscal 2020.
Brandon?
Thanks, Dax. Our third quarter results are a reflection of the solid progress we continue to make across all of the important areas of the business. Turning first to some of the key metrics we use to track our progress, considering the recent acquisition of Gastrofix, which brought us approximately 8,000 new customer locations, we now have over 74,000 customer locations on Lightspeed around the world. All told, that's an increase from 47,000 locations a year ago. ARPU expansion is an important metric for us, and we saw that continue to grow by double-digit percentages in our core business versus a year ago.
Total GTV processed by our customers during the third quarter was $6.2 billion, up 63% from a year ago, and approximately 30% excluding the impact of iKentoo and Kounta's GTV. On an LTM basis, we processed just under $20 billion for the year ended December 31st, up 45% from the year earlier, and 31% when excluding these acquisitions. With respect to Lightspeed Payments, we saw continued strong overall customer receptivity for this important long-term growth driver to our business. In the quarter, we saw further momentum in new customer adoption of payments, with greater than 50% of new U.S. retail customers contracting Lightspeed Payments at the time of purchasing Lightspeed's core software. This continued upward trend is a positive long-term sign for us.
As Dax mentioned, with today's release of new capabilities for Lightspeed Payments in our existing U.S. retail market, as well as the initial availability for our Canadian retail and U.S. restaurant customer segments, we believe we are well positioned to see this line of business continue its rapid growth trajectory. As we have proven with our U.S. retail rollout over the past year, we'll take a disciplined approach to rolling out these new markets as well, ensuring we deliver on the needs of our customers. Consequently, we will remain conservative on our near-term revenue outlook from these new markets, but maintain full confidence in their mid- to long-term growth opportunities. Turning now to overall financial results for the third quarter, we saw accelerating revenue growth again this quarter.
Revenue for the quarter was $32.3 million, up 61% from the same quarter a year ago, and ahead of our guidance of $31.5 million-$32.0 million. Software and payments revenue was $28.4 million, representing just under 90% of total revenue, and grew 58% in the quarter. When excluding approximately $2.5 million of iKentoo and Kounta revenue during the period, our software and payments growth rate was 45%. Total gross profit was $20.6 million, up 46% from the prior year's quarter. Overall gross margin was 64% of revenue this quarter. Adjusted EBITDA loss for the quarter was $5.3 million, as compared to $3.4 million a year ago, and landed within our guidance range. The increased loss from a year ago reflects the incremental costs in G&A of being a public company, and the purposeful investments during the year to drive greater brand awareness and greater payments adoption.
Net loss for the quarter was $15.8 million, compared to $71.1 million a year ago. Last year's loss did include a sizable $52.5 million accounting-based charge to earnings to adjust our pre-IPO preferred shares to their fair value. Cash using operations in Q3 was $7.9 million, excluding $1.9 million in transaction-related costs, as well as $1 million of stock-based compensation expense. This compares to $3.5 million a year ago. As discussed by Dax, in light of the continued success we have seen in Lightspeed Payments' rollout, we've updated our go-to-market strategy to further encourage payment adoption rates. We've seen good early success from this initiative. However, it did result in more of our customers electing to take monthly payment plans during their contract term, alongside taking Lightspeed Payments. This affected cash from operations by approximately $2 million in the quarter.
This effect will start to normalize as this transition matures, and we believe these short-term implications to our cash flow will have the long-term benefits associated with positioning us even more favorably as a preferred solution provider in the marketplace. We ended the quarter with $127 million in cash on the balance sheet. As Dax mentioned, on January 7th, we completed the acquisition of Gastrofix, a premier cloud-based omni-channel solutions provider based in Germany. The closing consideration consisted of approximately $60 million in cash, including an amount for the settlement of Gastrofix's liabilities, and approximately $44.5 million worth of Lightspeed shares. An additional amount of $4 million in cash and $3 million in shares is payable over the next two years, provided key members of the Gastrofix management team meet certain milestones. Gastrofix's 2019 estimated revenue, in accordance with IFRS, was $10.6 million.
I'll now conclude my prepared remarks by discussing our financial outlook. As a quick note on 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. Though we are quite bullish on our success over the long term in the new payments markets we announced today, we are assuming very little impact in this initial rollout quarter. Our Q4 revenue range reflects a cautious view of the seasonally slow GTV months of January through March and the impact of that lower purchasing activity on our payments revenue potential. For the final fiscal quarter ending in March, we expect between $35.0 million and $35.7 million of total revenue, bringing our full fiscal year to approximately $120 million in revenue.
This represents annual growth of approximately 55% versus our fiscal 2019 revenue and compares to our preliminary guidance of $107 million-$110 million issued last May, which represented 40% growth at the midpoint. Turning to adjusted EBITDA, our recent acquisition of Gastrofix does bring an incremental loss in the current quarter, and we expect that to be eliminated on a run rate basis within 12 months. Factoring this in for Q4, we expect an adjusted EBITDA loss of approximately $7 million, bringing the full year loss to approximately $22.5 million. With that, we are now ready to take questions. Operator?
At this time, I'd like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad, and we'll pause for a moment while we compile the Q&A roster. Your first question comes from the line of Josh Beck with KeyBanc. Go ahead, please. Your line is open.
Yeah. Thank you for taking the question, team. I wanted to understand, it sounds like you made some tweaks to the marketing strategy around payments. Could you maybe just give us a little deeper view on some of the changes that you made and what some of the early signs of success are?
I'll take this one. JP on the phone. As you know, about a year ago, we were very new into payments. This has been kind of a learning process the entire year. We tried to apply a number of marketing strategies. What we're realizing is that to optimize the attach rates on payments, and we're very pleased with the success we've had here, where we're above 50% now, we've had to have customers sign annually but pay monthly, because that's kind of the trend inside of the payments. What we realize is if we want to optimize the attach rates of every customer buying payments and improve as we go forward, we are now going to expect more customers who are going to be paying monthly. Again, what we're trying to do here, is we're trying to ensure that as many customers as possible attach payments, and that's really been one of the big changes in our marketing strategy.
Great. It also looks like you've formalized a partnership with Stripe. What are some of the, I guess, expected customer benefits that you would expect from that? Are there any notable changes to the way that we should be thinking about your unit economics on payments as a result of this new relationship?
This is Dax here. Just speaking to the Stripe partnership, I think we've spoken in the past about use cases which we couldn't do, even in U.S. retail, where we first rolled out Payments. The new partnership allows us to expand or upgrade our capability in U.S. retail, so new modern device types, as well as enhanced reporting capability and a much faster and more streamlined checkout experience. That's across new customers that are coming onto Payments. We've also been able to add Canada retail as well as U.S. restaurants, where we've been able to sort of expand into all these areas that we've been wanting to get to for a while. The partnership's been a fruitful one. We've had about 450 customers in beta for the last couple of months, and we're looking forward to continuing to build on that. On the unit economics, I'll pass it on to you guys.
Yeah. Hey, Josh, it's Brandon. Don't expect much change on the unit economics other than, as Dax mentioned, we really see this partnership as a lever to increase attach rates even further, given we think we can satisfy more end markets, and then more end customer cases. In terms of the underlying costs we expect from Stripe, they're going to look very comparable to our existing processing relationship.
Maybe just to answer, JP here, the question around what can customers expect, as an example, we can now do mobile checkout, and a lot of our story is around mobility and enabling retailers and restaurateurs to be mobile and check out customers wherever you want in the store. Here with Stripe now, we can detach ourselves from just the countertop terminals, and we have a lot of mobile capabilities now.
Very helpful. Thanks, everybody.
Our next question comes from the line of Richard Tse with National Bank Financial. Go ahead, please. Your line is open.
Yes. Thank you. Looks like you guys had quite a bit of strength on the hardware side of the business. I know that's not really what you want to focus on going forward. Was there a concerted effort here on that side of the business to eventually help the payment side?
Yeah. Hey, Richard. It's not hardware as much as it is kind of other one-time fees, some small amounts that came in in the quarter. Really, pretty positive thing, actually, because these reflect fees from some strategic partnerships, that big companies that I think are recognizing the asset we're building here at Lightspeed and have come to us, to try and find new ways to bring innovation to the market. As a result, we earned some one-time fees in the quarter pursuant to some of those.
Okay. That's helpful. Thanks. You guys have made a few acquisitions here. No doubt it's helped you diversify the business quite a bit. If we look ahead, what do you think how we should look at acquisitions here in terms of how its contribution to growth is going to be? Is it going to be something on the pace that you've had so far or sort of just one-off as they come up over the course of the year?
Yeah. Maybe I'll start, and Brandon, you can maybe jump in on the finances of this. Generally speaking, we have three types of acquisitions we need to do and we're looking at. The first one is really looking at technology enhancements. We have a core platform, and we're always looking at ways to make this platform more successful. The second type of acquisition we do is really around geographies and penetrating into new markets. There, I think we've made a lot of strides. As we're moving forward, what I'm here to say is you can expect to see more of these because we believe this is a huge market. There's 47 million potential buyers. We have 74,000 customers, there's a lot of white space and there's a lot of room for growth.
You can expect to continue to see these as we move forward. Now, when we think about the performance of these acquisitions, we are looking for good assets that are high growth assets. Here what we do is we normally implement our methodology in terms of go to market and all of our tools and our ways of being. Here the expectation is as we do acquisitions, we should accelerate the growth of these acquisitions because we'll bring in our methodology and our blueprints.
Okay, thanks. The last one from me, you guys had a strong sort of new merchant adds in the quarter as well. Can you maybe give us some color in terms of where those new merchants are coming from, let's say legacy vendors versus brand new companies versus some of the incumbent competitors to you guys who are fairly new?
Yeah. There's been no change. I think when you look at the market, what you have to look at is the majority of the market is on legacy platforms, and these platforms are old, antiquated, on-premise, and here, there's a big trend here where people are adopting more and more cloud. On that front, we've always had pretty much the same blend, and the blend is really net new. These are people opening new restaurants or opening new retail stores. I think anyone today opening something new would go with a cloud platform. The other one we have is switchers, and these are people coming from the old legacy. Here we haven't seen any change, and what we see actually is an acceleration from the legacy, people who are switching from legacies want to get into cloud more and more.
Here for us, when you look at the new locations we find, it's pretty much the same format. We're in line with what we thought we would be in terms of new adds and new locations. Actually, the other thing we look at is close rates. We look at how many people come to the pipeline, and here we can see our close rates have improved over the quarter, so we're feeling good about this. I think here what you can expect as we move forward is what we're seeing is there are more established businesses now who are going towards cloud-based systems, and we feel this is a really strong market for us as we go forward.
Okay, that's great. Thank you.
Our next question comes from the line of Daniel Chan with TD Securities. Go ahead please. Your line is open.
Oh, hi. Another question on M&A. There's less payments opportunity in Germany. What is the big opportunity here with Gastrofix? Previous acquisitions you made, there was a big payments opportunity with them, whereas there may be less of one with Gastrofix. Just your thoughts around the opportunity there.
Hey, Dan. It's true that electronic payments, and how much of those happen in Germany versus, say, North America, look a lot different. There's still a great opportunity there. Electronic payments continue to be a growing source of payments in that country. Yes, the opportunity in the near term may not be quite on par with what's in North America. It's still a great opportunity. Really what's happening in this market, you heard a little bit from Dax and JP, the distinction between kind of the core point-of-sale software and the traditional processing relationships and capabilities, these markets are merging. They're merging quickly. The need to have both sides of that is becoming increasingly important to win and be a leader.
Yes to answer the question, just in a nutshell, the ARPU per customer may not be quite the same in Germany as it is here, but it's still a great opportunity and something strategically that's very important for us.
Yeah. Can I add to that? Yeah, I think to emphasize Brandon's point, electronic payments is the biggest trending payment type in Germany. There's also a compelling event in Germany as we've detailed before, which is government regulation that's coming in this year that will see a big changeover in POS systems to comply with new tax regulation. We see that as a big opportunity for Lightspeed to be well-positioned as that transition happens.
Maybe just to add to what Dax is saying, just looking at market size, pure market size, when you look at the number of SMBs, Germany is by far the largest market in Europe. If you look at it this way, we are now the largest cloud-based player in Germany, in the largest market in Europe, that is undergoing a complete transition in terms of POS because of regulations. We felt the market was really right for us. Add on top of that transformation of payments and electronic payments that are gaining way more traction in Germany, and it's going to be, we think, a very lucrative market for us as we move forward.
Okay, that makes sense. Very helpful. Thanks. Just one more follow-on on payments in EU. We're seeing significant consolidation of payment processors in the region. As you're thinking about rolling out internationally for your payment solution, any impact on your pricing power or your negotiations with some of these payment processors as they continue to consolidate?
I think maybe I'll start on the first. Generally speaking, the question is why are they consolidating? They're consolidating because software companies like ours that provide real business value are integrating payments. That means if I'm a payment company and all I do is a payment terminal, you're going to see more and more consolidation there because you're going to see more and more companies like ours who are going to actually monetize the payment element and attach the payment element to the software that creates the value. I think that's what you're seeing, and that's what you're seeing globally. You're seeing new players in payments that are coming out, like Stripe, that are actually taking OEM models with us or with companies that are software companies.
You'll see all the more traditional payment companies who are consolidating together because there's a lot of pressure from the vendor who really sees more value in associating payments to software. That, I think, validates our strategy. When you think about payments for us in Europe, there are a number of players who provide capabilities for us. We are now the payments company in the eyes of the customer, Lightspeed, and all we do now is we rely on payments companies for the plumbing to ship the money around and deposit the funds. Here we will work with the more modern vendors as we move forward in Europe. There are a number of vendors who are Pan-European and actually are taking the same approach we are, which is just providing a technology component inside of a software.
I don't think it'll create any issues for us. Again, I think maybe the last point, which is on the rates, there is a lot of competition going on the rates for the non-integrated payments companies, because, again, there is less and less value, and actually there's way more value in having payments integration with software. These, let's say, traditional payment players are now having to compete with the rates. What we are seeing is that the software companies are much more transparent at giving fixed rates. Here, when you actually look at the actual revenue portion of payments, you'll have way less competition on that front.
That's very helpful. Thank you very much.
Our next question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Go ahead, please. Your line is open.
Hi, good morning. Can you clarify what the Stripe relationship means for your existing relationship with Worldpay? Will payments be exclusively powered by Stripe for any new merchants going forward, or will you still use Worldpay for certain types of customer segments?
Hi, Thanos. Yeah. We will have multiple partnerships that we leverage for Lightspeed Payments, especially as we start to roll out Lightspeed Payments around the world. Yeah, I don't think that changes our relationship with Worldpay. We're working with multiple vendors to be able to meet all use cases.
Great. Now that you've been offering payments for a year, how have your economics on payments tracked relative to your initial expectations as far as pricing and margins? Any surprises on that front, or has it been consistent with what you'd expected going in?
Yeah, no, actually really consistent, which has been quite encouraging for us. I think Dax mentioned in his prepared remarks that we've kind of rolled this thing out in the public eye, I think it's been a great success for us. We're seeing attach rates improve every quarter. We're seeing the economics hold. Now launching into new markets, we're really optimistic about the future opportunity for it as well. Trending pretty well.
Great. Finally, if you could accept.
maybe going back to the initial.
Oh, sorry. Go ahead.
Yeah, sorry, Thanos. Going back to the initial theory is the net ARPU per customer pretty much doubles when they attach payments.
Right. Okay, great. If we dissect your organic growth across restaurant versus retail in North America versus Europe, can you provide some color on the relative growth across those segments? Are they relatively consistent or any differences you'd call out there?
Yeah, I think relatively consistent, Thanos. I don't want to peel back that onion too much or dissect it too much, but I think we're pretty pleased with how we're performing in all of those things. We're continuing to gain share in Europe, North America, hospitality, and retail. Nothing too notable that we'll highlight there.
Great. I'll pass the line. Thanks.
Our next question comes from the line of Tien-Tsin Huang with JPMorgan. Go ahead, please. Your line is open.
Hi. Thanks so much. I think you mentioned that your conversion of existing customers improved. I think I heard that. Correct me if I'm wrong. If that's the case, are you doing something different to replace the incumbent from a pricing perspective? Just curious on the acquisition cost there.
Absolutely. You remember at the beginning, I said we adapted more and more monthlies. Here, and actually again, it's been a year of learning for us and how do we do it, and I think we finally got the groove going on the upsell of customers. Here, when you think about it, at the point of renewal, that's the best moment to get the customer, and that's what we've realized now. Here what we tend to do is we tend to attach Payments with software, and that goes back to what I was saying around they have annual commitments but monthly Payments. We try and help them move to Lightspeed by going monthly with the annual commitment rather than paying the entire renewal and the entire year up front. That's one.
The second thing is we've tested a lot of technologies to help us do a lot of good upsell within the product, and those are paying off finally.
Okay. Got it. Makes sense. Given the change in this beta with Stripe rolling out further, should we assume that the attach rate should improve from 50% from here or any guidance on that in the short and midterm?
I think that's certainly the goal. We've always highlighted that w e're pleased with the progress we're making. We see opportunity to see that continue to improve. I think what Stripe helps us achieve is a greater number of end customer use cases. That's certainly intent of this relationship, for sure.
Okay, last one. I want to hog the call. Just interchange adjustments made by Visa recently, been getting questions about that. Any early thoughts on what that means for your business? Any new update on target breakeven date? It makes sense you guys should keep doing M&A. Just curious if there's a change there. Thanks. Go ahead.
Yes, still digesting the interchange news. Trying to see what that means for our customer base. As you know, we price on a fixed-fee basis and for our customers to remove that complexity from their standpoint. Still trying to understand what that means within our specific customer segment, especially as we're going into new markets now. We'll report back in a future quarter on that. On the path to profitability, I think we've always said we know we're bringing on profitable customer relationships. That's foundational to this business for us. Our unit economics continue to trend in the right direction. We are seeing this market accelerate in terms of the pace of change. We're pretty pleased with our own position and our own execution in that market. We know that path to profitability is quite clear for us.
What's also very important for us is to make sure we capitalize on that leadership position. We'll give more formal guidance for next year at our next call. That continues to be the way we think about that specific question.
Yep, makes sense. Thank you.
Again, as a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Gus Papageorgiou from PI Financial. Go ahead, please. Your line is open.
All right, thanks. Just on the ARPU. The two recent acquisitions, I think, put downward pressure on your ARPU. A couple of questions. One, what's the probability you think you can get the acquisitions up to your base ARPU, probability of doing that and timeframe? Second, Brandon, I know you said the organic ARPU from your existing customer base was up double digits year-over-year. Just wondering if you could give us a sense of how much of that was increased adoption of software features and how much was payments.
I'll start with the latter. I think payments is going well for us. It's still a small overall portion of our total business. The ARPU expansion in the core is mainly driven from software, though payments is a growing contributor to that as we well know. On the acquisitions, I think when we've talked about those, these are growing businesses, adding locations, doing really well on their own, and they really haven't started in on that ARPU expansion journey that Lightspeed's enjoyed. With both Kounta and iKentoo, those additional modules are just now being rolled out inside their customer base. It's early days, but we're seeing good success there. Obviously, as we think about how to leverage payments more fully in those markets, that's going to be a big contributor also. Won't put a timeline on when we bring those things up to our level.
It will take some time. Those wheels are well in motion and seeing good early success.
Yeah, maybe just complementing what Brandon is saying, just keep in mind we acquire companies that tend to be single point solutions that are POSs. The real value of Lightspeed is that we are not just a POS. We have a full breadth of capabilities. Here as part of these acquisitions, the strategy is for all of our modules to become available to these customers one by one, and that's what then creates success from the vendor and which also creates ARPU expansion. As you may have heard, we're very pleased to say that the analysis we did on this fiscal year is Lightspeed customers grew between four and six times more than industry average, and it depends on the territories.
That just there reflects what we do, is we tend to start them on the POS, which is all these acquisitions in our core business, and then over time they expand, they acquire more modules from Lightspeed, which makes them more successful. We're going to see this probably with time with all the acquisitions we've done.
Great. Sorry, then just a follow-up question. On Stripe being a new kind of payments vendor, can you discuss is that going to help you perhaps launch new services like a lending service or instant deposit service?
Yeah, that's certainly one of the attractions of the partnership is the innovation curve that we get to ride of Stripe. Of course, they do have a capital solution. That's one of the things that attracted us to the partnership, obviously. I think as we've talked about in the past, we do think we've got a merchant base that a Lightspeed Capital solution would make sense for, so that continues to be something we explore overall as to the best path forward on that.
Yeah, I think financial services as well as just innovating in terms of device types, form factors, I think we've had great expansion with U.S. retail without having some of these things. We're quite excited about the future roadmap in terms of what we're going to be able to do with a nimble partner.
Great. Thanks for answering the questions.
Our next question comes from the line of Todd Coupland with CIBC. Go ahead, please. Your line is open.
Yeah, good morning, everyone. Now that you have Stripe on board, what percent of your locations or GTV now can take payments if they choose?
Yeah, I'm just trying to think how to best answer that, Todd. We did say Canada's about 10% of the GTV, that's further uplift. U.S. retail was always our largest customer segment overall in terms of GTV. Now we're starting the rollout of hospitality as well in the U.S. Our hospitality business, as we talked about, is strongest in Europe, we really see the payments potential as unlocking greater overall growth for us in terms of new location adds and hospitality in North America. Yeah, no specific number there, Todd, we're a lot further along than we were 90 days ago now.
I think if you step back, why Stripe? Because it expands our abilities to upsell our base.
Yeah, that's certainly been clear with other software platforms and with Stripe. Can you just talk about how we should view hospitality and restaurant rollout over the next few quarters? Maybe put it in context of your approach to retail. Retail was, I guess, a little bit slower initially and then took off. With those learnings, would you expect to have that initial slow roll and then pick up in a few quarters? Just talk about how we should think about hospitality rollout.
Yep. I do think we're going to take that same approach, Todd. I think that's the prudent thing to do. Hospitality is very different in terms of the workflows and payments needs. We now have the benefit of one year of experience in terms of selling, in terms of how we package and how we engage customers, how we operate, all of those benefits are, we're going to be able to leverage for sure. It is a very different market in terms of the workflow and payment capabilities, we will take that planned, disciplined rollout, starting customer sub-segment by customer sub-segment. As we gain confidence, open the valve a little further.
Okay. Last question from me. I thought you mentioned the March quarter will have some seasonality. Can you just talk about what that might look like, percent down or at least some qualitative color on the difference quarter-to-quarter? Thanks a lot.
Yeah, I think we're overall, hopefully, as you can tell, quite pleased with the performance of the business. Certainly, with payments it's been a great overall success story for us as we've built it over the year. Good news, we're seeing attach rates improve quarter by quarter. Some of the adjustments in the go-to-market approach this quarter, where we encouraged further adoption rates, led to some of the best months ever for the business in terms of payments. Now we get to chase new markets as well. All very encouraging for us. We're not factoring any of those new markets into any of our Q4 guidance. Really, the payments revenue stream in Q4 that we're planning on is U.S. retail only, and that's a seasonally slow quarter. We are learning as we go here what seasonality means for this part of our business.
It's certainly based on our best guesses here. It's certainly a steep step off from the holiday season of November and December. Yeah, that's something that we're trying to just be cautious of, conservative on as usual from us, as we think about the outlook for the fourth quarter. As we look forward and we have greater balance in payments, that seasonality mix is going to change, and we're excited to start unlocking those new markets. For now, it's mainly a retail payment revenue stream for us.
Great. Appreciate the answers. Thanks a lot.
Our next question comes from the line of Suthan Sukumar from Eight Capital. Go ahead please. Your line is open.
Good morning, guys. Curious to know what you guys are seeing from an omni-channel perspective. How has adoption looked like for your e-commerce offering, and what's been some of the feedback you've been getting from your customers, and how do you expect this offering to evolve going ahead, especially given the Stripe partnership with enhanced mobile capabilities?
Yeah. Maybe I'll start with omnichannel has always been core to what we do, and mobility actually is a good example, and selling across channels has always been kind of a key priority of all customers buying from Lightspeed. On that front, when you think about our segment, which is the more sophisticated SMBs that have multiple locations, that sell online, that need mobility within, I think that's always been the core of Lightspeed and why they buy from us. On that front, we haven't seen any changes. The only change we're seeing is that people want more and more to sell across channels. We are looking at potentially deploying new kinds of technologies there as we go into next year that'll support this a bit more.
I think what we're seeing is that we're seeing bigger and bigger customers who are adopting cloud and need also omnichannel, and slightly evolving needs, which is all goodness. Yeah, we're feeling good about omnichannel. We're feeling good about this. What we're seeing is that it's all driven by the consumer, and the consumer now we know is an omnichannel consumer that might do an initial purchase within a store and then might do the follow-on purchase online. We also see that in the restaurant space, where omnichannel is becoming more and more important, and the consumer now starts online, gets to the restaurant, eats, and then reviews online. These are very core to all of our roadmaps and our attention span, and we know this is one of the real drivers why our customers should adopt Lightspeed.
Yeah, we're going to be able to leverage this payments partnership to be able to transact at all of those touch points. Definitely when we see a Lightspeed customer come on board with point-of-sale, e-commerce is typically one of the initial modules that's adopted. Now with all of these new use cases being covered off by our expansion with this partnership, increased mobility with device types is going to be very appealing, especially as retailers do innovative new types of formats, like pop-ups or temporary stores, or actually just go mobile within the store. That, I think, is going to add more dynamism to Lightspeed installations. We're already seeing Lightspeed installations grow at four times to six times the industry average, and we expect these new capabilities to continue to light up these customers.
Thanks. That's helpful. The second question for you guys is on the sales and marketing front end. Just given the increasing scale of your business, how should we think about investments in your sales organization going forward with respect to direct sale or using partners?
Yeah, it's a very good question. I think maybe just if we step back. For us, the most important thing inside of our business is to have a CAC to LTV that makes sense and to ensure that on a unit economic, the customers that we acquire are acquired at the right rate, and that we have a sustainable business, and it goes back to everything we just discussed on this call. I think that's the main driver of what we're doing. Now, here, what we're seeing is that as we deploy payments, as an example, and as we have attach rates on payments that are increasing, this means that if we want to keep those ratios, we can spend more money on CAC, which should ultimately mean, as we move forward, that we will have increased adoption of Lightspeed.
Here, again, just going back to the news of today, we are now deploying payments into Canada. We're now deploying payments into the U.S. inside of restaurants. This means that we will be able to double down on the CAC because the LTV is going to be higher as these customers adopt payments, and we'll do the same as we also, over time, deploy payments throughout all of the geographies. I think for us, the most important is if you go back to the market, we're really looking at an incredibly large market, 47 million potential buyers. We see that there's a transformation happening, and for us, the most important at this stage is really to be sure that we acquire the customers at the right ratios, but that we continue to accelerate our growth.
Okay, great. Thank you for the color, guys. I'll pass the line.
There are no further questions at this time. I'd like to turn the call back over to our presenters.
Okay. Thanks, everyone, for joining us.
Thank you.
Look forward to speaking with you all again.
This concludes today's conference call. You may now disconnect.