Lightspeed Commerce Inc. (NYSE:LSPD) Q3 2024 Earnings Call Transcript

Lightspeed Commerce Inc. (NYSE:LSPD) Q3 2024 Earnings Call Transcript February 8, 2024

Lightspeed Commerce Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. My name is Christa and I will be your conference operator today. At this time I would like to welcome everyone to the Lightspeed Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we will have a question-and-answer Session. [Operator Instructions]. Thank you. I would now like to turn the conference over to Gus Papageorgiou, Head of Investor Relations. You may begin.

Gus Papageorgiou: Thank you, operator. And good morning, everyone. Welcome to Lightspeed’s fiscal Q3 2024 conference call. Joining me today are JP Chauvet, Lightspeed’s Chief Executive Officer, and Asha Bakshani, our Chief Financial Officer. After prepared remarks, we will open it up for your questions. We will make forward-looking statements on our call today that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Certain material factors and assumptions were applied in respect of conclusions, forecasts, and projections contained in these statements. We undertake no obligation to update these statements, except as required by law. You should carefully review these factors, assumptions, risks, and uncertainties in our earnings press release issued earlier today, our third quarter 2024 results presentation available on our website, as well as in our filings with U.S. and Canadian Securities Regulators.

Also, our comments today will include adjusted financial measures, which are non-IFRS measures and ratios. These should be considered as a supplement to and not a substitute for, IFRS financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website, on SEDAR Plus, and on the SEC’s EDGAR system. And finally note that because we report in U.S. dollars, all amounts discussed today are in U.S. dollars unless otherwise indicated. With that, I will now turn the call over to JP.

Jean Paul Chauvet: Thank you Gus and welcome everyone. Lightspeed continues to deliver on its key objectives for the year and Q3. Our Unified Payments initiative helped us deliver revenue of 239.7 million up 27% year-over-year and above the high end of our previously established outlook of between 232 million to 237 million. Adjusted EBITDA of 3.6 million also came in stronger than our outlook of 2 million, this is our second consecutive quarter of positive adjusted EBITDA performance. GPV as a percentage of GTV was just under 30% this quarter which is a noteworthy improvement from 25% last quarter and puts us right on track to meet our goal of 30% to 35% by the end of our fiscal year. Given that we are in the final stretches of 2024, I feel very confident that we will meet all our key objectives for the year.

As a reminder these objectives worked. One, reaping the benefits of One Lightspeed; two, accelerating revenue growth from financial services including Lightspeed payments and Lightspeed capital; three, continuing to build products that solve our customer’s problems and help them run their businesses particularly with our supplier network; and four, achieving adjusted EBITDA breakeven or better for the full fiscal year. As fiscal 2024 is drawing to a close, we are beginning to turn our attention to next year. I will provide a more detailed outlook of our goals for fiscal 2025 in our next earnings call. However, I want to recap the tremendous achievements our organization has accomplished since completing our initial IPO filed years ago. We consolidated our industry by acquiring and successfully integrating nine companies into two industry leading platforms.

We rolled our Lightspeed payments to our global customer base, we grew revenue over 10 fold, and GTV over five fold. And we undertook the necessary measures to achieve adjusted EBITDA profitability having now merged as a profitable company with strong organic revenue growth. These significant accomplishments took years of effort and lot of hard work. I want to thank everyone at Lightspeed for their dedication and commitment. Of course there is still work to do but going forward Lightspeed’s main focus will be on growing its top line while maintaining adjusted EBITDA positive performance. But I want to stress that growth will be our top priority. We intend to continue to generate positive adjusted EBITDA on an annualized basis, but as we balance the priorities of growth and profitability, the scale will tip towards growth.

We operate in a space with a massive opportunity, and many of our target customers continue to use dated legacy systems. We believe the majority of these customers will adopt cloud-based offerings in the next few years. We are well positioned to benefit from this shift, and with payments now tightly integrated into the software platform and mandatory for all eligible customers, we believe our unit economics will only improve. Clearly now is the time for us to keep our foot on the gas. In terms of One Lightspeed, our code-complete platforms are now available in almost all of our target global markets. I want to stress again that these are the best products we’ve ever shipped, and we continue to believe that the competitive gap between us and others in the market continues to widen.

Expanding and innovating our product offerings continues to be a priority for Light. And as we look at our product roadmaps, we will continuously assess whether it’s better to build or buy. M&A is part of this company’s DNA, and I believe our track record demonstrates that we know how to successfully identify, execute, and integrate meaningful acquisitions. M&A was critical in our ability to deliver the most compelling platforms for both retailers and restaurateurs, allowing us to offer best-in-class features, such as analytics, ingredient management, and e-commerce, within the timeframes that would not have been possible if we had developed these on our own. But at the same time, they did not hinder our business momentum. We continue to deliver a very strong organic growth rate and achieve adjusted EBITDA profitability all while acquiring and integrating nine organizations.

We also continue to focus on adding more high-GTV customers. Let me share a few examples of our customer wins during the quarter. We are excited to announce the addition of three new Michelin star restaurants. First, the River Café in the UK, which is known to have trained some of the greatest chefs in the world. In Germany, we signed the iconic Haebel in downtown Hamburg, and Prism in Berlin, all of whom chose Lightspeed restaurants. Also, Attica, a regular in the world’s 50 best restaurants list has selected Lightspeed to operate their fine dine restaurant in Melbourne. On the retail front, we added a number of locations for Lolë Clothing, the Canadian athletic apparel designer that switched to Lightspeed from one of our cloud-based competitors.

In the U.S., we signed Fit My Feet, a six-location footwear retailer that was switching from their on-premise legacy POS system. In the UK, we signed two locations from the high-end bike brand, Pinarello. Family-owned and operated since 1952, Pinarello has one simple objective, to make the world’s best bikes. In the quarter, Lightspeed was proud to be the retail POS for TwitchCon, the annual conference for the widely popular livestream video gaming platform Twitch, with over 60,000 attendees hosted in Las Vegas. And finally, we signed up several new brands for our supplier network, including casual lifestyle brand Tommy Bahama, Canadian footwear brand Baffin, and the casual men’s apparel company UNTUCKit. The list of high-value brands on our supplier network continues to expand.

We remain focused on building an integrated supply chain that links high-value brands to retailers and end consumers. We continue to invest in our supplier network and remain highly confident it will be a significant differentiator for our retail platform as well as a valuable source of new revenue streams. Moving on to Unified Payments, at this stage I am confident we will meet our goal of GPV representing 30% to 35% of GTV by our fiscal year-end. And that our Unified Payments initiative has proven to be a success. We continue to see ongoing progress in North America and rolled out our efforts in Europe and APAC in Q3. As expected, converting customers to payments in Europe and APAC will likely take longer than in North America. We are one of the first players to unify software with payments in Europe, particularly in continental Europe, and so there is more effort involved in educating our customer base.

We remain a very strong business in Europe and APAC and face less competition in those markets. Getting these customers onto payments improves our unit’s economics. So despite a lengthier time to transact in these regions, we are confident this is the right strategy and beneficial to our customers. The benefits of combining payments with software are undeniable. It saves our customers time and delivers much greater insight, and stir business operations while adding no cost the majority of the time. These advantages are just as applicable to our customers in EMEA and APAC as they are to customers in North America. As we exit our fiscal 2024, our account management teams in North America will gradually go back to upselling software in addition to payments.

But we expect to continue to make progress on expanding payments throughout fiscal 2025. So while we expect to end 2024 with GPV as a proportion of GTV at between 30% to 35%, we foresee this number continuing to grow throughout fiscal 2025. On the product side, we continue to deliver innovative features that help our customers manage and scale their businesses. We had several exciting new product launches this quarter. In the U.S., we launched instant payouts, allowing retailers to access funds immediately, no matter the date or time. Although still in the early stages, this offering saw very strong initial reception. We launched Lightspeed Capital in France, the Netherlands and Belgium this quarter, and Germany shortly after the quarter, expanding our global footprint for this high-margin offering.

For our customers in the U.S., we launched Lightspeed Tableside, a compact, portable, and flexible POS and payments processing device for restaurants. With Lightspeed Tableside, servers can instantly process orders and accept payments on an iPhone, reducing wait times, increasing table turnover, and improving customer satisfaction. And we also launched Tap to Pay on iPhone in both the UK and the Netherlands, allowing customers in those regions to accept payments right on their iPhone. We introduced Lightspeed Retail and New Order integration into the flagship retail offering, allowing our retailer customers to order directly from thousands of brands through the New Order by Lightspeed platform, giving our SMB customers the power of an advanced technology platform that was recently only available to enterprise customers and saving them several hours per week.

Within Lightspeed Retail, we launched enhancements to advance the insights, which will allow retailers to make even better decisions on what to stock, what to discount, and what to promote through new inventory and sales reports. Finally, on the topic of profitability, again, we are committed to being adjusted EBITDA breakeven or better for fiscal 2024 and believe we are well positioned to meet that goal. This will put us in a strong position as we advance into next year with breakeven or better adjusted EBITDA and growing top lines. As I mentioned at the start of the call, we will balance the dual priorities of growth and profitability and our focus will be on growth. Though we are focused on adjusted EBITDA profitability, and their GPV continues to grow, some of the incremental profits will be channeled towards expanding our outbound, our feet on the street sales motion.

We expect that the units economics on outbound will be better as these salespeople are more efficient at targeting high GTV customers. I believe expanding outbound can improve our growth rates, however, I want to highlight that the investment here will precede the growth. It takes time to hire and train salespeople and it generally takes six to 12 months for them to become highly productive. I will now turn the call over to Asha to take us through the quarterly results and provide outlook.

Asha Bakshani: Thanks, JP. Lightspeed had another great quarter with both revenue and adjusted EBITDA coming in ahead of our previously established outlook. And our Unified Payments efforts continuing to accelerate monetization of our trailing 12-month GTV of $19.2 billion. On today’s call, I will provide a recap of the quarter, discuss the progress of our Unified Payments efforts, and then provide an outlook for the remainder of the year. We achieved positive adjusted EBITDA for the second quarter in a row, and our goal is to continue to generate positive adjusted EBITDA. In addition, we are pleased with the progress on our key performance indicators in the quarter. Revenue and gross profit growth remained strong. ARPU hit record highs this quarter with 28% growth year-over-year.

GPV grew 69% thanks in large part to our Unified Payments efforts, monetizing 29% of our GTV. Our overall cash burn continues to decline, excluding cash flow tied to our merchant cash advance business, cash used in the quarter was under $5 million. On customer locations, we continue to shift our customer base towards high GTV customers. Although we are seeing positive initial traction with respect to this initiative, we are focused on accelerating this shift in fiscal 2025 through initiatives such as investments in outbound. In the quarter, revenue came in at $239.7 million, an increase of 27% year-over-year and ahead of our previously established outlook. Subscription revenue increased 9% year-over-year to $80.9 million. Gross margins on subscription revenue came in at 76%, an increase from 73% in the same quarter last year.

When removing the impact of share-based compensation expense, gross margin on subscription revenue was 77%, consistent with last quarter, thanks to a dedicated effort to consolidating cloud vendors and improved overall efficiencies. I want to reiterate that for this entire fiscal year, the vast majority of our account management team, which is usually focused on upselling our customers on software, has been temporarily assigned the job of onboarding new payments customers. Our account management team historically accounts for approximately half of our new subscription revenue in any given quarter. This quarter, our account managers continue to focus on Unified Payments, with teams from North America, EMEA, and APAC all working on this initiative.

As we move into our fourth fiscal quarter, most of our North American teams will begin to return upselling software as well as payments. We expect that by mid-fiscal 2025, the majority of our account managers will return to their traditional roles of selling software modules to existing customers and as a result, we expect software revenue growth to benefit in fiscal 2025. Transaction-based revenue grew 38% to $147.8 million. In the quarter, we saw GPV increase 69% year-over-year to $6.6 billion as a greater portion of our GTV went through our Lightspeed Payments platform. We also saw strong growth in the capital business in the quarter, with revenue more than doubling year-over-year. Referral fees continued to decline in the quarter as customers moved on to Lightspeed Payments.

Gross margins for transaction-based revenue came in at 30%, up from the previous quarter but down year-over-year given declining referral fees as a proportion of the sales mix and partially offset by rising capital revenues. Lightspeed Payments gross margin also improved thanks to an increasing mix of revenue coming from international markets where gross margins are better. Total adjusted gross margin, which excludes the impact of share-based compensation and related payroll taxes, came in at 43%, prior to the previous quarter and down year-over-year. Adjusted gross profit dollars came in at $103.2 million, an increase of 18% year-over-year. Adjusted EBITDA in the quarter came in positive at $3.6 million. This is much improved from an adjusted EBITDA loss of 5.4 million in the same quarter last year.

This improvement is the result of our continued focus on prudent spend across organizations, including the efficiencies we identified and implemented through actions like our reorganization that was completed in our fourth fiscal quarter of last year. Total adjusted R&D, selling and marketing, and G&A expenses were up 7% from a year ago. Adjusted R&D expenses were flat to last year. We increased investment in sales and marketing in order to capture more of our TAV. Much of this is for outbound salespeople. Adjusted G&A costs were up largely due to increased operating expenses tied to the growth of our capital program. As a percentage of revenue and gross profit, total adjusted R&D, sales and marketing, and G&A expenses declined year-over-year.

We had an adjusted income of $11.8 million versus an adjusted income of $0.4 million last year, thanks largely to the improvement in the items driving our adjusted EBITDA performance and growing net interest income in the quarter, which increased by approximately $2.6 million from a year ago. We continue to actively manage our share-based compensation and related payroll taxes, which were 23.6 million, down from 34.5 million a year ago, and approximately 10% of revenue, down from 18% in the same quarter last year. Overall GTV in the quarter came in at 23.1 billion up 3% year-over-year. Growing categories were partially offset by certain retail categories such as bike and home and garden that declined year-over-year. GTV growth was more modest this year, owing to a challenging macro environment and given management’s attention was focused on Unified Payments.

In fiscal 2025 however, increasing our high GTV customer base and growing our GTV will be a major focus for both retail as well as hospitality as you heard from JP. The good news is that GTV from our flagships is up 29% demonstrating that for a target customers and with our flagship products, we are seeing good success. This quarter we also continued to grow our sophisticated higher GTV customer base. Customer locations with GTV exceeding 1 million and 500,000 a year, both grew by 7% in the quarter, whereas those with GTV under 200,000 declined. As we focus on more complex higher GTV merchants, we expect the under 200,000 annual GTV cohorts to continue to decline. This churn is planned for, and as a reminder, these customers represent only 5% of our overall GTV.

As we churn off these lower value customers, we expect it will continue to impact our net location growth. However, the overall health of our customer base will continue to improve. Total ARPU in the quarter came in at $447 up 28% year-over-year. Unified Payments is helping increase overall ARPU as we mandate payments for all eligible new and existing customers, and we’re seeing healthy growth in software ARPU as well. Churn rates in the quarter are still below the levels we had anticipated for Unified Payments and the vast majority of our overall customer churn is in the cohort of customers processing under 200,000 in annual GTV. We had prepared for churn to increase as we rolled out Unified Payments, yet it is encouraging to see that the majority of our customers recognize the benefit of an integrated software payment solution and the value of the Lightspeed commerce platform.

In terms of our balance sheet, Lightspeed closed the quarter with just under 750 million in cash and cash equivalents, down slightly from approximately 761 million in the previous quarter. Merchant cash advances used 8.3 million of capital during the quarter. If we exclude the growing capital business, overall, cash burn in the quarter was just under $5 million down from under $10 million last quarter. Turning now to our Unified Payments efforts. At this stage, I believe that Unified Payments has been a success and we’re on track to end the year with GPV between 30% to 35% of GTV. Although we are happy with how Unified Payments has progressed, we will continue to focus on monetizing more of our GTV through our payments offering in the next year.

I am very proud of everyone involved in Unified Payments. It has been a significant initiative for Lightspeed and our employees continue to execute. It demonstrates how effectively this organization can achieve its goals once we set our mind to it. Now onto outlook. In the quarter ahead, most of our payments efforts will be focused on international markets, which as expected are taking longer than North America to convert. It is also worth noting that our fiscal Q4 is our seasonally slowest quarter from a GTV perspective. Given transaction based revenue is over 60% of total revenue and highly dependent on GTV growth. We remain conservative on our GTV growth assumptions, given a still subdued macro and we have not seen any signs of improvement in the first month of the calendar year.

For the full year of fiscal 2024, we’re increasing the lower end of our outlook and narrowing the range to total revenues of between 895 million and 905 million with breakeven or better adjusted EBITDA. With that, I will pass the call back to JP.

Jean Paul Chauvet: Thanks, Asha. At this stage, I’m highly confident that we will accomplish the goals we set ourselves at the beginning of the year, and particularly in the area of Unified Payments and profitability. Our attention is now turning to next year. As I stand back and look at our prospects, a few things stand out for me. One, our time is very large numbering in the millions and we maintain only a few hundred thousand customer locations. Two, our products are industry leading, especially for the more complex IGTV customers. Three, global reach for complex retailers and restaurateurs is unmatched. And four, our scale allows us to invest in our business without sacrificing profitability. It is very clear to myself and the Senior Management Team that the metrics we must focus on in fiscal 2025 are GTV growth and increasing the number of high GTV locations.

We will approach this challenge with the same level of commitment and execution as with Unified Payments, and I’m confident that we will deliver similar levels of success. With that, I will turn it over to the operator to take your questions.

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Q&A Session

Operator: Thank you. [Operator Instructions]. Your first question comes from the line of Dan Perlin from RBC. Please go ahead.

Daniel Perlin: Thanks. Good morning. I wanted to spend a second just back on Unified Payments for a second. You’ve mentioned several times as you have in prior quarters that the international market needs a lot more education. It’s been slower to adopt. I guess I have two questions there. One is, does the pace of payment adoption in the international market in any way, shape or form act as a gating kind of mechanism to slow your software growth or were you willing to sell software first and then come back and get payments later? So that’s kind of the first question I have.

Jean Paul Chauvet: Yeah, so good morning. I’ll take this one. I think when we think about Unified Payments in Europe, there are two sequences. The first sequence is new customers, so new customers buying our software and on that front, we bundle both. So, you could not buy software without payments. And on that front we’re seeing close rates that are strong adoption, that’s strong. So there’s — I think that’s the first good news is we are seeing on the new customer front that they are buying payments. Then the second big block here is existing customers and upselling existing customers to payments. And here as you know, we have planned for a slower adoption because it just simply puts more conservative markets. So, — but again, I just want to point out one data point here that’s very interesting is, planned slower growth, but still if — Lightspeed it’s up about 250% year-over-year when you look at European GPV.

So there is strong adoption and it is very much in line with what we have planned.

Daniel Perlin: Okay. No, that’s super helpful to kind of I guess bifurcate those two pieces to it. The second just quick follow-up question is the idea around expanding outbound sales to go after higher GTV locations. And it sounded like it was pretty clear investments are going to outpace revenue growth. And so the question I have there is, is there, I know you’re not giving guidance for 2025, but is there a risk — and maybe not a risk, is there just a cadence that we should be mindful of that EBITDA could be negative in the first half and maybe as that gets expounded and then it re-accelerates materially in the back half or should we be expecting a more kind of a positive cadence throughout the next year? Thank you.

Asha Bakshani: Thanks, Daniel. I’ll take that. You’re absolutely right. We did talk about outbound. We are planning to make some significant investments in our field outbound. We found, because we have field reps today, and we found that the unit economics on a field reps customer that they signed are much better because they’re much more efficient in going after our ideal customer profile. So, while we do expect that the investment will proceed revenue growth, we’re very confident that we’re still going to be adjusted EBITDA. We’re generating adjusted EBITDA profitability next year. And we do expect to pivot a little bit more towards growth than profitability, as you heard from our prepared remarks, but still very confident that we’ll be generating EBITDA margins next year.

Daniel Perlin: That’s great. Thank you so much.

Operator: Your next question comes from the line of Andrew Bauch from Wells Fargo Securities. Please go ahead. Andrew, your line is open.

Andrew Bauch: Sorry about that. Thanks for taking the question. Just want to dig into the GTV trends in the quarter and what you’ve seen thus far in the first couple of months here. I know you called out some weakness relative to macro, but maybe I could clarify your comments, Asha, I think you said that the trends haven’t improved into this quarter. Does that mean that there’s further deterioration that you’ve seen, but any additional color there would be helpful?

Asha Bakshani: Yeah, absolutely. Thanks for the question, Andrew. So GTV was really a mixed bag. I will talk about the performance in Q3 and then I’ll talk about January in a minute. The overall GTV as you heard from us was up 3% and that was largely driven by the macro in retail North America. Even though the holiday season was better than we had forecasted for last year it was still year-over-year growth was lower than we’ve seen historically at Lightspeed for the busy holiday season. We did have strong GTV growth all across Europe, and we had double digit GTV growth in APAC hospitality as well, but that again was muted by the declines we saw in several retail verticals such as bike and home in North America. In January we actually saw similar levels in the retail side, but we saw larger declines when it comes to our U.S. hospitality portfolio.

I don’t think that’s a Lightspeed specific stat, but at Lightspeed we did see in U.S. hospitality declines year-over-year. And so, when we — when all told we put that together and we look towards — forward to our Q4 guide, we want to remain prudent and conservative to make sure that we put out a commitment that we’re confident that we can meet.

Andrew Bauch: Yeah, and I’m sure the weather probably had something to do with that?

Asha Bakshani: Yes, in our retail North — sorry, our hospitality North American portfolio remained very much impacted by the weather in January.

Andrew Bauch: Got it. I guess my follow-up is the disclosure that you guys give around the customer locations by GTV tier, isolating the smaller merchants, the sub 200,000, remind me have we gotten that data point on a percentage of volume of overall GTV meaning and if we have, can you remind us what that was and if it’s changed over the last year or so?

Asha Bakshani: Yeah, absolutely. The under 200k annual GTV customer cohorts represent about 5% of the overall company GTV. And that it hovers between 5%, it goes down to 4%, but it’s always in that range. So again from a customer location standpoint, it’s a larger percent for sure. It’s about 30%, but overall it represents 5% of our GTV and as you’ve heard from us, this is a cohort of customers that we expect will turn over time. They don’t represent a large monetization opportunity for us. So these are again customers that we acquired through the nine acquisitions that we did over the past few years.

Andrew Bauch: Yeah, it’s good to hear that if they do churn, it’s not a major GTV headwind. Alright, I’ll jump back in the queue. Thank you.

Operator: Your next question comes from the line of Andrew Jeffrey from Truist Securities. Please go ahead.

Andrew Jeffrey: Hi, good morning. Appreciate you taking the questions. I just I want to try to dimensionalize long-term or just reconfirm maybe the Unified Payments aspirations. JP and Asha, do you think that that GPV can be a 50% attach, is that still a reasonable long-term goal, what would be the timing for achieving that, and what’s the geo mix look like, maybe you could help us by talking about where GPV attaches in North America versus Europe today and where you think that could go?

Jean Paul Chauvet: Yes, absolutely. As we always said, our next step and our ambition is to get to 50%. As we said, this year we’ll get to 30%, from 30% to 35% and we’re fairly confident we’re going to get that number. And what we said is the following year we could go between 40% and 45%. So we are very much on track for that and we believe that there’s no — there’s nothing stopping us. And even going back to the question we had on Europe earlier on, we had planned for a slower adoption in Europe, but the adoption is happening and just when you look at the attach rates on new customers, which is almost a 100 — very close to a 100%, that just over time when you look at the churn and how it works will bring us to 50%. So there’s no doubt in our mind.

I think maybe just answering the second question, of course, we’re way more advanced in the U.S. We started Unified Payments before. I think it’s a less conservative market. And there now we are actually working hard at Lightspeed to actually unleash all the verticals that we couldn’t unleash, like high risk. And so we’re really working hard now at expanding the TAM in the U.S. so we can continue having very strong penetration.

Andrew Jeffrey: Okay. That’s helpful. Thank you. And then — and I appreciate the emphasis on revenue growth, especially given your size and the TAM and also the outbound sales efforts. But — and again, I recognize you’re not guiding 25, but as we think out over the next several quarters, did we expect kind of a hockey stick at some point in software revenue growth, because pre your subscription revenue, it is pre your Unified Payments efforts, you were growing really fast. So I wonder if you could just maybe qualitatively talk about whether or not we see a real kind of hockey stick kind of inflection in your subscription revenue growth when you get everything sort of pointed in the right direction?

Jean Paul Chauvet: Yeah, so again, just setting the table here is, we said that this year we would focus on Unified Payments. And so when we say that that means that all the account managers that traditionally are upselling customers on software, that are traditionally expanding the capabilities of our customers with software, they have been almost a 100% focused just on selling payments. So that’s why what happened this year is penetration rates on payments went up, revenue on payments as I said even in Europe up 250% year-over-year. But that means that the software growth is not as strong as it would traditionally be because people are just focusing on software — sorry, on payments. As we exit this year, and we start now, especially in North America because it’s getting close to job done, we are now going to have our account managers that are going to go back into, hey, here are all the modules in software that our customers are not using and expanding that.

And I think maybe the last piece that I think is very interesting is Lightspeed Capital, where we are — which commands a very strong growth margin. That’s also going to be kind of one of the focus points for next year. So there is a, what you will see is as we go into next year, you’ll start seeing software growth go up again and go back to historical levels.

Andrew Jeffrey: Great. Appreciate that. Thank you.

Operator: Your next question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Please go ahead.

Thanos Moschopoulos: Hi, good morning. Can you provide some color on your churn experience in Europe as you’re ramping up Unified Payments, is that consistent with what you’ve seen in North America, or are there any regional nuances there?

Jean Paul Chauvet: Yeah, I mean, churn has been consistent. So it is under what we expected and we haven’t seen much movement in churn from after Unified Payments versus before. And the same thing is happening in Europe. We are again, at the end want to keep the customers so we are going to sequence it to ensure that we lose as few customers as possible. And I think maybe just going back to one of the comments Asha said, where we’re seeing a more emotional decision is in the low GMV bucket, and those are the ones that could potentially churn, but they’re not really important to us given it’s only 5% of our GMV. So not seeing any movement, not seeing any changes, and we are actually kind of putting the motion in place to ensure that we don’t lose our good customers.

Thanos Moschopoulos: Great. And then on the supplier network, can you update us on which verticals you now have critical mass and which is proving to be a strong differentiator, I mean, so clearly I would assume that’s the case for bikes and for high end apparel, but are some of the other verticals ramping up in that regard?