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Ladies and gentlemen, thank you for standing by, and welcome to the Lightspeed First Quarter 2021 Earnings Call. [Operator Instructions] Please be advised that today's call is being recorded.And at this time, I would like to turn the conference over to our speaker, Mr. Chris Mammone. Please go ahead, sir.
Thank you, operator, and good morning, everyone. Welcome to Lightspeed's Fiscal First Quarter 2021 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.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 at sedar.com.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 Dax.
Thanks, Chris. Our solid execution this past quarter under historically challenging conditions worldwide helped to cement Lightspeed's position as a leading cloud-based omnichannel solution in our segment. Nimble and innovative SMBs rising to the occasion are abandoning inadequate legacy systems in both the merchant point-of-sale and payment spaces in favor of Lightspeed's modern cloud-based platforms, giving these businesses the capability to run digital strategies alongside physical ones in a simple and integrated manner.The global pandemic has altered consumer behavior in everlasting ways and accelerated the next 3 to 5 years' worth of adoption of omnichannel strategies for SMBs in both the retail and hospitality sectors. The digital transformation forced by COVID-19 has become a permanent state of business. Retailers have doubled down on a shift to omnichannel that was already underway before the pandemic. Plans to overhaul operations in the next few years were accelerated and businesses were brought online overnight. The hospitality sector from quick serve to fine dine is in the similar state of digital transformation, driven by new consumer needs.As new challenges and consumer behaviors emerge, so does the opportunity for small and medium-sized businesses worldwide to build truly end-to-end multichannel shopping and dining experiences with Lightspeed. It is a moment to be seized on, facilitated only by the right technology. Lightspeed has been a clear beneficiary of these digitization tailwinds.Total revenue grew by 51% compared to the same quarter a year ago and topped $36 million. More than 90% of this base consists of recurring software and payments revenue, which grew 57% during the first quarter compared to the same quarter a year ago.The scale and diversity of our customer base has served us well in light of the pace of recovery in reopening markets as Lightspeed's core business has seen a return to levels ahead of last year, driven by strong merchant adoption of omnichannel software and integrated payments.According to our internal data, Lightspeed retail merchants grew their GTV more than 4 to 6x faster year-over-year than the industry average retail GTV in 2019. All indications are that our merchants have continued to enjoy this level of success during the pandemic. We've seen retail GTV continue to accelerate through June, and our restaurant GTV has bounced back sharply, evidence that the resilience of our customer base remains strong.Our customers are well-established, innovative industry leaders, ready to evolve with the new commerce economy, inspired to amplify their sales channels and eager to use technology to future-proof their business for these increasingly digital and virtual realities. Fortunately, this inevitable shift is happening at a time when product innovation at Lightspeed is accelerating, ensuring that we have the right set of solutions in place as our customers rely on us more than ever to enable their digitization journeys.On the retail omnichannel front, we rolled out major improvements to our digital checkout experience, including the availability of our new Mobile Tap, custom hardware and software mobile POS solution, which extends the sales perimeter to anywhere inside the store as well as outside to curbside pickup. And we're now offering digital wallet, which supports a broad range of payment methods globally in a secure and seamless one-click e-commerce checkout experience, driving improved conversion online.Our retail POS app saw further upgrades to its analytics capability with the rollout of Analytics Core, a slimmed down version of our analytics module at a lower price point for customers that, for now, don't require the full solution. By offering a tiered product for reporting, it gives our merchants greater options to grow with Lightspeed at the pace of their business. This further builds upon the inventory management and point-of-sale upgrades we rolled out throughout this past fiscal year to solidify our status as the premier solution in cloud-based retail POS.In this regard, we believe no other retail system operates with the power, depth and sophistication of features required by our segment of merchants, further appealing also to merchants that may have fewer requirements at the outset, but want to do more with technology to differentiate their business in this environment.There's a ton happening also within restaurants. First, I'm pleased to share that we've launched our order ahead capability, featuring enhanced pickup and delivery tools and other integrations. Also, our new e-commerce for restaurant offering is now in beta and features a complete redesign to better fit the evolving needs of customers. Yet another example of rapid innovation from Lightspeed in the hospitality vertical.Finally, the full convergence of our hospitality engineering teams globally into our flagship restaurant POS product will be completed on schedule during the current quarter. The fully redesigned hospitality system delivering on the Lightspeed promise of greatly simplifying complex hospitality workflows will be rolled out to all of our regions methodically over the next several months.Last quarter, we announced our new Omnichannel Loyalty customer engagement tool to help Lightspeed merchants across our entire landscape foster personalized, targeted relationships cohesively within their clientele across channels in a moment where this means more to business success than ever. We've seen strong initial adoption of this new product.As our customers begin to switch focus from stabilizing their operations today to optimizing their future growth, we're very excited to be announcing the initial availability of Lightspeed Capital for our U.S. retail customer base. For those customers utilizing Lightspeed Payments, our new capital offering will assist these SMBs with fast access to up to $50,000 in funds per location that they can use to invest in their businesses much more quickly than they'd be able to accomplish with traditional banks.With Lightspeed Capital, SMBs benefit from a much shorter application and eligibility process versus all of the bureaucracy and paperwork they'd encounter with traditional financial institutions. Our pre-integration with these customer systems provides us with the data and comfort to offer frictionless approval standards. This streamlined process is very important during the pandemic as it gives SMBs capacity to be nimble and strategic as the retail industry undergoes significant transformation.In addition to the foregoing, we will continue investing through this period to ensure our technology remains at the cutting-edge of the industry and that we remain the clear leader for our focused market segments. The importance of our work has never been more crucial. And as such, the market opportunity for Lightspeed has never been bigger.That said, the importance of going to market globally as one Lightspeed is paramount. To this end, we've made great progress in terms of the major rebranding initiative we've had underway to fold in the systems, processes and feature sets of our acquired platforms as one Lightspeed, offering all core products in all core markets.At this stage, both the Chronogolf and iKentoo brands have been completely rebranded as Lightspeed. We expect to complete this same exercise for Kounta later this summer and for Gastrofix to achieve this status by the end of the calendar year.I'd now like to highlight some recent successes within our partner strategy as yet another lever we are utilizing to bolster our go-to-market approach. Lightspeed works with many great partners to help our complex SMB customers manage all aspects of commerce in their business.We're thrilled to welcome Google into the Lightspeed ecosystem as one of our newest strategic partners. With Google, we're working on several broad-based initiatives to make physical businesses more discoverable in the digital space. The first of these initiatives is the Google My Business advanced profile listing solution. Currently in beta, Google My Business greatly enhances the speed to market for Lightspeed customers, compressing the lead time it takes to get a professional business listing set up and running online from what had been a multi-week process down to just a few days.Before I conclude my remarks, I would like to once again thank the Lightspeed family for the tenacity they've shown over the last few months. They continue to deliver for our merchants every single day. They live and breathe our company mission of bringing cities and communities to life through the economic empowerment of SMBs. They believe deeply that all communities and all entrepreneurs deserve to be successful. That is why I founded Lightspeed 15 years ago. The team I did so with was unique as we identified entirely as members of the LGBTQIA+ community.We've built the principles of diversity and inclusion into the very DNA of this company. This year, our inaugural global diversity and inclusion survey showed that nearly 1 in 5 Lightspeeders identify as LGBTQIA+. 9 out of 10 Lightspeeders report that they felt comfortable talking about their culture and background with their colleagues, while 83% of Lightspeeders feel that they can be their authentic selves in the workplace. I'm exceptionally proud of the culture and family we have fostered here at Lightspeed, especially during the last few challenging months.In closing, the coronavirus pandemic has made it clear to our merchants that the cloud-based omnichannel solution Lightspeed provides is no longer simply a competitive advantage but a business imperative as we move forward. Our merchants have demonstrated that they are the thought leaders that will redesign the retail and hospitality experiences of the future to short the economies and livelihoods of the communities that love and appreciate them now more than ever.With that, I'll turn it over to Brandon to review the quarter and our recent business trends.
Thanks, Dax. Overall, we've recorded another positive quarter in the face of a challenging macro environment. Last quarter, we commented that the impacts of the COVID-19 pandemic would accelerate the move away from legacy systems as SMBs adjusted their business priorities. Our first quarter results reinforces belief and signal strength for the long-term prospects of the business.Recapping the first quarter, total revenue was $36.2 million, up from $24.1 million a year ago, representing growth of 51%. Software and payments revenue was 57% higher than a year ago at $33.4 million. When excluding our recent acquisitions of Gastrofix, Kounta and iKentoo, software and payments revenue grew by 34% from the first quarter a year ago.EBITDA loss for the quarter was $2.2 million compared to $5.1 million a year ago. We ended the quarter with over 77,000 customer locations and our GTV for the quarter was $5.4 billion, up 17% from a year ago. Over the past 12 months, our GTV was over $23 billion, up almost 50% from the same period a year ago. We ended the quarter with unrestricted cash on hand of approximately $204 million.So it was a great quarter for us, all things considered.Now looking at some of the specific business trends we saw in the quarter, I'll start with the most encouraging, which was the pace of new business. As mentioned earlier, we feel the long-term outlook for new customer wins will be accelerated given the push to omnichannel cloud solutions and to see the pace of new business be as strong as it was in the quarter, I view as a very positive sign.Overall, despite the challenges faced by our end markets, we grew our customer base in the quarter, over 77,000 customer locations, up from 75,500 at the end of April. This was driven by accelerated new customer adds through the quarter with each month stronger than the month before it. By June, we had added 23% more locations than June of last year and 63% more than we added in April.Of course, partially offsetting this was higher levels of churn. While churn has improved each month from the levels we saw in March and April, we expect tightened churn to continue for the foreseeable future as the industry grapples with social distancing mandates. While business failure in our SMB customer base is outside of our control, as Dax mentioned earlier, the Lightspeed customer base overall is proving to be resilient and generally outperforming the broader industry. We saw this in our GTV trends.In aggregate, GTV rebounded nicely in the quarter from the lows we saw in late March and early April. And by June, we are seeing organic growth return. On the back of strong performance in some of our verticals such as bike, home & garden, sporting goods and golf, our retail segment globally saw growth in GTV over 30% in June compared to June of the prior year. For the quarter overall, growth was 13%, overcoming the initial slowness we saw in April. Within retail, we saw e-commerce growth of close to 100% in the quarter versus the prior year. And by the end of the quarter, we were seeing a strong resurgence in volumes in our physical spaces as well.The restaurant segment also bounced back sharply. As mentioned last quarter, our restaurant volumes were down by 80% or more in the last week of March and into April. However, by the end of June, we saw overall restaurant GTV get back to its pre-COVID levels. As a reminder, the majority of our restaurant customers are in international markets outside of North America, and this diversity is proving to be an asset as countries and economies around the world recover at differing rates.And finally, last quarter, I noted that less than 5% of our customers were on paused subscription plans. Those are now reduced to a negligible amount as customers have become transactional again. So all told, the health of our customer base continues to be encouraging as these businesses leverage our omnichannel solutions. Our retail segment is growing and our restaurant segment is recovering, which leads us to payments.Lightspeed Payments continued its rapid growth trajectory in the quarter. As mentioned last quarter, despite overall lower GTV in April, we saw a record month for Lightspeed Payments in April, and we saw that not only continue but accelerate further as the quarter progressed. Overall payments volumes grew significantly on the back of strong customer demand from both new and existing customers, an industry-wide move to electronic payments and away from cash and outstanding performance from some of our end markets like golf and bike.We saw attach rates, that is the portion of new customers contracting for Lightspeed Payments alongside their core subscription, remain at similar levels to the prior quarter in U.S. retail. Payments for Canada for retail and U.S. hospitality is off to a good start also. And despite these new markets being in early stages of rollout, the overall portion of customers contracting for Lightspeed Payments was strong at over 50% in the quarter.While we do expect some of this payments volume to wane as the seasonal aspect of these verticals starts to settle out in the fall, we are still only monetizing a small portion of our GTV through Lightspeed Payments, and significant runway continues to exist here for future growth. As Dax mentioned, we're also now ready with the initial rollout of Lightspeed Capital for our U.S. payments customers, which is something we think will be met with good long-term demand from our customer base.Lightspeed and Stripe have partnered to create this offering, whereby we will utilize our deep customer insights and use Stripe's existing infrastructure to create tailored capital offers to our eligible merchants. Stripe and Lightspeed will share in the net profit from these cash advances, and Lightspeed will leverage Stripe's capacity for capital, keeping our own balance sheet strong to continue to pursue our growth strategies. Offers are already being served to initial set of customer prospects, and we'll be expanding this program throughout the balance of the year.Now transitioning to our outlook for Q2 and beyond. Our near-term visibility has improved, owing in part to our recurring software-first business model. We are assuming that heightened levels of churn remain for the foreseeable future and are being cautious on both the anticipated new business volumes and customer GTV levels while the pandemic remains ongoing. All told, we expect Q2 revenue in the range of $38 million to $40 million, and we expect Q2 EBITDA to be in the range of $7 million to $8 million loss. Owing to the ongoing uncertainty regarding the duration and magnitude of the COVID-19 pandemic and any possibility of a resurgence, Lightspeed will not be providing full year guidance at this time.With that, we'll turn it back to the operator for your questions.
[Operator Instructions] And our first question comes from the line of Daniel Chan with TD Securities.
Congratulation on a good quarter. Just wondering if you guys can give us a little bit more detail around Lightspeed Capital, maybe provide your thoughts on the timing of its rollout and how the economics work?
Sure, Dan. Yes. So as you heard, we've launched this initially with Stripe, sort of partnership with them, where we'll leverage Stripe's capital infrastructure and Lightspeed's knowledge of the customer to just get this out the door and see how customer demand goes. We're pretty optimistic longer term. This initial launch phase, though, we really are taking kind of a -- like we did with payments, a measured approach as we launch this, work out the customer workflows and generally test overall demand. So kind of next quarter or 2, don't expect huge results from this as we do that. But longer term, we think this will be met with good long-term demand.
Okay. Sounds good. And then you also mentioned -- started from last quarter, but you also mentioned again this quarter that you see a lot of opportunity, displacing some of the legacy on-prem POS systems. How many of your new wins would you say are competitive displacements from legacy systems? And are you seeing any opportunities for displacing some of the newer cloud-based POS?
Yes. Maybe I'll take this one. So generally speaking, the bulk of the market, roughly 80% of the market is legacy systems. And it's a global fragmented market. So I think that's the good opportunity. And we think that with COVID, anyone who's on the legacy system now will want to move to platforms like ours because, obviously, you need to sell across channels. You need -- the online and the off-line worlds need to merge. So that is really the bulk of the efforts for us. And with that in mind, the majority of our new customers come from legacy systems.The second part of the question, the other cloud-based platforms, there's a clear differentiator between Lightspeed and all the other cloud-based POS. We have a very deep functionality set. So it does happen that customers would start on the smaller platforms and then need functionality that only Lightspeed can provide. And I think a good example of that is a lot of the cloud-based systems do not have e-commerce or loyalty or curbside pickup, and we're seeing a lot of traction there because you can't have a point solution and then integrate everything manually. You need to have one vendor that has the integrated solutions.
That makes sense. And last one for me. Now that you have greater visibility into the market, it looks like things are stabilizing and growing again, your balance sheet remains really strong. What's your view on M&A at this stage? And what are the opportunities looking like in the pipeline?
Brandon, can you handle this?
Sure. Yes, we continue to be active there. We've always said that M&A is an important part of the long-term strategy and we continue to be active for sure, seeing lots of good opportunities in front of us, and we'll continue to make this a priority for the business.
Maybe one point to add is we -- it's -- as we said, it's -- every country has a subpar, subscale point-of-sale platform. And here, what we're seeing is that there's probably some good opportunity for consolidation as we move forward.
And our next question comes from the line of Thanos Moschopoulos from BMO Capital Markets.
Can you update us on your payment economics and then how that's been trending? On the one hand, you have more card-not-present, presumably, on the other hand, you're doing some initial promotions. So net-net, how's that shaping out?
Yes, not too dissimilar from what we've always said, Thanos. You're right, there is a slight mix change online versus off-line, and that carries slightly different economics for us. Likewise, in Canada, the economics are slightly different than the U.S. But overall, kind of our 2.6% and 65 to 70 basis point net. That's been holding for us.
Okay. And then looking at your guidance for next quarter, it implies a significant step-up in OpEx. I'm going to guess that a lot of that is a step-up in sales and marketing, just given the improved environments, more investments in new customer acquisition. Is that fair?
Yes, for sure. I mean when this thing all started, we went into cost-containment mode for sure, not knowing what we would necessarily expect from new business demand and so on. And as you've seen today, demand has been good over the past couple of months and into July. So yes, ramping back up on some of that discretionary spend around sales and marketing to meet the demand. And that's what you're seeing in the OpEx guidance.
Great. Can you expand on the Google partnership? Should we be anticipating some associated revenue from this? And you kind of alluded to this maybe being the first step in a broader relationship. I don't know if you can comment on that, but any color would be helpful.
Yes. I mean in terms of the broader relationship, I think it's a series of initiatives that will help physical businesses be more discoverable online. In terms of revenue expectations, we feel that this is being integrated into our retail platform for now. I think it will increase the appeal of our retail platform, as do many of the other feature additions. But we're very excited to partner with Google to make our businesses more omnichannel through discoverability.
And our next question comes from the line of Richard Tse with National Bank Financial.
Yes. Just wondering if you guys are maybe having to rethink the development road map given the backdrop. My guess is that some of these changes are permanent here. And if that's the case, what will be the changes from the former path from a development perspective?
Well, from a development perspective, we've seen an acceleration of omnichannel, which we've been talking about for at least 5 years. So there's an acceleration of that road map. And as you've seen in the last -- even just the last week, we've rolled out more and more tools for merchants to be able to pivot to the new consumer reality, things like our Mobile Tap solution which allows curbside pickup and contactless digital wallet, more analytics tools that are more accessible. So things along those themes of being able to help merchants adapt digitally and for their physical businesses. And we're seeing the blend of those -- the solutions that address the blend of those be more and more requested and demanded, and you'll see our road map continue to accelerate, both for retail and hospitality, in those directions.
Okay. And like the new win rate was really impressive in the backdrop, especially given the churn. Can you maybe give us a bit more color on sort of the types of merchants you're drawing in? I get that you're offering to sort of broad sort of omnichannel offering, but obviously, those are really positive numbers. So is it sort of the typical complex merchants? Or is it a geography that's stronger than others? Maybe just a touch of color on that.
So I'll take this one. But -- so fundamentally, 80% of the market is legacy systems. And when you think about legacy systems, even though they're not connected online, they're very rich, functionally speaking. So when you look at the type of customers that are moving towards Lightspeed, they're really the typical Lightspeed customers that need inventory, that need to understand their cost structure. So it's a more, let's say, the more advanced merchants that could not -- that were using the legacy systems and need a platform in the cloud that supports not only the kind of physical requirements for legacy, but also supports omnichannel. So regardless if it's restaurants or retail, these are the more sophisticated and those -- they're those who need to really understand their inventory and ingredients when you think about restaurants, and most of them have -- obviously have a physical presence and need to sell across channel. So the good news here is nothing has changed. It's really the segment in which we're strong, and we're seeing more demand than ever. And so that's why going back to what Dax was saying, we're accelerating our road map because we feel that there's going to be acceleration of adoption in the market, and we want to be sure that we're ahead of the game. And we're always the best solution for these types of vendors.
Okay. And just last one for me with respect to the earlier question on M&A. Would you guys be thinking about focusing more on sort of expanding the channel? Like you've always been successful in diversifying the business that way or as opposed to sort of technology tuck-ins? Which one are you kind of leaning towards?
We're going to pursue, as we said, and we've always said there are 3 big buckets. The first one is really looking at geographical expansion. So looking at vendors that are providing point solutions within verticals and industries where we have no presence. The second one is really looking at consolidating markets where we already have a presence. And then the third one is really looking at expanding our capabilities. And I think you can expect a mix of all of these as we go forward.
And our next question comes from the line of Paul Treiber with RBC Capital.
Just hoping that you could delve a bit more into the growth that you've seen in e-commerce. You commented 100% year-over-year growth in the e-commerce GTV. Could you put some perspective around that? How much percent of total GTV in the quarter relates to e-commerce? Maybe how that compares versus maybe last quarter or last year?
Yes. Paul, so we saw, unsurprisingly, a pretty significant spike in e-commerce volumes in April and into May. And then what we saw happen into June and carrying through into July is that settled down a bit and the resurgence of the physical. So we sort of see this initial bubble of e-commerce where that becomes a much more significant portion of our overall GTV and then that wane as the quarter goes on, and the volume return to the physical space. I think from our perspective, this is kind of what being omnichannel is all about. However, that volume comes to our merchants, making sure they're able to catch it. And -- but yes, that's what we've seen in terms of the trends in the quarter. So started with a lot more online, obviously. And by the end, was getting back towards more traditional mix, albeit a little more tilted to digital, but a really strong resurgence of both physical retail as well as dine-in on the restaurant side.
And when we think about that mix longer term in the transition to omnichannel, do you see a -- like a natural kind of equilibrium or target where -- I don't know if it gets to 50-50 or a certain -- if you want to throw out a certain number, where you could see that getting to over the next several years?
I think the first natural answer is it depends on the type of retailer and the type of restaurateur. So if I'm a fine dine kind of restaurateur, hopefully, the bulk of my business will always be when people come to my restaurant. And the same thing is a lot of our retailers, if I'm a bike store, if I'm -- they do need service repair. So you'll always have, I would say, the majority of the transactions be done in the physical world in these cases. However, if I'm a coffee shopper, if I'm a quick-serve takeaway, obviously, there, the volumes are going to be much stronger now as we move forward with anything around online ordering and delivery. But I think, generally speaking, going back to what Brandon was saying is the pandemic hit forced everyone to stay home. So we saw a huge spike at the beginning of the quarter with all the online. And at that point, let's say, a big portion of the sales were done online. But I think here, what we're seeing is we're going back to normal levels and normal levels being 85% to 90% of transactions being done in the physical world.
All right. The -- on a similar set of lines, in terms of the growth in customer locations, what's the attach rate of e-commerce websites to -- versus physical locations? How does that growth compare versus last quarter or last year?
So I'll let Brandon talk about the numbers, but I can tell you that the demand is very strong. So -- Dax mentioned we've been praising omnichannel for 5 years. And before COVID, everybody was like, yes, I love the strategy. We have time over time. And I think what happened since COVID, and I think that's the exciting part, is most of the customers who were talking to us, they have omnichannel in mind. So they're not looking at this as a long-term strategy. They're like, okay, I need a vendor that can provide all the abilities that I need for my back office and all the physical, but that can enable me to sell across channels. And so here, I think the conversation is changing quite a bit, where most of the merchants now need the omnichannel or see it as a short- to medium-term solution, whereas before it was very aspirational.So I think it makes us more relevant than ever in a sense that we don't have to explain now the need to sell across channels. We have a strong demand of people coming to us saying, "Hey, I'm on my legacy system. It's very difficult for me to sell online without having silos. Can you provide me one holistic view, one holistic solution that can help me kind of run my business in a new way of transacting." So I don't know if I'm answering your questions but Brandon, maybe you have the more details on attach rates.
No, I think you've answered it well and really specifically broken that out, Paul. But as JP mentioned, we're obviously seeing a lot more e-commerce attach rates. It's always been a product that's sold well for us but getting significantly better in light of the current environment for sure.
Our next question comes from the line of Gus Papageorgiou with PI Financial.
Congrats on a great quarter. Just a couple of questions. I'm assuming a lot of the new customers that have come on board have come on at reduced plans since you did offer some promotions to get new customers. Can you tell us if they were to be paying full price, would that have made a material impact in the quarter? And what do you think the odds are that they'll renew their subscription once their 1-year term is over?And then secondly, just on capital, can you tell us -- do you plan to finance this from your own balance sheet or are you going to be looking for partners? And are you going to be insuring some of the loans like using partners like Export Development Canada?
So yes, in terms of your first question, was it significant in terms of -- I'll paraphrase, but some of the paused subscriptions and concessions we made, for sure, that was an impact on subscription revenue. We said last quarter under 5% of our customers had paused subscription plans, and that comes right out of the revenue line. Along with the discounts that we offer to new customers to join and to adopt new tools, that obviously has an impact on revenue. So for sure, we saw that. We're pretty optimistic. I mean we monitor the health of the customer base and what percentage are getting transactional and so on. But we're pretty optimistic on -- the types of merchants we attract aren't really tire kickers. So we're pretty optimistic that the conversions will happen as really they always have for our customer base, but we'll keep a close eye on that as the year plays out.And then on capital, as we mentioned, we're starting with Stripe, leveraging Stripe's infrastructure and their capacity to do capital, meaning this isn't coming off our own balance sheet here to start. So it won't be an impact from our standpoint on that, and therefore, no need for insurance. I think as this program matures, we'll see where it goes. We're excited to get this in market, offer it to our merchants, try and help during this difficult time for many of them. And we're really excited about the future of it. At the start, this is something we'll be offering alongside our great partner, Stripe.
And our next question comes from the line of Suthan Sukumar with Eight Capital.
Congrats on a strong quarter. First question for me is on some product and on module adoption trends, kind of when looking at your broader portfolio of add-ons available to your merchant base, I'm curious what you're seeing in terms of demand from your existing base over the course of the pandemic compared to what some of the newer merchants have been adding to the core platform right out of the gate.
Yes. So I think, again, everything -- adoption of digital solutions is really what we've seen throughout the quarter, and this is where existing customers are getting to us. So the simplest of example is if I'm a restaurateur and my restaurant is closed, we had a lot of customers come to us with requirements for our delivery platform and curbside pickup platforms. So we sold quite a few of those. And then when you look at our retail customers, obviously, all of those who didn't have e-commerce came to us asking for the omnichannel package. We saw also a lot of adoption on payments because what's happening is, as people are trying to save costs, they're trying to buy more from one vendor, hoping that the bundled cost will be lower. So we've seen quite a bit of that.And finally, Omnichannel Loyalty. We launched our loyalty platform that enables customers to redeem points and reengage across different channels. And so that also had a lot of adoption. So I think, again, the way we're looking at this is we have built this -- kind of this very sophisticated solution over time of modules that were really good for anything digital, and we're seeing a lot of adoption from that. So even though churns are slightly higher than they had been in the past, we've seen a lot of adoptions of the existing customers of the new modules, which helped out quite a bit.
Great. And just with respect to the competitive landscape, how are you guys seeing your peers, especially your cloud-based peers, adapt their strategy with respect to go-to-market or product? And secondly, do you guys see an opportunity to enhance your go-to-market approach even further?
So obviously, the enhance, we're thinking about that every day, trying to make it better. Just I'll address that one and then I'll talk about competition. The way we enhance our go-to-market is by looking at unit economic and trying to figure out how can we do better at the same -- with the same rates. And so here, a good example is because I have a strong attach rates on payments, I can now obviously spend a little bit more money to keep the same unit economics. And so that's how we see acceleration. It's really by deploying all of our new platforms and especially all the financial platforms globally. And so we -- as you know, we started in the U.S., then we moved to Canada, then we moved to restaurants U.S. and Canada. And now we're working hard to deploy this year, hopefully by the end of the year, to deploy our payments globally because that's how we're going to accelerate adoption. It's by having a better LTV because of the attach rates and the better economics on payments, and so we can hopefully spend more and attract more new customers by keeping the same unit economic.So talking about competition. I mean we've always had competition. I'm just going to go back to the market. It's a very big fragmented market. We operate in many different countries and many different continents, and we do not see the same competition everywhere. Now this being said, we understand our segment of the market very well and we have the best solution on the market for our segment. So where we do see competition is in the customers that are maybe not a perfect fit for us or maybe customers that are not as -- maybe slightly smaller or slightly bigger. But we haven't seen a lot of change in the competitive dynamics. Our close rates have gone up. So we're very excited about that.And I think maybe the other point just to add on competition is I think there's a lot of vendors out there that offer point solutions, that are maybe not offering e-commerce and not offering loyalty. And we think it's going to be a bit more difficult for the vendors that have point solutions because of the market dynamics. And as I said, a lot of the customers are coming to us now, not just for a point of sale but they're coming to us for a full set of commerce solutions. And I think it's probably going to be more difficult if you're a cloud-based vendor and you're offering a point solution versus the Lightspeed that offers true omnichannel.
[Operator Instructions] And our next question comes from the line of Josh Beck with KBCM.
This is Alex Markgraff on for Josh. This is more of an extension of a few earlier questions, but just as it relates to the new customers you see coming on to the platform, are you seeing customers that are kind of online first and more secondarily adapting point of sales solutions? Or is it still kind of largely point-of-sale first and then good e-com attach rates?
So we do see a bit of both, but the vast majority are customers that have a physical presence and need to shift from selling across one channel to selling online and adopting to the new models. But we do have -- we also -- we do always, and we've always had customers who are digital-first and also selling in store. Just going back to what Brandon was saying, for us, what's important is not so much where they sell, but it's to provide the full solution to enable any kind of model to work. And if your model is pure digital and then you want to do pop-ups, it does work with Lightspeed. And vice versa, if your model is, I've always been selling in store all my life or serving customers in my fine dine restaurant and now I need to sell online, we can very easily adapt to any model.
Okay. Great, very helpful. And then just last question. As it relates to the payments offering, I mean can you just kind of talk about the progress with the Stripe partnership? And are there any offerings that you've rolled out recently that are kind of directly attributable to that relationship that maybe you weren't able to roll out with other payments partners?
Yes. So we -- in this -- I believe it's been a quarter or 2 where we rolled out Stripe and then extended from U.S. retail to Canada retail and U.S. resto. So we've seen progress and uptake in all of those markets and are excited with the solution that we've been able to provide. This last week, we released Mobile Tap, which allows for curbside pickup and there's an integrated iPad custom solution, hardware solution that's probably only possible given Stripe's hardware that we're able to integrate into our custom solution. So that's a good example of contactless payment and curbside pickup enabled by devices that we have worked on with Stripe.
Perfect. And then I guess just maybe one extension of that. The comment about rolling out payments more globally. I mean is that something that you would attribute to expanded relationships on the payment side as well?
Yes. We will have to expand relationships to cover other regions. And we'd like to -- our ambition is to be able to serve our European and APAC customers by the end of the fiscal year with Lightspeed Payments.
And our next question comes from the line of Todd Coupland from CIBC.
I wanted to ask about the guidance and seasonality when we should expect, I guess, like in golf and garden to slow a bit? Just talk about that. Will we see that in the September quarter? Will it take to the December quarter for that to flow in?
Yes. We're -- I mean I think it's been an extraordinary period of time for bike shops and home & garden and some of these verticals that we serve very well. So we're planning on that, as you said, Todd, almost into -- starting to wane in the fall. We think we're planning for it to continue through the second quarter for the most part and then into the fall, start to see that wane a little bit. With any luck offsetting that will be a good holiday season for retailers and restaurants. But of course, we'll have to monitor how the whole pandemic plays out by then and what impact it may have into the fall and winter periods. But that's what we're -- that's our best insight right now in the seasonality that we're seeing.
Okay. And then just on restaurant. Obviously, restaurants have opened up in the regions that you're focused in, and you're seeing good in-room dining. Just wondering, though, how you're thinking about the waves of the pandemic versus government support and churn rates and all of that over the next few quarters? Have you learned enough about the restaurant market to give any insight into that?
Yes. I mean, I think we -- what we're seeing in the customer base is a resiliency that we hope to see that we do think we have a merchant base that is well equipped to weather the periods of hardship. And certainly, we're testing that at the moment. But I think just how that's played out as we've watched kind of the first wave go through has reinforced that. But looking forward, there certainly is uncertainty. It's -- we'll have to watch it closely as these peaks and troughs happen throughout the world. But I think what we've seen at least through this first wave is a customer base that's better equipped to kind of get through these moments in time.
I think maybe the biggest indicator there is transaction volumes. And so we're keeping a close eye on that, but we're happy to see that the transaction volumes have gone back up or are very close to pre-pandemic, especially in the restaurant. So it is an indicator that the businesses are getting healthier. But as Brandon said, we need to keep our eye on churn.
JP, just one quick follow-up on that. So with curbside starting to fill in and help restaurants, is that a 10% lift for restaurants that are operating at a 1/3 capacity or 50%? What are you seeing across the platform for curbside and delivery?
It depends on the restaurants, again. So if you think about quick serve, we even have quick serve restaurants that are doing much better just with curbside pickup now than they were before. So I think it's really the dynamics when you're selling online are very different, so you need to have a different mindset and be connected to the right marketplaces and be visible. But it really depends on the types of restaurants. But those who have adopted it well, we've seen a very significant pickup in their digital revenues, just put it that way.
And our final question comes from the line of Tien-Tsin Huang with JPMorgan.
Really encouraging results. Just thinking about some of the answers you guys gave around omni and the road map there, is the end goal to be, let's say, indifferent between a digital-first and a physical world first retailer? I'm just curious if that's even in the opportunity set of things that you're considering in terms of road map -- product road map?
Yes. I think that's our perspective. I think the businesses will start from different starting points. And I think that our vision has always been to have strong digital and physical tools where -- that serve as different entry points. And we've seen businesses that started just before the pandemic and moved completely to delivery as the pandemic set in within a few weeks of them opening and be largely a digital business in these first months to the degree that they've opened second locations from which they're doing delivery. And now as dining rooms are reopening, they're doing both. And so that's the kind of business that we foresee really helping to light up both physical and digital strategies. And so yes, I think that Lightspeed solution is -- has that depth and definitely has that -- has those entry points for people to start on whatever makes sense for the business model.
And maybe if I could just add, it's always been -- for us, it's always been kind of the core of everything we've done was selling across channels, and we want to be sure we will continue doing that.
Sure. Understood. And then maybe, Brandon, for you, just thinking about -- with omni and more card-not-present and things like that on the payment side, have you seen any change in fraud or some chargebacks or need to reserve for them? I'm just curious what's been going on the underlying side where you are the payment facilitator.
We haven't seen any meaningful fraud that we haven't detected or recovered or helped our merchants through. We have seen a greater incident rate of it. But again, the types of merchants we serve, just this isn't a huge category risk for us. So yes, we have seen an uptick in kind of potential incidents, but it's all been stuff we've managed through and helped our merchants through.
And ladies and gentlemen, we have reached the end of our allotted time. Thank you for your participation, and you may now disconnect.