Sezzle Inc (SEZL) 2019 Q4 法說會逐字稿

Thank you for standing by, and welcome to the Sezzle Inc.

investor call.

(Operator Instructions) I would now like to hand the conference over to Mr. Charlie Youakim, Chief Executive Officer and Co-Founder.

Please go ahead.

Thank you, and welcome to Sezzle Inc.'s FY '19 Results Presentation Call.

As mentioned, my name is Charlie Youakim.

I'm one of the Co-Founders and the CEO at Sezzle.

And I'm joined by Paul Paradis, a Co-Founder and our Chief Revenue Officer; and Karen Hartje, our CFO.

Before we start the presentation, we'd like to mention that our hearts go out to everyone affected by the Australian fires.

It was difficult to watch from the United States.

It was a big story here as well as Australia, I can tell you that.

Our hearts go out to all those affected by the fires.

And it's also great to see that the rains have come and put those out.

We'll now get into our results presentation.

A little bit of the agenda.

We'll start with some key highlights, then talk about our mission-driven approach to running our business, our year-end review, and then I'll hand it over to Karen for financial highlights.

I'm also sure you've noticed that we have a new brand look and feel that we're really excited to show off and talk about.

We think that it's a much better representation of what we do and what we are as a company, and we're excited to roll that change out for this annual report.

And we hope you're as excited about the new brand look and feel as we are.

We'll touch on it a bit more later in the presentation.

We'd also like to talk about our past year, obviously.

We're here for that reason.

It was a great year for us.

We had our IPO in Australia, where we were introduced to you all, and we're very excited to have you on board as investors to help support us.

Our game plan is to provide you a big return as you're one of our key stakeholders.

The IPO provided us capital to drive forward with tremendous growth into 2019, and we're happy to report that we did have tremendous growth, which we'll touch on in our key metrics.

If you slide ahead to Slide 3, you'll see that tremendous growth in action.

Underlying Merchant Sales, Active Customers, Active Merchants and Repeat Usage all rose.

So our key metrics continue to rise in tremendous numbers.

Active Customers, for instance, multiplied by 6 over the year.

We've since passed 1 million Active Customers in early February, and we continue to grow in that metric, basically representing the fact that we're at early stages here in the North American market with this product.

And we believe that we have tremendous growth ahead of us.

On the next slide, Slide 4, you'll see some other key metrics that I'm sure you'll all appreciate.

First of all, our total income, 10x-ed.

Our net transaction margin went positive which we all know for many investors was a big key metric to watch.

We went from negative 1% in 2018 to 0.3% positive net transaction margin for 2019.

We continue to see gains on that metric as we progress.

And that's exciting for us, of course, because we're big believers that we want to scale this business tremendously, but we want to do it on a profitable basis.

Net transaction losses also have been decreasing for us over time, going from 2.3% to 1.5% in 2019.

The next slide talks about our agenda, and I'll step right into our mission-driven approach.

When we started the company, we felt it was important to set a mission for what we were behind.

It would be our guiding light and the principles behind everything we did as a company.

And our mission, as you can see on Slide 7, is to financially empower the next generation.

And what does that mean?

If you skip ahead to Slide 8, I think it will really speak to what we're talking about with financial empowerment.

On Slide 8, when you look at American, so this is not including Canada, even though our North American products are -- just looking at the United States here.

But in the United States, looking at age buckets, 20-something, 30-something, 40-something and so on, if you take a deeper look at credit scores by age bucket, you'll really capture the problem that's going on here.

With the 20-somethings or 30 and younger, 67% of those consumers are essentially sub-prime with a credit score below 680.

And that means that they're disadvantaged in terms of getting access to credit.

And lack of access to credit leads to use of credit card -- debit cards and cash.

Continued use of debit cards and cash lead to a lack of building for credit scores.

And what happens is, with Slide 9, we talked a bit about this, it's a vicious credit cycle where users that are unable to get access to credit are unable to improve their credit scores, which continues to lead to a lack of purchasing power.

And that's something that we're trying to actively fix as a company.

On Slide 11, we talk about our beliefs and the reflection of who we are.

We believe that everyone should have a right to financial freedom.

We believe that technology is a powerful thing, and it can lead to really powerful good.

We believe that people deserve to be trusted, and we believe that the future is worth fighting for.

And these beliefs and our mission are really what led us to our branding change, which we talk a little bit about on Slide 12.

And the core idea behind our brand change was that we wanted a brand that represented what we believed in.

And those beliefs are transparency, inclusivity and diversity.

And by pulling in essentially a rainbow of colors, we're now pulling in the ideas of inclusivity and diversity because our population of our stakeholders are a diverse group of stakeholders.

We've got people of all races and religions, gender and sexual preference.

And what we wanted to talk about was that we want to embrace them all as a brand.

We're not just for one type of person.

We're for everyone.

What's exciting for us is this new brand look and feel is a big decision and has been quite a bit of work, quite frankly, and something I cautioned our team about when we launched into it.

But I can tell you we've surveyed a lot of our stakeholders, and the general consensus when talking about this new brand look and feel that we're presenting here to you today has been tremendously positive.

We feel that this brand truly represents us, and I believe that our stakeholders also believe that this truly represents us in a much better way than our prior brand.

We wouldn't have made this decision to change our brand lightly.

We did it with a lot of conversations with key stakeholders.

On Slide 13, we wanted to jump in to discuss our technology a bit.

We think it's one of our key differentiators as a company, the fact that we build all of our technology in-house and that this goes from our underwriting technology to our underlying software as well.

Everything is built in-house, which we think is a key differentiator for us as a company.

And as we continue to progress and make aggressive moves, both with potential product enhancements but also potentially geographic expansion, a strong technology set that is built in-house will allow our company to be quicker and more nimble than our competitors as we make these potential expansions into new product features and new geographies.

We're now a public company, which makes us a bit more mature.

But I think that we still have that technological start-up DNA within us, which is something that we embrace.

And on Slide 14, we talked a bit about one of those startup aspects of us as a company.

In early 2019, we were able to take part in an accelerator program, which generally is reserved for companies that are a little bit smaller than ourselves.

But we saw a unique opportunity to take part in an accelerator program that made a lot of sense for us as a company in our stage.

The METRO Target Retail Accelerator Program occurred in May of 2019, and that helped us in a couple of ways.

First of all, it got us in close contact with an enterprise retailer here in our backyard in Minneapolis with Target, where we're able to talk with a number of key personnel within their organization to understand how our products might fit into an enterprise retailer and what are the key themes that we should focus on as a company when we're talking to enterprise retailers here in the United States to make sure that our product is a winner.

And I think we came away with quite a bit from that accelerator program on that front.

There was also a European side to that program where we met with bigger METRO in Berlin.

And the great part about that is it gives an opportunity to talk with the Europeans about our product as well and to understand how our products might fit into their markets and how it might be a fit for what they're doing in retail in Europe.

Both sides of this program helped us tremendously, and which is why we wanted to touch on here in the results presentation.

Next, on Slide 16, we jump into our discussion of the stakeholder approach.

I'm not sure if everyone listening has heard of that approach.

It's something that we learned while we were in business school, Paul Paradis and myself.

And it's something that we have fully embraced as a company.

There are some big companies out there that also embrace it.

Salesforce is a great example of a company that follows a stakeholder approach.

And we think that it's a better approach for the long run when you're thinking about building the business.

And what does that mean?

So explaining the stakeholder approach.

For us, what that means is identifying our key stakeholders, which we've laid out on Slide 16, and then doing our best to fulfill and do a phenomenal job for all of your key stakeholders.

And if you do that, you'll have long-term success as a company.

So who are our key stakeholders?

I would say, first and foremost, it's the end consumer, the customer using our product and shopping with us at retail sites; and it's our retail partners; our employees, our team, making sure we're doing the best for our own team; our investors, our shareholders, who are -- many of which are on the call here today, making sure we provide a return for those shareholders; and then our community.

And what do we mean by community?

It's kind of an obscure one.

But what I usually say is what community means is you're doing right for the community, but you're also proud of what you do in the community.

So when you're walking around with a Sezzle shirt on or a Sezzle hat on, people think that you're doing cool things, and you're making a very positive impact on the world.

And so I think if you look at all of these key stakeholder elements, the goal is to win for all of them.

And you probably understand, there are some trade-offs here.

If you do some things positively for retailers, you might have to pull and tug at your teams, make them work harder, which is going to maybe hurt morale a bit.

Generally, I find that to be the opposite.

But the idea is all the stakeholders are behind all of our decisions we're making as a company.

And when you do that, you're generally going to be heading in the right direction for the long term.

And that's what we're concerned about as a company, is heading in the right direction in the long term.

We're now going to step through each one of these stakeholders in a little bit more depth to give you a better feel of how we think about each stakeholder.

On Slide 17, we start talking about our consumers.

And the headline at the top nailed it.

We always put our consumers first.

They are the key stakeholder for us.

If we don't fulfill for them, we're going to fail as a company.

And our view is that fulfilling for consumers, winning for consumers helps win with retailers.

And Paul will know this the best.

But when we're on calls with our retail partners, the retail partner generally doesn't even want to see the merchant dashboard, which you'd think they would care about, right?

It's a dashboard they're going to use.

No, they actually want to see the consumer experience.

They want to see how consumers are treated, how fast the checkout is, how easy the product is to use.

So by focusing on the consumer, we're really winning with another one of our stakeholders as well, the retailer.

So we put that consumer first, and the consumer is really who's behind our mission, financially empowering the next generation.

We're also making a big bet on Gen Z. We really believe in the power of Gen Z, as you can see on Slide 18.

This is the next generation of consumers, and this is the most disadvantaged group of consumers in North America when it comes to consumer credit.

The 18- to 24-year-old group is the current Gen Z group that's economically active.

But as you can see in the stat we pull out there, 4.5 million new members of this cohort of users become economically active every year.

This population actually makes up the largest population by cohort in North America with 90 million Gen Z users existing in North America versus 80 million millennials.

So it is the right group to be focusing on, and we are definitely doing that.

In every aspect of our business, we're thinking about how can we better equip our product and our stance towards going after Gen Z. And now it's another part of our rebrand.

We know that inclusivity and diversity and the embrace of inclusivity and diversity are important to Gen Z, which is another reason why we decided to make a branding change.

On Slide 20, you'll see some of the metrics around our consumers and just how much they love our product.

We had, as I mentioned earlier in the presentation, a 6x growth in consumers from 2018, where we had nearly around 150,000 active users to the end of 2019 where we had over 900,000 active users.

We also score extremely well with those consumers.

We're the top-rated BBB, Better Business Bureau, for those that are not familiar, -rated company with an A+ rating.

We had a Trustpilot score of 4.8 out of 5. And our Facebook reviews are 4.8 out of 5. Also not noted on the slide here are Google Play and Apple App Store ratings are also 4.8 plus.

We spend a great deal of our time making sure that consumers love what we do and love our products.

And this love affinity of our product leads to repeat usage.

As you can see from the stats, we already have 80 -- around 84% of our transactions that are coming from repeat users.

Our view is that this market, this buy now, pay later installments market is going to become a multiplayer market.

And the best thing that we can do as a company is continue to focus on consumers so that when there are other options available for them, they choose us first.

On Slide 21, we start talking about our next key stakeholder, our merchant retail partners.

On that slide, we have a large array of brands that we work with.

And we displayed it this way because we work with a large number of retailers.

We have over 10,000 active merchant retail partners, which is a phenomenal number, and it continues to grow at a rapid rate.

And we called it out this way because we are very good as a company in the SMB space.

We started there.

We design systems to make our product work extremely well for SMB retailers.

But now as we start to grow up as a company and expand our reach, we're also starting to step into midsize and enterprise.

We've added brands like Touch of Modern to our ranks, who is a major retailer here in the United States.

And we're also talking to enterprise retailers, as mentioned.

For example, in the Target METRO Accelerator Program, we're starting conversations with enterprise retailers.

But keep in mind, those enterprise conversations do take more time.

As we continue to work those channels, we're aggressively trying to win so that we can continue to scale up the company and create more reach for our product with more retail partners and larger retail partners.

On Slide 22, we talk about that explosive growth in our merchant retail partner network.

We grew from over 2,000 active retailers in 2018 to over 10,000 as we touched on.

And we've also exploded our underlying merchant sales, going from $31 million in UMS in 2018 to $244 million in 2019.

Our next key stakeholder is laid out on Page 23, and that's our team here at Sezzle.

I'm a strong proponent of the importance of building a great team because it's really difficult to build a great company unless you've got great people within it.

What we've done to do that is make sure that we have set our core values as a company, which are listed here, and make sure that we follow those, both in hiring and firing.

Above all, we focus on strong character and integrity.

But we also want to make sure that our team is passionately engaged.

They care about our consumer.

They care about our stakeholders.

They are driven to succeed, which means that they want to win, but not at all cost.

They demonstrate excellent communication, both listening and in proactively discussing topics with key stakeholders.

And of course, they like to have fun because we're working at this all day.

And if you're having fun, that makes it all the better.

And that also helps with retention, which we're really extremely good at.

We have some stats there about our team.

We're currently present in 4 countries.

We've got 9 languages that we speak here.

We're highly diverse.

We've got a number of our team that are going through H-1B processes.

Those are visa processes here, becoming citizens over time in the United States, which we're highly excited about.

And as you can see, our average age is quite young.

We're also located in Minneapolis, which is a little bit light on the start-up side, and that helps us because we've got some serious talent in the Minneapolis area.

We've got some of the best stats around Fortune 500 companies worldwide here in this city.

And those Fortune 500 companies are bringing great talent.

As you might imagine, we're a little bit cold here.

So it's not the weather that's bringing people in.

It's these strong companies and this strong business climate in Minneapolis and Saint Paul.

But those companies are large.

And if you're looking for an exciting young company to work for, well, it's going to be few and far between here in Minneapolis.

And so what that does is it allows us to draw on some really exceptional talent looking for this type of work where they can make a big difference in a smaller company.

And it's also led to fantastic retention for us as a company.

On Slide 24, we touch on another one of our key stakeholders, our shareholders, many of you on the call here today.

What we really wanted to talk about with regard to shareholders is that we understand that investors in our company are a key stakeholder, and it's our job to take their capital and their investment and return it to them at a greater number.

So it's always in our consideration as we think about building our company that investors need a return in our business and our job is to provide a return.

Next, we'd like to talk about our year in review.

Obviously, we touched on it a bit already, an exciting year for us because of the growth and because of the IPO and our first annual report that we present to you today.

But we've had a number of other items occur over the year that we'd like to touch on.

I'll skip through Slides 27 and 28 quickly.

We've already touched on these a bit.

But we've broken down our merchant and customer growth and our UMS growth quarter-by-quarter just to show how consistent the growth has been for us on those key metrics.

The growth continues and the excitement for us has not stopped.

We continue to grow in all of these key metrics.

On Slide 29, we know that Canada was a big endeavor for us in 2019.

And the Canadian team is growing, and the amount of merchants and customers within Canada are growing at a rate very similar to our United States growth out of the gate.

But I would say the one thing that is different is our pipeline in Canada exceeds our early-stage pipeline in the United States.

So the growth, we believe, will be amplified in the near term in Canada, well ahead of where we were in the United States growth curve at the same stage.

We got a picture of Patrick Chan there leading the way.

He's a PayPal vet.

So very familiar with the payment space and very familiar with retail partnerships available in the Canadian space.

The final item we'd like to touch on in our year in review is the regulatory environment here in North America.

As many of you on the call noticed, we did have an issue in the state of California with regulators there.

We did our best to address that issue as quickly as possible to correct it, which we did.

But our plan going forward is to prevent issues like California from happening.

We would like to point out that we have been proactive in our past.

In October 2019, we took the time to meet with the United States CFPB, the Consumer Financial Protection Bureau, in order to teach them about our space and about our company so they could better understand that we are companies that are very aligned with their mission.

When we spoke with CFPB, they told us that they are focused on trying to correct companies that are causing consumer problems.

And if you think about that and look at our company, it's something that we're very aligned with.

We constantly watch consumer reviews, and our goal is to eliminate the 1-star review.

And if we continue to do that as a company, we will be in strong alignment with the CFPB.

So we feel very good about that meeting.

2020, we'll continue to see efforts from our side and making positive relationships with regulators in North America, both in the United States and Canada, to prevent issues like California from occurring again.

I'll now hand the presentation over to Karen Hartje, our CFO, to go over the financial highlights on Page 31.

Thanks, Charlie, and hello to all.

Before we get into the financial presentation, please note that our financial statements are prepared in accordance with U.S. generally accepted accounting principles and are presented in U.S. dollars.

For financial highlights, turn to Page 32.

2019 was indeed a banner year.

Total income of $16.1 million in 2019 is nearly 10x 2018 total income of $1.6 million.

While growing income by 884%, we also drove improvement in our unit economics.

We'll celebrate with a big hurrah as 2019 net transaction margin was positive by 0.3% compared with negative 1% in the prior year.

We'll have more to say about net transaction margin later but wanted to highlight that the improvement was driven partially by the reduction in net transaction loss rate of 1.5% versus 2.3% last year.

2019 EBITDA totaled negative $10.7 million compared with negative $4 million in 2018, reflecting a decrease in earnings of $6.7 million.

This decrease is primarily due to an increase of $6.1 million in compensation-related expenses.

In 2019, compensation-related expenses comprised 65% of other operating expenses and increased by $6.1 million from the prior year due to the addition of 70 new positions.

The total number of employees and contractors as of year-end 2019 was 133 compared to 63 as of year-end 2018.

Our equity raise of $33.3 million in capital, net of costs, was a huge deal in 2019.

Most notably, we had a successful IPO on the ASX, and that is why we are here talking with you today.

I'm sure you all saw the announcement that we increased our committed debt funding capacity to $100 million in early December 2019 to facilitate future growth in underlying merchant sales.

On Page 33, you'll see the dramatic annual growth in total income per the chart on the left as well as impressive quarterly growth from the beginning of 2018 per the chart on the right.

On average, total income increased by 66% per quarter throughout 2019.

On Page 34, you will see that it's been a journey to drive net transaction margin from negative to positive from the second half of 2018 to the second half of 2019.

Now for the first half of 2018, you will see that we were net transaction margin positive.

But at that point in time, we were processing payments through ACH only with bank processing at substantially lower cost than card processing.

We also had no interest expense because we had no debt financing during that time.

We did not close our first line of credit until mid-November 2018.

In the second half of 2018, our net transaction margin was negative 1.4%, followed by negative 0.3% in the first half of 2019 and then positive 0.6% in the second half of 2019.

The second chart on the page reflects how we are successfully reducing losses in 2019 while scaling underlying merchant sales.

Moving to Page 35.

As previously reported, net transaction margin is expressed as a percentage of underlying merchant sales and is a non-GAAP measure that we believe provides useful information about our financial and operating performance.

We processed $244 million in underlying merchant sales in 2019 versus $31 million in 2018, reflecting a 685% whopping increase.

Our Sezzle income includes merchant fees and end customer reschedule fees, net of loan origination cost.

Merchant fees were the most significant element of Sezzle income.

Sezzle income totaled 5.5% in 2019 versus 4.6% last year.

The 0.9 percentage point improvement over the prior year was comprised of 0.5 percentage points in merchant fee income, 0.2 percentage points in reschedule fee income and 0.2 percentage points in lower loan origination cost.

Cost of income increased to 3.1% in 2019 from 2.9% in 2018.

This is an area I want to spend a little time on.

Cost of income is comprised primarily of processing fees paid to third-party payment processors, but it also includes customer communication costs and merchant affiliate program and partnership fees.

Payment processing cost as a percentage of underlying merchant sales was 2.4% for the year ended December 31, 2019, compared to 2.5% in the prior year.

In April 2019, Sezzle changed card processing service providers to lower processing costs.

Savings realized by the change in card processing service providers were partially offset by the increase in card utilization over the lower-cost ACH payment methods.

In June 2018, we transitioned the end customer primary payment method from ACH to card.

And by December 2019, more than 95% of all payments were processed through card.

The 10 basis point improvement in processing cost was offset by a 30 basis point increase in short-term referral fee costs stipulated by agreements with partners and merchants.

This increase reflects the success of our merchant and partnership teams' business development efforts.

Net transaction loss decreased to 1.5% in 2019 from 2.3% in 2018.

The 80 basis point improvement was driven by 40 basis points in lower losses and 40 basis points in higher collected failed payment fees.

Loss reductions were driven by improvements in fraud tools based on our strategies and credit line management as well as increased repeat usage.

Growth in the collected failed payment fee rate was due to the year-over-year lower average order value driven by an increase in repeat usage.

By offering failed payment fee waivers, reschedule options with an easy-to-use dashboard, we are providing our end customers with tools they can use to monitor and successfully make their installment payments.

The final element of net transaction margin, interest expense, increased to 0.5% in 2019 from 0.3% in 2018 for the obvious reason that we did not close on a credit facility to fund the receivables portfolio until November 14, 2018.

Going forward, our focus is to aggressively grow underlying merchant sales while managing costs and maintaining a positive net transaction margin.

On Page 36, you will see that we are well positioned for future growth.

We ended the year with $35 million in cash and cash equivalents.

We increased the size of our committed line of credit from $30 million to $100 million at a lower cost.

At year-end 2019, [$21,350,000] was drawn against the new facility.

The new facility will fund significant growth as every additional dollar of capital supports $14 of underlying merchant sales.

You will find our financial statements in the appendix, starting on Page 38.

We've covered the highlights, so in the interest of time, I won't be going through these in detail as much as I would love to.

Thanks, everyone, for your attention.

This concludes our financial presentation, and we can turn it back to the moderator for questions.

(Operator Instructions) The first question comes from Phil Chippindale with Ord Minnett.

A couple of questions from me.

First of all, can we just talk about the average merchant fee?

That's been trending up, I think in the December quarter it reached about 5.5%.

Can you just talk through the drivers for that recent trend, please?

Phil, this is Karen.

Nice to hear from you.

The increase in the merchant fee is really driven by the fact that as we mature as a business, more and more of our underlying merchant sales are coming from existing merchant relationships and are at the full contract price and don't reflect any type of promotional introductory feature to them.

And so given the mix of the customers we have at this point in time, that's what's driven the increase in the merchant fee rate.

Okay.

Just in terms of a broader question for the team.

Just wondering if you can give us a sense of the level of interest in North America for the buy now, pay later and micro installment sectors.

I suppose that -- we know the Australian markets obviously had a high level of interest for some time, but they're obviously along the ground over there.

And so I'd be interested in the types of and the level of interest that you're seeing at the moment from North American retailers and just how topical those conversations are for them.

Yes.

Phil, this is Paul Paradis.

I think relative to the Australian market, obviously, we are still at earlier adoption stages within the adoption life cycle.

But that being said, it really has started to increase significantly over the past, I'd say, year.

Recently, I was actually on a webinar with an e-commerce agency where they made the comment that buy now, pay later is now becoming table stakes or is being mentioned in every major Board conversation similar to Big Data of a year or 2-plus ago.

So I think we're starting to see just the start of a massive adoption of solutions like ours that I expect to take place over the next 2-plus years.

Paul, while I've got you, maybe can just talk a little bit about the mix of your retailers.

So you're obviously very strong in the SME segment.

Can you talk a little bit about your approach to try and get more penetration into some larger retailers?

I think in the slide pack, you've highlighted your involvement in the Target Accelerator Program.

But just interested in what larger retailers are looking for from buy now, pay later providers?

Is it marketing spend?

Is it great technologies, ease of integration?

What are the types of things that are getting traction for you guys?

Yes, I think it's all the above, Phil.

Certainly, the strength with SME to date has been primarily because they adopt faster and because the awareness of the solution is just taking some time.

To Charlie's point, it just takes longer for these enterprise retailers to adopt.

Many of them have IT road maps that are months, if not years, long.

But we hear a lot of things.

They look at technology, the integration.

They look at customer reviews.

They look at the UI, UX for the customer check-out.

They look at user base.

They look at scale.

They look at what markets you're present in.

So those are all factors that they're evaluating as they look at all the different solution providers.

I think one thing also worth noting is many of them are very interested in pilots.

They want to test this product before they dive in head first.

And so we've really been focused on creating systems within our product feature set that allows for these pilots to occur much easier, including launching virtual card solutions that allow us to launch pilots without any integration pain from the large retailer side of things.

And then in terms of how we're going about acquiring larger merchants, there's many acquisition channels that we're pursuing today.

Certainly, we've been beefing up our direct sales teams, specifically on the enterprise side.

We've also been pursuing many different channel partnerships within payments and retail partners that have existing relationships with retail, looking at how to increase marketing, whether it's speaking engagements, event marketing.

So I don't want to say that there's like one silver bullet, but we're really pursuing a multitude of acquisition channels.

Okay.

And just finally, you mentioned the potential for geographic expansion.

What are the key elements you're looking for in potential new markets that you're looking for?

And then just in terms of timing, when do you think you'd be looking to give us an update on any of those potential new markets?

Is that sort of a second half calendar '20 story?

I don't know if it'd be that soon.

So this is Charlie speaking.

So we look at -- and there are a number of factors, but a couple of the big factors would be market potential and how big could it potentially get in the market that we're looking at, the competitive level in that market.

If there's a lot of competition present in a market, maybe it's not the top market for us to go after.

Then before we had anything in-depth in any market that we might expand into, we'd be doing deep surveys, testing with pilots that basically are very low-cost pilots, potentially low-effort pilots if possible and testing product market set in those geographies before we would put any significant capital to use.

That's why I think it would be difficult to state that we would have anything in the second half of the year to announce, but potentially in 2021.

(Operator Instructions) The next question comes from Grace Fulton with Goldman Sachs.

I was just wondering, with the new brand identity you announced today, how are you planning on rolling that out and communicating that to your customer base?

So we've already started the process of rolling it out.

Chris Bixby, our VP of Marketing, is heading that process.

We have rolled out the vast majority of our widgets to merchant sites already.

We've already communicated -- ahead of our public launch that you saw with the annual report, we had already started talking to our merchant partners about the change, letting them know this was coming so they weren't surprised by it.

So a lot of that groundwork has already been laid and is in process right now.

Okay.

Great.

I was wondering if you could also just characterize how you're seeing the competitive environments in each of your markets of the United States and Canada at the moment.

The United States is the more competitive environment, but we've been in that market since the inception.

And I don't think that -- our feelings are there have been competitors entering our space a little bit more strongly at different stages of our time here in the United States.

So over the 2.5 years that we've been active, it feels relatively stable.

I mean I think competition started entering very early in our lifetime.

And over the last year, it's probably been relatively flat in terms of competitive landscape.

Some competitors have pulled back a little bit from interest rate base.

Some have dived in a little bit stronger.

But overall, it feels relatively flat.

Would you agree with that, Paul?

Yes, I would.

And Canada, like you mentioned, certainly less competitive.

There's really only one other company that are currently offering a similar service.

We have excitement about that market.

But really, my feeling is that because we're at such an early stage in the adoption life cycle, a rising tide lifts all boats right now.

And so I think we're seeing dramatic growth like everyone else is.

And it's actually helped, I think, our growth accelerate even faster than it would have if it wasn't as competitive.

Okay.

Great.

You've mentioned marketing a few times through the prepared remarks and also in earlier questions.

Just sort of to build yourself up over the next couple of years, just how much do you expect you will need to invest in marketing?

And what sort of form will that take?

How much will we need to invest in marketing over what period of time did you ask?

Next 2 to 3 years.

It's a good question.

I mean we take the approach of identifying how much of our overall budget we want to spend on a marketing basis, and then breaking it down from there, what we think the most effective marketing channels will be to acquire those merchants.

I mean obviously, this is a high-growth stage right now.

So we are probably spending more on marketing today than we will 3, 4 years from now.

But I can't comment as to how much we're planning to spend over the next 3 years.

Yes.

It would be difficult at this point to estimate the exact numbers, but I think we're going to take a thoughtful approach on a quarterly basis and looking at our budget and deciding do we want to increase the spend or decrease the spend.

I would like to add, like, overall, if you look at our spend, we have about 1/3 or a little over 1/3 of it in our development and data sciences to further develop our technology as it relates to our product offerings.

The other 1/3 would be in the sales and marketing space.

We have about 20% of that then in customer and merchant support areas, and the remainder in admin.

And so we're pretty equally weighted, I would say, between our development in data sciences investments in our teams as well as the sales and marketing.

There are no further questions at this time.

I'll now hand back to Mr. Youakim for closing remarks.

Well, thank you all for calling in and listening to our first annual report presentation.

We really welcome the interest and excitement about our business, and we hope to continue to produce results for you.

Thank you very much.