Ladies and gentlemen, thank you for standing by. My name is Brent, I will be your conference operator today. At this time, I would like to welcome everyone to the Lightspeed 3rd quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at that time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. It's now my pleasure to turn today's call over to Gus Papageorgiou, Head of Investor Relations. Please go ahead. Thank you, operator. Good morning, everyone. Welcome to Lightspeed's fiscal Q3 2023 conference call. Joining me today are JP Chauvet, Lightspeed's Chief Executive Officer, Brandon Nussey, Lightspeed's Chief Operating 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 2023 results presentation available on our website, as well as in our filings with U.S. and Canadian securities regulators. Our commentary 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, and on the SEC's EDGAR system. Finally, note that because we report in US dollars, all amounts discussed today are in US dollars unless otherwise indicated. With that, I will now turn the call over to JP. Thank you, Gus, and welcome everyone. Thank you for joining us this morning. Lightspeed reported another strong quarter today. Our adjusted EBITDA loss of $5.4 million came in better than our expected loss of $9 million. Our revenue of $189 million came in at the higher end of our outlook range of $185 million-$190 million. GPV grew 75%, much higher than our GTV growth of 10%, and on a constant currency basis, GTV grew 17%. I believe our results today reflect Lightspeed's commitment to profitable growth. Part of that commitment is a deliberate effort to pursue larger, more profitable customers. Although customer locations were flat from the previous quarter, we continued to shift towards higher GTV locations. Excluding certain locations as highlighted in our disclosures, customer locations with over $500,000 in annualized GTV grew by 15% over the same quarter last year and now represent 32% of total locations, up from 29% in the same quarter last year. Customer locations with over $1 million in annualized GTV were our fastest-growing cohort, both year-over-year and from the previous quarter, and were up 19% year-over-year. In this quarter, we signed several multi-locations and marquee customers, all with our latest flagship offering, including Sole Trader, a British shoe retailer that operates 28 locations across the UK, adopted our latest Lightspeed Retail offering along with payments. CASETiFY, one of the fastest-growing tech accessory brands reaching one in seven millennials, chose Lightspeed Retail with payments to power their first Australian flagship store. Three-Michelin-star restaurant Le Petit Nice, located in Provence, will be adopting Lightspeed's restaurant and payments. Moët Hennessy will be using Lightspeed Restaurants in its rollout of 1 of its initial restaurant projects. The Sky-Line Club, a Chicago fine dining institution delivering world-class cuisine since 1926, will adopt Lightspeed Restaurants along with analytics and payments. In our B2B network, we were happy to add Santoni, the high-end handmade Italian shoe brand, as well as Gerber Childrenswear. Earlier this fiscal year, I laid out 3 priorities for Lightspeed, which were, 1, to finish the integration of our acquisitions into 2 core platforms and 1 company, an effort we refer to as One Lightspeed. 2, expand payments across our global customer base. 3, position the company to reach profitability. 2 weeks ago, we announced a reorganization that included eliminating approximately 10% of our headcount. The main catalyst for this reorganization was the near completion of our One Lightspeed initiative. As we focused on two flagship offerings, it was always our intention that this initiative would unlock considerable savings for the company. I believe our new structure gives more accountability and authority to our existing senior management team, while at the same time removing costs and complexity from the organization. Approximately 50% of the cost reduction will come from management roles. Under the new org structure, we expect to streamline our organization to leaner working models, focus on key projects and customers, and continue to invest in our growth drivers. Deciding to reduce headcount is never an easy decision. We are parting ways with many talented and dedicated employees that's helped build Lightspeed into the company it is today. It was a necessary decision that strengthens our foundations for future growth. In terms of payments, as I mentioned, we had another strong quarter. Although our GPV still heavily depends on North America, we continue to see strong momentum in APAC and EMEA, where payments was launched just over a year ago. Before I discuss profitability, I want to touch on the current macroeconomic conditions and how Lightspeed is positioned. Given the macro uncertainty, our focus has turned to running the business with a greater focus on profitability. This includes focusing on attracting the right customers, those with over $500,000 in annualized GTV, and upselling our existing base, reducing operating expenses, and limiting marketing spend to areas with the highest returns. I know that the macro environment is presenting challenges for our customers. These conditions only highlight the need for complex SMBs to adopt technology. Lightspeed's cloud-based platform can help SMBs better manage their inventory, operate with fewer employees, eliminate mundane tasks, deliver data-driven insights, and give managers and owners more time to dedicate to their customers. Over the last two years, we have been building the most compelling offering for complex SMBs, and I've received very positive feedback from our customers. In my view, we have never had a stronger product market fit. In addition, we have a more agile, cost-effective, and accountable organizational structure. With costs coming out and accountability increasing, I believe we will be in a better position to address the long-term opportunity ahead of us. Finally, we assembled an exceptionally strong management team with the right experience to take us forward. Through a combination of strong internally developed talent and the addition of experienced and distinguished external candidates, we have the right people in the right positions to continue to build Lightspeed into the dominant platform for complex SMBs the world over. The macroeconomic conditions will likely present a challenge. Economic cycles come and go. I believe Lightspeed has never been better positioned. Getting back to profitability, in the quarter we delivered adjusted EBITDA loss ahead of our previously established outlook. We took the hard but necessary decision to reduce our overall headcount and cost base. I believe we are on track to meet our commitment of adjusted EBITDA breakeven or better in fiscal 2024. I am very proud of the company we are building. Our mission of igniting businesses everywhere in the world is an important one, and our suite of competitive products means we have never been in a stronger position to deliver on this mission. In the end, profitability is a vital part of building a successful business, and to that end, profitable growth will be the key driving force for the company for the foreseeable future. With that, I will hand the call over to Asha. Thanks, JP. Good morning, everyone. I will first provide an overview of our third quarter results, highlighting in particular our continued focus on operating discipline and profitable growth. I will discuss trends we are seeing across our global merchant base and finish with our outlook for the remainder of this fiscal year. Before getting into our third quarter results, I'd like to remind everyone that this quarter's total growth represents organic growth, given that our latest acquisition was made at the very beginning of our third quarter in the prior fiscal year. Turning to the quarter, Lightspeed delivered another strong quarter with adjusted EBITDA loss ahead of our previously established outlook and revenue of $188.7 million at the high end of our range, growing 24% from Q3 last year. Subscription and transaction-based organic revenue growth was 28% year-over-year on a constant currency basis. Recall that in Q3 of last year, we received a one-time payment of $5.5 million from one of our payment partners, and in this quarter, an additional $3 million from a different partner. When excluding the impact of these one-time catch-ups, subscription and transaction-based revenue grew 31% year-over-year, again on a constant currency basis. We exceeded our adjusted EBITDA loss outlook with an adjusted EBITDA loss of $5.4 million ahead of our previously established outlook of $9 million, our lowest quarterly adjusted EBITDA loss in over 2 years. As you've heard from us before, we continue to exercise prudence in our spend. The result of this is continuous improvement in operational efficiency, which has been driving better than expected EBITDA margins. We are happy with our progress here. Turning more specifically to the market environment, we continue to see the impact of foreign exchange rates, inflation, and shifting consumer spending on our merchants' businesses. I will walk you through some of the specific trends we are seeing across our customer base. Last year, we saw third quarter GTV grow 124% and 53% organically over the previous year, driven by back-to-physical shopping and dining in many of our regions. This year, our total GTV in Q3 was $22.4 billion, which grew 10% year-over-year or 17% on a constant currency basis. Omnichannel retail GTV grew by 6%, whereas hospitality GTV grew by 16%. In retail, we saw average GTV per location decline in several of our verticals, with bike shops, home improvement, and pet stores being particularly weak as these categories spiked during COVID and are now coming back to more normal pre-pandemic levels. Hospitality GTV growth was stronger year-over-year, given the impact of the COVID resurgences in the three-month period ended December 31, 2021, declined from our previous quarter. Helping to offset this macro weakness is our ongoing rollout of payments. We are fortunate to have a large customer base that remains under-penetrated with our payment solution. Our payments uptake has resulted in our gross payments volume growing 75% year-over-year to $3.9 billion. We launched payments globally in our last fiscal year, and although still early in our rollout, gross payments volume coming from outside North America is up 44% from the prior quarter. Turning to locations, we would like to remind everyone that Lightspeed remains focused on profitable growth. As you heard from JP, given the uncertain environment and the fact that we derive our highest ROI from upselling our base, our go-to-market focus has shifted to prioritizing high-value GTV customers from a net new perspective and growing our ARPU within our base, primarily through attaching payments. The result is a quarter where overall net new location count was flat from last quarter, but with larger GTV locations growing within the overall mix. Customers with annual GTV of $500,000 were up 15% year-over-year. Customers with under $200,000 in annualized GTV were our fastest declining cohort, down 4% year-over-year. I think it's worth repeating that not only do larger GTV customers tend to adopt more software and their payments potential is much greater, but they also exhibit less churn. As I mentioned last quarter, customer locations with over $500,000 in annualized GTV represent less than 10% of the churn of our overall base. The higher overall ARPU and lower churn from these customers results in our highest LTV to CAC ratios coming from this customer base. After excluding customer locations attributable to the Ecwid eCommerce standalone product, ARPU continues to trend in the right direction, with total ARPU of $348 increasing 20% year-over-year. The bulk of the ARPU increase came from increased payments revenue. The headwinds brought on by a strengthening US dollar relative to foreign currencies was most felt in our subscription revenue line, which was flat quarter-over-quarter and grew 13% from the third quarter last year on a constant currency basis. Transaction-based gross margins improved over last quarter, thanks largely to the one-time catch-up payment of $3 million from one of our payments partners, as well as to Lightspeed Capital. Our merchant cash advance business is gaining traction with merchants globally, particularly in today's economy, where traditional lending institutions are becoming more and more selective with lending to smaller businesses. Our Lightspeed Capital revenue grew 26% from the last quarter and 221% from a year ago, with our default ratios continuing to remain under 2%. Hardware gross margins continue to bring down overall gross margins as rising costs and supply chain issues continue to drive the cost of our hardware up. We had a goodwill impairment charge in the quarter of $749 million. I'll walk you through the mechanics of this. Goodwill is required to be tested for impairment at least annually. Our annual test date is December thirty-first. Given the decline in the valuations of technology companies broadly and Lightspeed's share price specifically, our net assets exceeded our market cap at December thirty-first, 2022. This was a goodwill impairment trigger for us. This goodwill charge is a non-cash accounting entry that does not reflect any current or future cash outlay for Lightspeed. We're also prudently managing our share-based compensation expense and have taken a number of actions to reduce it as a percentage of revenue. Our share-based compensation expense has declined as a percentage of revenue for every consecutive quarter this fiscal year, from 22% in Q1 to 18% in Q3. With the impact of the recent restructuring, we expect this ratio to decline even further. We ended the quarter with approximately $838 million in cash. Our cash decreased by approximately $24 million in the quarter. The largest uses of cash were working capital movement, including the growth of our merchant cash advance business, which we fund from our own cash balances to date. Now turning to our outlook. We expect consumer spending to remain challenged in the near term. Given that our transaction-based revenues are now over half of our total revenues, weaker growth in GTV presents a headwind for us in the months ahead. We expect to remain vigilant on spend and to continue to focus on profitable growth. For the full year fiscal 2023, Lightspeed now expects an adjusted EBITDA loss of approximately $37 million, improved from previously established outlook of approximately $40 million. The company now expects annual revenue to come in at the low end of the previously established outlook of $730 million-$740 million or approximately $740 million-$750 million on a constant currency basis. We remain committed to adjusted EBITDA break-even or better in fiscal 2024. With that, I'll hand it over to JP for closing remarks. Thanks, Asha. Before we go into Q&A, I want to welcome a new member to our senior executive team, Kady Srinivasan. Kady is our new Chief Marketing Officer and comes to us with over 15 years of experience leading marketing efforts at organizations such as Dropbox and Electronic Arts. I'm thrilled to have Kady on our team as we continue to focus on our core customers of complex SMBs, raise our brand awareness, and improve our go-to-market momentum. With that, we'll take your questions. At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your first question comes from the line of Daniel Perlin with RBC. Your line is open. Thanks. Good morning. I just had a couple of questions here, you know, specifically around the subscription ARPU being flat over the past several quarters. Like, you kind of touched on it a little bit, but I guess my question is, as you're making this pivot to obviously more profitable clients, I'm wondering what the pricing environment is, you know, around subscription and to what extent do you have to have discounts to incentivize certain merchants to want to take payments? Thank you. Good morning. I think the last phrase you said that I think is very much in line is what we look at is net take rate, which is net payments and net software. On that front, what we try and do is bundle a package that is gonna be just positive for Lightspeed. When you look at the bigger customers, especially the higher GMV, if I attach payments to the software, you'll realize that the bulk of the revenue on a net take basis is the software. Again, what we try and do is we just try and ensure that we maximize our take rate from when we sell to customers. Got it. Okay. Then on the just quickly on the EBITDA guidance for 2024, I looked back, it looks like you tweaked the language a little bit. You know, I think previously it was breakeven, now it's breakeven or better, but you've got the $25 million now of incremental, you know, annualized savings from this workforce reduction. I'm just wondering, are you suggesting that maybe you're more concerned about the top line to just kind of stay in that breakeven or slightly better range, or should we be thinking about that $25 million actually potentially falling through as we think about 2024 numbers? Thank you. Yeah, thanks for the question. You know, the $25 million in the reorg, you know, we had already contemplated that we would unlock operating efficiencies from the integration of our acquisitions when, you know, when we, when we committed to EBITDA breakeven next year. You know, we do anticipate breakeven or better. We anticipate that that's gonna happen somewhere in the mid-range of the year, given that in Q1 we have our in-person sales and partner and customer summit, which does drag down EBITDA. As you know, Q4 is our seasonally weakest quarter. We do expect adjusted EBITDA breakeven or better for the full year falling within those 2 quarters. Okay. Thank you. Your next question is from the line of Daniel Chen with TD Securities. Your line is open. Hi, good morning. Thanks for all the color on the customer locations. Just wanted to hope you can help me reconcile your comments about targeting larger locations. If we look at the ex-Ecwid locations, those were flat quarter-over-quarter, and then the Ecwid locations actually grew by 1,000 quarter-over-quarter. Just wondering if there are some strategic initiatives that still need to be rolled out or whether there was. Dan, you cut off there at the end. Yeah, just wondering, if you can just help provide some color on why the Ecwid locations grew sequentially by 1,000 locations, whereas the non-Ecwid locations stayed flat sequentially, whereas you guys are targeting to go after the larger locations? Again, just, when we look at Ecwid now, Ecwid is part of Lightspeed Omnichannel. Inside of the omnichannel strategy, we're going after bigger customers, and we're selling them, call it a channel agnostic platform. With that in mind, that has an impact when you upsell or you sell to existing customers the omnichannel platform, that creates new stores on Ecwid. Maybe that's one of the reasons. I think, ultimately we are focused on attracting the larger, more sophisticated, and that's gonna continue, and that's gonna be the focus for the company. That really brings us to profitability. That's really what's, you know, the key message is profitable growth, as I said. Okay. That's helpful. Is it fair to say that if when you upsell a brick-and-mortar store to the Omnichannel, that one location gets counted for the brick-and-mortar store, and then the other location gets counted for the Ecwid? Yeah. When we say stores, these are storefronts, so digital is a storefront and physical is a storefront. Okay. Thanks for that. Any update on getting Restaurants traction in the U.S.? Yeah, look, I think for the U.S., just being very clear, we are going after the more sophisticated segment. We're going after the more established segment. We gave a few names here in our script. Again, we are going to be deploying marketing dollars and sales teams to ensure that we attract the customers in a profitable way. We will not be going after the entire market, but going after the more established as... On that front, we're happy with the progress. Great. Thank you. Your next question is from the line of Andrew Bauch with SMBC Nikko Securities. Your line is open. Please take my question. I just wanted to touch upon the location disclosures. Andrew, we can't hear you very well. Sorry. Nice to see the location disclosures. Looking at the 500,000 above and the number above 15% year-over-year, 19%, are those numbers relatively consistent with what you guys have seen in prior quarters? Do you see any benefits from the shift away from the lower value merchants into those higher cohorts and leading to potentially more growth or more? Centralized focus on that we better win rates in that segment. Yeah. I think I understood, but we could barely hear. But I'm gonna address the question. We are focusing more and more on the $500,000+ and the $1 million+. We talked about this at the Investor Day. When you look at LTV over CAC, and you look at, you know, profitable growth, you have to double down on that segment. What we've been seeing this quarter, like all the other quarters, is the vast majority of our churn comes from customers that are under $200,000 of GMV. What we're seeing here, especially with the economic headwinds or, you know, the difficulties in the economy, the smaller ones are much more prone to churn than the larger customers. I think for us, this, you know, 15% and 19% growth is very much in line with what we've been seeing all year, and I think it's just a good reflection of our focus on that segment. Yes, this is gonna be more and more a priority. I don't know if you remember, but even at the investor day, I said if we have the same number of locations, you know, a few years from now, but all of these are within the right segment, Lightspeed will be in a really strong position. Yeah, definitely understand- Of course, those are the fastest-growing cohorts for Lightspeed. Right. I guess maybe if you could touch upon the One Lightspeed initiative. Are we actually there yet with the final restructuring announcements you made two weeks ago, or is that still on the come in the months ahead? Maybe any updates on the benefits you anticipate to see from that? Yeah. The question I guess is with regards to One Lightspeed and are we on track? We always said as we hit the end of the fiscal year, the vast majority of all our sales are going to be on the new platforms. We did the restructuring early January because that was the right time, because we now have very strong confidence in the products going forward. We are in the final steps of this. We are slightly more advanced with retail than we are with hospitality, but there are still a few little tweaks to do, but we are very much very much on track with what we said. With regards to the expectations here, I mean, we are gonna see... We have seen leverage because now we restructured according to these two products, and we will continue to see leverage. It will just simplify the business everywhere. When you look at acquisition, when you look at, you know, onboarding of customers, support calls, it's gonna just de facto become a much simpler business because we'll be just selling one payment platform globally and one retail platform globally and one hospitality platform globally. Same code base. Thank you, JP. Your next question comes from the line of Andrew Jeffery with Truist Securities. Your line is open. Hi. Good morning, everybody. Appreciate you taking the questions. J.P., I wonder if you could comment a little bit on sales cycle as you increase your focus, tighten the focus on bigger, more complex merchants, and whether or not that's affecting payments attach. Or if the payments attach that kind of stalled out this quarter a little bit as a% of total volume is more of a macro impact. I've got a follow-up. Yeah. So maybe, sales cycles, we, you know, we always have well understood the sales cycles with the, you know, the larger segments. We've been doing this forever. I think that's the real... When you look at the real value prop of Lightspeed, we really shine with the more sophisticated SMBs. We know how to sell, we know how to onboard, so it doesn't change much in our sequence on that front. Second piece of the question, attach rates. We are seeing very good attach rates on new customers. If you look. I think what gets us excited is attach rates in new customers, even outside of the US, are very strong, so we're not having any difficulties on that front. Maybe just to address the last piece of the question, which is, penetration, that is purely a factor of industries and GMV per merchant. Just as a, as a follow-up, if recognizing that nobody's macro crystal ball is particularly clear, you know, it feels like perhaps we're coming to the end of this normalization period that has seen retail, especially in certain verticals to which Lightspeed over samples, perhaps, you know, get to a point of normalization and maybe start to bottom out. How do you think? I understand you're taking an appropriately conservative approach to guidance, but how do you feel about returning to a normal sort of consumer spend environment where we could see more balanced growth across your two primary verticals? You're absolutely right. We are taking a conservative approach to guidance, especially given what we saw in, you know, in the third quarter, where you're seeing overall GMV pretty flat versus the quarter before. You know, we are in a position of strength in terms of, you know, focusing on profitable growth. If and when the macro does turn around, to your point, you know, we're in a position to take advantage of those growth opportunities as they arise. Okay. I appreciate that. Thank you. Your next question is from Josh Beck with KeyBank. Your line is open. Thank you for taking the question. I appreciate the disclosures on the locations by size. I'm just kind of, you know, wondering if we play this forward, you know, a couple of years more or less, how much of a change you expect or potentially we could see in the locations with greater than $500K of GMV? But look, again, talking about a big theme here, the company is focusing on this. Just maybe two years ago, we would probably be much broader in our fishing net with marketing, we would be much broader with sales, and this has changed. Right now we are hyper-focused when it comes to every function in the company, even on our roadmaps, to creating more and more value to that segment. That segment is really important to us, and I think it's very important to the SMB space because when you look even at the GMV, the total GMV, it's hyper-concentrated into the more established. Because we are doing suppliers, we're doing payments, for us, it's just gonna continue to be the focus as we go forward. What we are hoping is that as we continue to focus on that segment, we will see the numbers in the segments that matter do better for Lightspeed. Yeah. I don't know how much more do you want that? Again, what is really great for us, and when we look internally, is we are attracting more of the established. We're looking at churn. The churn is you know, is decreasing in that front. When we look at payments attached, we're now focusing more and more. Even when we're looking at upselling the base, there's a lot of initiatives internally around getting the more established customers. I think finally, what you can expect is with what we're doing with suppliers and verticalization here, you can expect us to see better attach rates as we go forward and better close rates because we'll be helped by the brands and suppliers within those industries to sell. Yeah, feeling good about the strategy and very happy with the results on that front and with the progress with the more established merchants. Okay. great to hear, and maybe just a related follow-up. when you look at, really the marketing and advertising budget, has it been fully recalibrated, which, you know, I imagine involves a shift, you know, from digital and performance more so towards outbound and field sales and that type of thing. Has it been fully recalibrated, or is that something that, you know, will continue maybe to shift as we exit fiscal 2023 and go into fiscal 2024? Yeah. We are in the midst. You know, we just hired a new CMO, and that is probably her number 1 focus today is to try and, you know, recalibrate. Even you'll see updates on the messaging. I think just to be clear, more established SMB for Lightspeed doesn't mean field sales. We are. The majority of our motion is still gonna be inbound, is gonna be marketing-led, and it's gonna be. I mean, the majority of our deals are still gonna be closed, you know, with Zoom and onboarded with Zoom. It's. I think that's what's very exciting to Lightspeed, is that even though these are much more established merchants and, you know, you look at the cohorts and they're much more profitable, the good news is the cost of acquisition is very similar, and most of it is done inbound and, you know, with a recipe that we understand very well. Okay. great color. Thanks, JP. Your next question is from the line of Raimo Lenschow with Barclays. Your line is open. Hey, thank you. Obviously, you can only control what you can control in this environment. Can you talk a little bit about the churn levels on the lower end? Is it just what we're seeing now? Is that just kind of you de-emphasizing it a little bit, or do you see elevated churn coming from the recession already, and how do you see that playing out? I think maybe just overall churn for the company is in line, and so there's no major changes there. What we are continuing to see, and we started exposing this, is we are seeing very much higher levels of churn in the lower end, in the under $200K. That's really, I think, if I remember correctly, it was 84% of our churn, you know, coming from under $200,000. If you go up and as you go to, you know, the $500,000+ and $1 million+, that's where your churn, you know, really becomes almost inexistent, and that's because there is no business failure. Yeah. Raimo, if I can just add on to that. You know, JP used the fishing net analogy. When that net isn't cast as wide to catch that cohort of customer quite as much as we're now focused less on, you're not replacing that cohort and that churn as much as we would have in the past. You're seeing it come through a little more. If that makes sense. Yeah. Okay. Yeah. No, it makes sense. One follow-up is on the, you adjusted the cost base. Now you're adjusting your program. How long will it? What do you anticipate, like, in terms of the impact that will have on the organization in terms of people in the right positions, people in the organization settling down? Is that part of your thinking as well? When do you think we're kind of done with that? Yeah. First of all, as you know, we did a big restructure, the goal of this restructure was to really remove a lot of management, remove a lot of overhead, become much leaner and also focusing on the right segment of customers. There's a number of initiatives that we now narrow to, okay, now we know this is what we're going after. What are we doing that is not in this segment that makes no sense? What part of our org chart has people working on this segment that is not vital to us? I think highest level, we are going to be automating as much as possible for our existing smaller customers, we're gonna focus our people, focus our attention, on, you know, on the segments that matter for us. It is a journey and, you know, we started the journey at the beginning of the year. We are now well progressed with this. I think in my mind, and that's the only way forward, is to look at where is it profitable. When you start digging there and you remove the nice to have, and you just focus on the must-have, the real answer is there. You know, just a simple example is if I know that 50% of my customers are the more established, that means instead of having all my support agents just focus on every customer, I'm gonna always privilege my highest GMV customers. When leads come in and they are, you know, under $200 and we know that, well, we'll probably actually not even try to serve them and not onboard them. I think we need to just remain hyper-focused. As I said, for me, the store counts are not the drivers. The drivers is for every $1 of marketing and every $1 of spend, what is my return? You know, that's the only way forward. As we go forward, you know, we're hoping to get better and better numbers in the more established, and we're hoping that, you know, the entire company is just gonna be focused on that. Yeah. Okay. Thank you. Well done. Your next question is from Eugene Simuni with MoffettNathanson. Your line is open. Hi, guys. Good morning. Just wanted to come back to macro headwinds for a minute. Can you elaborate a little bit on the, let's say, sources of the headwind? I can think of kinda two types, right? One is the normalization, which I think was already mentioned, so kinda the bike shop example. The other is more, is more fundamental, you know, weakness in consumer spending that might be related to kind of recessionary environment. Can you elaborate a little bit? Are you seeing both of those, or is it more one versus the other? Yeah. Thanks, Eugene. You know, it is really both of those. You're right about the COVID, you know, the COVID normalization. We're also seeing with rising interest rates and inflation, just consumer spending is shifting. You know, shifting to groceries, gasoline, things that, you know, are not in our core verticals. In addition to that, we're also seeing some FX headwinds about, you know, almost half of our customer locations are outside the U.S., and so, you know, that revenue is worth less in U.S. dollars. Outside of what you mentioned, I would say those would be the other two headwinds that we're seeing. Got it. Okay. That's helpful. Then related question, I wanted to ask about Lightspeed Capital, which you highlighted again, and sounds like doing very well. Yeah, maybe you can elaborate a little bit on the traction you're seeing there and also in the, you know, more challenging economic environment. Obviously, a product like that could be a little trickier, so would love to hear your philosophy on how you're managing that through that kind of potential recessionary risk. Yeah. Capital continues to go well. Revenue I think is up better than 200% this quarter. Advances, we continue to make it available to a broader base of our customers, and that advance volume has been increasing as well. So far so good on, you know, losses remaining minimal for us as well. We're seeing great returns there. The benefit we have, of course, and the impact of the macro is not something we consider and we factor in, is we see all the trends on a daily basis from our customer base, and that informs, you know, the offers we extend from the merchant cash advance. because we have that line of sight and that visibility into these trends, we can make, you know, what we think are pretty informed, and good decisions on who to advance to and how much. Got it. Okay. Thank you. Your next question is from the line of Thanos Moschopoulos with BMO Capital Markets. Your line is open. Hi. Good morning. With respect to becoming cash flow positive, how should we think about timing? You said profitability should be middle of fiscal 2024. Just given the working capital dynamics, should we think about cash flow being positive maybe a couple quarters after? Or how should we think about that? Hey, Thanos. You know, for now we're focused on adjusted EBITDA breakeven or better. We do manage our cash flows from operations very closely. As Brandon just talked about, you know, our merchant cash advance business is growing, and we are funding that from our own cash balances. As we see that business growing, we should expect to see cash from ops, you know, out of line with our adjusted EBITDA. As that business grows larger and larger, we are considering, you know, putting that off our balance sheet. In the interim, while it's on our balance sheet, we wouldn't expect cash from ops to be breakeven. Okay. Any update in terms of monetizing the supplier network, such as with B2B payments? Will that be sort of the next focus now that you've launched the unified retail and hospitality platforms? How should we think about timing? Yeah, you're exactly right. We are investing a lot in our B2B network. We, we do believe that's gonna be the moat, you know, as we go forward and going into the verticals, working with the suppliers, ensuring that suppliers get the sell-through from the network. That's a big piece of our strategy, but you're absolutely right. When you look at the sequences for us, the number one sequence was to get one product globally, which is Lightspeed Retail (X-Series), you know, integrating all of the greatest of eCom and, you know, omnichannel workflows. So that now is out or will be fully out by the end of this fiscal year. The next step now, we have a lot of initiatives, we'll be announcing a lot on that front. We have now the B2B team working in conjunction with this launch to now create value for the suppliers. We have a number of beta customers on the suppliers, every day we're continuing to improve this. That's next fiscal year, we'll be coming out with a lot of announcements on this and progress with suppliers within the industries that matter for us. Thanks for passing the line. Your next question is from the line of Josh Beck with Morgan Stanley. Your line is open. Great. Thank you for the question. I know that the inbound sales and virtual sales will remain your most important and dominant. I was wondering what the update is on the size and productivity of the outbound sales force, and I guess more broadly, like just the update on the go-to-market in US restaurants. Cool. maybe just again being clear, the outbound is well, we've progressed well. We've hired a lot of people, we are tracking very carefully, you know, LTV over CAC. here in our mind, we are going to use a lot of the outbound for the more established because that's where we can afford to, you know, to have that sequence. we're happy there with what we're doing. I think as we go forward, especially in the context of payments and especially in the context of geographical areas where we have a lot of concentration cities, basically around the world, we will have teams that are going to be, you know, upselling customers on payments and installing customers with, you know, a pure outbound motion. So that's the... With regards to X-Series, and sorry, K-Series and hospitality, we're very pleased with the progress. We've signed a few really good marquee customers in the U.S., that motion is going well. Again, for us, just being very clear, we are optimizing every dollar we spend, and that's the theme. Again, being very focused on hospitality, on the more established, those that really find the value. I think a lot of you have seen the progress we did on that product. It's absolutely outstanding, it is very well suited for established merchants. Like all the other divisions at Lightspeed, you know, coffee shops, small, medium, large coffees, you know, quick serve is not what we're gonna be focusing on. We're gonna be focusing on fine dine, table service, Michelin stars, because those are high GMV customers and give us a really good unit economic. Great. That's clear. On hardware, I know it's not, you know, a super important part of the financial statements, but the decline in hardware, was that also a function of discounting, and just related to payments attach and sort of how you think about everything all together, or more reflective of new location additions or just a change in customer behavior? Thanks. Yeah. You're absolutely right. It's really a result of the discounting, you know, particularly in North America hospitality, where, you know, that's what, you know, the customer base has come to expect given the competitive environment there. You know, as JP mentioned, we're laser focused on LTV to CAC and unit economics on a customer by customer basis. You know, these discounts are worth it in the end for us because the LTV to CAC ratios of those customers, which as you know for us is the larger, more established, the LTV to CAC ratios are very high. It makes sense for us to, even though it requires discounting, you know, that hits our PNL and immediately. Great. Thank you. Your next question is from Clarke Jeffries with Piper Sandler. Your line is open. Hello. Thank you for taking the question. First is, you know, JP, what was the most meaningful change to you in the business environment since last quarter with all this discussion of the macro? I'm trying to get a sense of whether Q3 was really a continuation of the same trends we've been talking about for previous quarters, or if there was really a change here that makes your view of the business environment worse or an improvement, potentially. I'd love to get your thoughts there. Yeah. Look, I think, that's why in my mind I distinguish what we can control versus what we can't control. On what we can't control, the biggest driver, I'm just gonna try and give you a few numbers that are in my mind. Last year, if you look at GMV or GTV growth from Q1 to Q3 was about 25%. If you look at this year, GMV growth from Q1 to Q3 was 0. We were, you know, $21 billion, $21 billion. Twenty-two. Sorry, $22 billion. I think just there, this is for me, the biggest headwind that is not related to Lightspeed is just, you know, spending is not what it was. You compare to last year, a 25% growth on two quarters versus this year, flat. There's not much you can do against that. I think for me, the macro is confirming that our strategy is the right one. The strategy of profitable growth is the right one. The strategy on focusing on the larger customers is the right one because that's how we've been pairing well in a market that's been very difficult when you look at the consumer spend. I think that's why I look at it is a tough year for restaurateurs and retailers, no doubt, when you look at GMV globally, yet we can help them. That's why we're focusing on the higher GMV merchants and doing everything we can to help them automate, you know, and do more with less. I think that's the main answer. Really appreciate it. Then just a follow-up. As we think through the implied guide for Q4, Asha, could you just help us think through the different offsets? I think you mentioned a catch-up payment. There's a currency headwind here. When you think about the items that would grow sequentially versus being flat, potentially offsets that mean that the underlying growth may be up sequentially, but the reported number may be still flat. Could you help us think through the factors there to consider? Absolutely. You know the one time, as you mentioned, is something that we saw in Q3 that was about a $3 million one-time catch-up from a payment processor, which we don't see in Q4. I think what's also important to keep in mind is that Q4 is seasonally our weakest quarter. You know, even in years where there are no macro headwinds, we typically see about a 20% decline from Q3 to Q4 in overall GMV. You know, as we enter our seasonally slowest quarter of the year, that's what we're contemplating in terms of the Q4 guidance. We expect FX to, you know, remain around the same in terms of Q3 levels. I think it's really more the GMV decline and the one time. Those are the two biggest items that we're expecting, you know, to affect the sequential Q3 to Q4 revenue. Perfect. Thank you very much. Your next question is from the line of Richard Tse with National Bank Financial Markets. Your line is open. Yes, thank you. As you sort of move upmarket with these, larger merchants, like, how has the competitive environment changed with respect to, you know, how you sort of go after those markets? Yeah, I think that's the good news, and that's why store count is growing well. As you go up, there's fewer competition. You know, I'm just gonna give you a few examples here. If I'm a coffee shop, I have no real value in understanding Lightspeed's analytics that gives you a magic quadrant of your menu items. Yet, if I'm a Michelin star, I see tons of value in this. If I'm a retailer and, you know, there's no value in our advanced analytics if you're only selling a couple of hundred SKUs. Yet, if I have 10,000 SKUs, that's where I see it. I think as we go upmarket, just simply answering the question, it is a much better landscape for us, where we provide a ton of value to customers. Okay. Then, you know, in terms of capital allocation, clearly you're focused on sort of efficiency here. You know, if you sort of look at the stock and you sort of look at your cash balance, it's just under $1 billion. Would you ever sort of consider, you know, kind of a buyback program? You know, it seems that as you get more efficient and approach break even, that, you know, that cash will get a bit of relief. What's your thinking on that, especially, you know, given where the stock is today here? It's something we continue to evaluate and with the board of directors, obviously. You know, we certainly still feel like we're early in the journey here. We've got a growing part of our business on the merchant cash advance program that, you know, we're leaning into, lots of growth opportunities we still see, and hopefully, you know, the macro environment will start to solidify at some point. These economic cycles do come and go. To date, we haven't concluded to do anything specific there, but we will continue to evaluate it. Okay, thank you. Your next question is from the line of Koji Ikeda with Bank of America Securities. Your line is open. Oh, hey, guys. Thanks for, thanks for taking the questions. Wanted to ask a question on payment attach rates. Doing the math, it looks like it's about flat quarter-over-quarter. Is that right? I guess, you know, kind of thinking forward, how should we be thinking about payment attach rates over the next several quarters, in a presumably tougher macro environment? I think payment attach rates, when we speak to those, that means what% of our new customers take payments alongside, you know, the software when they buy it. I think based on your question, what you're probably referring to is, you know, how much of our GTV do we monetize through our GPV. And that, you know, continues to progress well for us. A lot goes into the equation when you divide those two numbers, a lot of mixed things, both geographically and how specific verticals are performing at any given quarter. You just have to be. There's a lot that, a lot of variability that goes into that when you start to divide those two numbers. Overall, what we focus on is our GPV and is it growing. It's up 75% year-over-year, which is good, steady progress from our standpoint. We'll work hard to keep that going in the right direction. Got it. Thank you. Just one follow-up here, if I may. You know, when I look at the headcount reduction and the $25 million in annual savings, you know, 300 people being affected roughly shakes out to about $83,000 per employee. With, you know, the prior commentary of 50% coming from managers of the headcount reduction, I was just looking for some more color maybe to reconcile the profile of the remaining 50% and what departments were affected there. Thanks, guys. Look, just simply put, and I'm gonna paint the story just so we can understand it. If I'm selling 7 products across multiple regions, in each of these products I'm selling I have many layers. I have contributors, I have managers, then at the top I probably have, you know, somebody accountable for this globally. When you go from, call it 7 to 2, which is what we're preparing to go for as we go into the end of this fiscal year, you naturally just have layers of people in all groups that have been removed from the organization or replaced. At the top, that means you need fewer leaders to run the business, and you have more accountability with fewer leaders and way less distortion in terms of, you know, focus points. That's really what happened. I think just answering your question is like, it is, yeah, unfortunately, contributors, managers, directors, you know, VPs, Cs. There's just a simplification of the business that impacts pretty much everybody. I think for us now that we are in a much leaner organization, we now need to double down on hiring more salespeople, on hiring more onboarders and hiring more support people in the right divisions, in the right geographies. That's what we're doing now is we're between now and call it the end of Q1 next year, we're building, we're building our go-to-market engine. We're building all the functions to double down on what matters now for Lightspeed. Got it. Thanks, guys. Thanks for taking the questions. Your next question is from the line of Timothy Chiodo with Credit Suisse. Your line is open. Great. Thank you for taking the question. I know we touched on this a little bit, but it is a really important idiosyncratic driver for the company, the payments penetration, but specific to the attach, meaning for new customers. I know that we talked about this a little earlier in terms of some of the promotions that you've been doing. I believe those started two or three quarters ago. Could you just talk about what that has done to the payments attach? In other words, how much success it has driven, meaning if the new customer attach for payments used to be X%, how many points higher has it been as a result of these promotions? Do you expect to continue to offer these given maybe some success that you've seen or have not seen? Yeah. I think there's two things in my mind when you look at these promotions. They have two objectives. The first objective was to attach more new customers to payments, and the second objective was to reduce time to transact because you understand that the new economics for us is previously, when it was just software, I sign a customer, I started recognizing revenues. Now what happens is I sign a customer, I get the revenues on software, but I don't get the kick in on payments before they are transactional. Here, a lot of those promotions were really related to getting the customers transactional. If I tell the customer within their first 3 months you're getting a better rate, that's gonna give them an incentive to get the payment terminal up and running, plugged in, et cetera, as quickly as possible, which in returns for Lightspeed will give us a faster revenue recognition on. For that will decrease, you know, greatly your payback. On that front, maybe just again, looking at the 2 blocks, they've had a really good impact. That's why I think for us, especially in markets outside of the U.S. that are much more conservative in terms of adopting payments, we were very happy because these promotions have created attach rates for Lightspeed everywhere in the world, from Australia to Europe, to any country in Europe to the U.S., where we have very strong attach rates on new customers. That's why for me, when I look at it medium term and you look at how churn works in our cohorts, just assuring that you have the majority of your new customers that are buying payments means that over time, you're gonna end up with 50% of your at least 50% of your GMV that is on Lightspeed Payments. Or your GPV, sorry. So that's why we're very happy with both. The promotions really had a very strong impact on time to transact. Actually, this is still the number one focus in the company is removing the backlog between when someone signs and someone becomes transactional. I think there, going back to the first question we had on the call, we will be probably also for the larger customers doubling down with people, you know, with foot on the ground that are actually gonna physically go and plug the terminal in because it is a world where our customers have a number of priorities, and you've got to get them to, you know, plug in the terminal, make it work, et cetera. We're doing everything we can to reduce time to transact. Excellent. Thank you. That's really helpful on the time to transact. The follow-up is around payments penetration. You mentioned earlier that it was sort of flat quarter-over-quarter, and part of that was just related to the verticals that might have higher or lower payments penetration. Maybe you could just recap what those verticals were in the calendar Q4 and how that might change over the coming quarters. Clearly, golf is one, right? That's more seasonal. Also, correct me if I'm wrong, but U.S. retail was one of the earlier parts of the business to get Lightspeed Payments, and I would have expected the Q4 U.S. retail to have stronger volumes just due to holiday season, et cetera. Maybe just recap some of those various industries that are higher and lower and how that'll look over the coming quarters. It just comes back to the messages we've kinda outlined earlier. We're well penetrated in some of our strongest verticals like bike shops and, you know, sporting goods stores and things of that nature. You're absolutely right that typically during the holiday season, we see a nice bump there. As you heard from Asha earlier, and JP earlier as well, this holiday season for those verticals, due to, A, normalization off of COVID, and B, weaker consumer spending just didn't have the bump that we would typically see. That just all contributes to that mix thing when you're doing that math, Tim, of dividing GPV into GTV. That's the macro. Again, as JP said, we focus on what we can control, and unfortunately, consumer spending isn't one of them right now. Okay. Perfect. Thank you, Brandon. If I heard that right, it's more or less that, yes, the calendar Q4 actually would have a better mix of payments penetration, but it was more just that those verticals with the higher penetration maybe were a little bit macro impacted, and that left us with the overall number in that 17% range. You got it. Yeah. Perfect. All right. Thank you for taking all those. Appreciate it. Thank you. Thank you. I will now turn the call back to Mr. Gus Papageorgiou for closing remarks. Thank you, Brent. Okay. Thanks, everybody, for joining us today. We will speak to you all again after we release our Q4 results. Have a great day. Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.