[Financial & Operational Highlights](index=1&type=section&id=Lightspeed%20Announces%20Fourth%20Quarter%20and%20Full%20Year%202024%20Financial%20Results) Lightspeed reports strong Q4 and full-year 2024 financial results, marked by revenue growth and improved profitability [Fourth Quarter Financial Highlights](index=1&type=section&id=Fourth%20Quarter%20Financial%20Highlights) Lightspeed's Q4 2024 revenue grew 25% to $230.2 million, achieving positive Adjusted EBITDA of $4.4 million Q4 Fiscal 2024 Financial Highlights (vs. Q4 Fiscal 2023) | Metric | Q4 FY2024 (in millions) | Q4 FY2023 (in millions) | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $230.2 | $184.2 | +25% | | Transaction-based Revenue | $139.0 | $99.6 | +40% | | Subscription Revenue | $81.3 | $76.2 | +7% | | **Net Loss** | ($32.5) | ($74.5) | Improved | | Net Loss per Share | ($0.21) | ($0.49) | Improved | | **Adjusted EBITDA** | $4.4 | ($4.3) | Improved | | **Adjusted Income (Loss)** | $8.5 | ($0.4) | Improved | | Cash and Cash Equivalents | $722.1 | - | - | [Full Fiscal Year 2024 Financial Highlights](index=1&type=section&id=Full%20Fiscal%20Year%20Financial%20Highlights) Lightspeed's full fiscal year 2024 revenue grew 24% to $909.3 million, achieving positive Adjusted EBITDA for the first time Full Fiscal Year 2024 Financial Highlights (vs. FY 2023) | Metric | FY2024 (in millions) | FY2023 (in millions) | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $909.3 | $730.5 | +24% | | Transaction-based Revenue | $545.5 | $399.6 | +37% | | Subscription Revenue | $322.0 | $298.8 | +8% | | **Net Loss** | ($164.0) | ($1,070.0) | Improved | | Net Loss per Share | ($1.07) | ($7.11) | Improved | | **Adjusted EBITDA** | $1.3 | ($33.9) | Improved | | **Adjusted Income (Loss)** | $24.5 | ($25.1) | Improved | - Fiscal 2024 was a milestone year, with the company exceeding its revenue outlook and achieving a full year of **positive Adjusted EBITDA** for the first time[3](index=3&type=chunk) [Fourth Quarter Operational Highlights & Corporate Updates](index=2&type=section&id=Fourth%20Quarter%20Operational%20Highlights) Q4 operational highlights include strong ARPU and GPV growth, new AI-powered product launches, and strategic corporate updates Q4 2024 Key Performance Indicators (YoY) | KPI | Q4 2024 | Change (YoY) | | :--- | :--- | :--- | | **ARPU** | ~$431 | +29% | | **GPV** | $6.6 billion | +75% | | **Total GTV** | $20.7 billion | +2% | | **Lightspeed Capital Revenue** | - | +135% | | Customer Locations GTV >$500k/yr | - | +5% | | Customer Locations GTV >$1M/yr | - | +6% | - GPV as a percentage of GTV reached **32%** in the quarter, a significant increase from 19% in the prior year, demonstrating strong adoption of Lightspeed Payments[1](index=1&type=chunk) - New product releases include AI-powered configuration recommendations, margin-based pricing, enhanced order tracking with Apple Wallet, and Payment Links[6](index=6&type=chunk) - The company announced a reorganization to reduce headcount-related expenses by approximately **10%** (eliminating ~280 roles) and authorized a share repurchase program for up to **10%** of the public float[7](index=7&type=chunk) - Dax Dasilva has been reappointed as Lightspeed's permanent CEO, removing the interim tag[2](index=2&type=chunk) [Financial Outlook](index=3&type=section&id=Financial%20Outlook) Lightspeed provides a positive fiscal 2025 outlook, projecting revenue growth exceeding $1 billion and minimum Adjusted EBITDA of $40 million [Fiscal 2025 Outlook](index=3&type=section&id=Fiscal%2025%20Outlook) Lightspeed projects at least 20% revenue growth and a minimum of $40 million in Adjusted EBITDA for fiscal year 2025 Fiscal Year 2025 Outlook | Metric | Outlook | | :--- | :--- | | **Revenue Growth** | At least 20% | | **Adjusted EBITDA** | A minimum of $40 million | - The company expects to exceed the **$1 billion revenue mark** in Fiscal 2025[3](index=3&type=chunk) [First Quarter 2025 Outlook](index=3&type=section&id=First%20Quarter%202025%20Outlook) Lightspeed forecasts Q1 2025 revenue between $255 million and $260 million, with Adjusted EBITDA of approximately $7 million First Quarter 2025 Outlook | Metric | Outlook | | :--- | :--- | | **Revenue** | Approx. $255 million to $260 million | | **Adjusted EBITDA** | Approx. $7 million | - Subscription revenue growth for Q1 2025 is expected to be consistent with Q4 2024[10](index=10&type=chunk) [Supplementary Information](index=5&type=section&id=Supplementary%20Information) This section details financial outlook assumptions and defines key non-IFRS measures and performance indicators [Financial Outlook Assumptions](index=5&type=section&id=Financial%20Outlook%20Assumptions) The financial outlook relies on stable macroeconomic conditions and successful payment adoption, while acknowledging risks - Key assumptions include continued uptake of payments solutions, manageable churn rates, and successful migration of existing customers to flagship offerings[15](index=15&type=chunk) - Major risks include macroeconomic factors affecting SMBs, exchange rate fluctuations, inability to increase customer sales, competition, and information security breaches[17](index=17&type=chunk) [Non-IFRS Measures and Ratios & Key Performance Indicators](index=7&type=section&id=Non-IFRS%20Measures%20and%20Ratios%20%26%20Key%20Performance%20Indicators) This section defines key non-IFRS measures and KPIs like Adjusted EBITDA, ARPU, GPV, and GTV - **Adjusted EBITDA:** Defined as net loss excluding interest, taxes, depreciation, amortization, and adjusted for items like share-based compensation, transaction-related costs, and restructuring[22](index=22&type=chunk) - **ARPU (Average Revenue Per User):** Represents total subscription and transaction-based revenue divided by the number of Customer Locations[37](index=37&type=chunk) - **GPV (Gross Payment Volume):** The total dollar value of transactions processed through Lightspeed's payments solutions where it acts as the principal[39](index=39&type=chunk) - **GTV (Gross Transaction Volume):** The total dollar value of transactions processed through the software platform, an indicator of customer success and platform strength[40](index=40&type=chunk) [Financial Statements & Reconciliations](index=13&type=section&id=Financial%20Statements%20%26%20Reconciliations) This section presents Lightspeed's consolidated financial statements and reconciliations of IFRS to non-IFRS results [Condensed Consolidated Statements of Loss and Comprehensive Loss](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Loss%20and%20Comprehensive%20Loss) The statement details FY2024 total revenue of $909.3 million and a significantly reduced net loss of ($164.0) million Fiscal Year Ended March 31 (in thousands of US dollars) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | **Total Revenues** | $909,270 | $730,506 | | Gross Profit | $385,250 | $331,961 | | Operating Loss | ($203,019) | ($1,099,040) | | **Net Loss** | ($163,964) | ($1,070,009) | | Net Loss per Share | ($1.07) | ($7.11) | [Condensed Consolidated Balance Sheets](index=14&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, Lightspeed reported total assets of $2.575 billion, with cash and cash equivalents at $722.1 million Balance Sheet as of March 31 (in thousands of US dollars) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $722,102 | $800,154 | | **Total Assets** | $2,575,154 | $2,668,732 | | Total Liabilities | $162,753 | $171,283 | | **Total Shareholders' Equity** | $2,412,401 | $2,497,449 | [Condensed Consolidated Statements of Cash Flows](index=15&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) FY2024 saw improved net cash used in operating activities at ($97.7) million, with cash and cash equivalents ending at $722.1 million Cash Flows for Fiscal Year Ended March 31 (in thousands of US dollars) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | **Cash flows used in operating activities** | ($97,667) | ($125,284) | | Cash flows from investing activities | $25,950 | $8,817 | | Cash flows used in financing activities | ($6,226) ($35,411) | | **Net decrease in cash** | ($78,052) | ($153,500) | | **Cash and cash equivalents – End of year** | $722,102 | $800,154 | [Reconciliation from IFRS to Non-IFRS Results](index=16&type=section&id=Reconciliation%20from%20IFRS%20to%20Non-IFRS%20Results) This section reconciles IFRS net loss to non-IFRS measures, including Adjusted EBITDA and Adjusted Income, for Q4 and full fiscal year 2024 [Adjusted EBITDA Reconciliation](index=16&type=section&id=Adjusted%20EBITDA) This sub-section details the reconciliation of net loss to Adjusted EBITDA for both quarterly and full fiscal year periods Adjusted EBITDA Reconciliation (in thousands of US dollars) | Period | Net Loss | Adjustments | Adjusted EBITDA | | :--- | :--- | :--- | :--- | | **Q4 2024** | ($32,540) | $36,931 | $4,391 | | **Q4 2023** | ($74,468) | $70,120 | ($4,348) | | **FY 2024** | ($163,964) | $165,229 | $1,265 | | **FY 2023** | ($1,070,009) | $1,036,128 | ($33,881) | [Adjusted Income (Loss) Reconciliation](index=17&type=section&id=Adjusted%20Income%20%28Loss%29) This sub-section provides the reconciliation of net loss to Adjusted Income (Loss) for quarterly and full fiscal year results Adjusted Income (Loss) Reconciliation (in thousands of US dollars) | Period | Net Loss | Adjustments | Adjusted Income (Loss) | | :--- | :--- | :--- | :--- | | **Q4 2024** | ($32,540) | $41,066 | $8,526 | | **Q4 2023** | ($74,468) | $74,066 | ($402) | | **FY 2024** | ($163,964) | $188,499 | $24,535 | | **FY 2023** | ($1,070,009) | $1,044,955 | ($25,054) |

Total revenue of $230.2 million grew 25% year-over-year and annual revenue exceeded previously-established outlook Net loss and Adjusted EBITDA1 improved to ($32.5) million and $4.4 million, respectively GPV as a percentage of GTV was 32% in the quarter, up from 19% in the prior year ARPU2 of ~$431 grew 29% year-over-year with Net Retention Rate of ~110% Lightspeed reports in US dollars and in accordance with IFRS. MONTREAL, May 16, 2024 /PRNewswire/ - Lightspeed Commerce Inc. ("Lightspeed" or the "Company" ...

Q4 product updates feature new data-driven innovations in retail and hospitality to unlock additional customer value and operational efficiencies MONTREAL, April 30, 2024 /PRNewswire/ - Lightspeed Commerce Inc. (NYSE: LSPD) (TSX: LSPD) ("Lightspeed" or the "Company"), the one-stop commerce platform empowering merchants to provide the best omnichannel experiences, today highlighted the multitude of products and services shipped in Q4 to increase scalability through data-driven insights, and improve the exper ...

Financial Data and Key Metrics - Revenue for Q3 2024 was $239.7 million, up 27% year-over-year, exceeding the high end of the previously established outlook of $232 million to $237 million [34] - Adjusted EBITDA for Q3 2024 was $3.6 million, stronger than the outlook of $2 million, marking the second consecutive quarter of positive adjusted EBITDA [34] - Gross Payment Volume (GPV) increased 69% year-over-year to $6.6 billion, with GPV as a percentage of GTV improving to just under 30% from 25% last quarter [57] - Total GTV for the quarter was $23.1 billion, up 3% year-over-year, with growth in Europe and APAC hospitality offsetting declines in certain retail categories in North America [50] - Subscription revenue increased 9% year-over-year to $80.9 million, with gross margins on subscription revenue at 76%, up from 73% in the same quarter last year [47] - Transaction-based revenue grew 38% to $147.8 million, driven by the growth in GPV and the capital business, which more than doubled year-over-year [48] Business Line Data and Key Metrics - Unified Payments initiative is on track to achieve GPV representing 30% to 35% of GTV by fiscal year-end, with strong adoption in North America and progress in Europe and APAC [42] - The capital business saw revenue more than double year-over-year, contributing to a 95% gross margin [88] - Software revenue growth was impacted as account managers focused on Unified Payments, but is expected to rebound in fiscal 2025 as teams return to upselling software [66] - The supplier network continues to expand, with new high-value brands like Tommy Bahama, Baffin, and UNTUCKit joining the platform [41] Market Data and Key Metrics - Europe saw strong GTV growth, with GPV in Europe up 250% year-over-year, driven by new customer adoption and existing customer upselling [17] - APAC hospitality also experienced double-digit GTV growth, though retail in North America faced challenges, particularly in categories like bikes and home [23] - North America remains more advanced in Unified Payments adoption, with efforts now focused on expanding the Total Addressable Market (TAM) by targeting high-risk verticals [7] Company Strategy and Industry Competition - The company is shifting focus towards growth in fiscal 2025, with investments in outbound sales to target high-GTV customers, particularly in retail and hospitality [44] - The company plans to continue expanding its product offerings, including Lightspeed Capital and new POS solutions like Lightspeed Tableside, to enhance customer experience and drive growth [43] - The competitive gap between the company and others in the market is widening, with the company's integrated software and payments platform being a key differentiator [35] Management Commentary on Operating Environment and Future Outlook - Management is confident in achieving the fiscal 2024 goals, particularly in Unified Payments and profitability, with a focus on growing the top line while maintaining adjusted EBITDA positive performance [39] - The company expects to see a rebound in software revenue growth in fiscal 2025 as account managers return to upselling software modules [66] - The company is committed to achieving adjusted EBITDA breakeven or better for fiscal 2024 and expects to continue generating positive adjusted EBITDA in the future [44] Other Important Information - The company closed the quarter with $750 million in cash and cash equivalents, with cash burn excluding the capital business at just under $5 million [52] - The company is focused on improving unit economics through Unified Payments, with LTV to CAC more than doubling for customers taking both software and payments [93] - The company is exploring M&A opportunities to further enhance its product offerings and expand into new verticals and geographies [95] Q&A Session Summary Question: Unified Payments long-term goals and geographic mix [6] - The company aims to achieve 50% GPV attachment, with 30% to 35% expected by fiscal year-end, and 40% to 45% the following year. North America is more advanced, while Europe is seeing slower but steady adoption [7] Question: Software revenue growth and potential inflection point [8] - Software revenue growth was impacted by the focus on Unified Payments, but is expected to rebound in fiscal 2025 as account managers return to upselling software [9] Question: Churn experience in Europe [12] - Churn in Europe has been consistent with North America, with no significant changes post-Unified Payments rollout. The company is focused on retaining high-GMV customers [12][13] Question: Supplier network and vertical differentiation [14] - The supplier network is strongest in apparel and bikes, with expansion into sporting outdoors. The company is enhancing the experience for apparel customers and expanding into new verticals [14] Question: Outbound sales and EBITDA cadence [18] - The company is investing in outbound sales to target high-GTV customers, with investments expected to precede revenue growth. Adjusted EBITDA is expected to remain positive in fiscal 2025 [19] Question: GTV trends and macro impact [22] - GTV growth was mixed, with strong growth in Europe and APAC hospitality offset by declines in North American retail and hospitality. Weather impacted January performance in North American hospitality [23][25] Question: Small merchant GTV contribution [26] - Customers with under $200k annual GTV represent 5% of total GTV and are expected to churn over time, with minimal impact on overall GTV [26] Question: International market adoption and software growth [31] - The company is bundling software and payments for new customers in Europe, with strong adoption rates. Existing customers are being upsold to payments, with slower but steady adoption [17] Question: Direct sales force expansion [79] - The company plans to expand its outbound sales force, particularly in retail in the U.S. and hospitality in Europe, Canada, Australia, and New Zealand [82] Question: Gross margin outlook [97] - Gross margins are expected to remain above 40%, with declining referral fees offset by higher margins from international payments and growth in the capital business [97] Question: Software ARPU and growth potential [114] - Software ARPU has significant growth potential, with customers potentially paying 4x to 5x current levels as they adopt more modules and migrate to flagship products [120] Question: Vertical eligibility for Lightspeed Payments [102] - Approximately 80% of GTV is monetizable, with 15% to 20% in industries or geographies where payments are not yet supported. The company is working on solutions for high-risk verticals [103]

Revenue Growth - For the three months ended December 31, 2023, transaction-based revenue was $147.8 million, a 38% increase from $107.2 million for the same period in 2022[17]. - Total revenue increased to $239.7 million and $679.1 million for the three and nine months ended December 31, 2023, representing year-over-year growth of 27% and 24% respectively[24]. - Subscription revenue accounted for 34% and 35% of total revenues for the three and nine months ended December 31, 2023, down from 39% and 41% in the same periods of 2022[24]. - Transaction-based revenue represented 62% and 60% of total revenues for the three and nine months ended December 31, 2023, compared to 57% and 55% in the same periods of 2022[24]. - Transaction-based revenue for the three months ended December 31, 2023, increased by $40.7 million or 38.0% year-over-year, totaling $147.834 million, and for the nine months, it increased by $106.5 million or 35.5%, reaching $406.476 million[83][84]. Gross Transaction and Payment Volume - The company processed Gross Transaction Value (GTV) of $23.1 billion for the three months ended December 31, 2023, representing a 3% growth compared to $22.4 billion in the same period of 2022[19]. - Gross Payment Volume (GPV) was $6.6 billion for the three months ended December 31, 2023, a significant increase of 69% from $3.9 billion in the same period of 2022[20]. - Gross Transaction Volume (GTV) for the nine months ended December 31, 2023 was $70.0 billion, up 5% from $66.8 billion in the same period of 2022[40]. Customer Metrics - The average revenue per user (ARPU) was approximately $447 as of December 31, 2023, compared to approximately $348 as of December 31, 2022[17]. - The company has customer locations in over 100 countries, with approximately 51% in North America and 49% in other regions[22]. - The company targets sophisticated small and medium-sized businesses (SMBs) and focuses on high GTV customers, which are well-suited for its solutions[22]. Operating Performance - Operating loss for the three and nine months ended December 31, 2023 was $51.5 million and $161.7 million, significantly improved from $824.5 million and $1,016.2 million in the same periods of 2022[27]. - Net loss for Q3 2023 was $40,229, significantly improved from a loss of $814,802 in Q3 2022, with a nine-month net loss of $131,424 compared to $995,541 in the prior year[43]. - Adjusted EBITDA for Q3 2023 was $3,643, compared to a loss of $5,409 in Q3 2022, and a loss of $3,126 for the nine months ended December 31, 2023, compared to a loss of $29,533 in the same period of 2022[42]. Cash Flow and Liquidity - Cash flows used in operating activities for the nine months ended December 31, 2023 were $69.1 million, improved from $83.7 million in the same period of 2022[27]. - Cash flows used in operating activities for the three months ended December 31, 2023, were $18.2 million, an improvement from $26.4 million in the same period of 2022[139]. - As of December 31, 2023, the working capital surplus was $776.5 million, indicating strong liquidity for current and short-term growth requirements[135][136]. - Cash and cash equivalents decreased to $749.4 million as of December 31, 2023, down from $838.1 million in 2022[138]. Investment and Future Growth - Company plans to invest in Lightspeed B2B and AI-powered technology to enhance customer support and solution development[26]. - The company plans to drive adoption of its advanced commerce platform by scaling solutions for complex high GTV customers and investing in marketing strategies to attract new businesses[47]. - The company aims to expand market share and pursue value-enhancing acquisitions to drive future growth[26]. Cost Management - Total costs of revenues for Q3 2023 were $138.2 million, an increase of 34.6% from $102.7 million in Q3 2022[96]. - Research and development expenses for Q3 2023 decreased by $2.7 million or 7% compared to Q3 2022, totaling $34.7 million[101]. - General and administrative expenses for Q3 2023 increased by $1.5 million or 5% compared to Q3 2022, totaling $29.9 million[99]. Market Conditions and Risks - Economic conditions, including inflation and rising interest rates, may adversely affect consumer spending and, consequently, the company's financial performance by reducing transaction volumes processed through its payment solutions[53][54]. - The competitive landscape is expected to intensify, with both large established vendors and smaller companies vying for market share[47]. - The company has increased its allowance for expected credit losses (ECL) due to macroeconomic uncertainties, reflecting a proactive approach to managing credit risk[154]. Financial Position - Total assets decreased by $64.1 million or 2% from March 31, 2023, to December 31, 2023, with cash and cash equivalents accounting for $50.7 million of the decrease[124]. - Total liabilities decreased by $2.9 million or 2% from March 31, 2023, to December 31, 2023, driven by a decrease in current liabilities of $1.6 million and long-term liabilities of $1.4 million[125].

[Management's Discussion and Analysis of Financial Condition and Results of Operations](index=1&type=section&id=MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) [Overview](index=2&type=section&id=Overview) Lightspeed offers a cloud-based commerce platform for SMBs, with its strategy focused on integrating POS and payments, driving 25% revenue growth to $230.3 million in Q2 FY2024 - Lightspeed provides a cloud commerce platform for SMBs, integrating omni-channel sales, back-office operations, and payments[14](index=14&type=chunk)[15](index=15&type=chunk) - The company's flagship solutions, Lightspeed Restaurant and Lightspeed Retail, are being sold as a unified offering with embedded payments, a key strategic initiative to increase customer adoption and monetize a larger portion of GTV[16](index=16&type=chunk)[17](index=17&type=chunk) Q2 FY2024 Key Metrics vs. Q2 FY2023 | Metric | Q2 FY2024 (3 months ended Sep 30, 2023) | Q2 FY2023 (3 months ended Sep 30, 2022) | YoY Growth | | :--- | :--- | :--- | :--- | | Total Revenue | $230.3 million | $183.7 million | 25% | | Gross Payment Volume (GPV) | $5.9 billion | $3.7 billion | 59% | | Gross Transaction Volume (GTV) | $23.5 billion | $22.3 billion | 5% | | Monthly ARPU (ex-Ecwid) | ~$425 | ~$337 | 26% | - Transaction-based revenue has become the largest revenue stream, accounting for **60% of total revenues** for the quarter, up from **55%** in the prior year, reflecting the success of the payments strategy[22](index=22&type=chunk) [Sustainability and Macroeconomic Conditions](index=6&type=section&id=Sustainability%20and%20Macroeconomic%20Conditions) Lightspeed commits to sustainability and DEI, viewing macroeconomic uncertainties as drivers for SMB adoption of its cloud-based solutions - Sustainability efforts include the Carbon Free Dining program, which has planted over **1.5 million trees**, and partnerships with carbon-neutral cloud providers like AWS and Google Cloud[26](index=26&type=chunk) - The company maintains a target of at least **37.5% female representation** on its board and grants equity to all permanent employees upon hiring[27](index=27&type=chunk) - Despite macroeconomic pressures, Lightspeed sees an opportunity as SMBs increasingly replace legacy on-premise systems with modern, cloud-based platforms to manage labor shortages and find new efficiencies[29](index=29&type=chunk) - The company has no significant operations in the Middle East, Russia, or Ukraine but has relocated many personnel from Russia and increased cybersecurity monitoring in response to geopolitical instability[31](index=31&type=chunk) [Key Performance Indicators](index=7&type=section&id=Key%20Performance%20Indicators) Lightspeed tracks ARPU, GPV, and GTV, reporting strong Q2 FY2024 growth in ARPU and GPV, reflecting payments solution scaling Key Performance Indicators (Q2 FY2024 vs Q2 FY2023) | KPI | Definition | Q2 FY2024 (3 months ended Sep 30, 2023) | YoY Growth | | :--- | :--- | :--- | :--- | | **ARPU (monthly, ex-Ecwid)** | Total subscription & transaction revenue per customer location. | ~$425 | 26% | | **GPV** | Total transaction value processed through Lightspeed Payments. | $5.9 billion | 59% | | **GTV** | Total transaction value processed through the software platform. | $23.5 billion | 5% | [Non-IFRS Measures and Ratios](index=8&type=section&id=Non-IFRS%20Measures%20and%20Ratios) Lightspeed uses non-IFRS measures like Adjusted EBITDA and Adjusted Income, achieving positive results in Q2 FY2024, signaling profitability progress Reconciliation of Net Loss to Adjusted EBITDA (Q2 FY2024 vs Q2 FY2023) | (In thousands of US dollars) | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | | :--- | :--- | :--- | | Net loss | (42,492) | (79,943) | | **Adjusted EBITDA** | **242** | **(8,523)** | Reconciliation of Net Loss to Adjusted Income (Loss) (Q2 FY2024 vs Q2 FY2023) | (In thousands of US dollars) | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | | :--- | :--- | :--- | | Net loss | (42,492) | (79,943) | | **Adjusted Income (Loss)** | **6,404** | **(7,468)** | | **Adjusted Income (Loss) per Share** | **$0.04** | **($0.05)** | Reconciliation of Cash Flows to Adjusted Cash Flows (Q2 FY2024 vs Q2 FY2023) | (In thousands of US dollars) | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | | :--- | :--- | :--- | | Cash flows used in operating activities | (24,846) | (23,859) | | **Adjusted Cash Flows Used in Operating Activities** | **(26,455)** | **(22,840)** | [Summary of Factors Affecting our Performance](index=11&type=section&id=Summary%20of%20Factors%20Affecting%20our%20Performance) Lightspeed's performance depends on platform adoption, unified POS/payments strategy, AI investment, and international expansion, facing economic, competitive, and FX risks - A core strategy is the mandatory adoption of Lightspeed Payments for eligible new and existing customers to increase transaction-based revenue and simplify operations[47](index=47&type=chunk) - The company plans to continue investing in product development, including Lightspeed B2B and AI tools, to enhance its platform and drive cross-selling opportunities[48](index=48&type=chunk)[49](index=49&type=chunk) - Performance is sensitive to economic conditions that impact consumer spending and SMB health, as well as competition from a fragmented market of both large and small vendors[46](index=46&type=chunk)[51](index=51&type=chunk) - Foreign currency risk exists as a portion of revenues and expenses are in non-USD currencies. The company uses hedging for some expenses but not for revenue[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) [Key Components of Results of Operations](index=14&type=section&id=Key%20Components%20of%20Results%20of%20Operations) This section details Lightspeed's revenue streams (Subscription, Transaction-based, Hardware) and cost categories, with operating expenses expected to decrease as a percentage of revenue - **Revenue Streams:** - **Subscription Revenue:** Fees for software solutions, sold on monthly or annual plans - **Transaction-based Revenue:** Fees from payment processing (Lightspeed Payments), revenue sharing with partners, and merchant cash advances (Lightspeed Capital) - **Hardware and Other Revenue:** One-time sales of POS hardware and professional implementation services[64](index=64&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - **Cost Structure:** - **Direct Cost of Revenues:** Includes hosting, support salaries, payment processing fees (interchange), and hardware costs - **Operating Expenses:** Comprises G&A (finance, legal, HR), R&D (product development), and Sales & Marketing[69](index=69&type=chunk)[70](index=70&type=chunk)[72](index=72&type=chunk) [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Lightspeed reported Q2 FY2024 total revenue of **$230.3 million**, up **25%**, narrowing operating loss to **$52.0 million** through disciplined expense management Consolidated Statement of Loss Summary (Q2 FY2024 vs Q2 FY2023) | (In thousands of US dollars) | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | | :--- | :--- | :--- | | **Total revenues** | **230,273** | **183,699** | | Total cost of revenues | 134,105 | 102,230 | | **Gross profit** | **96,168** | **81,469** | | Total operating expenses | 148,154 | 168,285 | | **Operating loss** | **(51,986)** | **(86,816)** | | **Net loss** | **(42,492)** | **(79,943)** | [Revenues](index=18&type=section&id=Revenues) Total revenue for Q2 FY2024 increased **25.4%** to **$230.3 million**, driven by **35.9%** transaction-based revenue growth and **59%** GPV rise Revenue by Type (Q2 FY2024 vs Q2 FY2023) | Revenue Type | Q2 2023 ($ thousands) | Q2 2022 ($ thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Subscription | 81,043 | 74,494 | 6,549 | 8.8% | | Transaction-based | 137,672 | 101,304 | 36,368 | 35.9% | | Hardware and other | 11,558 | 7,901 | 3,657 | 46.3% | | **Total revenues** | **230,273** | **183,699** | **46,574** | **25.4%** | - The increase in transaction-based revenue was primarily due to accelerated adoption of payments solutions driven by the unified POS and payments initiative, leading to a **59% increase in GPV**[82](index=82&type=chunk) [Direct Cost of Revenues](index=20&type=section&id=Direct%20Cost%20of%20Revenues) Total direct cost of revenues for Q2 FY2024 rose **31.2%** to **$134.1 million**, with hardware costs showing negative margins due to promotional incentives Direct Cost of Revenues by Type (Q2 FY2024 vs Q2 FY2023) | Cost Type | Q2 2023 ($ thousands) | Q2 2022 ($ thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Subscription | 19,963 | 20,657 | (694) | (3.4)% | | Transaction-based | 99,425 | 70,011 | 29,414 | 42.0% | | Hardware and other | 14,717 | 11,562 | 3,155 | 27.3% | | **Total costs of revenues** | **134,105** | **102,230** | **31,875** | **31.2%** | - Hardware and other revenue had a **negative margin (127.3% cost of revenue)** due to discounts and free hardware provided to assist customers in transitioning to the unified Payments and POS offering[93](index=93&type=chunk) [Gross Profit](index=22&type=section&id=Gross%20Profit) Gross profit for Q2 FY2024 increased **18.0%** to **$96.2 million**, with margin decreasing to **41.8%** due to revenue mix shift Gross Profit and Margin (Q2 FY2024 vs Q2 FY2023) | Metric | Q2 2023 | Q2 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Gross profit ($ thousands) | 96,168 | 81,469 | 14,699 | 18.0% | | Gross profit % of total revenues | 41.8% | 44.3% | - | - | [Operating Expenses](index=23&type=section&id=Operating%20Expenses) Operating expenses showed significant leverage in Q2 FY2024, decreasing as a percentage of revenue due to lower share-based compensation and restructuring savings Operating Expenses as a Percentage of Total Revenues (Q2 FY2024 vs Q2 FY223) | Expense Category | Q2 2023 (% of Revenue) | Q2 2022 (% of Revenue) | | :--- | :--- | :--- | | General and administrative | 11.4% | 13.7% | | Research and development | 14.4% | 19.9% | | Sales and marketing | 26.2% | 35.0% | - Acquisition-related compensation expense decreased by **95.6%** to **$0.6 million** as amortization schedules for past acquisitions like NuORDER and Ecwid concluded[107](index=107&type=chunk)[109](index=109&type=chunk) - Share-based compensation and related payroll taxes decreased to **$23.3 million** from **$34.9 million** in the prior year, contributing to lower operating expenses across all functions[77](index=77&type=chunk) [Other Income and Income Taxes](index=27&type=section&id=Other%20Income%20and%20Income%20Taxes) Net interest income for Q2 FY2024 increased **121.5%** to **$10.7 million**, while income tax shifted from a recovery to a **$1.3 million** expense - Net interest income grew significantly to **$10.7 million** from **$4.9 million** year-over-year, driven by higher interest rates on the company's cash balances[113](index=113&type=chunk)[115](index=115&type=chunk) - The company shifted from a total income tax recovery of **$2.0 million** in Q2 FY2023 to a total income tax expense of **$1.3 million** in Q2 FY2024[116](index=116&type=chunk) [Key Balance Sheet Information](index=29&type=section&id=Key%20Balance%20Sheet%20Information) As of September 30, 2023, Lightspeed maintained a strong balance sheet with **$761.5 million** in cash and total assets at **$2.61 billion** Balance Sheet Summary | (In thousands of US dollars) | September 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | 761,491 | 800,154 | | Total assets | 2,610,857 | 2,668,732 | | Total liabilities | 162,607 | 171,283 | - Total assets decreased by **$57.9 million**, mainly due to a **$38.7 million** decrease in cash from operating activities and a **$43.6 million** decrease in intangible assets from amortization[119](index=119&type=chunk) - Total liabilities decreased by **$8.7 million**, driven by reductions in accrued compensation, income taxes payable, and deferred revenue[120](index=120&type=chunk) [Quarterly Results of Operations](index=31&type=section&id=Quarterly%20Results%20of%20Operations) Eight-quarter data shows consistent revenue growth and steady gross profit, with operating loss significantly improving to **$52.0 million** in Q2'24, reflecting cost management - Quarterly revenues have increased successively, except for seasonal weakness in the March quarters (Q4), which are historically the weakest for GTV post-holiday season[123](index=123&type=chunk) - Operating expenses have generally decreased sequentially in recent quarters (excluding a large goodwill impairment in Dec 2022 and restructuring charges in Mar 2023), reflecting cost control measures[127](index=127&type=chunk) Selected Quarterly Data (In thousands of US dollars) | Quarter Ended | Revenues | Gross Profit | Operating Loss | Net Loss | | :--- | :--- | :--- | :--- | :--- | | Sept. 30, 2022 | 183,699 | 81,469 | (86,816) | (79,943) | | Dec. 31, 2022 | 188,697 | 86,006 | (824,493) | (814,802) | | Mar. 31, 2023 | 184,228 | 86,961 | (82,839) | (74,468) | | Jun. 30, 2023 | 209,086 | 87,905 | (58,242) | (48,703) | | Sept. 30, 2023 | 230,273 | 96,168 | (51,986) | (42,492) | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Lightspeed maintains strong liquidity with **$761.5 million** in cash and a **$775.3 million** working capital surplus, sufficient for its needs Cash Flow Summary (Q2 FY2024 vs Q2 FY2023) | (In thousands of US dollars) | Three months ended Sep 30, 2023 | Three months ended Sep 30, 2022 | | :--- | :--- | :--- | | Cash flows used in operating activities | (24,846) | (23,859) | | Cash flows from investing activities | 7,855 | 1,853 | | Cash flows used in financing activities | (1,485) | (28,829) | | **Net decrease in cash** | **(18,786)** | **(52,213)** | - The company has a working capital surplus of **$775.3 million** and believes it has sufficient liquidity for its requirements[130](index=130&type=chunk) - In May 2023, the company filed a new base shelf prospectus, allowing it to offer various securities over a 25-month period to raise capital if needed[131](index=131&type=chunk) [Financial Instruments and Risk Management](index=36&type=section&id=Financial%20Instruments%20and%20Other%20Instruments) Lightspeed faces credit, liquidity, foreign exchange, interest rate, share price, and inflation risks, managing FX with forward contracts - Credit risk is primarily from cash and trade receivables, including merchant cash advances. The company maintains an allowance for expected credit losses (ECL)[145](index=145&type=chunk)[147](index=147&type=chunk) - Foreign exchange risk is managed by using forward contracts to hedge cash flows for certain expenses (primarily USD/CAD), but revenue is not hedged[150](index=150&type=chunk) - Inflation risk is identified as a factor that could increase operating costs and negatively impact customer spending, which would affect transaction volumes[153](index=153&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statement preparation requires judgment in revenue recognition, asset impairment, and deferred tax assets; a goodwill impairment test in Q2 FY2024 resulted in no charge - Key estimates involve revenue recognition (principal vs. agent), business combinations (fair value of intangible assets), and share-based compensation (valuation models)[155](index=155&type=chunk)[158](index=158&type=chunk)[161](index=161&type=chunk) - An impairment test for goodwill was performed as of September 30, 2023, because the carrying amount of net assets exceeded market capitalization. The test, using a fair value less costs of disposal model, demonstrated no impairment of goodwill[157](index=157&type=chunk) [Outstanding Share Information](index=39&type=section&id=Outstanding%20Share%20Information) As of October 31, 2023, Lightspeed had **152,585,256** Subordinate Voting Shares outstanding, plus stock options, DSUs, and RSUs Outstanding Securities as of October 31, 2023 | Security Type | Number Outstanding | | :--- | :--- | | Subordinate Voting Shares | 152,585,256 | | Stock Options (all plans) | 11,532,552 | | Deferred Share Units (DSUs) | 97,238 | | Restricted Share Units (RSUs) | 6,641,497 | [Disclosure Controls and Procedures and Internal Control Over Financial Reporting](index=40&type=section&id=Disclosure%20Controls%20and%20Procedures%20and%20Internal%20Control%20Over%20Financial%20Reporting) Management concluded Lightspeed's DC&P and ICFR were effective as of September 30, 2023, with no material changes identified - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[171](index=171&type=chunk) - No changes were identified during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting[173](index=173&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q1 2024 was $209.1 million, representing a 20% year-over-year increase and exceeding previous expectations [24][32] - Subscription revenue increased by 7% year-over-year to $78.7 million, with gross margins remaining at 75% [10][12] - Transaction-based revenue grew by 32% to $121 million, with gross payments volumes increasing by 56% year-over-year to $5.1 billion [11][24] - Adjusted EBITDA loss improved to $7 million from a loss of $15.6 million in the same quarter last year [12][32] - Total adjusted gross margin was 43%, down from the previous quarter and year-over-year [12][107] Business Line Data and Key Metrics Changes - Subscription revenue growth was driven by a temporary reallocation of the account management team to onboard new payments customers, yet still achieved a 7% increase [10][25] - Transaction-based revenue, which is over 50% of total revenues, is highly dependent on GTV growth, which was reported at $23.4 billion, up 6% year-over-year [14][110] - The fastest-growing customer cohort was those with over $1 million in annual GTV, which grew by 11% year-over-year [28] Market Data and Key Metrics Changes - The company noted that 50% of its customer locations are outside North America, which may impact GTV growth due to varying market conditions [30][134] - Churn rates remained consistent with historical ranges despite the launch of Unified Payments, with most churn occurring in customers processing under $200,000 in annual GTV [29][104] Company Strategy and Development Direction - The company is focused on executing its Unified Payments initiative, which aims to integrate payments with its POS platform, making it mandatory for eligible customers [8][99] - The strategy includes attracting larger, more sophisticated customers who can leverage the full capabilities of the software platforms [15][115] - The company aims to achieve adjusted EBITDA break-even or better for the fiscal year, with a commitment to sustainable long-term growth [32][105] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the performance in Q1 2024, highlighting strong customer feedback and the potential for growth through Unified Payments [5][106] - Concerns were raised about the macroeconomic environment, particularly regarding rising interest rates and inflation, which may affect future GTV expectations [41][110] - The company expects revenue for Q2 2024 to be between $210 million and $215 million, with an adjusted EBITDA loss of approximately $4 million [32] Other Important Information - The company has planted over 1.4 million trees as part of its sustainability initiatives [19] - Share-based compensation costs decreased significantly to $18.7 million from $38.3 million a year ago, improving as a percentage of revenue [27] Q&A Session Summary Question: What are the trends in retail versus hospitality? - Management noted that both categories are growing at similar rates, with luxury apparel and jewelry performing well, while outdoor sports categories have not recovered [37] Question: How are costs for transitioning customers to payments trending? - Costs are trending slightly better than expected, with less hand-holding required from customers during the transition [38] Question: What is the outlook for revenue and adjusted EBITDA in the second half of the year? - Management expects both revenue and adjusted EBITDA performance to improve significantly in the second half of the year [39] Question: What are the expectations for subscription revenue growth? - Subscription revenue growth is expected to be softer in the first half of the year but may improve in the latter half [48] Question: How is the adoption of Unified Payments progressing? - Adoption is progressing well, with a strong contingent of customers adopting the payment solution almost immediately [108]

First Quarter FY2024 Results Gross Payment Volume grew 56% (1) YoY to $5.1 billion (2) Fiscal 2024 Fiscal 2021 Fiscal 2022 Fiscal 2023 Launch Date GPV as a % of GTV(1) 22% (2) (1) Excluding Customer Locations and GTV attributable to Ecwid eCommerce standalone product, Lightspeed Golf and NuORDER by Lightspeed product. A Customer Location's GTV per year is calculated by annualizing the GTV for the months in which the Customer Location is actively processing in the last 12 months. (2) As at June 30, 2023 vs a ...

[Management's Discussion and Analysis](index=1&type=section&id=MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20JUNE%2030%2C%202023) This section provides an overview of the company's financial condition and operational results for the three months ended June 30, 2023 [MD&A Scope and Basis of Presentation](index=1&type=section&id=MD%26A%20Scope%20and%20Basis%20of%20Presentation) This MD&A covers financial condition and operating results for the three months ended June 30, 2023, prepared under IFRS and Canadian disclosure requirements, with all amounts in USD - MD&A covers the three months ended June 30, 2023, prepared under IFRS and Canadian disclosure requirements, with all amounts stated in **USD**[1](index=1&type=chunk)[2](index=2&type=chunk)[3](index=3&type=chunk) [Forward-looking Information](index=1&type=section&id=Forward-looking%20Information) This section describes the nature of forward-looking information, including financial outlooks, business strategies, and market expectations, emphasizing reliance on management judgment and assumptions, subject to risks and uncertainties - Forward-looking information covers financial outlooks, business strategies, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans, and objectives[5](index=5&type=chunk) - Forward-looking information is based on management's opinions, estimates, and assumptions, and is subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from expectations[7](index=7&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) [Trademarks and Additional Information](index=2&type=section&id=Trademarks%20and%20Additional%20Information) This section mentions Lightspeed's trademark usage and directs readers to SEDAR and EDGAR for additional company information - Trademarks such as **Lightspeed** and **NuORDER** are protected by applicable intellectual property laws and are company property[12](index=12&type=chunk) - Additional information about Lightspeed is available on **SEDAR** (www.sedar.com) and **EDGAR** (www.sec.gov)[4](index=4&type=chunk)[13](index=13&type=chunk) [Company Overview](index=2&type=section&id=Overview) This section provides a general description of Lightspeed's business, platform, revenue streams, customer profile, sustainability efforts, and the impact of macroeconomic conditions [Business Description](index=2&type=section&id=Business%20Description) Lightspeed offers a cloud-based commerce platform connecting suppliers, merchants, and consumers for an omnichannel experience, providing essential functions for SMBs to manage operations, accept payments, and grow - Lightspeed provides a **cloud-based commerce platform** connecting suppliers, merchants, and consumers to enable an omnichannel experience[14](index=14&type=chunk) - The platform offers core functionalities for consumer engagement, operations management, payment acceptance, and business growth, primarily serving **small and medium-sized businesses (SMBs)**[14](index=14&type=chunk)[15](index=15&type=chunk) [Platform and Solutions](index=3&type=section&id=Platform%20and%20Solutions) Lightspeed's cloud platform is designed around omnichannel consumer experience, comprehensive back-office operations, and payment facilitation, offering flagship solutions like Lightspeed Restaurant, Retail, eCommerce, NuORDER, B2B, and Lightspeed Capital - The platform is designed around three interconnected elements: **omnichannel consumer experience**, a **comprehensive back-office operations suite**, and **payment facilitation**[15](index=15&type=chunk) - Flagship solutions include **Lightspeed Restaurant**, **Lightspeed Retail**, **Lightspeed eCommerce**, **NuORDER by Lightspeed**, and **Lightspeed B2B**[16](index=16&type=chunk) - **Lightspeed Capital** offers merchant cash advance programs to help merchants manage cash flow, purchase inventory, and invest in marketing[17](index=17&type=chunk) [Revenue Streams](index=3&type=section&id=Revenue%20Streams) Lightspeed's revenue primarily comes from cloud software subscriptions and payment solutions, with significant growth in transactional revenue, supplemented by hardware sales and other services - Revenue is primarily derived from **cloud software subscriptions** and **payment solutions**, supplemented by hardware sales and professional services[22](index=22&type=chunk)[24](index=24&type=chunk) - Starting in fiscal year 2024, the company is selling **POS and payment solutions as a unified offering** to enhance customer experience and simplify business[17](index=17&type=chunk) Total Revenue Composition and Growth (Three Months Ended June 30) | Revenue Type | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----------- | :-------- | :-------- | :---------- | :--------- | | Subscription Revenue | 78.7 | 73.6 | 5.2 | 7.0 | | Transactional Revenue | 121.0 | 91.5 | 29.4 | 32.2 | | Hardware and Other | 9.4 | 8.8 | 0.6 | 6.7 | | **Total Revenue** | **209.1** | **173.9** | **35.2** | **20.2** | [Customer Profile and Geographic Reach](index=3&type=section&id=Customer%20Profile%20and%20Geographic%20Reach) Lightspeed targets SMBs with high GTV and complex needs, serving customers in over 100 countries, with North America accounting for 51% and retail and hospitality sectors representing 63% and 37% respectively - The company focuses on attracting **SMB customers with high GTV and complex needs**[19](index=19&type=chunk) - As of June 30, 2023, customers are located in **over 100 countries**, with **North America accounting for 51%** and the rest of the world for 49%[21](index=21&type=chunk) - Among customer types, **retail accounts for approximately 63%** and **hospitality for approximately 37%**[21](index=21&type=chunk) [Sustainability Initiatives](index=4&type=section&id=Sustainability%20Initiatives) Lightspeed is committed to sustainability through "Carbon-Free Dining" with Sustainably Run, offsetting business travel with TravelPerk, using renewable-powered cloud platforms, and promoting a diverse, equitable, and inclusive culture - Partnered with **Sustainably Run** for the **"Carbon-Free Dining" initiative**, planting **over 1.4 million trees** and providing food, income, and education to communities[27](index=27&type=chunk)[28](index=28&type=chunk) - Collaborated with **TravelPerk** to offset business travel carbon emissions and primarily uses **Amazon Web Services (AWS)** and **Google Cloud platforms** powered by renewable energy[28](index=28&type=chunk) - Committed to **Diversity, Equity, and Inclusion (DEI)**, with **10% of employees identifying as LGBTQ2S+**, and the board setting a gender representation target of at least **37.5% female members**[29](index=29&type=chunk) [Macroeconomic Conditions and Impact](index=5&type=section&id=Macroeconomic%20Conditions%20and%20Impact) Despite macroeconomic uncertainties, Lightspeed sees accelerated demand for cloud solutions among retail and hospitality SMBs as a significant market opportunity, leveraging its diversified customer base and geographic reach - The macroeconomic environment remains uncertain, including **inflationary pressures**, changes in consumer spending, instability in the banking sector, and rising interest rates[30](index=30&type=chunk) - Despite risks, the accelerated demand for **cloud-based solutions among SMBs** presents a significant market opportunity for the company[31](index=31&type=chunk) - For the three months ended June 30, 2023, **GTV was $23.4 billion**, a **6% year-over-year increase**, with the company viewing its diversified customer verticals and geographic reach as strong assets[32](index=32&type=chunk) [Key Performance Indicators](index=6&type=section&id=Key%20Performance%20Indicators) This section defines and presents Lightspeed's key performance indicators, including ARPU, GPV, and GTV, along with non-IFRS measures and their reconciliations [Key Performance Indicators (ARPU, GPV, GTV)](index=6&type=section&id=Key%20Performance%20Indicators%20%28ARPU%2C%20GPV%2C%20GTV%29) Lightspeed assesses business performance and identifies trends using Average Revenue Per User (ARPU), Gross Payment Volume (GPV), and Gross Transaction Volume (GTV), with ARPU (excluding Ecwid) growing 20%, GPV by 56% to $5.1 billion, and GTV by 6% to $23.4 billion as of June 30, 2023 - The company assesses its business, measures performance, and identifies trends through **Average Revenue Per User (ARPU)**, **Gross Payment Volume (GPV)**, and **Gross Transaction Volume (GTV)**[35](index=35&type=chunk) Key Performance Indicators (Three Months Ended June 30) | Metric | 2023 | 2022 | Change | Change (%) | | :-------- | :--- | :--- | :----- | :--------- | | Monthly ARPU (excluding Ecwid) | ~$383 | ~$320 | ~$63 | 20% | | GPV | $5.1 billion | $3.3 billion | $1.8 billion | 56% | | GTV | $23.4 billion | $22.1 billion | $1.3 billion | 6% | [Non-IFRS Measures and Ratios and Reconciliation of Non-IFRS Measures and Ratios](index=6&type=section&id=Non-IFRS%20Measures%20and%20Ratios%20and%20Reconciliation%20of%20Non-IFRS%20Measures%20and%20Ratios) This section defines and reconciles non-IFRS financial measures like Adjusted EBITDA, Adjusted Loss, and Adjusted Cash Flow from Operating Activities, which supplement IFRS data for better understanding of core business performance - Non-IFRS measures and ratios, such as **Adjusted EBITDA**, **Adjusted Loss**, and **Adjusted Cash Flow from Operating Activities**, provide supplementary information for a better understanding of the company's operating performance[39](index=39&type=chunk)[40](index=40&type=chunk) Adjusted EBITDA Reconciliation (Three Months Ended June 30) | (in thousand USD) | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Net loss | (48,703) | (100,796) | | Share-based compensation and related payroll taxes | 18,733 | 38,302 | | Depreciation and amortization | 28,192 | 29,144 | | Foreign exchange loss | 671 | 443 | | Net interest income | (10,362) | (2,007) | | Acquisition-related compensation | 2,545 | 17,103 | | Transaction-related costs | 609 | 2,174 | | Restructuring charges | 472 | 1,207 | | Litigation provision | 9 | 918 | | Income tax expense (recovery) | 823 | (2,089) | | **Adjusted EBITDA** | **(7,011)** | **(15,601)** | Adjusted Loss Reconciliation (Three Months Ended June 30) | (in thousand USD, except share and per share amounts) | 2023 ($) | 2022 ($) | | :------------------------------------- | :------- | :------- | | Net loss | (48,703) | (100,796) | | Share-based compensation and related payroll taxes | 18,733 | 38,302 | | Amortization of intangible assets | 24,505 | 25,876 | | Acquisition-related compensation | 2,545 | 17,103 | | Transaction-related costs | 609 | 2,174 | | Restructuring charges | 472 | 1,207 | | Litigation provision | 9 | 918 | | Deferred income tax recovery | (392) | (2,353) | | **Adjusted Loss** | **(2,222)** | **(17,569)** | | Net loss per share – basic and diluted | (0.32) | (0.68) | | Adjusted loss per share – basic and diluted | (0.01) | (0.12) | Adjusted Cash Flow from Operating Activities Reconciliation (Three Months Ended June 30) | (in thousand USD) | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Cash flow used in operating activities | (26,090) | (33,414) | | Share-based compensation related payroll taxes | 334 | 73 | | Transaction-related costs | 680 | 5,044 | | Restructuring charges | 830 | 583 | | Litigation provision | 76 | 2,159 | | Capitalized internally developed costs | (2,285) | (603) | | **Adjusted cash flow used in operating activities** | **(26,455)** | **(26,158)** | [Summary of Factors Affecting our Performance](index=9&type=section&id=Summary%20of%20Factors%20Affecting%20our%20Performance) This section outlines key factors influencing Lightspeed's performance, including market adoption, customer payment solution adoption, cross-selling, economic conditions, sales and marketing efforts, talent retention, international sales, seasonality, foreign exchange, and selective acquisitions [Market Adoption of our Platform](index=10&type=section&id=Market%20Adoption%20of%20our%20Platform) Lightspeed plans to drive market adoption of its advanced commerce platform, especially among complex, high-GTV customers, by expanding solutions, investing in product development and marketing, and pursuing selective acquisitions - The company aims to drive platform market adoption through **solution expansion**, **product development**, **marketing**, and **selective acquisitions**, focusing on complex, **high-GTV customers**[48](index=48&type=chunk) - The market is competitive and fragmented, and the company will focus on **selling flagship products globally** to reduce complexity and enhance performance[48](index=48&type=chunk) [Customer Adoption of our Payments Solutions](index=10&type=section&id=Customer%20Adoption%20of%20our%20Payments%20Solutions) Payment solutions are a key revenue driver, with Lightspeed selling POS and payment solutions as a unified product to boost adoption, which may lower overall gross margin due to transactional revenue's lower margin but is expected to drive growth and simplify operations - **Payment solutions** are the largest driver of the company's revenue growth, and selling **POS and payment solutions as a unified offering** is expected to further increase customer adoption[49](index=49&type=chunk) - As payment solution revenue increases, **overall gross margin may decline** due to the lower gross margin of transactional revenue[49](index=49&type=chunk) [Cross-selling and Up-selling with Existing Customers](index=10&type=section&id=Cross-selling%20and%20Up-selling%20with%20Existing%20Customers) Existing customers represent a significant cross-selling and up-selling opportunity, with Lightspeed employing a "land and expand" strategy and investing in product development, including AI tools, to increase adoption of solutions like Lightspeed Advanced Insights, Payments, and Capital - Existing customers represent significant **cross-selling and up-selling opportunities**, with significantly reduced sales and marketing expenses[50](index=50&type=chunk) - The company employs a **"land and expand" strategy** and plans to continue investing in product development, including integrating **Lightspeed B2B into POS** and adopting **AI tools**[50](index=50&type=chunk) [Economic Conditions and Resulting Consumer Spending Trends](index=11&type=section&id=Economic%20Conditions%20and%20Resulting%20Consumer%20Spending%20Trends) Lightspeed's performance is influenced by global economic conditions, where downturns can reduce consumer confidence and spending, impacting transaction volumes and customer churn, with SMBs being particularly vulnerable to macroeconomic factors, labor shortages, and supply chain issues - Global economic conditions and events may adversely affect **consumer confidence, spending, and disposable income**, thereby impacting the company's financial performance[51](index=51&type=chunk) - **SMBs** may be disproportionately affected by economic downturns, labor shortages, and global supply chain issues, leading to reduced usage of the company's platform[51](index=51&type=chunk)[52](index=52&type=chunk) [Scaling our Sales and Marketing Team](index=11&type=section&id=Scaling%20our%20Sales%20and%20Marketing%20Team) Lightspeed's future revenue growth largely depends on the effectiveness of its sales and marketing efforts, with plans to continue significant investment in expanding the sales team and outbound lead generation, particularly in the US market and for complex merchants - Future revenue growth largely depends on the effectiveness of sales and marketing efforts, and the company plans to continue **investing heavily in expanding its sales team**[54](index=54&type=chunk) - Investing in **outbound lead generation**, particularly in the **US market** and for complex merchants and restaurateurs with high annual GTV[54](index=54&type=chunk) [Retaining and Motivating Qualified Personnel](index=11&type=section&id=Retaining%20and%20Motivating%20Qualified%20Personnel) Lightspeed's future success relies on attracting and retaining highly skilled talent, especially in technology, engineering, and sales, using equity awards as a key compensation component while balancing their impact on operating results - Attracting and retaining **highly skilled talent**, especially in technology, engineering, and sales, is crucial for the company's future success[55](index=55&type=chunk) - **Equity awards** are a key component of overall compensation, but share-based compensation expenses increase operating costs[55](index=55&type=chunk) [International Sales](index=12&type=section&id=International%20Sales) Lightspeed sees significant international opportunities due to growing global demand for omnichannel platforms, planning investments in personnel, marketing, and selective acquisitions to support expansion while adhering to local regulatory frameworks - Global demand for **omnichannel platforms** continues to grow, presenting significant growth opportunities for the company's international business[56](index=56&type=chunk) - Plans to invest in **personnel, marketing, and selective acquisitions** to support international growth, while understanding and complying with local regulatory frameworks[56](index=56&type=chunk) [Seasonality](index=12&type=section&id=Seasonality) Lightspeed anticipates increased seasonality in its quarterly results as transactional revenue grows, with the quarter ending December 31 typically being the strongest due to the holiday season, and the quarter ending March 31 having the weakest GTV - As the proportion of **transactional revenue** increases, the seasonality of quarterly results is expected to continue to strengthen[57](index=57&type=chunk) - The quarter ending **December 31** is typically the strongest for transactional revenue (holiday season), while the quarter ending **March 31** usually has the weakest GTV[103](index=103&type=chunk) [Foreign Currency](index=12&type=section&id=Foreign%20Currency) Lightspeed faces foreign exchange risk, primarily from CAD and EUR, which can negatively impact USD-denominated revenues and expenses; the company uses forward foreign exchange contracts to hedge future cash flows and expenditures but not revenues - Foreign exchange fluctuations may negatively impact **USD-denominated revenues** (billed in local currencies) and expenses (primarily in **CAD and EUR**)[58](index=58&type=chunk) - The company has implemented a **hedging program** using **forward foreign exchange contracts** to mitigate the impact of FX fluctuations on future cash flows and expenditures, but does not hedge revenues[59](index=59&type=chunk) [Selective Pursuit of Acquisitions](index=12&type=section&id=Selective%20Pursuit%20of%20Acquisitions) Lightspeed complements organic growth with targeted acquisitions to accelerate product roadmaps, increase market penetration, and create shareholder value, though acquisitions can also divert management attention and lead to operational difficulties if not integrated properly - The company pursues **targeted acquisitions** to accelerate product roadmaps, increase market penetration, deepen vertical expertise, and create shareholder value for shareholders[60](index=60&type=chunk) - Acquisitions and investments may **divert management's attention** and lead to operational difficulties if not completed or integrated in a timely and proper manner[61](index=61&type=chunk) [Key Components of Results of Operations](index=13&type=section&id=Key%20Components%20of%20Results%20of%20Operations) This section details Lightspeed's revenue streams, direct costs of revenue, and operating expenses, providing a foundational understanding of its financial performance drivers [Revenues](index=13&type=section&id=Revenues) Lightspeed's revenue comprises subscription revenue from software and services, transactional revenue from payment solutions and Lightspeed Capital, and hardware and other revenue from POS hardware sales and professional services - **Subscription revenue** is primarily generated from the sale of software solutions and add-on services, including maintenance and support[62](index=62&type=chunk) - **Transactional revenue** is generated from providing payment functionalities, including transaction fees and Lightspeed Capital's merchant cash advance programs[63](index=63&type=chunk) - **Hardware and other revenue** primarily comes from the sale of POS peripheral hardware and professional services for installation and implementation[65](index=65&type=chunk)[66](index=66&type=chunk) [Direct Cost of Revenues](index=13&type=section&id=Direct%20Cost%20of%20Revenues) Direct cost of revenues includes subscription costs (support team salaries, hosting), transactional costs (payment processing, bank settlement), and hardware and other costs (hardware procurement, fulfillment, shipping, and professional services) - **Subscription revenue costs** primarily include support team salaries, employee-related costs, hosting infrastructure fees, and allocated corporate overhead[67](index=67&type=chunk) - **Transactional revenue costs** primarily include direct costs of payment solutions, direct costs of merchant cash advance programs, and support team salaries[68](index=68&type=chunk) - **Hardware and other revenue costs** primarily include hardware inventory procurement costs, third-party fulfillment company fees, shipping and handling fees, and professional services costs[69](index=69&type=chunk) [Operating Expenses](index=14&type=section&id=Operating%20Expenses) Operating expenses include general and administrative (finance, legal, HR), research and development (product management, core development), sales and marketing (sales, business development, customer acquisition), and acquisition-related compensation - **General and administrative expenses** include salaries and employee-related costs for finance, accounting, legal, administrative, and human resources departments, and are expected to decrease as a percentage of total revenue in the long term[70](index=70&type=chunk) - **Research and development expenses** are primarily for developing additional features and solutions, enhancing platform functionality and usability, and may qualify for tax credits[71](index=71&type=chunk) - **Sales and marketing expenses** are primarily for attracting new customers, retaining existing customers, and increasing revenue, and are expected to decrease as a percentage of total revenue with economies of scale and increased sales of the technology suite[72](index=72&type=chunk) - **Acquisition-related compensation** is the portion of consideration paid to key personnel of acquired companies, tied to ongoing employment or service obligations and specific performance criteria[73](index=73&type=chunk) [Results of Operations](index=15&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of Lightspeed's consolidated statements of loss, including revenue, cost of revenue, gross profit, and operating expense breakdowns, for the three months ended June 30, 2023 [Consolidated Statements of Loss](index=15&type=section&id=Consolidated%20Statements%20of%20Loss) For the three months ended June 30, 2023, Lightspeed's net loss significantly narrowed to $48.7 million from $100.8 million in the prior year, driven by revenue growth and reduced operating expenses Consolidated Statements of Loss Key Data (Three Months Ended June 30) | (in thousand USD, except per share amounts) | 2023 ($) | 2022 ($) | Change ($) | Change (%) | | :--------------------------- | :------- | :------- | :--------- | :--------- | | Total revenue | 209,086 | 173,882 | 35,204 | 20.2% | | Total cost of revenues | 121,181 | 96,357 | 24,824 | 25.8% | | Gross profit | 87,905 | 77,525 | 10,380 | 13.4% | | Total operating expenses | 146,147 | 182,417 | (36,270) | (19.9%) | | Operating loss | (58,242) | (104,892) | 46,650 | (44.5%) | | Net interest income | 10,362 | 2,007 | 8,355 | 416.3% | | Loss before income taxes | (47,880) | (102,885) | 55,005 | (53.5%) | | Total income tax expense (recovery) | 823 | (2,089) | 2,912 | (139.4%) | | **Net loss** | **(48,703)** | **(100,796)** | **52,093** | **(51.7%)** | | Net loss per share – basic and diluted | (0.32) | (0.68) | 0.36 | (52.9%) | [Share-based Compensation Breakdown](index=16&type=section&id=Share-based%20Compensation%20Breakdown) Total share-based compensation and related payroll taxes for the three months ended June 30, 2023, decreased by 51.1% to $18.7 million, primarily due to fewer and lower fair value equity awards issued in recent quarters and forfeitures Share-based Compensation and Related Payroll Taxes (Three Months Ended June 30) | (in thousand USD) | 2023 ($) | 2022 ($) | Change ($) | Change (%) | | :--------------------------- | :------- | :------- | :--------- | :--------- | | Direct cost of revenues | 1,853 | 2,246 | (393) | (17.5%) | | General and administrative expenses | 6,181 | 10,085 | (3,904) | (38.7%) | | Research and development expenses | 8,376 | 10,885 | (2,509) | (23.0%) | | Sales and marketing expenses | 2,323 | 15,086 | (12,763) | (84.6%) | | **Total share-based compensation and related costs** | **18,733** | **38,302** | **(19,569)** | **(51.1%)** | - The decrease in **share-based compensation and related payroll taxes** is primarily due to a reduction in the number and fair value of stock options and awards issued in prior quarters, as well as forfeitures in the current and prior periods (including during restructuring)[75](index=75&type=chunk) [Revenue Analysis](index=16&type=section&id=Revenue%20Analysis) For the three months ended June 30, 2023, total revenue grew 20.2% to $209.1 million, with transactional revenue up 32.2% to $121.0 million, subscription revenue up 7.0% to $78.7 million, and hardware and other revenue up 6.7% to $9.4 million Revenue Growth Analysis (Three Months Ended June 30) | Revenue Type | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----------- | :-------- | :-------- | :---------- | :--------- | | Subscription Revenue | 78.7 | 73.6 | 5.2 | 7.0 | | Transactional Revenue | 121.0 | 91.5 | 29.4 | 32.2 | | Hardware and Other | 9.4 | 8.8 | 0.6 | 6.7 | | **Total Revenue** | **209.1** | **173.9** | **35.2** | **20.2** | - **Transactional revenue growth** is primarily due to the continued adoption of payment solutions, driven by the initiative to sell **POS and payment solutions as a unified offering**, resulting in a **56% increase in GPV to $5.1 billion**[78](index=78&type=chunk)[79](index=79&type=chunk) - **Subscription revenue growth** is primarily due to the adoption of flagship solutions, the addition of new customers, and existing customers adopting more platform modules[77](index=77&type=chunk) [Direct Cost of Revenues Analysis](index=17&type=section&id=Direct%20Cost%20of%20Revenues%20Analysis) For the three months ended June 30, 2023, total direct cost of revenues increased 25.8% to $121.2 million, with transactional revenue costs up 41.5% to $89.0 million, subscription costs down 5.3% to $19.3 million, and hardware and other costs down 1.6% to $12.8 million Direct Cost of Revenues Analysis (Three Months Ended June 30) | Cost Type | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :-------- | :-------- | :-------- | :---------- | :--------- | | Subscription | 19.3 | 20.4 | (1.1) | (5.3) | | Transactional | 89.0 | 62.9 | 26.1 | 41.5 | | Hardware and Other | 12.8 | 13.0 | (0.2) | (1.6) | | **Total Cost** | **121.2** | **96.4** | **24.8** | **25.8** | - The increase in **transactional revenue costs** is primarily due to the growth in payment solution revenue[83](index=83&type=chunk) - The decrease in **hardware and other revenue costs** is primarily due to salary and employee-related cost savings from restructuring, despite negative gross margins from discounts and free hardware offered to encourage new business and unified payment/POS products[84](index=84&type=chunk) [Gross Profit Analysis](index=18&type=section&id=Gross%20Profit%20Analysis) For the three months ended June 30, 2023, gross profit increased 13.4% to $87.9 million, driven by subscription and transactional revenue growth; however, gross profit as a percentage of total revenue decreased from 44.6% to 42.0% due to the higher proportion of lower-margin transactional revenue Gross Profit Analysis (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Gross Profit | 87.9 | 77.5 | 10.4 | 13.4 | | As a percentage of total revenue | 42.0% | 44.6% | -2.6% | - | - The **gross profit as a percentage of total revenue decreased**, primarily due to the higher proportion of **transactional revenue**, which has a lower gross margin[85](index=85&type=chunk) [Operating Expenses Analysis](index=18&type=section&id=Operating%20Expenses%20Analysis) For the three months ended June 30, 2023, total operating expenses decreased 19.9% to $146.1 million, primarily driven by reductions in share-based compensation, acquisition-related compensation, and restructuring charges [General and Administrative](index=18&type=section&id=General%20and%20Administrative) General and administrative expenses decreased 17.5% to $24.9 million year-over-year, mainly due to reduced share-based compensation, transaction-related costs, and litigation provisions, partially offset by increased bad debt expense General and Administrative Expenses (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | General and administrative expenses | 24.9 | 30.2 | (5.3) | (17.5) | | As a percentage of total revenue | 11.9% | 17.4% | -5.5% | - | - The decrease is primarily due to reduced **share-based compensation** (from **$10.1 million to $6.2 million**), **transaction-related costs** (from **$1.9 million to $0.6 million**), and **litigation provision** (from **$0.9 million to zero**)[86](index=86&type=chunk) [Research and Development](index=18&type=section&id=Research%20and%20Development) Research and development expenses decreased 4.5% to $34.0 million year-over-year, primarily due to reduced share-based compensation, partially offset by increased salaries and employee-related costs (despite restructuring savings) and professional service fees Research and Development Expenses (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Research and development expenses | 34.0 | 35.6 | (1.6) | (4.5) | | As a percentage of total revenue | 16.3% | 20.5% | -4.2% | - | - **Share-based compensation decreased from $10.9 million to $8.4 million**[88](index=88&type=chunk) [Sales and Marketing](index=20&type=section&id=Sales%20and%20Marketing) Sales and marketing expenses significantly decreased 19.5% to $55.3 million year-over-year, primarily due to a substantial reduction in share-based compensation and prudent control over marketing and growth expenditures Sales and Marketing Expenses (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Sales and marketing expenses | 55.3 | 68.6 | (13.4) | (19.5) | | As a percentage of total revenue | 26.4% | 39.5% | -13.1% | - | - **Share-based compensation decreased from $15.1 million to $2.3 million**[89](index=89&type=chunk) - Other sales and marketing expenditures decreased by **$2.6 million**, reflecting prudent control over marketing acquisition and growth spending[89](index=89&type=chunk) [Depreciation](index=20&type=section&id=Depreciation) Total depreciation expense increased 12.8% to $3.7 million year-over-year, primarily due to additions to property and equipment and new lease commitments over the past 12 months Depreciation Expense (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Depreciation of property and equipment | 1.5 | 1.2 | 0.2 | 19.3 | | Depreciation of right-of-use assets | 2.2 | 2.0 | 0.2 | 8.9 | | **Total Depreciation** | **3.7** | **3.3** | **0.4** | **12.8** | [Foreign Exchange Loss](index=21&type=section&id=Foreign%20Exchange%20Loss) Foreign exchange loss increased 51.5% to $0.7 million year-over-year, primarily due to financial assets and liabilities denominated in non-USD currencies Foreign Exchange Loss (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Foreign exchange loss | 0.7 | 0.4 | 0.2 | 51.5 | [Acquisition-related Compensation](index=21&type=section&id=Acquisition-related%20Compensation) Acquisition-related compensation expenses significantly decreased 85.1% to $2.5 million year-over-year, as deferred compensation from the NuORDER and Ecwid acquisitions was partially or fully settled Acquisition-related Compensation (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Acquisition-related compensation | 2.5 | 17.1 | (14.6) | (85.1) | - The decrease is primarily due to the **partial or full settlement of deferred compensation** from the **NuORDER and Ecwid acquisitions**[92](index=92&type=chunk) [Amortization of Intangible Assets](index=21&type=section&id=Amortization%20of%20Intangible%20Assets) Amortization of intangible assets decreased 5.3% to $24.5 million year-over-year, mainly because intangible assets such as Chronogolf customer relationships and software technologies from Chronogolf, Kounta, and Gastrofix were fully amortized by June 30, 2023 Amortization of Intangible Assets (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Amortization of intangible assets | 24.5 | 25.9 | (1.4) | (5.3) | - The decrease is primarily due to the **full amortization of intangible assets** such as **Chronogolf customer relationships** and **software technologies from Chronogolf, Kounta, and Gastrofix**[93](index=93&type=chunk) [Restructuring](index=22&type=section&id=Restructuring) Restructuring charges decreased 60.9% to $0.472 million year-over-year, entirely consisting of severance payments from the restructuring initiated during the fiscal year ended March 31, 2023, for synergy and organizational agility Restructuring Charges (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Restructuring charges | 0.5 | 1.2 | (0.7) | (60.9) | - **Restructuring charges** consist entirely of **severance payments** resulting from the restructuring initiated during the fiscal year ended March 31, 2023, to achieve synergies and organizational agility[94](index=94&type=chunk) [Other Income](index=22&type=section&id=Other%20Income) For the three months ended June 30, 2023, net interest income significantly increased 416.3% to $10.4 million, primarily due to higher interest income from cash and cash equivalents and reduced interest expense from repaying the acquisition term loan Net Interest Income (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Net interest income | 10.4 | 2.0 | 8.4 | 416.3 | - The increase is primarily due to an **$8.0 million increase in interest income** from cash and cash equivalents and a **$0.3 million decrease in interest expense** from the repayment of the acquisition term loan[95](index=95&type=chunk) [Income Taxes](index=22&type=section&id=Income%20Taxes) For the three months ended June 30, 2023, income taxes shifted from a $2.1 million recovery in the prior year to an $0.8 million expense, mainly due to a decrease in deferred income tax recovery Income Tax Expense (Recovery) (Three Months Ended June 30) | Metric | 2023 (million USD) | 2022 (million USD) | Change (million USD) | Change (%) | | :----- | :-------- | :-------- | :---------- | :--------- | | Current | 1.2 | 0.3 | 0.9 | 360.2 | | Deferred | (0.4) | (2.4) | 2.0 | (83.3) | | **Total income tax expense (recovery)** | **0.8** | **(2.1)** | **2.9** | **(139.4%)** | - Income taxes shifted from a recovery to an expense, primarily due to a **$2.0 million decrease in deferred income tax recovery**[96](index=96&type=chunk) [Key Balance Sheet Information](index=24&type=section&id=Key%20Balance%20Sheet%20Information) This section presents key balance sheet data and quarterly operating results, highlighting changes in assets, liabilities, and the impact of seasonality on revenue and gross profit [Key Balance Sheet Information](index=24&type=section&id=Key%20Balance%20Sheet%20Information) As of June 30, 2023, total assets decreased by $40 million (1%) from March 31, 2023, mainly due to reduced cash and cash equivalents, intangible assets, and trade receivables, while total liabilities decreased by $13 million (8%), driven by lower accrued compensation, trade payables, and income taxes payable Key Balance Sheet Information | (in thousand USD) | June 30, 2023 ($) | March 31, 2023 ($) | Change ($) | Change (%) | | :--------------------------- | :---------------- | :----------------- | :--------- | :--------- | | Cash and cash equivalents | 780,277 | 800,154 | (19,877) | (2.5%) | | Total assets | 2,628,740 | 2,668,732 | (39,992) | (1.5%) | | Total liabilities | 158,236 | 171,283 | (13,047) | (7.6%) | | Total long-term liabilities | 20,146 | 20,826 | (680) | (3.3%) | - The decrease in **total assets** is primarily due to a **$19.9 million decrease in cash and cash equivalents** from cash used in operating activities, as well as reductions in intangible assets and trade and other receivables[99](index=99&type=chunk) - The decrease in **total liabilities** is primarily due to reductions in accrued compensation and benefits, trade and other payables, and income taxes payable[100](index=100&type=chunk) [Quarterly Results of Operations](index=25&type=section&id=Quarterly%20Results%20of%20Operations) Lightspeed's quarterly revenue generally shows an upward trend, with seasonal dips in quarters ending March 31 due to lower post-holiday GTV; direct cost of revenues increases with transactional revenue, gross margin declines due to lower-margin payment solutions, and operating expenses fluctuate with share-based compensation, acquisitions, and restructuring - **Quarterly total revenue** has consistently grown over the reporting period (except for the quarters ended March 31, 2022, and March 31, 2023), primarily driven by increases in subscription and transactional revenue[103](index=103&type=chunk) - **Total direct cost of revenues increased**, primarily due to higher direct costs associated with the growing number of customers adopting payment solutions[105](index=105&type=chunk) - **Gross profit as a percentage of revenue decreased** due to the success of payment solutions, which have higher direct costs[106](index=106&type=chunk) - **Operating expenses fluctuated** due to factors such as share-based compensation, acquisition-related compensation, goodwill impairment, and restructuring charges[107](index=107&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section details Lightspeed's capital management strategy, liquidity position, base shelf prospectus, and cash flow activities, ensuring sufficient resources for operations and strategic goals [Overview](index=27&type=section&id=Overview) Lightspeed's capital management strategy aims to maintain operational capacity and provide shareholder returns, ensuring adequate liquidity through cash flow monitoring and existing financing, with a working capital surplus of $778.1 million as of June 30, 2023 - The capital management strategy aims to maintain **operating capacity**, provide benefits to stakeholders, and deliver an appropriate return on investment to shareholders[109](index=109&type=chunk) - As of June 30, 2023, the **working capital surplus was $778.1 million**, and the company believes existing cash and available financing are sufficient to meet current and short-term growth needs and long-term strategic objectives[110](index=110&type=chunk) [Base Shelf Prospectus](index=28&type=section&id=Base%20Shelf%20Prospectus) In May 2023, Lightspeed filed a new short-form base shelf prospectus, allowing it to issue various securities, including subordinate voting shares, preferred shares, debt securities, and warrants, over a 25-month period - In **May 2023**, the company filed a new **short-form base shelf prospectus**, allowing it to issue various securities, including **subordinate voting shares, preferred shares, debt securities, and warrants**, over a **25-month period**[111](index=111&type=chunk) [Cash Flows](index=28&type=section&id=Cash%20Flows) For the three months ended June 30, 2023, cash flow used in operating activities was $26.1 million, cash flow from investing activities was $7.1 million, and cash flow used in financing activities was $0.9 million, resulting in a net decrease of $19.9 million in cash and cash equivalents Cash Flows (Three Months Ended June 30) | (in thousand USD) | 2023 ($) | 2022 ($) | Change ($) | | :--------------------------- | :------- | :------- | :--------- | | Cash flow used in operating activities | (26,090) | (33,414) | 7,324 | | Cash flow from (used in) investing activities | 7,141 | (2,192) | 9,333 | | Cash flow used in financing activities | (925) | (1,810) | 885 | | Effect of foreign exchange on cash and cash equivalents | (3) | (1,449) | 1,446 | | **Net decrease in cash and cash equivalents** | **(19,877)** | **(38,865)** | **18,988** | - **Adjusted cash flow used in operating activities was $26.5 million**, a slight increase compared to **$26.2 million** in the prior year, primarily impacted by changes in working capital[113](index=113&type=chunk) - **Cash flow from investing activities shifted from an outflow to an inflow**, primarily due to an **$8.2 million increase in interest income** and a **$2.0 million decrease in additions to property and equipment**[114](index=114&type=chunk) [Financial Instruments and Other Instruments](index=30&type=section&id=Financial%20Instruments%20and%20Other%20Instruments) This section addresses Lightspeed's contractual obligations, off-balance sheet arrangements, related party transactions, and various financial risks including credit, liquidity, foreign exchange, interest rate, share price, and inflation risks [Contractual Obligations](index=30&type=section&id=Contractual%20Obligations) Lightspeed's contractual obligations have increased, including renegotiated contracts with payment processors that will incur $12.435 million in commitments over the next five years - The company has renegotiated certain contracts with payment processors, resulting in **$12.435 million in commitments over the next five years**[119](index=119&type=chunk) [Off-Balance Sheet Arrangements](index=30&type=section&id=Off-Balance%20Sheet%20Arrangements) Lightspeed has no significant off-balance sheet arrangements, apart from low-value and short-term leases and other purchase obligations - The company has **no significant off-balance sheet arrangements**, other than low-value and short-term leases and other purchase obligations[120](index=120&type=chunk) [Related Party Transactions](index=30&type=section&id=Related%20Party%20Transactions) Lightspeed has no significant related party transactions, other than those disclosed in its unaudited condensed interim consolidated financial statements - The company has **no significant related party transactions**[121](index=121&type=chunk) [Credit and Concentration Risk](index=30&type=section&id=Credit%20and%20Concentration%20Risk) Lightspeed's credit risk, primarily from cash and cash equivalents and trade and other receivables, is managed by maintaining balances with high-credit-quality financial institutions and continuous analysis of trade receivables, with increased expected credit loss provisions due to macroeconomic uncertainty - **Credit risk** primarily arises from **cash and cash equivalents** and **trade and other receivables**, managed by maintaining balances with high-credit-quality financial institutions and continuous analysis of trade receivables[123](index=123&type=chunk)[124](index=124&type=chunk) - **Expected credit loss provisions increased** due to the uncertain macroeconomic environment[126](index=126&type=chunk) [Liquidity Risk](index=30&type=section&id=Liquidity%20Risk) Lightspeed manages liquidity risk by forecasting operating cash flows and investing financing activities; as of June 30, 2023, the company had $780.3 million in cash and cash equivalents and available credit facilities to meet financial commitments - The company manages **liquidity risk** by forecasting cash flows, and as of June 30, 2023, had **$780.3 million in cash and cash equivalents** and available credit facilities[127](index=127&type=chunk) [Foreign Exchange Risk](index=30&type=section&id=Foreign%20Exchange%20Risk) Lightspeed faces foreign exchange risk from financial instruments denominated in foreign currencies like CAD and EUR, which it mitigates through cash flow hedges using forward foreign exchange contracts, with a notional principal of approximately CAD 79.8 million as of June 30, 2023 - The company faces **foreign exchange risk** from financial instruments denominated in foreign currencies such as **CAD, EUR, GBP, AUD, CHF, and NZD**[128](index=128&type=chunk) - The company uses **forward foreign exchange contracts** for cash flow hedging, with a notional principal of approximately **CAD 79.8 million** as of June 30, 2023[128](index=128&type=chunk) [Interest Rate Risk](index=31&type=section&id=Interest%20Rate%20Risk) Lightspeed does not face significant interest rate risk, as most of its financial instruments, including trade and other receivables, payables, accrued liabilities, and lease liabilities, are non-interest bearing, with only a portion of its cash generating interest - The company does not face **significant interest rate risk** as most financial instruments are non-interest bearing[129](index=129&type=chunk) [Share Price Risk](index=31&type=section&id=Share%20Price%20Risk) Share price fluctuations impact accrued payroll taxes (social costs) related to share-based compensation, with an increase in share price leading to higher accrued social costs and vice versa - **Share price fluctuations** affect accrued payroll taxes (social costs) related to share-based compensation, with an increase in share price leading to **higher accrued social costs**[130](index=130&type=chunk) [Inflation Risk](index=31&type=section&id=Inflation%20Risk) Lightspeed faces inflation risk, which could increase operating costs and employee compensation, and negatively impact customer businesses and the company's financial performance by reducing consumer spending and transaction volumes - **Inflation risk** may lead to increased operating costs and employee compensation[131](index=131&type=chunk) - Inflation may negatively impact the company's financial performance by **reducing consumer spending and transaction volumes**[131](index=131&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the significant management judgments and estimates required for financial statement preparation, covering revenue recognition, impairment of non-financial assets (especially goodwill), business combinations, deferred tax asset recoverability, share-based compensation, and provisions [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statement preparation requires significant management judgments and estimates in areas such as revenue recognition, impairment of non-financial assets (especially goodwill), business combinations, deferred tax asset recoverability, share-based compensation, and provisions - Financial statement preparation requires significant management judgments and estimates in areas such as **revenue recognition**, **impairment of non-financial assets**, **business combinations**, **recoverability of deferred tax assets**, **share-based compensation**, and **provisions**[132](index=132&type=chunk) - **Goodwill impairment testing** is based on internal estimates of fair value less costs to dispose, with key assumptions including **discount rates, terminal multiples, and revenue growth rates**[134](index=134&type=chunk)[135](index=135&type=chunk) - **Business combinations** are accounted for using the acquisition method, with assets and liabilities recorded at estimated fair values, requiring significant estimates and judgments for intangible assets and contingent consideration[136](index=136&type=chunk) [New Accounting Pronouncements](index=32&type=section&id=New%20Accounting%20Pronouncements) As of June 30, 2023, no new accounting pronouncements are expected to significantly impact Lightspeed, though the company is evaluating the IASB's amendments to IAS 12 (Income Taxes) regarding "Pillar Two Model Rules" - As of June 30, 2023, **no new accounting pronouncements** are expected to have a significant impact on Lightspeed[141](index=141&type=chunk) - The company is evaluating the impact of the **IASB's amendments to IAS 12 (Income Taxes)** regarding **"International Tax Reform—Pillar Two Model Rules"**[142](index=142&type=chunk) [Outstanding Share Information](index=33&type=section&id=Outstanding%20Share%20Information) As of August 1, 2023, Lightspeed had 152,185,121 subordinate voting shares issued and outstanding, along with various options, DSUs, RSUs, and PSUs under different incentive plans Outstanding Share Information (As of August 1, 2023) | Instrument | Number Outstanding | Number Vested | | :-------------------------------- | :------------------- | :----- | | Subordinate Voting Shares | 152,185,121 | N/A | | Options (2012 Stock Option Plan) | 273,673 | 273,673 | | Options (Omnibus Incentive Plan) | 11,240,958 | 3,151,880 | | Options (Inducement Grants) | 104,167 | 104,167 | | Options (ShopKeep Inc. Plan) | 203,024 | 202,461 | | DSUs (Omnibus Incentive Plan) | 85,456 | N/A | | RSUs (Omnibus Incentive Plan) | 6,492,343 | 1,050,555 | | RSUs (Inducement Grants) | 273 | 273 | | PSUs (Omnibus Incentive Plan) | 95,328 | 0 | [Disclosure Controls and Procedures and Internal Control Over Financial Reporting](index=33&type=section&id=Disclosure%20Controls%20and%20Procedures%20and%20Internal%20Control%20Over%20Financial%20Reporting) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting, acknowledging inherent limitations of control systems - The **Chief Executive Officer and Chief Financial Officer** assessed and concluded that the company's **disclosure controls and procedures were effective** as of June 30, 2023[149](index=149&type=chunk) - No changes to the company's **internal control over financial reporting** occurred during the period ended June 30, 2023, that materially affected it[151](index=151&type=chunk) - Management acknowledges that any control system has **inherent limitations**, providing only reasonable, not absolute, assurance and cannot prevent or detect all misstatements due to error or fraud[152](index=152&type=chunk)

Disclaimer 2 General This presentation contains "forward-looking information" and "forward-looking statements" (collectively, "forward looking information") within the meaning of applicable securities laws. Forward looking information may relate to our financial outlook (including revenue, Adjusted EBITDA and Adjusted EBITDA as a percentage of revenue) and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, addressable markets, bu ...