Hello, and welcome to the Lightspeed Fourth Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a Q&A session. [Operator Instructions]. I would now like to turn the call over to Gus Papageorgiou. Please go ahead.

Thank you, operator. And good morning, everyone. Welcome to Lightspeed's fiscal Q4 2023 conference call. Joining me today are JP Chauvet, Lightspeed's Chief Executive Officer, and Asha Bakshani, our Chief Financial Officer. After prepared remarks, we will open it up for your questions. We will make forward-looking statements on our call today that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Certain material factors and assumptions were applied in respect of conclusions, forecasts and projections contained in these statements. We undertake no obligation to update these statements, except as required by law. You should carefully review these factors, assumptions, risks, and uncertainties in our earnings press release issued earlier today, our fourth quarter 2023 results presentation available on our website, as well as in our filings with US and Canadian securities regulators. Also, our commentary today will include adjusted financial measures, which are non-IFRS measures and ratios. These should be considered as a supplement to, and not a substitute for, IFRS financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website, on sedar.com and on the SEC's EDGAR system. And finally note that because we report in US dollars, all amounts discussed today are in US dollars unless otherwise indicated. With that, I will now turn the call over to JP.

Thank you, Gus. And welcome, everyone. Thanks for joining us this morning. Overall, I was very happy with our results this quarter. Revenue grew in line with our outlook. We achieved an organic revenue growth rate of 26%. Our GPV volumes were up by 70% year-over-year and our adjusted EBITDA loss of $4.3 million came in significantly better than expected. As we enter fiscal 2024, let me walk you through how we see this year unfolding. Since we went public on the Toronto Stock Exchange in 2019, we have been laser focused on becoming the go-to platform for sophisticated retailers and restauranteurs around the world. Delivering on the strategy meant building our payments platform from ground up. It meant making key strategic acquisitions. It meant honing on our sales and marketing organization to better target higher GTV customers. And earlier this year, it meant reorganizing how we operate to become a more nimble and streamlined company. I would say that we have spent the last four years establishing the foundations of this formidable company. And now, fiscal 2024 will be our year of execution. As we look to better align ourselves to the rule of 40 metrics, this fiscal year Lightspeed expects to, one, reap the benefits of having our One Lightspeed flagship product in market. We expect this to show up as an increased platform adoption among high GTV merchants, higher ARPU and more efficient and rapid product innovation. Two, accelerate revenue growth from financial services, including both Lightspeed Payments and Lightspeed Capital. Three, continue building products that solve our customers' problems and help grow their businesses, particularly with our supplier network. And four, accomplish our goal of becoming adjusted EBITDA breakeven or better for the full fiscal year. In terms of One Lightspeed, I'm really happy to report…

Thanks, JP. I'm pleased to announce that Lightspeed was able to deliver revenue in line with our previously established outlook and an adjusted EBITDA loss better than expected. I'm going to provide a recap of the quarter, discuss the expected financial impact of our unified payments and POS launch, and then provide an outlook for the upcoming quarter and full year. Given there were no acquisitions in this quarter or the prior year comparable, all those members I will quote are organic. In the interest of time, I will focus most of my comments on the quarter versus the full fiscal year. But, overall, for fiscal 2023, Lightspeed delivered revenues of $730.5 million, an increase of 33% year-over-year. On a constant currency basis, revenues were $743.4 million, increasing 36% year-over-year. Adjusted EBITDA loss came in at $33.9 million. And despite the impact of challenges and uncertainty in the macroeconomic environment, for fiscal 2023, we had an annual net retention rate of approximately 110%. One of the highlights of our fourth quarter is our progress towards adjusted EBITDA profitability. We saw subscription gross margins improve to multi quarter highs, transaction based gross margin stabilize and we were more disciplined with hardware subsidies. In addition, we began to see the benefits of the recent restructuring. And now that we're focused on two core products, I expect we will recognize further cost savings, which we can use to invest in accelerating our product innovation. In the quarter, revenue came in at $184.2 million, an increase of 26% year-over-year and in line with our previously established outlook. On a constant currency basis, revenues increased 27%. Subscription and transaction based revenues grew by 28% or 30% on a constant currency basis. Subscription revenue increased 8% year-over-year to $76.2 million and 11% on a constant currency…

Thanks, Asha. As I said, 2024 will be a year of execution for Lightspeed. I expect to exit the year with strong momentum. We will accelerate payments penetration, we will win more complex, high GTV customers, and we will innovate like never before. We are very excited for our unified payments and POS initiative and our two flagship platforms, Lightspeed Retail and Lightspeed Restaurants. With that, I will turn it over to the operator to take your questions.

[Operator Instructions]. Your first question comes from the line of Daniel Chan of TD Cowen.

You mentioned that you expect some churn in your larger customers as you roll out this unified payment strategy. Can you just talk about what you saw with your North American retail customers as you roll this out? Where did they go? And what was the feedback that they provided to you on why they were leaving the POS system as you rolled out this unified payment solution?

Maybe just to clarify, we expect lower churn in the higher GTV. So we expect that the initiative will churn actually the lower customers and not the larger ones. So just being clear there. For me, there's two big blocks to the unified payment strategy. The first one is on new business. So when you look at the new business customers, every customer now, everywhere in the world where we have payments cannot buy Lightspeed without Lightspeed Payments. And for now, we've seen actually no change in the close rates. And we've seen, of course, higher ARPU because customers are all buying payments. So I think that we're very confident and feeling good about good about the strategy. And then the second fold to this are existing customers. And existing customers, for now we're launching in the US on retail. And as we get to the end of the fiscal year, we'll be launching everywhere in the world. And on that front, it's very much in line with what our beliefs were. We do not believe that people are going to change their point of sale and core business platform for the payment terminal. And actually, we have strong belief that, on the other side of this journey, we're getting extremely good feedback from customers who are using the payment platform. And what we're getting from them is, of course, unified reporting makes their lives much easier, less errors because the customers have an integrated payment platform, better customer experience because these are not old terminals, we're giving them state-of-the-art, brand new terminals. Maybe the last thing I want to add on this is we're making it as easy as possible for them. So we're giving them free terminals. We're buying out their contracts, we're sending people onsite to help them install. And, of course, we will be – and I think we shared the statistic before, but in the majority of the cases, I think it's 70% of the cases, we always have lower rates than the rest of the market. So it should be a full net positive for our customers. And that's why we're deciding to do it now. We think it's going to be a really good initiative.

I noticed that your Lightspeed Capital deployment has increased significantly. How do you plan on scaling that business as payments adoption is expected to accelerate following this unified payments initiatives?

I'll take that, Daniel. So the majority of our customers that we offer Capital to are actually Lightspeed Payments customers. And as we mentioned in the prepared remarks, we have now self-serve on Capital in several of our regions. And so, what that means is as more and more customers come on to Lightspeed Payments, we've already underwritten those customers. So as a result, those customers will be offered Capital. We have algorithms that determine the amount of merchant cash that we advance to each merchant that they're eligible for. So we definitely expect that business to continue to scale as we get more and more customers onto Lightspeed Payments because then they, by default, become eligible for Lightspeed Capital.

Your next question comes from the line of Andrew Jeffrey of Truist Securities.

I guess, on the unified payments, just so I understand it. Can you just detail how it sort of changes from what you've been doing to date with Payments that's gotten the Payment attach up to 19%? Are there pricing changes that are part of this? Does this look like other competitors in the market? I just kind of want to understand some of the nuance behind this shift? And then I've got a follow-up.

Look, until now, payments was not mandatory. I think that's the best way to say it. So we were in a way kind of more with the carrot and kind of Switzerland. So we would go to see the customers and say, hey, if you want, there is Lightspeed Payments. And so, it was not mandatory for new customers. And it was not mandatory for existing. So here, what we've done is we spent the last three years really developing one service that could work everywhere in the world. And as you know, we have one payment service that works all across Europe, that works in Asia, and in the US on hospitality and retail. We didn't want to be too aggressive because we wanted to reach scale and ensure that all of our customers were happy and sure that we know – we knew how to onboard customers. And so, we're very happy with the results there. And we've reached scale everywhere in the world now, in terms of Lightspeed Payments, and we're getting close to 20% penetration as we end the quarter. Not 19%, but 20%. Here, for us, we felt it's the right time to do this because we know – I think we have our processes internally that work. And we also know that there's a lot of value. And frankly, I think that's the most exciting parts of the market and our customers is when they use Lightspeed Payments, they save time, they have a much better experience with our customers. And when you look at the market today with cost of labor going up and interest rates and everything, for them, the only way out is doing more with less. And that's why we feel now is the right time to say, well, you know what, we cannot consider any more payments and software as being dissociated. They are one platform. And it's actually going to simplify our business going forward because every customer now is going to is going to follow the exact same onboarding flow, where everybody's on payments, every new customer, and every existing customer is going to move to Lightspeed Payments. And that means we will only develop one version of our software instead of having all these integrations with all these different partners, one version of our software that'll provide value to every single one of our customers.

So, it becomes an attach rate function primarily is what it sounds like. Just, Asha, when I look at 1Q and the guide, you had very nice ARPU. The subscription yield was up really nicely in 4Q. Is the implication that GTV on a reported basis could be down in 1Q year-on-year?

Yes, yes. We're forecasting – we're being very cautious on GTV. As we exit Q4 and start Q1 and the new fiscal year, we are seeing GTV in several of the retail verticals where Lightspeed thrives continue to be down year-over-year such as bike and home improvement. So we are being cautious on GTV. And that's what you're seeing come through in the Q1 guide. However, in addition to that, the account management teams inside Lightspeed, who typically focus on upselling our base on software, is going to be 100% focused in the first couple of quarters on onboarding five to six times the number of customers that we typically onboard on Lightspeed Payments. So there's that that impacts 1Q as well in the in the software revenue growth. Over the year, though, you see that we – given the guide for the year, it's evident that we expect very strong revenue acceleration in the back half of the year as the initial launch of unified payments is behind it. And in addition, we start seeing the extra volume on those additional customers getting up and running on to Lightspeed Payments.

Your next question comes from the line of Martin Toner of ATB Capital Markets.

At what pace do you think you can move existing customers over to unified POS and payments? And how successful are you being at implementing a third party processing fee?

I'll take this one. The plan is, very simply put, that we believe we can move the majority of our customers between now and the end of the fiscal year onto Lightspeed Payments. As I said, we're going to start with retail in the US, which is our biggest vertical, and the biggest concentration of customers and we'll move to hospitality in the US, and then we're going to move to Europe and APAC. So this is the year for me of, we take all of our existing customers and we bring them to Lightspeed Payments. We've done a number of initiatives there and we know what it's going to take to get there. And I think that's why going back to what Asha was saying, normally, when you sell software, you recognize the revenues immediately. But we're going to take the majority of our go-to-market people and say, instead of selling software to our customers, we're going to move them to payments. But there is a delay between the moment they say I'm coming to payments, and then we've got to get them onboarded, transactional, shipped all the hardware. And so, that's why you see a softer kind of a guide on revenues in the first half of the year. But if this works well, and according to what we have planned, that means we're going to end the year with profitability and high growth. And for me, these are all the sequences we've been putting together for the last few years, and we knew this was the final step of Lightspeed Payments. When we always said that we believed we could get to 50% penetrated, we knew there was a step in there, which is, okay, now we know it's working, we know our customers love it, so now we have to go into – okay, now let's bring the majority of our customers on to the platform.

Can you talk a little more about the implementation? Are there limitations to the pace that you guys can move based on people and availability of hardware?

No, I think it's just gradual. We have a lot of customers in every country. So I think, for us, we want to be cautious again in how we do it. We want to be sure that it's a successful outcome. And so, that's why we're starting – and we're going to be learning all year long as we continue to deploy. But for now, just very clearly, the process is, you're going to speak to – all of our account managers now are just focused on calling the customers, reaching the customers. And as you know, we're going to be accommodating the rate. So we need to take their current statement, we need to look at the rate that they have, we need to get back to them with what is the real rate versus – your legacy systems are always very smoke and mirror when it all comes to rate. So we give them the same rate, we accommodate the same rate. And then from there, we send them to our onboarding teams. From there, the onboarding team needs to ship the hardware. We have planned for all of the hardware. Just being very clear. We've been working with our partners there to be sure we have the right volumes. And then, when the hardware is shipped – and this is where it's going to be, obviously, kind of costing us a lot of money in the first half of the year is we're then going to be sending people onsite, who are going to be kind of holding the hand of the customer all the way and are going to be plugging into terminals, getting into – and so, then it's as simple as plugging into terminals, putting the right code number, and then the customers are up and running. So it's a well understood, repeatable process we've been doing. But now the idea is, in the first half of the year, we're going to put as many people as we can at Lightspeed to do what I just described, which is going onsite, which is shipping those terminals, and holding the hands of the customers. Because the one thing we know about retailers and restauranteurs, they don't really like change. So we're doing everything we can to make this change as seamless as possible. We're giving the terminals, we're buying out the contract, we're accommodating the same rates, we're sending people onsite because we want the experience to be good, because we know that once they use it, they will love it.

Your next question comes from the line of Thanos Moschopoulos of BMO Capital Markets.

If you look at your retail versus hospitality mix, as you're shifting towards the higher GTV locations, is there any shift in that dynamic? Are you having more traction sending up one of those verticals versus the other when we talk about higher GTV locations?

Thanos, I think, again, we're seeing what we've seen for the past year. So we're seeing the under $200k cohort, we're seeing that shrink actually now about 6% year-over-year, and we're seeing the higher GMV or GTV cohorts grow. And I think that's kind of been happening all year round. But I think the good news here is when you look at the $200k cohort, that represents 5% of our GMV and represents I think 80% of our churn. So we're seeing good adoption from new customers. We're seeing ARPU grow. We announced a few very large retailers and restauranteurs that have been moving to Lightspeed that we acquired in the quarter. And the flip side of that is we're seeing this slew of low GMV customers just churn at higher rates. And I think, even if you look at the macro environment, and we have planned for that – I kept saying the whole year, hey, we think that with what's happening in the economy, that cohort is not going to be a good one. And we're seeing heightened churn in those cohorts, and, and we're actually seeing really good adoption on the higher courts.

The only thing I would add to that, Thanos, is from a vertical perspective, we remain in the 60% retail, 40% hospitality markets despite the move up-market. The split by vertical is still 60% retail, 40% hospitality.

In terms of your approach to outbound sales, to date, it's been exclusively North America. As you launched the payments initiative globally, given some of the hand holding you might need to do, might you start deploying direct sales in other geographies as well?

You're right. More and more as we look at the higher GMV merchants, we're doing more and more outbound. And not just for existing customers with terminals and everything, but also even to try and attract customers. And we're taking a very hyper geography – very focused approach on all the different countries and all the different. So we have teams, as you know, all over the world. So, that is one of the blends that we're seeing is that we're seeing more and more outbound. Again, I think that's very much in line with the cautiousness that we have. We want to be sure that our unit economics are strong. So we are really focusing on the right customer base. And I think for me that's the other data maybe that I think is interesting is our cohorts are growing at 110% year-over-year, and that's because the customers that stay on the platform are buying more and are buying more modules and more from Lightspeed. So that's why we really have to continue on this strategy of focusing on the higher GMV. And you're right, that means a higher blend of outbound versus what we would have historically had in the company.

Your next question comes from the line of Tien-Tsin Huang of J.P. Morgan.

I know a lot of hard work went into getting to this point. So it feels like, JP, very big bet, obviously, on the product and fitness and that clients are going to love it. I guess my question is, as you go out into the field, and you face resistance, whether it's businesses aren't ready to do it now, they're too busy, or they're happy with what they have, or they get price matching from other peers, is there a plan B? I'm just curious, how much force are you going to put in to effectuate the plan? Because, again, I'm sure you're confident in the product and whatnot, I'm just curious if there's a plan B.

Look, if you do not want to move to Lightspeed, we will, we will be charging you a transaction fee. And like all the other companies actually in our space that are the newer generation. So I think nothing new there. But we really have strong confidence. We did a few tests before we launched the initiative on cohorts of customers, and what we're seeing is, -- and that's where we feel strongly is, first of all, the new platforms we just launched – and I don't know if you saw it yesterday, we launched our new hospitality – are probably the best products we've ever built and creating a lot of value with a very clear understanding of where we bring value to customers. And I think we just have very strong confidence that people are not going to replace the core platform that runs everything in their business for the payment terminal. We think everybody is going to see this once they've – and change is, I think the most difficult piece, is how do I make change as simple as possible. But once they're on the other side, we're very confident that they're going to like what they see. And if the customers do not want to, well, we will be charging them a transaction fee. But when we've modelled the year, we've modeled all the scenarios and it is a net positive any way you look at it for Lightspeed.

I appreciate the confidence and doing it now. I think it makes sense with the unified platform being done. Last quick question. Just on the marketing, the branding in this moment now, right, to take advantage of it, are you going to do anything unique on the sales and marketing front here beyond the outreach that you described?

Well, look, we've hired a new Chief Marketing Officer. She was at Klaviyo before and Dropbox. So we've hired somebody that's definitely going to step up our game. I think for me, when I look at marketing – and that's where I get probably very emotional and excited is, if you actually look at our restaurants and our retailers and how they use the platform, they use us for everything. They use us to run their email campaigns, to manage their food, to manage their menus, to manage our kitchens, to manage back office, to manage – I've always said it's the hidden side of the iceberg. We truly are the core platform running their businesses. And I think we need to do a better job at being the go to brand and making that very clear that we're not just a cash register. We're not just a POS, we run their businesses. And, yeah, so the big mandate here for Kady, who's joined us, is twofold. One to ensure that we become the go to platform globally for, call it, the higher GMV SMBs. And ensuring that I think we need to develop the brand in a much stronger way.

Your next question comes from the line of Josh Baer of Morgan Stanley.

I just wanted to clarify, which of the location disclosures will be moved to annual disclosures?

Josh, we won't disclose annual total location count quarterly, but we will on an annual basis. So you'll get that from us yearly. We did disclose it this quarter at the year-end, that the total location count was 168,000 locations outside from Ecwid at the end of March 2023.

I'm assuming we'll still get ARPU on a quarterly basis?

What we want to make sure is that everyone has all the pieces to model the business. And so, we expect subscription revenue, as we've said in the past, to grow annually at a rate of about 10% GPV, to continue to grow 50 plus percent year-over-year. And we also expect overall gross margins in the 40% to 45% range. And so, between those components and ARPU, we'll ensure that you have what you need to continue to model our business.

Your next question comes from line of Koji Ikeda of Bank of America Securities.

A couple from me here. And I wanted to kind of go back to the unified payments and the POS initiative. So, just digging in, wondering if you could talk a little bit more about if customers opt out, can you talk a little bit more about what sort of fee is involved if the customer does not or decides not to use Lightspeed Payments? Is that going to be same around the world? Is it a monthly fee, percent of transaction? And then, how do you think about churn assumptions or longer sales cycles due to this initiative that is embedded in the guidance?

I'll start with the easy one, which is sales cycles. We have already launched payments now and we have a couple of months under our belt globally. And here we have seen zero change in length, zero change in close rates, and we've seen higher ARPU. So on that front, extremely confident that this is not going to be an impediment to growth and to attracting the right customers. Yes, on that front, so feeling very confident there. Going back to churn assumptions, we do not believe that churn will be high as we launch unified payments to our existing customers on the cohorts that matter. We believe that the high GMV merchants will actually love what we're doing because the bigger the merchant, the more they need automation, the more they need speed of transaction to check out, the more they're going to like unified payments because it is the best way to provide the best experience to your customers in a very fast and efficient way. We think that those that might not, we see them as the more emotional customers, which are the lower GMV ones. And those we think that churn is going to be high. But it's not that important to us, given that 5% of our total GMV comes from the customers under $200k. And that is a significant amount of customers still. So, I don't know how to answer this differently, but we're feeling really confident around bringing the customers that matter that are going to have a really big impact on revenue for Lightspeed and growth in ARPU. If they don't, just being very clear, if they do not want to – at the end of all of this, they've all received communication and they're going to continue throughout the year in all the other regions that says that they have a grace period, but at the end of this grace period, if they don't use Lightspeed, they have two options, they have – one option is to go and find another vendor, which is okay for that cohort of customers. And then the second option is they can use Lightspeed Payments, but they're going to be charged a transaction fee. And in the US, it's going to be about 50 basis points, which is, again, very much in line with other vendors who are proposing this to their customers. Just being very clear, that's the scenario. But we do not believe that there are many customers who are going to go with the transaction fee. And we've modelled the churn assumptions to levels that – I think we've been very conservative. And even in those scenarios, when we look at our guidance for the year, we're very confident in it.

My follow-up here. And it's really on the withdrawal of the 35% to 40% organic revenue growth guide. I'm trying to really reconcile here the positive comments, the long term strategy, the payments rollout, and I do understand the caution with the macro, and maybe just a tilt of caution with the payments initiative just because it's so new. But it does sound so long term positive for the business. What other factors are coming into play? Or anything else to specifically call out for the reason to withdraw the medium term guide here, the 35% to 40%?

Absolutely. The main factor for withdrawing 35% to 40% are actually the 20%, 23% outlook that we're providing for the year is actually that the company will be focused on unified payments in the first half of the year. And you're seeing that come through in the revenue guide for the first quarter. For example, our account management teams that are typically focused on upselling our base will be focused fully on onboarding 5x to 6x the number of customers that we typically onboard. And so, you're seeing the impact of that in the first half of the year as the company is gearing up to onboard, underwrite 5x to 6x the number of customers that we typically would. However, in the back half of the year, as the company – that launch of unified payments is behind us, the initial launch, and we get the benefit of the added volumes of all these customers coming on to unified payments and using Lightspeed Payments, we start to see very strong momentum and strong revenue growth as we exit fiscal 2024.

Maybe just clarifying, the difference between software and payments is, and I know I said it, but in software, when you sell and the customer buys your software, it immediately translates into revenues. On payments, and especially with the unified payments approach, in some cases, we're giving our customers a quarter to move because the larger ones takes a lot of time to deploy. And so, that's why, yeah, it's a year of two halves, basically. The first half is – and that's why, again, going back to why we withdrew is, for this year, we're certainly not giving the guidance that we had historically given. And that's because it's two halves and even though we think we will end the second half in a very strong position.

Your next question comes from line of Suthan Sukumar of Stifel.

A couple of questions for me. Firstly, on the go-to-market piece, sounds your sales model has been evolving to more direct sales [indiscernible] to go after the higher GTV merchants, which obviously makes sense. How are you thinking about your CAC? And just kind of curious how that's been trending, given the higher LTV potential? And do you also see opportunity for more focused investment from a sales and marketing standpoint to drive more impact with these larger merchants?

Just again, being very clear, the CAC hasn't changed. And I think that's the good news is your CAC hasn't changed, but now we have all customers who are buying payments. So on the unit economics front, we've seen really good progress there. Of course, outbound is slightly more expensive than inbound as we can all imagine. But here again, if you're attracting high GMV customers and they're all attaching payments, you can easily afford a slightly higher CAC because your payback is going to be shorter because your customers are on payments. And if you go for the right segment of customers, you're actually going to have better unit economics. So that's how we run the business. It's always going to be how we run it. And I think for us, we're just obsessed around unit economics, but that's why we do believe – and again, on a macro map of the year, as we end the year and we have more and more customers on unified payments, we will be investing more in go-to-market just because our LTV is going to be stronger and just because we'll have unified payments with everyone. So I think here going back to description of the year, first half the year is about execution, bringing as many customers as possible on payments. Second half the year is tailwinds of payments and we will see high growth in revenues. And it will also enable us to invest way more in attracting more customers. So that's how we view it right now. But I think just being clear, the CAC over the last year has really gone in the right direction. So it's actually not increased, it's been declining.

Next, I wanted to touch on the competitive landscape. Kind of curious what you're seeing in terms of the competitive intensity in the market today? Are you seeing competition or rather competitive intensity increase as you move upmarket? Or is it largely consistent with what you've been seeing in prior periods?

We have two big categories of products, and I'm just going to go through both of them. On the retail front, we now have our new platform, we are extremely competitive everywhere in the world. I think we are the go-to everywhere in the world for more established merchants. We're even seeing customers actually move from other platforms because they scale off the other cloud based systems. And actually, we're very excited about what they're telling us, is even our ecommerce capabilities are now – they would arguably say – better than competition because we've been hard at work for two years rebuilding from scratch our retail platform. And it's brand new, no technical debt, state of the art, and really what we're hearing from our customers, it's better than it's ever been and it's extremely competitive. I think we are the go to globally for retail. Now, unfortunately, GMV in that segment, and retail has not been as good as hospitality, but that is really the strongest suit for Lightspeed globally. When you take hospitality, I think hospitality, we have basically two large markets, and I will start with what I call outside of the US or rest of the world. Rest of the world, we are the global, dominating, go to merchant for established. So if you go to London, you go to Paris, you go to Germany in any city, we are the kind of go to platform and we're not seeing any competition there. And, really, we spent a lot of time just making this better. We've launched actually – you might have read yesterday, we've launched a new version of our hospitality. And, really, we think that's really good. Now in the US, we have a competitor called Toast that's doing really well. And in…

Your last question comes from the line of Richard Tse of National Bank Financial.

In the release, you talk about for the rule of 40. I'm kind of curious to see, what's your ideal balance for sort of growth and profitability as you look forward over the next couple of years? If I can kind of just slip another one in, I'm kind of also curious to see, of the proportion of your customers that have adopted payments, how many of those, on a percentage basis, have taken on Capital?

I'll maybe start with Capital. Capital is very small right now. We're just getting it launched. We just recently released it in the product. And the story around Capital is you need to surface the right offer at the right time. So we're putting a lot of efforts into that. And as Asha said, we preapprove a lot of our customers. And so, when they're in a workflow of reordering, that's when you pop up the offer. And it's great for them because it's just easy access to funds. And for us, it's great because we withhold on the sales side. So default rates are very low. And we know everything about our merchants, given we run their businesses. Sorry, I forgot the first question.

Between growth and possibility as you sort of…

Look, we are going to run the business this year really focusing on trying to be as close as possible as we end the year to the rule of 40. And we are going to run the business on looking at sales efficiency. I think we've got to do better there. And naturally, as we deploy Payments, that's going to look much better. I think for us, and again, I don't think we have any significant market share. I think the market is up for grabs. And so, for me, it's going to be the balance between how much do we reinvest and if the unit economics are good. I guess the other way to say it is, I'll put it differently, we know that our cohorts grow at 110% year-over-year. We know that our customers in the right segment are going to stay with us forever and continue buying more. And we know that we have no significant market share for now. So I think we need to show that we can be breakeven or better, show we can be profitable, but then I want to be able to – if we define to double down on getting the market because I think there's a real opportunity out there to build a much larger company than we have today. And I think if the units are strong, we need to double down on going after the market. So that's how we're looking at it right now is rule of 40, is going to be always weighted towards growth. But we need to be able to, if we want to, to show that we can be profitable as an organization.

There no further questions at this time. I'd now like to turn the call back to Gus Papageorgiou for closing remarks.

Thanks, everyone, for joining us today. If there are any follow-up questions, please reach out to the IR team. And we look forward to speaking to you again after our next quarter. Have a great day, everyone.

This concludes today's conference call. You may now disconnect.