Earnings call transcript: Lightspeed Q1 2025 sees mixed results

Lightspeed POS Inc. (LSPD) reported its Q1 2025 earnings on July 31, revealing a mixed financial performance. The company missed its earnings per share (EPS) forecast, reporting $0.06 against an expected $0.13, a 53.85% shortfall. However, revenue exceeded expectations, reaching $304.9 million compared to the forecasted $287.22 million, a positive surprise of 6.16%. Following the announcement, Lightspeed’s stock rose by 3.69% in pre-market trading, reflecting a cautiously optimistic market response. According to InvestingPro data, the company maintains strong financial health with a current ratio of 5.36, indicating robust liquidity management. InvestingPro subscribers have access to 10 additional key insights about Lightspeed’s financial position.

Key Takeaways

• Lightspeed missed EPS expectations by 53.85%, reporting $0.06 against a forecast of $0.13.
• Revenue exceeded forecasts, coming in at $304.9 million, a 6.16% surprise.
• Pre-market trading saw Lightspeed’s stock increase by 3.69%.
• Gross profit improved by 19% year-over-year to $129 million.
• The company launched new AI-powered features across its platforms.

Company Performance

Lightspeed demonstrated robust year-over-year growth in several areas despite missing EPS expectations. Total revenue grew by 15% to $205 million, maintaining its impressive 5-year revenue CAGR of 55%. The gross profit increased by 19% to $129 million, with a healthy gross margin of 41.81%. The company reported a 55% rise in adjusted EBITDA to $16 million, showcasing its ability to enhance profitability. The gross transaction volume (GTV) increased by 4% to $24.6 billion, and average revenue per user (ARPU) rose by 16% to $655. Based on InvestingPro’s Fair Value analysis, Lightspeed currently appears undervalued, presenting a potential opportunity for investors. Discover detailed valuation metrics and more insights with an InvestingPro subscription.

Financial Highlights

• Revenue: $205 million, up 15% year-over-year.
• Earnings per share: $0.06, below the forecast of $0.13.
• Gross profit: $129 million, a 19% increase year-over-year.
• Adjusted EBITDA: $16 million, up 55% year-over-year.
• Gross margins: improved to 42% from 41% last year.

Earnings vs. Forecast

Lightspeed’s Q1 2025 earnings report showed a significant miss in EPS, which came in at $0.06 compared to the forecasted $0.13, marking a 53.85% negative surprise. This miss is notable compared to previous quarters, where the company had generally met or exceeded earnings expectations. However, revenue exceeded projections by 6.16%, reaching $304.9 million, indicating strong sales performance.

Market Reaction

Following the earnings release, Lightspeed’s stock price rose by 3.69% in pre-market trading, reaching $13.43. This positive movement suggests that investors focused more on the revenue beat and the company’s growth prospects rather than the EPS miss. The stock’s current price remains well within its 52-week range of $7.34 to $18.96, indicating moderate investor confidence. InvestingPro analysis shows the stock has demonstrated strong returns over both the last month and quarter, though with notable volatility (Beta of 2.79). A comprehensive Pro Research Report, available to subscribers, provides detailed analysis of Lightspeed’s market position among 1,400+ top US stocks.

Outlook & Guidance

For fiscal 2026, Lightspeed projects revenue growth of 10-12% and a gross profit growth target of 14% year-over-year. The company expects adjusted EBITDA to be between $68 million and $72 million. Lightspeed continues to invest in outbound sales and product innovation, targeting a 10-15% compound annual growth rate (CAGR) in customer locations over the next three years.

Executive Commentary

CEO Dax DeSilva expressed confidence in the company’s strategy, stating, "We laid out a bold strategy, and in Q1, we delivered." He highlighted the role of AI in enhancing efficiency, noting, "AI is certainly contributing to the progress that we’ve made in efficiency." DeSilva also emphasized Lightspeed’s dual focus on growth and profitability: "We’re proving that Lightspeed can invest meaningfully in growth while improving profitability."

Risks and Challenges

• The EPS miss could signal potential challenges in cost management or market conditions.
• Macro-economic pressures could impact consumer spending and business investments.
• Competition in the retail and hospitality sectors remains intense, requiring ongoing innovation.
• Supply chain disruptions could affect product availability and operational efficiency.
• The success of new AI-powered features is yet to be fully realized in financial performance.

Q&A

During the earnings call, analysts inquired about Lightspeed’s AI implementation and its benefits to merchants. Questions also focused on the productivity of the expanded sales team and the company’s strategy for increasing payments penetration. Growth opportunities in different markets were explored, with executives providing insights into potential areas for expansion.

Full transcript - Lightspeed POS Inc (LSPD) Q1 2026:

Van, Conference Operator: Thank you for standing by. My name is Van, and I will be your conference operator today. At this time, I would like to welcome everyone to the LightSpeed First Quarter twenty twenty six Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer Thank you.

I would now like to turn the call over to Gus Papayorio, Head of Investor Relations. Please go ahead.

Gus Papayorio, Head of Investor Relations, Lightspeed: Thank you, operator, and good morning, everyone. Welcome to Lightspeed’s fiscal Q1 twenty twenty six conference call. Joining me today are Dax DeSilva, Lightspeed’s Founder and CEO Asha Pakshanti, our CFO and J. D. St.

Martin, our President. After prepared remarks from Dax and Asha, 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 first quarter fiscal twenty twenty six results presentation available on our website as well as in our filings with U. S. 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 plus and on the SEC’s EDGAR system. Note that because we report in U. S. Dollars, all amounts discussed today are in U. S.

Dollars unless otherwise indicated. With that, I will now turn the call over to Dax. Thank

Dax DeSilva, Founder and CEO, Lightspeed: you, Gus, and good morning, everyone. Last year, we made the strategic decision to focus Lightspeed on two core growth engines: retail in North America and hospitality in Europe. These are markets where we have a proven right to win, strong product market fit and significant headroom for growth. We refocused our product road map, revamped our go to market strategy, and aligned our organization to execute on that strategy. That strategy is working.

Our Q1 results speak for themselves. Revenue of $3.00 $5,000,000 increased 15% year over year and exceeded the high end of our outlook. Gross profit of 129,000,000 increased 19%, also significantly above our outlook of 13%. Payments penetration reached 41%, up from 36% in the same quarter last year. Adjusted EBITDA came in at $16,000,000 up 55% year over year.

And we added approximately 1,700 net new customer locations in our growth engines in the quarter, with total growth engine locations up 5% year over year. Total locations at the end of the quarter were approximately 145,000 and were up year over year. This morning, I want to share how we are progressing against the three strategic priorities we laid out at our Capital Markets Day. As a reminder, those priorities are: one, growing customer locations in our growth engines two, expanding subscription ARPU and three, improving adjusted EBITDA and free cash flow. On growing customer locations.

At Capital Markets Day, we committed to growing customer locations in our core growth engines, North American retail and European hospitality, with a targeted three year customer location CAGR of 10% to 15%. In Q1, total growth engine locations were up 5% year over year, with approximately 1,700 net new customer locations added in the quarter, a clear acceleration from three percent last quarter. As our go to market and product investments continue to scale, dislocation growth will converge towards the 10% to 15% target we laid out during the CMD. Overall, customer location count was net positive for the quarter. Location growth was driven by a go to market engine that’s becoming best in class, anchored in disciplined funnel management across both outbound and inbound channels.

Outbound driven bookings more than doubled year over year for our growth engines, and we now have over 130 of our 150 planned outbound reps in seat, the majority of which are still ramping as it takes approximately six months for an outbound rep to become fully productive. We also had a strong quarter in vertical brand marketing, growing our presence in trade shows and customer events. Thanks to our strong outbound and vertical brand marketing efforts, we are seeing a halo effect on inbound, with inbound bookings up 15% year over year. We had many notable customer wins this quarter. In retail, we added premium streetwear retailer Last Stop with 10 locations in Maryland and Virginia Shades of Charleston, a four location eyewear retailer in South Carolina Within the order by Lightspeed, we added Neiman Marcus and Bergdorf Goodman and marquee brands Fabletics and Tory Burch, displacing key competitors and reinforcing our position as a dominant B2B platform in retail.

And in golf, we signed Western Golf properties with 11 locations in California and Nevada. In hospitality, we added Le Petite Chaise, the oldest restaurant in Paris and DePaul, a two Michelin starred restaurant in Amsterdam and The Corrigan Collection, with seven locations across The UK and Ireland by Michelin starred chef Richard Corrigan. On driving software revenue and ARPU, Q1 software revenue grew 9% year over year, and software ARPU increased 10% driven by product innovation as well as sales of our flagships, primarily to retail customers in North America and hospitality customers in Europe. In retail, we launched customer inventory adjustments, allowing for detailed tracking of stock changes. We added inventory turns and a gross margin return on investment metric within retail insights.

We further improved the Lightspeed scanner app to allow for product search, inventory checks and pricing. And within the order by Lightspeed, we launched order trends that helps merchants identify the top selling products by brand. Early adopters have seen a 10% increase in average order value. In hospitality, we launched our AI powered benchmarks and trends in Europe, giving restaurateurs visibility into how their performance compares to peers by region, cuisine and price point, a feature already proven in North America. We rolled out mobile tap on light speed table side in The UK, Netherlands and Belgium, improving table turnover and service speed.

We further enhanced kitchen display system with features such as prep insights and menu updates and added deeper insights to the LightSeed Pulse app, such as best sellers and top staff. Then we introduced a new sales report dashboard, consolidating all key metrics into a customizable, real time view to help operators plan smarter and optimize margins. This kind of innovation, tailored to high value merchant needs, helps drive higher win rates, ARPU expansion and grow customer lifetime value. On expanding profitability, Ash will walk through the numbers in more detail, but I want to underscore a few things. First, Lightspeed continues to deliver strong software gross margins of 81%, a reflection of the mission critical nature of our platform.

Our customers run established businesses, and they value technology that helps them manage their inventory, organize staff, access capital and improve the customer experience. That value is evident in both our industry leading software margins and our other growth metrics. Second, our adjusted EBITDA performance in Q1 of £16,000,000 increased 55% year over year and is a clear sign that our model is working. Importantly, we were able to significantly improve adjusted EBITDA while continuing to invest in outbound sales, vertical marketing and in product and technology. We’re proving that Lightspeed can invest meaningfully in growth while improving profitability.

In closing, we laid out a bold strategy, and in Q1, we delivered. I want to thank the entire Lightspeed team for a strong start to fiscal twenty twenty six. With that, I’ll turn it over to Asha.

Asha Pakshanti, CFO, Lightspeed: Thanks, Dex, and welcome, everyone. Lightspeed had a great start to the year with revenue and gross profit coming in well ahead of our initial outlook, thanks largely to expanding locations within our growth markets, increasing software ARPU, strong payments penetration and relentless operating efficiency, which is now a part of the Lightspeed DNA. I will walk you through a detailed look at our financials and then provide our Q2 and fiscal twenty twenty six outlook. Total revenue grew 15%, ahead of our outlook, driven by software ARPU expansion and increasing payments penetration. Revenue growth was primarily generated by our growth markets of North America Retail and European Hospitality as more and more customers move on to our platforms and attach new software modules.

In addition, we benefited from improving same store sales, thanks to a more stable macro environment. Software revenue was $90,900,000 up 9% year over year, with software ARPU up 10% year over year. Software ARPU increased due to new software releases along with the benefit of pricing actions taken last year. Transaction based revenue was $204,600,000 up 18% year over year. Gross payments volume grew 21% year over year, and capital revenue grew 34% year over year.

Gross payments volume as a percentage of gross transaction volume came in at 41%, up from last quarter and year over year. Overall, GTV grew by 4% to $24,600,000,000 and total average GTV per location continued to climb as we continue to sign more high value customers. We saw GTV in our growth engines accelerate this quarter to 12% year over year, with growth engine locations up by 5% year over year. ARPU reached a record $655 up 16% year over year, driven by both higher software and payments monetization. ARPU grew across both our growth and efficiency markets, with growth markets outpacing the overall average.

ARPU in our growth markets is higher than our efficiency market. And as those locations grow, I expect it to have a positive influence on overall ARPU. With respect to profitability and operating leverage, total gross profit grew 19% year over year, exceeding both revenue growth and our 13% outlook, driven by strong top line performance and expanding gross margins in both subscription and transaction based revenues. Q1 gross profit benefited from new software modules released last year as well as the price increases that were put through mid last year. Total gross margin was 42%, up from 41% last year.

Despite transaction based revenue increasing to 67% of sales from 65% of sales last year, gross margins improved through initiatives, including effective spend management and the growth in higher margin revenue such as LightSweet Capital. We delivered strong software margins of 81%, up from 79% a year ago, largely driven by cost discipline. Gross margins for transaction based revenue were 29%, up from 26% last year. This improvement reflects growth in our capital business and the expansion of payments in international markets, where margins exceed those in North America. As we convert customers to Lightspeed Payments, we increased our overall net gross profit dollars.

And in the quarter, we saw transaction based gross profit grow 30% year over year. Total adjusted R and D, sales and marketing and G and A expenses grew 15% year over year, primarily due to meaningful investments we are making in field and outbound sales as well as product innovation in our growth engine. Adjusted EBITDA in the quarter came in at $15,900,000 increasing 55% from the $10,200,000 we delivered in Q1 last year, driven by continued success from our strategic shift and our relentless focus on operating efficiency. Adjusted free cash flow is nearing breakeven and came in at $1,700,000 used in the quarter. Free cash flow adjusts for cash related to our merchant cash advance business and includes our capital expenditures.

We continue to actively manage our share based compensation and related payroll taxes, which were 14,000,000 or 5% of revenue for the quarter versus $11,700,000 or 4% of revenue in the same quarter last year. We continue to manage equity usage prudently. With respect to capital allocation and our balance sheet, we completed our fiscal twenty twenty six normal course issuer bid of approximately 9,000,000 shares, returning $85,000,000 back to shareholders in our first quarter. In addition, we opportunistically used $30,000,000 to repurchase our stock in the open market to fund future RSU settlement obligations, limiting share dilution upon settlement. Excluding these two items, which were elective, our cash balance would have increased over the previous quarter.

We ended Q1 with approximately $448,000,000 in cash. Approximately $200,000,000 remains under our broader Board authorization to repurchase up to $400,000,000 in Lightspeed shares, and we continue to be opportunistic on further share repurchases. Our balance sheet remains healthy and positions us well as we continue our strategic focus. With respect to our efficiency market, we continue to retain revenue with location churn largely offset by continued strength in payments penetration, capital revenue growth and higher ARPU. It’s worth highlighting that payments penetration for these markets is 35%, below our global average, which we view as a meaningful opportunity.

We believe there’s strong potential to increase adoption amongst these customers. Now turning to our outlook. Despite a fluid macro environment, we maintain strong conviction in our strategy and ability to execute. This financial outlook is consistent with our targeted three year gross profit CAGR of approximately 15% to 18% and our three year adjusted EBITDA CAGR of approximately 35% that we presented at our Capital Markets Day in March. For the second quarter, we expect total revenue in the range of approximately $3.00 5,000,000 to $310,000,000 total gross profit growth of approximately 14% year over year total adjusted EBITDA to be in the range of approximately $17,000,000 to $19,000,000 For fiscal twenty twenty six, we continue to expect revenue growth of approximately 10% to 12% year over year, gross profit growth of approximately 14% year over year, and adjusted EBITDA to be in the range of approximately $68,000,000 to $72,000,000 With that, I’ll turn the call back to the operator.

Van, Conference Operator: Your first question comes from the line of Dan Perlin from RBC Capital Markets. Please go ahead.

Dan Perlin, Analyst, RBC Capital Markets: Thanks. Good morning and good to see the results kind of trending in line with the strategy here. The question I have around subscription revenue growth of 9%, I think subscription ARPU percent growth. Sounds like, you know, the pricing initiatives from last year were were a part of that, incremental growth versus, let’s say, location growth. So I’m wondering if you could just speak to how much of an opportunity that you might still see within the pricing metrics that you have when you think about incremental new signings as well as maybe some

Van, Conference Operator: of the backlog? Thank you.

Dax DeSilva, Founder and CEO, Lightspeed: Thanks for the question. So yes, we view the 9% software growth in Q1 as a solid result. We saw 7% last fiscal year. Ultimately, revenues is tied to new customer adds where we showed location growth in our growth engines this quarter, really excited to show that momentum as well as product adoption. And both of these are trending in the right direction.

So we did see the impact of price increases this quarter from last fiscal year that are rolling through this fiscal year. But that said, growth engines are growing. We’re seeing stronger ARPU and we made large investments in sales and product. And so we will see software growth continue to grow. It won’t be overnight, but we’re definitely headed in the right direction.

Van, Conference Operator: Yep.

Dan Perlin, Analyst, RBC Capital Markets: And then just a quick follow-up, in particular on the new location growth. Also very good to see that 5% year over year. You know, you did talk about, I guess, expecting that to continue to ramp towards, let’s say, 10% growth rate over time. I’m wondering if you have any kind of contextual expectations about the duration it might take in order to achieve another double digit growth rates there. Thank you.

Dax DeSilva, Founder and CEO, Lightspeed: Yes. The CAGR is for three years. So we’ll see that growth rate for locations converge towards 10% to 15% towards fiscal twenty twenty eight. But yes, I believe we’re off to a strong start in the growth engine. And this is our first quarter of the transformation.

We are ramping our sales organization. So we have 130 of the 150 outbound reps in seat. Many of them are ramping towards being going towards full quota. We’re also seeing from the outbound, all the outbound efforts and vertical brand marketing efforts a halo effect on inbound. So we’re feeling positive about location growth.

In addition to the investments we’re making in the sales organization, we’re making significant investment in product and technology in the growth engines. That’s being funded by efficiency and funds from the efficiency market. So that all is going to pay off in the quarters to come and result in further location growth.

Gus Papayorio, Head of Investor Relations, Lightspeed: Ben, can we go to the next question please?

Van, Conference Operator: Your next question comes from the line of Trevor Williams from Jefferies. Please go ahead.

Trevor Williams, Analyst, Jefferies: Great. Thanks very much. I just want to go back. Maybe we could revisit some of the upside drivers for Q1 both on revenue and gross profit. And then just in terms of the shape of the year, think last quarter, at least with how the year had been laid out, we were kind of building to a progressive acceleration over the course of the year.

And then just based on the Q1 outperformance and keeping kind of the full year guide where it is, it’s just a slightly different shape with kind of what’s implied deceleration wise off of Q1. So just curious if there was anything unsustainable in the first quarter or if maybe now there’s maybe a bit more embedded conservatism for the balance of the year? That’d be helpful. Thanks.

Asha Pakshanti, CFO, Lightspeed: Yes. Thanks for the question, Trevor. I’ll take that one. Q1, you’re right, we did see solid execution and that’s what you’re seeing in the results. Our strategy is really starting to pay off.

But with respect to the guide, what we need to keep in mind, as Dax just mentioned, is we’re very early days in our transformation. We’re four months into the year. And as Zach said, we have 130 of 150 reps in seat, but less than half of them are fully ramped. So we just want to make sure that we give them the time to ramp before we start to increase the guide for the year. The guide for the year is a range.

While we’re confident we’re trending at the high end of that range, we’re not going to increase the guide at this time. Outside of that, really no onetime things in Q1. I mean, Dax talked a little bit about the price increase, which we did midway through the year last year. You’re seeing the full benefit of that in Q1. But as our outbound reps continue to ramp, we expect this solid execution to continue.

Trevor Williams, Analyst, Jefferies: Okay. I appreciate that. And then just any color on kind of how quarter to date trends have looked in July on some of the key drivers would be helpful. Thank you, guys.

Asha Pakshanti, CFO, Lightspeed: Yes. We did see the macro stabilize in April in Q1 and we continue to see that in July. And then from an internal execution perspective, we’re really excited and encouraged by what we’re seeing. July continues to look a lot like the first quarter, and we’re excited about the execution internally as well.

Van, Conference Operator: Your next question comes from the lines of Thanos Moskopoulos from BMO Capital Markets. Please go ahead.

Thanos Moskopoulos, Analyst, BMO Capital Markets: Hi, good morning. Can you talk about the same store sales dynamic in retail versus hospitality? Was there a meaningful difference there? Were they similar?

Asha Pakshanti, CFO, Lightspeed: Thanks, Tanos. Yes, the same store sales hospitality were better than North America retail. We actually saw double digit growth in European hospitality and low single digit growth in Noam retail. A part of that in Europe, however, is also FX. But from an FX neutral perspective, we did see stronger growth in same store sales in Europe.

But outside of that, no other major differences in both of those markets.

Thanos Moskopoulos, Analyst, BMO Capital Markets: Great. And then in terms of, the vertical marketing strategy, any specific verticals you’d call out where that’s especially resonating, or would it just be across, you know, your your main key verticals you talked about, historically?

J.D. St. Martin, President, Lightspeed: Yeah. I mean, we have

Dax DeSilva, Founder and CEO, Lightspeed: our eight key verticals in retail. Some examples of some trade shows that we’ve done are the running shows, outdoor sports shows. We’re integrated, of course, with the brands through new order in those verticals. So we’re pitching Lightspeed Solutions both from the merchant side as well as the brand side. It all comes together at these trade shows.

That makes a ton of sense for Lightspeed. In addition to doing trade shows as well for European hospitality. We also did Lightspeed Edge, which was a customer event. That’s one of many customer events we have planned both sides of the pond for Noam Retail and EMEA hospital. And just connecting with the thought leaders and influencers and prospects, customer prospects in these markets through vertical brand marketing.

There’s definitely a halo effect that’s both for outbound and for inbound channels. And that’s how we see how what’s going to fuel our acceleration in customer location count over the coming quarters.

Van, Conference Operator: Your next question comes from the line of Josh Beyer from Morgan Stanley. Please go ahead.

Josh Beyer, Analyst, Morgan Stanley: Great. Thanks for the question and congrats on a great quarter. Taks, a two parter on AI. I just wanted to ask how you expect AI to impact retail and hospitality at a high level? And then second, what is Lightspeed’s AI strategy?

Dax DeSilva, Founder and CEO, Lightspeed: Yes. So I think AI is certainly contributing to the progress that we’ve made in efficiency in Q1, and it’s a continuation of what we saw last fiscal year. We use AI at light speed primarily to automate the repetitive predictable tasks and also to drive insights for the business. So from a light speed company perspective, we’ve deployed AI across support. Almost 70% of chat interactions are now answered by AI.

It’s being implemented across our sales funnels as we scale our sales organization. Development teams are using co pilots to increase efficiency and velocity. So we’ve seen a lot of benefit from that with more to come. From the product side, we’re excited to have released AI features all throughout last year. We have a very, very high velocity across our development teams.

Some examples are AI web builder for our ecom product, using generative AI as well as benchmarking trends and AI powered tool for hospitality as well as tools to enhance photos, configure menus, right product descriptions and e comm. Throughout the product, think we can save merchants time. At the end of the day, retailers and restaurateurs go into these businesses because they’re passionate about cuisine, they’re passionate about the vertical that they’re in, in retail and all of the backend admin tasks. That’s that’s they didn’t cut they didn’t join these businesses or start these businesses to to administrate Lightspeed’s back back office. And that’s where AI can come in and really remove some of the some of the repetitive tasks and give them more leverage to add value where they best add value to their businesses.

Josh Beyer, Analyst, Morgan Stanley: Okay. Thank you.

Van, Conference Operator: Your next question comes from the line of Timothy Chiodo from UBS. Please go ahead.

J.D. St. Martin, President, Lightspeed: Great. Thank you for taking the question. So, Dax, I think you mentioned earlier that for the investment behind sales, you’re already at 130,000,000 of the 150,000,000 You also mentioned some of the timeline to get productive and many of those are ramping up and takes about six months or so to hit those quotas. I was wondering if you could talk a little bit about those quotas, meaning are we talking about locations per month and if you could put some rough numbers around what the expectations are. Is it based on volume brought in?

Is it brought based on an expected lifetime value or gross profit levels? Or any other metrics that you could put around what the expectations are on a per sales representative basis? Thanks a lot.

Dax DeSilva, Founder and CEO, Lightspeed: Yes. I’ll just start by saying outbound is a super successful way for us to target and win those high GDV customers. We expect to see strong unit economics and payback ratios in our growth markets for reps that are fully ramped. I’ll let JD jump into a little bit of the what we expect from each ramp.

Timothy Chiodo, Analyst, UBS: Yes. Ultimately, every single outbound rep is measured in a very diligent way. We look at number of demos booked, number of demos attended and bookings per month. And then we triangulate the bookings back to the cost of the motion. And what we’re really pleased to see is that we continue to see the same strong payback ratios that we saw last year.

Even if we’re hiring a lot more reps this year, we’re very, very focused on that payback and efficiency metric and we continue to see the progress there. We’re very, very enthusiastic with the progress we’re making across the board, not just in EMEA Hospitality, but also in Noam Retail with our outbound efforts.

J.D. St. Martin, President, Lightspeed: Perfect. Thank you. And as a related follow-up, can you just recap some what those expected either payback periods are and or the LTV to CAC levels that are sort of expected from this initiative?

Timothy Chiodo, Analyst, UBS: Yes. We’ve seen last year high single digit, low double digit payback ratios. So months payback on the cost of the motion and we continue to see that when we look at ramp reps. Best in class as far as what we see in SaaS and so that’s what we’re hyper focused on and we continue to see that.

Van, Conference Operator: Your next question comes from the line of Tien Tsin Huang from JPMorgan.

Gus Papayorio, Head of Investor Relations, Lightspeed0: Hi, thanks. Good results here. Just wanted to ask for you, Dax, just thinking about products and product velocity, I know it’s a big theme for the sector right now. What products are attaching well from the last twelve months? What are you excited about next that’s coming out?

I’m just curious what’s on the product pipeline.

Dax DeSilva, Founder and CEO, Lightspeed: Yes. I mean, we’re really excited on both the retail front and the hospitality front. On retail, we’ve seen a lot of success with insights. These are insights into how to turn inventory so businesses can be more profitable. We approach that from the in store level, but also from the ordering side.

I mean, that’s something really unique about the Lightspeed retail offering is what is how we integrate with New Order. We’re really starting to see benefit from that integration with New Order in our key eight verticals because no other competitor offers that end to end solution for inventory. And so there’s you’ll see a lot of acceleration in terms of product roadmap around inventory from the store level and also from ordering for brands. A lot of our announcements this quarter are around inventory and around new order. And you’ll see we’re attracting really, really big brands and really big retailers to the solution as a result.

And so expect to see more in that direction on the retail side. More since we have a wealth of data, more AI powered insights to capitalize on the unique position that Lightspeed has in this ecosystem for those verticals. On the hospitality side, we have an amazing suite effect. So that means we have a great tool to serve customers with LightSpeed table side. KDS, our kitchen display system, coordinates the kitchen side.

And then our Pulse app is the third part of the solution, and that’s for the management administration layer. And that’s a really unique set of features that we’re building upon. We’re adding AI insights to that we have some really, really exciting things in the road map to really just take what we have, which is the industry leading solution and pan European solution, the only pan European solution for hospitality and just continue to build out that lead with further enhancements to this incredible suite.

Gus Papayorio, Head of Investor Relations, Lightspeed0: Great. That’s good. Thanks for that. Just my quick follow-up, I know Tim asked about the sales growth and productivity. Just I’m curious, does that have any update thoughts on leveraging indirect sales or selling through partners?

Dax DeSilva, Founder and CEO, Lightspeed: Yes. I think partnerships is the third part of the puzzle. Inbound is where Lightspeed has been traditionally really, really strong. We’re investing a lot in outbound, but we’re still growing inbound. Inbound’s also seen a 15% halo effect from all of our investment in outbound and vertical brand marketing.

The partnerships is a third part of the puzzle. That’s an area of the business that will that over the coming years is going to see a big it will contribute a lot to the overall revenue. And I’ll let JD talk a little bit more about what we’re doing there.

Timothy Chiodo, Analyst, UBS: Yes. To build on DAX’s answer, we’ve always actually been strong in partnerships since day one when the product was originally built on the retail side that was a big channel for us. And here we leverage two types of partners. So we have referral partners that send leads to our team internally that we close and we also have a strong reseller network particularly in Europe. Obviously, a strong focus this year is on outbound given our ability to target high GTV ICP customers.

But you can expect that we’ll continue to see growth as well from partnerships and that will be a story for years to come too.

Van, Conference Operator: Your next question comes from the line of Dominic Ball from Rothschild. Please go ahead.

Gus Papayorio, Head of Investor Relations, Lightspeed1: Hi guys. Thank you very much for my question. Great numbers on GTV growth since the past since it’s been around about Q2 twenty twenty two. So as an understanding for sort of the balance for what’s driving this growth, it seems to be a mixture of sort of improved same store sales, more outbound sales, which then also help inbound and then potential cross selling from new order as well. Is there any just to help us understand this better, is there any one channel there that’s driving incremental g TV over the others?

Dax DeSilva, Founder and CEO, Lightspeed: Well, you know, I think overall, GTV grows when we grow locations. And so that’s, I think, one of the key drivers. We grew GDV 4% overall. But in the growth market, we grew GDV 12%. So in our growth engines where we’re adding locations and where we’re investing, GDV is growing even faster.

I’ll let Asha dive a little bit deeper into some of the dynamics around GDV.

Asha Pakshanti, CFO, Lightspeed: Yes, sure. Thanks for the question, Dominic. So just to add on to what Dax said, the GTV growth is coming primarily from the growth portfolio given how well we’re doing on locations there. If we look at North America Retail versus EMEA Hospitality, we’re seeing stronger growth in EMEA Hospitality, in particular from a same store sales perspective. But there are also several verticals in Retail that have been quite strong this quarter.

So we’re seeing bike come back to single digits positive single digits from being down for several quarters. We’re seeing toys, for example, have a very strong same store sales quarter in retail. So several verticals in Noram retail are doing very well, but quite a bit of the growth did also come from EMEA hospitality.

Gus Papayorio, Head of Investor Relations, Lightspeed1: That’s great. And if I can just sneak one more in, if that’s okay. There seems to be maybe a little bit of a step up in investment from peers right now. So in The US retail POS market, Clovis stepping up themselves and marketing. Shopify is investing more in the European restaurant market.

I mean, Shift4 and Global Blue, Toast, one day, will probably expand there as well. So do you expect maybe a little bit of a higher cost of growth from here onwards as well?

Dax DeSilva, Founder and CEO, Lightspeed: Yes. Certainly, there’s always going be competition in the market. We’re hyper focused on our particular verticals, the eight key verticals in North America Retail and the key cities in Europe where we’re expanding our European hospitality customer base. Think we have a good differentiated position in these markets and we’re going after a particular customer that’s higher GTV than

Josh Beyer, Analyst, Morgan Stanley: a lot

Dax DeSilva, Founder and CEO, Lightspeed: of these competitors. There’s a lot of names in the space, but there’s a lot of different segmentation in retail and hospitality. And so that’s what we built our strategy on, and that’s where we have the ability to have real customer wins.

Van, Conference Operator: Your next question comes from the line of Kevin Krishnaratne from Scotia. Please go ahead.

Gus Papayorio, Head of Investor Relations, Lightspeed2: Hey there. Thank you. Good morning. First question, you mentioned in the growth markets that ARPU outpaced the broader average. How about software ARPU?

How is that trending? And I guess related to that, your 9% software revenue that you printed, how do you think about how that evolves over the coming quarters in the context of your 10% to 12% total revenue guidance?

Asha Pakshanti, CFO, Lightspeed: Yes. Thanks for the question, Kevin. So yes, software in the growth portfolio, software ARPU was higher than in the efficiency or the rest of world portfolio just by virtue of the fact that the primary product in our growth portfolio are our flagships in EMEA, hospital and Noam retail, and that’s where all the product innovation is happening. And so when you think from a software module attach perspective, we’re seeing much higher software ARPU in the growth portfolio. But consolidated, we’re seeing a 10% growth year over year, which is still very healthy.

From a software growth perspective, the 9% year over year, we’re very pleased with that growth. We do expect that growth to continue to improve. We just need to keep a few dynamics in mind such as price increases midway through the year last year. But at the same time, we’re expecting outbound to continue to ramp. We expect software growth to continue.

It’s not going to happen overnight, as Dax mentioned earlier, but over time, absolutely.

Gus Papayorio, Head of Investor Relations, Lightspeed2: Thank you for that, Ash.

Van, Conference Operator: And the second question, you

Gus Papayorio, Head of Investor Relations, Lightspeed2: had mentioned double digit same store sales growth in Europe, FX might have helped there. Just on your overall top line revenue, 15%, do you have a number of what your revenue growth would have been on a constant currency basis?

Asha Pakshanti, CFO, Lightspeed: Yes. I would say a couple points under that. It wasn’t too much of an impact because European hospitality, when you think about 100% of the Lightspeed revenue, is not the most significant part, but it definitely did help the top line. So would say FX is a couple of percentage points on the 15%.

Van, Conference Operator: Your next question comes from the line of Koji Ikeda from Bank of America. Please go ahead. Yes. Hey, guys. Thanks so much for taking the question.

I wanted to ask you or maybe take a huge step back and ask you a bit of a more philosophical question of how you’re thinking about growth and profitability, you know, real really your focus on profitable growth. And so it does feel like we’re heading into a period of more certainty, with regulatory noise, you know, especially around tariffs and maybe even a potentially better macro over the next twelve months. And so I know you’re focused, like hyper focused on profitable growth, but how do you balance that against the potentially improving demand environment? I mean, I I guess the question here is, how do you make sure you’re not leaving anything on the table?

Dax DeSilva, Founder and CEO, Lightspeed: Yeah. I think, that’s a that’s a great question. I I think our strategy is designed so that we are not leaving anything on the table. We’re investing a tremendous amount in growing outbound, ramping outbound. It’s going to take time, but we’re already seeing results as well as product investments to grow that competitive moat.

I think I think you’re right. I think that we’ve seen the macro stabilize although there is volatility and tariffs are a factor, but we’ve also seen the retailers in our customer base that order, that imports their inventory. We’ve seen them, have strategies, often using Lightspeed Deorder to manage, their suppliers. They have strategies to to manage that, since the beginning of the year. Right?

So I I think that for us, we have an aggressive growth strategy from our perspective. I think what we’re able to show with these results is that we’re able to make those investments in the growth engines funded by our efficiency markets, make significant investments, our product and technology investments, than $50,000,000 more this year. And we’ve never ramped had a ramp like this in our sales organization in our history in this short amount of time. I think all of those exercises are new for Lightspeed in terms of their scale, but they’re going to give us confidence to plan more to plan further growth initiatives that are as aggressive in future years. We’re in a three year transformation.

This is our year one plan, And we’re always cognizant that we want to capture as much demand as possible and grow market share and have as many customer locations as we can.

Van, Conference Operator: Your next question comes from the line of Todd Coupland from CIBC. Please go ahead.

Timothy Chiodo, Analyst, UBS: Yes. Good morning, everyone. A lot of questions on growing the rep count. I’m just wondering, when you get to the 150 and they are performing at your targeted levels, does that get you into that 10% to 15% location growth? Or would you need to build on that team?

Dax DeSilva, Founder and CEO, Lightspeed: Yeah. The 10% to 15% CAGR is a three year CAGR. So yes, we do expect that our 5% at the end of Q1 to converge to 10% to 15% over between now and fiscal twenty twenty eight. But yes, as these reps ramp, you’re going to see acceleration in the customer location growth and that growth number.

Timothy Chiodo, Analyst, UBS: Okay. And my second question has to do with payments attached and the very strong transaction growth. That seemed a little bit stronger than expected. Was that a favorable mix relative to where Lightspeed payments are attached? Or are you attaching at a higher rate and we should expect that to actually trend even higher as we go through the year.

Just talk about expectations there. Thanks a lot.

Asha Pakshanti, CFO, Lightspeed: Yes. Thanks, Todd. I’ll take that one. So the penetration rate at the end of Q1 or in Q1 was quite healthy. We saw a six percent growth year over year.

That’s really a result of solid execution on our part. Every eligible customer must take payments now, as you know. But also payments penetration is a function of what’s happening in the underlying macro. And so the payment penetration rate, rather than being a barometer, a measurement barometer for performance, is more an opportunity metric. Like that’s the opportunity in front of us, what’s not yet monetized.

But we’re very excited about where payment penetration is going. We expect that March upwards to continue. Depending on what’s happening in the underlying macro, the rates vary quarter to quarter, but very, very confident in an upward trajectory here.

Dax DeSilva, Founder and CEO, Lightspeed: One thing to add is that in our efficiency markets, we’re only 35% penetrated due to non competes. And so we are going to focus on growing the payment penetration in that market. And so there’s no real impediment to getting to the corporate average there. I think will get some attention from us and drive the overall rate.

Van, Conference Operator: Your next question comes from the line of Raimo Lenschow from Barclays. Please go ahead.

Josh Beyer, Analyst, Morgan Stanley: Perfect. As I can I stay on that one? If you think about that, it’s as you said, payment penetration is more an output and the 35,000,000 is obviously like a low point that you can go further. How much of a if you think about it, like how should we think about then on a more quarterly level, like how to kind of drive that higher? Is that something there that we look at milestones when non competes come out and then there’s going to be a step change?

Or like how do you see that evolving this year and going forward?

Asha Pakshanti, CFO, Lightspeed: Yes. Thanks, Heiko, Raimo. I think we’re the way we should think about it is a gradual improvement quarter to quarter. There’s going to be non competes rolling off. There’s going to be more opportunity in one region versus another.

And then there’s the dynamics of the underlying GTV. So I would say from a modeling perspective gradual improvement quarter to quarter is what we should expect.

Josh Beyer, Analyst, Morgan Stanley: Okay. Perfect. And then one for Daxi. Obviously, the world is changing with GenAI. Search as a way for e commerce guys to kind of get their business done is kind of maybe changing and we’re doing more JET GPT, etcetera.

I mean, you talked earlier about like How you’re kind of using AI, but it sounded more like internal. How do you think about, like, you you need to change and and your retailers need to change to kind of do well in this new world?

Dax DeSilva, Founder and CEO, Lightspeed: Yeah. I mean, I did cover a little bit about what we are doing on the product side. So that is really enabling our merchants, whether they’re retailers or restaurateurs, to save time in the back end. So that’s being able to generate a website using AI that’s already in our retail product as well as doing photo enhancement, image sorry, product descriptions on hospitality side, configuring menus, which is which can be onerous. And we have a tool called Benchmark and Trends in Hospitality that’s powered by AI that lets you as a restaurant compare your your menus, your results, your staffing to other restaurants in the neighborhood so that you have the right pricing, the right staffing.

So I think it’s going to transform the way that retailers and restaurateurs operate their business. I think it’s going to give them more leverage, allow them to be more profitable, and allow them to spend less time on the low value portion of their business in terms of what takes up their time and in terms of admin, and spend more time on the high value differentiated things that they do in regards to curating product, curating menus and the things where they add the most value as entrepreneurs.

Van, Conference Operator: Your final question comes from the line of Richard Tse from National Bank Financial. Please go ahead.

Gus Papayorio, Head of Investor Relations, Lightspeed3: Thanks for squeezing me in here. With respect to your wins in your target markets, can you

Gus Papayorio, Head of Investor Relations, Lightspeed1: give us maybe a sense of

Gus Papayorio, Head of Investor Relations, Lightspeed3: the mix of those wins from newly formed businesses versus established merchants? And on the latter here, is that still largely displacing the incumbents?

Dax DeSilva, Founder and CEO, Lightspeed: Yes. I’ll pass that to JT.

Timothy Chiodo, Analyst, UBS: Yes. Honestly, Rich, thank you the question Richard. The trend remains very similar to our answer last quarter. So as far as displacements what we see is about a third, a third, a third. So we displace a third from legacy providers in the space, a third from more let’s say modern peers.

And then we also see a third coming from new business formation. And so we continue to see that trend. Obviously as I highlighted with the strategy, we’re hyper focused on the key verticals in non retail and EMEA hospitality. And so we expect that trend to continue as we continue to focus on those segments.

Gus Papayorio, Head of Investor Relations, Lightspeed3: Okay. And my second question, you’ve been incredibly aggressive on capital allocation on the buyback side. Obviously, with the scaling profitability here, should we expect that pace to continue through the rest of this year?

Asha Pakshanti, CFO, Lightspeed: Yes. Thanks for the question. We’ve completed our NCIB, our normal course issuer bid for this fiscal year. That was done in the first quarter. We returned about $86,000,000 to shareholders in the quarter.

With respect to future buybacks, we’re going to continue to remain opportunistic. There are other avenues with which we can continue to buy back. Outside of an NCIB, we’re going to remain opportunistic. And we still have $200,000,000 left on our Board authorization. So we’ll have a look at what’s happening in the market and make sure that we take advantage of the opportunity when and if it arises.

Van, Conference Operator: I will now turn the call back over to Gus for closing remarks.

Gus Papayorio, Head of Investor Relations, Lightspeed: Thank you, Van. Thanks, everyone, for joining us today. If anyone has any further questions, please reach out to myself. I’ll be around all day. And we look forward to speaking to you at our next conference call, and have a great day, everyone.

Van, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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