Q2 2025 Lightspeed Commerce Inc Earnings Call

Good afternoon. My name is John and I will be your conference operator today. At this time, I would like to welcome everyone to the Lightspeed Second Quarter 2025 Earnings Call. All lights have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Gus Papageorgiou, Head of Investor Relations. You may begin your conference.

Gus Papageorgiou: Thank you, operator, and good morning, everyone. Welcome to Lightspeed's fiscal Q2 2025 conference call. Joining me today are Dax Dasilva, Lightspeed's founder and CEO, Asha Bakshani, our CFO, and J.D. Seymour-Fance, 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.

Gus Papageorgiou: You should carefully review these factors, assumptions, risks, and uncertainties in our earnings press release issued earlier today, our second quarter 2025 results presentation available on our website, as well as in our filings with U.S. and Canadian securities regulators.

Gus Papageorgiou: Also, our commentary today will include adjusted financial measures, which are non-IFRS measures and ratios.

Gus Papageorgiou: 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 CedarPlus, and on the SECs at your system.

Note that because we report in U.S. dollars, all amounts discussed today are in U.S. dollars unless otherwise indicated.

Gus Papageorgiou: Our commentary today is focused on our business and Q2 financial results. As you can appreciate, we will not be taking questions concerning the company's ongoing strategic review.

We respectfully refer investors to the press release we issued on September 25th and our quarterly filings made today with U.S. and Canadian securities regulators.

Before I pass the call on to Dax, I also want to announce that in light of such ongoing strategic review, we will postpone our Capital Markets Day previously scheduled for November 20th.

Gus Papageorgiou: We note that there can be no assurances given at this time as to the outcome of our strategic review and that no further Announcements or comments in respect of this matter will be made except as required under our regulatory obligations

With that, I will now turn the call over to Dax.

Dax Dasilva: Thanks Gus and welcome everyone. I am pleased to report another strong quarter from Lightspeed. Revenue grew 20% year-over-year to $277.2 million, exceeding our previously established outlook of between $270 and $275 million.

Payments penetration increased meaningfully to 37% from 25% in the same quarter last year.

Dax Dasilva: which, in combination with our concentrated effort to control costs, allowed us to deliver record quarterly adjusted EBITDA of $14 million, ahead of our previously established outlook of $12 million, and significantly better than break-even adjusted EBITDA in the same quarter last year.

Dax Dasilva: Another milestone worth highlighting, especially as we mark our 20th year of operations, is that on a trailing 12-month basis, revenues exceeded $1 billion with adjusted EBITDA of $32 million.

Dax Dasilva: As we look towards the future, Lightspeed is in the enviable position of maintaining a large and growing top line, positive adjusted EBITDA, the strongest products we've ever had, and a very healthy balance sheet.

Our mission remains to empower independent retail and hospitality entrepreneurs with the technology they need to help build and grow their businesses.

Gus Papageorgiou: We also continue to focus our efforts on our Ideal Customer Profile, or ICP, sophisticated high-volume and multi-location SMBs with complex workflows, transacting more than $500,000 in GTV per year.

Gus Papageorgiou: Thanks to our industry-leading flagship platforms and strong go-to-market teams, we were able to add a host of compelling new customers this quarter, particularly in our key verticals of North American retail and European hospitality.

Gus Papageorgiou: In retail, one of our biggest customer wins in the quarter was Grow Generation, America's largest hydroponic retailer. We signed over 30 locations with our flagship light suit retail offering, thanks in part to our seamless integration with NetSuite.

In California, Bare Bones Workwear adopted Lightspeed Retail. Offering over 100 workwear brands in their 10 locations across the state, Lightspeed Retail is the perfect fit for this high-GDV multi-location retailer.

Gus Papageorgiou: We also added the Nashville Country Music Hall of Fame, with over 1 million new visitors per year. This country music institution will use Light Street Retail to power its multiple retail outlets.

Gus Papageorgiou: As part of our outbound initiative, we have been reaching out to new order retail customers who are using our B2B offering, but are not using the Lightspeed Retail POS.

Gus Papageorgiou: The ability of our POS to integrate into the NewOrder B2B order management system is a meaningful differentiator for our retail offering, and we continue to grow the number of brands available on NewOrder.

Gus Papageorgiou: By seamlessly importing orders from uOrder into the Lightspeed Retail POS, we save them valuable time and simplify their operations.

Gus Papageorgiou: This strong and unique value proposition is resonating with these customers and we are gaining traction.

Gus Papageorgiou: We were thrilled to sign Mabee Jean's flagship locations in Canada and the U.S. Our sophisticated inventory management capabilities, along with our well-developed APIs, new order B2B integration, and competitive payment rates, made Lightspeed Retail the natural choice for this expanding denim brand.

Gus Papageorgiou: Our new order B2B capabilities were also instrumental in signing Wayne's Boot Shop in Cody, Wyoming, which was previously managing their inventory manually. Lightspeed Retail is saving them valuable time so that their team can focus more on their customers.

Gus Papageorgiou: Other notable brand additions from this quarter include J. Lindbergh, Bugatti Group, and Columbia Sportswear.

Gus Papageorgiou: Last quarter, I commented that we added 12,000 PET products to New Order to open up the PET vertical.

Gus Papageorgiou: Since then, we have seen close rates on pet stores improve 40% in the quarter, a very encouraging sign.

Gus Papageorgiou: In hospitality, Lightspeed Restaurant's ability to integrate with some of the leading ecosystem partners like Seven Chiffs, Open Table, and Uber remains a key differentiator for us. It is one of the main reasons we are able to secure complex high-GDP customers.

Gus Papageorgiou: Natalie, with two locations in the heart of central London, chose Lightspeed because of our ability to integrate platforms such as Optimize Inventory and Delivery Solution, Deliverect.

Gus Papageorgiou: We also added 4PM Entertainment in Amsterdam as a Light Seed Restaurant customer.

Gus Papageorgiou: Taking advantage of the booming Padel tennis market, 4PM launched The Paddlers. With over 20 locations across the Netherlands and Germany, 4PM will be using light food restaurant payments for their food and beverage service.

Gus Papageorgiou: Our ability to manage multiple locations across different countries under one software and payments platform makes this a natural fit for pan-European operators like 4PM.

Another example of this is Jador Hospitality Group.

Gus Papageorgiou: J'Adore operates a collection of restaurants, nightclubs and bars across France and has started rolling out Lightspeed to help support their expansion.

Gus Papageorgiou: While our go-to-market teams continue to focus on our ideal customer profile, our product teams are delivering features that can make these customers more successful.

Gus Papageorgiou: In the quarter, we continue to accelerate the pace of innovation, releasing several new compelling features.

Gus Papageorgiou: We have the global launch of Retail Insights for our retail customers.

We also introduced automatic order distribution for multiple location retailers.

Gus Papageorgiou: With Lightspeed Multi-Location Ordering, retailers can now create one purchase order from multiple locations and automatically distribute stock based on inventory plans.

Gus Papageorgiou: And finally, we released instant payouts for retail customers in the UK, which carries a 95% plus gross margin.

Gus Papageorgiou: Eligible LightFeed merchants will be able to access funds immediately after the transaction, even on weekends and holidays.

Gus Papageorgiou: Instant Payouts is already available to LightSuite Retail customers based in the U.S.

Gus Papageorgiou: We are also excited about an addition to Instant Sites for e-commerce merchants, allowing merchants to create and design customized sections for their e-commerce sites.

Gus Papageorgiou: In Hospitality, we released our groundbreaking Benchmarks and Trends module. Through the power of machine learning, Benchmarks and Trends gives restauranteurs a clearer picture of how the restaurant compares to other local venues on several metrics, including pricing and customer favorites.

Gus Papageorgiou: We launched our sales summary page, allowing restaurant tourists to spot trends faster by leveraging improved data visualization.

Gus Papageorgiou: We extended Happy Hour Pricing to Order Anywhere, our online ordering module. This feature allows businesses to dynamically adjust online menu prices so guests ordering from their website can take advantage of Happy Hour Pricing.

Gus Papageorgiou: This month, one of our newest features, Kitchen Display, will go into general availability. Kitchen Display allows for constant connectivity between the front and back of the house, which improves restaurant operations and customer service.

Gus Papageorgiou: We have recently launched this product in EMEA and are seeing over 10% of new customers adopt this solution.

Gus Papageorgiou: helping increase ARPU. This is the kind of innovation that allows us to win new customers and grow subscription revenue.

Gus Papageorgiou: In terms of the second half of the year, I'll remind everyone that for Fiscal 2025, we are focused on three key operational objectives aimed at achieving our goal of profitable growth. And these are…

Accelerating software revenue growth.

continuing to advance adoption of our financial services

and continuing to control costs and finding additional operational efficiencies.

Gus Papageorgiou: With respect to financial services and operational efficiencies, I am very happy with the significant progress we've made in such a short time, and I think the results today are a testament to our ongoing success there.

Gus Papageorgiou: On software revenue, we've initiated efforts this year that will start to impact these numbers in the next two quarters.

Gus Papageorgiou: These initiatives include expanding our outbound sales team, aiming to increase the number of reps by over 60% by year end.

Launching new software modules which will expand software ARPU.

Implementing select price increases which will increase software revenue growth.

Growing our brand awareness in key retail and hospitality verticals.

Speaker Change: Beyond these tactical efforts and since my return as CEO in February, I have been focused, along with our world-class team, on transforming the business towards a path of profitable growth.

Speaker Change: Based on our ongoing strategic review of our operations, we have decided to focus our efforts on the markets where we are strongest and have a proven right to win. These are retail in North America and hospitality in Europe.

Gus Papageorgiou: Our other markets will remain important to Lightspeed as they represent a strong customer base, and we will focus on growing revenue there primarily through upselling existing customers.

Gus Papageorgiou: We've decided to focus on Retail North America and European Hospitality because they are our largest and fastest growing customer base.

Gus Papageorgiou: accounting for the majority of revenues and growing faster than our overall business.

have Compelling Union Economics.

represent our strongest competitive position.

Gus Papageorgiou: are our most compelling product market fit and have our highest close rates.

Gus Papageorgiou: There are two main actions that will result in shifting our strategic focus to these two markets.

Gus Papageorgiou: Firstly, our go-to-market efforts will bias strongly towards retail in North America and hospitality in Europe. The vast majority of inbound and outbound marketing efforts will be channeled to these two markets.

Gus Papageorgiou: and these markets will represent the majority of new customer additions.

Gus Papageorgiou: Secondly, our product development efforts will also be concentrated on these markets.

Gus Papageorgiou: Our R&D is already focused on our flagship products, Light Suite Retail and Light Suite Hospitality, which are ideally positioned for the North American retail and European hospitality markets.

Gus Papageorgiou: We believe this will improve our competitive position in these markets and boost software ARPU.

Gus Papageorgiou: While this adjustment will result in several changes in the business, many things will remain the same. Our ideal customer profile does not change. We will continue to focus on larger, more sophisticated SMBs with complex needs.

Gus Papageorgiou: Leading with our flagships as the main product offering also does not change as these products are ideally suited for the target markets

Gus Papageorgiou: And finally, our goal of expanding financial services such as payments, capital, and instant payouts remains the same.

Gus Papageorgiou: By focusing our organization's efforts on these two core markets, we believe we will improve our growth profile, simplify the organization, and improve customer satisfaction.

Gus Papageorgiou: There are efforts that will be required to shift our organization towards this new operating model, but they are very manageable, as these two markets already represent the majority of our revenues.

Gus Papageorgiou: Projects are now underway to align our business to the new model, and I expect they will be substantially completed by the end of the fiscal year.

Speaker Change: I will now let Ash take us through the quarterly results and provide our outlook.

Ash: Thanks, Dax, and welcome everyone. Lightspeed had a great second quarter with revenues and adjusted EBITDA coming in ahead of our previously established outlook.

Ash: Our operations continue to show drastic improvement in adjusted EBITDA profitability, and this quarter we were cash flow positive if we exclude cash used to grow our capital program.

Ash: I will walk you through our latest quarter's performance, our key metrics, and finally provide an outlook for the upcoming quarter and fiscal year.

Gus Papageorgiou: Total revenues increased 20% and gross profit dollars increased 19%, thanks largely to our unified payments efforts and growing software ARPU.

Gus Papageorgiou: Subscription revenue grew 6% year-over-year to $85.5 million, with gross margins on subscription revenue increasing to 79% from 75% in the same quarter last year, thanks to a concentrated effort to manage costs.

Gus Papageorgiou: I continue to be very happy with our strong performance in subscription gross margin.

Gus Papageorgiou: As we have outlined in our recent earnings calls, we expect subscription revenue growth to improve in the back half of the fiscal year, with subscription revenue growth for the second half of the year to be in the 8-10% range, with accelerating momentum in Q4 vs. Q3.

Gus Papageorgiou: Transaction-based revenue grew 33% to $183.8 million. In the quarter, we saw GPV increase 49% year-over-year to $8.8 billion, as we process a greater portion of our GTV through our Lightspeed Payments platform.

Gus Papageorgiou: Lightspeed Capital Revenue grew to $9.3 million from $4.2 million in Q2 of last year, up 121% year-over-year as the program continues to be popular with our customers.

Gus Papageorgiou: Lightspeed Capital offers fast access to capital and automatic repayment through Lightspeed Payments. Merchants are leveraging this offering to finance inventory purchases, upgrade equipment, and expand their overall business.

Gus Papageorgiou: Gross margins for transaction-based revenue were 27%, and include gross margins from our capital program, which continues to grow with healthy margins.

Gus Papageorgiou: As we convert customers to lightspeed payments, we increased our overall net gross profit dollars and in the quarter. We saw transaction base gross profit grew 33% year over year.

Gus Papageorgiou: 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 33% year-over-year.

Gus Papageorgiou: Total gross margin was 41% flat with the previous quarter and down only slightly year over year gross profit increased 19% year over year to $114 3 million.

Gus Papageorgiou: Total gross margin was 41%, flat with the previous quarter and down only slightly year-over-year. Gross profit increased 19% year-over-year to $114.3 million.

Gus Papageorgiou: Despite transaction based revenues increasing in the sales mix from 60% in Q2 last year to 66%. This year, we were able to maintain our gross margins at comparable levels. Thanks to continuous spend management and the growth of higher gross margin revenue from items such as capital is.

Gus Papageorgiou: Despite transaction-based revenues increasing in the sales mix from 60% in Q2 last year to 66% this year, we were able to maintain our gross margins at comparable levels thanks to continuous spend management and the growth of higher gross margin revenue from items such as capital.

Gus Papageorgiou: It's worth highlighting that gross profit per location grew 19% year over year, thanks to increasing payments adoption and a shift towards hygiene TV customers.

Gus Papageorgiou: It's worth highlighting that gross profit per location grew 19% year-over-year thanks to increasing payments adoption and a shift towards high-GTV customers.

Gus Papageorgiou: Total adjusted R&D sales and marketing and G&A expenses increased by 4% compared to the previous year and as a percentage of revenue our adjusted R&D sales and marketing and G&A expenses declined significantly year over year from 42% in Q2 of last year to 37.

Gus Papageorgiou: Total adjusted R&D, sales and marketing, and G&A expenses increased by 4% compared to the previous year.

Gus Papageorgiou: And as a percentage of revenue, our adjusted R&D, sales and marketing, and G&A expenses declined significantly year over year, from 42% in Q2 of last year to 37% this year.

Gus Papageorgiou: <unk> this year.

Gus Papageorgiou: Adjusted EBITDA in the quarter came in positive at $14 million. This marks a significant improvement from the adjusted EBITDA of zero point $2 million in the same quarter last year.

Gus Papageorgiou: Adjusted EBITDA in the quarter came in positive at $14 million. This marks a significant improvement from the adjusted EBITDA of $0.2 million in the same quarter last year.

Gus Papageorgiou: This positive trend in operating expense reduction results from our unwavering focus on finding efficiencies across the organization.

Gus Papageorgiou: This trend along with our growing gross profit has resulted in meaningful adjusted EBITDA margin expansion.

Gus Papageorgiou: This trend, along with our growing gross profit, has resulted in meaningful adjusted EBITDA margin expansion.

Gus Papageorgiou: As we continue to examine and optimize our cost base. We are renegotiating significant contracts reviewing global locations to consolidate and reduce our footprint and scrutinizing corporate overhead such as travel and software licenses. We are confident that these efforts will result in an even more efficient and win.

Gus Papageorgiou: As we continue to examine and optimize our cost base, we are renegotiating significant contracts, reviewing global locations to consolidate and reduce our footprint, and scrutinizing corporate overheads such as travel and software licenses.

Gus Papageorgiou: We are confident that these efforts will result in an even more efficient and resilient organization.

Gus Papageorgiou: <unk> organization.

Gus Papageorgiou: Reducing costs and several of these areas have allows us more flexibility to continue to invest in product and go to market initiatives.

Gus Papageorgiou: Reducing costs in several of these areas have allowed us more flexibility to continue to invest in product and go-to-market initiatives.

Gus Papageorgiou: As we have mentioned we plan to continue to grow our outbound sales team as they are more effective at winning merchant and our ideal customer profile.

Gus Papageorgiou: As we have mentioned, we plan to continue to grow our outbound sales team as they are more effective at winning merchants in our ideal customer profile.

Gus Papageorgiou: We will also continue to invest in product innovation to further strengthen our leadership position among complex high GTD mentioned.

Gus Papageorgiou: We will also continue to invest in product innovation to further strengthen our leadership position among complex, high-GTB merchants.

Gus Papageorgiou: Our focus on retail in North America, and hospitality in Europe will allow us to concentrate our efforts. So we can maintain strong growth while also expanding adjusted EBITDA margin.

Gus Papageorgiou: Our focus on retail in North America and hospitality in Europe will allow us to concentrate our efforts so we can maintain strong growth while also expanding adjusted EBITDA margins.

Gus Papageorgiou: For the quarter, we had an adjusted income of $19 9 million.

Gus Papageorgiou: For the quarter, we had an adjusted income of $19.9 million, compared to $6.4 million last year, thanks largely to the improvement in the items driving our adjusted EBITDA performance.

Gus Papageorgiou: Compared to $6 4 million last year, thanks, largely to the improvement in the items driving our adjusted EBITDA performance.

Gus Papageorgiou: We continued to actively manage our share based compensation and related payroll taxes, which were $19 5 million or 7% of revenue for the quarter down.

Gus Papageorgiou: We continue to actively manage our share-based compensation and related payroll taxes, which were $19.5 million, or 7% of revenue for the quarter.

Gus Papageorgiou: Down from $23 3 million or 10% in the same quarter last year due to the ongoing prudent management of our equity.

Gus Papageorgiou: GTV from our flagships continue to be strong this quarter, up 26% year-over-year, demonstrating that for our target customers and with our flagship products, we are seeing good success with attracting the right customer base.

Gus Papageorgiou: Safe store sales and retail, however, remain challenged across many of our verticals. The good news here is that the rate of decline is easing.

Gus Papageorgiou: Overall GTV in the quarter, including non-flagship offerings, was flat to last year at $23.6 billion.

Gus Papageorgiou: For the remainder of fiscal 2025, our focus will be on increasing our high-GTV customer base and accelerating subscription revenue growth in both retail and hospitality.

Speaker Change: As Dax mentioned, we are increasing our outbound sales efforts, particularly in North America retail and EMEA hospitality, implementing targeted price adjustments, optimizing our customer onboarding, management, and support processes.

Speaker Change: And as mentioned, we've already reoriented most of our account managers back to upselling software.

Speaker Change: All of which should show impact on subscription revenue in the second half of this fiscal year.

Speaker Change: Sophisticated customer locations with GTV exceeding $500,000 a year and $1 million a year continue to increase as the proportion of our customer mix, while those with GTV under $200,000 a year continue to decline.

Speaker Change: Given the initiatives we have launched and further actions we expect to launch that Dax mentioned, we expect to see an inflection point for growth in our ICP customers in fiscal 2026, particularly in North America retail and EMEA hospitality.

Speaker Change: Excluding ECWIT customers, our total ARPU for the quarter reached a record $527, an impressive 24% increase year-over-year.

Speaker Change: In terms of our balance sheet, Lightspeed closed the quarter with just under $660 million in cash and cash equivalents, down from approximately $674 million in the previous quarter.

Speaker Change: Cash used to grow our Merchant Cash Advance Program with $18.8 million during the quarter.

Speaker Change: Lightspeed also had positive adjusted free cash flow in the quarter, which was great to see as we continue to position the company to deliver sustainable free cash flow.

Speaker Change: In the quarter, GPV as a percentage of GTV was 37%.

Speaker Change: Our Unified Payments Initiative has improved our ability to sell, onboard, and get customers transactional on payments.

Speaker Change: We will continue to benefit from those improvements, and we expect the proportion of GTV flowing through our payments offering to continue to increase, as all new eligible customers onboarded must take payments.

Speaker Change: We expect to end the year with GPV representing between 40-45% of GTV.

Speaker Change: The LTV to CAC of our customers improves when they add payments and we are seeing that in our results today.

Speaker Change: The LTV2CAC of our customers improves when they add payment, and we are seeing that in our results today.

Speaker Change: Now turning to our outlook our year to date results have been encouraging with both revenue and adjusted EBITDA coming in ahead of our outlook for Q3, we expect subscription revenue growth rate to improve over the levels seen in Q2, as we expand the <unk> continuing to return <unk> to upsell.

Now, turning to our Outlook.

Speaker Change: Our year-to-date results have been encouraging, with both revenue and adjusted EBITDA coming in ahead of our outlook.

Speaker Change: For Q3, we expect subscription revenue growth rates to improve over the levels seen in Q2. As we expand the outbound teams, continue to return our ANs to upselling software and implement price increases.

Speaker Change: <unk> software and implement price increases. In addition, we expect to see strong growth in transactional based revenue as our GTD continued decline.

Speaker Change: In addition, we expect to see strong growth in transactional-based revenue as our GPV continues to climb.

Speaker Change: For the third quarter, we expect revenue between $280 million to $285 million and adjusted EBITDA of approximately $14 million.

Speaker Change: For the third quarter, we expect revenue between $280 to $285 million and adjusted EBITDA of approximately $14 million.

Speaker Change: For fiscal 2025, we are raising our adjusted EBITDA expectations to a minimum of $50 million, while maintaining our outlook for overall revenue growth of at least 20%.

Speaker Change: With that I will hand, the call back to the operator.

Speaker Change: With that, I will hand the call back to the operator.

Speaker Change: As we open up for questions.

As we open up for questions.

Speaker Change: Yes.

Speaker Change: As we open up for questions I, just want to reiterate that with respect to the company's ongoing strategic review the board and management team are squarely focused on acting in the best interest of the company and its stakeholders like she does not have a pre supposed to outcome, meaning all options are very much on the table from remaining a standalone public company to all the altra.

Speaker Change: As we open up for questions, I just want to reiterate that with respect to the company's ongoing strategic review, the board and management team are squarely focused on acting in the best interest of the company and its stakeholders. Lightspeed does not have a presupposed outcome, meaning all options are very much on the table, from remaining a standalone public company to all the alternatives we're exploring as part of the review process.

Speaker Change: So we are exploring as part of the review process.

Speaker Change: As you can understand it isn't the best interest of the company not to communicate anything about the process at this time as it is still ongoing so we won't be taking questions on the strategic review process. We will now take your questions. Thank you.

Speaker Change: As you can understand, it is in the best interests of the company not to communicate anything about the process at this time as it is still ongoing, so we won't be taking questions on the strategic review process. We will now take your questions. Thank you.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. If you have dialed in and who would like to ask a question. Please press star followed by the number one and your telephone keypad. If you would like to withdraw your question simply breast Darwin again in order to accommodate everyone. We would like to ask you to please limit yourself to one question and one follow up only.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number 1 on your telephone keypad.

Speaker Change: We'll pause for a moment to compile the Q&A roster. Thank you.

Speaker Change: Our first question comes from the line of Dan Perlin with RBC capital markets. Please go ahead.

Speaker Change: Our first question comes from the line of Dan Perlin with RBC Capital Markets. Please go ahead.

Speaker Change: Thanks, Good morning, and nice results here.

Speaker Change: Thanks, good morning and nice results here. I guess I just wanted to dig in a little bit more towards the Pivot to Software. Asha, you mentioned that third quarter...

Dan Perlin: I guess just wanted to dig in a little bit more towards the pivot to software after you've mentioned that third quarter.

Speaker Change: Thus far is showing good signs of this acceleration I mean, I know you've outlined multiple reasons why it should happen.

Speaker Change: And they're all very logical I'm, just wondering kind of the early signs of what you actually are seeing and then in relation to that the pricing initiatives that youre, putting in the market or those other squarely just in the third quarter up have you been starting to add a little bit.

Speaker Change: And they're all very logical. I'm just wondering kind of the early signs of what you actually are seeing. And then in relation to that, the pricing initiatives that you're putting in the market, are those...

Speaker Change: Are there squarely just in the third quarter or have you been starting that a little bit in this current quarter in anticipation of that because it does feel like the there's others in the industry that are putting a lot of pricing on clients right now as well.

Speaker Change: In this current quarter in anticipation of that because it does feel like the.

Speaker Change: There's others in the industry that are putting a lot of pricing on the on clients right now as well.

Speaker Change: Hey, Dan Thanks for the question.

Speaker Change: Hey Dan, thanks for the question. So yeah, you're right. We did mention that we are seeing encouraging signs in the quarter So we you know, we completed October and the software revenue growth We're already starting to see improvements as well as the last month of Q2, which was you know, September

Speaker Change: Well, you're right. We did mention that we are seeing encouraging signs in the quarter. So we you know we completed October and the software revenue growth, where we're already starting to see improvements as well as the last month of Q2, which was September but overall the inflection in software that we're already seeing comes from several areas as we did.

Speaker Change: But overall, the inflection in software that we're already seeing comes from several areas as we discussed in the prepared remarks, including the account managers that used to be inundated with payments have now come back to selling software full-time or upselling our base on software. And on the price increases in particular, we've implemented the price increases, communicated them in both July and October, and so we should start to see that impact starting in Q3.

Speaker Change: And in the prepared remarks, including the account managers that used to be inundated with payments have now come back to selling software fulltime or upselling, our based on software and on the price increases in particular, we've implemented the price increases communicated them in both July and October and so.

Speaker Change: We should start to see that impact starting in Q3.

Speaker Change: Okay.

Speaker Change: Right.

Okay.

Speaker Change: That's great. Just quickly on gross profit margins, came in better than what we had expected and that's kind of despite payments continue to be really strong in terms of its growth rate.

Speaker Change: Just quickly on gross profit margins came in better than what we had expected and that.

Speaker Change: Despite payments continue to be really strong in terms of its growth rate and obviously your script subscription margins were really good I guess the question is outside of just the mix shift associated with subscription getting a little bit stronger.

Speaker Change: and obviously your subscription margins were really good. I guess the question is...

Speaker Change: Is lightspeed capital like playing a role yet to help offset payments growth.

Speaker Change: Or is that just still really too early in the cycle to make.

Speaker Change: Medical contributor.

Speaker Change: Yeah, we're definitely seeing an impact from Lightspeed capital I mean, you know when we think about the numbers and you'll see them in our disclosure docs, we're looking at high single digits per quarter in revenue, but because that comes in at 95% plus gross margins. It definitely has an impact already in offsetting you know both the residual of the residual.

contributor.

Speaker Change: Moving over to payments.

Speaker Change: And also just more and more of our revenue coming in at Lightspeed payments gross margin. So capital is definitely having an impact already.

Speaker Change: and also just more and more of our revenue coming in at Lightspeed Pavement's gross margin. So capital is definitely having an impact already.

Speaker Change: Okay, that's great to hear thank you.

That's great to hear. Thank you.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the life, Andrea Bolger with Wells Fargo Securities. Please go ahead.

Speaker Change: Your next question comes from the live Andrew Boch with Wells Fargo Securities. Please go ahead.

Andrew, you might be on mute.

Thank you. Bye bye.

Speaker Change: Operator, maybe we'll go to the next question. Thanks for taking the question. Could you remind us how large North American retail and EMEA hospitality are, and potentially how fast those are growing, and then...

Speaker Change: In this pivot to those segments and the reoriented focus, what's the goal on what the growth of those businesses could be?

Speaker Change: Hey Andrew, thanks for the question. So, North America Retail and EMEA Hospitality are the majority of our revenues today. And when we think about our flagship products, these are the two markets that they're primarily serving, Noam Retail and EMEA Hospitality. While we're not, you know,

Speaker Change: The prioritization and the focus that we're now putting on the two markets where we have the highest right to win, the best unit economics.

Speaker Change: You know, what that ultimately does is it does allow us to accelerate growth, but at the same time, it allows us to expand EBITDA margins given that, you know, we do have this efficiency portfolio that we're working on cost optimizing.