Q1 2027 Lightspeed Commerce Inc Earnings Call

July 30, 2026

Speaker #2: Thank you for standing by. My name is Jale, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lightspeed Q1 2027 earnings call.

Operator 2: Thank you for standing by. My name is Jill, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lightspeed Q1 2027 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. I would now like to turn the conference over to Gus Papageorgiou, Head of Investor Relations. You may begin.

Operator: Thank you for standing by. My name is Jill, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lightspeed Q1 2027 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. I would now like to turn the conference over to Gus Papageorgiou, Head of Investor Relations. You may begin.

Speaker #2: Bienvenue à la téléconférence sur les résultats du premier trimestre 2027 de Lightspeed. All lines have been placed on mute to prevent any background noise.

Speaker #2: 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 1 on your telephone keypad.

Speaker #2: If you would like to withdraw your question, simply press star 1 again. I would now like to turn the conference over to Gus Papageorgiou, Head of Investor Relations.

Speaker #2: You may begin.

Speaker #3: Thank you, operator, and good morning, everyone. Welcome to Lightspeed's fiscal Q1, 2027 conference call. Joining me today are Dax Dasilva, Lightspeed's founder and CEO; Asha Bakshani, Lightspeed CFO; and Gabriel Benavides, Lightspeed's Chief Revenue Officer.

Gus Papageorgiou: Thank you, operator, and good morning, everyone. Welcome to Lightspeed's fiscal Q1 2027 conference call. Joining me today are Dax Dasilva, Lightspeed's Founder and CEO, Asha Bakshani, Lightspeed CFO, and Gabriel Benavides, Lightspeed's Chief Revenue Officer. 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 the conclusions, forecasts, and projections contained in these statements. We undertake no obligation to update these statements except as required by law.

Speaker #3: After the formal 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.

Speaker #3: 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.

Speaker #3: You should carefully review these factors, assumptions, risks, and uncertainties in our earnings press release issued earlier today, our first quarter fiscal 2027 results presentation available on our website, as well as in our filings with U.S.

Gus Papageorgiou: You should carefully review these factors, assumptions, risks, and uncertainties in our earnings press release issued earlier today, our Q1 fiscal 2027 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+, and on the SEC's EDGAR system. 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 Dax.

Speaker #3: 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.

Speaker #3: Reconciliations between the two can be found in our earnings press release, which is available on our website, on CedarPlus, and on the SEC's EDGAR system.

Speaker #3: 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.

Speaker #4: Good morning, everyone, and thank you for joining us. Before we get started, I would like to welcome Lightspeed's Chief Revenue Officer, Gabriel Benavides, on the call today.

Dax Dasilva: Morning, everyone, and thank you for joining us. Before we get started, I would like to welcome Lightspeed's Chief Revenue Officer, Gabriel Benavides, on the call today. Six months into his new role, Gabe is having a tremendous impact on our go-to-market efforts. He's already signed one of the largest partnership deals in the company's history, brought on strong new talent, and restructured our entire go-to-market team. I thought it would be helpful to have Gabe in our Q&A session so you can hear about our go-to-market momentum directly from him. Fiscal 2027 started off strong for Lightspeed, with the company surpassing its revenue outlook. In Q1, on an organic year-over-year basis, we delivered revenue of $323 million, up 17%, and gross profit of $139 million, up 12%. Adjusted EBITDA of $18 million came in within our outlook range.

Speaker #4: Six months into his new role, Gabe is having a tremendous impact on our go-to-market efforts. He has already signed one of the largest partnership deals in the company's history, brought on strong new talent, and restructured our entire go-to-market team.

Speaker #4: I thought it would be helpful to have Gabe in our Q&A session so you can hear about our go-to-market momentum directly from him. Fiscal 2027 started off strong for Lightspeed, with the company surpassing its revenue outlook.

Speaker #4: In Q1, on an organic year-over-year basis, we delivered revenue of $323 million, up 17%, and gross profit of $139 million, up 12%. Adjusted EBITDA of $18 million came in within our outlook range.

Speaker #4: Software growth accelerated to 8%, and payments penetration was very strong at 44%, up from 40% a year ago on an organic basis. Our performance was driven by strong execution in our growth engines, where we saw total revenue up 20%, GTV up 14%, customer locations up 10%, and payments penetration at 49%, up from 45% last year.

Dax Dasilva: Software growth accelerated to 8%, and payments penetration was very strong at 44%, up from 40% a year ago on an organic basis. Our performance was driven by strong execution in our growth engines, where we saw total revenue up 20%, GTV up 14%, customer locations up 10%, and payments penetration at 49%, up from 45% last year. Thanks to our healthy performance and growing confidence in our strategy and operations, we returned approximately $86 million through share repurchases in the quarter as part of our commitment to return capital to shareholders. Last year, we launched our refresh strategy, sharpening our focus and concentrating our product and go-to-market resources on our two growth markets, retail in North America and hospitality in Europe.

Speaker #4: Thanks to our healthy performance and growing confidence in our strategy and operations, we returned approximately $86 million through share repurchases in the quarter as part of our commitment to return capital to shareholders.

Speaker #4: Last year, we launched our refresh strategy, sharpening our focus and concentrating our product and go-to-market resources on our two growth markets: retail in North America and hospitality in Europe.

Speaker #4: With the foundations of that transformation now firmly in place, year two is about pressing our advantage and executing with even greater discipline to drive stronger results.

Dax Dasilva: With the foundations of that transformation now firmly in place, year two is about pressing our advantage and executing with even greater discipline to drive stronger results. I'll walk through the progress we made this quarter and lay out some of the initiatives we're driving to accelerate our performance further. As always, I'll organize my comments around our three stated priorities. One, growing customer locations in our growth engines. Two, expanding subscription ARPU. Three, improving adjusted EBITDA and free cash flow. Let me start with customer locations and our growth engines. Total growth engine customer locations increased by approximately 10% year over year to a total of 99,000. Our strategy to create durable growth by focusing on higher quality agreements with ICP customers extends to our partner ecosystem.

Speaker #4: I'll walk through the progress we made this quarter, and lay out some of the initiatives we're driving to accelerate our performance further. As always, I'll organize my comments around our three stated priorities: (1) growing customer locations in our growth engines; (2) expanding subscription ARPU; and (3) improving adjusted EBITDA and free cash flow.

Speaker #4: Let me start with customer locations in our growth engines. Total growth engine customer locations increased by approximately 10% year over year, to a total of 99,000.

Speaker #4: Our strategy to create durable growth by focusing on higher quality agreements with ICP customers extends to our partner ecosystem. In Q1, a legacy white-label partnership agreement was terminated, resulting in the removal of approximately $500 low ARPU locations from our customer base.

Dax Dasilva: In Q1, a legacy white label partnership agreement was terminated, resulting in the removal of approximately 500 low ARPU locations from our customer base. Total customer locations, including growth and efficiency markets, were 146,000 at the end of the quarter, after giving effect to the divestiture of the non-core Upserve U.S. hospitality product line. We remain focused on winning more sophisticated multi-location SMBs with complex needs. The customer's best positioned to take advantage of Lightspeed's full software suite. Examples include Adorn Boutique, which required advanced inventory management across multiple locations in Texas, and Synergy Sportswear, which operates seven locations and was already a user of NuORDER by Lightspeed before recognizing the benefit of the Lightspeed POS with wholesale built right in. Attracting existing NuORDER customers to the Lightspeed POS has become a leading driver of new retail customer locations for our recently expanded outbound sales teams.

Speaker #4: Total customer locations, including growth and efficiency markets, were 146,000 at the end of the quarter, after giving effect to the divestiture of the non-core Upserve U.S.

Speaker #4: hospitality product line. We remain focused on winning more sophisticated, multi-location SMBs with complex needs. The customers' best best positioned to take advantage of Lightspeed's full software suite.

Speaker #4: Examples include Adorne Boutique, which required advanced inventory management across multiple locations in Texas; and Synergy Sportswear, which operates seven locations and was already a user of new order by Lightspeed before recognizing the benefit of the Lightspeed POS with wholesale built right in.

Speaker #4: Attracting existing new order customers to the Lightspeed POS has become a leading driver of new retail customer locations for our recently expanded outbound sales teams.

Speaker #4: Also during the quarter, we were pleased to add brands, including Lafayette 148, Slow Tide, and Head Golf to new order. Providing them with a modern, collaborative, wholesale experience while enhancing their product discoverability across thousands of Lightspeed retailers.

Dax Dasilva: Also during the quarter, we were pleased to add brands including Lafayette 148, Slowtide, and Head Golf to NuORDER, providing them with a modern, collaborative wholesale experience while enhancing their product discoverability across thousands of Lightspeed retailers. As we continue to expand the number of brands on NuORDER, we deepen the value of our Lightspeed wholesale network for retail customers by making it easier to discover and purchase from the brands that matter most to them, all within a single platform. This strengthens our flywheel. More brands attract more retailers, and more retailers attract more brands. In Europe, we continue to build on our leading position in hospitality, driven by a product offering and go-to-market motion that we believe are unmatched.

Speaker #4: As we continue to expand the number of brands on NuORDER, we deepen the value of our Lightspeed wholesale network for retail customers by making it easier to discover and purchase from the brands that matter most to them, all within a single platform.

Speaker #4: This strengthens our flywheel, more brands attract more retailers, and more retailers attract more brands. In Europe, we continue to build on our leading position in hospitality, driven by a product offering and go-to-market motion that we believe are unmatched.

Speaker #4: We had a 19-location launch of the Dutch chain Broadhuis, which needed a platform that could support table service, bakery, and kitchen workflows while centralizing management.

Dax Dasilva: We added 19 locations of the Dutch chain, Vlaamsch Broodhuys, which needed a platform that could support table service, bakery, and kitchen workflows while centralizing management. Our product strength was reinforced by our robust partner ecosystem, an advantage that carried across our European markets. In the UK, we welcome 17 locations of Afrikana Peri Kitchen & Grill, a growing African-inspired restaurant chain. Golf also remains a strong vertical for Lightspeed. This quarter, we signed Encore Leisure Group, with 16 locations across the US, and the prestigious Royal Latem Golf Club in Belgium. Combining our two flagship platforms, Lightspeed Retail and Lightspeed Restaurant, allows us to address this highly lucrative and significant growth market. High-quality customer growth remains one of our top priorities, and we've launched several new initiatives to sharpen how we target, onboard, and support the right customers for Lightspeed. The first is improving seller productivity.

Speaker #4: Our product strength was reinforced by our robust partner ecosystem. An advantage that carries across our European markets. In the UK, we welcomed 17 locations of Africana Perry Kitchen & Grill, a growing African-inspired restaurant chain.

Speaker #4: Golf also remains a strong vertical for Lightspeed. This quarter, we signed Encore Leisure Group with 16 locations across the U.S. and the prestigious Royal Latim Golf Club in Belgium.

Speaker #4: Combining our two flagship platforms, Lightspeed Retail and Lightspeed Restaurant, allows us to address this highly lucrative and significant growth market. High-quality customer growth remains one of our top priorities, and we've launched several new initiatives to sharpen how we target onboard and support the right customers for Lightspeed.

Speaker #4: The first is improving seller productivity. By modernizing our go-to-market systems and processes, rolling out better training and enablement, and optimizing our organizational structure, we expect to increase seller productivity, which will allow us to drive revenue growth without scaling costs at the same rate.

Dax Dasilva: By modernizing our go-to-market systems and processes, rolling out better training and enablement, and optimizing our organizational structure, we expect to increase seller productivity, which will allow us to drive revenue growth without scaling costs at the same rate. In addition, we are refreshing our partner and channel strategies. Strengthening and growing our ecosystem will help drive efficient revenue growth by expanding product availability, driving more value for our customers, partners, and Lightspeed, while improving retention and lowering churn. Turning to software revenue and ARPU. Organic year-over-year software revenue growth accelerated from 6% last quarter to 8% this quarter. It was encouraging to see software growth accelerate this quarter, driven by continued efforts on upselling, sharper focus on ICP customers, a stronger end-to-end customer journey, and a continued stream of new software features.

Speaker #4: In addition, we are refreshing our partner and channel strategies. Strengthening and growing our ecosystem will help drive efficient revenue growth by expanding product availability, driving more value for our customers, partners, and Lightspeed, while improving retention and lowering churn.

Speaker #4: Turning to software revenue and ARPU, organic year-over-year software revenue growth accelerated from 6% last quarter to 8% this quarter. It was encouraging to see software growth accelerate this quarter, driven by continued efforts on upselling, a sharper focus on ICP customers, a stronger end-to-end customer journey, and a continued stream of new software features.

Speaker #4: In this quarter, we continued to deliver new innovations across our flagship platforms of Lightspeed Retail and Lightspeed Restaurant, which is key for long-term software ARPU growth.

Dax Dasilva: In this quarter, we continued to deliver new innovations across our flagship platforms of Lightspeed Retail and Lightspeed Restaurant, which is key for long-term software ARPU growth. In retail, we launched more AI enhancements, enabling our merchants to build blogs and websites faster and drive more traffic to their sites. Our new Klaviyo integration saves time building personalized marketing campaigns. We simplified the omnichannel experience, enhanced Lightspeed Scanner in store checkout, and rolled out better visibility into orders revenue and the most popular SKUs on NuORDER by Lightspeed. In hospitality, the latest upgrades to Lightspeed AI allow merchants to simply ask a question and get instant reports, charts, and insights about their restaurant, as well as manage operational checklists. For multi-location restaurants, our new locations manager manages menus and syncs updates across every venue in just a few clicks.

Speaker #4: In Retail, we launched more AI enhancements, enabling our merchants to build blogs and websites faster, and drive more traffic to their sites. Our new Klaviyo integration saves time building personalized marketing campaigns.

Speaker #4: Annually simplified the omnichannel experience. Enhanced Lightspeed scanners in-store checkout. Enrolled out better visibility into orders revenue and the most popular SKUs on new order by Lightspeed.

Speaker #4: In hospitality, the latest upgrades to Lightspeed AI allow merchants to simply ask a question and get instant reports, charts, and insights about their restaurant as well as manage operational checklists.

Speaker #4: And for multi-location restaurants, our new locations manager manages menus and syncs updates across every venue in just a few clicks. Our AI features have been well received by our customers.

Dax Dasilva: Our AI features have been well received by our customers. Of all the latest releases on Lightspeed Restaurant, Lightspeed AI is tracking as one of the fastest adopted by users, signaling an opportunity to expand agentic capabilities for restaurants. We are moving away from AI that just answers questions to specialized agents that can help run your business, to AI that can interpret and analyze data to actively suggest actions that can grow revenues or cut costs, such as reordering inventory of popular items, marking down inventory that is not selling, and switching suppliers when prices increase. Imagine that our merchants could hire someone with decades of knowledge about what makes their business succeed. We have that data and that knowledge, and our AI improvements are making it more accessible to our customers.

Speaker #4: Of all the latest releases on Lightspeed Restaurant, Lightspeed AI is tracking as one of the fastest adopted by users, signaling an opportunity to expand agentic capabilities for restaurants.

Speaker #4: We are moving away from AI that just answers questions, to specialized agents that can help run your business—to AI that can interpret and analyze data to actively suggest actions that can grow revenues or cut costs.

Speaker #4: Such as reordering inventory of popular items, marking down inventory that is not selling, and switching suppliers when prices increase. Imagine that our merchants could hire someone with decades of knowledge about what makes their business succeed.

Speaker #4: We have that data and that knowledge. And our AI improvements are making it more accessible to our customers. We believe no one is better positioned to deliver AI-powered solutions that can help our customers run and grow their businesses.

Dax Dasilva: We believe no one is better positioned to deliver AI-powered solutions that can help our customers run and grow their businesses. Our SMB and mid-market merchants' priority is to build better businesses, not build their own software. Now turning to profitability. Asha will take you through the numbers in detail, but overall, I want to stress that in the second year of our transformation, we are very focused on improving profitability and, in particular, increasing free cash flow. Our revenue growth remains strong, delivering on our profitability goals comes down to disciplined execution. To that end, we have undertaken some key initiatives. We are continuing to rationalize all of our costs across the organization. The deployment of AI tools and a more focused strategy have allowed us to concentrate our efforts and improve productivity. This has led to lower headcount requirements, particularly in product development.

Speaker #4: Our SMB and mid-market merchants priority is to build better businesses not build their own software. Now turning to profitability. Asha will take you through the numbers in detail.

Speaker #4: But overall, I want to stress that in the second year of our transformation, we are very focused on improving profitability and, in particular, increasing free cash flow.

Speaker #4: Our revenue growth remains strong, so delivering on our profitability goals comes down to disciplined execution. To that end, we have undertaken some key initiatives.

Speaker #4: We are continuing to rationalize all of our costs across the organization. The deployment of AI tools and a more focused strategy have allowed us to concentrate our efforts and improve productivity.

Speaker #4: This has led to lower headcount requirements particularly in product development. We've also stepped up our efforts to monetize our backbook. Which was a driver of our improvement in payments penetration.

Dax Dasilva: We've also stepped up our efforts to monetize our back book, which was a driver of our improvement in Payments Penetration, which reached 44% in Q1, up from 40% a year ago on an organic basis. Within our growth engines, Payments Penetration was even higher at 49%. Driving more revenue from existing customers is a significant opportunity to scale the business efficiently. The entire executive team and I are focused on improving our profitability and cash flow, which we see as essential to creating long-term shareholder value. With that, I will turn it over to Asha.

Speaker #4: Which reached 44% in Q1, up from 40% a year ago on an organic basis. Within our growth engines, payments penetration was even higher at 49%.

Speaker #4: Driving more revenue from existing customers is a significant opportunity to scale the business efficiently. The entire executive team and I are focused on improving our profitability and cash flow.

Speaker #4: Which we see as essential to creating long-term shareholder value. With that, I will turn it over to Asha.

Speaker #2: Thanks, Dax. And good morning, everyone. Our first quarter results reflect a strong start to fiscal 2027. I want to highlight three key trends we saw in the quarter.

Asha Bakshani: Thanks, Dax, good morning, everyone. Our first quarter results reflect a strong start to fiscal 2027. I want to highlight three key trends we saw in the quarter. First, the underlying drivers of profitability were strong. Software and payments gross margin continued to improve. Software gross margins of 83% were up year over year from 81% in the same quarter last year, and transaction-based gross margins grew to 32% from 31% on an organic basis, or 29% a year ago as reported. Second, our efficiency markets delivered stronger growth this quarter. Those markets saw organic revenue growth in the high single-digit range, which helped to improve our overall growth profile. Finally, Payments Penetration was 44% this quarter, driven by healthy uptake from new customers and continued conversion of our back book. Within our growth engine, Payments Penetration was up 49%.

Speaker #2: First, the underlying drivers of profitability were strong. Software and payments gross margin continued to improve. Software gross margins of 83% were up year over year from 81% in the same quarter last year.

Speaker #2: And transaction-based gross margins grew to 32% from 31% on an organic basis or 29% a year ago as reported. Second, our efficiency market delivered stronger growth this quarter.

Speaker #2: Those markets saw organic revenue growth in the high single-digit range, which helped to improve our overall growth profile. Finally, payments penetration was 44% this quarter.

Speaker #2: Driven by healthy uptake from new customers and continued conversion of our backbook. Within our growth engines, payments penetration was at 49%. Our growth engines represent approximately 75% of revenue and that makeshift bodes well for long-term payments penetration.

Asha Bakshani: Our growth engines represent approximately 75% of revenue, and that mix shift bodes well for long-term Payments Penetration. Overall, we believe there's significant runway for Payments Penetration to continue to grow in the coming years. I will discuss the quarter in more detail and then provide our outlook for Q2 and fiscal 2027. For year-over-year comparisons, I will reference organic figures that normalize the impact of the Upserve divestment. Total revenue grew 17% to $322.7 million, exceeding our outlook for organic growth of 10% to 14%, driven by growth in high GTV customer locations, higher software ARPU, and increased year-over-year Payments Penetration. Notably, revenue in our growth engines increased 20%. Software revenue for the quarter was $95.4 million, up 8% year over year and up 12% in our growth engine.

Speaker #2: Overall, we believe there is significant runway for payments penetration to continue to grow in the coming years. I will discuss the quarter in more detail, and then provide our outlook for Q2 and fiscal 2027.

Speaker #2: For year-over-year comparisons, I will reference organic figures that normalize the impact of the observed divestment. Total revenue grew 17% to $322.7 million, exceeding our outlook for organic growth of 10 to 14%, driven by growth in high GTV customer locations, higher software ARPU, and increased year-over-year payments penetration.

Speaker #2: Notably, revenue in our growth engines increased 20%. Software revenue for the quarter was $95.4 million, up 8% year-over-year and up 12% in our growth engines.

Speaker #2: Software ARPU increased 6% year-over-year, up from 4% last quarter. Software growth accelerated versus last quarter, driven by a higher location count in our growth engines, successfully landing high GTV customers who adopt more software and a continued focus on upsell across our backbook.

Asha Bakshani: Software ARPU increased 6% year over year, up from 4% last quarter. Software growth accelerated versus last quarter, driven by a higher location count in our growth engine, successfully landing high GTV customers who adopt more software, and a continued focus on upsells across our back book. We also saw a much larger mix of annual deals this quarter versus the same quarter last year. Transaction-based revenue for the quarter was $214.5 million, up 20% year over year. Gross Payments Volume also grew 20% year over year. GPV as a percentage of GTV came in at 44%, up from 40% in the same quarter last year on an organic basis. Our high-margin capital revenue had standout performance and grew 56% year over year. Customers who take Lightspeed Capital exhibit significantly lower churn and generate higher lifetime value.

Speaker #2: We also saw a much larger mix of annual deals this quarter versus the same quarter last year. Transaction-based revenue for the quarter was $214.5 million, up 20% year-over-year.

Speaker #2: Gross payments volume also grew 20% year-over-year. GPV as a percentage of GTV came in at 44%, up from 40% in the same quarter last year on an organic basis.

Speaker #2: Our high-margin Capital revenue had standout performance and grew 56% year-over-year. Customers who take Lightspeed Capital exhibit significantly lower churn and generate higher lifetime value.

Speaker #2: Growing this high-margin offering is a key priority for the business. Overall, Q1 GTV grew by 9% to $25.7 billion. We saw positive same-store sales overall, with particular strength in retail.

Asha Bakshani: Growing this high-margin offering is a key priority for the business. Overall, Q1 GTV grew by 9% to $25.7 billion. We saw positive same-store sales overall, with particular strength in retail. Within our growth engine, GTV grew by 14% year over year. Total monthly ARPU reached approximately $676, up 13% year over year, driven by both higher software and Payments monetization. With respect to our efficiency market, revenue growth was in the high single digit range, supported by strong Payments adoption. Payments Penetration in our efficiency market was 32% in the quarter, well below the overall business, which gives us meaningful room to grow Payments revenue. Turning to profitability and operating leverage. For year-over-year comparison, I will continue to reference organic figures that normalize for the impact of the Upserve divestment.

Speaker #2: Within our growth engines, GTV grew by 14% year-over-year. Total monthly ARPU reached approximately $676. Up 13% year-over-year. Driven by both higher software and payments monetization.

Speaker #2: With respect to our efficiency markets, revenue growth was in the high single-digit range, supported by strong payments adoption. Payments penetration in our efficiency markets was 32% in the quarter.

Speaker #2: Well below the overall business, which gives us meaningful room to grow payments revenue. Turning to profitability, an operating leverage. For year-over-year comparisons, I will continue to reference organic figures that normalized for the impact of the observed divestment.

Speaker #2: Total gross profit for the quarter grew 12% year-over-year, driven by strong top-line performance across both subscription and transaction-based revenue. Total gross margin for the quarter was 43%, compared to 45% a year ago on an organic basis.

Asha Bakshani: Total gross profit for the quarter grew 12% year-over-year, driven by strong top-line performance across both subscription and transaction-based revenue. Total gross margin for the quarter was 43%, compared to 45% a year ago on an organic basis. The decline was partially due to mix, as transaction-based revenue increased to 67% of revenue from 65% in the same quarter last year. In addition, hardware gross margins declined due to supply chain constraints that resulted in higher freight costs. This is not a structural issue, and we are implementing programs to improve our hardware supply chain management. We expect hardware margins to improve in the H2 of the fiscal year. Software gross margin was 83%, up from 81% a year ago. This improvement was largely driven by Lightspeed AI resolving 80% of our support tickets, reducing our cost of support and service delivery and driving efficiencies.

Speaker #2: The decline was partially due to mix as transaction-based revenue increased to 67% of revenue from 65% in the same quarter last year. In addition, hardware gross margins declined due to supply chain constraints that resulted in higher freight costs.

Speaker #2: This is not a structural issue, and we are implementing programs to improve our hardware supply chain management. We expect hardware margins to improve in the second half of the fiscal year.

Speaker #2: Software gross margin was 83%, up from 81% a year ago. This improvement was largely driven by AI resolving 80% of our support tickets, reducing our cost of support and service delivery, and driving efficiencies.

Speaker #2: Gross margins for transaction-based revenue were 32%, up from 31% a year ago on an organic basis. This improvement reflects increased payments penetration in our international markets where margins exceed those in North America.

Asha Bakshani: Gross margins for transaction-based revenue were 32%, up from 31% a year ago on an organic basis. This improvement reflects increased Payments Penetration in our international markets, where margins exceed those in North America, and growth in our Lightspeed Capital revenue. As we convert customers to Lightspeed Payments, we increase our overall net gross profit dollars, and in the quarter, we saw transaction-based gross profit grow by 23% year-over-year. For operating expenses, adjusted EBITDA, adjusted free cash flow, and share-based compensation, the year-over-year comparisons are on an as-reported basis. Total adjusted research and development, sales and marketing, and general and administrative expenses grew 7% year-over-year. This is primarily driven by investment in field and outbound sales. At the same time, we are taking action to improve productivity.

Speaker #2: And growth in our Lightspeed Capital revenue. As we convert customers to Lightspeed payments, we increase our overall net gross profit dollars and in the quarter we saw transaction-based gross profit grow by 23% year-over-year.

Speaker #2: For operating expenses, adjusted EBITDA, adjusted free cash flow, and share-based compensation, the year-over-year comparisons are on an as-reported basis. Total adjusted research and development, sales and marketing, and general and administrative expenses grew 7% year-over-year.

Speaker #2: This is primarily driven by investment in field and outbound sales. At the same time, we are taking action to improve productivity. In addition to rationalizing headcount, we are expanding our self-onboarding program for certain customer cohorts, which will fully automate onboarding and improve the overall merchant experience.

Asha Bakshani: In addition to rationalizing headcount, we are expanding our self-onboarding program for certain customer cohorts, which will fully automate onboarding and improve the overall merchant experience. Initial efforts have already delivered improved conversion at lower cost, and we are scaling this program further. Adjusted EBITDA in the quarter was $17.5 million, up from $15.9 million in Q1 last year, driven by continued execution against our strategic shift and our focus on AI and automation to improve operating efficiency. It is noteworthy that divesting Upserve means that our fixed costs are absorbed over a lower revenue base. This impact will be offset by our growing revenue base, along with our efforts to reduce costs. As a percentage of gross profit, adjusted EBITDA was 13%. Our fiscal 2028 goal is for adjusted EBITDA to be at 20% of gross profit.

Speaker #2: Initial efforts have already delivered improved conversion at lower costs and we are scaling this program further. Adjusted EBITDA in the quarter was 17.5 million, up from 15.9 million in Q1 last year, driven by continued execution against our strategic shift and our focus on AI and automation to improve operating efficiency.

Speaker #2: It is noteworthy that divesting observed means that our fixed costs are absorbed over a lower revenue base. This impact will be offset by our growing revenue base along with our efforts to reduce costs.

Speaker #2: As a percentage of gross profit, adjusted EBITDA was 13%. Our fiscal 2028 goal is for adjusted EBITDA to be at 20% of gross profit.

Speaker #2: Our net loss was $2.4 million, or a loss of $0.02 per share, compared to a net loss of $49.6 million, or a loss of $0.35 per share a year ago, thanks to improved gross profit and having now fully amortized our acquisition-related intangibles.

Asha Bakshani: Our net loss was -$2.4 million, or a loss of $0.02 per share, compared to a net loss of -$49.6 million, or a loss of $0.35 per share a year ago, thanks to improved gross profit and having now fully amortized our acquisition-related intangibles. Adjusted free cash flow was -$4.4 million in the quarter, which was impacted by working capital movement. The prior year period reflects a full quarter's contribution of Upserve to cash flows, whereas the current period reflects Upserve only up to its divestiture on 28 April 2026. We remain confident that the actions we are taking to grow quality locations and revenues while finding significant operating efficiencies have us on track to meet our three-year free cash flow target of $95 million for fiscal 2028. For fiscal 2027, we expect free cash flow to show significant growth over fiscal 2026.

Speaker #2: Adjusted free cash flow was negative 4.4 million in the quarter, which was impacted by working capital movement. The prior year period reflects a full quarter's contribution of observed to cash flows, whereas the current period reflects observed only up to its divestiture on April 28, 2026.

Speaker #2: We remain confident that the actions we are taking to grow quality locations and revenues while finding significant operating efficiencies have us on track to meet our three-year free cash flow target of $95 million for fiscal 2028.

Speaker #2: For fiscal 2027, we expect free cash flow to show significant growth over fiscal 2026. We continue to actively manage share-based compensation and related payroll taxes, which were 12.7 million dollars for the quarter, versus 14 million in the prior year quarter.

Asha Bakshani: We continue to actively manage share-based compensation and related payroll taxes, which were $12.7 million for the quarter versus $14 million in the prior year quarter, and declined as a percent of revenue versus Q1 last year from 5% to 4%. With respect to capital allocation and our balance sheet. Our balance sheet remains very healthy. We ended Q1 with approximately $372 million in cash, down from $454 million in March. That reduction was driven by discretionary action to return capital to shareholders and reduce the dilutive impact of share-based compensation. In the quarter, we spent $66 million to buy back and cancel 7 million shares, reducing our issued and outstanding share count by 4% year-over-year. We also used $21 million to repurchase shares in the open market to fund future share award settlement obligations, which limits dilution upon settlement.

Speaker #2: And, declined as a percent of revenue versus Q1 last year, from 5% to 4%. With respect to capital allocation and our balance sheet, our balance sheet remains very healthy.

Speaker #2: We ended Q1 with approximately $372 million in cash, down from $454 million in March. That reduction was driven by discretionary actions to return capital to shareholders and reduce the dilutive impact of share-based compensation.

Speaker #2: In the quarter, we spent 66 million dollars to buy back and cancel 7 million shares, reducing our issued and outstanding share counts by 4% year-over-year.

Speaker #2: We also used $21 million to repurchase shares in the open market to fund future share award settlement obligations, which limits dilution upon settlement.

Speaker #2: In addition, we received approximately 19 million dollars from the sale of observed in the quarter. We will continue to be opportunistic with our remaining share buyback authorization.

Asha Bakshani: In addition, we received approximately $19 million from the sale of Upserve in the quarter. We will continue to be opportunistic with our remaining share buyback authorization. Approximately $150 million remains under our broader board authorization to repurchase up to $400 million in Lightspeed shares. Aside from the potential share buyback, our largest use of cash will be the continued growth of our merchant cash advance program. There were $160 million in MCAs outstanding at the end of the quarter, and we intend to continue expanding this high-margin program over time. As we grow the program, we remain disciplined in our underwriting, and default rates have stayed consistent in the low single-digit range, which gives us confidence to continue expanding. Overall, our balance sheet remains strong and positions us well to continue executing against our strategic priorities. Now on to outlook.

Speaker #2: Approximately $150 million remains under our broader board authorization to repurchase up to $400 million in Lightspeed shares. Aside from the potential share buyback, our largest use of cash will be the continued growth of our merchant cash advance program.

Speaker #2: There were 116 million dollars in MCEs outstanding at the end of the quarter and we intend to continue expanding this high margin program over time.

Speaker #2: As we grow the program, we remain disciplined in our underwriting, and default rates have stayed consistent in the low single-digit range, which gives us confidence to continue expanding.

Speaker #2: Overall, our balance sheet remains strong and positions us well to continue executing against our strategic priorities. Now, on to outlook. For fiscal 2027, our existing outlook remains unchanged and consistent with the company's three-year targets for gross profit, adjusted EBITDA, and adjusted free cash flow, as presented in our Q4 earnings release in May 2026.

Asha Bakshani: For fiscal 2027, our existing outlook remains unchanged and consistent with the company's three-year target for gross profit, adjusted EBITDA, and adjusted free cash flow presented in our Q4 earnings release in May 2026. For fiscal 2027, we expect total revenue of $1.225 billion to $1.265 billion, representing organic growth of 12% to 15%. Total gross profit of $565 million to $585 million, representing organic growth of 12% to 16%. Adjusted EBITDA of $75 million to $95 million. For Q2 of fiscal 2027, we expect total revenue of $316 million to $326 million, representing organic growth of 12% to 16%. Total gross profit of $141 million to $146 million, representing organic growth of 10% to 14%. Adjusted EBITDA of $20 to $25 million. With that, we will now take your questions.

Speaker #2: For fiscal 2027, we expect total revenue of $1.225 billion to $1.265 billion, representing organic growth of 12% to 15%. Total gross profit is projected at $565 million to $585 million, representing organic growth of 12% to 16%.

Speaker #2: Adjusted EBITDA of $75 million to $95 million. For Q2 of fiscal 2027, we expect total revenue of $316 million to $326 million, representing organic growth of 12 to 16 percent.

Speaker #2: Total gross profit of $141 million to $146 million, representing organic growth of 10% to 14%. And adjusted EBITDA of $20 million to $25 million.

Speaker #2: With that, we will now take your questions.

Speaker #1: Thank you. So, the floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Operator 2: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you're called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We do ask for today's session that you please limit yourself to one question and one follow-up. Again, to join the queue, that is star one. Your first question comes from the line of Dan Perlin of RBC. Your line is open.

Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you're called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We do ask for today's session that you please limit yourself to one question and one follow-up. Again, to join the queue, that is star one. Your first question comes from the line of Dan Perlin of RBC. Your line is open.

Speaker #1: If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker #1: And we do ask for today's session that you please let yourself to one question and one follow-up. And again, to join the queue that is star one.

Speaker #1: Your first question comes from a line of Dan Perlin of RBC. Your line is open.

Speaker #3: Thanks. Good morning. Asha, I just had a question in terms of subscription growth accelerated to 8 percent versus 6. So that was really encouraging.

Dan Perlin: Thanks. Good morning. Asha, I just had a question in terms of subscription growth accelerated to 8% versus 6%. That was really encouraging. The ARPU was up about 6%, I think. I'm just trying to make sure I understand the slight gap between the two, and then how do you think about the timing of closing that over the next couple of quarters? Thank you.

Speaker #3: And ARPU was up about 6 percent, I think. So I'm just trying to make sure I understand the slight gap between the two and then how do you think about the timing of closing that over the next couple of quarters?

Speaker #3: Thank you.

Speaker #4: Thanks. Thanks for the question, Dan. When we think about subscription revenue, super happy with what we're seeing there going from 6 to 8 percent.

Asha Bakshani: Thanks for the question, Dan. When we think about subscription revenue, super happy with what we're seeing there, going from 6% to 8%. There are lots of puts and takes in the ARPU numbers, as you can imagine, timing, the type of locations we're bringing on board. As we're bringing more and more large GTV locations that take more of the suite Lightspeed has to offer, we should continue to see that software ARPU growth align better with the total revenue acceleration on software.

Speaker #4: There are lots of puts and takes in the ARPU numbers, as you can imagine. Timing, the type of locations we're bringing on board. As we're bringing more and more larger GTV locations that take more of the suite Lightspeed has to offer, we should continue to see that software ARPU growth align better with the total revenue acceleration on software.

Speaker #3: Okay. So it's kind of mix in timing of types of locations that are getting on boarded. Got it.

Dan Perlin: Okay. It's kind of mix and timing of types of locations that are getting onboarded. Got it.

Asha Bakshani: Absolutely.

Speaker #4: Absolutely.

Dan Perlin: Just a quick question on AI, maybe it's a little early to even draw distinction here, but as the product increasingly embeds AI solutions, how do you think about managing the cost of AI? Is it priced like a token cost plus a margin for the clients? The question is really as clients start to utilize it, there's an opportunity, I guess, for your cost structure to have some controls on it. I'm just wondering how you're thinking about managing that. Thank you.

Speaker #3: Just a quick question on AI and maybe it's a little early to even draw a distinction here, but as the product increasingly embeds AI solutions how do you think about managing the cost of AI and is it priced like a token cost plus the margin for the clients?

Speaker #3: Because the question is really, as clients start to utilize it, there's an opportunity, I guess, for your cost structure to have some controls on it.

Speaker #3: And I'm just wondering how you're thinking about managing that. Thank you.

Speaker #5: Yeah. I think when it comes to the product, I think we're being pretty judicious on what kinds of models we use for different kinds of tasks.

Dax Dasilva: Yeah, I think when it comes to the products, we're being pretty judicious on what kinds of models we use for different kinds of tasks. You do not need to use a frontier model for a lot of the things that Lightspeed AI is doing in retail and hospitality. There's a lot of options now. The team is doing a lot of experimentation, it's really helping us manage costs that we can make sure that we have great software uplifts from our AI tools that we have planned as we build more agents that are specialized in our product to handle everything from inventory to operations management. Yeah, you do not need high token cost frontier models to be doing all of those kinds of tasks. You can get great insights and agentic-driven action, the software, without leveraging frontier.

Speaker #5: You do not need to use a frontier model for a lot of the things that Lightspeed AI is doing in retail and hospitality, and there are a lot of options now.

Speaker #5: The team is doing a lot of experimentation and it's really helping us manage costs that we can make sure that we have great software uplifts from our AI tools that we have planned as we build more agents that are specialized in our product to handle everything from inventory to operations management.

Speaker #5: But yeah, you do not need high token cost frontier models to be doing all of those kinds of tasks. You can get great insights and actions out of agentic-driven action.

Speaker #5: The software without leveraging frontier.

Speaker #3: That's great insight. Thank you, Dex. Thank you, Asha.

Dan Perlin: That's great insight. Thank you, Dax. Thank you, Asha.

Speaker #1: Your next question comes from a line of Dominic Ball of Rothschild and Company Redburn. Your line is open.

Operator 2: Your next question comes from the line of Dominic Ball of Rothschild & Co Redburn. Your line is open.

Operator: Your next question comes from the line of Dominic Ball of Rothschild & Co Redburn. Your line is open.

Speaker #6: Hi Dax. Asha, Gus, yeah, thanks for the question. Nice organic GPV numbers. So kind of similar question to that in terms of some of your peers have started to directly monetize their AI products.

Dominic Ball: Hey, Dax, Asha, Gus. Thanks for the question, and nice organic GPV numbers. A kind of similar question to that in terms of some of your peers have started to directly monetize their AI products. For example, like Toast IQ Grow. Lightspeed has Lightspeed AI. It will be great to understand kind of how many merchants are currently adopting this and then the potential to monetize that going forward as well. Thank you.

Speaker #6: For example, like Toast IQ Grow, Lightspeed AI, it would be great to understand kind of how many merchants are currently adopting this, and then the potential to monetize that going forward as well.

Speaker #6: Thank you.

Speaker #5: Yeah. I think in hospitality, where we launched our AI products first, this is the fastest uptake of any module that we've ever seen in our history.

Dax Dasilva: Yeah. I think in hospitality where we launched our AI products first, this is the fastest uptake of any module that we have ever seen in our history. We have a really high percentage of folks adopting the AI tools. If you think about merchants in our SMB to mid-market space, the ability for them to query the product for the charting, the insights, the reporting that they need, rather than try to understand a reporting interface or build custom reports, it is very appealing. That is very encouraging because adoption usage means that we have, in the future, pricing power, and we can add more AI and agentic tools across our pricing tiers. We have not done that to date, but we are gathering the data to be able to do so.

Speaker #5: We have a really high percentage of folks adopting the AI tools. If you think about merchants in our SMB to mid-market space, the ability for them to query the product for the charting, the insights, the reporting that they need, rather than try to understand a reporting interface or build custom reports, I mean, it's very appealing.

Speaker #5: And so that's very encouraging because adoption usage means that we have in the future pricing power and we can we can add more AI and agentic tools across our pricing tiers.

Speaker #5: We haven't done that to date, but we're gathering the data to be able to do so.

Speaker #6: Thank you.

Dominic Ball: Thank you.

Speaker #1: Your next question comes from the line of Thanos Mochopoulos of BMO. Your line is open.

Operator 2: Your next question comes from the line of Thanos Moschopoulos of BMO. Your line is open.

Operator: Your next question comes from the line of Thanos Moschopoulos of BMO. Your line is open.

Speaker #7: Hi, good morning. Could you speak to your hiring plans and sales for the upcoming year? It sounds like a lot of the focus will be on improving productivity of the existing force. Is the hiring slowing down as far as bringing on new bodies, or what are your thoughts on that?

Thanos Moschopoulos: Hi, good morning. Could you speak to your hiring plans and sales for the upcoming year? It sounds like a lot of the focus will be on improving productivity of the existing force. Is the hiring slowing down as far as bringing on new bodies, or what's your thoughts on that?

Speaker #3: Yeah. Dennis, thank you for the question. I'll take this one. This is Gabe Benavides. Happy to be here, Chief Revenue Officer at Lightspeed. A couple of things.

Gabriel Benavides: Yeah. Thanos, thank you for the question. I'll take this one. This is Gabe Benavides. Happy to be here, Chief Revenue Officer at Lightspeed. A couple things. As Dax mentioned, on one side, we've already welcomed new sales leadership to Lightspeed that brings with them tremendous experience and depth of expertise in just the right areas. As regards our sales capacity, really our capacity build-out is largely behind us, and our growth ambitions are largely within reach with our existing capacity, as long as we successfully pivot to a real focus on seller productivity, which is where we're spending a lot of our time and focus right now.

Speaker #3: As Dax mentioned, on one side, we've already welcomed new sales leadership to Lightspeed that brings with them tremendous experience and depth of expertise in just the right areas.

Speaker #3: As regards our sales capacity, really our capacity build-out is largely behind us. And our growth ambitions are largely within reach with our existing capacity as long as we successfully pivot to a real focus on seller productivity, which is where we're spending a lot of our time and focus right now.

Speaker #7: Great. And then you commented on expanding the partner ecosystems, spending more time on the partner strategy can you expand on that as well in terms of some of the areas of opportunity there?

Thanos Moschopoulos: Great. You commented on expanding the partner ecosystem, spending more time on the partner strategy. Can you expand on that as well in terms of some of the areas of opportunity there?

Speaker #3: Yeah, absolutely. Another great question. Really two big parts to take note of. One, deeper collaboration with our biggest, the most important partners. We recently announced a deep integration with Meta and a partnership with Klaviyo being extended as well.

Gabriel Benavides: Yeah, absolutely. Another great question. Really two big parts to take note of. One, deeper collaboration with our biggest and most important partners. We recently announced a deep integration with Meta and a partnership with Klaviyo being extended as well. Maybe more to the point, a real focus on monetizing the connectivity layer in our tremendous base of customers. That creates bi-directional monetization opportunities for Lightspeed and our great partner ecosystem, and of course, it directly creates greater customer value as well. Dax, in the prepared remarks, we mentioned signing one of the largest deals in our partner history this past quarter, and that was directly related to that second part of the strategy refresh.

Speaker #3: And maybe more to the point, a real focus on the monetizing the connectivity layer in our tremendous base of customers. That creates bidirectional monetization opportunities for Lightspeed and our great partner ecosystem.

Speaker #3: And of course, it directly creates greater customer value as well. Dax, in a prepared remarks, we mentioned signing the largest one of the largest deals in our partner history.

Speaker #3: This past quarter, and that was directly related to that second part of the strategy refresh.

Speaker #7: Great. I'll pass along. Thank you.

Thanos Moschopoulos: Great. I'll pass along. Thank you.

Speaker #3: Thank you.

Gabriel Benavides: Thank you.

Speaker #1: Your next question comes from a line of Matt Code of Truist. Your line is open.

Operator 2: Your next question comes from the line of Matt Coad of Truist. Your line is open.

Operator: Your next question comes from the line of Matt Coad of Truist. Your line is open.

Speaker #5: Hi. Hey, good morning, guys. Thanks for taking the question. I just wanted to ask about the net location ads and the growth engines. It came in a little bit quarter over quarter.

Matt Coad: Hi. Hey, good morning, guys. Thanks for taking the question. Just wanted to ask about the net location adds and the growth engines that came in a little bit quarter over quarter. I'm kind of curious if maybe the World Cup had an impact, maybe there were some delayed integrations, anything like that. Any detail that you can give on seasonality or expectations for net location adds for the rest of the year would be helpful. Thank you.

Speaker #5: I'm kind of curious if maybe the World Cup had an impact, maybe there was some delayed integrations, anything like that. And then any detail that you can give on kind of like seasonality or expectations for net location ads for the rest of the year would be helpful.

Speaker #5: Thank you. Yeah. So we added a approximately 1,300 net new locations in the quarter. The first quarter is a bit seasonally a lighter quarter than, for example, Q4.

Dax Dasilva: Yeah. We added approximately 1,300 net new locations in the quarter. Q1 is a bit seasonally a lighter quarter than, for example, Q4. We had a removal of some locations from a white label agreement that we terminated. Yeah, I think we're focused primarily on quality locations. I think there's the seller productivity efforts, but there's also how are we getting the right locations for Lightspeed that's a good fit with our product lines. You see location growth, it's still at 10% within our CMD goal of 10% to 15% as a three-year CAGR. You also see software growth growing, right? It's the higher quality locations that we're focused on.

Speaker #5: And we had a removal of some locations from a white label agreement that we terminated. Yeah, I think we're focused primarily on quality locations.

Speaker #5: I think there's the seller productivity efforts, but there's also how are we getting the right locations for Lightspeed. That's a good fit with our product lines.

Speaker #5: And so you see location growth, it's still at 10% within our CMD goal of 10 to 15 percent as a three-year CAGR. But you also see software growth growing, right?

Speaker #5: So it's the higher quality locations that we're focused on.

Speaker #1: Super helpful, Dax. Thank you. And then just quick follow-up. Any commentary on the path forward for the hardware growth margin? I know there's a lot of moving pieces with discounting and go-to-market efforts and memory costs that we all have to take into consideration here.

Matt Coad: Super helpful, Dax. Thank you. Just quick follow-up, any commentary on the path forward for the hardware gross margin? I know there's a lot of moving pieces with discounting and go-to-market efforts and memory costs that we all have to take into consideration here, any help would be helpful. Thank you.

Speaker #1: So, any help would be helpful. Thank you.

Speaker #4: Yeah, thanks. Thanks for the question, Matt. We are seeing some compression in hardware margins coming from the temporary supply chain constraints that we mentioned.

Asha Bakshani: Yeah, thanks for the question, Matt. We are seeing some compression in hardware margins coming from the temporary supply chain constraints that we mentioned. We have put some guardrails in place, and we genuinely believe that's going to bring those margins back to more normalized levels in H2 of this year. I think what we need to keep in mind, Matt, is that the hardware investments, the way we look at that is a means to a specific end, expanding high-margin Payments and software. It is working. We saw GPV grow 20% organically. Payments Penetration reached 49% in our growth engines, which is an all-time high for us. More importantly, our core software gross margins expanded to 83%. We see these hardware investments as one time.

Speaker #4: We have put some guardrails in place and we genuinely believe that's going to bring those margins back to more normalized levels. In the back half of this year.

Speaker #4: I think what we need to keep in mind, Matt, is that the hardware investments, the way we look at that is a means to a specific end, expanding high-margin payments and software.

Speaker #4: It is working. We saw GPV grow 20% organically. PayPen reached 49% in our growth engines, which is an all-time high for us. And more importantly, our core software growth margins expanded to 83%.

Speaker #4: So we see these hardware investments as one-time. We do expect the margins to improve in the back half of the year as these guardrails that we put in place start coming to fruition.

Asha Bakshani: We do expect the margins to improve in H2 of the year as these guardrails that we put in place start coming to fruition. Overall, we really don't see hardware capping long-term margins. It's only about 4% of our revenue. The programs that we've launched will improve these economics in H2 of the year.

Speaker #4: But overall, we really don't see hardware capping long-term margins. It's only about 4% of our revenue. And so the programs that we're launched that we've launched will improve these economics in the back half of the year.

Speaker #1: Your next question comes from a line of Tianxin Huang of JP Morgan. Your line is open.

Operator 2: Your next question comes from the line of Tien-Tsin Huang of J.P. Morgan. Your line is open.

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

Speaker #8: Thanks for taking the question. Just on the sales productivity, just going back to that, just curious around quarter attainment and if there's been any changes in the quarter or commission structure overall, has that been progressing as planned?

Tien-Tsin Huang: Thanks for taking the question. Just on the sales productivity, just going back to that, just curious around quota attainment and if there's been any changes in the quota or commission structure overall, has that been progressing as planned? I'm just curious if there's been any pivoting there. Thank you.

Speaker #8: I'm just curious if there's been any pivoting there. Thank you.

Speaker #3: Yeah, great question. I want to share too many specifics around targeting or commissions. We've got a pretty broad audience in the call, but I can tell you, as we've shifted the focus to seller productivity, the early signs are quite encouraging.

Gabriel Benavides: Yeah, great question. I won't share too many specifics around targeting or commissions. We've got a pretty broad audience on the call. I can tell you, as we've shifted the focus to seller productivity, the early signs are quite encouraging. We're already seeing, for example, in our pipeline, deals of a size and scope emerge that we haven't really seen before without breaking the great velocity that we tend to have here at Lightspeed as well.

Speaker #3: We're already seeing for example, in our pipeline, deals of a size and scope emerge that we haven't really seen before without breaking the great velocity that we tend to have here at Lightspeed as well.

Tien-Tsin Huang: Got it. No, that's good to hear. For Asha maybe, just want to make sure. I heard positive same-store sales overall. It does seem like the spending environment has been pretty good in the geographies that you're in. Any surprises would you call out, and sort of in thinking around H2, has your thought process changed there on just macro spend? Thank you.

Speaker #8: Got it. That's good to hear. But just for Asha, maybe just on the just want to make sure I heard positive same-source sales overall.

Speaker #8: It does seem like the spending environment has been pretty good in the geographies that you're in. Any surprises? Would you call out and sort of been thinking around the second half of the year as your thought process changed there?

Speaker #8: On just macro spend. Thank you.

Speaker #4: Yeah, thanks, Tianxin. No, you know what, we are like we mentioned in the prepared remarks, we're seeing a very strong macro pretty solid macro across North America, retail, and EMEA hospitality.

Asha Bakshani: Yeah. Thanks, Tien-Tsin. No, you know what? Like we mentioned in the prepared remarks, we're seeing a very strong macro, pretty solid macro across North America retail and EMEA hospitality. We saw total GTV up 14% in the growth engines. The same-store sales, if I double-click on retail, our largest verticals, bikes, sporting goods, golf, jewelry, all had double-digit or close to double-digit growth year-over-year. When we look at EMEA hospitality, we also see very solid growth. We saw the euro temper a little bit towards the end of the quarter. You're hearing that from others as well. Really nothing that concerns us. We're feeling really good about the macro.

Speaker #4: We saw total GTV up 14% in the growth engines. The same-store sales, if I double-click on retail, our largest verticals by exporting goods, golf, jewelry, all had double-digit or close to double-digit growth year over year.

Speaker #4: When we look at EMEA hospitality, we also see very solid growth. We saw the euro temper a little bit towards the end of the quarter.

Speaker #4: I mean, you're hearing that from others as well. But really nothing that concerns us. We're feeling really good about the macro.

Speaker #8: Great to hear. Thank you both.

Tien-Tsin Huang: Great to hear. Thank you both.

Speaker #1: Your next question goes from a line of Martin Toner of ATB Cormac. Your line is open.

Operator 2: Your next question comes from the line of Martin Toner of ATB Cormark. Your line is open.

Operator: Your next question comes from the line of Martin Toner of ATB Cormark. Your line is open.

Speaker #5: Yeah, that's Cormac. Thanks, guys, for taking the question. And.

Martin Toner: Yeah, that's Cormark. Thanks, guys, for taking the question.

Speaker #1: Martin, we can't hear you very well. Can you speak up, please?

Operator 2: Martin, we can't hear you very well. Can you speak up, please?

Gus Papageorgiou: Martin, we can't hear you very well. Can you speak up, please?

Speaker #5: Yeah. How's this?

Martin Toner: Yeah. How's this?

Speaker #1: Yeah, much better.

Operator 2: Yeah, much better.

Gus Papageorgiou: Yeah, much better.

Speaker #5: Thank you very much. Can you kind of walk us through and any reasons for gross margin weakness in the quarter? Was there anything transient?

Martin Toner: Thank you very much. Can you kind of walk us through any reasons for gross margin weakness in the quarter? Was there anything transient, and what are your thoughts on gross margin for the rest of the year?

Speaker #5: And what are your thoughts on gross margin for the rest of the year?

Speaker #4: Yeah, thanks for the question, Martin. The gross margin, what you're seeing in the quarter are a couple of factors or dynamics. First and foremost, we're our payments transaction-based revenues doing really well.

Asha Bakshani: Yeah. Thanks for the question, Martin. The gross margin, what you're seeing in the quarter, are a couple of factors or dynamics. First and foremost, our payments. Transaction-based revenue is doing really well. We had a solid quarter, as you saw. Transaction-based revenue, as that mix grows, that comes in at 25% to 30% gross margins, depending on the region, North America lower and Europe and international higher. As that grows, you see more revenue coming in at the 20% to 30% gross margin. We're still feeling really good about 43% to 45% margins that we've put in our long-term guidance. The only thing that I would say temporary transient is the hardware. We just talked about that. We did see some slight compression from normalized hardware margins that you would see from Lightspeed. We saw slight compression in the recent quarters coming from supply chain constraints.

Speaker #4: We had a solid quarter as you saw. Transaction-based revenue as that makes grows, that comes in at 25 to 30 percent gross margins depending on the region.

Speaker #4: North America, lower in Europe and international higher. So as that grows, you see more revenue coming in at the 20 to 30 percent gross margin.

Speaker #4: We're still feeling really good about 43 to 45 percent margins that we've put in in our long-term guidance. The only thing that I would say temporary transient is the hardware.

Speaker #4: We just talked about that. We did see some slight compression from normalized hardware margins that you would see from Lightspeed. We saw slight compression in the recent quarters coming from supply chain constraints.

Speaker #4: We talked about that in the prepared remarks. But we do definitely see this as something that's transient. We've put in some guardrails in place that we expect to see benefit us in the back half of the year and nothing that concerns us.

Asha Bakshani: We talked about that in the prepared remarks. We do definitely see this as something that's transient. We've put in some guardrails in place that we expect to see benefit us in H2. Nothing that concerns us. These programs are launching and will improve these economics in H2. Overall, feel really good about where we are on gross margins and where we're headed in the rest of this year.

Speaker #4: These programs are launching and will improve these economics in the back half of the year. Overall, I feel really good about where we are on gross margins and where we're headed for the rest of this year.

Speaker #5: Quick.

Martin Toner: Quick-

Speaker #1: Your next question comes to a line of Matt Bullock of Bank of America. Your line is open.

Operator 2: Your next question comes to the line of Matt Bullock of Bank of America. Your line is open.

Operator: Your next question comes to the line of Matt Bullock of Bank of America. Your line is open.

Speaker #5: Hi, great. Thanks for the question. I was hoping if you could elaborate maybe give us an update on the strategy for the opportunity ahead in driving payments penetration up within the efficiency markets specifically.

Matt Bullock: Hi. Great. Thanks for the question. I was hoping if you could elaborate, maybe give us an update on the strategy for the opportunity ahead in driving Payments Penetration up within the efficiency market specifically. I have one quick follow-up.

Speaker #5: Then I have one quick follow-up.

Speaker #3: Yeah, I think thanks for the question. The strategy overall for payment penetration increase is very close when we look at our efficiency portfolio, which is fairly broad as with our growth engine portfolio.

Gabriel Benavides: Yeah. Thanks for the question. The strategy overall for Payments Penetration increase is very close when we look at our efficiency portfolio, which is fairly broad, as with our growth engine portfolio. It's the opportunities to drive better Payments Penetration into our back book, and we're off to a great start for this year. In a more targeted fashion in our efficiency portfolio and a very broad fashion in our growth portfolio, we're looking to increase attach rate, of course, on our front book sales as well. Yep. No, go ahead.

Speaker #3: It's the opportunities to drive better payment penetration into our backbook, and we're off to a great start for this year. And in a more targeted fashion in our efficiency portfolio and a very broad fashion in our growth portfolio, we're looking to increase attached rate, of course, on our front book sales as well.

Speaker #3: For a little more color. Yep, go ahead.

Matt Bullock: Oh, sorry. Go ahead.

Speaker #5: Oh, sorry. Go ahead.

Speaker #3: No, just I think Dax mentioned this in the prepared remark. We've launched a couple of targeted, very specific initiatives for our backbook base of customers.

Gabriel Benavides: No, I think Dax mentioned this in the prepared remark. We've launched a couple of targeted, very specific initiatives for our back book base of customers. I was going to mention that over the last few years, Lightspeed's payment capabilities, processing capabilities, have really grown, and we've been a little bit quiet about those enhanced capabilities. We're bringing those to bear fully with full voice right now in the front book and back book, which will really help drive growth in the efficiency portfolio.

Speaker #3: And I was going to mention that over the last few years, Lightspeed's payment capabilities, processing capabilities have really grown and we've been a little bit quiet about those enhanced capabilities.

Speaker #3: We're bringing those to bear fully with full voice right now in the front book and backbook, which really helps drive growth and efficiency portfolio.

Speaker #5: Got it. Thank you. And then just a quick follow-up on the termination of the white label agreement. Can you just remind us how prevalent those white label locations are across the base of locations and then would be interested to learn more if you can provide color on kind of what happened around that termination of the agreement?

Matt Bullock: Got it. Thank you. Then just a quick follow-up on the termination of the white label agreement. Can you just remind us of how prevalent those white label locations are across the base of locations, and then would be interested to learn more, if you can provide color on kind of what happened around that termination of the agreement.

Speaker #3: Yeah, I can take the first half of this, Dax. Yeah, well, first to your question, very, very few of these remaining in any way in the backbook.

Gabriel Benavides: Yeah, I can take the first half of this, Dax. Yeah. Well, first to your question, very few of these remaining in any way in the back book. I would say negligible. Look at this truly as a one-time thing, there's two big elements. This particular type of white label agreement didn't really fit our strategy going forward. We have a refresh strategy around payments and certainly around partners, which we touched on. The agreement was terminated, and we've both moved forward.

Speaker #3: I would say negligible. So look at this truly as a one-time thing. And there's two big elements. This particular type of white label agreement didn't really fit our strategy going forward.

Speaker #3: We have a refreshed strategy around payments and certainly around partners. Which we touched on. And so the termination, the agreement was terminated and we've both moved forward.

Speaker #5: Got it. Thank you.

Matt Bullock: Got it. Thank you.

Speaker #1: Your next question comes to a line of Timothy Chiotto of UBS. Your line is open.

Operator 2: Your next question comes from the line of Timothy Chiodo of UBS. Your line is open.

Operator: Your next question comes from the line of Timothy Chiodo of UBS. Your line is open.

Speaker #5: Great. Thanks for taking the question. This question is most likely, I think, mostly for Gabe. But in the last year or so, in terms of the US retail competitive environment, there's really two changes that stand out at least to us.

Timothy Chiodo: Great. Thanks for taking the question. This question is most likely, I think, mostly for Gabe. In the last year or so, in terms of the US retail competitive environment, there's really two changes that stand out, at least to us. One is the revamped Genius product and the hiring of a few hundred more salespeople. On the Square side, Square's clearly pivoted to hiring field sales and then also working increasingly with the ISO channel. I wanted to see if your teams have noticed the impact of these two competitors, how you're responding to that, if at all, and any other context you could give around the general competitive environment in the US retail segment. Thank you.

Speaker #5: One is the revamped Genius product and the hiring of a few hundred more salespeople. And then on the Square side, Square is clearly pivoted to hiring field sales and then also working increasingly with the ISO channel.

Speaker #5: And I wanted to see if your teams have noticed the impact of these two competitors how you're responding to that, if at all, and any other context you could give around the general competitive environment in the US retail segment.

Speaker #5: Thank you.

Speaker #3: Yeah, of course. Great question, great multi-part question. So first, certainly competitive environment. That is very true. I will say this. I believe a North America retail the customer that we are purpose-built to serve is underserved.

Gabriel Benavides: Well, of course. Great question. Great multipart question. First, certainly competitive environment. That is very true. I will say this, I believe in North America retail, the customer that we are purpose-built to serve is underserved, even with such a competitive environment. Our opportunity in North America is terrific, both near term and going forward, long tail, high ceiling. As I mentioned, our capacity build-out phase was not just concentrated in North America, but it's largely behind us. We're really focusing on a pivot to productivity. As regards the North American market, that's going to mean a little better, sharper ICP definition and focus and targeting, the value-based and unified approach to selling that Dax mentioned a couple of times in the prepared remarks to make sure that we are capturing that opportunity to the greatest extent possible.

Speaker #3: Even with such a competitive environment. So our opportunity in North America is terrific, both near term and going forward. Long tail, high ceiling. And as I mentioned, our capacity build-out phase was not just concentrated in North America, but it's largely behind us.

Speaker #3: So we're really focusing on a pivot to productivity. As regards to North America market, that's going to mean a little better well, sharper ICP definition and focus and targeting.

Speaker #3: The value-based and unified approach to selling that Dax mentioned a couple of times in the prepared remarks to make sure that we are capturing that opportunity to the greatest extent possible.

Speaker #3: And so really for the foreseeable future, I'll call it, it's about better performance in our ICP opportunity and verticals within North America. There's a lot there for us.

Gabriel Benavides: Really for the foreseeable future, I'll call it's about better performance in our ICP opportunity and verticals within North America. There's a lot there for us.

Speaker #5: Thank you.

Timothy Chiodo: Thank you.

Speaker #1: Your next question comes from a line of Andrew Harte of BTIG. Your line is open.

Operator 2: Your next question comes from the line of Andrew Harte of BTIG. Your line is open.

Operator: Your next question comes from the line of Andrew Harte of BTIG. Your line is open.

Speaker #6: Hey, thanks for the question. Following up on the prior question on the backbook opportunity, I guess can you talk about why you think now's the right time to go after the backbook?

Andrew Harte: Hey, thanks for the question. Following up on the prior question on the back book opportunity, I guess, can you talk about why you think now's the right time to go after the back book? Then when you think about getting those wins, what's the kind of gross profit uplift on a per customer basis? If you could talk about the sales motion there as well and any impacts on churn or the opposite, adding customers. Thanks.

Speaker #6: And then when you think about getting those wins, what's the kind of gross profit uplift on a per-customer basis? If you could talk about the sales motion there as well and any impacts on churn or the opposite adding customers, thanks.

Speaker #3: Yeah, great question. I'll take the first part of this maybe. As far as the timing, listen, I think that maybe I'll start here very quickly.

Gabriel Benavides: Yeah, great question. I'll take the first part of this maybe. As far as the timing, listen, I think that maybe I'll start here very quickly. There's a bit of a formula I think that we're adhering to at Lightspeed right now, which is being very purposeful at signing or bringing on board the right customer where our product depth, regardless of market, makes the biggest difference and our go-to-market economics tend to be the strongest, signing them to great deals with great deal economics, and then retaining them over time and growing them. As their business thrives, they should be adopting more and buying more from Lightspeed, both on a subscription basis and a transactional basis.

Speaker #3: There's a bit of a formula, I think, that we're adhering to at Lightspeed right now, which is being very purposeful about signing or bringing on board the right customer where our product depth, regardless of market, makes the biggest difference and our go-to-market economics tend to be the strongest.

Speaker #3: Signing them to great deals with great deal economics and then retaining them over time and growing them as their business thrives, they should be adopting more and buying more from Lightspeed.

Speaker #3: Both on a subscription basis and it's transactional basis. So all that said, we have 146,000 customer base a tremendous opportunity for us to be very purposeful about driving value, bringing our terrific partner network and ecosystem to bear and increasing the monetization there.

Gabriel Benavides: All that said, we have 146,000 customer base, a tremendous opportunity for us to be very purposeful about driving value, bringing our terrific partner network and ecosystem to bear, and increasing the monetization there. Really, I think the timing is right now, and it has been right for a little while and be right going forward. It's about purposeful execution, focusing on customer value, and that is at the center, actually. It's a great question because that's at the center of a lot of the changes that we've made over the past couple of quarters.

Speaker #3: So really, I think the timing is right now, and it has been right for a little while, and will be right going forward. It's about purposeful execution—focusing on customer value—and that is at the center, actually.

Speaker #3: It's a great question because that's at the center of a lot of the changes that we've made over the past couple of quarters.

Speaker #6: That's helpful. And then just on that, curious if there's any kind of uplift we can think about when you win a backbook customer. And then, as my other follow-up question, the focus on cost rationalization.

Andrew Harte: That's helpful. Just on that, curious if there's any kind of uplift we can think about when you win a back book customer. As my other follow-up question, the focus on cost rationalization. I know there was a comment that there was a lot of opportunity in the R&D line. It also looks like G&A ticked up in Q1 as well on an adjusted basis. Asha, if you could just help us think about the entire cost structure going forward. Thanks.

Speaker #6: I know there was a comment that there was a lot of opportunity in the R&D line. It also looks like G&A ticked up in the first quarter as well and then adjusted basis.

Speaker #6: So Asha, if you could just kind of help us think about the entire cost structure going forward. Thanks.

Speaker #4: Yeah, sure. Thanks, Andrew. From I'll answer the margin question first. Gabe talked a lot about partnerships from a software perspective that gives us more to upsell.

Asha Bakshani: Yeah, sure. Thanks, Andrew. I'll answer the margin question first. Gabe talked a lot about partnerships from a software perspective that gives us more to upsell. We see no reason why those deals wouldn't come in at the 83% software margins that you're seeing from us. That's what we've seen to date. From a payments perspective, depending on whether they're North America or international, the margins range from 25% all the way up to 40%. As we get more and more of these back book customers onto payments, we should see them coming into our book at those margins as well. From a cost rationalization perspective, as you know, we're relentless about cost discipline inside the company. We actively manage our structure as a part of normal operations. Consistent with that approach, we recently reduced about 10% of our headcount in product and tech.

Speaker #4: We see no reason why those deals wouldn't come in at the 83% software margins that you're seeing from us. I mean, that's what we've seen to date.

Speaker #4: From a payments perspective, depending on whether they're North America or international, the margins range from 25 all the way up to 40%. And as we get more and more of these backbook customers onto payments, we should see them coming into our book at those margins as well.

Speaker #4: From a cost rationalization perspective, as you know, we're relentless about cost discipline inside the company. We actively manage our structure as a part of normal operations.

Speaker #4: Consistent with that approach, we recently reduced about 10% of our headcount. In Product and Tech, we are being prudent with our resources. This was all a part of our transformation.

Asha Bakshani: We are being prudent with our resources. This was all a part of our transformation, increasing our operational efficiency and fueling these smart reinvestments into the high return growth initiatives is how we run the business. The last thing I'll say is, as you know, we've focused in North America retail and in EMEA hospitality, and that focus really helps us to sharpen our execution, and we are concentrating our investments in the areas with the highest return and removing work that's no longer a priority for us. Lots of really good work inside the company on cost rationalization, and we feel really good about where we're going there.

Speaker #4: Increasing our operational efficiency and fueling these smart reinvestments into the high-return growth initiatives is how we run the business. The last thing I'll say is, as you know, we've focused in North America retail and in EMEA hospitality.

Speaker #4: That focus really helps us sharpen our execution, and we are concentrating our investments in the areas with the highest return, while removing work that's no longer a priority for us.

Speaker #4: So, lots of really good work inside the company on cost rationalization, and we feel really good about where we're going there.

Gabriel Benavides: I guess lastly, on the uplift part of your question, I think certainly, I would put it this way, these are the metrics to watch. Software growth, especially within our growth engine portfolio, that's the area to watch as we go through the rest of the year and beyond. Certainly, a lot of that will come from the back book strategies we're employing.

Speaker #3: your question, I think certainly I would put it this way. This is these are the metrics to watch. Software growth, especially within our growth engine portfolio, and that's you'll see that's the area to watch as we go through the rest of the year and beyond.

Speaker #3: And certainly, a lot of that will come from the backbook strategies we're employing.

Speaker #1: And again, if you have a question, you just start one on your telephone keypad. Your next question comes from a line of Todd Coopland of CIBC.

Operator 2: Again, if you have a question, it is star one on your telephone keypad. Your next question comes the line of Todd Coupland of CIBC. Your line is open.

Operator: Again, if you have a question, it is star one on your telephone keypad. Your next question comes the line of Todd Coupland of CIBC. Your line is open.

Speaker #1: Your line is open.

Speaker #2: Great. Thanks. Good morning, everyone. I wanted to ask about location growth implied in the Q2 and 2027 guide. I think you said organic growth was 10% in Q1.

Todd Coupland: Great. Thanks. Good morning, everyone. I wanted to ask about location growth implied in the Q2 and 2027 guide. I think you said organic growth was 10% in Q1. What are you implying in the guidance for Q2 and 2027?

Speaker #2: What are you implying in the guidance for Q2 and 2027?

Speaker #4: Thanks, Todd. From a location growth perspective, I think we're anchored around the cattle market state CAGR we provided of 10% to 15%. There are puts and takes.

Asha Bakshani: Thanks, Todd. From a location growth perspective, I think we're anchored around the capital markets day CAGR we provided of 10% to 15%. There are puts and takes quarter to quarter because there is seasonality in our business. We feel really good about that 10% to 15% CAGR. We were at 10% in this past quarter. All of the initiatives that Gabe and Dax talked about earlier are going to help to drive and even accelerate location growth and obviously in particular in our growth engines.

Speaker #4: Quarter to quarter because there is seasonality in our business. But we feel really good about that 10 to 15% CAGR. We've we were at 10% in this past quarter.

Speaker #4: All of the initiatives that Gabe and Dax talked about earlier, are going to help to drive and even accelerate location growth. And obviously, in particular in our growth engines.

Speaker #2: Great. Thank you very much.

Todd Coupland: Great. Thank you very much.

Speaker #1: Your next question comes from the line of Susan Sukumar of Stifel. Your line is open.

Operator 2: Your next question comes from the line of Suthan Sukumar of Stifel. Your line is open.

Operator: Your next question comes from the line of Suthan Sukumar of Stifel. Your line is open.

Speaker #5: Good morning and thanks for taking my questions. For first one, I want to follow up on the channel. Can you speak a little bit about your priorities for the overall channel strategy?

Suthan Sukumar: Good morning, thanks for taking my questions. For the first one, I want to follow up on the channel. Can you speak a little bit about your priorities for the overall channel strategy? Is this really to double down in core areas or help you penetrate net new markets and customer verticals?

Speaker #5: Is this really the double down in core errors or help you penetrate net new markets and customer verticals?

Speaker #3: Oh, it's a great question. You'll take this one. Well, it's both. I think the when I talk about the size of our opportunity being near term as well as long term, long tail, high ceiling, a lot of that immediate or near term opportunity it's both, but it comes from this backbook.

Gabriel Benavides: Oh, it's a great question. Yeah, I'll take this one. Well, it's both. I think when I talk about the size of our opportunity being near term as well as long term, long tail, high ceiling, a lot of that immediate or near-term opportunity, it's both, but it comes from this back book. We have such a terrific and broad partner ecosystem. I will share one of the very pleasant surprises that I had when I joined Lightspeed was just the number of partners that are really eager to work with us or expand their collaboration with us. We have a real opportunity to drive customer value, which translates to revenue growth in our back book to drive improved retention in our back book, which of course contributes to all of the measures we watch as well. Then certainly there's a front book co-selling opportunity as well.

Speaker #3: So we have such a terrific and broad partner ecosystem. I will share one of the very pleasant surprises that I had when I joined Lightspeed was just the number of partners that are really eager to work with us or expand their collaboration with us.

Speaker #3: And we have a real opportunity to drive customer value, which translates to revenue growth in our backbook to drive improved retention in our backbook, which of course contributes to all of the measures we watch as well.

Speaker #3: And then certainly there's a front-book co-selling opportunity as well. One of the things that we're looking at, as always, is as we expand our reach into additional markets—nearer or longer term—we can really activate and leverage our great partner ecosystem to enter markets effectively: high yield, but low risk as well.

Gabriel Benavides: One of the things that we're looking at as always is as we expand our reach into additional markets nearer or longer term, we can really activate and leverage our great partner ecosystem to enter markets effectively with high yield but low risk as well.

Suthan Sukumar: Okay, great. Appreciate that color.

Speaker #5: Okay, great. Appreciate that color. For my second question, I want to touch on capital allocation. Asha, I think you kind of talked about maintaining flexibility for the capital program, but I'm curious, how active do you guys expect to be on share buybacks going forward?

Gabriel Benavides: Yeah.

Suthan Sukumar: For the second question, I want to touch on capital allocation. Asha, I think you kind of talked about maintaining flexibility for the capital program. Curious, how active do you guys expect to be on share buybacks going forward and what other priorities are you contemplating here from a capital allocation perspective?

Speaker #5: And what other priorities are you contemplating here from a capital allocation perspective?

Speaker #4: Yeah, thanks for the question. We're pretty serious about returning cash to shareholders. We talked about the buyback. We've bought back 7 million shares in Q1 of this year.

Asha Bakshani: Yeah, thanks for the question. We're pretty serious about returning cash to shareholders. We talked about the buyback. We bought back 7 million shares in Q1 of this year. We're about a little over 80% through the buyback that we just announced in quarter. We also purchased shares to help avoid on the open market share to prevent dilution from a shareholder perspective. We are returning capital to our shareholders, and we are doing so from a position of strength. Even after repurchasing and canceling 7 million shares in Q1, we did end the quarter with over $370 million in cash. We have no meaningful long-term debt and alongside positive free cash flow that we expect to generate this year. Outside of the merchant cash advance business, to be honest, which high-margin business growing 56% year-over-year, super excited about where that's going.

Speaker #4: We're about a little over 80% through the buyback that we just announced in quarter. We also purchased shares to help avoid on the open market share to prevent dilution from a shareholder perspective.

Speaker #4: So we are returning capital to our shareholders and we are doing so from a position of strength. Even after repurchasing and canceling 7 million shares in Q1, we did end the quarter with over 370 million in cash.

Speaker #4: We have no meaningful long-term debt and alongside positive free cash flow that we expect to generate this year. Outside of the merchant cash advance business, to be honest, which high margin business growing 56% year over year, super excited about where that's going.

Speaker #4: But outside of that, the for us, it's really about where we investing for long-term to deliver long-term shareholder value. And for now, that is really the merchant capital advance business.

Asha Bakshani: Outside of that for us, it's really about where are we investing to deliver long-term shareholder value. For now, that is really the merchant capital advance business and returning cash to our shareholders through buybacks.

Speaker #4: And returning cash to our shareholders through buybacks.

Operator 2: That concludes our Q&A session. I'll now turn the conference back over to Gus Papageorgiou for closing remarks.

Operator: That concludes our Q&A session. I'll now turn the conference back over to Gus Papageorgiou for closing remarks.

Speaker #1: That concludes our Q&A session. I'm going to turn the conference back over to Gus Papageorgiou for closing remarks.

Speaker #2: Great. Thanks, everyone, for joining us today. Myself and the rest of the team will be around for the rest of the day if anyone has any follow-up questions.

Gus Papageorgiou: Great. Thanks, everyone, for joining us today. Myself and the rest of the team will be around for the rest of the day if anyone has any follow-up questions. We look forward to speaking to you on our next quarterly call. Thank you and have a good day, everyone.

Speaker #2: And we look forward to speaking to you on our next quarterly call. Thank you and have a good day, everyone.

Speaker #1: That concludes today's conference call. You may now disconnect.

Operator 2: That concludes today's conference call. You may now disconnect.

Operator: That concludes today's conference call. You may now disconnect.

Todd Coupland: Please wait. The conference will begin shortly.

Q1 2027 Lightspeed Commerce Inc Earnings Call

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