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Certain material factors and assumptions were applied in respect of conclusions, forecasts and projections contained in these statements. We undertake no obligation to update these statements except as required by law. You should carefully review these factors, assumptions, risks and uncertainties in our earnings press release issued earlier today our fourth quarter fiscal twenty twenty five results presentation available on our website as well as in our filings with U. S. And Canadian securities regulators. Also, commentary today will include adjusted financial measures, which are non IFRS measures, and ratios. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website on SEDAR plus and on the SEC's EDGAR system. Note that because we report in U. S. Dollars, all amounts discussed today are in U. S. Dollars unless otherwise indicated. With that, I will now turn the call over to Dax. Thank you, Gus, and welcome, everyone. Fiscal 2025 was a pivotal year for Lightspeed, We exceeded $1,000,000,000 in annual revenue for the first time in company history, delivered $53,700,000 in adjusted EBITDA, and realigned the business around the focused strategy designed to drive long term profitable growth.
12m 31s
There were many things to be proud of in fiscal twenty twenty five, Revenue grew 18%, adjusted EBITDA rose substantially from 1,300,000.0 to 53,700,000.0 We launched a series of industry leading innovations such as retail insights our kitchen display system, we refocused our efforts on two core growth markets: retail in North America hospitality in Europe. We have strong product market fit and a proven right to win restructured the organization better align with our new strategy and met our goal of profitable growth. And we completed a share repurchase program for 9,700,000.0 shares returning over $130,000,000 of capital to investors. In addition, after the year end, Lightspeed further executed its share repurchase program, buying back an additional 9,000,000 shares. In the last twelve months, Lightspeed has repurchased approximately 18,700,000.0 shares, or about 12% of the shares previously outstanding at the end of last year for about $219,000,000 In Q4, we continued to make meaningful progress towards our strategic priorities. Software ARPU grew 11% year over year, reflecting strong adoption of our new modules and ongoing price optimization. Gross margin reached 44%, driven by disciplined cost management. We added quality customer locations in our growth markets, retail for North America and hospitality for Europe.
14m 1s
Supported by the growing effectiveness of our outbound sales teams. Importantly, March was a record month for outbound sales. These achievements reflect not only strong execution, but the foundational transformation we undertook this year. With many of the hard decisions behind us, fiscal twenty twenty six will be a year of executing on our plan and delivering on our potential. While macroeconomic conditions remain uncertain across our global footprint, our ongoing strategic execution and product capabilities position us well for continued resilience. From forecasting demand, sourcing inventory from the thousands of suppliers on our wholesale network, The Lightspeed Commerce platform is built to help merchants thrive in a matter what conditions they face. In late March, we hosted our Capital Markets Day in New York City. Where we outlined our new strategy and financial goals. Want to recap some of the highlights from that day. Lightspeed is concentrating efforts on its growth markets. Where we have a clear right to win. Our go forward strategy is anchored in two high opportunity areas: North American retail, where we serve complex high GDP retailers differentiated tools and deep vertical expertise. European hospitality, a fragmented market where Lightspeed is already a leader, with workflow automation, local support fiscal compliance.
15m 28s
In these areas, we are doubling down on outbound sales capacity product innovation, customer experience. Elsewhere, we are focused on efficiency.
15m 38s
Continuing to support existing customers while realigning our cost structure to maximize adjusted EBITDA for the whole business. The success of our efforts within these growth markets will be measured by our ability to grow customer locations and software ARPU. While improving overall profitability. I want to highlight the progress we are making on the first two goals Ash will follow with a more thorough discussion on profitability and our financials. Go to market progress.
16m 8s
Customer locations in our growth markets grew over 3% in fiscal 'twenty five, and GTV for these customers grew 6%. Notably, this growth came despite the strategic pivot only beginning to ramp in December 2024. When we realigned our organization to execute on our profitable growth strategy. Making further investments in sales and product, we expect to accelerate net customer locations growth towards our targeted three year CAGR of 10% to 15%. We're scaling our outbound sales organization rapidly, As of April, filled over half of the 150 roles we committed to by fiscal twenty twenty six. In Europe, field teams are now active across key cities in Germany, The UK and France. North America retail, our AI powered outbound engine is helping reps target and convert high value merchants. We are leveraging AI to feed the top of the sales funnel through outbound cold calling and our salespeople then convert those leads into active customers. Our AI engine helps us prioritize outbound calling to the highest value leads. We are moving quickly to fill all of our outbound positions. Outbound sales reps require some time to fully ramp, usually around six months. So we will see a lag between hiring and results.
17m 25s
But thus far, the results are very encouraging. Outbound salespeople are much more efficient at targeting our IC customers. And because these are generally more established customers, they tend to go live much faster. Because they do not need to clear hurdles such as financing or signing leases. March was our best month yet for outbound revenue, which was driven by faster go live times, higher average GTV per location and higher productivity per rep. Here are a few examples of such well established customers signed in the quarter. Runners Roost in Colorado with seven locations, carrying one of the most complete selections of fitness shoes and apparel in The USA. They had previously relied on separate POS and payments providers we were able to deliver an integrated solution. Tennis Plaza, with nine locations in Florida, frequently ranked as the number one tennis specialty store in America, they had considered several cloud based competitors, but chose Lightspeed due to our inventory management B2B and the ability to sell on the Lightspeed scanner app that we announced last quarter. Woodstock was seven locations in New York and New Jersey, a streetwear retailer going for its premium sneakers apparel and accessories, they chose Lightspeed as their end to end solution provider.
18m 43s
Half Moon Bay Golf Links in California with two world class championship golf courses connected to a luxury resort Finally, within Lightspeed New Order, we signed several new brands, including Birkenstock Australia Crew Clothing in The UK, and the Children's Wear brand's Tee Collection. In EMEA Hospitality, we also had great success during this quarter and signed a number of notable customers. We continued our winning streak amongst Michelin starred restaurants and chefs, by adding La Vie and Dusseldorf Zet Joe in Bruges, and Restaurant Jewellery in Rotterdam. High GDV restaurants with complex operations turned to Lightspeed to seamlessly power their operational flow. We added group decor with eight restaurants in Paris, five of which have Michelin Stars. They switched to Lightspeed from their legacy system. With an impressive seven of them going live on the same day. We signed L'Orealet de Chambord, located within a luxury hotel in the Loire Valley. They chose Lightspeed for our centralized management system modern tools and integration with key partners. Finally, we also saw traction amongst multi location chains, signing burger and sauce, with 18 restaurants in The UK. They were impressed with the flexibility of our platform and wanted a reliable partner to help them pursue their aggressive expansion plans.
20m 7s
The second key metric by which we measure the success of our strategy is ARPU expansion. Driven by product innovation and retention within our core markets. In Q4, software ARPU grew 11% year over year. Driven by deeper module adoption recent pricing initiatives. Proof that our flagship platforms are resonating with the right customers. As part of our strategic pivot, in fiscal twenty twenty six, are investing over 35% more in product development than in fiscal twenty twenty five to accelerate innovation across our offerings for retail customers in North America, and hospitality customers in Europe. These capabilities are now being translated into modular features that help complex merchants scale efficiently. In retail, we shipped several key innovations to improve operational control and online reach for our customers, including seasonal trends, enhance inventory planning and insight for retailers to ensure accurate inventory levels Sales visualization so retailers can view data in the interactive graphic form to better understand their business generative AI powered web builder, which allows our customers to simply show a screenshot of what they want their website to look like. And our web builder will deliver a fully integrated professional looking online store with no coding required.
21m 26s
Omni Gift Cards, so retailers can sell and redeem gift cards across in store and online selling channels and the new order catalog portal, which creates a self-service portal for brands who want to share their catalogs with the thousands of merchants using the Lightspeed POS. In hospitality, we ship several key features, including Google integration with OrderAnywhere, Restaurants can now make sure they're showing up in Google searches increasing order volume and offering a convenient ordering experience. And we launched advanced production instructions and consolidated items. These releases allow kitchen staff to adjust menu items for variations such as allergens, and it automatically queues multiple orders of identical items to minimize prep time. As we enter fiscal twenty twenty six with our renewed focus on our growth engine, we expect even further acceleration in product innovation, which, along with our aggressive outbound strategy will drive improved sales velocity. Our goals for 2026 are clear.
22m 28s
Increased customer locations within our growth markets expand software ARPU and enhance profitability for the entire business. I look forward to reporting on our progress throughout the year. And we'll now turn the call over to Asha. Thanks, Zach, and welcome, everyone.
22m 46s
Fiscal twenty twenty five was a milestone year for Lightspeed.
22m 49s
Not only in hitting $1,000,000,000 in revenue for the first time, but in laying the financial and operational groundwork for sustained profitable growth. We realize the company around markets with the strongest unit economics increased pricing to better reflect the value of our platform and doubled down on our payments and capital initiatives. As a result, we entered fiscal twenty twenty six with a leaner, more focused business. And significantly improved profitability. My comments today will walk through our financial performance for the year and our fiscal Q4, outline our progress on capital return as well as margin expansion, And finally, I will provide our outlook for the upcoming quarter and full fiscal year. Total annual revenue of $1,077,000,000 grew 18% year over year. With a positive net retention rate and surpassing the $1,000,000,000 milestone on a fiscal year basis for the first time. Annual gross margins held steady at 42% despite an increase in transaction based revenue from 60% to 65% of our total revenue. Adjusted EBITDA grew from $1,300,000 a year ago to $53,700,000 in fiscal twenty twenty five. Reflecting both revenue growth and disciplined cost control. Gross payments volume increased by 40% in the year, and GPV as a percentage of GTV increased from 32% in Q4 of last year to 38% in Q4 of this year.
24m 31s
Demonstrating growing adoption of Lightspeed Payments. We ended the year with $558,000,000 in cash after repurchasing 9,700,000.0 shares and funding a net amount of $45,000,000 in merchant cash advances in the year. Excluding these two outflows, our cash position increased year over year. These results illustrate our commitment to profitable growth and our focus on opportunistically returning capital to our shareholders. With respect to fiscal Q4, total revenue grew 10%, driven by software ARPU expansion and continued payments penetration. Despite macro headwinds impacting same store sales, and transaction based revenue, in a subset of our portfolio gross margin performance was strong. At 44%. Software ARPU grew 11% year over year, driven by new module adoption price optimization and our continued shift towards high GTV customers. Software revenue was $87,900,000 up 8% year over year. Supported by new software releases and fiscal Q4 pricing actions. Transaction based revenue was $150,800,000 up 14% year over year. GPV rose 19% year over year to $7,900,000,000 and capital grew 28% benefiting from our unique visibility into merchant cash flow and real time repayments [indiscernible] TCV from our growth engines grew 6% year over year. Despite the strategic pivot only beginning to run-in December 2024.
26m 22s
Validating our go forward strategy to focus on North America retail and European hospitality. Overall, GTV remained flat at $20,600,000,000 due to same store sales softness primarily in our rest of world markets. In line with our strategy, our customer mix continued to shift toward higher GTV merchants. Locations with over $1,000,000 in GTV increased while locations with sub-two hundred thousand dollars in GTV declined. Importantly, customer locations in our growth markets of North America retail and European hospitality grew over 3% year over year. We primarily target ICPs although many customers are opening new locations and it takes time for them to ramp to higher GTV. Despite this ramp, on average customer locations across our customer base excluding e commerce sites, process in excess of $500,000 a year in annual GTV. Which is evidence of our successful move upmarket. All of our go to market and product development efforts are focused on these customers. GPV as a percentage of GTV remains flat to last quarter at 38%, given same store softness in certain highly penetrated verticals such as hospitality customers in North America. We expect total GPV as a percentage of GTV to continue to trend upwards. As our customer location adds in our growth markets [indiscernible] In April of this year, we saw total GPV as a percentage of GTV rise to 40% and we expect this will continue to improve throughout the year.
28m 11s
ARPU, excluding Ecwid standalone, reached a record $489 up 13% year over year. Driven by both higher software and payments monetization. With respect to profitability, and operating leverage, in fiscal Q4, gross profit grew 12% year over year. Outpacing revenue growth. Total gross margin was 44%, up from both the same quarter last year as well as our fiscal Q3. Despite transaction based revenue increasing, from 60% to 62% of sales compared to last year, we were able to improve our gross margin through effective spend management. Targeted price increases and the growth in higher margin revenue from items such as Lightspeed Capital. We delivered strong software gross margins at 81% up from 77% a year ago driven by pricing uplift and cost discipline. Our customer churn remained in line with the historical levels, despite our price increases. Demonstrating the strength of our platform and the value it brings to our customers. Gross margins for transaction based revenue were at 29%, up slightly from the previous quarter and flat to the same quarter last year. And includes gross margins from our capital programs continues to deliver healthy margins of over 90%. 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 11% year over year.
29m 55s
Adjusted EBITDA in the quarter came in at $12,900,000 nearly triple the $4,400,000 delivered in Q4 of last year. Driven partially by early success in from our transformation pod. Total adjusted research and development sales and marketing and general and administrative expenses rose just 3% year over year. Well below gross profit growth. As we scale within our growth engine, we expect this leverage to continue. We continue to actively manage our share based compensation and related payroll taxes which were $11,800,000 or 5% of revenue for the quarter. Versus $10,100,000 or 4% in the same quarter last year. Continue to manage equity usage prudently. Adjusted income rose to $15,000,000 from $8,500,000 last year. With respect to capital allocation and our balance sheet, we executed aggressively on our buyback program. As you heard from Dax. Since 03/31/2024, we have repurchased 18,700,000.0 shares. Approximately 12% of outstanding shares as of 03/31/2024. For $219,000,000 $84,000,000 of these share repurchases made after the quarter. As of now, approximately $200,000,000 remains under our broader Board authorization to repurchase up to $400,000,000 in Lightspeed shares we continue to remain opportunistic on further share repurchases. We ended Q4 with $558,000,000 in cash. Down from $662,000,000 in the prior quarter.
31m 50s
Almost entirely due to the $92,000,000 used for buybacks in the quarter. And $7,600,000 used to fund our merchant cash advances. Adjusted free cash flow used was $9,300,000 in Q4, We had a goodwill impairment charge in the quarter of $556,000,000 I'll walk you through the mechanics of this. Goodwill is required to be tested for impairment at least annually. Given the recent volatility in the valuations of technology companies broadly, and Lightspeed's share price specifically, our net assets exceeded our market cap. At 03/31/2025. This was a goodwill impairment trigger for us. On our tests, resulted in a $556,000,000 charge in the quarter. This goodwill charge is a noncash accounting entry that has no impact on our liquidity or execution capability. Our balance sheet remains healthy, and positions us well for this upcoming year of profitable growth. With respect to our efficiency markets, while our core focus is on retail in North America, and hospitality in Europe, We maintain many happy customers in other markets. With the revenue from our efficiency markets increasing year over year, in fiscal twenty twenty five, and GPV as a percentage of GTV in our efficiency markets increasing from our fiscal Q3 to Q4.
33m 25s
We will continue to add software value, drive adoption of financial services such as payments and capital, and of course, continue to drive efficiency in these markets. While minimizing the distraction from our core. Before I move on to outlook, I would like to draw everyone's attention the fact that going forward, from a total locations perspective, we are changing the definition of what constitutes a customer location. We have historically emphasized that a single unique customer can have multiple customer locations including physical, and e commerce site. So e commerce sites used by customers alongside a physical site have been counted as separate customer locations. From the POS. As our POS and e commerce solutions are bundled, as a single omnichannel product, we believe this distinction has become less meaningful. Going forward, we consider this bundled product to be a single customer location. The end result is that the total number of customer locations changes. From approximately 162,000 to approximately 144,000 as of 03/31/2025. While the monthly ARPU moves, from $489 to $545 Going forward, we will consider standalone e com sites those that are not bundled with any physical site separately, as we have always done for Ecwid eCommerce standalone sites.
34m 57s
Please see our MD and A or press release for details. Now turning to our outlook. Despite continued macro volatility, we enter fiscal twenty twenty six with strong conviction in our strategy and in our ability to execute. We're on track to scale our outbound team to 150 reps by year end. And expect the continued rollout of new features to support both software and transaction based revenue growth. This financial outlook reflects our most recent view of the macroeconomic environment and is consistent with our three year gross profit CAGR of approximately 15% to 18% and three year adjusted EBITDA CAGR of approximately 35% that we presented at our Capital Markets Day in March. For fiscal twenty twenty six, we expect total revenue growth of approximately 10% to 12% year over year total gross profit growth of approximately 14% total adjusted EBITDA to be in the range of approximately 68,000,000 to $72,000,000 For the first quarter, expect total revenue in the range of approximately $285,000,000 $290,000,000 Total gross profit growth of approximately 13% total adjusted EBITDA to be in the range of approximately 14,000,000 to $16,000,000 With that, I'll turn the call back to the operator.
36m 37s
Thank you very much. Ladies and gentlemen, once again, we'll start our Q and A session now. And please remember if you would like to ask a question it is star followed by the number one on your telephone keypad. And once again, we do respectfully ask that you limit yourself to one question followed by a single follow-up question when you're given the opportunity to speak. Our first question for today comes from the line of Trevor Williams from Jefferies. Your line is live.
37m 8s
Thanks very much. I wanted to go back to the full year guide, if we could, and just the embedded acceleration in revenue growth. Beyond the first quarter. If you guys just could talk to kind of the primary drivers behind that, the level of visibility, just kind of and then any kind of underlying macro assumptions that we should be aware of within that? Thank you.
37m 28s
Yeah. Hey, Trevor. Thanks for the question. What's built in our fiscal twenty twenty six guide is, as you know, we're investing quite a bit in go to market We're hiring to a 50 outbound reps. We're over half of the way there already. And so once those outbound reps ramp, we expect them to start, you know, showing acceleration on both software and location and then the payments revenue that comes with that. In addition to that, what's built in fiscal twenty twenty six is the incremental 35% of OpEx that we've 35% growth on total R and D spend that we've baked into fiscal twenty six, you know, for product innovation, that's going to start to to be reflected in additional modules being released and upsell as well. So that is really what's baked into fiscal twenty twenty six from a revenue acceleration perspective and gross profit growth acceleration perspective. With respect to the macro, we have seen some softness in the fourth quarter, as you know. From a same store sales perspective. And we do expect or we are baking into our by that macro that we saw in Q4. Now we did see the same store sales stabilize in April and in early May.
38m 47s
But we're still being conservative on the guide. Just given the uncertainty that's out there today. We want to put a guide out that we're very confident that we can hit.
38m 57s
Okay. Got it. Thanks very much. And then on the payments penetration rate, Ash, I heard you give the 40% number for April and the expectation for that to go up over the course of the year. You could just put a finer point on maybe the range we should be thinking about by the end of the fiscal year and kind of key variables within that Thank you.
39m 18s
Yeah, for sure. So I'll start with talking about payments penetration overall in the quarter. There was a slight growth from Q3 to our fiscal Q3 Q4. And the reason penetration didn't rise more sharply is really just a mix shift. We saw the same store softness that I talked about, but that happened in certain highly penetrated verticals such as hospitality in North America. But overall, you know, payment penetration is really not a concern for us. The underlying trend is very healthy. As you mentioned and as we said in our prepared remarks, we're already up 40% in the month of April. And so as we scale our go to market reps and continue to focus on payments attached, we have a a pretty high attach rate given that we, you know, we sell the product as an integrated solution today. We do expect penetration to continue trending upward. We're not guiding on payments penetration because as you know, with the uncertain macro and the impact on same store sales, that goes up and down. We use we really use payments penetration more as a there's tons of opportunity out there for us. If we're at 40% in April, there's still a lot of upside for us there.
40m 30s
And we expect that 40% to continue to grow through fiscal twenty six and Thanks very much. Thanks for your questions. Our next question is from the line of Koji Ikeda with Bank of America. Your line is live.
40m 52s
Yes. Hey, guys. Thanks so much for taking the question. I wanted to go back to that prior question about the guide. And it sounds like there's two key levers here, that are kind of informing your guidance for 2026. Ramping sales capacity, balance against an uncertain macro. And so thinking about those two levers, you know, are both of those levers detuned meaningfully for the guide? Or is one of those factors more conservative versus the other? Thank you.
41m 19s
Yeah. Thanks for the question, Koji. If go back to the guide, you know, when we look at outbound, if we take the the catalyst for revenue acceleration and we start with that, When we look at outbound, we have seen very encouraging signs to date. These are the reps that give us the highest unit economics the lowest payback periods. And so scaling the outbound is something that we have high confidence in, and that's what's baked into the plan. From a macro perspective, as I mentioned, there is a fair bit of conservatism baked in just given that there is still a fluid macro out there. And like I said, we want to put a guide out there that we're confident we can hit. The macro is less in our control, so we've baked more conservatism into that factor. Whereas the outbound, the hiring is going very well. We feel that that is very much in our control. And so, you know, we're being, you know, we're very confident in in the outbound and that ramp that we've assumed in our in our guide.
42m 22s
Got it. Thanks, Asha. And then when looking at the guide, looks like gross profit is growing faster than revenue. So maybe walk us through what are the levers there for that for 2026 and then how to think about gross profit growth versus revenue in 2026 and beyond? Just thinking, is this a onetime, you know, faster growth in '26 and it'll normalize after that, or is this something we could continue seeing?
42m 46s
In the out years? Thank you.
42m 48s
Yeah. Thanks for thanks for the question. Great question, Koji. We do expect, and you see that in our guide, that gross profit growth outpaces top line growth. And that's really coming from the fact that the majority of the growth that you're going to see from Lightspeed in fiscal 'twenty six and beyond is from location ads and from software. And that's because the big ramp of unified payments and getting the back book onto payments is behind us. There's still some opportunity there for sure because we're only 40% penetrated as at April. But the majority of the growth that you're going to see is going to come from very high margin software, which as you've seen from us comes in over 80%. And so we actually expect the gross profit growth to outpace top line growth. And as consistent with what we said at Capital Markets Day, overall gross profit growth, expect to be growing at a CAGR of 15% to 18% between now and fiscal twenty twenty eight. And so you should expect to see the 13% we outlined in Q1 to continue to grow every quarter into F twenty twenty six and even F twenty twenty seven and beyond.
43m 59s
Thank you. Thanks for your questions. Our next question is from the line of Andrew Baugh with Wells Fargo Securities. Your line is live. Hey. Thanks for taking the question. You know, in the release, you talked about product and technology development, investments being up I think, 35%. This year. Can you help us understand better understand the the the places that you are investing maybe a finer point on on what is being enhanced and how that translates you know, to your confidence in the software uptake over time? Yeah. So, thanks for the question. You know, these are these are the two best, platforms for retail and hospitality that didn't like to use history. As you've seen from the last quarters, we've had a tremendous amount of product velocity adding software modules and software value on our retail flagship and on our hospitality flagship. And of course, products play extremely well. In our two growth markets, Noam Retail and EMEA Hospital. Our focus is for retail are to go deeper into and add software value for our key eight verticals, make sure that we are going deep into inventory management, deep into connections to the brands that those verticals rely on.
45m 24s
And increasing the online presence aspect for these businesses, are many are physical first. On the hospitality side, front of house, back of house and administrative tools, have an incredible suite of products that works seamlessly together. So enhancing that and making sure that that that is a great fit for hospitality businesses that are pan European. We are the best pan European solution for hospitality businesses with big ambition. So that's sort of the focus. But as you see in Q4, delivering a lot of value along those themes very, very aggressively.
46m 5s
That's great. And maybe if you could just get a refresh on know, the mix between the flagship businesses, retail and restaurant, And how should we think about the growth across each of those verticals into '26 It it is one kind of trending stronger than the other? And and how do you think that progresses?
46m 29s
Yeah. I'll I'll I'll take that one. Well, from a mix perspective, retail is about 60% of our hospitality is about 40%. As you know, our new focus is our new strategy focus on focuses on Noam retail. And EMEA hospitality. We are when we talk about outbound, the 50 reps that we're hiring in the year, that does contemplate both retail and hospitality. They're different outbound motions, but they're outbound reps nevertheless. So when we think about fiscal twenty six and beyond, that sixty-forty mix stays relatively the same from a retail versus hospitality perspective. And when we think about the growth markets, we are expecting gross profit to grow at a CAGR of 20% to 25%. As we outlined at Capital Markets Day, And from an overall business, the gross profit growth to be in the 15% to 18%. And so we are maintaining that guide.
47m 34s
So sounds pretty balanced. Thank you. Thank you. Our next question is from the line of Dominic Ball with Redburn Rothschild and Company. Your line is live. Hey, guys. Thank you very much for the question. And I think the guidance and the cadence is quite clear. When it comes to Lightspeed Capital, this offers quite attractive gross margins. Can you sort of remind us or clarify how this is currently funded? Is it on balance sheet? How much of your cash balance are you sort of comfortable deploying here? And looking forward, would you ever consider a forward flow arrangement?
48m 14s
Hey, Dominic. Thanks for the question. Yeah, Lightspeed Capital is fully funded on our balance sheet today. As you can imagine, the economics are quite a lot different when we off balance sheet. The economics are very favorable today. We have a take rate of between 12% to 15% on these merchant cash advances and our payback is six to seven months. So from an APR perspective, the take rate is well 20%. And given that we've got pretty good insight into our customers, into their cash flows, into what folks in their demographic are doing from a sales perspective and we pay ourselves back through Lightspeed Payments we actually have a very low default rate in low single digits. Percent. And so for today, that is funded on our own balance sheet. We have $560,000,000 almost of cash still on the balance sheet. And we're nearing cash flow breakeven. So from a cash flow perspective, we can afford to keep it on our balance sheet. However, from a risk perspective, there is a point at which we will contemplate pulling this off the balance sheet or at least a part of it. But for now, if I look at the end of Q4, we have about 69,000,000 outstanding at the end of the quarter, so still very palatable from where we sit.
49m 38s
As that grows, we're definitely looking at how we off balance sheet that and still keep some of the economic for ourselves.
49m 47s
Yeah. That makes sense. Seems like it's plenty of sort of growth there. And just one on maybe Lightspeed Payments Adoption. When That's Being Expanded To Europe, has this adoption curve been a little bit different to The U. S? And is there a higher or lower structure ceiling to Lightspeed payments in the European markets?
50m 7s
Thank you for the question. A payments in Europe from an attach rate perspective, is as strong as we see in North America.
50m 16s
So when we go to market in our key markets in Europe, we really lead with the combined solution. Of software and payments. And we're really pleased to see that our attach rate remains as high as what we've seen North America.
50m 32s
Alright. Thank you, guys. Thank you for your questions. Our next question is from the line of Thanos Moskopoulos with BMO Capital Markets. Your line is live. Hi, good morning.
50m 46s
With respect to same store sales growth, can you provide some color in terms of the dynamic across the different end markets and verticals? How that's being impacted by the macro?
50m 58s
Yeah.
50m 59s
Hey, Thanos. Thanks for the question. We did see same store sales pressure pretty much across the board when we think about high level geography, and vertical. Of course, there were some, you know, same store sales There was more softening in certain verticals, in particular, North America hospitality, which, as you know, is a very highly penetrated vertical. And so when we see softness in a highly penetrated vertical, that impacts our overall revenue. The impact is quite significant. But I would say outside of North America hospitality, which is where we saw the highest level of softness, we did see softness in retail North America and European hospital as well. That said, however, trends did begin to stabilize in April and in early May. And while it's too early to call a rebound, we're really not seeing further deterioration either. But as I said earlier, we did plan for fiscal twenty twenty six quite conservatively, so that we hit our guidance despite the macro uncertainty. Great. And with respect to software ARPU, obviously, a combination of your pricing adjustments and and, I guess, some expansion and upsell. I I know you've recently some new modules recently. So maybe just speak to what you're seeing from an upsell perspective and, the trajectory you're anticipating on that.
52m 20s
Over the coming year? Yes. Thank you for the question, Thanos. I'd say overall, we're really pleased with the progress we're making here. We've seen significant improvement from where we were in the first half of the fiscal year. And the momentum that you see in the back half, expect to see continue in fiscal year twenty twenty six. From a software module perspective, the new modules that we released on the hospitality side, KDS, table side devices, what we have upcoming on the on the benchmark and trend side. Expect that this will continue to be very strong from an attach rate perspective. Then similarly on retail, whether if it's insights or the evolution of our mobile scanner to become [indiscernible] We also see significant improvement there and that's contributed to our softer ARPU growing 11% year over year in Q4 So we're really pleased with the progress there. And as you highlighted, we had some core to customers that had to be adjusted from a pricing perspective. Those ways have gone through now. And we're pleased with the progress on front as well. So what you can expect from us is continued momentum going into fiscal year twenty six from that point of view.
53m 34s
Great. I'll pass the line. Thank you.
53m 37s
Thank you. Our next question is from the line of Tien Tsin Huang with JPMorgan. Your line is live.
53m 46s
Hey, thank you so much. I'll ask my two questions just together. The 35% more in product development, is that just investments in people or or tools, DAX? I heard the the detail across the two platforms. So just want to understand what what exactly you're investing in and and if that continues, on a run rate basis. And just on the location growth side in the growth markets, is that any change in where that's coming from? Is it more of new business starts? Are you seeing more flips of legacy? Any interesting call outs as you as you grow your go to market?
54m 16s
Thanks.
54m 18s
Yes. On product development, it is increasing headcount on both our retail and development teams. So that we can have more squads to be building out different product modules and and and and enhance the product.
54m 33s
On locations.
54m 35s
Yeah. As you know, we guided at our Capital Markets Day customer location count growing at 10% to 15% from a CAGR perspective. We're really excited for that and we're already seeing some really strong momentum in that direction. Answer your question specifically, it continues to be about a third, a third, a third. So a third are brand new businesses opening going with us. About a third are switching from legacy and about a third are switching from more modern platforms that are merchants that are, our prospects have outgrown. Because too basic in in functionality and they need something more robust that Lightspeed can provide. So we continue to see that trend.
55m 15s
Great. Thank you.
55m 17s
Thank you.
55m 19s
Our next question is from the line of Josh Baer with Morgan Stanley. Your line is live. Thanks for the question. One on strategy, one quick one on financials. Just on strategy, I was hoping you could talk through some of the advantages of being a pan European when it comes to EMEA hospitality. Just wondering any sense for the number of restaurant groups that would fit into the Pan European category versus you know, more country specific or independent?
55m 54s
Yeah. We really see. Thank you for the question, Josh. We see the diversification that Lightspeed has playing in multiple markets as a key strength for us. And specifically in hospitality in Europe, as you heard from us at Capital Markets Day, we see the revenue opportunity to be in the $3,000,000,000 range from a TAM perspective in the direct markets where we operate today. With an additional $2,000,000,000 in revenue for adjacent countries that we intend to expand into. The coming years. So there's a lot of TAM to capture for us. And we really have an amazing product in Europe in hospitality. It is the best product for the market And we're hearing it from our customers, we're hearing it from our reps reps and so we're really stepping on the gas there. So quite excited for the revenue that we can we can tap into in the coming years.
56m 50s
Okay. Got it. And just on the financial side, I was hoping we could talk about free cash flow for this year. Maybe a review of the gap between EBITDA and free cash flow in fiscal twenty twenty five and how what we should expect for fiscal twenty twenty six? Thanks.
57m 9s
Yeah. Thanks for the question Josh. When we think about free cash flow, you saw nearing breakeven in fiscal twenty twenty five, and you should see that improve even further in fiscal twenty twenty six. As you mentioned, it's really driven by the majority of the items driving the improvement. In adjusted EBITDA where we're forecasting we're going from about $54,000,000 in fiscal twenty twenty five to about $70,000,000 in fiscal twenty twenty six. And so we do expect to see the free cash flow of fiscal twenty twenty five of minus $11 improve. With respect to the items that are driving the difference, it's the typical working capital type items, prepayments, accounts payable and receivable obviously, they don't hit the P and L at the same rate as they hit the cash flow. We have other things like taxes on the big the large buyback that we did recently. But it's nothing out of the ordinary that are reconciling items between adjusted EBITDA and free cash flow. And we do expect with the improvements in adjusted EBITDA, that we're going to near breakeven or better in fiscal twenty twenty six.
58m 23s
Our next question is from the line of Richard Tse with National Bank. Your line is live.
58m 30s
Hi. Good morning. This is Mike Stevens on for Rich. Just wanted to revisit. You guys have talked in the past about new order payments opportunity and the volume that's running through that platform. Just wondering if we could revisit that and how efforts are going to monetize that. And are there any, challenges in in doing so on that platform?
58m 54s
Hey, Mike. Thanks for the question. I'll take that one. You're right. There is a pretty large payments opportunity for the B2B volume that we have today. There's about $10,000,000,000 of B2B volume that flows through our new order system that's not in the $90,000,000,000 of GTV that we talk about for Lightspeed. We have started the monetization, on a small scale. I would say today, it's low single digit millions in terms of revenue. And we expect that's gonna be growing in fiscal twenty six and beyond. So still at the beginning of that journey, but we have started the monetization, and and we expect that to continue. In the coming quarters.
59m 34s
Okay. Great. And then, just wanted to dig in a little further on the Lightspeed cap You you kinda touched on some of the puts and takes on that business. What you know, it generated about 35,000,000 this year. What can we maybe expect in, you know, near term as as a target for that business? I know I think you guys are launching some other high margin financial products as well, but yeah, any kind of near term growth, targets that that we can gather?
1h 6s
Yes. Thanks, Mike. I'll take that one. So when we think about Lightspeed Capital and what's baked in fiscal twenty six, around 30% or more growth on the top line that comes in at about 95% gross margin and quite a bit of that falls down to the EBITDA line. There is a lot of opportunity. We can move faster if we wanted to. When we look at our peers, for example, they're giving out one of their GTV. In merchant cash advance. Lightspeed is well below that. 1% of our GTV would be almost $1,000,000,000 in merchant cash advance. So when we think about the opportunity, it's there. It's just that in this macro, we want to move carefully on a product like capital. Like I mentioned earlier, our default rates are in the very low single digits. And we want to keep it there. So while there is a lot of opportunity, what we are baking into our fiscal twenty twenty six guide is about 30% growth on the top [indiscernible] Okay. Excellent. Appreciate that insight.
1h 1m 6s
Thank you.
1h 1m 7s
Our next question is from the line of Raimo Lenschow with Barclays. Your line is live.
1h 1m 14s
Hey, thanks for squeezing me in. Two quick questions. First of all, what you obviously, as you mentioned, you're focused on like retail U. S, hospitality Europe. But you still have all of the other businesses there. Like, what is your what are your planning assumptions in terms of you know, you know, stability rate of decline, etcetera, for the the non focused parts that question one. Question two is on the the 50 sales count. Obviously, there kind of was an option that was available to you, like, before. Like, how do we go and did we discover, like, the sales guys are so important? And and how did you come up with that number that have 50 if they're kind of so amazing? Why not hire more? On that one? Thank you.
1h 1m 58s
Thanks, Raimo. I'll take the rest of the world market and then I'll hand it over to JD to talk about outbound. So our non core areas do remain important for us. We call them the rest of the world market. We're not prioritizing them where growth capital is concerned. But ultimately, we're running them for efficiency. We're running them in a more streamlined way. We have very happy profitable customers. In that Rest of the World portfolio, and we've optimized our team to support those regions and verticals so that these customers continue to be taken care of. These markets offer still lots of upside or growth opportunity from a net retention perspective. For example, we're still rolling out capital in those markets. Payment penetration is still lower in those markets. Payments does come in at a 30 plus percent margin in those markets as well. And we are happy with the progress there. Revenue in the Rest of the World markets grew. Year over year. Our payment penetration grew year over year. Our GPV as well grew 22% year over year. So again, very profitable markets for us. We're just not focusing on those markets from a growth perspective, but we are growing that customer base through net retention and it's going well.
1h 3m 15s
As per outbound, thank you for the question. We dive into that in our presentation at Capital Markets Day. But to summarize, fiscal year twenty twenty five for us was really the first year where we did held down at scale and we're really happy with the results that we saw. As you pointed out as well in your question. That's why we're really doubling down there. We're effectively essentially tripling the sales force on that side in that that funnel or in that motion. And if you look at our progress in Q4, it was a record quarter from a bookings perspective. In outbound March. As we highlighted in our prepared remarks was really, really strong. So we're really happy with the momentum. As far as why Hire why not hire more than that, there is about a six month ramp from hired to full production from our outbound reps. And so while we see really strong unit economics, we see bookings relative to OpEx being very strong and stronger than all our acquisition motions. We also want to be conscious that there is a ramp, right? So we're taking that into account in our model and into our build for the year.
1h 4m 23s
But what you can expect from us going forward is that you'll see and you'll continue to see outbound becoming more and more of a driving force as far as how we acquire customers. And why we like outbound as well is that we're able to be very targeted When we acquire customers via outbound, we acquire the right customer, the customer that's generating the right GTV, the right unit economics that are a great fit for our product. Churn is lower when we go through outbound. So for all of these reasons, we're really pleased with the progress that we're seeing here. And I think as per why we didn't do it before, it's really the evolution of our product. Our product has really matured as Dax highlighted on both retail and hospitality and allows us now to offer a full suite that really caters to the more sophisticated retailers and restaurateurs out there and to really focus on those retailers and restaurateurs outbound is the way to go. So it's really all these things are kind of to fruition and are clicking for us and now we're doubling down on it.
1h 5m 23s
Perfect. Thank you.
1h 5m 25s
Thank you for your questions. And we have a final question for today from the line of Timothy Chiodo with UBS. Line is live.
1h 5m 34s
Great. Thank you. I think all the answers, Asha, around capital were really, really helpful. A minor follow-up there. It looks like in the quarter, capital revenue growth decelerated from 90% into the high 20s I'm not mistaken. And I think it was really it was helpful that you gave the implied guidance for capital next year would be a little bit of an acceleration. Was there any kind of nuance around this quarter's capital revenue growth either just lapping dynamics or something else that would have made the growth decelerate to that extent this quarter?
1h 6m 5s
Yes, for sure. Thanks, Tim. Thanks for the question. As we talked about, we did see the macro softness in Q4 on same store sales and that directly impacts capital revenue. As you know, capital revenue basically comes from the collections that we make from our customers sales. So we get paid back through Lightspeed Payments. So when our customer same store sales are declining, or lower in terms of GTV, versus the prior quarter, we get paid on a slower pace and that directly impacts capital revenue. As I mentioned though in April and May, we started to to see the same store sales stabilize. So we should see that capital revenue come back in the first quarter.
1h 6m 48s
Okay, great. Thank you. Okay, that really helps.
1h 6m 50s
Yeah.
1h 6m 51s
I I was just wasn't clear to me that that would explain going from 90 to high twenties, but I was wondering if there was anything else there. But it sounds like no, but I appreciate the answers. Thanks.
1h 7m 2s
Thank you for your questions. And ladies and gentlemen, that will conclude our Q and A session for today's call. I'd like to turn it back over to Gus for any closing comments. That's it. Thanks for joining us this morning. The IR team will be around if anybody has any further questions And we look forward to speaking to you at our next conference call. Thanks, everyone.
1h 7m 21s
Thank you.
Key Insights
Fiscal 2025 was a milestone year for Lightspeed, surpassing $1 billion in annual revenue for the first time (up 18% YoY), with adjusted EBITDA rising from $1.3M to $53.7M and gross margin reaching 44% in Q4.
The company executed a strategic pivot, focusing on North American retail and European hospitality, scaling outbound sales (targeting 150 reps by year-end), and investing 35% more in product development for FY26 to drive innovation and ARPU growth.
Shareholder returns were prioritized, with approximately 18.7 million shares (about 12% of shares outstanding) repurchased over the last 12 months for $219M; $200M remains authorized for further buybacks.
FY26 guidance: total revenue growth of 10–12%, gross profit growth of ~14%, and adjusted EBITDA of $68–72M; Q1 guidance: revenue of $285–290M, gross profit growth of ~13%, and adjusted EBITDA of $14–16M.
Payments penetration reached 40% in April and is expected to continue rising; software ARPU grew 11% YoY in Q4, and Lightspeed Capital is expected to grow top-line by ~30% in FY26 at ~95% gross margin.
