Lightspeed Commerce Inc.

Joining me today are Dax Silva, Lightspeed's founder and CEO, Asha Bhashani, our CFO, and J.D. St. Martin, our president. After prepared remarks from Dax and Asha, we will open it up for your questions. We will make forward-looking statements in 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 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 second quarter fiscal 2026 results presentation available on our website, as well as in our filings with U.S. and Canadian securities regulators. Also, our commentary today will include adjusted financial measures, which are non-IFRS measures and ratios. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website, on CEDAR 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. And with that, I will now turn the call over to Dax.

Thank you, Gus, and good morning, everyone. I'm thrilled to announce that Lightspeed had another very strong quarter. Revenues, gross profit, and adjusted EBITDA came in above our previously established outlook. This marks the second consecutive quarter where we have exceeded revenue and gross profit outlook metrics. In addition, we delivered positive free cash flow, and saw our GTV and location growth accelerate as we continued solid execution of our strategy. Our decision to focus on our two core growth engines, retail in North America and hospitality in Europe, is clearly working, and we are seeing fantastic momentum. From product development to landing new business, our teams are delivering at record pace. To deliver on our strategy, we are harnessing the latest advances in AI As an example, this quarter we released a host of new AI-driven products and features to enhance our customers' omnichannel capabilities. We are already seeing strong adoption across thousands of use cases. Additionally, by increasingly integrating AI tools in our go-to-market efforts, we are seeing sales productivity improvements, such as doubling the number of connected calls from our outbound sales reps. We continue to leverage AI thoughtfully to drive revenue, improve products, and reduce costs. I want to begin today by comparing this quarter against the three strategic priorities we laid out at our Capital Markets Day. As a reminder, those priorities are growing customer locations in our growth engines, expanding subscription ARPU, and improving adjusted EBITDA and free cash flow. On growing customer locations, in Q2, customer locations in our core growth engines North American retail, and European hospitality were up 7% year-over-year, an acceleration from 5% last quarter, with approximately 2,000 net new customer locations added in the quarter. This acceleration clearly demonstrates that Lightspeed is growing in markets where we have a proven right to win. As a reminder, our goal is a targeted three-year customer location CAGR of 10% to 15%, and we are on pace to meet that goal. Total customer location count, which includes all of our markets, was net positive again this quarter. Expanded outbound sales efforts, increased investment in vertical brand marketing, and more effective inbound spending have helped drive location growth, particularly in our growth engines. Outbound bookings in our growth engines nearly tripled year over year. Since the start of the fiscal year, we've grown our outbound team to approximately 130 fully ramped reps within our growth engines. each now carrying a full quota. This investment is paying off. Our outbound motion continues to drive highly targeted acquisition of our ideal customers with strong unit economics. We will keep allocating resources toward outbound to capitalize on this proven engine of growth. During the quarter, we continue to expand our presence at trade shows, a great source of lead generation for ICP customers. Our new order offering gives us a unique position within the retail environment and participating in these events gives us an opportunity to both demonstrate our strong product offerings and communicate our vision for new order and our wholesale network. We're also continuing to host our own signature product innovation events where we gather customers to showcase recent product launches and industry insights. Coming up, we'll be hosting Lightspeed Edge in Paris on November 24th for hospitality customers and New York City on January 12th for our retail customers. All of these efforts continue to have a halo effect on our inbound funnel as we increase our visibility with our ideal customers through trade shows, outbound targeting, and lightspeed branding on our terminals at local restaurants in Europe and retailers in North America. We had many notable customer wins this quarter. In retail, we added 40 location Crocodoodle which operates pottery painting franchises across Canada. Benson's Pet Center, with nine locations in New York and Massachusetts. Within New Order by Lightspeed, we extended our partnership with Nordstrom and added marquee brands such as Carhartt and Steve Madden. And in golf, we signed On Top of the World Communities, with three restaurants and two golf courses in Candler Hills, Florida. In hospitality, we added the two Michelin star restaurant Hirschen, and Salzburg, Germany. The Beckford Group focuses on unique premium hospitality experiences across their six locations in the southwest of England. And with two locations in Antwerp, Belgium, we welcomed Da Giordani, one of the area's well-known Italian restaurants. On driving software revenue in ARPU, Q2 software revenue grew 9% year-over-year, and software ARPU increased 10%. Growth in our key markets is fueling software revenue as expanding location counts and targeted outbound efforts attract larger, more sophisticated customers who tend to adopt higher-end plans. This momentum is further supported by our steady release of new innovative features on our flagship offerings. In the quarter, we released several new features. In retail, we launched multiple AI-powered tools designed to dramatically improve our merchants' online presence with minimal cost or effort on their part. We launched the LightSeed AI showroom designed for physical retailers who wanted a compelling online presence without the added time commitment of running an e-commerce store. LightSeed's AI agent takes product data hosted within the LightSeed platform and delivers a custom branded website and catalog to help drive store traffic. Originally released back in March in beta, LightSeed's cutting-edge AI-driven website building tool is now available to all customers who are looking to offer a full e-commerce experience using real-world examples, and the tool builds a fully integrated professional-looking online store with speed and ease. And we launched AI product descriptions. This powerful new tool significantly streamlines manual workflow, adding new products to e-commerce sites. Retailers can customize descriptions by adding specific instructions for tone, style, and length to ensure brand consistency. Since August, this description and formatting tool has been used to unique product descriptions. In addition to these AI-powered tools, we were very excited to launch New Order Marketplace. Currently, our retailers use New Order to connect directly to each of their brands individually, allowing them to search within that brand's product catalog. However, our retailers have to conduct searches brand by brand. With Marketplace, retailers can search for specific products, colors, styles, or sizes, across multiple brand catalogs simultaneously to help them discover new products and better curate their offerings. Currently in beta, Marketplace will be launching soon to all eligible new order customers. In hospitality, we launched Integration Hub. The hub enables our customers to easily discover, connect to, and start using over 200 third-party applications within the Lightspeed ecosystem. We've seen strong initial reception, with almost a third of our flagship hospitality customers interacting with the hub since its launch. Adding on to the already robust capabilities available to restauranteurs through LightSeed's AI-powered benchmarks and trends, our latest update adds new visual layers to the sales performance chart, highlighting best and worst days relative to the market and providing drill-down views for each sales metric, helping merchants make data-driven pricing and operational decisions. Benchmarks and trends remains the anchor feature for our top-tier plan within hospitality. In August, we launched Lightspeed Capital in Switzerland, where we saw strong and immediate demand from our Swiss customers. Finally, we launched Time Menus to bring automation to multi-menu setups, eliminating the need for manual workarounds. We also enabled Lightspeed Order Anywhere to sync with the restaurant's Google Business profile, ensuring a consistent online presence and improving discoverability. By narrowing our focus to our growth engines, we've enabled our development teams to become far more productive, and I'm thrilled with the pace of innovation we are seeing on our two flagship offerings. I want to take a moment to share a glimpse of what's next for Lightspeed. As you have seen with several of our recent product launches, we've been deeply investing in AI as a meaningful way to empower our customers and redefine how they run their businesses. I'm thrilled to preview our upcoming innovations. Lightspeed AI, a new way for merchants to access insights and make decisions directly within their POS. Think of this as your AI assistant with agentic capabilities. Our AI acts as a trusted partner to help our customers find answers, uncover trends, and act faster than ever before. Custom-built to serve our retailers' and restaurateurs' needs. This is the next evolution of Lightspeed's AI journey. building on the success of products like AI showroom and benchmarks and trends. And it's already being tested by a select group of customers. We can't wait to share more in the coming months as AI becomes a foundational part of how we help businesses thrive. On expanding profitability, finally, our third strategic priority was to expand profitability. And in this quarter, we did exactly that through expanded margins and improved cash flow. LightSeed further strengthened its software gross margins to 82%, and transaction-based gross margins reached 30%, with both improving year-over-year and from the previous quarter. Adjusted EBITDA of $21 million increased 53% year-over-year. Importantly, we also saw improved cash flow, delivering adjusted free cash flow of $18 million, up significantly from $1.6 million in the same quarter last year. Back in March, at our capital market stage, we laid out a bold strategy with three-year financial goals. We are now over two quarters into that period, and I believe our strong results are evidence that we are well on our way. Within retail, our large customers are complex retailers that need sophisticated solutions to help them order, manage, and turn over their inventory. These customers need more than basic software to run their businesses. They need a light ERP solution, which is exactly what we offer. We believe no other cloud POS vendor can match the feature set within LightSuite retail. In addition, we stand apart with the new order LightSuite integration because with new order, LightSuite's retail POS has wholesale built right in. The end result is an unmatched ordering workflow and a flywheel effect where more brands bring in more retailers and more retailers bring in more brands. Within European hospitality, I am confident that we have the superior product offering We are now complementing that strong offering with a go-to-market motion that is becoming best in class. In addition, regulatory requirements involving fiscalization are a barrier to new entrants into that lucrative market. We have a formula that is working, and we believe we will continue to excel in this region. I will let Asha take you through our financials before making closing comments.

Thanks, Zach, and welcome, everyone. Lightspeed had an exceptional second quarter. with our key financial metrics and KPIs surpassing expectations. Our results are evidence that our product innovation, our aggressive outbound strategy, and our strategic focus we embarked on are working. We are delivering in the areas that matter most, which sets us up well for the long term. Before I take you through the financials, I would like to highlight some key trends in the quarter that I found very encouraging. First, and perhaps most importantly, We're seeing a tremendous impact from our strategy to focus on our growth markets of North America retail and European hospitality, as you heard from DAX. Software revenue in these markets increased 20% year-over-year. GTV was up 15% year-over-year. Payments penetration was 46%, up from 41% last year, and customer locations were up 7% year-over-year versus 5% in the previous quarter. These markets make up over 65% of our total consolidated revenue. When we isolate the metrics in these markets, they reveal the true competitiveness of our offering and the strength of our platforms. We are really excited about the accelerated growth we're seeing in these markets, especially since we are still early in our transformation. Second, even with aggressive investments in products and go-to-markets, The company's total profitability and cash flow metrics continue to improve. Growth margins and adjusted EBITDA showed great progress, and our relentless focus on driving profitable growth helped us deliver positive free cash flow of $18 million in the quarter, up from $1.6 million a year ago. And we expect to generate break-even or better free cash flow for the full fiscal year, a significant milestone for Lightspeed. As usual, I will walk you through a detailed look at our financials and then provide our Q3 and fiscal 2026 outlook. Total revenue grew 15% ahead of our outlook, driven by a growing location count, software ARPU expansion, and increasing payments penetration. Revenue growth was primarily generated by our growth markets of North America retail and European hospitality. as more and more customers move on to our platforms and attach new modules. In addition, we benefited from improving same-store sales thanks to a more stable macro environment. Software revenue was $93.5 million, up 9% year-over-year, with software ARPU up 10% year-over-year. Software ARPU increased due to our outbound teams attracting larger customers, new software releases, and the benefit of price increases we implemented last year. Transaction-based revenue was 215.8 million, up 17% year-over-year. Gross payments volume grew 22% year-over-year, and capital revenue grew 32% year-over-year. GPV as a percentage of GTV came in at 43%, up from 37% in the same quarter last year. Overall, GTV grew by 7% to $25.3 billion, and total average GTV per location continued to climb as we continued to sign more high-value customers. GTV in Europe benefited from favorable FX rates as the U.S. dollar weakened against local currencies. Total monthly ARPU reached a record $685, up 15% year over year. driven by both higher software and payments monetization. ARPU grew across both our growth and efficiency markets, with growth markets outpacing the overall average. And as those locations grow, we expect a continued positive impact on overall ARPU. With respect to our efficiency markets, our goal is to maintain the revenue base through additional module attachments and expansion of financial services. As an example, This quarter in Australia, we launched instant payouts on light-speed payments for hospitality merchants. This high-margin offering allows merchants to receive their daily sales the very same day, including weekends and holidays. There also continues to be meaningful opportunities to grow payments revenue in these markets, as payments penetration is at 36%, well below the 46% penetration in our growth markets. In the quarter, we were able to keep total revenue close to flat year over year. With respect to profitability and operating leverage, total gross profit was strong, growing 18% year over year, exceeding both 15% revenue growth and a prior 14% outlook, driven by strong top-line performance and expanding gross margins in both subscription and transaction-based revenues. Total gross margin was 42%, up from 41% last year, despite transaction-based revenue increasing to 68% of total revenue from 66% last year. Hardware gross margins declined this quarter due to strategic discounts and incentives to drive new business, as well as free hardware provided to support customer transitions to our unified payment and POS offerings. We delivered strong software gross margins of 82%, up from 81% last quarter and 79% a year ago. This is largely driven by increased cost efficiency. We are increasingly using AI to reduce the cost of support and service delivery. As an example, AI now resolves over 80% of inbound chat interactions on our flagships. This has allowed us to significantly reduce headcount in support. which is showing up in our expanded gross margins in software. Gross margins for transaction-based revenue were 30%, up from 27% last year. This improvement reflects growth in our capital business and in payments penetration in our international markets, where margins exceed those in North America. 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 28% year-over-year. Total adjusted R&D, sales and marketing, and G&A expenses grew 13% year-over-year. This includes meaningful investments we are making in field and outbound sales, as well as product innovation in our growth engine. Adjusted EBITDA in the quarter came in at 21.3 million, increasing 53% from 14 million in Q2 last year, driven by continued successes from our strategic shift and our focus on AI and automation to accelerate operating efficiency. As a percent gross profit, adjusted EBITDA was 16%, approaching the longer-term 20% target we outlined at our capital markets day. I'm very happy to report adjusted free cash flow of $18 million in the quarter. Thanks to our improving profitability and disciplined working capital management, we were able to deliver positive free cash flow despite our accelerated outbound strategy and increased investment in R&D. Although free cash flow will vary quarter by quarter, we expect to deliver break-even or better adjusted free cash flow for the full fiscal year. We continue to actively manage our share-based compensation and related payroll taxes, which were $17.4 million or 5% of revenue for the quarter versus 19.5 million or 7% of revenue in the same quarter last year. With respect to capital allocation and our balance sheet, we ended Q2 with approximately $463 million in cash, an increase of approximately $15 million from last quarter. Approximately $200 million remains under our broader board authorization to repurchase up to $400 million in Lightspeed shares, and we continue to be opportunistic in evaluating further share repurchases. Total shares outstanding in the quarter were down by 10% versus the same quarter last year, due primarily to the $179 million in shares repurchased and canceled over the last 12-month period. Aside from potential buybacks, Our largest use of cash will be growing our merchant cash advance business. There are currently $107 million in MCAs outstanding, and we believe we can continue to grow this balance over time. With that said, we're also running the MCA business more efficiently, using less capital this quarter versus the same quarter last year, despite growing revenue by 32%. This is due to our successful efforts to reduce payback periods to seven months. With respect to M&A, we remain opportunistic in the evaluation of small token acquisitions to help accelerate product development, but large-scale acquisitions are not a strategic priority for us. Our balance sheet remains healthy and positions us well as we continue our strategic focus. Now, turning to our outlook. For modeling purposes, I would like to highlight a couple of factors. First, Q3 GTV is generally flat to slightly down from Q2 due to seasonality, and we expect similar performance this year. Although Q3 benefits from the retail holiday season, in Q2 we have strong performance in European hospitality as well as golf. In terms of software growth, in Q3 we will lap the price increases implemented last year. As a result, we expect software growth to slightly moderate for the second half of the year. Looking ahead, we remain confident in our ability to execute against our go-forward financial outlook shared at our capital markets day in March. As a recap, we targeted a three-year gross profit CAGR of approximately 15% to 18% and a three-year adjusted EBITDA CAGR of approximately 35%. Given our strong performance to date, We are raising our outlook for the full fiscal year. For the third quarter, we expect revenue of approximately $309 to $312 million, gross profit growth of at least 15% year over year, and adjusted EBITDA of approximately $18 to $20 million. For fiscal 2022, based on a strong first half of the year, we are increasing our outlook for the year. We expect revenue growth of at least 12% year-over-year, gross profit growth of at least 15% year-over-year, and adjusted EBITDA of at least $70 million. With that, I'll turn the call back to Dax.