Lightspeed Commerce Inc. Q4 FY2026 earnings call

- Strategic Transformation Progress * Lightspeed completed the first year of its 3-year transformation plan focused on prioritizing Growth Engines (North America retail, European hospitality), and delivered against all Capital Markets Day 2025 commitments in FY2026. * Divested the non-core Upserve U.S. hospitality product line post-fiscal year-end, creating a more streamlined, focused business aligned to high-conviction growth opportunities. * Updated the executive leadership team to support the next growth phase: added Gabriel Benavides as CRO, Leslie Martin as Chief Strategy and Transformation Officer, and Bhawna Singh as CTO.

- Customer Location Growth * Q4 marked the fourth consecutive quarter of accelerating net location growth, with Growth Engines hitting 11% year-over-year growth (3,200 net new locations), reaching 150,000 total company-wide customer locations. Growth came from expanded outbound field sales motions in European hospitality and new remote outbound motions for North America retail, with the vast majority of net new locations from new logos.

- Product Innovation & AI Differentiation * Launched multiple new AI-powered features: AI-driven brand recommendations for the Lightspeed wholesale marketplace, AI OCR for automated product data entry, AI menu imports for restaurants, and a new promotion engine for Order Anywhere. Over 80% of customer support tickets are now resolved by AI, driving meaningful cost reductions. * Strong adoption of new product features: ~30% of restaurant customers use Lightspeed Pulse, ~20% of target restaurant locations have adopted Lightspeed Restaurant AI, and use of retail insights has tripled year-over-year. * Lightspeed holds a unique competitive advantage for AI due to its proprietary, end-to-end transaction data across wholesale, retail, hospitality and payments, enabling differentiated AI workflows that general-purpose tools cannot deliver. AI features will be included in higher-tier plans to drive ARPU growth, and higher customer success from AI also increases payment and capital revenue.

- Financial & Operational Efficiency * Achieved positive full-year adjusted free cash flow for the first time in FY2026, demonstrating disciplined, profitable growth. AI-driven automation has reduced operational costs, with software gross margins improving, and transaction-based gross margins up 200 basis points year-over-year to 31%.

- Capital Allocation * Ended Q4 with $454 million in cash; the board approved a new normal course issuer bid for up to 8.5 million shares, with ~$200 million remaining in authorized share repurchase capacity. Prioritizes growing the high-margin Lightspeed Capital program opportunistically, and only pursues small tuck-in acquisitions (large-scale M&A is not a priority).

Lightspeed operates two core segment groups: Growth Engines (retail in North America, hospitality in Europe) and Efficiency Markets. For Q4 FY2026: 1. Growth Engines: Total revenue grew 24% year-over-year, software revenue grew 9% year-over-year, GTV grew 19% year-over-year, net new customer locations added 3,200 for an 11% year-over-year ending location increase, and payment penetration reached 46%. This segment contributes approximately 75% of total company revenue post-Upserve divestiture, and is targeted to grow to 80% of total revenue in FY2027. For full-year FY2026, Growth Engines added 9,400 net customer locations (11% year-over-year increase), total revenue grew 24%, software revenue grew 15%, and GTV grew 15%. 2. Efficiency Markets: Overall Q4 FY2026 revenue was flat year-over-year; after adjusting for the Upserve divestiture, revenue grew modestly. Payment penetration increased to 36% (up from 33% year-over-year), remaining below the company-wide average. 3. Company-wide Q4 FY2026: Total revenue was $290.8 million, up 15% year-over-year. Software revenue was $93.3 million, up 6% year-over-year. Transaction-based revenue was $185.3 million, up 17% year-over-year. Capital revenue grew 73% year-over-year, with merchant cash advances (MCA) outstanding growing 12% year-over-year to $118 million. Total gross profit was $129 million, up 15% year-over-year, with gross margin of 44%. Adjusted EBITDA was $15.1 million, up 17% year-over-year. Full-year FY2026: Total adjusted EBITDA grew 35% year-over-year to $72.5 million, with positive adjusted free cash flow of $18.2 million, and gross margin expanded 100 basis points to 43% company-wide.

- 3-Year (FY2025-FY2028) Target Updates (all adjustments reflect only the Upserve divestiture, no changes to underlying core growth targets): * Consolidated gross profit CAGR remains 15%-18%; adjusted EBITDA as a percentage of gross profit is still targeted at 20% by FY2028, with adjusted EBITDA CAGR now projected to exceed 50% (up from 35% originally). * Gross margin target is updated to 43%-46% (from 42%-45% originally). * FY2028 adjusted free cash flow is projected at ~$95 million, down slightly from the original $100 million target. * Growth Engine targets are unchanged: gross profit CAGR of 20%-25% and location CAGR of 10%-15% through FY2028.

- Full-Year FY2027 Guidance: * Total revenue: $1.225 billion to $1.265 billion, representing 12%-15% organic year-over-year growth, with acceleration expected through the year. * Total gross profit: $565 million to $585 million, 12%-16% organic growth. * Adjusted EBITDA: $75 million to $95 million.

- Q1 FY2027 Guidance: * Total revenue: $305 million to $350 million, 10%-14% organic growth. * Total gross profit: $136 million to $141 million, 10%-14% organic growth. * Adjusted EBITDA: $15 million to $20 million.

- Growth outlook: Location growth is expected to remain within the 10%-15% year-over-year range for FY2027, with seasonal fluctuations in quarterly net adds. Lightspeed Capital is expected to grow over 35% pro forma in FY2027, with prudent growth to maintain low default rates.

- Macro-economic uncertainty: Management incorporated a cautious macro outlook into FY2027 guidance; if macro conditions outperform expectations, results will exceed guidance, but weaker macro could pressure performance. * Competitive pressure: The POS and payments industry is competitive, requiring hardware discounting to drive customer adoption and payment attachment, which has pressured hardware gross margins in recent quarters (though management has implemented corrective actions for FY2027). * Execution risk: Sustaining location growth acceleration and delivering on AI product roadmaps depends on continued go-to-market effectiveness and product development execution. * Contractual constraints: Existing legacy merchant contracts create delays for converting existing customers to Lightspeed Payments, limiting near-term penetration gains.

Q: What drives the expected acceleration of revenue growth through FY2027, and how fast will Lightspeed Capital grow? / A: Acceleration comes from continued product innovation (especially new AI features) ramping throughout the year, paired with ongoing increases in payment penetration across the customer base. For Lightspeed Capital, after adjusting for the divested Upserve business (which was a heavy user of the program), pro forma growth is still expected to hit over 35% in FY2027. Management will grow the program prudently to maintain the industry's low single-digit default rates, which have improved alongside shorter payback periods. (327 characters)

Q: Will net location growth acceleration continue, and what is the software growth outlook for FY2027? / A: Net location growth has accelerated for four consecutive quarters to 11% year-over-year, driven by effective field sales in European hospitality and new remote outbound motions in North America retail. Growth is expected to remain within the 10%-15% 3-year target range through FY2027. Software growth will be supported by ongoing product innovation (especially AI features that drive adoption of higher-tier plans), expanded cross-sell/upsell capabilities from the new CRO, and increased investment in partner channel strategies. (356 characters)

Q: What is Lightspeed's AI product strategy, and how does it differ from general AI tools? / A: Almost all new product releases are now AI-powered, with a focus on building agentic AI workflows for complex merchant tasks like wholesale buying and inventory management. Lightspeed has a unique advantage because it holds proprietary end-to-end data across wholesale, point-of-sale, and payments, allowing it to deliver tailored insights that general AI tools (which only use public data) cannot. AI is already driving higher adoption of existing platform features, and it will be monetized through upgraded plans and increased payment/capital volume from more successful merchants. (394 characters)

Q: What are the opportunities for further payment penetration growth? / A: Company-wide payment penetration hit 46% in Growth Engines and is slightly under 40% post-Upserve divestiture, so there is significant room for growth, especially in lower-penetration Efficiency Markets. Many legacy customer payment contracts are expiring in FY2027, and product enhancements have resolved most past merchant friction for switching. Lightspeed will prioritize aggressive back-book conversion alongside continued onboarding of new locations to Lightspeed Payments in FY2027, which should move the needle on penetration. (331 characters)

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