Lightspeed Commerce, Inc. Q3 FY2025 earnings call

• Dax returned as CEO one year ago and is proud of the team's achievements, including accelerating software growth, improving payments adoption, and establishing profitability. - Initiated a strategic review leading to doubling focus on retail in North America and hospitality in Europe, and a transformation plan. - Delivered 17% year-over-year revenue growth, 9% software revenue growth, and adjusted EBITDA ahead of outlook. - Announced a $400 million share repurchase program. - Launched new initiatives like software revenue growth, kitchen display system in hospitality, and supplier network in retail. - Reallocated resources from non-growth areas to focus on growth engines.

Revenue grew 17% year-over-year to approximately $280 million. Software revenue was $88.1 million, representing 31.5% of total revenue, with 9% year-over-year growth. Transaction-based revenue was $181.7 million, representing 64.9% of total revenue, with 23% year-over-year growth. Lightspeed capital revenue was $10.2 million, almost doubling from $5.2 million in Q3 of the previous year. Total ARPU for the quarter, excluding Equit customers, reached a record $533, with an 19% increase year-over-year, driven by both unified payments and an 11% increase in software ARPU.

• Expected revenue growth for fiscal 2025 to be approximately 20%. - Raised adjusted EBITDA expectation for fiscal 2025 to over $53 million, more than 30% higher than initial outlook. - Intend to execute $100 million of current share repurchase authorization immediately and an additional $300 million under further authorization subject to market conditions. - Anticipate inflection point for growth in ICP customers in fiscal 2026.

• Foreign currency impact putting downward pressure on non-U.S. dollar denominated revenue. - Seasonality affecting GTV performance, particularly fiscal Q4 being seasonally weakest for GTV. - Impact of seasonality on payments penetration rates, with golf being a seasonally slow vertical in Q3.

Q: Dan Perlin asked about why the sale process wasn't the right choice and if non-core markets would see closures.

A: Dax said the strategic review determined continuing as a public company to execute transformation plan is best. Non-core markets will be maintained but not heavily invested in.

Q: Dan Perlin asked Asha about FX headwinds.

A: Asha said FX was a headwind but still expect to hit guidance.

Q: Raimo Lenschow asked about software performance and share repurchase.

A: J.D. talked about software growth due to innovation and price adjustments; Asha discussed share repurchase cadence.

Q: Trevor Williams asked about outbound sales force size.

A: J.D. said 19% of reps focus on outbound, expecting to climb to 25% by end of fiscal year.

Q: Thanos Moschopoulos asked about timing of price increases and growth prospects of core markets.

A: Asha said Q1 F26 will see full impact of price increases; details on growth prospects at Capital Markets Day.

Q: Dominic Ball asked about Lightspeed's differentiation in retail and divestiture plans.

A: Dax talked about tailoring to medium-high complexity retailers; Asha said no immediate divestiture plans but assess opportunities.

Q: Tien-Tsin Huang asked about software growth floor and M&A.

A: Asha said 9% is a floor and M&A considered for tuck-ins; Asha said no large strategic M&A but opportunistic.

Q: Timothy Chiodo asked about competitive environment in retail.

A: J.D. said Lightspeed differentiates by going deep in fortress verticals.

Q: Todd Coupland asked about buyback structure.

A: Asha said $100 million under NCIB and more to be discussed at Capital Markets Day.

Q: Richard Tse asked about supplier network scaling and monetization.

A: J.D. said supplier network is scaling with new order platform and increased close rates.

Q: Martin Toner asked about gross margin compression in payments and legacy brands.

A: Asha said residuals and international expansion affect gross margin; J.D. said legacy brands are maintained but flagship products are growing.

Q: Daniel Chan asked about seasonality affecting payments penetration and Q4 EBITDA margin.

A: Asha explained GTV seasonality across quarters and EBITDA margin expectations.