Lightspeed Commerce Inc. (LSPD:CA) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial metrics, including revenue growth and adjusted EBITDA. Despite some concerns about negative hardware margins and unclear guidance, the focus on AI and strategic growth in customer locations, especially in retail and hospitality, is promising. The Q&A section confirms positive market sentiment with competitive gains and successful distribution investments. The company's strategic plan and positive outlook on AI adoption and payment penetration further enhance the sentiment, suggesting a likely stock price increase in the short term.
Key Financial Performance
Revenue $312.3 million, an 11% increase year-over-year, driven by an expanding location count, higher software ARPU, and increased year-over-year payment penetration.
Adjusted EBITDA $20.2 million, a 22% increase year-over-year, attributed to strategic shifts, focus on AI and automation, and operating efficiency improvements.
Free Cash Flow $15 million, up from a use of $0.5 million a year ago, due to improved adjusted EBITDA, disciplined management, and favorable working capital movements.
Software Revenue $93 million, a 6% increase year-over-year, with software ARPU rising 4% year-over-year, driven by larger, more sophisticated merchants and new product releases.
Transaction-based Revenue $209.4 million, a 15% increase year-over-year, with GPV growing 19% year-over-year and capital revenue growing 34% year-over-year.
Gross Profit $134.3 million, a 15% increase year-over-year, driven by strong top-line performance and expanding gross margins in both subscription and transaction-based revenue.
Gross Margin 43%, up from 41% last year, due to increased cost efficiency and higher payment penetration in international markets.
Customer Locations Approximately 148,000, with a 9% year-over-year growth in customer locations in growth engines, adding approximately 2,600 net new locations in the quarter.
Payments Penetration 46%, up from 42% last year, reflecting increased adoption of Lightspeed Payments.
GTV (Gross Transaction Volume) $25.3 billion, an 8% increase year-over-year, with GPV as a percentage of GTV at 42%, up from 38% last year.
ARPU (Average Revenue Per User) $660, an 11% increase year-over-year, driven by higher software and payment monetization.
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Operating Highlights
Lightspeed AI: Launched to integrate Agentic AI into retail and hospitality workflows, helping merchants optimize inventory and improve kitchen execution in real time.
Marketplace in Lightspeed Wholesale: Unveiled to allow retailers to browse, compare, and purchase inventory from multiple brands in one place.
Tap to Pay for Android: Added to Lightspeed Scanner to improve checkout efficiency.
Lightspeed Tempo: Introduced pacing intelligence to guide servers in hospitality workflows.
Lightspeed Reservations: Launched as an integrated alternative to third-party platforms for independent restaurants.
Lightspeed Tasks: Standardizes workflows across locations to improve consistency and execution.
North America Retail and European Hospitality: Focus on these markets resulted in 21% revenue growth and 13% software revenue growth year-over-year.
Customer Location Growth: Added approximately 2,600 net new locations in Q3, a 9% year-over-year increase, reaching 148,000 total locations.
Adjusted EBITDA: Achieved $20.2 million, a 22% year-over-year increase, and positive free cash flow of $15 million.
Software ARPU: Increased by 4% year-over-year, driven by innovative product releases and targeting sophisticated merchants.
Gross Margins: Improved to 43%, with software gross margins at 82% and transaction-based revenue margins at 31%.
Shift to Annual Contracts: Focused on attracting higher-quality merchants with lower churn and higher lifetime value.
Outbound Sales Expansion: Fully hired 150 outbound reps, targeting high-value customers with strong unit economics.
AI and Automation: Leveraged to reduce costs and improve operating efficiency.
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Risk or Challenges
Market Conditions: Fiscal Q4 is typically the lowest GTV quarter, indicating seasonal revenue challenges. Additionally, the company is lapping pricing actions from the previous year, which may moderate revenue growth.
Strategic Execution Risks: The company is pulling forward incremental investments into Q4, particularly in retail outbound sales, which could strain resources and impact profitability if not managed effectively.
Economic Uncertainties: The shift to annual contracts, while beneficial for long-term cash flow, involves upfront discounts that could impact short-term revenue.
Competitive Pressures: The company is focusing on high-value customers and expanding ARPU, but this strategy requires significant investment in outbound sales and product innovation, which may not yield immediate returns.
Supply Chain Disruptions: Hardware gross margins declined due to strategic discounts and incentives, which may indicate challenges in maintaining profitability in hardware sales.
Regulatory Hurdles: No explicit regulatory risks were mentioned in the transcript.
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Guidance & Outlook
Revenue Projections: For Q4, revenue is expected to be approximately $280 million to $284 million. For fiscal 2026, revenue is projected to be approximately $1.216 billion to $1.22 billion.
Gross Profit Projections: For Q4, gross profit is expected to be approximately $125 million to $127 million. For fiscal 2026, gross profit is projected to be approximately $523 million to $525 million.
Adjusted EBITDA Projections: For Q4, adjusted EBITDA is expected to be approximately $15 million. For fiscal 2026, adjusted EBITDA is projected to be approximately $72 million.
Customer Location Growth: Targeting a 10% to 15% three-year customer location CAGR for growth engines in North America Retail and European Hospitality.
Free Cash Flow: The company expects to generate positive free cash flow for the full fiscal year 2026.
Payments Penetration: Payments penetration is expected to continue its upward trend over time.
Product Innovation and Investments: Incremental investments are being pulled forward into Q4 to meet higher-than-expected demand, particularly in the retail outbound sales organization.
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Shareholder Return Plan
Share Repurchase Program: Approximately $200 million remains under our broader board authorization to repurchase up to $400 million in Lightspeed shares. 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. Subject to TSX approval, Board approval and market conditions, we intend to renew this buyback program in fiscal 2027.
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Key Q&A
Q:How would you describe the health of your end markets, particularly in terms of regional performance and any surprises?
A:Same-store sales were healthy in fiscal Q3, with positive growth across all highly penetrated retail verticals. Home & Garden and Bike saw a slight deceleration from Q2 to Q3 due to seasonality. FX in the European market, particularly the strong euro, provided a slight boost to GTV.
Q:How sustainable are the current gross margins in software, and what factors contribute to their strength?
A:Gross margins are sustainable at over 80%, driven by subscription growth, OpEx optimization, better cloud spend rates with Google and AWS, and efficiency improvements in support departments through AI deployment.
Q:What differentiates Lightspeed's software capabilities in the context of AI disruption?
A:Lightspeed's software is differentiated by its proprietary payments and wholesale data, which power Agentic AI workflows. The company has rolled out Lightspeed AI and showcased its AI vision at innovation events. Proprietary data drives insights, analytics, and benchmarking tools.
Q:How should we think about the growth path for software, particularly in light of pricing changes and medium-term growth expectations?
A:Growth engines, which represent 2/3 of revenue, grew 13%. The company is focusing on cross-sell and upsell motions for new software modules. Medium-term growth expectations are positive, with continued innovation and module releases.
Q:How do you plan to balance growth between the growth engines and the efficiency portfolio?
A:The efficiency portfolio is performing well, with gross profit up. The focus is on keeping customers happy, adding value through financial services, and growing the growth portfolio to ensure net positive location growth.
Q:What is the outlook for SaaS ARPU growth, particularly in terms of pricing on the back book and front book?
A:SaaS ARPU growth is driven by lapping price increases and evolving pricing and packaging as new software modules are released. The company is moving customers to higher-tier products and expects continued ARPU uplift.
Q:Can you unpack the 2,600 location wins and the impact of distribution investments?
A:Location growth is accelerating, with 9% growth this quarter. Wins are evenly distributed across retail and hospitality. Distribution investments, particularly in EMEA hospitality, are showing success, with more benefits expected in fiscal 2027.
Q:What proprietary data sets and network effects sustain Lightspeed's competitive moat in AI?
A:Proprietary payments and wholesale data, along with a unique supply-to-consumer workflow, create a competitive moat. Lightspeed AI and Marketplace leverage these data sets to offer unique insights and tools across the retail and hospitality chain.
Q:What is the composition of new location growth, and how does it reflect competitive dynamics?
A:New location growth is composed of 1/3 brand-new businesses, 1/3 from competing systems, and 1/3 from legacy systems. This reflects competitive share gains and the appeal of Lightspeed's offerings.
Q:How are customers adopting AI products, and when will it drive meaningful improvements for Lightspeed?
A:AI adoption is growing, with tools like benchmarking trends and Lightspeed AI being rolled out. These tools are expected to drive upsell and new software module value, with meaningful improvements anticipated as adoption increases.
Q:What is the trajectory for payment penetration in markets outside growth engines?
A:Payment penetration in non-growth markets is in the low 30s, compared to 42% overall. There is significant opportunity for growth, with penetration expected to climb into the 40s and 50s over time.
Q:What factors contribute to the Q4 guidance, and how does seasonality impact expectations?
A:Q4 guidance reflects typical seasonality, with GTV expected to drop 15-20% due to lower spending in January to March. The guidance assumes continued strong execution by the team.
Q:What are the early contributions of Gabriel Benavides to the go-to-market strategy?
A:Gabriel Benavides is focusing on optimizing outbound and partnership strategies, particularly in retail and hospitality. His expertise is expected to accelerate growth and improve productivity.
Q:What is the timeline for additional Lightspeed AI features, and what are the margin implications?
A:Additional Lightspeed AI features are being rolled out to select customers, with broader availability in the coming months. There are no significant margin implications, and software margins remain strong.
Q:What is the outlook for Lightspeed Capital, and how is it being managed?
A:Lightspeed Capital is growing prudently, with over 30% growth this quarter. Default rates remain low, and the business is highly profitable with close to 100% gross margins.
Q:What trends are you seeing in churn across core and efficiency markets?
A:Churn is being managed effectively, with location counts growing by 2,000. Software and payments revenue in efficiency markets are flat to slightly up, indicating a healthy customer base.
Q:What is driving the negative margins on hardware, and how does it impact overall gross margins?
A:Negative hardware margins are due to discounts and incentives for new business and payment terminal adoption. Hardware margins are expected to range from -50% to -60%, but overall gross margins remain strong.
Q:What is the impact of shifting customers to annual contracts on software growth?
A:Shifting to annual contracts has improved cash flow and reduced churn, with 50% of North America retail contracts now annual. This transition supports long-term software growth.
Q:What are the plans for price increases and software ARPU growth in fiscal 2027?
A:Broad price hikes are not planned; instead, ARPU growth will come from evolving pricing and packaging as new modules are added. SaaS ARPU is expected to grow as customers adopt higher-tier bundles.
Q:What is the outlook for Lightspeed Capital growth and its impact on margins?
A:Lightspeed Capital is expected to grow prudently, maintaining low default rates and high EBITDA margins. It is a high-margin business with significant growth potential.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance for next year, particularly regarding medium-term growth expectations and the impact of AI adoption on financials. Responses were often conceptual, lacking detailed numerical data or timelines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
America Retail
Day customer
European Hospitality
GPV percentage
GTV Payments
Golf
Hospitality market
Payments penetration
Retail European
Wholesale retailer
acquisition
action
approval
brand place
buyback program
cash event
discount
framework Capital
goal
location engine
market respect
module attachment
month period
outbound sale
percentage GTV
product engine
profitability cash
reminder
remittance
retailer POS
shift contract
stage
subscription base
term Capital
use cash
win
LSPD Transcript
Lightspeed Commerce Inc. (LSPD:CA) Q3 2026 Earnings Call Transcript
Positive2-5
The earnings call highlights strong financial metrics, including revenue growth and adjusted EBITDA. Despite some concerns about negative hardware margins and unclear guidance, the focus on AI and strategic growth in customer locations, especially in retail and hospitality, is promising. The Q&A section confirms positive market sentiment with competitive gains and successful distribution investments. The company's strategic plan and positive outlook on AI adoption and payment penetration further enhance the sentiment, suggesting a likely stock price increase in the short term.
Lightspeed Commerce Inc. (LSPD:CA) Q2 2026 Earnings Call Transcript
Positive11-6
The company reported strong financial performance with a 53% increase in adjusted EBITDA and significant growth in free cash flow. Payments penetration and customer location growth are accelerating, and outbound sales are thriving. Positive trends in ARPU growth and strategic investments in growth engines further support a positive outlook. Although management was unclear on some specifics, the overall sentiment remains positive due to strong metrics and optimistic guidance. Given the company's market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Lightspeed Commerce Inc. (LSPD) Q1 2026 Earnings Call Transcript
Positive8-1
The earnings call highlights strong financial performance with record revenue, increased EBITDA, and improving margins. Product innovation and strategic investments in sales are expected to drive growth. The positive guidance and successful share repurchase program further support a positive sentiment. Despite some management uncertainties in Q&A, the overall outlook is optimistic, suggesting a positive stock price movement over the next two weeks.
Lightspeed Commerce Inc. (NYSE:LSPD) Q4 2025 Earnings Call Transcript
Positive5-23
The earnings call highlighted positive financial performance with an 18% revenue growth and significant EBITDA increase. The Q&A session revealed management's confidence in growth strategies, including a large increase in outbound sales reps and R&D investment. Despite macro uncertainties, guidance remains optimistic with a focus on high-margin growth. The share repurchase plan and strong cash position further support a positive outlook. Given the $2.1 billion market cap, these factors suggest a positive stock price movement in the 2% to 8% range over the next two weeks.
LSPD Slides
LSPD Report
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