Thank you for standing by. My name is Gail, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lightspeed Second Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Gus Papageorgiou, Head of Investor Relations. You may begin.

Thank you, operator, and good morning, everyone. Welcome to Lightspeed's Fiscal Q2 2026 Conference Call. Joining me today are Dax Dasilva, Lightspeed's Founder and CEO; Asha Bakshani, our CFO; and J.D. Saint-Martin, our President. After prepared remarks from Dax and Asha, we will open it up for your questions. We will make forward-looking statements on 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 to 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 2 can be found in our earnings press release, which is available on our website, on SEDAR+ 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 2 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 a 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 3 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…

Thanks, Dax, 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 platform. 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 product and go-to-market, the company's total profitability and cash flow metrics continue to improve. Gross 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 breakeven 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…

Thanks, Asha. Before we take your questions, I would like to take this time to welcome our new Board members. In July, we welcomed Glen LeBlanc, the former EVP and CFO of BCE Inc., who brings with him over 30 years of tech and telecom experience. Last month, we also welcomed Sameer Samat and Odilon Almeida to our Board of Directors. Sameer is currently President of the Android ecosystem at Google, and Odilon served as the CEO of ACI Worldwide, a global payment software and solutions provider. I look forward to working with all of them as we continue to advance our strategy and support our customers. I would also like to thank our departing Board members, Rob Williams, Paul McFeeters and Patrick Pichette for their contributions and support over the past several years. In closing, I think Q2 is clear evidence that our strategy is working. I want to thank all of the employees at Lightspeed for making this strategy a success. Without your dedication and commitment, none of this would be possible. With that, I will turn the call back to the operator to take your questions.

[Operator Instructions] Your first question comes from the line of Thanos Moschopoulos of BMO Capital Markets.

It seems like you're seeing a good return on your investment in outbound sales. And so in light of that, how should we think about the sales ramp? Might you look to accelerate your hiring plans for this year? And maybe too early to talk about next year, but safe to assume that you'll continue to ramp those investments heading into next year?

Thanks, Thanos. Yes. So outbound sales, overall, it's going really, really well. Our Q2 outbound bookings tripled year-over-year. So really, really pleased about that. As you know, this is the go-to-market motion that's going to allow us to really target our ICPs with precision and really have the best sales metrics. We've grown our outbound team to approximately 130 fully ramped reps right now in our growth engines, North American retail and EMEA Hospital (sic) [ European hospitality ]. And those are all carrying a full quota. We are expecting to get to 150 by the end of the fiscal year. And yes, and we are planning -- we're in the planning stage for how many reps we'll deploy in subsequent years.

Okay. Great. And then maybe just a question on capital. As we think about the growth going forward? I mean, is much of that going to be driven by the launch in new geographies? And how should we think about the rollout? You mentioned Switzerland. What will be the strategy there for further expansion?

Yes. I'll take that one. Thanks, Thanos. Capital is going really, really well. You saw that come through in the prepared remarks and in the PR. We are using capital to upsell and cross-sell across the base. And in the Rest of the World portfolio, capital is one of the products that's super popular in the upsell to the merchant base. As we continue to ramp outbound and bring more ICPs into the funnel, we should continue to see capital growing quite nicely. You saw over 30% growth this year, and we should expect to see pretty solid growth into future years because the ICP customers that we're getting through in the outbound funnel are real prime customers for the capital business. They're very creditworthy, high GTV customers. And so that's -- we should expect that to help capital grow even stronger.

Your next question comes from the line of Trevor Williams of Jefferies.

I wanted to start with a bigger picture question on pricing. Just how you guys would frame the current backdrop at the industry level. Asha, I heard the call out on hardware discounting as more of a customer acquisition tool. I'm just curious if that's more of a proactive or reactive move to anything you're seeing competitively.

Trevor, thanks for the question. The hardware discounting is totally proactive. The hardware discounting is quite typical and common. You saw a slight uptick this quarter from what you've seen historically, and that just comes with more new locations. As we attract more and more locations in our growth portfolios, in particular, we are giving discounts to get those customers through the door. Pricing and packaging overall has been going very well for Lightspeed. We had some pretty significant price increases about a year ago, and that's what you're seeing come through partly in the growth this year. As we look forward, Dax talked a bit about all the product velocity and how strong that has been at Lightspeed. And so we keep including these new modules in different pricing and packaging. And so that evolution is going to continue, and that continues to drive quite a nice ARPU uplift for Lightspeed.

Okay. No, I appreciate that. And then on the GTV growth acceleration we saw this quarter, I think you called out higher GTV location from the success with the growth engines. Anything else you can dimensionalize around same-store sales, location growth? And I know you don't guide to GTV growth, but with the momentum that we're seeing on the growth engines side, is it fair for us to assume that the trajectory that we've seen over the last couple of quarters that, that should persist going forward?

Yes. I'm going to say that same-store sales in both retail and hospitality, both in NAM and Europe were really positive this quarter. It's the best quarter for same-store sales in quite some time. And total GTV was up about 15% year-over-year in the growth engines and about 7% overall. So that's a good acceleration. It's also driven by all of the new locations. As you saw, we closed 2,000 new locations in the growth engines, which is an acceleration from last quarter.

Your next question comes from the line of Josh Baer of Morgan Stanley.

Congrats on a really strong quarter. I wanted to dig in a little bit on investments in EBITDA and just really understand the takeaway from the change in the EBITDA guidance sort of reframe from $68 million to $72 million to greater than $70 million. So you've been -- you outperformed EBITDA again, the guide for Q3 was good. Like is there a reason to think that investments are ramping in the back half of the year and into Q4? Or yes, like how should we think about greater than $70 million? And then I just have a follow-up on OpEx.

As you can see, we're seeing a lot of traction in our growth engines. We want to continue to accelerate location counts. We want to continue to invest in our go-to-market. And so some of that -- some of our -- some of the funds are being reinvested in continuing that trajectory. I think that's important for the company. I think everybody wants to see us be able to capture share in our biggest opportunities for growth. Asha?

Yes. Thanks, Josh. I think Dax really drove that point home. We're just -- the EBITDA raise is smaller than the beats that you've seen to date only because we really want to give ourselves the flexibility to double down on investments where we're seeing that the investments pay off even more quickly than expected. And we are seeing that in several areas in our growth engines. And so the smaller EBITDA raise is really to give ourselves that flexibility to continue to invest in growth. There's a large TAM out there, and we're excited about that.

Okay. That makes a lot of sense. I guess a follow-up would be on just the software piece here. Software ARPU growth is higher than the total software revenue growth, but you're still adding customers on a net basis year-over-year, quarter-over-quarter. How do we put those 2 different growth rates?

Yes. Great question, Josh. The software ARPU growth is growing faster than total software growth really just results from the mix shift. As we're bringing larger and larger customers onto the platform and churning the smaller customers, you're seeing that show up in the average revenue per user per month more quickly than in the software revenue. And that's really all that's about -- and that's a good news story for Lightspeed. We're bringing more of the larger customers, higher ARPU customers onto our platform, and we're seeing the vast majority of the churn in the smaller merchants.

Your next question comes from the line of Tien-Tsin Huang of JPMorgan.

Just curious, any good quarter here. Any interesting observations out of the growth markets from a monthly perspective, month-to-month, that is, that informs your confidence to raise your outlook? And I'm curious, same question here for quota-carrying sales, any seasoning effects here? I'm assuming you'll see more productivity. I just don't know how that's balanced across the 130 that you have.

I think Q2 is a really good quarter for European hospitality. It's their go-to season as well as for golf. Obviously, we'll see a little bit less of those 2 elements of the growth engines in Q3. We'll see more of NoAm retail. So that's sort of how our seasonality looks in the next little while. But yes, I think we are we are seeing a real payoff of those go-to-market efforts and those growth engines. We're seeing acceleration. And I think with outbound, we're really able to target those customers that are natural fits for where our product plays, which is those higher GTV merchants in retail and hospitality.

Got it. And then Dax, I'm curious I have to ask on the efficiency markets. Any change there in your thinking on strategy? Because it seems like there's some surgical things you're doing there to enhance growth or productivity there. Any change in thoughts?

I think we consider this a really big success, right? It's really helping us fuel growth in the growth engines. We see 20% software growth in our growth engines. We're happy. But as you can see, the efficiency markets are really holding. We're -- we have really positive trends on efficiency, and we're -- yes, it's maintaining what it needs to.

[Operator Instructions] Your next question comes from the line of Matthew English of RBC Capital Markets.

This is Matthew on for Dan Perlin, RBC. So I have a question on NuORDER. It's great to hear the rollout of Marketplace. I was wondering if you could frame the monetization strategy of that asset and maybe the outlook for attaching payments to that B2B volume.

Yes. This is such an exciting part of the strategy, and you're seeing quarter after quarter become a bigger and bigger part of all parts of the retail story, and it's a massive part of our sales pitch now. So we are the only retail POS with wholesale built right in. You're going to see a massive rollout of our vision of this at NRF. But day-to-day in our sales calls, this is -- it is a massive benefit for the retailers in our target verticals to be able to buy from wholesale right inside our platform because we can offer a workflow that literally nobody else can offer in our space. Now that is even made more powerful by the fact that we can leverage all of our insights, our AI-driven insights and our capital products to make turns of inventory even more efficient. And now with Marketplace, it's not just the brands that you're currently working with that are available to you NuORDER, you can now discover new brands, search across brands that you haven't interacted with. And so it really opens up the world of NuORDER for our retail customers and allows them to diversify and add to their curation. So it's very, very exciting, multifaceted advances on NuORDER. We have amazing brands coming on to the platform as well, like this quarter, Carhartt is a major new addition. And I think what's exciting about that is that Carhartt also has a lot of retailers that they work with that should be on Lightspeed. And so brands are recommending retailers join the platform and retailers are recommending that their key brands are also on the platform. And as you mentioned, there's a big payments opportunity here as well. So we've got now the infrastructure in place to take advantage of that, and that's a part of our acceleration strategy with NuORDER.

Your next question comes from the line of Matt Coad of Truist Securities.

Really good set of results here. I wanted to touch on the locations growth. I thought really encouraging set of results, both on total locations and growth engines. I was hoping you could unpack it a little bit for us, both on gross adds in the growth engines, kind of like what subverticals maybe you're seeing outsized success in or what kind of geographies within Europe you're seeing success in? And then also curious if you could touch on churn rates. It seems like churn rates have gotten a little bit better for you guys based on our math. So any tidbits or pieces of information there would be helpful.

Yes. I think this is a major win for the company to have 2,000 new locations, an acceleration from 5% to 7% location growth in 1 quarter. As you know, our 3-year CAGR that we shared at Capital Markets Day is 10% to 15% location growth. So in 2 quarters of the transformation, we're already making major progress. And this just feeds all of our metrics, right? It just helps everything grow to have more high-quality merchants joining the platform. And so this is the #1 thing that I talk about every single day at the company as we have to bring more customers on to Lightspeed's platform. And this has become a rallying cry because we know that we can add value for these customers by having them join the platform, by having them leverage NuORDER, by having them leverage all our new AI tools and all of the deep inventory tools and restaurant management tools that we have for European restaurants as well. So in our growth engines, I would say location growth, if you look quarter-by-quarter. It's pretty evenly split across the 2 growth engines. We've got areas of seasonality, of course. When it's go time for European hospitality and golf in the summer months, there's less likely to be onboard onto a new system. They're often interested in learning about it, but to close them, it's more likely to close them in Q3. And then conversely, for retail, they're not going to want to switch systems in the middle of the buying holiday season, which is their opportunity to make the most money. So yes, we do see different opportunities, but I think we are able to -- we're still able to grow in our key verticals. So the key verticals as well for retail where we see some of the biggest opportunity is multi-brand apparel that are using NuORDER to buy from a lot of different brands. We, of course, are very, very strong in sport and outdoor, which includes some of our strongest verticals like bike and golf, but there's a lot of other different verticals that we're doing really well in like running and swimwear, et cetera. In European hospitality, we're in a number of different European countries. We've been historically strong in the Benelux and the U.K., but France and Germany are real exciting stars for us right now as well. So this is -- there's lots of areas of strength that we're going to continue to build on.

With no further questions, that concludes our Q&A session. I'd now like to turn the conference back over to Papageorgiou for closing remarks.

Thank you, operator. Thanks, everyone, for joining us today. We will be around all day if anyone has any further questions, and we look forward to speaking to you at our next conference call in early of next year. Thanks, everyone, and have a great day.

This concludes today's conference call. You may now disconnect.