Thank you for standing by. My name is Van, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lightspeed First Quarter 2026 Earnings Call. I would now like to turn the call over to Gus Papageorgiou, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Lightspeed's Fiscal Q1 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 and that could cause actual results to differ materially from those projected. Certain material factors and assumptions were applied in respect of 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 first 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 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. With that, I will now turn the call over to Dax.

Thank you, Gus, and good morning, everyone. Last year, we made the strategic decision to focus Lightspeed on two core growth engines: retail in North America and hospitality in Europe. These are markets where we have a proven right to win, strong product-market fit, and significant headroom for growth. We refocused our product roadmap, revamped our go-to-market strategy, and aligned our organization to execute on that strategy. That strategy is working. Our Q1 results speak for themselves. Revenue of $305 million increased 15% year-over-year and exceeded the high end of our outlook. Gross profit of $129 million increased 19%, also significantly above our outlook of 13%. Payments penetration reached 41%, up from 36% in the same quarter last year. Adjusted EBITDA came in at $16 million, up 55% year-over-year, and we added approximately 1,700 net new customer locations in our growth engines in the quarter, with total growth engine locations up 5% year-over-year. Total locations at the end of the quarter were approximately 145,000 and were up year-over-year. This morning, I want to share how we are progressing against the 3 strategic priorities we laid out at our Capital Markets Day. As a reminder, those priorities are: One, growing customer locations and our growth engines; two, expanding subscription ARPU; and three, improving adjusted EBITDA and free cash flow. On growing customer locations. At Capital Markets Day, we committed to growing customer locations in our core growth engines, North American retail and European hospitality, with a targeted 3-year customer location CAGR of 10% to 15%. In Q1, total growth engine locations were up 5% year-over-year, with approximately 1,700 net new customer locations added in the quarter, a clear acceleration from 3% last quarter. As our go-to-market and product investments continue to scale, this growth will converge towards the 10% to 15% target we laid out during the CMD. Overall, customer location count was net positive for the quarter. Location growth was driven by a go-to-market engine that's becoming best-in-class, anchored in disciplined funnel management across both outbound and inbound channels. Outbound-driven bookings more than doubled year-over-year for our growth engines, and we now have over 130 of our 150 planned outbound reps in seat, the majority of which are still ramping, as it takes approximately 6 months for an outbound rep to become fully productive. We also had a strong quarter in vertical brand marketing, growing our presence in trade shows and customer events. Thanks to our strong outbound and vertical brand marketing efforts, we are seeing a halo effect on inbound, with inbound bookings up 15% year-over-year. We had many notable customer wins this quarter. In retail, we added premium streetwear retailer Last Stop, with 10 locations in Maryland and Virginia; Shades of Charleston, a 4-location eyewear retailer in South Carolina. Within NuORDER by Lightspeed, we added Neiman Marcus and Bergdorf Goodman and marquee brands Fabletics and Tory Burch, displacing key competitors and reinforcing our position as a dominant B2B platform in retail. And in golf, we signed Western Golf Properties, with 11 locations in California and Nevada. In hospitality, we added La Petite Chaise, the oldest restaurant in Paris; Aan de Poel, a two Michelin Star restaurant in Amsterdam; and the Corrigan Collection, with 7 locations across the U.K. and Ireland by Michelin starred chef, Richard Corrigan. On driving software revenue and ARPU. Q1 software revenue grew 9% year-over-year, and software ARPU increased 10%, driven by product innovation as well as sales of our flagships, primarily to retail customers in North America and hospitality customers in Europe. In retail, we launched Customer Inventory Adjustments, allowing for detailed tracking of stock changes. We added Inventory Turns and a gross margin return on investment metric within Retail Insights. We further improved the Lightspeed Scanner app to allow for product search, inventory checks, and pricing. And within NuORDER by Lightspeed, we launched Order Trends, which helps merchants identify the top-selling products by brand. Early adopters have seen a 10% increase in average order value. In hospitality, we launched our AI-powered Benchmarks & Trends in Europe, giving restaurateurs visibility into how their performance compares to peers by region, cuisine, and price points, a feature already proven in North America. We rolled out Mobile Tap on Lightspeed Tableside in the U.K., Netherlands, and Belgium, improving table turnover and service speed. We further enhanced Kitchen Display System with features such as prep insights and menu updates, and added deeper insights to the Lightspeed Pulse app, such as bestsellers and top staff. And we introduced a new sales report dashboard, consolidating all key metrics into a customizable real-time view to help operators plan smarter and optimize margins. This kind of innovation, tailored to high-value merchant needs, helps drive higher win rates, ARPU expansion, and grow customer lifetime value. On expanding profitability, Asha will walk through the numbers in more detail, but I want to underscore a few things. First, Lightspeed continues to deliver strong software gross margins of 81%, a reflection of the mission-critical nature of our platform. Our customers run established businesses, and they value technology that helps them manage their inventory, organize staff, access capital, and improve the customer experience. That value is evident in both our industry-leading software margins and our other growth metrics. Second, our adjusted EBITDA performance in Q1 of $16 million increased 55% year-over-year and is a clear sign that our model is working. Importantly, we were able to significantly improve adjusted EBITDA while continuing to invest in outbound sales, vertical marketing, and in-product technology. We're proving that Lightspeed can invest meaningfully in growth while improving profitability. In closing, we laid out a bold strategy, and in Q1, we delivered. I want to thank the entire Lightspeed team for a strong start to fiscal '26. With that, I'll turn it over to Asha.

Thanks, Dax, and welcome, everyone. Lightspeed had a great start to the year, with revenue and gross profit coming in well ahead of our initial outlook, thanks largely to expanding locations within our growth markets, increasing software ARPU, strong payments penetration, and relentless operating efficiency, which is now a part of the Lightspeed DNA. I will walk you through a detailed look at our financials and then provide our Q2 and fiscal 2026 outlook. Total revenue grew 15%, ahead of our outlook, driven by 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 software modules. In addition, we benefited from improving same-store sales, thanks to a more stable macro environment. Software revenue was $90.9 million, up 9% year-over-year, with software ARPU up 10% year-over-year. Software ARPU increased due to new software releases, along with the benefit of pricing actions taken last year. Transaction-based revenue was $204.6 million, up 18% year-over-year. Gross payments volume grew 21% year-over-year, and capital revenue grew 34% year-over-year. Gross payments volume as a percentage of gross transaction volume came in at 41%, up from last quarter and year-over-year. Overall GTV grew by 4% to $24.6 billion, and total average GTV per location continues to climb as we continue to sign more high-value customers. We saw GTV in our growth engines accelerate this quarter to 12% year-over-year, with growth engine locations up by 5% year-over-year. ARPU reached a record $655, up 16% 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. ARPU in our growth markets is higher than our efficiency market. And as those locations grow, I expect it to have a positive influence on overall ARPU. With respect to profitability and operating leverage, total gross profit grew 19% year-over-year, exceeding both revenue growth and our 13% outlook, driven by strong top line performance and expanding gross margins in both subscription and transaction-based revenues. Q1 gross profit benefited from new software modules released last year, as well as the price increases that were put through mid last year. Total gross margin was 42%, up from 41% last year. Despite transaction-based revenue increasing to 67% of sales from 65% of sales last year, gross margins improved through initiatives including effective spend management and the growth in higher margin revenue, such as Lightspeed Capital. We delivered strong software margins of 81%, up from 79% a year ago, largely driven by cost discipline. Gross margins for transaction-based revenue were 29%, up from 26% last year. This improvement reflects growth in our capital business and the expansion of payments in international markets, where margins exceed those in North America. As we convert customers to Lightspeed Payments, we increased our overall net gross profit dollars. And in the quarter, we saw transaction-based gross profit grow 30% year-over-year. Total adjusted R&D, sales and marketing and G&A expenses grew 15% year-over-year, primarily due to 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 $15.9 million, increasing 55% from the $10.2 million we delivered in Q1 last year, driven by continued success from our strategic shift and our relentless focus on operating efficiency. Adjusted free cash flow is nearing breakeven and came in at $1.7 million used in the quarter. Free cash flow adjusts for cash related to our merchant cash advance business and includes our capital expenditures. We continue to actively manage our share-based compensation and related payroll taxes, which were $14 million or 5% of revenue for the quarter versus $11.7 million or 4% of revenue in the same quarter last year. We continue to manage equity usage prudently. With respect to capital allocation and our balance sheet, we completed our fiscal 2026 normal course issuer bid of approximately 9 million shares, returning $85 million back to shareholders in our first quarter. In addition, we opportunistically used $30 million to repurchase our stock in the open market to fund future RSU settlement obligations, limiting share dilution upon settlement. Excluding these two items, which were elective, our cash balance would have increased over the previous quarter. We ended Q1 with approximately $448 million in cash. Approximately $200 million remains under our broader Board authorization to repurchase up to $400 million in Lightspeed shares, and we continue to be opportunistic on further share repurchases. Our balance sheet remains healthy and positions us well as we continue our strategic focus. With respect to our efficiency market, we continue to retain revenue, with location churn largely offset by continued strength in payments penetration, capital revenue growth, and higher ARPU. It's worth highlighting that payments penetration for these markets is 35%, below our global average, which we view as a meaningful opportunity. We believe there's strong potential to increase adoption amongst these customers. Now turning to our outlook. Despite a fluid macro environment, we maintain strong conviction in our strategy and ability to execute. This financial outlook is consistent with our targeted 3-year gross profit CAGR of approximately 15% to 18% and our 3-year adjusted EBITDA CAGR of approximately 35% that we presented at our Capital Markets Day in March. For the second quarter, we expect total revenue in the range of approximately $305 million to $310 million, total gross profit growth of approximately 14% year-over-year, total adjusted EBITDA to be in the range of approximately $17 million to $19 million. For fiscal 2026, we continue to expect revenue growth of approximately 10% to 12% year-over-year, gross profit growth of approximately 14% year-over-year and adjusted EBITDA to be in the range of approximately $68 million to $72 million.

Good to see the results kind of trending in line with the strategy here. The question I have around subscription revenue growth of 9%, I think subscription ARPU, kind of 10% growth. It sounds like the pricing initiatives from last year were a part of that incremental growth versus, let's say, location growth. So I'm wondering if you could just speak to how much of an opportunity that you might still see within the pricing metrics that you have when you think about incremental new signings as well as maybe some of the backlog?

Thanks for the question. So yes, we view the 9% software growth in Q1 as a solid result. We saw a 7% last fiscal year. Ultimately, subscription revenue is tied to new customer additions, where we showed location growth in our growth engines this quarter, really excited to show that momentum, as well as product adoption, and both of these are trending in the right direction. So we did see the impact of price increases this quarter from last fiscal year that are rolling through this fiscal year. But that said, our growth engines are growing. We're seeing stronger ARPU, and we made large investments in sales and product. And so we will see software growth continue to grow. It won't be overnight, but we're definitely headed in the right direction.

And then just a quick follow-up, in particular, on the new location growth. Also very good to see that 5% year-over-year. You did talk about, I guess, expecting that to continue to ramp towards, let's say, a 10% growth rate over time. I'm wondering if you have any kind of contextual expectations about the duration it might take in order to achieve kind of the double-digit growth rates there?

The compound annual growth rate is projected for three years, with location growth expected to reach between 10% and 15% by fiscal year 2028. We are off to a robust start in our growth initiatives, and this marks the first quarter of our transformation. We've ramped up our sales team, currently having 130 out of 150 outbound representatives in place, many of whom are working towards achieving full quota. We're also noticing a positive impact on inbound growth from our outbound and vertical brand marketing efforts. We're optimistic about the growth in locations. In addition to the investments we're making in our sales team, we are significantly investing in product and technology within our growth engines, which will be supported by efficiency gains and funding from the efficiency market. These efforts are expected to pay off in the upcoming quarters, leading to further growth in locations.

Ben, can we go to the next question, please?

I just want to go back, maybe we could revisit some of the upside drivers for Q1, both on revenue and gross profit. And then just in terms of the shape of the year, I think last quarter, at least with how the year had been laid out, we're kind of building to a progressive acceleration over the course of the year and then just based on the Q1 outperformance and keeping kind of the full year guide where it is, it's just a slightly different shape with kind of what's implied deceleration-wise off of Q1. So just curious if there was anything unsustainable in the first quarter? Or if maybe now there's maybe a bit more embedded conservatism for the balance of the year? That would be helpful.

Yes. Thanks for the question, Trevor. I'll take that one. Q1, you're right, we did see solid execution, and that's what you're seeing in the results. Our strategy is really starting to pay off. But with respect to the guide, what we need to keep in mind, as Dax just mentioned, is we're very early days in our transformation. We're 4 months into the year. And as Dax said, we have 130 of 150 reps in seat, but less than half of them are fully ramped. So we just want to make sure that we give them the time to ramp before we start to increase the guide for the year. The guide for the year is a range. While we're confident we're trending at the high end of that range, we're not going to increase the guide at this time. Outside of that, really no one-time things in Q1. I mean, Dax talked a little bit about the price increase which we did midway through the year last year. You're seeing the full benefit of that in Q1. But as our outbound reps continue to ramp, we expect this solid execution to continue.

Okay. I appreciate that. And then just any color on kind of how quarter-to-date trends have looked in July on some of the key drivers would be helpful.

Yes. We did see the macro stabilize in April in Q1, and we continue to see that in July. And then from an internal execution perspective, we're really excited and encouraged by what we're seeing. July continues to look a lot like the first quarter, and we're excited about the execution internally as well.

Can you talk about the same-store sales dynamic in retail versus hospitality? Was there a meaningful difference there? Or were they similar?

Thanks, Thanos. Yes, the same-store sales in European hospitality were better than North America retail. We actually saw double-digit growth in European hospitality and low single-digit growth in North American retail. A part of that in Europe, however, is also FX. But from an FX neutral perspective, we did see stronger growth in same-store sales in Europe. But outside of that, no other major differences in both of those markets.

Great. And then in terms of the vertical marketing strategy, any specific verticals you'd call out where that's especially resonating? Or would it just be across your main key verticals you've talked about historically?

Yes. We have eight key verticals in retail. Some examples of trade shows we've participated in include running shows and outdoor sports shows. We are connected with the brands through NuORDER in these verticals. We're promoting Lightspeed solutions from both the merchant and brand perspectives, and these trade shows bring everything together. This approach is very beneficial for Lightspeed, especially as we also take part in trade shows for European hospitality. Additionally, we organized Lightspeed Edge, a customer event that is one of many planned for both retail and EMEA hospitality. By engaging with thought leaders, influencers, and potential customers in these markets through vertical brand marketing, we create a strong impact for both our outbound and inbound channels. This strategy will drive our growth in customer locations over the next few quarters.

Congrats on a great quarter. Dax, a 2-parter on AI. I just wanted to ask how you expect AI to impact retail and hospitality at a high level? And then second, what is Lightspeed's AI strategy?

Yes. AI is definitely contributing to our efficiency improvements in the first quarter and building on the progress we made last fiscal year. At Lightspeed, we primarily use AI to automate repetitive tasks and gain business insights. We've implemented AI in our support systems, with nearly 70% of chat interactions now handled by AI. It's also being utilized throughout our sales processes as we expand our sales team. Our development teams are leveraging AI tools to improve efficiency and speed. We've experienced significant benefits from these initiatives, with more advancements on the way. On the product front, we released various AI features throughout last year and have a rapid development pace. Examples include our AI Web Builder for e-commerce, generative AI applications, and AI-driven tools for hospitality such as Benchmarks & Trends, plus features to enhance photos, configure menus, and write product descriptions. Overall, we aim to save merchants time. Ultimately, retailers and restaurateurs enter these businesses out of passion for their craft, not to manage administrative tasks. AI helps eliminate some of these repetitive duties, allowing them to focus on adding value where it matters most for their businesses.

Great. So Dax, I think you mentioned earlier that for the investment behind sales, you're already at 130 of the 150. You also mentioned some of the timelines to get productive and many of those are ramping up, and it takes about 6 months or so to hit those quotas. I was wondering if you could talk a little bit about those quotas, meaning, are we talking about locations per month? And if you could put some rough numbers around what the expectations are? Is it based on volume broadening? Is it based on an expected lifetime value or gross profit levels or any other metrics that you could put around what the expectations are on a per-sales representative basis?

Yes. Outbound is a highly effective strategy for us to reach and secure those high GTV customers. We anticipate robust unit economics and payback ratios in our growth markets for fully ramped representatives. I'll let J.D. explain what we expect from each ramp.

Yes, ultimately, every single outbound rep is measured in a very diligent way. We look at number of demos booked, number of demos attended, and bookings per month. And then we triangulate the bookings back to the cost of the motion. And what we're really pleased to see is that we continue to see the same strong payback ratios that we saw last year. Even if we're hiring a lot more reps this year, we're very, very focused on that payback and efficiency metric, and we continue to see the progress there. So we're very, very enthusiastic about the progress we're making across the board, not just in EMEA hospitality, but also in retail with their outbound efforts.

Perfect. And as a related follow-up, can you just recap some of what those expected either payback periods are and/or the LTV to CAC levels that are sort of expected from this initiative?

Yes. We've seen last year, high single-digit, low double-digit payback ratios. So months payback on the cost of the motion, and we continue to see that when we look at ramp reps. Best-in-class as far as what we see in SaaS. And so that's what we're hyper-focused on, and we continue to see that.

Good results here. I just wanted to ask for you, Dax. Just thinking about products and product velocity. I know it's a big theme for the sector right now. What products are attaching well from the last 12 months? What are you excited about next that's coming out? I'm just curious about what's on the product pipeline.

We are very enthusiastic about developments in both retail and hospitality. In retail, we have achieved considerable success through insights that help businesses manage inventory effectively to increase profitability. Our approach focuses on both in-store management and the ordering process. A standout feature of the Lightspeed Retail offering is our integration with NuORDER, which is beginning to show significant benefits within our eight key verticals, as this end-to-end inventory solution is unmatched by any competitor. You can expect to see increased momentum in our product roadmap related to inventory management at both the store level and through ordering solutions for brands. This quarter, we made several announcements regarding inventory and NuORDER, enhancing our appeal to prominent brands and major retailers, indicating further developments on the retail front. With our extensive data, we are poised to deliver more AI-powered insights, leveraging Lightspeed's unique position within the ecosystem. On the hospitality side, we are proud of our comprehensive suite of tools. Lightspeed Tableside provides excellent customer service, while our Kitchen Display System (KDS) manages kitchen operations, and our Pulse app handles management tasks. We are building on this unique combination of features, and we have exciting AI insights and further enhancements planned for the leading pan-European hospitality solution we offer. Our goal is to strengthen our market lead with these innovations.

Great, that's good. Just a quick follow-up. I know Tim asked about the sales growth and productivity. I'm curious, is there any update or thoughts on leveraging indirect sales or selling through partners?

Yes, I believe partnerships are the third essential component. Lightspeed has a strong history in inbound sales, and while we're heavily investing in growing outbound sales, inbound is still seeing growth. Our outbound initiatives and vertical brand marketing have positively impacted inbound, resulting in a 15% increase. Partnerships are crucial for the future, and I expect them to significantly contribute to our overall revenue in the coming years. I’ll allow J.D. to provide more details on our efforts in this area.

Yes, to build on Dax's answer, we've always actually been strong in partnerships since day 1 when the product was originally built on the retail side, that was a big channel for us. And here, we leverage two types of partners. So we have referral partners that send leads to our team internally that we close, and we also have a strong reseller network, particularly in Europe. Obviously, a strong focus this year is on outbound given our ability to target high GTV/ICP customers, but you can expect that we'll continue to see growth as well from partnerships, and that will be a story for years to come too.

Great numbers on GTV growth, and it's the best since around Q2 2022. To understand the balance driving this growth, it appears to be a combination of improved same-store sales, increased outbound sales that also enhance inbound sales, and potential cross-selling from NuORDER. To clarify our understanding, is there a specific channel that is contributing more to incremental GTV than the others?

Well, I think overall GTV grows when we grow locations. And so that's, I think, one of the key drivers. We grew GTV 4% overall, but in the growth market, we grew GTV 12%. So in our growth engines, where we're adding locations and where we're investing, GTV is growing even faster. I'll let Asha dive a little bit deeper into some of the dynamics around GTV.

Yes, thank you for the question, Dominic. To build on what Dax mentioned, the growth in gross transaction volume is mainly coming from our growth portfolio due to our success in expanding locations. In comparing North America retail to EMEA hospitality, EMEA hospitality is experiencing stronger growth, particularly in same-store sales. However, we've also had several retail verticals perform well this quarter. For instance, we are witnessing bike sales return to positive single-digit growth after several quarters of decline. Additionally, toys have had a strong same-store sales performance in retail. Many verticals in North America retail are thriving, but a significant portion of our growth is also attributed to EMEA hospitality.

Yes, certainly, there's always going to be competition in the market. We're hyper-focused on our particular verticals, the 8 key verticals in North America retail and the key cities in Europe where we're expanding our European hospitality customer base. I think we have a good differentiated position in these markets, and we're going after a particular customer that's higher GTV than a lot of these competitors. There's a lot of names in the space, but there's a lot of different segmentation in retail and hospitality. And so that's what we built our strategy on, and that's where we have the ability to have real customer wins.

First question, you mentioned in the growth markets that ARPU outpaced the broader average. How about software ARPU? How is that trending? And I guess, related to that, your 9% software revenue that you printed, how do you think about how that evolves over the coming quarters in the context of your 10% to 12% total revenue guidance?

Yes. Thanks for the question, Kevin. So yes, software in the growth portfolio, software ARPU was higher than in the efficiency or the rest of the world portfolio just by virtue of the fact that the primary product in our growth portfolio are our flagships in EMEA hospitality and North American retail, and that's where all the product innovation is happening. And so when you think from a software module attach perspective, we're seeing much higher software ARPU in the growth portfolio. But consolidated, we're seeing a 10% growth year-over-year, which is still very healthy. From a software growth perspective, the 9% year-over-year, we're very pleased with that growth. We do expect that growth to continue to improve. We just need to keep a few dynamics in mind, such as price increases midway through the year last year. But at the same time, we're expecting outbound to continue to ramp. So we expect software growth to continue. It's not going to happen overnight, as Dax mentioned earlier, but over time, absolutely.

The second question, you mentioned double-digit same-store sales growth in Europe, FX might have helped there. Just on your overall top line revenue, 15%, do you have a number of what your revenue growth would have been on a constant currency basis?

Yes. It was, I would say, a couple of points under that. It wasn't too much of an impact because European hospitality, when you think about 100% of the Lightspeed revenue is not the most significant part. But it definitely did help the top line. So I would say FX is a couple of percentage points on the 15%.

I wanted to take a moment to ask a broader question about how you view growth and profitability, particularly your emphasis on profitable growth. It seems we are entering a time of greater certainty regarding regulations, particularly with tariffs, and possibly a more favorable macroeconomic environment over the next year. I understand your intense focus on profitable growth, but how do you balance that with the improving demand situation? Essentially, how do you ensure that you're maximizing your opportunities?

Yes, that's a great question. Our strategy is crafted to ensure we maximize every opportunity. We are making significant investments to enhance our outbound efforts, which will take time to yield results. However, we are already seeing some progress and are also investing in our products to strengthen our competitive advantage. I believe you are correct that the macro environment is stabilizing, despite some ongoing volatility and the impact of tariffs. We have observed retailers in our customer base implementing their own strategies, often utilizing Lightspeed NuORDER to manage their suppliers since the start of the year. Our growth strategy is quite aggressive, and the results we are showing demonstrate our ability to invest in growth areas supported by our efficiency in operations. This year alone, our product and technology investments will exceed $50 million, and we have ramped up our sales organization at an unprecedented pace in our history. Although these initiatives are new for Lightspeed at this scale, they will instill confidence in our future growth plans. We are in the first year of a three-year transformation and are fully aware of the importance of capturing demand and expanding our market share and customer locations.

A lot of questions on growing the rep count. I'm just wondering, when you get to the 150 and they are performing at your targeted levels, does that get you into that 10% to 15% location growth? Or would you need to build on that team?

Yes, the 10% to 15% compound annual growth rate is based on a three-year period. We anticipate that our current 5% at the end of Q1 will increase to the 10% to 15% range by fiscal '28. As our representatives ramp up, you will observe an acceleration in customer location growth and the overall growth figures.

Yes. Thanks, Todd. I'll take that one. So the penetration rate at the end of Q1 or in Q1 was quite healthy. We saw a 6% growth year-over-year. That's really a result of solid execution on our part. Every eligible customer must take payments now, as you know. But also, payments penetration is a function of what's happening in the underlying macro. And so the payments penetration rate, rather than being a barometer for performance, is more an opportunity metric. Like that's the opportunity in front of us, what's not yet monetized. But we're very excited about where payment penetration is going. We expect that to march upwards to continue, depending on what's happening in the underlying macro. The rates vary quarter-to-quarter, but very, very confident in an upward trajectory here.

One thing to add is that in our efficiency markets, we're only 35% penetrated due to non-competes. And so we are going to focus on growing the payment penetration in that market. And so there's no real impediment to getting to the corporate average there. I think that will get some attach from us and drive the overall rate.

Perfect. Can I stay on that topic? Payment penetration is more of an outcome, and 35% is clearly a starting point that can be increased. How should we consider driving that higher on a quarterly basis? Should we think about milestones, such as when non-competes expire, leading to a significant change? How do you see that developing this year and beyond?

Yes. Thanks for the question, Raimo. I think we should view it as a gradual improvement from quarter to quarter. There will be non-competes expiring, more opportunities in certain regions compared to others, and the dynamics of the underlying GTV. So, from a modeling standpoint, we should expect gradual improvement each quarter.

Yes, I covered some of our product initiatives. These are designed to help our merchants, whether they are in retail or dining, save time on operational tasks. For example, we're utilizing AI to create websites within our retail product and enhance photos and product descriptions in the hospitality sector, as well as streamline the often tedious process of menu configuration. We also offer a tool called Benchmark & Trends for restaurants, which uses AI to help them compare their menus, results, and staffing with other local restaurants. This ensures they have appropriate pricing and staffing levels. Overall, I believe these advancements will revolutionize how retailers and restaurateurs run their businesses, giving them greater leverage and profitability while allowing them to focus less on administrative tasks and more on high-value activities like product and menu curation, where they can truly excel as entrepreneurs.

With respect to your wins in your target markets, can you give us maybe a sense of the mix of those wins from newly formed businesses versus established merchants? And on the latter here, is that still largely displacing the incumbents?

Yes, thank you for the question, Richard. The trend remains quite consistent with our response from last quarter. In terms of displacements, we observe a distribution of about one-third each: one-third from legacy providers, one-third from more modern peers, and one-third from new business formations. We expect this trend to persist as we maintain our focus on key verticals in North American retail and European hospitality.

Yes. Thanks for the question. We've completed our NCIB, our normal course issuer bid, for this fiscal year. That was done in the first quarter. We returned about $86 million to shareholders in the quarter. With respect to future buybacks, we're going to continue to remain opportunistic. There are other avenues with which we can continue to buy back. Outside of an NCIB, we're going to remain opportunistic, and we still have $200 million left on our Board authorization. So we'll have a look at what's happening in the market and make sure that we take advantage of the opportunity when and if it arises.

Thank you, Van. Thanks, everyone, for joining us today. If anyone has any further questions, please reach out to myself, I'll be around all day. And we look forward to speaking to you at our next conference call. Have a great day, everyone.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.