Lightspeed Commerce (LSPD) Q1 2027 earnings call transcript

Thank you operator and good morning everyone. Welcome to Lightspeed's fiscal Q1 2027 conference call. Joining me today are time for Stolea, Lightspeed's founder, and CEO, Ashima. It's the TFO and Gabriel Benavides, Lightspeed's chief revenue officer. After a prepared remarks from Dax Nasha, 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 with different material leave from those projected.

Certain material factors and assumptions were applied in respect of conclusions, forecasts, and projections contained in these statements. We undertake no obligations to update these statements, except it's required by law. You should carefully review these factors, assumptions, risks, and uncertainties in our earnings press release issue today. Our first quarter of fiscal 2027 results presentation available on our website, as well as in our filings with US 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. Reconciliation between the two can be found in our earnings press release, which is available on our website. I'm Cedar Plus, and on the SEC's EDUER system. Note that because we report that US dollars all amounts discussed today are US dollars, unless otherwise indicated.

With that, I will now turn the call over to Dax.

Good morning, everyone, and thank you for joining us. Before we get started, I would like to welcome Lightspeed's chief revenue officer Gabriel Benavidez on the call today. Six months into a new role, Gabe is having a tremendous impact on our go-to-market efforts. He's already signed one of the largest partnership deals in company's history, brought on strong new talent, and restructured our entire go-to-market team.

I thought it would be helpful to have Gabe in our Q&A session so you can hear about our go-to-market momentum directly from him.

Fiscal 2027 started off strong for Lightspeed, but the companies surpassing its revenue outlook. In Q1, on an organic year-over-year basis, we delivered revenue of $323 million, up 17%, and gross profit of $139 million, up 12%. Just as EBITDA of $18 million came in within our outlook range, software growth accelerated to 8%, and payments penetration was very strong at 44%, up from 40% a year ago on an organic basis. Our performance was driven by strong execution in our growth engines, where we saw total revenue up 20%, GTV up 14%, customer locations up 10%, and payments penetration as 49%, up from 45% last year.

Thanks to our healthy performance and growing confidence in our strategy and operations, we returned approximately $86 million through share repurchases in the quarter as part of our commitment to return capital to share. Last year, we launched our refresh strategy, sharpening our focus, and concentrating our product and go-to-market resources on our two growth markets, retail in North America, and hospitality in Europe.

With the foundations of that transformation now firmly in place, year two is about pressing our advantage and executing with even greater discipline to drive stronger results. I'll walk through the progress we made this quarter and lay out some of the initiatives we're driving to accelerate our performance further.

As always, I'll organize my comments around our three stated priorities. One, growing customer locations in our growth engines. Two, expanding subscription ARPU and three, improving adjusted EBITDA and free cash flow.

Let me start with customer locations in our growth engines. Total growth engine customer locations increased by approximately 10% year over year to a total of 99,000. Our strategy to create durable growth by focusing on higher quality agreements and ICP customers extends to our partner ecosystem.

In Q1, a legacy white label partnership agreement was terminated, resulting in the removal of approximately 500 low R per locations from our customer base. Total customer locations, including growth and efficiency markets were 146,000 at the end of the quarter. After giving effect to the divestiture of the non-core, observed US hospitality product line.

We remain focused on winning more sophisticated multi-location SMBs with complex needs. The customer's best decision to take advantage of light seats full software suite. Examples include adorn boutique, which required advanced inventory management across multiple locations in Texas. And synergy sport square, which operates seven locations and was already a user of new order by Lightspeed before recognizing the benefit of the Lightspeed POS with wholesale built right in.

Attracting existing new order customers to the Lightspeed POS has become a leading driver of new retail customer locations. For our recently expanded outbound sales teams.

Also during the quarter, we're pleased to add brands, including Lafayette 148, Slowtide and Head Golf to new order. Providing them with a modern collaborative wholesale experience while enhancing their product discoverability across thousands of Lightspeed retailers.

As we continue to expand the number of brands on your order, we deepen the value of our Lightspeed wholesale network for retail customers by making it easier to discover and purchase from the brands that matter most to them, all within a single platform. It strengthens our flywheel, more brands attract more retailers, and more retailers attract more brands.

In Europe, we continue to build on our leading position in hospitality driven by a product offering and go-to-market motion that we believe are unmatched. We had a 19 locations of the Dutch Chain launch prototype, which needed a platform that could support table service, bakery and kitchen workloads while centralizing management.

Our product strength was reinforced by our robust partner ecosystem and the advantage that carries across our European markets. In the UK, we welcomed 17 locations of Africana, Perry, Kitchen and Grill, a growing African inspired restaurant chain. Golf also remains a strong vertical for Lightspeed. This quarter, we signed Encore Leisure Group, 60 locations across the US, and the prestigious Royal Latem Golf Club in Belgium.

Combining our two flagship platforms, Lightspeed Retail and Lightspeed Restaurant allows us to address the highly lucrative and significant growth market. High quality customer growth remains one of our top priorities, and we've launched several new initiatives to sharpen how we target onboard and support the right customers for Lightspeed.

The first is improving the seller productivity. By modernizing our go-to-market systems and processes, rolling out better training and enablement and optimizing our organizational structure, we expect to increase seller productivity, which will allow us to drive revenue growth without scaling costs at the same rate.

In addition, we are refreshing our partner and channel strategies. Strengthening and growing our ecosystem will help drive efficient revenue growth by expanding product availability, driving more value for our customers, partners and Lightspeed, while improving retention and lowering trend.

Turning to software revenue in our group, an organic year over year, software revenue growth accelerated from 6% last quarter to 8% this quarter. It was encouraging to see software growth accelerate this quarter driven by continued efforts on upselling, sharper focus on ITP customers, a stronger end-to-end customer journey, and a continued stream of new software features.

In this quarter, we continued to deliver new innovations across our flagship platforms of Lightspeed retail and Lightspeed restaurants, which is key for long-term software, our growth.

In retail, we launched more AI enhancements, enabling our merchants to build blogs and websites faster and drive more traffic to their sites.

Our new Playbio integration saves time building personalized marketing campaigns. And we simplified the omni-channel experience, enhanced Lightspeed scanners in store checkout, and rolled out better visibility into orders revenue and the most popular SKUs on new order by Lightspeed.

In hospitality, the latest upgrades to Lightspeed AI allow merchants to simply ask a question and get instant reports, charts and insights about their restaurant, as well as manage operational checklists. And for multi-location restaurants, our new locations manager manages menus and sync updates across every venue in just a few clicks.

Our AI features have been well received by our customers. Of all the latest releases on Lightspeed restaurants, Lightspeed AI is tracking as one of the fastest adopted by users, signaling an opportunity to expand agent capabilities for restaurants.

We are moving away from AI that just answers questions to specialized agents that can help run your business, to AI that can interpret and analyze data to actively suggest actions that can grow revenues or cut costs, such as reordering inventory of popular items, marking down inventory that is not selling, and switching suppliers when prices increase.

Imagine that our merchants could hire someone with decades of knowledge about what makes their business succeed. We have that data and that knowledge, and our AI improvements are making it more accessible to our customers. We believe no one is better positioned to deliver AI-powered solutions that can help our customers run and grow their businesses. Our SMB and mid-market merchants' priorities to build better businesses, not build their own software.

Now we're turning to profitability. Ash will take you through the numbers in detail, but overall, I want to stress that in the second year of our transformation, we are very focused on improving profitability, and in particular, increasing free cash flow.

Our revenue growth remains strong to delivering on our profitability goals come with sales and disciplined execution. To that end, we have undertaken some key initiatives. We are continuing to rationalize all of our costs across the organization. The deployment of AI tools and a more focused strategy have allowed us to concentrate our efforts and improve productivity. This has led to lower headcount requirements, particularly in product development.

We've also stepped up our efforts to monetize our back book, which was a driver of our improvement and maintenance administration, which reached 44% in Q1, up from 40% a year ago on an organic basis. Within our growth engines, payments penetration was even higher at 49%. Driving more revenue from existing customers is a significant opportunity to scale the business efficiently.

The entire executive team and I are focused on improving our profitability and cash flow, which we see as essential to creating long-term shareholder value. With that, I will turn it over to Aksha.

Thanks, Aks, and good morning, everyone. Our first quarter results reflect a strong start to fiscal 2027. I want to highlight three key trends we saw in the course. First, the underlying drivers of profitability were strong. Software and payments growth margins continue to improve. Software first margins of 83% were up year over year from 81% in the same quarter last year, and transaction-based growth margins grew to 32% from 31% on an organic basis, or 29% a year ago as reported.

Second, our efficiency markets delivered stronger growth to support. Both markets saw organic revenue growth in the high single-digit range, which helped to improve our overall growth profile.

Finally, payments penetration was 44% this quarter, driven by healthy updates from new customers and continued conversions of our backbone. Within our growth engine, payments penetration was up 49%. Our growth engines represent approximately 75% of revenues, and that makes shifts as well for long-term payments penetration. Overall, we believe there's significant runways for payments penetration to continue to grow in the coming years.

I will discuss the quarter in more detail, and then provide our outlook for Q2 and fiscal 2027. For year-over-year comparisons, I will reference organic figures that normalize the impact of the observed divestment.

Total revenue grew 17% to 322.7 million, exceeding our outlook for organic growth of 10 to 14%, driven by growth in high GTV customer locations, higher software output, and increased year-over-year payments penetration. Notably, revenue in our growth engines increased 20%. Software revenue for the quarter was 95.4 million, up 8% year-over-year and up 12% in our growth engines. Software R2 increased 6% year-over-year, up from 4% last quarter.

Software growth accelerated versus last quarter, driven by a higher-location count in our growth engines, successfully landing high GTV customers without more software and a continued focus on upsells across our back book. We also saw much larger makes of annual yields this quarter versus the same quarter last year. Transact-based revenue for the quarter was 214.5 million, up 20% year-over-year.

Growth payments volume also grew 20% year-over-year. GTV as a percentage of GTV came in at 44%, up from 40% in the same quarter last year on an organic basis.

Our high margin capital revenue had standout performance and grew 56% year-over-year. Customers who take live speed capital exhibit significantly lower churn and generate higher life-time value. Growing this high margin offering is a key priority for the business.

Overall, GTV grew by 9% to 25.7 billion. We saw positive same-store sales overall with particular strength and retail. Within our growth engines, GTV grew by 14% year-over-year.

Total monthly our pool reached approximately $676, up 13% year-over-year, driven by both higher software and payments monetization. With respect to our efficiency market, revenue growth was in the highest single digit range supported by strong payments adoption.

Payments penetration in our efficiency market was 32% in the quarter, while below the overall business, which gives us meaningful rules to grow payments revenue.

Turning to profitability and operating leverage. For year-over-year comparisons, I will continue to reference organic figures that normalized for the impact of the observed investment.

Total growth profit for the quarter grew 12% year-over-year, driven by strong, and transaction-based revenue. Total growth margin for the quarter was 43% compared to 45% a year ago on an organic basis. The decline was partially due to mixed, as transaction-based revenue increased to 67% of revenue from 65% in the same quarter last year. In addition, hard work was margins declined due to supply chain constraints that resulted in higher freight costs.

This is not a structural issue, and we are implementing programs to improve our hardware supply chain management. We expect hardware margins to improve in the second half of the fiscal year.

Software growth margin was 83% up from 81% a year ago. This improvement was largely driven by AI resolving 80% of our support ticket, reducing our cost of support and service delivery and driving efficiency.

Growth margins for transaction-based revenue were 32% up from 31% a year ago on an organic basis. This improvement reflects increased payment penetration in our international markets, where margins exceed those in North America, and growth in our light-speed capital revenue.

As we convert customers to light-speed payments, we increase our overall net gross profit dollars, and in the quarter, we saw transaction-based gross profit grow by 23% year over year.

For operating expenses, adjusted even though, adjusted for cash flow and share-based compensation, the year-over-year comparisons are on and as reported basis.

Total adjusted research and development sales and marketing and general and administrative expenses grew 7% year over year. This is primarily driven by investment in fields and outbound sales. At the same time, we are taking action to improve productivity.

In addition to rationalizing headcount, we are standing ourselves onboarding programs for certain customer goals, which will fully automate onboarding and improve the overall merchant experience. Initial efforts have already delivered improved conversion at lower costs, and we are scaling this program further.

Audacity with the in-the-quarter was 17.5 million, up from 15.9 million in Q1 last year, driven by continued execution against our strategic shift and our focus on AI and automation to improve operating efficiency. It is noteworthy that divesting observe means that our fixed costs are absorbed over a lower revenue base. This impact will be all set by our growing revenue base, along with our efforts to reduce costs.

As a percentage of gross profit, adjusted even though was 13%. Our fiscal 2028 goal is for adjusted EBITDA to be at 20% of gross profit.

Our net loss was $2.4 million, or a loss of $0.2 per share, compared to a net loss of $49.6 million, or a loss of $0.35 per share a year ago, thanks to improved gross profit and having now fully amortized our acquisition-related intent.

Adjusted free cash flow was negative $4.4 million in the quarter, which was impacted by working capital movement. The prior year period reflects a full quarter's contribution of observed to cash flows, whereas the current period reflects observed only unto its divestiture on April 28, 2026. We remain confident that the actions we are taking to grow quality locations and revenues while finding significant operating efficiencies have us on-track to meet our three-year free cash flow targets of $95 million for fiscal 2020.

For fiscal 2027, we expect free cash flow to show significant growth over fiscal 2026. We continue to actively manage share-based compensation and related payroll taxes, which were $12.7 million for the quarter, versus $14 million in the prior year period, and declined as a percent of revenue, versus Q1 last year, from 5% to 4%, with respect to capital allocation and our balance sheet.

Our balance sheet remains very healthy. We ended Q1 with approximately $372 million in cash, down from $454 million in March. That reduction was driven by discretionary action to return capital to shareholders and reduce the diluted impact of share-based compensation. In the quarter, we spent $66 million to buy back and cancel 7 million shares, reducing our issue and outstanding share count by 4% year-over-year. We also used $21 million to repurchase shares in the open market to fund future share award settlement obligations, which limits the pollution upon settlement.

In addition, we received approximately $19 million from the sale of observed in the quarter. We will continue to be opportunistic with our remaining share-by-back authorization.

Approximately $150 million remains under our broader board authorization to repurchase up to $400 million in lengthy shares. Aside from the potential share-by-back, our largest use of cash will be the continued growth of our merchant cash advance program.

There were $160 million in MCA's outstanding at the end of the quarter, and we intend to continue expanding this high-margin program over time. As we grow the program, we remain disciplined in our underwriting and default rates of state consistency in the low single-digit range, which gives us confidence to continue expanding.

Overall, our balance sheet remains strong and positions as well to continue executing, again, our strategic priorities. Now on to Outlook. For fiscal 2027, our existing Outlook remains unchanged and consistent with the company's three-year target for gross profit, adjusted even though an adjusted free cash flow presented in our Q4 earnings release in May 2026.

For fiscal 2027, we expect total revenue of $1.225 billion to $1.265 billion representing organic growth of 12 to 15%. Total gross profit of $565 million to $585 million representing organic growth of 12 to 16%, adjusted even though of $75 million to $95 million.

For Q2 of fiscal 2027, we expect total revenue of $316 million to $326 million representing organic growth of 12 to 16%. Total gross profit of $141 million to $146 million representing organic growth of 10 to 14%, and adjusted even though of 20 to 25 million dollars.

With that, we will now take your questions.

Thanks. Thanks for the question, Dan. You know, when we think about subscription revenue, you know, super happy with what we're seeing there going from six to eight percent, there are lots of puts and takes in, you know, in the RPU numbers, as you can imagine, timing the type of locations we're bringing on board. As we're bringing more and more larger, large GTV locations that take more of the sweet lights we had to offer, we should continue to see that software RPU growth, you know, align better with the total revenue acceleration on software.

Yeah. I think like when it comes to the product, you know, we're being pretty judicious on what kinds of models we use for different kinds of tasks. You do not need to use a frontier model for a lot of the things that like V to AI is doing in retail and hospitality.

And so, and there's a lot of options now. The team is doing a lot of experimentation, and it's really helping us manage costs that we can make sure that we have great software uplifts from our AI tools that we have planned as we build more agents that are specialized in our product to handle everything from inventory to operations management.

But yeah, you do not need high token cost frontier models to be doing all of those kinds of tasks. You can get great insights and actions out of, you know, that's great insight.

Yeah. I think in hospitality where we launched our, you know, launched our AI products first, this is the fastest uptake of any module that we've ever seen in our history. We have a really high percentage of folks adopting the AI tools. If you think about merchants in our SMB to mid-market space, the ability for them to query the product for the charting the insights, the reporting that they need rather than try to understand a reporting interface or build custom reports. I mean, it's very appealing.

And so that's very encouraging because, because adoption usage means that we have in the future pricing power and we can, you know, we can add more AI and agent tools across our pricing tiers. We haven't done that to date, but we're gathering the data to be able to do so.

Yeah. Thanos, thank you for the question. I'll take this one. This is Gabe Benovita. It's having to be your chief revenue officer at Lightspeed. A couple of things. As Dax mentioned on one side, we've already welcomed new sales leadership to Lightspeed that brings with them tremendous experience and depth of expertise in just right areas. As regards our sales capacity, really, our capacity build out is largely behind us. And our growth ambitions are largely within reach with our existing capacity as long as we successfully pivot to a real focus on seller productivity, which is where we're spending a lot of our time in focus right now.

Yeah, absolutely. Another great question. Really two big parts to take note of one. Deeper collaboration with our biggest and most important partners. We recently announced a deep integration with Meta and the partners with Clavio being extended as well. And maybe more to the point, a real focus on the monetizing the connectivity layer in our tremendous base of customers that creates bidirectional monetization opportunities for Lightspeed and our great partner ecosystem. And of course, it directly creates greater customer value as well.

Dax, in a prepared remarks, we mentioned signing the largest, one of the largest deals in our partner history, this past quarter. And that was directly related to that second part of the strategy refresh.

Yeah. So we added approximately 1,300 net new locations in the quarter. The first quarter is a bit seasonally a lighter quarter than, for example, Q4.

And we had a removal of some locations from a white label agreement that we terminated. Yeah, I think we're focused primarily on quality locations. I think there's the seller productivity efforts. But there's also how are we getting the right locations for four light speed that's a good fit with our product lines. And so you see location growth still at 10% within our CMD goal of 10 to 50% as a three-year cagger.

But you also see soft growth growing, right? So it's the higher quality locations that we're focused on.

Yeah. Thanks. Thanks for the question. You know, we are seeing some compression hardware margins coming from, you know, the temporary supply chain constraint that we mentioned. We have put some guardrails in place and we genuinely believe that's going to bring those margins back to more normalized levels in the back half of this year. I think what we need to keep in mind is that the hardware investment, the way we look at that is a mean to a specific end, you know, expanding high margin payments and software.

It is working. We saw GPV go 20% organically, pay pen, reach 49% in our growth engine just an all-time high for us. And more importantly, our course software gross margins expanded to 83%. So we, you know, we see these hardware investments as one time. We do expect the margins to improve in the back half of the year as these guardrails that we put in place, you know, start coming to fruition.

But overall, we really don't see hardware capping long-term margins. It's only about 4% of our revenue. And so, you know, the programs that we're launched that we've launched will improve these economics in the back half of the year.

Yeah, great question. I want to share too many specifics around, you know, targeting or commissions. We've got a pretty broad audience in the call. But I can tell you, as we shifted the focus to seller productivity, the early signs are quite encouraging. We're already seeing, for example, inner pipeline deals of a size and scope emerge that we haven't really seen before, without breaking the great velocity that we tend to have here at life speed as well.

Yeah, thanks, Tinson. No, you know, what we are, like we mentioned in the prepared remarks, we're seeing a very strong macro, pretty solid macro across North America retail and EMEA hospitality. We saw total GTV of 14% in the growth engines. The same source sales. If I double click on retail, our largest verticals, bikes, sport and goods, golf jewelry, you know, all had double digit or close to double digit growth year over year. When we look at EMEA hospitality, you know, we also see very solid growth. We saw the, you know, the Euro temper a little bit in the towards the end of the quarter. I mean, you're hearing that from others as well. But really nothing that concerns us.

We're feeling really good about about the macro.

Yeah. Thanks for the question, Martin. You know, the gross margin, what you're seeing in the quarter, a couple of factors or dynamics. First and foremost, we're our payment transaction based revenues doing really well. We have a solid quarter. As you saw, transaction based revenue as that makes gross. You know, that comes in at 25 to 30 percent gross margins depending on the region, North America, lower and Europe and international higher.

So as that grows, you know, you see more revenue coming in at the 20 to 30 percent gross margin. We're still feeling really good about, you know, 43 to 45 percent margins that we've put in our long term guidance. The only thing that I would say temporary transient is the hardware. We just talked about that. We did see some slight compression from normalized hardware margins that you would see from life. We saw slight compression in the recent quarters coming from supply chains constraints. We talked about that in the prepared remarks. But, you know, we do definitely see this as something that's transient. We've put in some guardrails in place that we expect to see benefit us in the back half of the year and nothing that concerns us.

You know, these these programs are launching and we'll improve these economics in the back half of the year. Overall feel really good about where we are on gross margins and where we're headed in the rest of this year.

Yeah. I think, you know, thanks for the question. The strategy overall for a payment penetration increase is very close when we look at our efficiency portfolio, which is fairly broad as with our growth engine portfolio. If the opportunities to drive better payment penetration into our back book and we're off to a great start for this year and in a more targeted fashion in our efficiency portfolio and a very broad fashion in our growth portfolio, we're looking to increase attached rate, of course, on our front book sales as well for a little more color.

That was just, I think, Dax mentioned this in the preparing mark. We've launched a couple of targeted, very specific initiatives for our back book base of customers. And I was going to mention that over the last few years, light speeds, payment capabilities, processing capabilities have really grown. And we've been a little bit quiet about those enhanced capabilities. We're bringing those to bear fully with full voice right now in the front book and back book, which really helps drive growth and efficiency portfolio.

Yeah.

I can take first step of this, Dax.

Yeah. Well, first of your question, very, very few of these remaining in any way in the back book. I would say negligible. So look at this truly as a one time thing, and there's two big elements. This particular type of white label agreement didn't really fit our strategy going forward. We have a refresh strategy around payments and certainly around partners, which we touched on.

And so the termination, the agreement was terminated and we both moved forward.

Yeah, of course. Great question. Great multi-part question. So first, certainly competitive environment. That is very true. I will say this. I believe in North America retail, the customer that we are purpose built to serve is underserved, even with such a competitive environment. So our opportunity in North America is terrific, both near term and going forward. Long tail, high ceiling. And as I mentioned, our capacity build out phase was not just contrary to North America, but it's largely behind us. So we're really focusing on a pivot to productivity.

As regards to North America market, that's going to mean a little better, well, sharper ICP definition and focus and targeting the value-based and unified approach to selling the tax mentioned a couple of times in the prepared remarks to make sure that we are capturing that opportunity to the greatest extent possible. And so really for the foreseeable future, I'll call it, it's about better performance in our ICP opportunity in verticals within North America. There's a lot there for us.

Yeah, great question. I'll take the first part of this maybe. As far as the timing, listen, I think that maybe I'll start here very quickly. There's a bit of a formula I think that we're adhering to at Lightspeed right now, which is, you know, being very purposeful at signing or bringing on board the right customer where our product depth, regardless of market, makes the biggest difference. And our go-to-market economics tend to be the strongest, signing them to great deals with great deal economics and then retaining them over time and growing them as their business thrives. They should be adopting more and buying more from Lightspeed, both on a subscription basis and a transactional basis. So all that said, we have 146,000 customer base.

A tremendous opportunity for us to be very purposeful about driving value, bringing our terrific partner network and ecosystem to bear, and increasing the monetization there. So really, I think the timing is right now and has been right for a little while and be right going forward. It's about purposeful execution, focusing on customer value, and that is at the center, actually. It's a great question because that's the center of a lot of the changes that we've made over the past couple quarters.

Yeah, sure. Thanks, Andrew. I'll answer the margin question first. Gabe talked a lot about partnerships from a software perspective that gives us more to upsell. We see no reason why those deals wouldn't come in at the 83% software margins that you're seeing from us. I mean, that's what we've seen to date. From a payments perspective, depending on whether they're North America or international, the margins range from 25 all the way up to 40%. And as we get more and more of these back book customers onto payments, we should see them coming into our book at those margins as well.

From a cost rationalization perspective, you know, as you know, we're relentless about cost discipline inside the company. We actively manage our structure as a part of normal operations consistent with that approach. We recently reduced about 10% of our headcount in product and tech. We are being prudent with our resources. This was all a part of our transformation, increasing our operational efficiency and fueling these smart reinvestments into the high return growth initiatives is, you know, how we run the business.

The last thing I'll say is, as you know, we've focused, you know, in North America retail and in EMEA hospitality. And that focus really helps us to sharpen our execution. And we are concentrating our investment in the areas with the highest return and removing work that's no longer a priority for us. So lots of really good work inside the company on cost rationalization. And we feel really good about where we're going there.

And I guess lastly, on the uplift part of your question, I think certainly, I would put this way, this is, these are metrics to watch. Software growth, especially within our growth engine portfolio. And that's the area to watch as we go through the rest of the year and beyond. And certainly a lot of that will come from the back book strategies we're employing.

Thanks, Todd. From a location growth perspective, I think, you know, we're anchored around the Cavill Market State Cagger. We provided up 10 to 15%. There, you know, puts and takes quarter to quarter because there is seasonality in our business. But we feel really good about that 10 to 15% Cagger. You know, we were at 10% in this past quarter. All of the initiatives that Gabe and Dax talked about earlier are going to help to drive and even accelerate location growth. And obviously in particular in our growth engines.

Oh, it's a great question. You'll take this one. It's both. I think when I talk about the size of our opportunity being near term as well as long term, long tail high ceiling, a lot of that immediate or near term opportunity. It's both. But it comes from this back book. We have such a terrific and broad partner ecosystem. I will share one of the very pleasant surprises that I had when I joined Lightspeed was just the number of partners that are really eager to work with us or expand their collaboration with us. And we have a real opportunity to drive customer value, which translates to revenue growth in our back book to drive improved retention in our back book, which of course contributes to all of the measures we watch as well.

And certainly there's a front book co-selling opportunity as well. One of the things that we're looking at as always is as we expand our reach into additional markets near a longer term, we can really activate and leverage our great partner ecosystem to enter markets effectively high yield, but low risk as well.

Yeah. Thanks for the question. We're, we're pretty serious about returning cash to shareholders. You know, we talked about the buyback. We've bought back seven million shares in Q one of this year. You know, we're about a little over 80% through the buyback that we just announced in quarter. We also purchased, you know, shares to help avoid on the open market share to, to prevent dilution from a shareholder perspective.

So we are returning capital to our shareholders and we are doing so from a position of strength. Even after repurchasing and canceling seven million shares in Q one, we did end the quarter with over 370 million in cash. We have no meaningful long term debt and alongside, you know, positive free cash flow that we expect to generate this year.

Outside of the merchant cash advanced business, to be honest with, you know, high margin business growing 56% year over year. Super excited about where that's going. But outside of that, you know, the, the, the, for us, it's really about where we investing for long term to deliver long term shareholder value. And for now that is really the merchant capital advanced business and, and returning cash or shareholders through buyback.

Great. Thanks everyone for joining us today. Myself and the rest of the team will be around for the rest of the day. If anyone has any follow up questions and we look forward speaking to you on our next quarterly call. Thank you and have a good day everyone.