Okay. Just for the benefit of everybody in the room, the deck that you're going to see behind me will be available this morning. On our IR site, you might want to download it in case some of the presenters block the data. Good morning, everyone, and welcome to Lightspeed's 2025 Capital Markets Day. It's great to have you with us today in person and virtually here at the New York Stock Exchange as we share our vision, strategic execution plan, and financial outlook for the years ahead. Today, you will hear from our leadership team as we outline how Lightspeed is evolving to better seize market opportunities, accelerate profitable growth, and create long-term shareholder value. Before we begin, please note that today's discussions will include forward-looking statements.
These statements reflect our current expectations and are based on assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements except as required by law. Please carefully review our Capital Markets Day presentation and press release available on our website and our recent filings with Canadian and U.S. securities regulators for a comprehensive discussion of these risks, assumptions, and uncertainties. Behind me is the agenda for today. Lightspeed is undergoing a pivotal, pivotal transformation focused on expanding our product capabilities, refining our go-to-market strategy, and concentrating our efforts on investments and efforts where we can—we have the strongest competitive advantage. Throughout today's discussions, we will detail how we are positioning ourselves to be the leading commerce platform for omni-retailers that have strong physical presence and complex hospitality businesses worldwide.
Our agenda includes presentations on our fiscal 2026 to 2028 strategy and transformation journey, how we plan to accelerate our growth engines through go-to-market and product innovation, our financial outlook and disciplined approach to capital allocation, and we will conclude with a Q&A session before transitioning into breakout sessions where you can explore our latest products and learn more about how they empower our retail and hospitality customers. Thank you again for joining us today. With that, it is my pleasure to hand it over to our Founder and CEO, Dax Dasilva, to discuss Lightspeed's strategic vision and transformation journey. Dax.
Thanks, Gus, and good morning, everybody. Before I get started, I wanted to introduce our Executive Chair designate, Manon Bruyette. Manon is here in the room. Manon, please stand up so everyone can see you. Manon brings tremendous experience with strategic pivots and transformations in high-growth settings. In the role of Executive Chair, she will support and complement me and our executive team as we accelerate Lightspeed's own transformation. Please, feel free to introduce yourself to Manon during the breaks. While our presentation today is going to be focused on our strategy and the medium to long-term trajectory of our business, where we see great strength, I want to briefly address what we are seeing in the short term. The macro environment currently does remain uncertain.
Since we last reported our results in early February, we've seen growing softness in same-store sales across North America and Europe. Small business optimism has also been softening, which means that fewer people are starting new businesses and existing businesses are being cautious about investing. While our software business remains strong and has only seen a small impact, transaction-based revenue growth has been more challenged by all of these factors, of course. This is the reason why we have recently revised our guidance on revenue growth. While we can't predict how the macro will unfold as there is no crystal ball, we're currently continuing to be agile and proactive, maintaining our focus on growing locations, driving gross profit through higher subscription revenue, and enhancing our adjusted EBITDA and free cash flow. These are the things we can control.
As you will see, we have a strong strategy and a clear path for doing so over the next three years. With that, onto the main presentation. Lightspeed is a point-of-sale platform that powers some of the best retailers and restaurateurs in the world. Our mission is to be the one-stop commerce platform for merchants to simplify operations, grow efficiently, scale efficiently, and grow. We empower merchants and restaurants that are too complex for small business solutions, yet underserved by enterprise platforms. While much has evolved over the years, this core mission has remained unchanged. Our purpose is to empower those business people, entrepreneurs, creators, chefs, artists to grow thriving businesses. These businesses are the backbone of our neighborhoods.
We are committed to making this business journey easier for them, streamlining the complexities, reducing tedious tasks, and offering financial support through financial services where possible, and bringing cutting-edge technology to their fingertips. This mission is something that I deeply believe in, and I know it fuels the passion of every member of our team. With that, let's take a look back at how we got to where we are today. We have come a long way since Lightspeed was founded in 2005. We started with an on-premise system for Mac computers for Apple retailers, software that I built, that eventually became Lightspeed POS for retail. Even back then, we served very complex retailers similar to our target customers today. Our next phase was focused on scaling the company. We went from on-premise to cloud-based, and we expanded beyond just retail into hospitality and other areas like e-commerce and analytics.
We have gone from a regional POS player to a global player. Now a lot of our revenue also comes from our payment solutions. We focused on growth and evolving our platform and tech stack, and we went public on the Toronto Stock Exchange and the New York Stock Exchange. We acquired strategic capabilities through acquisitions like Vend, Ecwid, and New Order. Our most recent phase focused on efficiency. We have made strategic organizational changes, launched our retail and hospitality flagships, and prioritized our unified payments initiative. That brings us to our next chapter. One of the reasons I rejoined in the role of CEO is to drive this next phase of Lightspeed, which will focus on sustainable, profitable growth. We will get into the details later in the presentation, but I am incredibly optimistic and excited about this next chapter of growth.
With that, let's start by taking a look at what we do today. We are a true one-stop commerce platform, combining software and payments into a seamless integrated system. We execute on this mission through two core products: Lightspeed Retail and Lightspeed Restaurant. Lightspeed Retail is purpose-built for omni-retailers with a strong physical presence who need robust solutions that can handle complex inventories, multiple locations, and both online and offline channels. Our growth focus for retail is primarily North America, the U.S., and Canada, where we see many opportunities for expansion. Lightspeed Restaurant is designed specifically for complex restaurant operations, integrating front-of-house, back-of-house, and payments into a single unified experience, a foundational suite to run a restaurant. We are deepening our leadership in Europe with restaurant, particularly in Germany, the U.K., France, Benelux, and Switzerland, where cloud adoption in the restaurant industry continues to accelerate.
With over 10 years of experience in these European markets, we are already a proven leader. By targeting the right customers in the right markets with the right platform, Lightspeed is well-positioned to scale efficiently, deepen customer engagement, and create long-term value. Since our IPO in 2019, Lightspeed has expanded its platform, diversified its offering, and strengthened its product capabilities, driving consistent growth along the way. We've achieved double-digit revenue growth, increased our software ARPU, and significantly deepened payments penetration to become a truly unified commerce platform for our customers. Now we're entering the next chapter of our growth story, one where we continue to scale with focus, driving profitable growth. We have a clear, actionable plan to make it happen. Specifically, we are focused on delivering across three key priorities. First, growing customer locations across our growth engines.
Second, driving higher gross profit and software revenue in particular. Third, enhancing profitability, especially our adjusted EBITDA and adjusted free cash flow. Last year, we conducted a comprehensive strategic review to refine our focus and ensure we were investing in the right areas to deliver across our key priorities. We focused specifically on two key decisions. Number one, where should we play as a company? What are the markets and verticals where we have a competitive edge? Number two, how we win in the areas where we play. How do we win? What are the right product investments, the way we go to market, and the best capital allocation to deliver shareholder value? Our strategic review has led us to a clear and focused go-forward strategy that we're going to share with you today.
While we continue to improve our adjusted EBITDA in the rest of the world portfolio, we are doubling down on two areas of our business, NOAM Retail and AMIA Hospitality, which will be our growth engines going forward. We've identified these markets as our growth engines because they drive our highest close rates, our strongest product-market fit, have compelling unit economics, and our most defensible competitive position. NOAM Retail and AMIA Hospitality have a massive combined revenue TAM of $80 billion and are areas that represent our strongest competitive edge and strongest growth opportunities. Of the $80 billion TAM available across these growth engines, we have a near-term focus on $21 billion. That's $18 billion in NOAM Retail and $3 billion in AMIA Hospitality, and that represent the most immediate areas for growth.
By executing with focus in these high-potential markets, we're confident in our ability to capture market share, expand ARPU, and drive sustained profitable growth. In our presentation today, we will provide a lot more detail on why we're poised to deliver on this growth, to deliver on this growth across these two growth engines. Before talking about why we're uniquely positioned to win in these growth engines, I want to underscore the size of the opportunity ahead of us. Just in the last 12 months, we the growth engines generated approximately $630 million in revenue. Even in just our near-term focus areas, we are looking at a TAM more than 30 times that, which expands even further when looking at the broader Noam Retail and AMIA Hospital markets. We have a lot of room to grow. We have two growth engines, as I mentioned, Noam Retail and AMIA Hospitality.
There are two reasons why we have chosen these as areas to double down on. Number one, they have large TAMs with significant runway for growth. Number two, we have a strong product-market fit there, as seen by close rates of approximately 35% in both Noam Retail and AMIA Hospitality. In both of our growth engines, we have deep and defensible moats that give us a unique position in the market, and we're also going to dive into that in the presentation. In North American retail, we have over 20 years of experience and deep expertise in multiple key verticals that are tailored to support omni-retailers with a strong physical presence that need a more robust feature set than just a simple point of sale.
We have a differentiated product in retail, which we're going to go into more detail later, and an integrated B2B wholesale network called Lightspeed New Order, which has over 4,000 world-class brands available for ordering. Across this coming year, we're going to continue to integrate New Order deeply, even deeper into our point of sale, enabling broader cross-brand wholesaling experiences for our SMB retailers. In AMIA Hospitality, we're the leading modern cloud-based provider in a hospitality market still dominated by legacy systems in AMIA, with 10 years of experience throughout the region. As cloud adoption accelerates, we are in a prime position to capture market share. With deep local integrations, fiscal compliance, and seamless connectivity across front and back-of-house operations, Lightspeed is the preferred choice for fine dining, casual dining, and multi-location restaurants looking to modernize.
In both regions, we have a strong go-to-market strategy, which we're going to talk about in depth. As you'll see, our product is built from the ground up to support omni-retailers and restaurants, restaurateurs that have a strong physical presence and need a foundational software platform, effectively a light ERP, without having to deal with cumbersome legacy solutions. Let's now talk a bit more about each of these growth engines specifically. In the North American retail space, our sweet spot is omni-retailers who have a strong physical presence, often the upper end of SMB before you hit enterprise. They typically manage thousands or tens of thousands and sometimes hundreds of thousands of SKUs across multiple locations. These retailers are often running quite complex businesses.
They want a seamless solution that not only helps them sell online and offline, but also helps them manage and simplify the complexity in their business. Our ideal customer location has an annual GTV of around $500,000, though many come in at a lower GTV at first and eventually expand. Many of our customers are, in fact, new businesses whom we support as they expand and grow. For retailers, we offer a unified one-stop product that tackles many of their key challenges, such as offering a compelling in-store experience, helping them manage their inventory, allowing them to easily order and reorder from brands, and also leveraging open integrations and APIs to connect our product with other platforms that merchants use to run other aspects of their business.
While our product is broadly applicable across verticals, there are eight key verticals that we are doubling down on in the near term. We already have a strong foothold across all of these. Our product-market fit sets us up for strong growth across these eight. Combined, these verticals offer us an $11 billion TAM. We have a scalable go-to-market strategy to go after this market through a high-precision outbound motion, which allows us to be efficient with sales resources while accelerating adoption. That is going to be supported by a focused vertical marketing strategy. By combining a differentiated product, a scalable acquisition engine, and vertical expertise, we are reinforcing our leadership position and driving long-term growth in North American retail. Now, turning to AMIA Hospitality, our target customers are restaurants, often with multiple locations and complex workflows, and in the full-service and fine dining categories.
From a product perspective, our mission is to bring our software to meet the restaurant user wherever they are in the restaurant, be it the kitchen, tableside, or the GM's office. We support complex front-and-back-of-house restaurant operations, creating a foundational suite that allows for more seamless management of the restaurant. We are fiscalized in key countries in AMIA, giving us a strong and defensible moat against new entrants and have deep integrations with all of the local partners. Finally, our insights, benchmarking, and trends engine, and you got to see this demo later at the breakouts, that's going to help restaurants make better strategic decisions because it's based on giving them better data. Here, we're currently focused on six key markets in Europe. Each of these is highly fragmented and is currently serviced by a variety of legacy players that are subscale.
We are a modern cloud provider with a pan-European footprint, and we have field sales teams on the ground across key high-restaurant-density cities across Europe to capture the market. With legacy providers losing ground and cloud adoption accelerating, Lightspeed is in a prime position to grow in this space. To support our growth ambitions, we are executing a transformation strategy built on three core pillars: go-to-market investments, product enhancements, and organizational transformation. On go-to-market, we are shifting to a more efficient outbound motion to make sure we reach the right customers. We are expanding our outbound sales capacity, growing to 150-plus reps over the next year across retail and hospitality. We are also accelerating investments in high-impact product initiatives, including next-generation point-of-sale features, deeper supplier integrations, and enhanced payments capabilities.
Finally, we have established a C-suite-led transformation office to drive execution across our key priorities with 11 workstreams progressing at a rapid pace. Our C-team-led transformation is focused on the three key priorities I laid out earlier: growing location count, increasing software ARPU, and improving adjusted EBITDA and free cash flow. This reflects our commitment to making continued investments in go-to-market and product and technology while still expanding our margins. Our leadership team is highly focused on driving successful execution, and you will hear from JD, John, Adonir am, and Asha throughout the day on how we are making a lasting impact. While the transformation is ongoing, we're already starting to see great results.
We started the year with an adjusted EBITDA outlook of at least $40 million and have increased that guide by more than 30% because of the benefits of the transformation that we have seen in year. Particular highlights include the pricing and packaging work that we've done, which included dynamic repricing capability to better align our pricing with the value that we deliver in our software. In December, we redesigned our org structure to align more strongly with our strategy. We are already seeing real impact, and we are just getting started. To summarize, we are doubling down on our growth engines, Noam Retail and AMIA Hospitality, focusing on our three key priorities: grow locations, gross profit, and profitability, and taking a purposeful approach to our capital allocation to support those three priorities.
I'll hand it over to JD and John shortly to dive deeper into our North American retail opportunity. Before I do that, let's look at a brief video that showcases how Lightspeed Retail serves retailers and acts as a one-stop commerce platform. Thank you.
All right. Hello, everyone. My name is JD Saint-Martin, President at Lightspeed. I lead our go-to-market teams globally, and I'm really excited to dive deeper into the North American retail opportunity. I will also be joined by my colleague, John Shapiro, Chief Product and Technology Officer, as we go through these upcoming slides. Retailers in North America face critical operational challenges that limit their efficiency, limit their profitability, and limit their growth. Managing inventory, particularly for high SKU density retailers, remains one of the biggest pain points leading to overstocking or stockouts.
Placing orders to brands you carry in your store remains very, very archaic. It's common to see retailers having to place multiple phone calls, send multiple emails, even sometimes deal with fax machines, believe it or not. Receiving orders is just as frustrating. When the box shows up to the store, retailers are having to key in every single item in their system, including UPC, product description, imagery, and so much more, ultimately leading to hundreds of precious hours wasted. On the sales floor, the in-store experience is often suboptimal, particularly when trying to ring through complex transactions that include services and work orders. While there's a lot of talk of e-commerce, we often find still disconnected online and offline sales, with no real-time sync leading to inventory inconsistencies and disjointed customer experiences. Finally, a lack of real-time analytics leads store managers to make misinformed decisions.
All these challenges ultimately hold retailers back. They're missing out on revenue opportunities, and they're dealing with increased costs. That is where Lightspeed comes in. Lightspeed is the one-stop commerce platform for merchants with complex needs. Our mobile POS provides a smooth customer experience on the sales floor. Our complete omnichannel offering allows retailers to sell anywhere: in their store, on their website, on social media, on any marketplace. We are known for our best-in-class inventory management, allowing retailers to manage a high degree of SKU complexity for a single location all the way to warehouse management servicing hundreds of locations. Our New Order network is a unique differentiator. We are allowing our retailers to connect and order from 4,000 world-class brands such as Ralph Lauren, Arc'teryx, Burberry, and many more. Our advanced analytics enable retailers to make the right decisions at the right time.
Our seamless accounting and ERP integrations provide the peace of mind that retailers need. All of this is underpinned, sorry, by our unified payments and capital solution to ensure our retailers get paid and also access capital when they need it the most. For those in the room, you have JP in the back at the break. If you want to check out the product and play with it, I highly encourage you to do that. If you think about our product offering, we really shine with medium to high complexity omni-merchants who have a strong physical presence. Our customers are businesses at scale. They're averaging north of $500,000 in annual GTV per location. Our bread and butter are businesses managing 1-30 locations, but the robustness of our platform allows for customers to manage hundreds of locations.
We have plenty of examples such as Specialized Bikes, Eastern National, Joe Lee's, Pullworks, and so many more. Our retailers have a strong physical presence, but with omnichannel needs that we handle beautifully. Ultimately, we seamlessly handle complexity. This is best presented by the GTV that you see here on the slide. The average merchant at Lightspeed is generating five times the GTV of a Shopify merchant, and that includes Shopify Plus. While other cloud platforms are optimizing for simple merchant needs, Lightspeed Retail is really purpose-built for inventory-heavy businesses who have a physical presence. While our competition stays broad and shallow, we go deep, deep in specific sub-verticals. All of these verticals have one key element in common. They all manage thousands, if not tens of thousands of SKUs.
Our product is the ideal platform for what we call internally our eight fortress verticals. These are apparel and footwear, home and garden, sports and leisure, which includes bike and golf, vape and smoke, jewelry, wine and liquor, health and beauty, and pets. As you heard from Dax, the North American retail opportunity represents a $74 billion revenue opportunity, and our immediate focus is an $18 billion revenue TAM by targeting these eight verticals. These are verticals where Lightspeed delivers unmatched value. Now let's look at a couple of examples to illustrate why retailers choose Lightspeed to power their businesses in these verticals. We'll start in the next slide with sports and leisure. As I said, that also includes bike and golf. This is a vertical that represents a $2 billion revenue opportunity for Lightspeed.
Today, we own approximately 4% of this vertical, and we have a clear path to expand a lot further from here onwards. The reason why we're best positioned in this segment is because we have built unique functionality to handle the complex needs of these merchants, such as equipment rentals, service and repair, serialized items. A lot of these merchants also allow online booking. They have members, so member management, on-account charges. These are really unique flows, and we've built that for many years, and so we've really built that expertise. The best way to represent that, if you look at the strength in this vertical, is best highlighted by the fact that we win over a third of every single sales qualified lead, best-in-class close rate and SaaS. Now let's shift to another example. This would be the multi-brand apparel category.
This is also a key vertical for us, a $4 billion TAM. Here we're only scratching the surface as far as the potential that we have from here onwards. The name of the game for a multi-brand apparel retailer is their vertical assortment. It is very common for these retailers to manage 50-plus different brands with complex product matrices. Here, too, this is really where Lightspeed excels. First, our inventory management and insight modules let these retailers efficiently manage high-count inventories across multiple locations and ultimately make the smart decisions and know when to order, how much to order, how much, or how little. On top of that, beyond our inventory management, now with our Lightspeed New Order platform, we're uniquely positioned to give something truly amazing to these retailers.
We allow retailers, as I said before, to order from 4,000 market-leading brands, and that number keeps growing as we go. These are brands that are truly relevant to their business. These are brands that they carry in their store or that they want to carry in their store in the future. We allow these retailers to discover new collections, order from these brands, and receive their purchase orders with all the relevant product information all the way through into their point of sale, all the information ready to go, saving them hundreds of hours of manual work per year. The combination of tailored features is, in many ways, unique in the market and positions us very well to capture further share in this segment. How do we plan to win in North American retail from a go-to-market perspective?
Ultimately, our strategy is built on two key pillars: verticalizing our sales and marketing infrastructure and outbound precision targeting. We will dive deeper into those two concepts in the next slide. One of the biggest opportunities we have in North American retail is optimizing how we acquire new customers. Historically, you have heard from us, we have relied on paid advertising and a strong inbound motion to drive our growth. As we continue to scale, we have shifted from paid advertising to a much more efficient and targeted outbound motion, which ultimately aims at targeting merchants that are doing north of $500,000 in GTV in our eight fortress verticals. Underpinning this strategy is AI and automation, which allows us and helps us to refine how we identify those ideal customer profiles, those merchants, how we engage with these merchants, and ultimately how we convert those leads into Lightspeed customers.
The results speak for themselves. As you can see on this slide, in this fiscal year, so this is fiscal year 2025, which is ending in a couple of days, shout out to our friends in sales. We were pushing hard for the last month. You can see that we've grown outbound by 300% year over year from a bookings perspective. We've added $300,000 in monthly recurring revenue from outbound sales channels in fiscal year 2025, all that while maintaining a very strong LTV over CAC, strong unit economics. On top of outbound, we're also implementing a verticalized sales and marketing strategy. Ultimately, we're organizing our sales teams, our customer success teams based on industry specialization rather than taking a one-size-fits-all. We're also directing our brand marketing efforts towards these eight fortress verticals.
By aligning our marketing and sales approach to the specific needs of each of these verticals, we ensure that every single merchant interaction is intentional, it's informed, and it's tailored to the unique needs of these merchants. To execute this, we have built dedicated sales pods for each of these verticals, and we're equipping the team with customized sales playbooks that reflect the vertical-specific flows prevalent in these industries. We're increasing, and you can expect to see us increase our presence at vertical-specific trade shows and events. In summary, we're building a more specialized, customer-centric sales organization. By scaling lead generation and increasing conversion rates, we're driving sustainable and profitable growth in North American retail. With that, I will hand it over to John. We'll go deeper into our product strategy.
Thanks, JD. I'm John Shapiro, Chief Product and Technology Officer.
Winning in North American retail requires us to continue to solve our customers' problems better than anyone else and better than any other alternative. Our product strategy is really built on four pillars here. First of all, we are redefining in-store selling, creating seamless, intuitive experiences that help retailers grow sales by elevating their customers' experiences. Second, we are enabling our merchants to leverage online tools to win locally, helping them connect their physical and their digital sales channels in ways that drive growth and increase their customer retention. Third, we're disrupting inventory management through automation and advanced insights, solving one of the biggest operational pain points for complex retailers. Finally, we are growing a dynamic wholesale network that streamlines operations so that merchants can connect with suppliers, manage procurement, and scale efficiently.
Each of these areas represents critical investment in our platform, and together, they reinforce our position in the market. Let's start by taking a closer look at how we're driving innovation on the sales floor. With our focus on omni-merchants, with a strong physical presence, Lightspeed has been built from the ground up for the realities of running a complex physical retail business. Our platform is designed to handle multi-location, high SKU inventory, and supplier integrations while seamlessly connecting those online and offline channels that we're talking about. We deeply understand the complexities of our merchants' in-store workflows, and we build for and we solve for those in ways that are unmatched. For many omni-retailers in our focus verticals with that strong physical presence, that in-store experience is much more than just a transaction. It's about providing a high-touch service that meets their customers' unique needs.
That is why going beyond the simple transactions and offering the capabilities that we're talking about today to do special orders, to handle services, to handle complex fulfillment operations, is so important and such a key element that sets ourselves apart from our competition. Across our priority verticals, about 20% of merchants in certain of our focus verticals regularly rely on things like special orders and services capabilities to complete sales, which just underscores how critical and how important having these kinds of support directly in the product and directly in the platform is to them. Whether it's a home and garden retailer managing custom furniture orders or a multi-brand apparel store coordinating pre-orders and specialty items, these businesses need these solutions that go beyond these basic point-of-sale functionality, and we are that one-stop provider that offers that. We have strong in-store selling capabilities.
What about selling online? Our e-commerce solution is designed for our omni-merchants with that strong physical presence to be able to seamlessly sell across both online and offline channels, offering a unified experience to their customers. This is a key pain point for many retailers. While online storefronts are common, seamlessness between those two channels is not. The online storefront is often very different from in-store, with inconsistencies in experiences and inventory tracking, which results in lost sales opportunities and often unhappy consumers. Our unified solution prevents this and creates a truly holistic platform across both of those channels, both for selling but also for customer engagement. Our integrated, personalized customer communications keep those customers engaged across email, SMS, loyalty programs, and targeted promotions, creating broader engagement with the customer than would otherwise be possible. We see the results.
Merchants who use our e-commerce experience turn at about a 17% lower rate compared to those who only use the in-store capabilities of the point of sale exclusively, demonstrating how vital that cross-channel integration is for them. It translates into higher revenue for us. Merchants who use our online platform drive about 14% higher monthly subscription ARPU. As we continue to invest in the space, our focus remains on making it even easier for merchants to unify their commerce operations and maximize customer engagement no matter how their customers choose to shop. Regardless of whether customers are shopping in-store or online, retailers need to ensure that they have the right inventory available at the right time at the right place. For retailers with warehouses in multiple locations, that is even more complex.
Without accurate data-driven inventory management, merchants risk either overstocking, stockouts, and just in general, inefficiencies that impact both sales and profitability. That is exactly where Lightspeed's insights capabilities come in and why our third strategic pillar centers around inventory management. By leveraging AI and advanced analytics, we help merchants optimize stock levels in real time, reducing excess inventory while ensuring that they always have the right product available for that customer who wants to buy it exactly when and where they need it. That impact is clear. Merchants using our inventory forecasting capabilities realize 25% higher gross profit per dollar of inventory spent. That is a bit of a mouthful. Basically, what that means is that for every $100 they spend on inventory, they are driving an additional $25 of gross profit. That translates into about $4,500 per month on average of additional monthly gross profit for a typical ICP.
That is a substantial business outcome for them. Not only are they managing inventory more efficiently, they're driving to those better financial outcomes for their businesses. Beyond stock management, our platform also provides predictive analytics that helps retailers anticipate demand, optimize ordering cycles, and reduce waste. By embedding these capabilities directly into the platform, we enable merchants to act on insights rather than just react to inventory issues. Our inventory management solution isn't only about tracking products. It's about turning data into action, giving retailers the intelligence they need to run more profitable operations. As JD and Dax have mentioned earlier, one of the biggest competitive advantages that we have in retail at Lightspeed is Lightspeed New Order. Unlike standalone point-of-sale systems, we offer merchants a unified commerce ecosystem, seamlessly connecting wholesale purchasing, inventory replenishment, and supplier management.
Right now, we are primarily focused on improving merchants' ability to buy from the individual brands that they work with. This summer, we plan to introduce a cross-brand buying and shopping experience. Later in the year, retailers will be able to discover new brands and products directly within Lightspeed point of sale. How does this actually help our customers? The impact is quite dramatic. In case studies with customers, we find merchants using our wholesale platform saving up to hundreds of hours of manual work per year, allowing them to spend less time managing orders and more time on growing their businesses. In a few minutes, you're going to hear directly from a customer about their experience with New Order. By continuing to invest in our wholesale network, we are reinforcing a key differentiator.
This is something that sets Lightspeed apart, one that drives merchant efficiency, expands our revenue opportunity, and deepens our competitive moat. First, we're going to dive a little bit deeper into what this means for the business. Today, as you heard, we connect merchants with over 4,000 brands through Lightspeed New Order. This scale is critical because merchants can streamline procurement, access a wider range of products, and manage inventory more efficiently, all within our platform. This and the Lightspeed New Order wholesale platform transforms our product from a set of features into the place commerce happens in our focus verticals between retailers and brands and bringing them together. What does this mean for our business? It improves our value proposition to merchants.
We believe, and we've seen, that merchants are more likely to choose Lightspeed because they can instantly tap into a vast network of major brands, ensuring that they have the right inventory in their stores when they need it. They can continue to engage with these brands through the platform and even discover other brands and products that could be a great fit for them and their customers. One of the key benefits of physical retail is that instantaneous access to products as a consumer, and the Lightspeed New Order network enables and empowers merchants to offer that to their customers. Second, it creates stickiness. Because we're integrated into merchants' core operations from ordering to pickup, delivery, and reordering, it becomes deeply embedded into their businesses. Retention improves, stickiness is higher and better using the Lightspeed and New Order network. We're not stopping here.
We see significant opportunities to expand our supplier network even further, adding more brands and categories, including within sports, outdoor, and home. By continuing to scale this network, we're strengthening our competitive moat and reinforcing our position as the essential e-commerce platform for especially retailers. Do not take it just from us and just from me. Let's hear directly from Squash Blossom, a retail boutique in Atlanta, about their experience as an active network participant.
It used to take me about 25 minutes to do my PO data entry, but now using New Order and Lightspeed together, it saves me so much time. I can get it done within five minutes. My name is Lisa Bobb, and I have been the owner of Squash Blossom for the last nine years. We find items from all over the world, everything from independent designers to big-name brands. It's really important to be able to keep track of what's coming in, how well it's selling, what I need to reorder, forecast to make sure I have a good balance of inventory in the store at all times. I ran through a pretty intensive software selection process, and I found that Lightspeed had the best features to be able to run the business the way I want to run it.
I'm using Lightspeed and New Order together to bring in all of my purchase order information directly into Lightspeed in real time. It has cut my data entry for purchase orders down by 80%. Lightspeed helps me reach my goals and grow my business because I can literally run my business anywhere around the world. I can check in on anything that's going on in the store. I have access to the real-time data that I need to make smart business decisions. I can keep everyone in the loop from my employees to my customers to my vendors so that we're all on the same page and winning together. Yay!
Hopefully, that helps reinforce just how valuable these capabilities are for merchants and how that benefits also the brands on the platform. Overall, our North American retail strategy is built on three core strengths: an $18 billion near-term opportunity within our focus verticals with significant growth upside, a strong product-market fit. Our advanced inventory management, omnichannel capabilities, and supplier integrations are tailored for the needs of complex high-SKU retailers and targeted investments in both go-to-market and product innovation, ensuring that we continue to expand our footprint, drive software revenue, and increase market share. By executing against this strategy, we are accelerating our leadership in North American retail and driving long-term scalable revenue growth. Next, JD and Adonira m Sides will cover EMEA Hospitality. First, we're going to take a 10-minute break. Thank you.
Ye ah, I have to intro the—yeah. Yeah. Get two more minut es.
Hello again. Welcome back.
If I can encourage you all to—for those in the audience—to come back and take a seat because we'll dive deeper into the EMEA Hospitality opportunity. For this section, I'll be joined by my colleague, Adoniram Sides, who leads product and technology across our hospitality group. Before we do that, though, we will kick things off with a short video highlighting the completeness of our hospitality platform. Let's do that. All right. Hopefully, this video makes you want to start a restaurant in Europe. When you do, clearly, we have you covered. In the event that you're not using Lightspeed, operating a restaurant in Europe is complex. Restaurant operators deal with multiple challenges, which ultimately creates friction in their day-to-day operations. Front-of-house operations are critical, as you can imagine, to guest experience.
Yet, it's very common to see servers spend way too much time walking, if not even running, between tables, the kitchen, and a fixed POS on the counter. This leads to delayed orders, increased wait times, and critical errors. Kitchens are crumbling under complete chaos. Working with inefficient and messy paper tickets, chefs are waiting on verbal updates down the line. They're often preparing incorrect orders with mismatched cooking preferences, all leading to subpar dishes for their diners. In the office, back of the house, the restaurant manager lacks real-time analytics. Restaurant managers often rely on intuition. That's the kiss of death in an industry that is driven by tight margins. Lastly, COVID has changed a lot of things, and it's here to stay. These things are the rise of online orders and delivery. Now it is a critical part of any restaurant operation.
Yet, we typically see very disconnected systems leading to inventory mismatches. To keep their sanity, restaurant operators require a connected solution for in-store dining, takeout, and delivery. This is where Lightspeed comes in. We bring it all together under one comprehensive suite of solutions. Our mobile POS and table-side devices ensure there is no more running around on the restaurant floor. Our digital Kitchen Display System ensures there are no more chaotic kitchens. We are known for our best-in-class reporting and analytics. Look, do not take my word for it. Ed Nirum in the breakout will give you a demo of our infamous magic quadrant, which allows restaurateurs to make smart decisions day in and day out. Beyond restaurant operations, Lightspeed connects restaurants to a broader ecosystem of partners. Through deep local software integrations and country-specific fiscal integrations, we help restaurants tailor their system to their exact needs.
Our OrderAnywhere feature enables restaurants to seamlessly process orders both online and offline, providing the flexibility modern diners expect. All of this, like in retail, same goes in hospitality, is underpinned by our unified payments and capital solutions, allowing retailers to get paid seamlessly and also obtain capital when and where they need it the most. The EMEA hospitality market presents a significant growth opportunity for Lightspeed. With a total addressable market of $5 billion in revenue, we see a near-term path to capturing a greater portion of $3 billion in revenue by just focusing on our focus markets. These are markets where we already have a physical presence. That includes the Benelux, as Dax highlighted earlier, France, Switzerland, Germany, and the British Isles. Our competition across these markets is largely fragmented and subscale. A lot of these players are legacy players.
Lightspeed is a major cloud player with truly a pan-European presence, fiscalized in all of our key markets, with feet on the ground and a strong local presence. Lightspeed is primed to leverage our pan-European market fit to expand across the continent. As a reminder, we've been operating in Europe now for over 10 years. We have gained a deep understanding of the European hospitality market. Over that period, we've had a physical presence in each of our key markets and have built a tight network of not just highly referenceable customers, customers that everyone knows in their community, but also a strong web of local partners that enhance our product and customer experience. We also know where we win, and that's with complex, high-volume restaurants that require advanced, scalable solutions.
Our go-to-market strategy of having feet on the street through a seasoned field sales team across key restaurant densities is allowing us to efficiently allocate resources and ultimately capture share in the most valuable section of the market. Our platform delivers an integrated, fiscalized suite that seamlessly connects front-of-house, back-of-house, and management operations, ensuring restaurants have everything they need to operate efficiently in their local environment. By offering a solution tailored to the needs of complex, multi-location restaurants, we provide a competitive advantage that incumbents cannot easily match. To accelerate our growth and further capture share, we have strategically deployed, and you can see on the map, field sales teams across major urban areas in Europe. Here, our approach is hyper-local. We're leveraging a city-by-city strategy with a strong feet-on-the-street sales force to drive customer acquisition as well as expansion in key markets.
As seen here on the slide, we already have a strong field presence in key cities such as London, Berlin, Paris, Hamburg, and Amsterdam. If you think of these cities, these are major hospitality hubs. We have deployed successfully sales teams and built strong brand recognition to drive customer engagement and expansion. Over the past year, we have successfully leveraged field sales to target our ideal customer profile while also in parallel maintaining unit economics that are very healthy and strong payback ratios. This approach has proven to be not just effective, but really ideal to then scale from this point onwards. Our near-term focus for expansion is on other similar restaurant densities across the British Isles, France, and Germany. These markets present a significant opportunity for penetration and growth.
By establishing a strong local presence in high-density urban areas, we ensure that we can establish direct relationships with restaurant owners and operators. This strategy ultimately allows us to provide a hands-on product demonstration, as you can experience later in the break. We can also go on-site to ensure a smooth, rapid, and onboarding process. By being on-site, being in those local markets, we also provide a localized support, all of which are critical in converting and retaining customers in the hospitality industry. We are moving quickly with this strategy, and we have put this into action with local teams already in place. As we saw in the last slide, we are now executing on our plan to scale up that sales team into full-size territory sales teams across 20 cities in Europe.
That means that in each of these cities, we have a field city manager paired with 6 to 10 field account executives and typically two implementation consultants so that we can follow a signed customer into an on-premise implementation process. To accelerate our growth, we are executing on this ambitious plan to get to 100 field and outbound sales reps by March 2026 across our key European markets. This ensures we have the scale and the reach to drive meaningful expansion. This is not the first time you hear of us on this topic. To situate you, at the end of November, we had 20 reps in these positions. Since then, today in March, we have made a lot of progress. We have already hired over half of these 100 FTEs.
We are well on our way to building the strongest on-the-ground sales force in the industry, ensuring that we capture market share efficiently and at scale. Now, I'll pass it over to Adonira m, who will go deeper into our product strategy in hospitality. Thank you.
Thanks, JD. Looking forward to speaking to you all today. Everybody eats food, so our part of the session is really exciting. What you may not be familiar with is how our product fits into how food gets onto your plate in a restaurant. We have a vision of what software should be in restaurants. That vision is tightly coupled to the way that restaurants truly work. Our product needs to meet the user where they are, which means at the cook's grill.
It means at the server's table, or it means at the GM's phone, whether they're in their office or traveling around. In order to achieve that vision, we have four strategic pillars in Lightspeed Hospitality. First, we're accelerating the suite effect across our integrated offerings. That includes KDS, or Kitchen Display System. That includes the point of sale, which hopefully you've seen in the back. If you haven't, take a look with Liz back there. Pulse, our team collaboration and mobile reporting tool. This is important because it takes us from being the point of sale to being a suite of products that are foundational software to manage all parts of the restaurant. Second, we're enabling next-gen multi-location workflows and capabilities, which are really critical to those multi-location users you heard JD speak about.
It's important that if you have 2, 5, 10, 15 restaurants, you can manage those restaurants at scale, something that our platform does uniquely well. Third, we are creating an expanded partner ecosystem, which is essential to succeeding in Europe, as JD mentioned. That includes local online ordering platforms, local reservation platforms in all of our target cities and markets. You can't succeed in Europe as a restaurant hospitality platform without having those local integrations, and that's somewhere where we have an edge. Finally, we're enhancing our already robust reporting and analytics offering to offer even stronger real-time insights from the magic menu quadrant that JD mentioned, and you'll see more of in the breakout session, to our game-changing benchmarks and trends intelligence, which we'll show you quite a bit of today. Let's start with the KDS. That's a recent system.
Again, that's the Kitchen Display System, the thing that's used in the kitchen that we've rolled out that has seen a great deal of traction thus far. A key part of our strategy in EMEA is making the restaurant operations much more efficient. One of the first steps in this plan was rolling out that KDS, that Kitchen Display System. We've already seen strong traction in doing so. We've only had that in the market for about six months. Our KDS is a Lightspeed-built product that fully leverages our point of sale. It uses all the technology that's in the point of sale, but it exists as its own product and its own source of revenue for Lightspeed. It allows restaurants to coordinate their kitchen in real time and improves order accuracy and reduces food waste.
If you haven't ever been in a kitchen before, maybe you've seen The Bear, hopefully, you have seen the way that actual communication happens in many kitchens, and that's with physical printed sheets or handwritten things or verbal communication between teams. This is very inefficient. What we've done is we've embedded this directly into our platform, this system, and that enables orders to flow seamlessly between the front of house, which of course is where the server is, to the back of house, which of course is where the food is actually made. That keeps kitchen teams and the front of house running very smoothly, which is a major difference than the way it works, even with third parties working together. Equally important to our growth, to Lightspeed's growth, our KDS is a fully self-onboarding product.
We have an in-product upsell tool called Lighthouse, and that eliminates friction to the adoption process, which allows merchants to trial our products and go live without external support. In fact, many of our customers have engaged with that in-product sales experience. They've started a trial, even on this KDS for their back of house, and became fully operational the same day, just hours later, running multiple KDSs in just hours after discovering the product, which is pretty incredible. Again, if you've ever watched The Bear, you know how much complexity that involves, literally just in the physical space. The data confirms that this strategy is working. Since launching about six months ago, KDS has achieved a 13% attach rate on net new deals, and we expect that number to grow significantly.
On average, our restaurants are adopting two screens per location at about $30 per screen, and that drives meaningful software RPU expansion for us. It's a new line of revenue that exists in our business. KDS has, in general, been very successful to our customers, but you may be wondering, where are we taking it from here? We have the point of sale. We have the KDS. One of the biggest opportunities in hospitality technology is creating that truly integrated ecosystem, one that unifies all of the tools that you, as a restaurateur, use every day. Lightspeed is eliminating the fragmentation of the technology world and also the fragmentation of the market that we're in and accelerating towards a single foundational suite that combines the point of sale, the kitchen, and the general management tools.
As you saw before, the KDS is a key part of that strategy, enabling that real-time communication between the front of house and the back of house to improve their speed, accuracy, and overall efficiency. That is just one piece of a much larger vision. With our tableside mobile point of sale, servers can take orders, they can process payments, and they can access real-time updates directly on the floor, right at the table they're at. We're bringing our technology to where the server is. We're not making the server go to where our technology is. That reduces walking time. If you've ever watched a server in a restaurant, you've seen them move from table to table to table, having to memorize things. Our technology goes with them, so they have to memorize less.
It enables more personalized service so that the restaurant actually delivers a better experience, the type of experience that they want to deliver, rather than constantly having someone being like, "Oh, I'm so sorry. I forgot to place that dish. Oh, geez. Did you tell me what you wanted your steak fired at?" All of that goes away on our platform. If you're not familiar with these challenges, instead of running back and forth to the point of sale, and then maybe that's at the front of the restaurant or maybe even in the kitchen, it's quite a distance away, they can stay with guests. They can improve that overall dining experience. Really importantly, they drive higher table turnover for restaurants. They drive better revenue for restaurants, and they drive better satisfaction for restaurants. Our interests are highly aligned because that higher turnover helps Lightspeed too.
When our customers, when our restaurants' revenue increases, Lightspeed, because we have payments as a part of our ecosystem, also increases. We win when they win. As a result of that high alignment and interest, we build products that are more directly tied into their business. As a result, they like our products better. For restaurant managers who are always on the go, they're folks who are not physically seated in a restaurant every single day. If they have 2, 5, 10 locations, they can't be. Our Pulse product puts critical business insights right at their fingertips wherever they may be. Whether it's a general manager checking live sales metrics, tracking table turnover, or receiving alerts when services may be trending a little slower than they expected, Pulse ensures that the restaurant leaders can make informed decisions from anywhere.
We expect many new customers to adopt this full platform suite that you have heard me speak of. That reinforces that restaurants see value in a fully integrated system, which we have already seen today. Perhaps more importantly, for this room, it is expected that customers who purchase this full suite from us will drive $115 in incremental monthly revenue per location, which is a significant amount of expansion relative to our historical business. By bringing together point of sale, KDS, that Kitchen Display System, tableside mobile, the thing in the server's pocket at the table where they are doing business, and Pulse, the mobile reporting tools, into a single connected system, we are not just improving restaurant operations. We are redefining how hospitality businesses run, scale, and succeed. For restaurant operators, success is not just about managing the day-to-day.
One of the places that you've heard JD and Dax allude to is that we have a really key difference in our product suite. That key difference is a differentiated insights ecosystem that goes well beyond basic reporting to providing real-time actionable intelligence. We're introducing a machine learning-based just-in-time recommendations engine, which helps restaurateurs optimize everything from their staff performance, as you can begin to imagine. Our products are where their staff are. As we do this, we can make their staff more efficient, to menu performance, again, information that's very hard to get at, ensuring that they are operating as efficiently and as profitably as possible. We're also enhancing in-product discovery and upsell opportunities. By embedding insights directly into our platform, we enable restaurant operators to identify new revenue streams and capitalize on high-margin offerings in real time.
We are improving the automated reporting experience as well, which makes it much easier for operators to track key performance metrics or monitor trends or make informed decisions, which is what we want them to do, all on that single integrated platform. That integrated platform comes together to enable them to be more effective. By the way, when we land multiple products with those customers, we become more sticky in their business. It is much harder to displace the KDS or the point of sale from a restaurant when the two are deeply embedded together and when the reporting platform leverages everything that those products have in terms of capability as well. As a result, we expect 20% of new customers to purchase this new analytics module, reinforcing the demand for those deeper insights.
More importantly, it's expected that those customers drive an additional $110 in monthly revenue added per location. Again, significant expansion for us on the revenue side. By delivering a smarter, more intuitive analytics ecosystem, we're not just improving restaurant reporting for our restaurateurs. We're enabling revenue growth for restaurants, a key thing that they need. It's hard to run a restaurant. Restaurateurs have enough going on in terms of just delivering you great service. They don't need to also be worrying about how to grow. We enable them to have operational efficiency, and we enable them a key thing I've heard from restaurateurs over and over and over from hundreds of restaurateurs at this point. They want long-term success. They want to be able to survive. That's what our platform does.
I'd like to show you a video from one of our key customers and a very successful restaurateur that puts all of that into better words than I ever could: Silo.
Silo started in 2019. It was Douglas McMaster who came up with the concept. He was actually challenged by somebody to run a pop-up without a bin, and then the idea and everything else came from there. Silo's zero waste policy was a game changer for me coming into the business. Everything is reused. Everything comes back out into service time and time again. We started to use Lightspeed in June 2022 in our very busy period, which was a sink or swim moment for us. Having an integrated payment and tellscreen system revolutionized the speed of service we could do.
The time saved on the transaction period between the old system and the new system was phenomenal. I think our busiest day, we ended up making 10% more on our record than we had before, which was amazing. Weekly, I used to have to spend three hours between different reports from payment terminals and till terminals. Now it's all done for me, and I just enter one number, and everyone's happy. Lightspeed does everything for you. No maths when you add up a bill, no maths when you divide a bill. The staff can put the order on the till, press send. A customer could have paid. Simple, easy, saves time. Lightspeed automatically posts the sales into our accounting system overnight, and that goes into a report that goes to the directors in the morning. It has saved a lot of manual intervention from our side.
It takes five minutes to teach anyone on the business report where to find the numbers, what the numbers are, where to put the numbers, and where the numbers go. It really takes no time at all for the till system to send the information to the payment terminal. It's fantastic. Everything's smooth. Everything's simple. If we need to, we can add four more tills within five minutes and have four more staff members delivering our product to the guest. At the end of the night, you run one report, take one number, sign off, go home.
What you hear there, you hear the actual practical application of what we do. We save them time. We make it easier for them to understand their business. Again, if you've watched The Bear or maybe you have friends who own restaurants, those are the most relaxed restaurateurs you've ever seen.
That is a result of using the product in a way that enables them to focus on what they do well, to focus on the service, on the experience, on the concept that they are trying to deliver. EMEA Hospitality represents a significant growth opportunity for Lightspeed. With a $3 billion short-term addressable market in our near-term focus geographies and our strong product-market fit and our competitive differentiation, that enables us to be completely set apart from both legacy players and from smaller regional players, of which Europe has many. In fact, we are very fortunate in the fact that we are a multinational player in a place where restaurants often cross country borders. By offering an industry-tailored, deeply integrated solution, we are becoming the platform of choice for hospitality businesses looking to modernize their operations.
We have a clear path to expansion in Lightspeed Hospitality through targeted investments and go-to-market execution, as you heard JD say, and our ongoing product innovation. We are very well positioned to drive both location growth and, as you saw verbatim, software revenue expansion in this market. With that, I will turn it over to a deeper dive into the financials and pass to Asha. Thanks for your time.
Thanks, Zen and Iron. Hey, everyone. I am Asha Bakshani, Lightspeed CFO. You have heard lots of exciting content today about who we are, where we win, and why our customers love us.
Let's take a step back and look at where we are today from a financial perspective: our key growth drivers, our plan for operating expense efficiency and for minimizing dilution for our shareholders, and finally, how this strategic pivot we've recently embarked on changes our business profile as we look forward over the next three years. Let's take a step back and look at our financial profile over the past three years, specifically the various growth drivers within the business. Over the past three years, we achieved a CAGR of 30% on revenue, a gross profit CAGR of 21%. Our adjusted EBITDA grew from minus 13% of gross profit to plus 10% today, all fueled by our key growth drivers: software, locations, and payments. Software ARPU increased from $131 per location per month to $166, thanks to our continued shift to higher GTV customers and software module attach.
Our ICP locations have grown by 23%, and our GTV has increased 38%, reflecting our successful move up market, which, as you heard today, is where our product is most ideally suited. Payments penetration has moved from 11% three years ago to 38% today. As many of you know, payments was a key focus of ours over the past two years. Getting our backbook of customers onto payments was critical from a profitability perspective, as we get, on average, 2.5 times more gross profit from a software and payments location than from a software alone. From fiscal 2022 to fiscal 2025, our strategy, products, operations, and financials demonstrate proven strength. We built a solid foundation. We delivered an impressive track record of organic growth. Through relentless focus on efficiency, we've meaningfully improved profitability. These are the fundamentals supporting our current transformation.
Location mix, software growth, and financial services have significantly contributed to our gross profit growth, and we expect these factors to continue to drive our future growth. As you heard from Dax, given the success of our two flagship products in both retail and hospitality, now was the right time to refocus our strategy. We've divided our focus into two areas: our growth engines, primarily North America retail and EMEA Hospitality, which is where the majority of our flagship customers are today, versus the rest of the world, where we have a stable, happy customer base, the majority of whom are on our non-flagship platforms. We have defined, clear objectives for our growth engines and rest of the world, as Dax detailed earlier.
At a high level, we intend to accelerate investments in our growth engines where we get the highest ROI on every dollar invested, while we optimize the rest of the world for efficiency. The success of our flagship adoption over the past few years has really solidified our market position in North America retail and European hospitality, and it's reaffirmed our strong competitive advantage. Today, both are large and fast-growing with solid go-to-market metrics, as you heard from JD, and strong product-market fit, as you heard from both John and Adoniram . Today, our growth engines make up about 65% of our total gross profit at Lightspeed, with 25% improved CAC payback and a 30% higher close rate than in the rest of the world. Our strategy focuses on investing primarily in these markets to further broaden our competitive moats and maximize growth.
Strategically reallocating product and go-to-market investments specifically into our growth engines allows us to double down investments on where it matters most, while at the same time driving adjusted EBITDA and free cash flow improvement given the efficiencies from the rest of the world. We expect the total product and sales and marketing spend in the growth engines to increase substantially from fiscal 2024, and this is being funded by cost optimization initiatives across the entire business. We're utilizing a disciplined capital allocation approach designed to maximize shareholder returns while ensuring that we are investing strategically for sustainable growth. To achieve this, we're following three key principles that guide our investment decisions: focus, clarity, and return. From a focus perspective, as you heard, we're concentrating our capital on our key growth engines to deepen our competitive moat.
Instead of spreading our investments thin across multiple areas, we're strategically concentrating resources where we have the strongest competitive advantage, and we therefore get the highest return for every dollar invested. Second is clarity. Every significant investment is supported by a clearly defined business case with explicit financial targets and rigorous strategic alignment. We don't just invest for the sake of growth, and many of these investments will be made as a part of the C-suite-led transformation that Dax talked about earlier and will follow a disciplined approval process. Third is ROI. We continuously evaluate our investments to ensure we're maximizing return on capital. This means constantly reassessing where our dollars generate the highest impact and reallocating when necessary. An example of this is the shift that JD talked about from expensive paid advertising to an efficient, targeted outbound motion.
As you can see, this approach aligns with our three strategic priorities to accelerate growth and profitability, as you heard from Dax. As a reminder, accelerate customer location growth through a more efficient, targeted sales and vertical-specific marketing. Second, increase ARPU through product innovation, cross-selling payments and capital, and monetizing platforms like Lightspeed New Order. Third, improving adjusted EBITDA and free cash flow by reallocating resources towards our highest return investments. Let's now look at what this approach does to the financial profile of our growth engines and how that translates into the consolidated business model for the next three years. With a near-term opportunity of $21 billion in our growth engine, our strategy allows us to drive strong margin expansion. We expect our growth engines to grow gross profit at a three-year CAGR of 20%-25% from fiscal 2025 to fiscal 2028 inclusive.
That is fueled by all the investments you heard about today in both product and go-to-market. This gross profit growth will come from a mix of our key growth drivers: locations, software, and financial services. A 10%-15% three-year CAGR on net location growth, total software ARPU growth coming from continued upselling and cross-selling software modules, continued payments penetration both on the existing backbook and on our new business now that every eligible new customer must take payments, and last but not least, continued penetration on Lightspeed Capital. We are early in a large market, and we expect to capitalize on that opportunity, but we are moving with prudence to ensure this remains a very high-margin business. We are confident in our ability to drive accelerated growth in these markets for Lightspeed, given the strategy that we have laid out today.
Given this focus on our growth engines, we expect North America retail and EMEA Hospitality to make up the vast majority of our consolidated business by March 31, 2028. During the same period, we expect the rest of the world to grow low single digits from a gross profit perspective and, at the same time, generate meaningful adjusted EBITDA for the whole business through continuous operating expense efficiency. Now, let's look at how these growth rates translate for the company as a whole. We will continue to employ rigorous financial discipline and drive strong growth in both gross profit and adjusted EBITDA over the next three years. As our payments software mix has shifted and payments revenue is now over 60% of total revenue, we are most focused on total gross profit across the business.
We expect that through a combination of locations, software, and financial services, our revised strategy will allow us to grow total gross profit at a three-year CAGR of 15%-18%. At the same time, through efficiency gains, particularly in the rest of the world, we expect to grow total adjusted EBITDA at a three-year CAGR of approximately 35% from fiscal 2025 to 2028. This would result in a gross profit value of approximately $700 million and an adjusted EBITDA value of approximately 20% of gross profit for the fiscal year ended March 31, 2028. I want to highlight, however, that the ramp in gross profit growth and in adjusted EBITDA will not be linear, given the high level of investments we're making in our aggressive outbound strategy, as well as our verticalized product innovation that you heard about earlier.
In our go-to-market, for example, we're prudently going city by city, and reps need time to ramp up to full quotas before these investments turn into revenue, gross profit, and adjusted EBITDA for the business. Our financial strategy remains focused on maintaining a strong balance sheet while generating significant free cash flow. This allows us to reinvest in high-return opportunities while also returning value to our shareholders through our expanded buyback program. Looking at our free cash flow trajectory, we're nearing break-even free cash flow outside of our capital program and expect to generate approximately $100 million in free cash flow in fiscal 2028. Furthermore, after our last earnings call in February, we completed the repurchase of approximately $95 million worth of shares, having now utilized all the capacity under the share buyback of over $130 million that we launched at the beginning of this fiscal year.
In addition, we announced today that we received authorization to file a new normal course issuer bid to continue to repurchase shares throughout fiscal 2026, and that was filed today. Thanks to our strong cash flow trajectory and balance sheet, we are well positioned for the current macroeconomy. In the coming months, we will continue to apply our disciplined approach to capital management and investments, actively steering through this macro environment. We've also been purposefully managing share-based compensation as a part of our broader focus on profitability. From fiscal 2022 to fiscal 2024, share-based compensation as a percentage of revenue steadily declined from 20% to 8%. Looking ahead, we expect this ratio to continue to improve, which, along with our share buyback program, reaffirms our commitment to minimizing shareholder dilution and delivering long-term shareholder value.
Over the next few years, we will track our progress and our success along the strategy that we've laid out today through three core operating metrics, which will help you model our business and track our progress. Within our growth engines, we will focus on location growth and ARPU, which we expect will drive software revenue improvement each year, as well as success in increasing payments monetization per customer. Location growth will track our ability to expand our merchant base and increase our market penetration in our key growth verticals. By focusing and investing primarily in our growth markets, we expect location growth will accelerate over the coming years. Starting in fiscal 2026, we will report on customer location growth and ARPU across our growth engines annually, ensuring transparency and accountability as we execute on our long-term vision.
In the rest of the world, we will be focusing on net revenue retention and total OPEX efficiency to drive significant adjusted EBITDA and free cash flow on a consolidated basis. I've said a lot of numbers, so let's take a step back and summarize. In summary, we expect to continue our trajectory of meaningful margin expansion across the entire company. We're targeting total gross profit growing at a CAGR of 15%-18% across the three fiscal years ending March 31, 2026, 2027, and 2028 for a total of $700 million of total gross profit and 20% adjusted EBITDA margins, as well as $100 million in free cash flow in fiscal 2028. We also expect total gross margins across the business to be in the range of 42%-45%, given the growth drivers that we have at our disposal.
This growth is driven by gross profit in our growth engines growing at a CAGR of 20%-25% and low single digit to flat gross profit growth in the rest of the world. The gross profit growth in our growth portfolio will come from location growth, net location growth growing at a CAGR of 10%-15%, and ARPU growth across both payments and capital. Consolidated adjusted EBITDA growing at a CAGR of approximately 35% across the three fiscal years as a result of the rest of the world efficiency gains and the growth investments we're making paying off. We will disclose fiscal 2026 expectations in May at our year-end earnings call. At that time, we will share more proof points of our strategy, and we should have an indication of how gross payments volume is trending. Thank you all for your time today.
With that, I will pass it over to Dax.
Thanks so much, Asha. To close, I want to summarize why Lightspeed is well positioned for sustained growth and value creation. First, we have a focused strategy, as you've seen today. We're doubling down on our growth engines in North American retail and EMEA Hospitality, where we have the strongest market position. We're disciplined in how we invest and are making the right investments in our product as well as our go-to-market strategy to drive long-term expansion. Our transformation is focused on driving locations, gross profit, and profitability, and it's already yielding results. Lastly, Lightspeed's financial outlook over the coming years is incredibly solid. We're executing a disciplined plan that positions us for sustained gross profit growth, margin expansion, and enhanced shareholder returns. Thanks, everybody, for your time and engagement today.
As the founder, CEO, and third-largest shareholder, I've never been more excited about Lightspeed's future, and I look forward to continuing the conversation with you guys, with everybody in the breaks and in the breakouts, as well as the Q&A. We have breakout sessions where you can see our latest product innovations. You have to see these presentations. They go quite deep into the amazing innovation that we have on retail and in hospitality. Ran through them yesterday. It's a must-see. You will also understand how we're driving value for merchants in retail and hospitality by really looking into the value that they get out of the products. We are going to have a short break, and after that, we are going to dive into Q&A. I look forward to chatting with everybody. Thank you.
Okay, I'll let everybody take their seats. We will do a Q&A.
You can ask—welcome back, everyone, and thanks for joining us through the presentation. We'll now open up the floor for any questions. For those of you online, you can submit questions online. I do have a microphone, so put your hand up, and I will hand you the microphone. Please use the microphone when you ask a question. Koji raised his hand first, so I'll start him off.
Hey, guys. Koji Ikeda from Bank of America. Thanks so much for doing this. Appreciate all the information in the slides, and it looks like you got a very compelling story here and targets. It would be great when you guys achieve all these, and we think you guys have a chance to do it here. I wanted to really kind of dig down into the nitty-gritty of the sales motion.
I think this is what's super important. I got one question and one follow-up. The first question is about the outbound sales pitch to North America retail. It sounds very compelling for a retail store with no online presence and an old payment system. I think you guys could walk into these stores and sell it all day. Many of the target verticals that you have listed up there have some sort of online presence, right? It does seem like there needs to be a little bit of convincing that needs to be done for these retailers that have something to go all in on Lightspeed. Maybe help us understand what is the outbound sales motion and how you convince these customers that already have something to go all in with Lightspeed.
Y eah, I'll let JD go into it.
Just to start, our outbound motion for retail is distinct, of course, from the field reps that we have in Europe. These are remote reps at our office that are calling out on warm lists into our particular eight verticals that we have in retail. That is supported by a lot of vertical marketing that we are doing at trade shows for those different verticals. I will let JD go into actually how that translates.
Yeah, thank you for the question, and thanks, Dax. If you think about the omni experience that you described, right, our retailers sell in the physical world, and they also sell online. Ultimately, in these eight fortress verticals that we highlighted, they are really highlighting the importance of the physical experience in the store.
If you're a golf course, if you're a bike store, if you're a Rolex AD, you're going to go in the store to feel the material, obviously to play the sport that you want to play, or buy the skis that are going to be in for the next season. That is a critical part of our merchants. They're physical first, but also they want to be present online. That is where we have an amazing solution. Our omnichannel flows, and John highlighted that earlier, allows those retailers, while the majority of their sales are happening in the store, to also sell online. They'll sell online for a couple of reasons. Sometimes being online is to actually drive more traffic in the store, right? They'll push their inventory online. They'll allow folks in their community to see what's in the store.
Sometimes people will buy online, but they'll go in the store to get the final adjustments, the fitting. Like we're big in high-end menswear or women's wear. You want to get that fitting, and you want to make sure that it's tailored to your needs. You go into the store to complete the sale and to walk away with your goods. Sometimes you'll purchase the whole thing online. We allow these retailers to do all of that. As far as the sales outbound motion is concerned, if you think about Lightspeed, call it like three years ago, all of our sales came from an inbound marketing funnel, right? We casted a wide net, and we would attract all sorts of retailers, all sorts of merchants from all sorts of sizes.
Now what we're doing is we're really going deep into these eight fortress verticals where our pitch really resonates. Our product really shines for those merchants. We have a very compelling argument, and we're doing that in a very targeted way. That allows us to expand even further into these verticals.
JD, just to add one quick thing on the follow-up question. We are most excited and proud about our online offering. Obviously, we showed and talked about the seamlessness of that connectivity. We also have integrations to all the most popular online platforms out there. If you're using us for online, you can also—sorry, if you're using us for in-store, as JD described, because we excel there, and you have an existing online presence, then you can connect the two through our open API integration.
Yeah, it should be still—it was still just a follow-up question here?
Yeah. The follow-up question is maybe moving over to EMEA hospitality. What is the critical factor with restaurant operations that makes Lightspeed so attractive? The reason why I asked it is I'm trying to understand the pitch, right? It sounds like Lightspeed helps restaurants with their operations succeed because it doesn't sound like it's not a food issue why restaurants fail. Is it maybe we help you with your margins and operations, and that's the reason why these restaurants might not be succeeding? It feels like there's a lot of successful restaurants out there, and that might be a hard pitch for Lightspeed to come into. Maybe the struggling restaurants out there where looking for margin with operations, Lightspeed could help.
Maybe help us understand how you win with the successful restaurants and why, or what is that thing within Lightspeed, that critical factor that makes it so compelling?
I think I'll pass that one to Donnie, if you can dive into that one.
Yeah, absolutely. Happy to. Thanks, Dax. I'd say that we work great for both restaurants that want to grow, but restaurants that are successful. The reason for that is that being a restaurateur is a tremendously hard job. I think it's over said, I suppose. If you think about what they do in their day-to-day, they spend a tremendous amount of time just trying to manage physically the business, the operations of the business, making sure that your servers are trained, making sure that your cooks are making great food.
What they don't have time for often is actually managing the fundamentals of their business in the same way that we manage ours. Our platform comes in to take some of the burden off of that operational piece, as you astutely called out. We help them with things like insights, benchmarks, and trends, some of the things you heard me talk about, become more successful, not just like grow out of a hole. If you're doing well right now because you're great at food or you're great at experience, you may not be amazing at business. We see that over and over again with restaurateurs, where we come in to get you to be amazing at business as well. You can think of it in two forms.
On one side, we're taking away some of the complexity of the day-to-day, the things that are just in your way. On the other side, we're making you more successful at the financial component of your business because we're providing you that hidden data you can't get elsewhere in a format that doesn't require you to be using a BI tool or something like this to do so.
I would encourage you to go to see the breakout session on the hospitality offering. I think it'll highlight a lot of what you're asking there, Koji. We'll go to Todd first, and then Tim. Go ahead.
Great. Thanks. Todd Coupland from CIBC. Implied in the update for Q4 was about 8% growth, I think, year over year. Bridge that to your 15%-18% profit growth expected over the next three years.
It seems like there's a near-term gap, and our expectation should be more moderate growth in fiscal 2026, but just talk about expected rhythm there.
Thanks a lot.
Asha, do you want to take this one?
Yeah, sure. Thanks, Todd. The 7%-8% is specifically software growth. The 15%-18% is total gross profit CAGR. There is a difference there. One main difference there would be payments. Payments penetration will continue. We're again early in a big market, and every new customer needs to take payments. What we're expecting to see in fiscal 2026 in particular, you'll hear the details at our year-end earnings call in May. By that time, we'll have more proof points of how this calendar year is trending, and also more proof points on our strategy.
What we are assuming is the softness that we're seeing in the macro, and you heard that from us on Monday. We expect that to continue for the near term. Again, we have a solid growth trajectory, right? What we control are cost and efficiency, and we're going to manage that based on what we're seeing in the macro. We're going to make sure that we're investing in our growth drivers and funding that from the rest of the world and efficiency across the business.
Go ahead, Tim.
Great. Thanks. Tim Chiodo, UBS. A question along similar lines. Just to make sure we have it all right, the most recent update was, I believe I was talking to Gus, so it was approximately 20% growth previously for fiscal year 2025, which was maybe a hair below 20%.
I think what some investors were looking at is the reduction from 20 to 18 and saying, "Wow, 2.7 weeks. If I annualize that, that's a whole lot." The first thing's first, it sounds like it was maybe a little bit less than that of an impact, meaning it was maybe more 1.7 weeks, and we should annualize that. I want to start there just to level set. Is that the right way to think about it?
Thanks, Tim. Again, we'll give you more details in our next call for fiscal 2026. If we're going to bring down the guide, we're going to bring it down to a place where we're very confident that we're going to achieve, if not beat that number. You'll have all the details in May. Again, what we are assuming for fiscal 2026 is near-term softness continuing.
It's very difficult to forecast 12 months or 36 months based on one month of softness. As you've seen from lots of reports out there, March was the softest month. That's pretty widespread out there. Again, we put a guide out there that we're very confident that we're going to achieve. That's what we released on Monday. What we're showing in what we're modeling in fiscal 2026 in particular is some of this near-term softness continuing on the macro, but us, again, investing very heavily and seeing the fruits of some of that investments in norm retail and EMEA hospitality.
Perfect. Perfect. Thank you. It's reasonable then to think about it then as somewhat run rating the more recent trends. Without getting into too much detail on 2026, we should be expecting a mild acceleration in the out years in the three-year guide. Exactly.
Absolutely.
Yeah. All right. Great. That's good on the numbers. This is a quick one on the salespeople in Europe. They're 55 going to 100 by the end of 2026, I believe it was. Just ballpark. One salesperson, what are they expected to produce each month, either in terms of gross profit dollars or in terms of volume, and how are they incentivized? If you could just walk through some of that, that'd be appreciated. JD?
Yeah, happy to. Maybe just to talk about the REM first, and then we'll get into the quotas. At the end of November, we had about 20-22 reps, field sales reps in Europe. Since the December reorg, we've started to hire and invest significantly in that area. Already very happy with the proof points with the 22 gave us the confidence to really double down on that.
Today, we're close to 60. By March 2026, so in a year from now, our goal is to be at 100. If you look at those reps, we typically expect about a four-month ramp. During that ramp period, they're focused on booking meetings. If you're asked how they're commissioned or how they're incentivized, during their ramp, it's really quality of demos, number of meetings that they're getting, and getting that pipeline filled up. From month four onwards, it shifts to bookings effectively. How we monitor our progress there is we look at the OpEx of a rep, a fully loaded OpEx of that rep, and the MRR or ARR that they book on an ongoing monthly basis, and what is that efficiency ratio.
What we can say, and what we're really happy to see, is that efficiency on field sales in Europe is actually better than our inbound motion. When you load all the cost of a field sales rep, including all the support that we're giving those reps from a marketing perspective, they're able to bring in the revenue, and the ROI is significant. We're really happy with that progress from that point of view.
Thank you.
Thanos Moschopoulos from BMO. Maybe just to follow up on that, is it fair to assume that the ARPU from the customers you closed with an outbound sales force, is that significantly higher than what you get from the inbound ones? Yes. I'll take the question. Yeah. From an LTV perspective, really, you see that the impact of outbound is that we sign bigger customers.
We're able to better target our ICPs with an outbound motion, and in the specific case of EMEA hospitality, that field sales motion. The deals are bigger, the software ARPU is higher, the GTV of these merchants, and ultimately the payments volume that flows through our rails is also higher. What we also find is these customers are more established, so there's less structural churn. Our ability to target these restaurants allows us to ultimately also impact churn. Overall, the LTV profile is higher, while the CAC is marginally higher. The trade is well worth it. It's absolutely worth the approach here.
Just to add one thing, the inbound funnel is not going away. It actually will grow, but in proportionally less than what we're investing in outbound. We are making it more efficient and more able to isolate and target ICP cust omers.
We do get a wide spectrum of customers from small to large in that performance marketing effort. Obviously, outbound is where we're going to be growing the fastest because it's much more targeted.
Your guiding for the gross profit from the non-core markets to be flat to up a little under three-year targets, I'm actually surprised it's not negative given that those customers are on legacy platforms. Maybe just a bit of color there in terms of why it shouldn't be shrinking.
Sure.
Yeah, sure. Thanks, Thanos. What we have to keep in mind is that in the rest of the world portfolio, they are on non-flagships, but there's still lots of modules that we can upsell and cross-sell. The focus there is on net revenue retention. We have a stable, happy customer base.
Even though they're on non-flagships, they like the platforms they're on. It's a very stable platform. We spend very little money in those markets. From an efficiency perspective, it's highly efficient. From a gross profit growth in particular, there's still payments and capital that we can continue to upsell. The rest of the world portfolio is lower from a penetration perspective than North America, for example. There is lots of opportunity to still upsell and cross-sell. That's why we're expecting the growth to be flat to low single digits.
Thank you.
Hey, thanks. Andrew Hart from BTIG. In the 2028 guidance, it feels like there's two-three points of gross margin expansion expectation. How much of that is pricing versus maybe transaction or subscription accelerating more relative to transaction as it has been historically?
I guess another way of thinking about it is a revenue question of that top-line growth. What's kind of the expectation for transaction versus subscription?
Yeah, sure. What we're expecting for over that three-year period is that you'll see two things from a growth perspective. You'll see net retention on the rest of the world growing at a slower pace, but you should see both software payments and capital growing at an accelerated pace on the North America retail and EMEA hospitality. We do expect that in that period and by fiscal 2028, software revenue growth is going to outpace payments revenue growth because the majority of that backbook is now on payments. We're at about 40% today. By fiscal 2028, we'll be even more penetrated from a backbook perspective. The location growth is what's really driving our growth over that period of time.
Location growth will drive software, which obviously comes in at an 80% gross profit. That is going to be driving the majority of that growth.
Very helpful. Thanks. It seems like there was a lot of or a decent amount of talk today about the e-com opportunity. I guess, obviously, you lead with the physical sale with the POS, but then as you are going into your customers and trying to get their e-com business, just walk us through some of those conversations. What are some of the hurdles you have to get over to get that across the board and then the ARPU uplift there as well?
I think e-com, we have some of the best velocity in terms of development in the company.
What's exciting about how we're building e-com is we don't need to build a platform that's trying to do everything from drop shipping for starters to there's a lot of use cases that we can exclude because we're working on omnichannel workflows for those key verticals, right? We are hyper-focused, and we're going to deliver very, very focused value for the key verticals. Do you want to expand a little bit further on?
Sure. I'd be happy to do that, Dax. I think the main challenge we see is that these merchants are not online savvy.
I think that that focus that Dax describes gives us that ability to go in and talk about how it's really an extension of their in-store platform, that the Lightspeed Retail point of sale platform and a pitch for the breakout we're going to show this later on today is very seamless to go from I'm selling in store, really almost like a check of a box to and I want to sell online. We can use, and we're deploying AI, generative AI capabilities to take the product information you have already in your point of sale, make that merchandise ready for consumers, create sites for you when you might not have that marketing expertise as a mainstream in-store type of retailer. Being able to really unlock and drive that.
We also talked about if you have other platforms that you want to work with, we can very seamlessly and easily tap into and connect into that for you. It is really about that connectivity, that seamlessness, and really us taking on the burden of making you as a retailer online savvy without you having to know how to do that.
Y es. Thank you. Richard Tse with National Bank Financial. I'm just trying to understand New Order and how it gives you a competitive advantage. Can you maybe talk about how many deals you've actually won because of New Order and what that offe rs you?
Yeah, I think New Order, what we're seeing at the moment is it's really helping on close rates, especially in those key verticals. Also, there are a lot of leads that are coming. It is reducing our overall LTV to CAC.
Do you want to talk further?
Thank you, Richard, for the question. New Order is a critical piece of our moat in retail. It impacts the overall engine across the board. First and foremost, New Order, the B2B product, that wholesale product is used by market-leading enterprise retailers and brands like the Nordstroms of this world, the Burberrys, the Arc'teryx of this world. They use New Order for their assortment, right? Now, connecting these brands with our retailers, it impacts the entire funnel. You really see the impact across the board. We are generating more leads. People are talking about this, word of mouth, the impact on all the hours that we're shaving off the labor cost has now had an impact on lead gen.
Then all the way through, if you look at our qualification rates, if you look at our close rates, it is also impacting that in a very positive way. On the other side, our existing customers or new customers that go with us now with the capabilities of those things coming together and really the impact of the network, we see the impact on churn. Lower churn, if you look at our NPS, these customers are providing really solid feedback. It is really the entire engine ultimately that is impacted by this network effect.
Okay. Related on New Order, is there an opportunity to capture payment revenue that runs through that? Is that kind of part of your model here?
Yeah. John, you want to take that one?
Yeah. There absolutely is.
Right now, we already have some interesting proof points of beginning and starting to do that. There is about $13 billion of wholesale volume that runs through the network already. As that continues to grow, whether it is payments revenue directly, whether it is kind of connecting in that marketplace and a marketplace type dynamic, there is a lot of upside and opportunity to tap into that that we are just starting to scratch the surface on.
Good morning. Martin Toner from ATB. You are going to focus most ly on primary growth markets. Just wondering why you have not or if you would consider some portfolio management with the rest of the business.
Y eah. The rest of world portfolio, the efficiency portfolio, we have a lot of satisfied customers where we can continue to add value. We have decided as a part of this strategy that we are not going to force migrate these folks.
They're successful on these platforms. We have opportunity to cross-sell, upsell, and have profitability from that portfolio fund some of our growth and expansion in the growth markets. I think that's the value that's being added. Did you want to continue?
I think, Dax, hit the nail on the head. The portfolios of the rest of the world and the assets that are there are really driving efficiencies to fund the growth in the rest of the business. There's still lots of optimization that we can do there. For now, that's our priority. Optimize that portfolio of assets and then use the funds from that optimization to fund our growth portfolio. We're always open to opportunistic from a capital allocation perspective, and we're always evaluating opportunities.
For now, this is rea lly where we're focused is getting efficiencies out of that portfolio to fund the growth portfolio so that we can still improve our profitability.
Thank you.
There's a bunch of puts and takes to get from revenue to gross profit. Gross profit margins have been declining a little bit here. Do you expect that trend to contin ue? What do you expect in terms of gross profit margin from here?
Yeah. From a gross margin perspective, despite the growing payments revenue, which comes in at a 25%-30% gross margin, we expect total gross margins to stay in the 42%-45% range. That's because of a few factors. One, we expect the majority of the growth to come from software that comes in at 80% gross margins.
In addition to that, from a payments perspective, although gross and net take rates are lower in Europe and the rest of the world than North America, from a gross margin perspective, it's over 30%. Last but not least is we're still very early for Lightspeed Capital. It's a very nascent business. There's a huge opportunity in front of us. That comes in at a 95% gross margin. All told, we expect gross margins to absolutely stay in that range or even higher as we start to penetrate more of our backbook on capital.
Y eah. We're innovating on a couple of other financial services products like same-day payout and instant payout that are also extremely high margin. Early days, but have those in market and are promoting them to customers.
Hi there. Kevin Krishnaratne at Scotia.
Just a question on the growth engine customer location growth. I think the target is 10%-15% growth over the next three years. How does that compare to what you've been doing in 2025? Because I think you've previously disclosed ICP growth, which has been a bit lower, but that includes the non-growth engine. Can you just talk about the trajectory as you get to the 10%-15% customer location growth?
Asha.
Yeah, sure. Yeah, no problem. The 10%-15%, again, is really North America retail and EMEA hospitality. That is about two-thirds of our business today. From an ICP perspective, the majority of our ICPs are in our growth portfolio as well. It's just that, as a reminder, an ICP is a customer that's already hit the $500,000 in GTV.
You would have heard Dax talk about in his presentation that we have lots of customers that are brand new customers that are just opening their doors. They take time to ramp up to that $500,000 mark. We are selling only to complex retailers and restaurateurs. That is where our flagships thrive. The whole portfolio of North American retail and EMEA hospitality are essentially the locations that we are going to be reporting on. We want to be fully transparent. You will see how many locations are ICPs in there. That location count is what we expect to grow. In the spirit of transparency, we are going to disclose what that location count looks like annually. Flagships, the majority of our flagships are in there as well. You will be able to track how that has been growing over time.
Can you talk about some of the drivers? Obviously, there's the outbound motion. I am thinking in North America, one thing you did not really touch on is the network effect and sort of word of mouth. I think in North America, that could be quite important to you. Do you mind touching on that?
I think it's really important, especially we're focused very heavily on those eight key verticals, right? We are going to be, as part of that strategy, there's vertical brand marketing. We are going to be very present at trade shows with the influencers and the figures within those verticals. Also, remember, we are also working with the brands. We are working from the brand side, the key brands in those different verticals. I think that we will have a lot of buzz within the customer community, within stores themselves.
We will also have from the trade show, from the industry perspective, and also from the brand perspective, buzz being created for Lightspeed. Also, it's important to note that when you have outbound motions, and maybe this applies a little bit more on the field sale side in EMEA hospitality, you have a lot of buzz that's being created by having all these conversations happen in the field.
Those are some perspectives. Do you have additional?
No, I mean, at the end of the day, we acquire customers via three motions, right? We have an inbound marketing strategy. We have an outbound. And on both North American retail and EMEA hospitality, on a relative basis, we're investing a lot in those two areas. Then we also have a partner and distribution model.
As far as the three-year plan is concerned, we're expecting all three channels or all three motions to grow sequentially year over year. Outbound is getting, relatively speaking, a lot more investments. As Dax highlighted, we definitely see, and we've seen this year, the halo effect that outbound creates on the two other motions, both inbound and partnerships.
Question from online. Why don't you focus on selling retail in Europe and restaurants in North America? Wouldn't this be an ideal synergy between the two bu sinesses?
That's not what our operating model review outputted. Did you want to talk about that, JD?
Yeah. No, I think it's a good question because it summarizes what we're sharing with you all today, right? The strategy is we're doubling down in the two areas of the business where we have an exceptional product-market fit and an amazing go-to-market fit.
I think the operational review confirmed that in those two areas, there's a large TAM to capture. The name of the game for us going forward is focus, focusing on those two areas. That will ultimately create the most shareholder value for the company.
Yeah. We have 20 years of experience in those key verticals in North American retail. The ROI for every dollar spent acquiring a customer and winning a customer, and we already have so many customers in those verticals in North America, it's very different from spending that dollar building EMEA retail from scratch. Of course, the dynamics around hospitality, we've been in that market 10 years. We've got high concentration in cities that have density of restaurants. Very easy to expand on that. In the U.S., there's a player here called Toast that changes the competitive dynamic completely.
We do not have as much of an established track record here as we have. The European product for the hospitality product for retail for hospitality in Europe has the DNA of Europe, right? It was originally conceived from an acquisition in Europe. A lot of the technology that we acquired over time was from different European vendors as well as insights and analytics from UpServe. That is why we have such a lead in European hospitality. It makes perfect sense just to double down there and capture that market.
Hey, guys. Good morning. Suthan Sukumar from Stifel. My first question is really around retention within your non-core, non-growth engine markets. Can you speak about some of the strategies you have for retention as you push on optimization and profitability in these segments?
Yeah. Yeah, thanks.
The large majority of how we manage net revenue retention is going to come from cross-sell and upsell, right? Basically, we have payments penetration, again, is lower in that portfolio of assets than in the rest of our assets, Noam retail in particular. Penetrating those assets onto payments really helps from a net revenue retention perspective. Capital is another one, right? From a capital perspective, we started with North America. We're just now branching into other countries in the world. We're very, very early again in a large market. Selling capital, which is a very high gross margin business to the rest of the world, really helps in improving net revenue retention. Those are the two areas. I mean, obviously, we have a happy customer base. Mitigating churn is always important. We make sure we're making sure that that base is more and more stable.
It's very stable today, whatever we need to do to improve any issues that arise. The vast majority of the net revenue retention is really going to come from cross-sell and upsell of either software or payments and capital, which is very low penetration today.
Is there any plan to move some of those customers onto flagship platforms over time as well, or those will remain on the legacy platforms?
I think that the customers that are doing multiple locations that are expanding a lot are going to be attracted to the flagship platforms. We're happy to do migrations. Customers that are well served on their existing platforms, they might have been on that non-flagship platform for five-plus years. They understand that the support costs for us are low. The OpEx on the platforms itself is low because they're stabilized.
They can remain on those platforms. We will still add value for them through financial services that is across all of our different platforms. Anything that is added to Omnichannel or anything that is added to New Order is typically accessible to all the non-flagship platforms as well. They are still getting value. We can still upsell to them. We can still cross-sell to them. If they want to move to the flagships, we will assist them .
Great. Thanks. Just one quick one for me on the B2B New Order opportunity. Do you see opportunity to expand beyond the core eight verticals that you are focused on today in retail?
Pass that to you.
I mean, I think the right way to look at it is near-term and long-term. I think our main approach is that there is a ton of upside and opportunity in those eight right now.
As we think about over the next few years, that's where we're really investing in. We're always assessing and analyzing how adjacent verticals and sub-verticals can benefit from our capabilities and our technology.
Thank you.
John, just since there are a lot of questions about our e-commerce, just want to point out that you will be demonstrating s o me of the e-commerce capabilities in the breakout session, correct?
Yeah. I'm going to use this as a chance to plug it. We're going to demonstrate e-commerce. We're going to demonstrate the integrated time savings of the New Order network into Lightspeed point of sale and all the complex fulfillment and sales workflows. Please do make sure to join there. I'll plug Noam as well. The hospitality workflows and insights are really something you have to see.
Another question from online.
Could you walk through your expectations on monetization, specifically bridging a 10%-15% CAGR in locations versus a 20%-25% CAGR in gross profit across your growth engines? Do you expect subscription attach, payment attach, or pricing to be the most significant contributor there?
Yeah. Thank you. The 20%-25% CAGR on gross profit is driven by net location growth, as whoever asked the question outlined. The delta will really come from ARPU. It's driven by software ARPU. John and Adaniram talked about all of the vertical-specific software that we're going to be creating. We've developed several modules. Adaniram talked about KDS and Insights. These will all be upsold to drive software revenue. There is ARPU from financial services. I talked a little bit about capital very early in a large market.
There is lots of capital opportunity that will drive an uplift in ARPU. The gross profit growth as well. Last but not least is payment penetration. We are at 40% penetrated today. We can easily get to 60% plus. The rest is cash in the system or in regions where Lightspeed does not play today. Again, there is a lot of opportunity still from a payments perspective. Continuing to penetrate payments, continuing to penetrate capital or merchant cash advance business, and then software. Those are going to be the three driving factors for ARPU uplift in addition to locations.
Okay. I think we are kind of out of time. Okay. We will do one more question from the audience.
Thank you. Hi. This is Mina from JPMorgan sitting in for Tianjin Huang. The first question I had was about your unified payments.
I guess you guys have kind of hit that low 40% target that you guys had for the year. You had discussed when you were, I guess, first previewing the program that you were trying to hit around 50% penetration long-term. Would this still be a good target to kind of think about for potentially fiscal year 2028 or longer term after that?
Yeah. Thanks, Mina, for the question. Ultimately, we still have a lot of opportunity on payments. We're at 40% today. We do think that 50% is the right target as we look forward. We have things like non-solicits that are starting to run out that we couldn't penetrate onto payments. That was one of the big reasons why the delta is not yet penetrated. As those start to run out, we can penetrate that backbook on payments.
The other factor is there's several customers that had three-year deals. When we started on the payments journey, we did not want to inundate them to change payments until their renewals. That three-year renewal period is also coming up. These are all reasons why you will see the rest of that backbook getting penetrated as we move forward. Let's not forget that every new eligible customer must take payments. They cannot buy only software from Lightspeed. Just by virtue of that, n aturally, you will see payments penetration improve.
Great. Thank you. Just one other quick follow-up. I'm curious why you guys have a really interesting go-to-market strategy. It seems really compelling . I'm curious why you aren't necessarily doubling down on feet on the street in North America retail or your AI outbound sales motion in EMEA hospitality.
Is that just the dynamics of those markets, or what's at play there?
Yeah. I think in North America retail, it's very vertical by vertical, right, as opposed to city by city. We have tried experiments in both over t he last year. What makes sense is to go vertical by vertical on retail as opposed to a geographical strategy. Do you want to dive deep into that?
Ye ah. That's exactly that. I would say on top of that, Mina, what we also find is that in hospitality, the decision makers typically add the location. Taking a field approach makes sense. On the retail side, we're more efficient to doing it more from a remote outbound perspective and getting to the decision maker that way. Yeah. That's why there's a bit of a different approach he re.
Thank you.
Thank you so much.
Just quickly, Katie Keeser for Josh Baer, Morgan Stanley. Just wanted to hit on the capital allocation piece. Any considerations you guys can share about the kind of pace of buyback, pace of administering that going ahead, and then kind of the other side of the coin with M&A? Obviously, that's been a priority in the past. When we're thinking about kind of the accelerating pace of innovation, anything on the potential tech tuck inside? Thank you.
Yeah. I'll take the M&A one and then I'll pass to you for the buyback. Yeah. I think we're always being opportunistic looking at small tuck in M&A that can accelerate software development or add to software ARPU. We have a team that looks at opportu nities.
Yeah.
On the buyback question, Katie, we filed a new NCIB today, having utilized all the capacity on the fiscal 2025 one that we filed in April of $132 million a round. We filed a new one today, similar magnitude. There is a limit to how much we can do through an NCIB. There are also other avenues available to us. We can buy back outside of that as well. We have been authorized by our boards to buy back approximately $300 million in addition to what we have already done. We plan to utilize just what is happening in the market opportunistically and buying back stock in that way.
Okay. I think we will wrap it up there. Again, we are going to have the breakout sessions. There is one for hospitality, one for retail. You can split yourselves up. They are back to back. You can attend both.
For those of you here in the room, there are box lunches available. I suggest after the first breakout session, please help yourself to a box lunch. Our management team will be around after. If you have any follow-up questions, you can pepper them on a one-to-one basis. Thank you, everyone, for participating in the Q&A. We're going to wrap it up here. It was great to have you with us today, whether you were here personally or virtually on our webcast. We're excited to have you with us as we embark on this next phase of Lightspeed's journey. I want to wrap it up there. We'll move on to the breakout.