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Thank you for waiting. My name is Gail, and I will be your conference operator today. I would like to welcome everyone to the Lightspeed Second Quarter 2026 Earnings Call. I will now turn the conference over to Gus Papageorgiou, Head of Investor Relations. You may begin.
Thank you, operator, and good morning, everyone. Welcome to Lightspeed's Fiscal Q2 2026 Conference Call. Joining me today are Dax Dasilva, Lightspeed's Founder and CEO; Asha Bakshani, our CFO; and J.D. Saint-Martin, our President. After prepared remarks from Dax and Asha, we will open it up for your questions. We will make forward-looking statements on our call today that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Certain material factors and assumptions were applied in respect to conclusions, forecasts and projections contained in these statements. We undertake no obligation to update these statements, except as required by law. You should carefully review these factors, assumptions, risks and uncertainties in our earnings press release issued earlier today, our second quarter fiscal 2026 results presentation available on our website as well as in our filings with U.S. and Canadian securities regulators. Also, our commentary today will include adjusted financial measures, which are non-IFRS measures and ratios. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website, on SEDAR+ and on the SEC's EDGAR system. Note that because we report in U.S. dollars, all amounts discussed today are in U.S. dollars unless otherwise indicated. And with that, I will now turn the call over to Dax.
Thank you, Gus, and good morning, everyone. I'm thrilled to announce that Lightspeed had another very strong quarter. Revenues, gross profit, and adjusted EBITDA came in above our previously established outlook. This marks the second consecutive quarter where we have exceeded revenue and gross profit outlook metrics. In addition, we delivered positive free cash flow and saw our GTV and location growth accelerate as we continued solid execution of our strategy. Our decision to focus on our two core growth engines, retail in North America and hospitality in Europe, is clearly working, and we are seeing fantastic momentum. From product development to landing new business, our teams are delivering at a record pace. To deliver on our strategy, we are harnessing the latest advances in AI. As an example, this quarter, we released a host of new AI-driven products and features to enhance our customers' omnichannel capabilities. We are already seeing strong adoption across thousands of use cases. Additionally, by increasingly integrating AI tools in our go-to-market efforts, we are seeing sales productivity improvements such as doubling the number of connected calls from our outbound sales reps. We continue to leverage AI thoughtfully to drive revenue, improve products, and reduce costs. I want to begin today by comparing this quarter against the three strategic priorities we laid out at our Capital Markets Day. As a reminder, those priorities are: growing customer locations in our growth engines, expanding subscription ARPU, and improving adjusted EBITDA and free cash flow. On growing customer locations. In Q2, customer locations in our core growth engines, North American retail and European hospitality, were up 7% year-over-year, an acceleration from 5% last quarter with approximately 2,000 net new customer locations added in the quarter. This acceleration clearly demonstrates that Lightspeed is growing in markets where we have a proven right to win. As a reminder, our goal is a targeted three-year customer location CAGR of 10% to 15%, and we are on pace to meet that goal. Total customer location count, which includes all of our markets, was net positive again this quarter. Expanded outbound sales efforts, increased investment in vertical brand marketing, and more effective inbound spending have helped drive location growth, particularly in our growth engines. Outbound bookings in our growth engines nearly tripled year-over-year. Since the start of the fiscal year, we've grown our outbound team to approximately 130 fully ramped reps within our growth engines, each now carrying a full quota. This investment is paying off. Our outbound motion continues to drive highly targeted acquisition of our ideal customers with strong unit economics. We will keep allocating resources toward outbound to capitalize on this proven engine of growth. During the quarter, we continued to expand our presence at trade shows, a great source of lead generation for ICP customers. Our NuORDER offering gives us a unique position within the retail environment, and participating in these events gives us an opportunity to both demonstrate our strong product offerings and communicate our vision for NuORDER and our wholesale network. We're also continuing to host our own signature product innovation events, where we gather customers to showcase recent product launches and industry insights. Coming up, we'll be hosting Lightspeed Edge in Paris on November 24 for hospitality customers and New York City on January 12 for our retail customers. All these efforts continue to have a halo effect on our inbound funnel as we increase our visibility with our ideal customers through trade shows, outbound targeting, and Lightspeed branding on our terminals at local restaurants in Europe and retailers in North America. We had many notable customer wins this quarter. In retail, we added 40-location Crock A Doodle, which operates pottery painting franchises across Canada; Benson's Pet Center with 9 locations in New York and Massachusetts. Within NuORDER by Lightspeed, we extended our partnership with Nordstrom and added marquee brands such as Carhartt and Steve Madden. And in golf, we signed on Top of the World Communities with 3 restaurants and 2 golf courses in Candler Hills, Florida. In hospitality, we added the 2 Michelin Star restaurants Hirschen in Salzburg, Germany. The Beckford Group focuses on unique premium hospitality experiences across their six locations in the Southwest of England. And with 2 locations in Antwerp, Belgium, we welcomed Da Giovanni, one of the area's well-known Italian restaurants. On driving software revenue and ARPU. Q2 software revenue grew 9% year-over-year and software ARPU increased 10%. Growth in our key markets is fueling software revenue as expanding location counts and targeted outbound efforts attract larger, more sophisticated customers who tend to adopt higher-end plans. This momentum is further supported by our steady release of new innovative features on our flagship offerings. In the quarter, we released several new features. In retail, we launched multiple AI-powered tools designed to dramatically improve our merchants' online presence with minimal cost or effort on their part. We launched the Lightspeed AI showroom designed for physical retailers who want a compelling online presence without the added time commitment of running an e-commerce store. Lightspeed's AI agent takes product data hosted within the Lightspeed platform and delivers a custom-branded website and catalog to help drive store traffic. Originally released back in March in beta, Lightspeed's cutting-edge AI-driven website building tool is now available to all customers who are looking to offer a full e-commerce experience. Merchants simply describe or show Lightspeed's website builder the kind of site they want using real-world examples, and the tool builds a fully integrated, professional-looking online store with speed and ease. We launched AI product descriptions. This powerful new tool significantly streamlines the manual workflow of adding new products to e-commerce sites. Retailers can customize subscriptions by adding specific instructions for tone, style, and length to ensure brand consistency. Since August, this description and formatting tool has been used to create approximately 57,000 unique product descriptions. In addition to these AI-powered tools, we were very excited to launch NuORDER Marketplace. Currently, our retailers use NuORDER to connect directly to each of their brands individually, allowing them to search within that brand's product catalog. However, our retailers have to conduct searches brand by brand. With Marketplace, retailers can search for specific products, colors, styles, or sizes across multiple brand catalogs simultaneously to help them discover new products and better curate their offerings. Currently in beta, Marketplace will be launched soon to all eligible NuORDER customers. In hospitality, we launched Integration Hub. The hub enables our customers to easily discover, connect to, and start using over 200 third-party applications within the Lightspeed ecosystem. We've seen strong initial reception with almost one-third of our flagship hospitality customers interacting with the hub since its launch. Adding on to the already robust capabilities available to restaurant operators through Lightspeed's AI-powered benchmarks and trends, our latest update adds new visual layers to the sales performance chart, highlighting best and worst days relative to the market and providing drill-down views for each sales metric, helping merchants to make data-driven pricing and operational decisions. Benchmarks and trends remain the anchor feature for our top-tier plan within hospitality. In August, we launched Lightspeed Capital in Switzerland, where we saw strong and immediate demand from our Swiss customers. Finally, we launched time menus to bring automation to multi-menu setups, eliminating the need for manual workarounds. We also enabled Lightspeed Order Anywhere to sync with the restaurant's Google business profile, ensuring a consistent online presence and improving discoverability. By narrowing our focus to our growth engines, we've enabled our development teams to become far more productive, and I'm thrilled with the pace of innovation we are seeing on our two flagship offerings. I want to take a moment to share a glimpse of what's next for Lightspeed. As you have seen with several of our recent product launches, we've been deeply investing in AI as a meaningful way to empower our customers and redefine how they run their businesses. I'm thrilled to preview our upcoming innovation, Lightspeed AI, a new way for merchants to access insights and make decisions directly within their POS. Think of this as your AI assistant with agentic capabilities. Our AI acts as a trusted partner to help our customers find answers, uncover trends, and act faster than ever before, custom-built to serve our retailers and restaurateurs' needs. This is the next evolution of Lightspeed's AI journey, building on the success of products like AI showroom and benchmarks and trends and is already being tested by a select group of customers. We can't wait to share more in the coming months as AI becomes a foundational part of how we help businesses thrive. On expanding profitability. Finally, our third strategic priority was to expand profitability. And in this quarter, we did exactly that through expanded margins and improved cash flow. Lightspeed further strengthened its software gross margins to 82%, and transaction-based gross margins reached 30%, with both improving year-over-year and from the previous quarter. Adjusted EBITDA of $21 million increased 53% year-over-year. Importantly, we also saw improved cash flow, delivering adjusted free cash flow of $18 million, up significantly from $1.6 million in the same quarter last year. Back in March, at our Capital Markets Day, we laid out a bold strategy with three-year financial goals. We are now over two quarters into that period, and I believe our strong results are evidence that we are well on our way. Within retail, our large customers are complex retailers that need sophisticated solutions to help them order, manage, and turn over their inventory. These customers need more than basic software to run their businesses. They need a light ERP solution, which is exactly what we offer. We believe no other cloud POS vendor can match the feature set within Lightspeed Retail. In addition, we stand apart with the NuORDER Lightspeed integration because with NuORDER, Lightspeed's retail POS has wholesale built right in. The end result is an unmatched ordering workflow and a flywheel effect where more brands bring in more retailers and more retailers bring in more brands. Within European hospitality, I am confident that we have the superior product offering. We are now complementing that strong offering with the go-to-market motion that is becoming best-in-class. In addition, regulatory requirements involving fiscalization are a barrier to new entrants into that lucrative market. We have a formula that is working, and we believe we will continue to excel in this region. I will let Asha take you through our financials before making closing comments.
Thanks, Dax, and welcome, everyone. Lightspeed had an exceptional second quarter with our key financial metrics and KPIs surpassing expectations. Our results are evidence that our product innovation, our aggressive outbound strategy, and our strategic focus we embarked on are working. We are delivering in the areas that matter most, which sets us up well for the long term. Before I take you through the financials, I would like to highlight some key trends in the quarter that I found very encouraging. First, and perhaps most importantly, we're seeing a tremendous impact from our strategy to focus on our growth markets of North America retail and European hospitality, as you heard from Dax. Software revenue in these markets increased 20% year-over-year. GTV was up 15% year-over-year. Payments penetration was 46%, up from 41% last year, and customer locations were up 7% year-over-year versus 5% in the previous quarter. These markets make up over 65% of our total consolidated revenue. When we isolate the metrics in these markets, they reveal the true competitiveness of our offering and the strength of our platform. We are really excited about the accelerated growth we're seeing in these markets, especially since we are still early in our transformation. Second, even with aggressive investments in product and go-to-market, the company's total profitability and cash flow metrics continue to improve. Gross margins and adjusted EBITDA showed great progress, and our relentless focus on driving profitable growth helped us deliver positive free cash flow of $18 million in the quarter, up from $1.6 million a year ago, and we expect to generate breakeven or better free cash flow for the full fiscal year, a significant milestone for Lightspeed. As usual, I will walk you through a detailed look at our financials and then provide our Q3 and fiscal 2026 outlook. Total revenue grew 15%, ahead of our outlook, driven by a growing location count, software ARPU expansion, and increasing payments penetration. Revenue growth was primarily generated by our growth markets of North America retail and European hospitality as more and more customers move onto our platforms and attach new modules. In addition, we benefited from improving same-store sales, thanks to a more stable macro environment. Software revenue was $93.5 million, up 9% year-over-year, with software ARPU up 10% year-over-year. Software ARPU increased due to our outbound teams attracting larger customers, new software releases, and the benefit of price increases we implemented last year. Transaction-based revenue was $215.8 million, up 17% year-over-year. Gross payments volume grew 22% year-over-year, and capital revenue grew 32% year-over-year. GPV as a percentage of GTV came in at 43%, up from 37% in the same quarter last year. Overall GTV grew by 7% to $25.3 billion, and total average GTV per location continued to climb as we continue to sign more high-value customers. GTV in Europe benefited from favorable FX rates as the U.S. dollar weakened against local currencies. Total monthly ARPU reached a record $685, up 15% year-over-year, driven by both higher software and payments monetization. ARPU grew across both our growth and efficiency markets with growth markets outpacing the overall average. And as those locations grow, we expect a continued positive impact on overall ARPU. With respect to our efficiency markets, our goal is to maintain the revenue base through additional module attachments and expansion of financial services. As an example, this quarter in Australia, we launched Instant Payout on Lightspeed Payments for hospitality merchants. This high-margin offering allows merchants to receive their daily sales the very same day, including weekends and holidays. There also continues to be meaningful opportunities to grow payments revenue in these markets as payments penetration is at 36%, well below the 46% penetration in our growth markets. In the quarter, we were able to keep total revenue close to flat year-over-year. With respect to profitability and operating leverage, total gross profit was strong, growing 18% year-over-year, exceeding both 15% revenue growth and our prior 14% outlook, driven by strong top-line performance and expanding gross margins in both subscription and transaction-based revenue. Total gross margin was 42%, up from 41% last year, despite transaction-based revenue increasing to 68% of total revenue from 66% last year. Hardware gross margins declined this quarter due to strategic discounts and incentives to drive new business as well as free hardware provided to support customer transitions to our Unified Payments and POS offering. We delivered strong software gross margins of 82%, up from 81% last quarter and 79% a year ago. This is largely driven by increased cost efficiency. We are increasingly using AI to reduce the cost of support and service delivery. As an example, AI now resolves over 80% of inbound chat interactions on our flagships. This has allowed us to significantly reduce headcount in support, which is showing up in our expanded gross margins in software. Gross margins for transaction-based revenue were 30%, up from 27% last year. This improvement reflects growth in our capital business and in payments penetration in our international markets, where margins exceed those in North America. As we convert customers to Lightspeed Payments, we increased our overall net gross profit dollars. And in the quarter, we saw transaction-based gross profit grow 28% year-over-year. Total adjusted R&D, sales and marketing, and G&A expenses grew 13% year-over-year. This includes meaningful investments we are making in field and outbound sales as well as product innovation in our growth engine. Adjusted EBITDA in the quarter came in at $21.3 million, increasing 53% from $14 million in Q2 last year, driven by continued successes from our strategic shift and our focus on AI and automation to accelerate operating efficiency. As a percent of gross profit, adjusted EBITDA was 16%, approaching the longer-term 20% target we outlined at our Capital Markets Day. I'm very happy to report adjusted free cash flow of $18 million in the quarter. Thanks to our improving profitability and disciplined working capital management, we were able to deliver positive free cash flow despite our accelerated outbound strategy and increased investment in R&D. Although free cash flow will vary quarter-by-quarter, we expect to deliver breakeven or better adjusted free cash flow for the full fiscal year. We continue to actively manage our share-based compensation and related payroll taxes, which were $17.4 million or 5% of revenue for the quarter versus $19.5 million or 7% of revenue in the same quarter last year. With respect to capital allocation and our balance sheet, we ended Q2 with approximately $463 million in cash, an increase of approximately $15 million from last quarter. Approximately $200 million remains under our broader Board authorization to repurchase up to $400 million in Lightspeed shares, and we continue to be opportunistic in evaluating further share repurchases. Total shares outstanding in the quarter were down by 10% versus the same quarter last year due primarily to the $179 million in shares repurchased and canceled over the last 12-month period. Aside from potential buybacks, our largest use of cash will be growing our merchant cash advance business. There are currently $107 million in MCAs outstanding, and we believe we can continue to grow this balance over time. With that said, we're also running the MCA business more efficiently, using less capital this quarter versus the same quarter last year despite growing revenue by 32%. This is due to our successful effort to reduce payback periods to 7 months. With respect to M&A, we remain opportunistic in the evaluation of small tuck-in acquisitions to help accelerate product development, but large-scale acquisitions are not a strategic priority for us. Our balance sheet remains healthy and positions us well as we continue our strategic focus. Now turning to our outlook. For modeling purposes, I would like to highlight a couple of factors. First, Q3 GTV is generally flat to slightly down from Q2 due to seasonality, and we expect similar performance this year. Although Q3 benefits from the retail holiday season, in Q2, we have strong performance in European hospitality as well as golf. In terms of software growth, in Q3, we will lap the price increases implemented last year. As a result, we expect software growth to slightly moderate for the second half of the year. Looking ahead, we remain confident in our ability to execute against our go-forward financial outlook shared at our Capital Markets Day in March. As a recap, we targeted a three-year gross profit CAGR of approximately 15% to 18% and a three-year adjusted EBITDA CAGR of approximately 35%. Given our strong performance to date, we are raising our outlook for the full fiscal year. For the third quarter, we expect revenue of approximately $309 million to $312 million, gross profit growth of at least 15% year-over-year, and adjusted EBITDA of approximately $18 million to $20 million. For fiscal 2026, based on a strong first half of the year, we are increasing our outlook for the year. We expect revenue growth of at least 12% year-over-year, gross profit growth of at least 15% year-over-year, and adjusted EBITDA of at least $70 million.
Thanks, Asha. Before we take your questions, I would like to take this time to welcome our new Board members. In July, we welcomed Glen LeBlanc, the former EVP and CFO of BCE Inc., who brings with him over 30 years of tech and telecom experience. Last month, we also welcomed Sameer Samat and Odilon Almeida to our Board of Directors. Sameer is currently President of the Android ecosystem at Google, and Odilon served as the CEO of ACI Worldwide, a global payment software and solutions provider. I look forward to working with all of them as we continue to advance our strategy and support our customers. I would also like to thank our departing Board members, Rob Williams, Paul McFeeters, and Patrick Pichette for their contributions and support over the past several years. In closing, I think Q2 is clear evidence that our strategy is working. I want to thank all of the employees at Lightspeed for making this strategy a success. Without your dedication and commitment, none of this would be possible. With that, I will turn the call back to the operator to take your questions.
分析師問答
Your first question comes from the line of Thanos Moschopoulos of BMO Capital Markets.
It seems like you're seeing a good return on your investment in outbound sales. And so in light of that, how should we think about the sales ramp? Might you look to accelerate your hiring plans for this year? And maybe it's too early to talk about next year, but is it safe to assume that you'll continue to ramp those investments heading into next year?
Thanks, Thanos. Yes, outbound sales are performing exceptionally well. Our Q2 outbound bookings have tripled compared to last year, which is very encouraging. This approach allows us to precisely target our ideal customer profiles and achieve optimal sales metrics. We've expanded our outbound team to around 130 fully ramped representatives in our growth engines, North American retail and European hospitality, all of whom are meeting their quotas. We aim to reach 150 by the end of the fiscal year. Additionally, we are in the planning phase for how many representatives we will deploy in the upcoming years.
Okay. Great. And then maybe just a question on capital. As we think about the growth going forward? I mean, is much of that going to be driven by the launch in new geographies? And how should we think about the rollout? You mentioned Switzerland. What will be the strategy there for further expansion?
Capital is performing exceptionally well, as highlighted in our prepared remarks and press release. We're leveraging capital to enhance our upselling and cross-selling efforts across our customer base. In our Rest of the World portfolio, capital has become a very popular product among merchants. As we increase our outbound efforts and attract more ideal customer prospects into our pipeline, we anticipate continued strong growth for capital. We achieved over 30% growth this year, and we expect solid growth in the coming years as the ideal customers we are onboarding through outbound efforts are well-suited for the capital business, being creditworthy and high GTV customers. This trend should further strengthen capital's growth.
Your next question comes from the line of Trevor Williams of Jefferies.
I wanted to start with a bigger picture question on pricing. Just how you guys would frame the current backdrop at the industry level. Asha, I heard the call out on hardware discounting as more of a customer acquisition tool. I'm just curious if that's more of a proactive or reactive move to anything you're seeing competitively.
Trevor, thanks for the question. The hardware discounting is totally proactive. The hardware discounting is quite typical and common. You saw a slight uptick this quarter from what you've seen historically, and that just comes with more new locations. As we attract more and more locations in our growth portfolios, in particular, we are giving discounts to get those customers through the door. Pricing and packaging overall has been going very well for Lightspeed. We had some pretty significant price increases about a year ago, and that's what you're seeing come through partly in the growth this year. As we look forward, Dax talked a bit about all the product velocity and how strong that has been at Lightspeed. And so we keep including these new modules in different pricing and packaging. And so that evolution is going to continue, and that continues to drive quite a nice ARPU uplift for Lightspeed.
Okay. No, I appreciate that. And then on the GTV growth acceleration we saw this quarter, I think you called out higher GTV location from the success with the growth engines. Anything else you can dimensionalize around same-store sales, location growth? And I know you don't guide to GTV growth, but with the momentum that we're seeing on the growth engines side, is it fair for us to assume that the trajectory we've seen over the last couple of quarters should persist going forward?
Yes. I'm going to say that same-store sales in both retail and hospitality, both in North America and Europe, were really positive this quarter. It's the best quarter for same-store sales in quite some time. And total GTV was up about 15% year-over-year in the growth engines and about 7% overall. So that's a good acceleration. It's also driven by all of the new locations. As you saw, we closed 2,000 new locations in the growth engines, which is an acceleration from last quarter.
Your next question comes from the line of Josh Baer of Morgan Stanley.
Congratulations on a strong quarter. I wanted to explore the investments in EBITDA and understand the implications of the change in the EBITDA guidance from $68 million to $72 million to now being greater than $70 million. You outperformed EBITDA again, and the guidance for Q3 was favorable. Is there a reason to believe that investments are increasing in the second half of the year and into Q4? How should we interpret the guidance of greater than $70 million? I also have a follow-up regarding OpEx.
We are experiencing significant progress in our growth areas and aim to increase our location count. We are committed to further investing in our go-to-market strategy, and some of our funds are being reinvested to maintain that growth trajectory. This is crucial for the company, and everyone wants to see us capture market share in our key growth opportunities. Asha?
Yes, thanks, Josh. I believe Dax really emphasized that point. The increase in EBITDA is smaller than the previous gains we've reported because we want to maintain the flexibility to invest more in areas where we're seeing quicker returns on our investments. We're experiencing this in several of our growth sectors. Thus, the modest increase in EBITDA is intended to allow us to keep investing in growth. There’s a large total addressable market out there, and we're enthusiastic about it.
Okay. That makes a lot of sense. I guess a follow-up would be on just the software piece here. Software ARPU growth is higher than the total software revenue growth, but you're still adding customers on a net basis year-over-year, quarter-over-quarter. How do we put those two different growth rates?
Yes, that's a great question, Josh. The software ARPU growth is outpacing the overall software growth due to a shift in our customer mix. As we onboard larger customers and phase out smaller ones, this transition is reflected more quickly in the average revenue per user per month than in the overall software revenue. Overall, this is positive news for Lightspeed as we are attracting more high-ARPU customers while experiencing the majority of churn among the smaller merchants.
Your next question comes from the line of Tien-Tsin Huang of JPMorgan.
Just curious, any good quarter here. Any interesting observations out of the growth markets from a monthly perspective, month-to-month, that informs your confidence to raise your outlook? And I'm curious, same question here for quota-carrying sales, any seasoning effects here? I'm assuming you'll see more productivity. I just don't know how that's balanced across the 130 that you have.
I think Q2 is a really good quarter for European hospitality. It's their go-to season as well as for golf. Obviously, we'll see a little bit less of those two elements of the growth engines in Q3. We'll see more of North American retail. So that's sort of how our seasonality looks in the next little while. But yes, I think we are seeing a real payoff of those go-to-market efforts and those growth engines. We're seeing acceleration. And I think with outbound, we're really able to target those customers that are natural fits for where our product plays, which is those higher GTV merchants in retail and hospitality.
Got it. And then Dax, I'm curious I have to ask on the efficiency markets. Any change there in your thinking on strategy? Because it seems like there's some surgical things you're doing there to enhance growth or productivity there. Any change in thoughts?
I consider this a significant success. It is really driving growth in our key areas, and we're experiencing a 20% increase in software growth in those areas. We are pleased with this progress. Additionally, the efficiency markets are performing well. We are observing positive trends in efficiency, which are meeting our expectations.
Your next question comes from the line of Matthew English of RBC Capital Markets.
This is Matthew on for Dan Perlin, RBC. So I have a question on NuORDER. It's great to hear the rollout of Marketplace. I was wondering if you could frame the monetization strategy of that asset and maybe the outlook for attaching payments to that B2B volume.
This is an exciting aspect of our strategy, and we're seeing it become increasingly significant in our retail narrative, playing a crucial role in our sales approach. We offer the only retail POS that incorporates wholesale capabilities. Expect a substantial demonstration of our plans at NRF. In our daily sales conversations, this presents a significant advantage for retailers in our target sectors, as they can purchase wholesale directly through our platform, enabling a workflow that is unique in our industry. This is further enhanced by our ability to utilize our insights, AI-driven analytics, and capital products to optimize inventory efficiency. With Marketplace, it's not only the brands you're currently engaging with that are accessible through NuORDER; you can also discover and search for new brands you haven't interacted with before. This significantly expands the opportunities available to our retail customers, helping them diversify and refine their selections. We're thrilled about the multifaceted advancements in NuORDER. We're also welcoming outstanding brands to the platform, such as Carhartt this quarter, which is significant because they have many retailers that should also be using Lightspeed. Brands are encouraging retailers to join the platform, and retailers are suggesting that their key brands get on board as well. Additionally, there's a significant payments opportunity here, and we now have the framework in place to capitalize on that, which aligns with our acceleration strategy for NuORDER.
Your next question comes from the line of Matt Coad of Truist Securities.
Really good set of results here. I wanted to touch on the locations growth. I thought a really encouraging set of results, both on total locations and growth engines. I was hoping you could unpack it a little bit for us, both on gross adds in the growth engines, kind of like what subverticals maybe you're seeing outsized success in or what kind of geographies within Europe you're seeing success in? And then also curious if you could touch on churn rates. It seems like churn rates have gotten a little bit better for you guys based on our math. So any tidbits or pieces of information there would be helpful.
Yes, this is a significant achievement for the company with 2,000 new locations, increasing our location growth rate from 5% to 7% in just one quarter. As highlighted at Capital Markets Day, our three-year compound annual growth rate for locations is projected to be between 10% and 15%. We are already making substantial progress just two quarters into our transformation. This growth positively impacts all of our metrics, as having more high-quality merchants join the platform is essential. My primary focus every day at the company is to attract more customers to Lightspeed's platform. This has become a unifying goal because we are confident that we can provide value to these customers by having them utilize the platform, as well as our NuORDER and AI tools, along with our inventory and restaurant management solutions for European restaurants. When examining our growth engines, location growth is distributed evenly across the two. There are areas of seasonality; for instance, during the summer months, European hospitality and golf are busier, which makes onboarding onto new systems less likely. They often show interest but are more inclined to make commitments in the third quarter. On the other hand, for retail, businesses typically avoid switching systems during their peak buying season. Despite this, we are achieving growth in our primary sectors. In retail, we see considerable potential in multi-brand apparel utilizing NuORDER to source from various brands. We also maintain a strong presence in the sports and outdoor segments, including key areas like biking and golfing, along with success in other categories such as running and swimwear. In European hospitality, we've established a presence in numerous countries, having historically performed well in the Benelux region and the U.K. France and Germany are also becoming very promising markets for us. We have identified several areas of strength that we intend to further develop.
With no further questions, that concludes our Q&A session. I'd now like to turn the conference back over to Papageorgiou for closing remarks.
Thank you, operator. Thanks, everyone, for joining us today. We will be around all day if anyone has any further questions, and we look forward to speaking to you at our next conference call in early next year. Thanks, everyone, and have a great day.
This concludes today's conference call. You may now disconnect.