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Good day, and thank you for standby. Welcome to the Lightspeed Fourth Quarter 2021 Earnings Call. [Operator Instructions] Please be advised today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Gus Papageorgiou. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to Lightspeed's fiscal fourth quarter and full year 2021 conference call. Joining me today are Dax Dasilva, Lightspeed's Founder and the CEO; Brandon Nussey, Chief Financial Officer; and JP Chauvet, President of Lightspeed. After prepared remarks, we will open it up for your questions. We will make forward-looking statements on our call today that are based on assumptions and therefore, 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. You can read about these risks and uncertainties in our earnings press release issued earlier today, as well as in our filings with the U.S. and Canadian securities regulators. Also, our commentary today will include adjusted financial measures, which are non-IFRS measures. 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.com and on the SEC's EDGAR system. In addition, our commentary today will include key performance indicators that help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Such key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies. And finally, note that because we report in U.S. dollars, all amounts discussed today are in U.S. dollars unless otherwise indicated. With that, I will now turn the call over to Dax.
Thanks, Gus. Good morning, everyone, and thank you for joining us today. Before I get started, I just wanted to welcome everyone from -- from the Lightspeed team. We are thrilled to have Anna and her colleagues join Lightspeed as we seek to transform the retail experience for our customers and consumers alike. This past quarter closes off our 2021 fiscal year. And I think it is safe to say that it has been the most transformative year in the company's history. Despite a global pandemic, that was particularly hard on our customer base of small and medium-sized businesses, Lightspeed managed to deliver some of the strongest performance in the company's history, undertake 3 landmark acquisitions, which greatly improved our presence in the key U.S. market. List on the New York Stock Exchange, released a series of new offerings, including Lightspeed capital, curbside pickup, e-commerce for restaurant, order ahead and subscriptions and launched 2 major strategic initiatives with supplier network and our recently announced global partnership with Google. Our transformation was definitely by design but also highly influenced by our environment. I believe that every one of our customers will look back on the past year as the moments where they realized that an omnichannel strategy was no longer optional, it has become an absolute necessity. Never has our goal of arming our customers with the technologies they need to operate and scale their business felt so relevant. And we are proud that they have chosen Lightspeed as their technology partner of choice. We were happy to end the year on a high note with Lightspeed delivering quarterly revenues that exceeded previously established guidance and Street expectations. We grew revenue 127% year-over-year with organic software and transaction-based revenue growth of 48%. Lightspeed Payments had another record quarter and grew revenues both year-on-year and from the previous quarter. And we are now present in over 140,000 customer locations when we include the recent acquisition of Vend. Some notable customer wins in the quarter included AG Jeans, this premier denim and knitwear house chose Lightspeed's modern cloud-based platform to upgrade from their legacy system. AG Jeans will be using a series of Lightspeed offerings, including Payments in their 18 locations across the U.S. Tommy John, this husband and wife backed venture, designs, manufactures and sells quality undergarments for men and women in their 6 locations throughout the U.S. using Lightspeed Retail and Payments. Zeus Street Greek focuses on high-quality and consciously sourced ingredients. Street Greek maintains 20 quick-serve restaurants throughout Australia and keeps the Lightspeed to improve their operations through features like better inventory management. In usual Lightspeed fashion, it was a very busy quarter. In addition to announcing and more recently closing the acquisition of Vend, we launched Payments in the United Kingdom, undertook a very successful offering of $620 million and more recently announced our strategic partnership with Google to improve the discoverability of SMBs on that popular search engine. Brandon will take you through the numbers in greater detail, I would like to focus on some key topics, including the recent announcement of our partnership with Google, some of the initial success we are experiencing with the integration of our latest acquisitions and some of the more recent trends we are seeing in our business. Earlier this month, we announced a partnership with Google. The goal of this joint initiative is to improve product discovery for small merchants on Google's popular search engine. Through the Lightspeed platform, our merchants will be able to display live inventory levels on Google Search results. Rather than ordering online, consumers will know they can walk down the street and find what they're looking for at a local merchant. Our rich Google integration also allows merchants to easily manage ad spend and improve the discovery of their locations, truly unlocking the omnichannel potential of businesses powered by Lightspeed. We believe this initiative will help small merchants compete with large online marketplaces. However, when combined with the capabilities of supplier network, we think the 2 are even more powerful. Supplier network allows merchants to pull high-quality images directly from their suppliers catalogs by enabling our merchants to display both live inventory and compelling images, we believe the consumer experience will easily rival anything from big box competitors. I think initiatives such as these illustrate that Lightspeed has evolved beyond being a simple point solution with the payments offering. Our scale and technology allow us to go beyond helping SMBs simply manage inventory and transact. We are helping them solve a greater variety of challenges from online discovery to optimizing their supply chains. As we continue to evolve, I believe our value proposition can go beyond the merchant and the supplier and on to entire industries. By acting as a common thread amongst merchants, suppliers and consumers, we believe Lightspeed can help make products more available, merchants more successful and consumers more engaged with local retailers. I think this will be especially true in our focused verticals. Part of the reason we are able to expand our ambitions attract partners such as Google and invest in new technologies is our scale. That scale has been a result of our considerable organic growth, but also thanks to our M&A efforts. M&A has always been a part of our strategy. And in the last 6 months, it has been front and center. Over time, we should continue to recognize the benefits of our M&A strategy across our entire business. But I believe it is important to highlight that we are already seeing some of these benefits. As many of you know, when we acquired ShopKeep and Upserve, both of those companies maintain high levels of payments penetration within their customer base. However, the economics they were recognizing were inferior to our own. Since joining Lightspeed, we have had success leveraging our combined scale to recognize more favorable terms from 1 of our payments providers. Improving the payment economics for these acquisitions was always a priority. But in this case, we achieved our goals much earlier than anticipated. This is one of the reasons we had such strong results in this quarter. In addition to improving the top line, our greater scale is also helping on the cost side as well, notably on our customer acquisition costs. Our increased scale and brand recognition in the U.S. market is resulting in increased traffic to our own site. With U.S. site visits up 50% in this quarter versus the same quarter last year, which generally leads to more cost-effective lead generation for Lightspeed. In an industry where customer acquisition costs are increasing, we are happy to see our costs remain relatively flat. I think these 2 examples illustrate that the benefits of our M&A strategy are not distant or qualitative, but rather immediate and real. Over time, we will continue to recognize more and more benefits as we harmonize our go-to-market teams, fold the best of all technologies into 1 Lightspeed platform and continue to use our scale and technological depth to deliver more solutions for our customers. Before I hand it over to Brandon, I just wanted to highlight some key trends in the quarter. Overall, as we entered Q4, we were seeing increased lockdowns, which negatively impacted our business. But as we exited, we saw some regions begin to lift those restrictions and March proved to be a very strong month. We saw a new business really advanced, especially in EMEA and in hospitality. Payments again had a very strong quarter, both in terms of revenue and new customer wins. We added more payments customers than in any other quarter so far by a wide margin. I think we are experiencing strong trends for various reasons. Firstly, I think Lightspeed is benefiting from economies reopening globally. We maintained strong footprint in the U.S., U.K. and Australia, all of which are in advanced stages of their COVID recovery. But even in regions where lockdowns are still present, like Central Europe, we are seeing signs that our customers are beginning to prepare for an eventual reopening. France, for example, has been showing very promising signs in recent weeks.Secondly, as Payments becomes more widely available, we are seeing that offering continue to boost our overall growth rate. Payments has only been made available in our hospitality business more recently as hospitality GTV improves while economies reopen, we should see Payments continue to be a strong contributor growth. Finally, and I think most importantly, we believe our customers are recognizing that an omnichannel approach is no longer optional. Before COVID many of our potential customers understood the inherent benefits of a cloud-based omnichannel commerce platform, but were perhaps too distracted by just running their business to undertake the efforts to change. The challenges of the COVID-19 pandemic have made it quite evident that business as usual is no longer possible. Merchants need to be able to conduct business on their customers' terms, be it in store, online or through curbside pickup. And we believe Lightspeed is becoming the platform of choice as these SMBs adopt omnichannel strategies. As I said at the beginning of my comments, this past year has been the most transformative our company has ever seen, there is no shortage of challenges ahead of us, but as a company we have never been stronger, or more confident than we are today.I am very proud of what we have accomplished in the past year, but I'm even more excited about what lies ahead. And with that, I will pass it on to Brandon.
Thanks, Dax. Another good quarter across the board. As you heard from Dax. We continue to be encouraged by the trends we are seeing as economies around the world reopen. Along with the benefits we are seeing from our increased scale as customers seek upgraded technology to help them run their businesses. Looking at the building blocks of our business. Everything starts with customer locations, which grew to approximately 119,000 at March 31 and is now over 140,000 on a pro forma basis, including our recent acquisition of Vend. This is up from 115,000 a quarter ago and from 76,500 last year. As we anticipated, lockdowns around the world in the first part of the quarter impacted new customer location additions in January and February, particularly in Europe. However, by March, we had our best customer location addition month ever, with strong demand coming from all markets and a resurgence in hospitality and Europe as those markets began to prep for reopening. All told, for the quarter, gross location additions were up 51% from a year ago. And 27% organically, a strong result, all things considered. While gross customer location additions were terrific. As we mentioned last quarter, we did face ongoing heightened churn, particularly in hospitality, reflecting the toll of the lockdown some of our customers have faced. We've seen that moderate into April, however. But so long as the pandemic remains, we will continue to be cautious in our outlook to reflect increased churn owing to business failure in our customer base. The great news is that we're seeing plenty of reasons for optimism in our customer base as customers find success using our omnichannel solutions to reach their consumers. This shows up in our GTV, which was almost $11 billion in the quarter, up 76% from a year ago. Excluding ShopKeep and Upserve contribution, overall GTV was $7.6 billion. Up 25% versus a year ago. Omnichannel retail continues to perform exceptionally well for us, with GTV up 65% from a year ago organically. Within retail, e-commerce volumes were up almost 100% from a year ago. Hospitality was down 15% year-over-year organically, but saw a solid resurgence in March, which continued into April. March grew approximately 10% sequentially from February and April grew by approximately a further 15% from March. We're quite bullish on how these trends continue as economies reopen around the world and look to our Australian market as a bellwether here, which saw GTV growth of over 75% year-over-year in the quarter. ARPU per location was up to $215, representing an increase of approximately 50% from a year ago. Subscription ARPU, which excludes our transaction-based revenue stream increased by over 10% as more and more customers adopt functionality beyond the basic POS. An ARPU increase as a result of payments grew significantly given the success we have had with driving payments revenue.Lightspeed Payments continues to be an exceptional performer for us. We had our best quarter ever, for customers contracting for Lightspeed Payments alongside their core software subscription and overall payments revenue was up by well over 300% from a year ago. In the last month of the quarter, our overall penetration of GTV was approaching 10%, excluding Upserve and ShopKeep, showing the runway we still have ahead of us. All of this led to overall revenue of $82.4 million, up 127% from $36.3 million a year ago. For the full year, revenue was $222 million, up 84% from $121 million a year ago. Excluding the impact of ShopKeep and Upserve, revenue was $51.2 million in the quarter. Within our total revenue, our software and Payments revenue for the quarter was $75.3 million, up 137% from $31.8 million a year ago. When excluding ShopKeep and Upserve, organic software and Payments revenue grew by 48%. And for the full year, software and payments was $202 million, up from $107 million a year ago. You'll see in our filings that we have provided supplemental disclosure of our subscription revenue and transaction-based revenue. Subscription revenue for the year was $119 million or 54% of our total revenue. This represents growth of 51% from the prior year. Transaction-based revenue, representing our payments business plus our legacy payment referral based revenues was $83 million or 37% of total revenue and was up by 195% over last year. Included in transaction revenues was the impact of a newly negotiated contract with our payments partner at Upserve and ShopKeep. This new contract did 2 things: provide us with better economics than the businesses were achieving on their own and also brought us better control over the end customer relationships. As a result of this, we were able to realize an uplift in revenue of approximately $7 million in the quarter and greater gross margins as well. This is a great new story and reflective of how our scale has improved our negotiating power. But it's worthwhile noting that even without this, our revenue performance for the quarter handily beat our previous guidance of $68 million to $70 million. While we will continue to work on bringing all customers from their acquisitions to Lightspeed core offerings over time. This contract amendment does put us closer to the economic outcome we expect in the meantime, far earlier than we otherwise had planned. Gross margin for the quarter was 53% and was 57% for the year. Overall gross profit grew by 85% in the quarter and 57% for the year. The decline in gross margin year-over-year reflects the growing impact of our Payments business and lower hardware margins achieved this year due to various incentives we extended to our customers to encourage adoption of our solutions as economies reopen. Adjusted EBITDA loss for the quarter was $9.6 million, ahead of our guidance of $12 million to $14 million and was $21.2 million for the year. And adjusted EPS was $0.09 a share in the quarter and $0.23 a share for the year. As a percentage of revenue, adjusted EBITDA loss declined from 17% a year ago to 11.7% this quarter, reflecting the ongoing leverage we are seeing in our business model. You'll note a new item on the income statement, a restructuring charge we booked in the quarter. Following our most recent acquisitions of ShopKeep and Upserve, we reorganized the leadership layer of the business to ensure we maintain organizational agility and to capture certain synergies. As a result of these actions, we anticipate annual savings of approximately $8.4 million and recorded a $1.8 million severance cost charge in the quarter. All told, a really great quarter and a great year for the business. As Dax mentioned, this year was a transformative one for us, and I'm really encouraged by the positioning of the business in our markets. Which brings me to our outlook for fiscal '22. There's a reason for plenty of optimism as we look ahead. The trends we are seeing in markets that are reopening, the ongoing benefits of our increased scale and the tremendous opportunities that still lie ahead in payments and financial services are some of the contributors to this optimism. For the first quarter, we expect to achieve revenue in the range of $90 million to $94 million and adjusted EBITDA loss of approximately $10 million. For the full year of fiscal '22, we expect revenues to be in the range of $430 million to $450 million, with adjusted EBITDA of approximately $30 million loss or 7% of revenue, which has improved from approximately 10% this year. With that, we'd like to open it up for questions.
[Operator Instructions] Our first question comes from the line of Andrew Jeffrey with Truist Securities.
Nice job on renegotiating payment terms on recent acquisitions. And Brandon, you mentioned that you now have more control over the merchant relationship. Can you elaborate on what you think that means for potential penetration of the back book of those recently acquired companies?
Yes. Thanks for the question. It's all good news. We're quite pleased with our ability to get this done at the pace we got it done and what this amendment does is, most importantly, allow us to achieve better economics. But not too far behind that, of course, is just getting better control over the end customer relationship, which is important. To your question, I think it really opens the door for us to continue to migrate the back book as we called it, at a good pace this year alongside what we do with the rest of the Lightspeed's core business. So this really kind of opens the door to let that happen.
Okay. Looking forward to seeing that. And I think encouraging comments too, on customer acquisition cost. Can you provide an update on what LTV to CAC looks like today and/or what the breakeven time by cohort is? It sounds like that's improving pretty nicely.
Yes, it is. I think it all starts with the -- some of the ARPU stats that we gave. We're seeing that grow 50% year-over-year, which is pretty core to the thesis of we think there's a lot more economics to capture per customer. That, of course, leads into another improving LTV to CAC ratio for us, which has been also pretty fundamental to the model. We're really, really encouraged by what we're seeing in terms of leverage, sales and marketing as a percentage of revenue has come down significantly year-over-year. And all that kind of comes together and allows us to continue to invest for growth, which is what we're privileging right now given the position we feel we're in, in a market that is only accelerating right now in our view and our ability to capture more dollars per customer, of course, allows us to keep that investment at a level that makes sense for the overall business with an eye to long term as being a really profitable business.
Your next question is from Daniel Chan with TD Securities.
You talked about -- you're seeing the benefits of the reopening. Have you seen the mix of e-commerce versus brick-and-mortar GTV in regions that are reopening? Have you seen the mix of that change?
JP, you're on mute, sorry. I can see you talking, but...
Sorry. Can you hear me now?
Yes.
Sorry about that. Very quickly, sorry, don't want to lose too much time. But we've seen -- when you look at our business, e-commerce continues to be very strong. So we've seen growth year-over-year at about 100%. Retail physical brick-and-mortar has rebounded, and we've seen growth up to 65% year-over-year. And hospitality, of course, with the curfews and COVID have continued to remain low, where they're still under year-over-year. But what we've seen in the last quarter and if we look at the month of March, we've seen a real rebound there. So I think for us, what's important is, as we've always said, omnichannel is core. And I think the value of Lightspeed is we can help our merchants service their customers on any channel. And here with -- now we're seeing the reopening, which are seeing revenues go back into strong growth on physical. And so it makes us very positive about the future.
Okay. Can you remind us if there is a difference in economics between online payments versus brick-and-mortar payment transactions?
Slightly better online, not overly materially different, but we do get slightly better online.
Okay. And then just one final one for me. How are the early days of Payments doing in Europe? I know you just recently launched it, but is the adoption rate comparable to what you saw when you first launched in the U.S.?
Early, early days, Daniel. So more to say in the feature on that. But yes, we're optimistic that will be a great market for us. It's just really early on at the moment.
Our next question is from Raimo Lenschow with Barclays.
Last quarter, you talked about Australia as an example for a region, country that this reopening. Can you just kind of maybe kind of continue there? Like how did that kind of evolve from the opening last quarter? And then the follow-up to that is then, if you look at March being the strongest quarter, was that kind of pent up demand? Or do you think that's a new normal?
So Australia continues to be very strong. And actually, what we've seen in Australia was starting to see in the U.K. with all the reopening. So again, our thesis here is as markets reopen, this is going to be a strong positive for Lightspeed. GTV in Australia is growing 75% year-over-year. And I think that's a great number considering last year, they were not in the same position we were with COVID. So what we're seeing is as markets reopen, there's a lot of new concepts that are created. There's a lot of -- a lot of investment going in into our markets, and this creates a higher GTV and a lot of demand for our products.
And then the -- if you think about it, you had the strongest new customer quarter you mentioned or months in March. Is that like -- do you think that's a pent-up demand? Or it just like an idea of what's going to come?
I think it's the result of Lightspeed having a good offering for the market and the results of a very dynamic market and the reopenings. So we've always felt good around the after COVID world. And everything we see now confirms what our thoughts have been, which is after COVID Lightspeed is even more relevant, given how strong our platforms are for the physical world. And yes, so I think March -- if March is a reflection of what the year is going to look like. We're very happy.
Our next question is from Thanos Moschopoulos with BMO.
With respect to the new payment agreements for the ShopKeep and Upserve, just to clarify, I think you moved those from a referral relationship to Lightspeed Payments, are you now pay [ tax ] to those customers? Could you Confirm that?
Yes. We didn't -- so I think as we mentioned, there was going to be a period of technical integration with these newly acquired businesses that was going to take us some quarters. So we haven't completed that. That work still remains ahead as my earlier comments, hopefully reflect it. And our intention is to, obviously, not just with Payments, but with everything we do is to get all of these customers on the Lightspeed core offerings. But recognizing that, that was going to take some time, what we did was approach Payments' partners and say, look, we've got this infrastructure. We're happy to take on more of the obligation historically had been. And that -- and then also leveraged kind of the scale of the business to encourage folks to give us better economics on the overall transactions as well. So it just allows us better customer control. It got us better economics, which is really important, and we were able to do it at a much quicker pace than we otherwise would have. So it makes sense.
Yes. But to clarify, then, that means that maybe over the next year as you -- there could be further upside in economics as you actually group some of those customers to for Lightspeed Payments? Is that the takeaway?
Yes. Yes.
Okay, great. Dax, if you could give us an update in terms of just the integration of various platforms and where that stands? I mean, obviously, early days for events, but just in terms of the prior acquisitions, what remains to be done to get a [indiscernible] platform?
Yes. So I think we're highly encouraged by what we're seeing on the hospitality convergence of platforms. We've got our flagship product now being sold in EMEA. Internally, we call it K- series. That will be making its way to the U.S. by summer. But we also have amazing assets, analytics from Upserve other functionality around inventory management for restaurants from [ counter ] that will all make it to the reference platform. So on the hospitality side, where things are really rolling and we expect to have extremely competitive products worldwide this year. On the retail side, retail e-comm side, we're also barreling forward on that convergence plan. And we're going to go from what I think is the best retail cloud platform. To a truly unbeatable one with the combo of ShopKeep and all the Lightspeed technology assets.
Your next question is from Josh Beck with KBCM.
I wanted to go back to the Google integration that seems quite notable. So I'm just curious, once this is fully fleshed out and rolled out will a consumer be shopping online and maybe whatever the category is, say, a bicycle. And see, okay, this is, for example, what I could buy from an online-only merchant and right next to it. Like here is an image from a supplier at the bike shop down the street. So I'm just -- you may not know at this point, but I'm just kind of curious how this is going to be presented from a consumer perspective?
Yes. Local inventory ads, which is Google Lea. That's 1 part of our integration with Google will show consumer where they can buy that item nearby. As a business, now in Lightspeed, you can set a radius that shows where your locations are and what the -- what radius they serve. And so serving high-quality images, potentially from our supplier network, allows them to be prioritized in the Google search engine. So it's discoverability for local merchants. Those merchants may also have an online presence. So it will serve to drive traffic to both channels. And that's really the idea here is how do we help our businesses succeeded omnichannel merchants, how do we drive traffic to them? And I think Google is the perfect partner for this. And if they want to go further, they want to go further than these local inventory ads, which are free as part of our system. They can set up smart shopping campaigns, which is also a part of this integration, which allows them to more proactively market to customers in their area.
Very helpful Dax. Go ahead.
No, I was just going to say, I mean, all of this is part of our strategy to actually help physical businesses and have the same strategies as digital businesses. So giving the ability for someone who's spending an ad online with Google to actually measure the real return on investment in physical sales. And I think that's really exciting. And that's, again, the value of our platform in the cloud is we can now do this.
That makes total sense. I also wanted to ask on the new customer front, you had some pretty high profile, well recognized brands. When you look maybe just across the composition of the gross add that you're bringing, do you feel like there's a notable shift upmarket taking place? Or maybe that's just more natural evolution that you've seen and the types of customers you're bringing on?
Yes, we've seen it since the beginning. So [indiscernible] [ single ] locations and then we have multi-locations. And what we've seen across time that we have bigger and bigger customers, but I think location. And what we've seen across time is that we have bigger and bigger customers, but I think it's just a natural growth. What we did, remember last year, as we said, we've put in place a team in charge of mid-market, and we we've structured the company to support mid-market in a better way. And I think it's just the result of that strategy that are paying off on.
Our next question is from Tim Chiodo with Crédit Suisse.
I want to dig in a little bit on the location adds. So that was a real highlight of the quarter, a top leading indicator of future results. So in terms of the mix, if we think about any group of new locations coming in, let's just say there were 10 or 100, just to make the math simple. Can you just talk about what portion of those would be newly formed businesses just being created a new retailer or a new restaurant versus existing businesses that might have switched over to Lightspeed and maybe just talk about how that might have evolved, what that percentage those mix percentages might have looked like a year or 2 ago and what it might look like now? And how it might look ahead as more and more new businesses are formed coming out of COVID?
Yes. So I think -- so we haven't seen an evolution in the blend. So we've always had kind of a give or take, the same blend of new creation, people creating new concepts versus switchers. So we have this logic of starters and switchers and the blend hasn't changed. However, what we've seen is that during the pandemic, we have more and more digital demand, where we had a lot of demand for curbside pick up and we had a lot of demand for e-commerce. What we're seeing in the markets that are reopening is that the demand goes back the other side, where there's a lot of demand for physical platforms and actually for new concepts. So I think for me, what we're seeing is as markets reopen, the blend in terms of digital versus physical go back to what they were pre pandemic, but we haven't seen any kind of visible shift from, oh, these are only people opening new versus switchers. I think we've always had a good blend of each. And what we see also is that on different geographies, we have very different demand. And the markets that are completely reopened like now the U.K. or Australia, we see a lot of demand that goes back to the physical world.
Okay. Great. That's really good context. I really appreciate that. A second question or a follow-up. Somewhat, I guess, unrelated actually. But back to the Payments business, within some of the revenue share agreements that you have, either with your existing within Lightspeed's, revenue share agreements, so not Lightspeed payments, more of the sort of traditional ISP rev share business that's more legacy for you guys and then maybe in some of the acquired properties as well. I understand there are some non solicit agreements in there and there's sort of a time frame where you can't maybe approach all of those customers as quickly as you would like and maybe puts a little bit of a governor, but that should be opening up at some point. And maybe you could just put a little bit of context around, the mechanics of how that works and how that presents a nice opportunity ahead?
Yes. I think it's pretty standard practice in this industry where you're getting kind of a referral based revenue stream from 1 of the payment processing partners that coincident without your signing a nonsolicit. These contracts also will have terms on them that will expire at various points. So -- and of course, we're where these are partners of ours and we will honor every contractual obligation we have. Longer run, longer term, we just believe in the customer experience being a lot stronger, bringing together software and payments from a single provider. And of course, that's the reason we exist is to make our customers happy. So in the long run, we do expect to continue to wean off of these referral based relationships. But working well with our partners as we do so. So there's various opportunities, Tim, and I know I'm not answering your question directly. But there's various windows where we can take on that activity a little more directly than we can currently do. And some of those windows will open kind of tail end of this fiscal year for us. But yes, in the long run, we expect all of -- just -- we really believe the value prop of bringing these things together as strong customers will be coming our way as much as we want them to anyway.
Your next question is from Richard Tse with National Bank Financial.
Yes. On the ShopKeep and Upserve payment amendments. I just wanted to clarify, is it sort of largely the scale now, Lightspeed that allows you to sort of kind of get that bargaining power? Or was it kind of your relative offering prowess to sort of recognize that opportunity post those acquisitions that led to those amendments?
I think all of those things. If you think about how this naturally would play out. You've got a partner of those businesses who now gets the deal with a much larger entity where the greater opportunity is aggregating all these things together. So that creates opportunity for them leverage for us. And then the conversation then and -- to what's important to Lightspeed, what's important to our customers. How can we do this in a way that puts our joint customer at the forefront. And because we have the infrastructure, we become a trusted entity in the processing relationships. Those partners are willing to help us in that regard and help our customers in that regard. So I think it starts with scale or we have a much more compelling opportunity for these partners. And then from there, just our capabilities and our infrastructure, a lot of that conversation or allow that conversation to progress pretty quickly, which allowed us to make some of the improvements you saw in the quarter.
Okay. Great. And my other question has to do with that. I think you talked about the subscription revenue up 10%. And it's tied into the sort of supplier network, which sounds like it's actually a bit more -- increasingly more meaningful, especially with that sort of connection of Google. So supplier network going to be sort of a module that merchants have to pay an incremental fee for? Or will it be part of Lightspeed platform in general?
So I'll take this one. The way we look at it is the supplier network is a module -- it's going to become as we go forward a module of the commerce platform. As we said, we really want to go deep into verticals that matter for us. And within those verticals, we really want to triangulate suppliers, stores and consumers because there's a ton of value for everybody in the ecosystem. So I think here, we've had an incredible reception from a lot of our suppliers. And actually, what we've realized from this that they want to go faster than we can go today. So we need to invest a lot in those capabilities to go faster. But here, as we go forward, this integration and this visibility we give for suppliers to see what is the real sell-through at the store level and vice versa, the ability we give the stores to order directly from suppliers and see inventory levels at suppliers We think it's key to the success in the verticals where we operate. So there's a lot as we go forward that we're going to be investing.
Okay. Great. And that supplier network is available across the board now to all merchants, and...
It is.
Okay.
And we've been onboarding them very slowly, and there's a lot of -- again, we're very early in setting out the whole structure for every vertical. But within -- we've been progressing a lot within the key industries, but there's still a lot to do.
And Richard, just to clarify one thing, maybe I misheard it. But the average revenue per customer ARPU on the subscription side was up 10%, revenue obviously, ahead of that.
Your next question is from Paul Treiber with RBC Capital.
Just wanted to delve a little more into the Google partnership. Without getting into the specifics, could you speak to the general economic model with partners like Google. You mentioned it's free for the merchant. Is it coming up as they say, for the organic search and it's not part of Google Ads? Or is -- are you paying effectively Google for it? Could you elaborate a bit there, please?
Yes. I think the basic inventory ads, it's called Lea, local inventory ads, that is a part of the Lightspeed retail offering. And that is -- that will publish and make discoverable the local inventory within a radius for that store. Beyond that, retailers can set up smart shopping campaigns. That's another part of the integration, and that is paid for. But it is 8x we've calculated it. It's 8x more efficient to use a smart shopping campaign because Google and Lightspeed leverage data to make that ad spend even more efficient, 8x more efficient than if that retailer was doing that on their own with their own buys. And the idea there is to make sure that we're democratizing this kind of capability so that it's accessible to all SMBs and not just big box retailer, big box. E-com that can afford to plan such a campaign or optimize such a campaign? So yes, one is free and one is a part of highly optimized paid campaign.
And -- sorry, sorry, go ahead.
Ultimately, if the merchant is doing well, there's a lot of transaction volume, and that's how we get the payback is we'd like to think. So our goal, again, is to just get all of our customers to be more successful than the average when they're on the Lightspeed platform.
That makes sense. Is there an opportunity to expand that out into additional ad networks? And then could you also surface the ability for your own merchants, if they so chose, pay for higher visibility either pay-per-click or pay per conversion?
Yes. I think we've gone from helping a business manage and operate a store to interfacing with consumer. And now I think we're driving traffic to the consumer. And so I think that this is a big -- a big partnership that shows what Lightspeed can do at scale, we've just partnered with the largest -- the largest companies out there in order to benefit our customers. And I think there's lots of opportunities to continue to drive traffic to our customers, there's many channels. And we want our customers to be on as many channels as possible.
The next question is from Josh Baer with Morgan Stanley.
A couple on M&A. It seems to me, even outside of the contribution from the renegotiated payment terms and some of the commentary around efficient customer acquisition, like ShopKeep and Upserve together have outperformed under your ownership. I'm wondering if you'd agree in any context for what's driving that? Like at this point, are those acquired customers adopting more software, more Lightspeed modules from you?
Josh, yes. So I think one of the things we're encouraged across our business. And certainly, what we see in Upserve and ShopKeep as well is just the benefits of the reopening, if you think about Upserve's business in particular, we've seen the GTV growth, which in turn, turns into payments revenue for that business. Coincident with the reopening in the U.S. I gave some stats, 10% up March over February for the 14% up in April over March, and that's been really encouraging. I think the whole hospitality segment of our business, of which Upserve the beneficiary. Is showing signs of good life as we go through the reopening in all of our markets. That's what led to some of the outstanding numbers we saw in March. I think that's a main contributor. And I think there's other things we're doing inside these customer bases to make's sure that they know they have migration paths and the things that they can do in the long run with Lightspeed. And I think that's helping overall as well. But I'd say the primary factors has been the collective business, including those acquisitions, have benefited from the reopenings.
That's helpful. And more broadly on M&A, wondering if the strategy looking forward is the same in the past and really focusing on the, I think, on the pace of M&A, meaning, you've done a lot of acquisitions recently is that pace sustainable? Or should we expect a period of digestion at this point? That's it for me.
So maybe I'll take this one. If you look at the M&A first 2 things. If you look at hospitality in the U.S. and you look at Upserve, they're now fully integrated with Lightspeed. Actually, the CEO of Upserve is now the GM of Global hospitality, at Lightspeed, Sheryl. And then if you look at ShopKeep, ShopKeep is fully integrated also with Lightspeed and Mike DeSimone now being the Head of Global retail, at Lightspeed. So I think we feel good about the acquisitions. We are seeing the returns. We've set up account management teams to upsell and also to cross-sell when customers are outgrowing the platforms we've acquired. So and even the CFO of ShopKeep now is in charge of Lightspeed Capital. So I think we're a good company in acquiring. I think we understand what we need to do. And I think we feel very good about the returns. And as you mentioned, the companies within Lightspeed are doing better than outside of Lightspeed. So with that in mind, we want -- I think we will continue to be active with M&A. I think maybe the slight change is until now, we've increased geographical penetration and concentration by acquiring companies that were in our sector. I think as we go forward, we're more thinking now about how do we scale and how do we combine more technology to help accelerate the growth of these companies. And so when we think about that, we think about omnichannel, which is key, we think about suppliers, but I think you can expect active M&A but not within the same categories that we've had in the last year.
Our next question is from Todd Coupland with CIBC.
Yes. One quick follow-up on the location count. Has ShopKeep and Upserve started to benefit from location growth as the U.S. has been opening?
Certainly, certainly the Upserve business has. I think we've been as you may recall, Todd, with ShopKeep itself, we very quickly moved that product into more of a nurture mode. And with Lightspeed Retail being the core product, we're taking the market in North America. So that customer base is a little bit different. But with Upserve, for sure, the reopening has been a really nice contributor to that business.
And then a follow-up. We didn't talk too much about, but could you just give us an update on how that's going and some of the milestones for the coming fiscal year?
You broke up there, Todd, just when you just on the subject of that question.
Can you hear me now, Brandon?
Yes. Yes.
Yes. The question was on Lightspeed capital. We didn't talk too much about it today. Could you just give an update and what we should expect in the coming fiscal year?
Yes. I've seen more encouraging signs there. It's rekindled the -- what was the ShopKeep capital product JP mentioned. Former CFO of the ShopKeep business has been helping to drive that for us. So we're seeing lots of encouraging signs, and we're seeing lots of good momentum. And if anything, our optimism is brighter than ever on that product line. As we head into this fiscal year, it's still early. It's still not a huge contributor. But from what we're seeing, both with our the rekindling of the ShopKeep program and taking that a little bit wider across our customer base. And then what we're seeing with our ongoing relationship with Stripe in that respect. Seeing good momentum across both of those right now. So pretty encouraged, though it is still early days.
Maybe, I think we'll take -- we have time for one last question.
Our last question is from Tian-Tisn Huang with JPMorgan.
I'll keep it quick. I'm curious, did you give what the Vend revenue contribution would be for fiscal '22?
Yes. When we announced that acquisition, about $34 million in revenue.
Right. I wasn't sure if there was any assumed the growth beyond that, but happy to start with that. And just my quick follow-up is just the gross profit contribution from the payment contract change. I think you said $7 million of revenue, Brandon. So what's the gross profit impact from that? Just to help us understand the P&L impact?
Yes, we didn't give a specific number there, but it was -- if you follow through what our typical margin is on that line of business. It wasn't quite to that extent, but we got a nice little bump from that as well.
There are no further questions at this time. Now I'll turn the call back over to Gus.
Okay. Well, thanks for joining us this morning on the call. If anyone has follow-up questions, please feel free to reach out to me. We are around all day today. Thanks again, everyone, and have a great day.
That concludes today's conference call. Thank you, everyone, for joining. You may now disconnect.