That's great.
Good morning, everybody. My name is
Uh-oh. That was my mic.
My name is Gus Papageorgiou. The presentation today will be conducted in English. We're very excited to welcome everybody here at our headquarters in Montreal.
This is the first event we're hosting in this newly renovated facility, where we feature our concept restaurant and hospitality and retail outlet. The demos today will be the retail demo to my left here will be conducted in a retail setting. The hospitality demo would normally be in the hospitality section, but it's filled with audiovisual equipment. But Evan is back there, he'll be hosting the hospitality demo as well. Before we get going, I just wanted to thank everybody that made today possible.
Our events team, Suthan Sukumar, William, and Sophie. The finance team, Joseph and Alex, and their teams for pulling the financial data together.
Our design, brand, and communications team for putting the presentation together. Of course, our executive leadership team for their dedication and commitment. You notice I didn't thank our legal team. It's not that they're not helpful, but they make me read statements like this, so I'm just going to read a brief version of it.
We will make forward-looking statements today during our presentation 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 of conclusions, forecasts, and projections contained in these statements. We undertake no obligation to update these statements except as required by law.
You should carefully review these factors, assumptions, risks, and uncertainties in our earnings press release issued on November third, our Capital Markets Day presentation available on our website, as well as in our filings with US and Canadian securities regulators. Also, our presentation today will include 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 Capital Markets Day presentation, as well as our November third earnings press release, the latter of which is available on our website, on sedar.com, and on the SEC's EDGAR system.
Finally note that because we report in US dollars, all amounts discussed today are in US dollars unless otherwise indicated. In terms of the agenda for today, JP will start things off talking about Lightspeed's strategy and opportunities.
JP, JD Saint-Martin, our newly appointed President, will talk about our go-to-market strategy. We'll take a quick 15-minute break.
JD will come back and have a fireside chat with two Lightspeed customers.
Hopefully, they're happy customers. Brandon will hit on operating highlights, and Asha will discuss our path to profitability.
With that, I'm going to hand it over to our founder and Executive Chair, Dax Dasilva. Whoop. Clicker.
Thank you, Gus. It's really amazing to welcome everybody here to our Montreal HQ, affectionately known as The Castle. Many familiar faces, but mostly from Zoom.
Welcome, of course, everybody that's on the webcast.
This is me developing back in 2005, 2006, what would eventually become the Lightspeed POS for retail. Back then, it was an on-premise system for the Mac, for Apple retailers. These were our original customers. But very complex retailers and very much in the same category as the customers we serve in retail today. I knew how to code and managed to grow Lightspeed to $10 million in ARR.
In order to continue scaling the business, I knew that I needed some help. In 2012, when we got our first investment from Silicon Valley, from Accel, I brought in JP, my friend and colleague, to help me grow and scale this ambitious company. A lot of things have changed since then. Lightspeed's gone from being an on-premise solution to cloud-based.
We've gone from a regional POS to a global player. We've expanded beyond retail into hospitality. Of course, back then, our revenues were exclusively software-based, and now a lot of our revenue comes also from our payment solutions. A lot has changed over the years, but one thing has remained the same, and that's our mission as a company. Lightspeed exists to bring cities and neighborhoods to life.
We're here to help those entrepreneurs, those creators, those chefs, those artists build their meaningful, community businesses at scale. Businesses that are the fabric of the neighborhoods and communities that they serve.
We're here to make for them the complex simple, to remove the tedious work, and that tax their energy and their time, and to provide financial support where we can, and bring the power of technology that was once only reserved for the large players, to serve those small businesses that are really crucial to the vitality of our cities, towns, and neighborhoods. It's a mission that I'm really, really proud of, and I believe it motivates every single person, in the company worldwide today. Building a company requires more than just a noble mission.
It requires a talented and dedicated executive team that can execute on that mission, and I hope you'll spend some time with a lot of them that are here with us today. It's still amazing to me how far this company has come, and it wouldn't be here today without the assistance of JP Chauvet. As I said, my good friend and colleague who's also celebrated 10 years with the company this month. JP was crucial in building Lightspeed into the company that you see and that you'll see presented today.
In my mind, there's no one better suited to lead the company into the future.
With that, I'm going to turn the podium over to JP so he can reveal a little bit about what the future holds for Lightspeed.
Thank you. JP?
Good morning, everyone. How are you?
Feeling good?
Yeah. Well, first I want to welcome you to our customer experience center.
We just opened it. It's actually the first time we do an event here, so inauguration and hopefully a good one. Really excited to be here today. I think for me, what makes me think Lightspeed is important and what makes me stay here is our mission. If from day one, it's always been David against Goliath, and it was always about helping the small independent retailers compete with big bucks. Then we moved into hospitality, but I really think that this is still a very important core kind of DNA of Lightspeed, is how we help our customers.
Most of our employees, and I'm sure all of our leaders are at Lightspeed for the same reason, which is to bring good to the world and bring good to cities and bring good to communities around the world. Because if you, like me, travel a lot and like all of us, what makes a city is often the small retailers and restaurateurs that create this experience. I think it would be a sad world without all these small independent businesses. That's really what drove the mission day one.
That's why I joined Lightspeed 10 years ago, and this is why I'm still fulfilling this mission. I still strongly believe in what we do, and I think it's great to have now a scaled up company that brings good to the planet. Just wanted to start with this.
Before I go into my presentation, I want to talk about a real big stepping stone for us, Ryan Tabone. We're very excited. Ryan was an executive at Google and could have chosen many paths and decided to join Lightspeed. I know a big piece of it is he loves small businesses. What I want to start by doing now is welcoming him on stage so he can say a few words to you and introduce himself.
Thank you. Ryan.
Hi, everyone. Nice to meet you all in person and virtually online.
As JP mentioned, I spent the last 15 years at Google. Don't let the suit fool you. I built a number of businesses for them and worked in hardware, SaaS, finance, and a variety of other industries. I have to say, I'm extremely excited to be here at Lightspeed. I've had the fortunate opportunity to be able to fortunately choose opportunities where I could make fundamental shifts for a large number of people. What do I mean by fundamental shifts? Well, that's when someone has a problem, and they don't realize it's a problem until you give them a solution, and then they don't want to go back to the way things were.
I chose not Lightspeed, in part because I believe the next fundamental shift is going to be had in small and medium businesses. Well, okay, why is that? Think about the last time you were in a retail shop or a restaurant. I'm sure you don't need to think hard. I know talking to you, last night, a number of you were proud to be servers or salesmen or sales folks, or delivery folks.
That these small and medium businesses really impact not only our society but our economies. Yet we expect these merchants who run these businesses to be superheroes. Well, why is that?
Because in addition to doing what actually matters in terms of serving unique value to each of you as their customer, we expect them to be experts in planning, ordering, inventory management, managing sales in store, managing sales online, different forms of payment. Oh, and I don't know, managing the cash flow so that they can actually stay afloat. In enterprise, you have dedicated folks for all of these.
We expect these small and medium businesses to be able to handle this, or at least most of society does by throwing a bunch of software and hardware at them and saying, "Figure it out." It's no wonder that they might be frustrated, lose a lot of time in just trying to serve you as a customer. They need to manage all of this other complexity. That just seems ridiculous to me.
I would think that if you were in their state, you would think the same.
Okay, let's go back to the original question: Why does Lightspeed get me excited?
Well, first part is the opportunity.
The second is, well, where can I make the most of that opportunity?
I obviously chose Lightspeed. Why?
Well, three main reasons. One, they have the complete stack. Right?
We talked about all those different pieces that I need to be able to somehow compile together with hopefully being a technologist. Well, if I could work with one touch point and be able to solve all of that, so I don't have to think about it, that's huge. Second, being able to handle a wide variety of complexity. There are not too many players who can do that, and yet, as I mentioned, these merchants need to solve a lot of complexity.
The third, and this one's near and dear to my heart, is being cloud-based and data-rich.
How do you make these solutions that people don't even realize they have? You understand how they use the product, you see the problems that they have, even if they don't realize it, and then you ship changes that solve those problems. Being able to have this rich set of data means that we can actually help these businesses by providing insights on how they can run their business better from top to bottom of the stack, not just in isolated pieces.
That's a huge differentiator and a really exciting for me. Basically, what that means is that Lightspeed has the ability to save these merchants tons of time and to actually help them operate their businesses better. Really making these merchants the superheroes we expect them to be.
I'm here and excited to build that solution, and, I look forward to seeing you all on my journey.
Thank you for the time.
Thanks, Ryan, and we really welcome to Lightspeed.
We're super excited. I think for me, as you all know, we have big ambitions. The way we accomplish those big ambitions is bringing smarter people than anybody in the room to try and drive more value for customers.
Let's look back before we look forward, because I think internally, I often say we have to look at our feet and climb the mountain, and just once in a while, turn around and look at the view. I want to do this today for just the first five minutes of my presentation. Most of you were listening to Dax, Brandon, and myself when we did our IPO, and I thought it would be interesting to see in three years, or slightly more than three years, what we've accomplished.
A lot of you were here and were listening to us, and there was a lot of questioning. So I think it's worth looking back and realizing the progress here. We went out, we were 47,000 locations, $13 billion in GMV. $130 was our total ARPU, and our revenue growth in the last twelve months were 35%. As I remember a few of the conversations, the first topic was.
Do you think you can sustain the 35% growth? Today, you fast-forward, we look at the trailing twelve months, and we had 69% growth. We've accelerated the growth of the business. If you look at customers, we've more than tripled our customers. We've more than multiplied by five our GTV, and the ARPU has gone from a thir...
$130 to a staggering $337 in three years. I know often there's always a lot of demanding voices to do more and always to be better and always to be. But I think when I look at this, I'm like, "We've truly accomplished what we said we'd do." The next big point that I think was really transformational for Lightspeed. You remember we had this view and we were like, " we used to give away all our customers to referral partners for payments." We're like, "We don't understand. We give these customers to our partners. They keep the lion's share of the revenues," and we were given crumbs.
Here what we had said when we did the IPO is we were about to launch our payments platform. We're like, "We are certain we can get those customers to buy from Lightspeed."
At the time, it was retail only in the U.S. You fast-forward three years and now we are $11.5 billion. Actually, I think an interesting parallel is the total transaction volume on Lightspeed today for payments is equivalent to the total transaction volume of Lightspeed when we did our IPO. If you look at the second biggest factor, which is a big driver to our growth and our profitability, is 51% of our revenues now come from payments. I'm really proud, and I think our team is really proud. We are now a true payments company and a true software company.
We know how to sell payments, we know how to onboard customers on payments, and we know how to create value for customers by tightly integrating the POS with the payments platform. Here, last driver of growth is as throughout the years, we kept deploying payments into new geographies, new products, and today, the vast majority of all our customers, even from all the acquisitions, have access to Lightspeed Payments. Brandon will be sharing a few exciting slides later.
Really what it proves is when we launch a product somewhere, we know how to sell it, and we get the returns on that investment. Why is this exciting? Because we're only getting started. Very proud of this. You might not know, but my first job, I was product manager. We went public. We were a point solution selling a POS.
Here what we had said is we have a few modules, and we want to continue to grow the portfolio. If I look at our offerings today, we now have a true commerce platform that fulfills the majority of the needs of our customers. What I'm really proud of, and I know a lot of you thought we were maybe biting more than we could chew or eating more than we could digest, but I'm really proud. I heard last night, it sounds too good to be true. We went down this path of rebuilding completely our platforms.
This is for somebody in technology is a very daunting task, but I'm really proud that today, for hospitality and retail, we have brand-new products that are built from all the best microservices of the companies we've acquired, and we have very, very little technical debt.
I think it's quite amazing when you see companies that have been around for that long, that we now have two incredible products, one for retail and one for hospo, that are truly brand new and state-of-the-art. This was probably the biggest struggle in the last year and a half for all our developers, is when we said, "No, no, we are going to rebuild." Everybody was a bit concerned, but I'm really happy to see the progress.
Today I'm happy to report that the majority of our new sales in the last month were on the new platforms globally. That's huge progress. Here, as we'll be talking about this. We have an objective by the end of the year. Why do we win? I'm going to start with hospitality. I think this is a very interesting slide. We are not a U.S.-only company. In fact, the U.S. is not the bulk of our revenues and our customers when you look at hospitality. If you go through Europe, most of the cities in Europe have strong penetration of Lightspeed.
We are the only large player in Europe that has scale, and we've built that through the years, and I'm really proud of this because the barrier to entry to Europe as an example, or even to Quebec and Canada, we're here in Montreal, you cannot sell in Montreal a platform like ours without being integrated with the government's platforms. In Quebec, it's called the MEV, and throughout every country in Europe you have these platforms. This is a real moat for Lightspeed. Now, okay, we have a big competitor in North America, but they are very broad.
They go after every segment of the industry from coffee shops all the way to very established merchants.
We want to focus on the established high GMV merchants, and I'm really excited today we're going to show you some data points that hopefully will explain why for the last three quarters we are smiling and you're concerned by our net new store counts. Here, where's the opportunity, especially in the more established, especially on a global scale, the majority of the merchants are on legacy systems.
Here, arguably, COVID has created some kind of acceleration. In the post-COVID world, we'll be talking about this, we'll create even more acceleration for replacement of legacy platforms. Where do we win in retail? Of course, in retail we are the dominant US player in the more established. We do omnichannel, and that's where I'm one of the proudest with our new platforms, is we truly have completely embedded headless commerce, which came through Ecwid.
It is now completely integrated in the new platform. This means not only is it about building a website and creating a cart on a website, it's about embedding commerce everywhere. That is truly what Ecwid was about because Ecwid was e-commerce widget. I know the industry now is talking about headless commerce, but here in that front we have an amazing offering.
Again, there are players in the market, and there's a lot of noise there, but the reality is our smallest customers are Shopify and Square's largest customers, and we don't compete with them unless on the smaller segment of where we're going after. As you all know, I hope you've heard me tell you for the last three quarters, we need to focus on the more established higher GMV merchants.
Here, this is why we win is again, in our market, the bulk is legacy. Because legacy platforms are rich, they're rich for physical retailers, but they do not offer omnichannel, which is not a nice-to-have anymore, and especially in the context of post-COVID. Let's talk about this market. We updated those numbers. I think it's important that we share these with you.
The number of small businesses has grown. There's now 65 million restaurateurs and retailers on the planet, and there has been a ton of growth with the smaller players. Here, when you actually look at the concentration, and now with this new objective of going with the more established, our bullseye, which is the black, and not to say we're not going after the others, the more established, the black ones, 10 employees and more is 2.5 million.
In any way you look at this is a very big market and it's not one player takes it all. There's going to be a ton of room. I think for me, the platform you need when you're a small merchant versus the platform you need when you're a more established merchant is night and day. Hopefully, some of our customer testimonials are going to share with you why they think Lightspeed is really the best platform for them.
Now, this is a news that we feel is very exciting. If you actually look at the 2.5 million, which is under 4% of the market, that represents 51% of your GMV. What does this mean for Lightspeed?
This means that in the context of doing more with less, in the context of path to profitability and in the context of owning significant GMV of the SMBs and everything we're doing, and Heath offline is going to be talking about our B2B network. In that context, if you really want to go after the lowest hanging fruit, it is not trying to go after the long tail of the 65 million.
It's really focusing the business on the more established. That goes again, very much with our strategy, and it goes very much with our strategy to grow in a profitable way. How does this translate inside of Lightspeed? I think that's what's the exciting part here is what the market is telling us really should validate what our strategy is.
Here what I'm just showing you is an example of a fully loaded ARPU for each of these categories. On the left side what you see is a retailer or a restaurateur with $200K. You keep hearing me say small, medium, large coffee, small, medium, large T-shirts. If you can manage your inventory with your eyes, you don't need Lightspeed.
Also Lightspeed doesn't want you because frankly, look at the difference. A $1 million established retailer or restaurant brings us $2,435 per month, fully loaded versus a small retailer, $200 per month or a small restaurateur bringing us $500. Look at the order of magnitude. It's a 5x. Going back to again, the market tells you you need to concentrate on the bigger.
Our platforms are much better suited for the more established merchants. Finally, monetization, and it's especially payments. Look at this big wide line. We need to do what's right for Lightspeed. Again, that's probably why you see a smile on our faces, and that's probably why we've kept telling you for quarters now, not all merchants are equal. Size matters for Lightspeed if we want to build a long, sustainable business that lasts forever and is profitable. That's my favorite slide of probably what I'm presenting today.
This is the first time we shared this with you, and we thought it would be interesting. I think it's exciting. Here for once, we're sharing you our cohort of customers. I know I've been telling you, asking folks saying, "Show me the data." Here is the data. It's super simple.
46% of our customers under 200K represents 5% of our GMV. As we've seen, the highest of those 46% is a fifth of the revenues I could get with the segment in red, which represents 81% of my GMV. That's why, naturally, what do you think happens at Lightspeed? Naturally, our people in performance marketing are not targeting the small ones anymor
e. Naturally, our salespeople are not going to do anything to try and close a small deal. We might actually even bogus them and send them to our competition because they are going to bear maybe 25% less cost, but there is no value for Lightspeed's platform there. Actually, there's very little room for growth because they don't really care about most of our modules.
Here, what we're showing you is that 46% of customers is less and less relevant to us in the context of path to profitability, monetization of payments, and our willingness to actually upsell and grow ARPU over time. The other reality is that actually if you look at churn within those cohorts, you'll realize that the 5% of our GMV is the vast, vast majority of our churn.
I would argue, just being contrarian, if we were still 167,000 customers five years from now, and that all those customers were above $500,000 in GMV, we would be an extremely successful company. We would own a much bigger share of the GMV of SMBs than if we had 300,000-400,000 of everything. I think that's really the reality here. Why? Why?
Is this a change? I heard that a lot last night. Is this a change to your strategy? It is definitely an update to our strategy. Three years ago, most of people in this room were telling us we are not spending enough money, we're not growing fast enough, we are not investing enough to be the dominant player. That's not what we're hearing today.
In this context of doing more with less, this context of a guarantee that we are going to be profitable, we just need to focus on the larger ones, and those are going to bring us to the promised land. That's why even if we have 1,000 locations of net new every quarter, even if we have flat every quarter, all we need to look at inside of Lightspeed is are we growing these cohorts? The red ones.
We put them red, so you can know that's what Lightspeed wants. This is our color. Again, this is what we have to do. That means half of our customer base is really becoming the largest focus in terms of our attention. What does that mean?
That means we're not spreading money when we're acquiring, we're being very targeted. That means w e're not going to be onboarding customers that are going to churn within two years. That means we're not going to be supporting customers with high touch or onboarding them with high touch. We're going to be just focusing on the customers that bring us the best GMV, and this is going to be goodness for Lightspeed.
The good news is, 1.5 of the red, I don't know if somebody can make the math, is at least is better than probably 8 times the light gray. Again, that's why we have a smile on our face is the next slide. If you actually look at the cohorts that matter, and let's start with the $1 million. You remember that was the largest. The $1 million cohort on a store count, okay, is growing 30% year-over-year. We'll have a customer later talk about, and I think their revenues is close to $400 million, and they're using Lightspeed Payments, which is fabulous. Here again, is that equivalent to a coffee shop?
No. This is what's going to drive Lightspeed's value.
Here, the other thing I just want to bring to your attention is we have headwinds on the under 200,000. You understand that if I have a headwind of a declining cohort of half of my customer base, give or take, of course, that's going to create headwinds in net new. For our business, this is goodness. Do we have that GMV? This is simple graph.
You have that data, but I think it's worth looking at it. This is total GMV of Lightspeed. I think the most telling story here is Shopify has 2 million customers plus from what I think. Their 2 million customers plus are only double the GMV of Lightspeed's 90,000 customers that bring in almost the majority of what we're doing.
Here again, that's another way to show this story is size matters, and not all customers are equal. We can very easily get to a better GMV than what Shopify is today by keeping the same number of customers and just shifting the mix into the higher GMV customers. Really in the context of path to profitability and in these times where everybody's asking us to be very focused and continue to grow and grow in a sustainable way and get to profitability and show that we are a scaled-up organization, that is the path forward for me.
Today we wanted to share more, explain the cohorts, explain the growth, show really. Again, I'm just going to summarize. You start from the market. The market is highly concentrated. You go to the value of Lightspeed's platforms.
We create a ton of value for the more established because we have all these features that make a clear differentiator with us and all the other cloud players on the market, and that's where the majority of that market is on legacy systems. You go down to analyzing our cohorts. It tells you we don't really care that much, even though we have those customers. I think for us here, what we're trying to figure out is in those customers, which ones are going to grow and which ones are not going to grow.
Because that is still going to be a lead engine for the more established, but we need to focus the entire energy on Lightspeed on the more established, and we need to penetrate payments, and that'll make us successful. Just today, simple math.
If I were to monetize Lightspeed at the same rate as our competition with the current GMV that we have, it would bring about $1.8 billion in revenues, and we would be cash flow positive. Here, this is not insurmountable. Why are we not there yet? It's because we have a global customer base in many countries. 40%, I think, outside of our customers are outside of the US.
It is a much more daunting task than to build a payment service that works in the US and sell it to customers. We've gone down the path of building a platform, one code that works card present, card non-present, credit and debit schemes in all the countries where we operate. We've taken the last three years to build this, and Brandon's going to show you, we know how to sell it.
All we have to do now is continue doing what we're doing, and we'll be there. Maybe another way to show it is, and that's really how we look at our business internally is a percentage of GTV. It's growing. Why is it growing?
Simple. It's growing because. Actually maybe a data point is the first product we launched was Lightspeed Retail in the U.S. That is now almost at 30% penetration. I think it's 27% penetration. It shows that the first product we launched is going through the exact same growth as some of our other competitors in terms of penetration of payments. It's just a question of time, and I'm really proud now that we have the platform that's launched. This is the driver, 86% growth year-over-year on GPV.
This is not a U.S.-only GPV. This is a global GPV. This is a global payments platform. It's a much heavier lift, but the moat is much stronger once you have it. Because I don't see many competitors who are going to wake up tomorrow and magically be card present and non-present in all the countries where we've been operating for all these years. I don't see any competitor in the hospitality space that magically will wake up and have a strong presence in Germany or have a strong presence in France, because these countries require heavy lifting for the technology platform.
You look at how they run taxation, you look at workflows, you look at fiscal integrations, you look at the card mixes, you look at how the interchange works. It's a completely different world, and we've done the heavy lifting.
That's why, again, we've been smiling for the last 3, 4 quarters. This is another big one.
Cash advances, we work with a more established segment. There's way less risk. Brandon's going to talk about this later also. But here, this is super exciting. We just got started. We just got this into our products. Here again, look, Lightspeed is 0.04% of GMV in terms of cash advances.
Compare this to a Shopify at 1% or a Block at 2%. Even if we were to be half as good of Shopify, which I don't believe, and we went to 0.5%, this would be more than $100 million in our gross margin. So there's a lot of room here to grow again. Here, what is the sequence?
Get the product, put the product, and then start really pushing it. We just got the product. We're now putting the product in the platforms, and we're going to be pushing it like everybody else. I think the real value of Lightspeed compared to the other players, there's way less risk. We have more established merchants, and we have a much, much better understanding of the default rates and the risk rates.
We believe there's still lots of opportunity wherever we look and especially in the more established vendors. want to talk about our strategy, and I know we've shared this many times with you. When we went IPO, we were a point solution mainly focused on merchant services.
That meant that really what we were trying to do is as soon as your inventory hit the store, we were trying to optimize how your store would work, how you would sell. Here it's clear that this is not enough. It's clear that even, and I'm sure Heath is going to talk about this. And JD, no matter how big the retailer, the way they work with their suppliers is through agents, it's pen and paper and Excel sheets.
If you really want to help this guy, there's no other way than to look at the ecosystem. We've been talking about this for a year. We're progressing well. You remember we shared this at the last capital markets day. If we connect the ecosystem and we use data, we can drive value to everyone.
We can drive value to the brands that have zero visibility on what's happening in the SMB space. Here, of course, the aggregate view of Lightspeed, every store we bring that has high GMV brings a ton of value to the brands, because before cloud, these were disconnected, no visibility. We can drive value to the brands and the suppliers on the aggregate view by giving them sell-through.
We can drive value to those brands to help them identify new stores that should be selling their brands. We could become a distributor. We can also add a ton of value. I'm looking at Clusier, who will be talking later on.
We can add a ton of value to merchants because we can remove the middleman, we can remove pen and paper, and we can actually tell them, "Hey, this is how many we think you should be ordering, and here are new brands you don't know about that we think will sell in your demographics." Finally, we can add value to consumers because we have all the data on the consumers, and especially with payments now, we have it in a in a tokenized way. Here what we need to do is we actually need to drive value to consumers to enabling the stores where they consume to have brands that we know will suit them.
Ultimately, we can get to even models like B2B2C, where a consumer orders directly from a store and gets shipped from the brand to the consumer. We can do merchandising.
We work in Australia and summer in Australia is winter in North America. We can look at unsold inventory on one side of the world, buy it back and sell it to other stores that are still selling summer when it's winter here. There's a lot of things we should be doing, and we're only getting started here. The good news is, when I look at Lightspeed's growth for the next three years, we don't need this. This here is what will drive long-term value after we fully penetrated payments and we're a multi-billion dollar company and profitable. It doesn't mean we do not need to invest in this today.
That is one big area of investment. We know that if we connect all of this, there is a true network effect that happens because you end up in a scenario where the brands recommend Lightspeed to the store, the consumers want the stores to have Lightspeed, and the stores generate way more value if they're in the Lightspeed network because we can guide them towards what's good for them. I know this is probably a big vision, and I heard also, "Wow, that sounds like, you're taking on something really big." I think you have to take on something really big if you believe in the mission.
The good news is, I don't think this will have an impact tomorrow. I think this will have an impact maybe after tomorrow, but this is what's going to be Lightspeed's long-term value.
I do believe ultimately that by connecting all of the stores to Lightspeed, we can use strategies of larger players in the e-commerce space in terms of enabling the consumers to connect with brands and dictating how all of this works. Let's talk about the industry. This is also, I think, a unique moment in time. Let's talk about our customers.
This is unfortunately the toughest time for SMBs, and I think you might have read about it, you might have heard about it in the newspapers, you might have talked to retailers. I spend a lot of time talking to our customers, and when you look at what's happening with our retailers and our restaurateurs is the consumer behavior has shifted back to physical, but the consumers have not forgotten about digital. You look at pre-pandemic was super simple.
You had one channel mainly to manage. Customers would come to your store and restaurants, you'd serve them good food, they'd review you well, and you could rinse and repeat. What happened is COVID hit, everybody went online, everybody developed habits, and now that COVID has ended the digital habits, everybody's going back, but you still remember. Now what does that mean?
You've seen it probably when you go to customers and you have 4 or 5 iPads and you're like, "Why do they have that many iPads?" It's super simple. They have multiple delivery networks, they have multiple systems. They have and unfortunately, their POS cannot integrate all of those, so they end up having silos and manual tasks. Why am I saying this? That is, the consumer behavior is driving more work than ever for our customers.
They need more people than they used to run their business because it is not as simple as it was. Now, unfortunately for them, inflation rates is bringing the cost of labor up. That means a lot of them can't really afford to have more people working for them. The third thing is, even if they wanted to hire people, what happened during COVID is everybody left.
Everybody left the industry, started doing other jobs, and right now, I'm sure you see it in your local regions, most restaurants are not open as many times as they want to because they don't have enough staff. I even had a customer when I was in New York, and I did a roundtable a few weeks ago, say, "What?
Do I need to price a burger at $35 for me to strike a profit?" That is a real difficulty. You feel that there's a lot of difficulties in this market right now. Finally, last thing that's hitting them now is a potential recession. They are not in the best of states, and unfortunately, the more established ones are using platforms, legacy platforms that are really not equipped to help them. That's why when we look at this market, we think that they need us more than ever. We think that they are back against the wall.
Not only did they come out of two years of a difficult time with the pandemic, but now they are back against the wall because they cannot operate their businesses in an efficient way with the staff that they have and what they can afford. That's what they're saying. They all recognize we need investments into technology. We need to make this happen now so that we can be in a good spot.
When you look at our value proposition, and I think a lot of people asked me that question last night, is like, "Hey, what else do we need to work in the segment?" Well, that's the good news. In the more established merchants, we have everything they need. We just need to be sure they know about us. It's a global market. There's 2.5 million of them out there.
That's why for us, focus is the only way forward. Because if you look at our platforms, they're all built around automation and doing more with less. The platforms are around integrating all the delivery networks, integrating omni-channel, and enabling a merchant to see consumers across channel, integrating with all of their kitchen technology and kitchen displays so that they can do much better, and they stop printing receipts. It's all about automation. Integrating with their accounting platforms so that no manual tasks, no more Excel sheets. Integrating with payments so that they can have a complete view of the money, and when the money hits the account for every single transaction. That's why it's not a commodity.
That's why even payments is not a commodity for Lightspeed. It's driving value for merchants.
This is a very important moment in time, I think. This is a moment where I think they need us more than ever. If we do it right, we get the profitability, we focus on the established merchants, I think this is how we'll get this market. Last thing I want to talk about is focus. I'm a strong believer in focus. I've been running technology all my life. I've done scaled up startups.
Focus is the one thing that matters to success. I want to talk about our focus for the next six months. There's really three focus points for Lightspeed, and only three. I know everybody's like, "What about this, and what about" Of course, we care about capital. Of course, we care about the the B2B network. What is our focus today?
What do we need to accomplish to be successful next year at Lightspeed? The first one is one Lightspeed. You've heard me say this. What does this mean? I'll just be very explicit. It means that if you're a restaurateur or retailer anywhere on the planet, I want you by the end of this fiscal year to be buying our new platforms.
We have two. Right now we did a lot of acquisitions. It is a bit of a complex environment to navigate. We have countries where we have multiple systems that are competing. We need to get to one hospitality and one retail platform for new customers by the end of the year. Why? It's going to simplify our business. We're going to be able to look at our funnel. Internally, I call it I'm the chef, and we're doing a soup.
It's a very simple recipe to build a very strong and a very good soup. Here, this means there's one funnel, one marketing, one CRM, one billing platform for all new customers.
Here, we've done a lot of progress. We've shared it with you. We have the products. You can see them here today. We are extremely proud of those platforms. Here we are on track for between now and the end of the year to be certain that we sell one platform globally for hospitality and one for retail. Very easy to say, very complex to do. We are not one market, one currency, one tax system. We are global. We all know that the workflows in Switzerland or Germany or France or Italy are completely different from U.S. workflows.
By the way, that's another story. I don't know why taxation and tip management is so complicated in the U.S., but what I mean here is that this is heavy lifting, and this is going to guarantee our future. The second thing we need to do this year is payments. We now have one payment service globally. We need to do better. We need to attach more customers. Maybe one piece of information, vape. we couldn't underwrite vape which is a fairly important one for us. We just announced that we now can underwrite vape.
That's a good example of we need to get into more industries when we sign up new customers. That means we need the payment platform to evolve. The other big thing we need to do is we need to double down on existing customers.
Not double down on the 46% that are representing 5% of our GMV. We need to double down on the large GMV customers and bring them onto Lightspeed one by one. This means hire salespeople dedicated to payments. This means hire onboarding people dedicated to payments. This means really gearing this company towards increasing the GMV of the large customers at Lightspeed.
The last thing we need to do, profitability is a word, and it's not something that magically happens overnight because you get rid of 25% of your workforce. This is not our way of doing it. Profitability means it's a path. It means it's something you've thought about, that you go to incrementally, that is the right thing. We've been working on this now for more than a year, and we need to now finalize what it means.
Ash is going to be talking about this. Finalize. Actually, point number one and number two are probably the biggest driver to point number three. We do well with payments. We do well with one Lightspeed, we are there. Ultimately, we want to be, and I know we said that when we did our IPO, and we're still I think growing towards that direction or speeding towards that direction.
We want to be the go-to brand in the more established SMBs globally. Last thing I want to talk about is the future. Once we're there just picture ourselves next year with adjusted EBITDA positive or better, what are we going to be working on? Next year, we have to work on all of these. We have to work on more financial services, which means capital. We really need to get capital out.
As the more we deploy payments, the more the gross margin deteriorates. The more we sell capital, the more the gross margin goes up. That is, again, a very easy task in the context of our customers that need capital, in the context of our established customers.
This is really important to us. Next thing we need to do, I know a lot of people are asking, "So what are the next things you're developing?" Of course, we're not everything for everyone yet, but we need to continue developing our product, and that means we need more features. We need more capabilities. We need to come to them with new capabilities that are going to enhance their business. Ryan was talking about using the macro to influence the micro. Well, this is it. There's so much data we're aggregating.
We're aggregating $90 billion of transaction volume. In there, we have all the information we need to drive awareness at the micro level. There's a lot of products that we should be developing from there. The third one is, once we have a good soup that's easy to cook, let's double down. Go to market. We need to double down. We need to go back to a simple business where we understand our data points and we have one CRM for each product.
From there, it makes it so much simpler to understand cohorts, understand dependencies, understand your attribution models, and we do understand them, but today we have a lot of products. There's a lot of spillover and complexity between those products. Once we're there, we need to do much better at going faster.
Not faster for everyone, not trying to run after a magic number of net new store counts. We gotta go faster in the established merchants, the 2.5 million that represent 50% of the market. Then finally, once we have those products globally, we need to now put a ton of energy on building migration paths to our existing customers, because we have a lot of customers that came to us through acquisitions, and here we're going to be building a ton of software to help them migrate onto the new platforms once they're launched globally.
Again, there is a sequence, and in French, you say you can't, i don't know. you can't dance faster than the music. and for me, the steps are, you first get every new customer on the new platforms, you have a platform that is competitive globally, and then you bring in all your existing customers onto the platform. so those are the priorities for call it the next 18 months once we've accomplished the first three. i want to end with a quote because i do think we did, we were very ambitious, ? i know it's very ambitious to acquire eight companies in two years and say i'm going to build a new product, and that new product is going to be launched globally.
I did see in some eyes while we were presenting this that everybody was worried. And I'm really proud that we are almost there. I'm really proud that we have almost accomplished what we said we would do. And so I thought this quote is really, it always seems impossible until it's done. It seems very much like Lightspeed and it seems, I think for me, it represents how Lightspeed feels today. And that's why, again, we always have a smile.
I hope you see we're really excited. We have a ton of energy. It's because we are heading towards the right path. And I think we've done the heavy lifting in the last, you know, call it 18 to 24 months. So thank you very much. Thanks for everybody online for listening to us. I'm really proud to welcome you to our headquarters. This is our customer experience center. This is where we are, I'm going to say, drink our own champagne or we are going to now test our tools. We have a retail store. It's going to be a pop-up for our customers.
We want to showcase our customers to our people. Behind you is going to be a cafeteria and a restaurant for all of our, and we are going to be using, of course, Lightspeed technology. And I think it's a very important thing that we understand how to use our technology. And as we hire new people, we're going to put them here and make them learn everything about Lightspeed. So thanks for being here and I hope you enjoy the rest of the day. Have a great one. Thank you.
All right.
Hello, everyone. Good morning to everyone online. Good morning and welcome to everyone on-site.
It's a real honor to welcome you here in Montreal, welcome you here at Lightspeed HQ, or as Dax said earlier, the Lightspeed Castle, and our Customer Experience Center. My name is JD. I'm the President of Lightspeed. I joined Lightspeed via an acquisition, like a lot of us. This was the acquisition of Chronogolf, a company that I co-founded and led for many years. I joined in May 2019, but we had been an important partner of Lightspeed for many years, actually since 2014, and became the largest reseller of Lightspeed technology prior to the acquisition.
It's been an absolute honor to see the growth of that acquisition within the Lightspeed walls. Today, all of our go-to-market teams, as well as the industry GMs, are part of my group. Today we will double-click on a lot of the items that were touched on by JP across all the presentations. That will be a common thread. On my side, I'll talk about our ideal customer profile. I really want to revisit that segment. That's a really important piece of what we're trying to achieve. Obviously, we will talk about how and where we win in both Lightspeed Retail and Hospitality. We'll also talk about our go-to-market motion.
We've been tweaking our go-to-market motion as our ideal customer profile is evolving, and there's a lot to talk about there, and we're really proud of what we're achieving. Lastly, we will highlight really amazing new customers that have joined us in the past few months that will also articulate the ideal customer profile that we're really focused on. I'll step out for the break, and then I'll also come back on for a fireside chat with two amazing customers that have joined us both recently as well as for over a decade.
We're going to have a really good time talking about those two journeys. All right, our ideal customer profile. In the last year, we've been spending a lot of time refining our target customer profile.
These are targets or segments, sorry, where Lightspeed truly wins, where our product market fit is the strongest, and where our unit economics are also the healthiest. You heard from JP before, we build products for the serious retailer, for the serious restaurant operator, and we're really proud of the new flagship products that we're bringing to market.
Today, for everyone that's on site, you'll have the opportunity at every break to see demos of these new flagship products. Please take the time. It's going to be a great opportunity for you to play with the software, to see it all in action, to see it all in motion. We also have breakout sessions.
Our industry GMs are here in the room, and it's going to be a close and intimate session for all of you so that you can see all the progress that we've been making on moving and converging to one core Lightspeed product per industry. When we think about our merchant landscape, I really like this framework because it really crystallizes the way we look at the space and the way we look at our merchants.
As we said before, we build products for the serious retailer and the serious restaurant operator. GTV, from our perspective, is a good way to measure and look at the complexity of our merchants. We don't build products for the micro, part-timer, simple, basic operations that are out there. We build products for merchants that are facing a lot of complexity.
Our target customer profile are customers that are north of $200K in GTV, as highlighted by JP. Our ideal customer profile, and I'm going to spend a lot of time on that ideal term in a little bit, but our ideal customer profile, customers that have medium to high complexity are doing north of $500K in GTV. These are businesses that have multiple employees.
These are businesses that often manage multiple locations, and these are businesses that are an ideal fit for our suite of products. We are seeing a lot of momentum in these segments. Again, Asha is going to double-click on that, but we're really excited to see the momentum that we're seeing in those segments. If you think about the Lightspeed customer, the Lightspeed customer is ambitious. The Lightspeed customer, as I said before, manage serious businesses. They have multiple employees.
They sell across multiple channels, across multiple locations. On the retail side, they have thousands of SKUs. On the hospitality side, they have very complex workflows. They require best-in-class insights. They require reporting at their fingertips so that they can make the right decisions at the right time. Our business operators wear multiple hats, and as JP highlighted, in the current times, these are really challenging times. They are navigating a world where labor is scarce and costs are going up.
A challenging recipe to pull off. This is where we come in. This is truly where Lightspeed shines. Lightspeed is the one-stop commerce platform that brings all of these complex workflows together. We offer solutions that streamline all the key operations of our retailers and our restaurant operators, so they can truly focus on what they do best, delight their customers.
Let's talk a little bit more about our retail offering. You heard me say earlier, the ideal customer profile. I do want to spend a lot more time on what this means for us at Lightspeed. We are well-known in the retail industry as a solution that goes deep into 12 core verticals. There are solutions out there that are simple, that are one size fits all.
You will never win in these 12 verticals. To win in these 12 verticals, you need to have deep inventory management flows that you can handle in order for these customers to find success. From pet stores to bikes to jewelry to health to apparel, of course, all of these 12 verticals have one major thing in common. They have a lot of SKUs that they have to manage.
If we double-click on that and we look at our customers, we also find that these customers have a lot of success with our solutions when they're doing north of 500K in GTV. That's the ideal Lightspeed Retail retailer for us at Lightspeed. Guess what? Those customers are healthy, churn risk is lower, and they thrive when they use our solutions. You saw some of these economics earlier, but when we double-click on that and we illustrate what that ideal Lightspeed Retail customer looks like.
When they start with Lightspeed, a brand new customer taking both Lightspeed Retail software and Lightspeed Payments, we typically see a $533 gross monthly ARPU per location. This is illustrating, as JP highlighted earlier, 200K in GTV and starting with our most basic plan on the software side, our lean plan.
The good news is as they use our technology, as they use our software, they find success, and as they find success, their GTV grows. As their GTV grows, they need more tools to manage their growth. They open new locations.
They start to sell in multiple channels. That's where, again, Lightspeed shines, and we come in, and we can provide all these tools and bring it all under one roof, under one vendor. On the right-hand side, we're illustrating the growth of the GTV going from 200K to 500K. These merchants naturally, organically growing to add more modules, more software modules, to continue to power their operations.
The ARPU grows to $1,352 per month per location gross as they use our solutions and as they continue to see their GTV grow. Of course, this is one illustration, but we have multiple examples where the GTV is much higher than that and where, of course, the gross monthly ARPU is a lot more significant. We wanted to make sure we crystallize and illustrate what the ideal Lightspeed Retail customer looks like from an economics perspective. Why are we able to pull off these economics?
Well, that is our amazing Retail product. You're going to have again the opportunity to see it all in action. It is very complex to operate in those 12 core verticals that we talked about.
We have spent a lot of time building specific features, essential features that are key to these verticals so that they can find success. That is what the Lightspeed Retail product looks like. It's also a product that is a global product suited for global markets. It's a dominant solution in North America. It's a dominant solution in APAC and in the UK, and we have plenty of upside, plenty of runway to open new markets on that front.
Obviously, we're known for our deep inventory management solutions, but we're also now known for our omni-channel capabilities, and JP touched on that as well earlier. You can sell from anywhere, not just on-site, not just online. With E-Series, you can sell on social, you can sell on marketplaces, you can meet your customers, you can meet them where they are.
That is a key element of this solution as well. Then lastly, it is a best in class iOS solution. iOS means when you onboard new employees, it's much simpler to get started, and we'll talk about that in the fireside chat. That is truly a unique and simple way to get a customer or, sorry, a new employee on board and get them up to speed in a couple of hours.
They're, they know where to go. They know what to do. Beyond the iOS solution here, it is also a solution that provides a ton of analytics, a ton of insights that are at your fingertips, so you can make the right decisions. We'll hear from Pierre-Benoît Duhamel at Clusier. That is something that is crucial to his business. We are only getting started here.
Heath, our GM of Lightspeed B2B is in attendance. The supplier network for us is going to be a game changer. If you think of the supply chain in retail, it is a supply chain that is broken. We have an amazing opportunity beyond the amazing commerce solution that we provide today to continue to drive a lot more value to our merchants.
Please take a lot of time with Heath in the breakout sessions because he'll actually be giving you a first demo of the integration that we've built between NuORDER and our retail platform. It's really, really exciting. Okay, you've seen this slide from JP earlier, obviously, but I do want to spend a bit of time to highlight again something that hopefully you can remember from here onwards.
If you think of Square and Shopify, they categorize, and you can read this, they categorize our smaller merchants as mid-market, right? Again, we want to highlight we are focused on the serious business operators out there, and we do believe that we have a true omni-channel that handles the complexity and the high GTV merchants that are out there.
That is a TAM that is still very much ripe for the taking. This is a TAM, this is a market where retailers out there are still using legacy solutions, on-premise solutions, and that's where Lightspeed shines, and that's where really we can serve those customers that cannot operate with this post-COVID era with these legacy solutions. They need a solution like Lightspeed to thrive.
Similarly, let's move over to hospitality, and let's look at what we're doing on the hospitality side. Again, we want to crystallize what is the ideal customer profile, what is the ideal Lightspeed restaurant operator. No surprise, we're going to talk about it again. We cater to the serious restaurant operation. We cater to the higher complexity.
That being said, we regroup our customers in four categories, four buckets. The first one are multi-location QSR groups. Again, multi-location, you can imagine the complexity there. Bars, pubs, and nightclubs also have very specific and unique flows that we ideally cater to. Full table service restaurant and particularly on the premium side, so higher end Michelin star restaurants. We have a lot of customers, award-winning customers that fall in that category. Then lastly, hotels and establishments with multiple revenue centers.
We've built a ton of PMS integrations that go a long way and that are crucial in that segment. If we define the ideal Lightspeed Restaurant customer, again, we see that they have one to multiple locations.
They handle very complex flows, and they do north of $500K in GTV. That's where, no surprise, we have a lot of momentum and where the unit economics are the healthiest for us. If we look at the next slide, we are again going to look at this illustration, but now with the hospitality framework. When a new Lightspeed Restaurant customer comes to us, again, they will choose both our software and our payment solution.
In year one, you can expect a monthly gross ARPU per location of $542 coming from our most basic restaurant software plan, as well as, the monetization that comes from payments on $200K in GTV. No surprise, as JP articulated earlier, they find a ton of success using our solutions. They're able to cater to all the demands and all the needs of the new modern customer that is out there.
\They see their GTV grow, they see success, and they are able to then expand their goals, take on more modules. Some of them are listed here, and they're part of our more advanced plans. Kitchen Display, accounting integrations, our best-in-class reporting or Insights module. It is truly the module that, if you have just two minutes, spend time with Evan to look at it.
It is really what puts us in a different sphere when we sell to the more premium customers. Inventory management, PMS integrations. There's such a wide range of things that we can offer to these merchants as they continue to grow. Of course, that $500K in GTV, you can see a $1,482 ARPU coming through as they expand and as they grow with us. How do we make it work?
Well, Lightspeed Restaurant is the ideal product in that segment. No surprise, it is a dominant solution in Europe, it's a dominant solution in APAC, and it is a growing solution in North America. What is special about this solution? First and foremost, incredible offline mode. In a restaurant, it's absolutely paramount. You absolutely need to operate offline if your network goes down.
It is built on blockchain technology that allows us to pull this off. Blockchain also means that it is a blazing fast product. You'll see again the demo from Evan. For high volume merchants, high volume restaurants, absolutely key to be able to handle that. We offer a world-class analytics solution that has been talked about already. It is, for us, a game changer, and it comes from our Observe acquisition. Then, beyond the best-in-class analytics, we are now rolling out our new inventory management solution that comes from our Kounta acquisition.
We are truly a global product. When we say global product, we mean that we need to handle all the fiscalization requirements in every single country where we operate. That is not a small feat. We will hear from Peter later today from L'Osteria.
In every single European market, it is a different fiscal requirement, a different fiscal integration. The product has the foundation so that we can continue to roll this out. Obviously, very, very key elements. Obviously, our property management solutions on top of that adds another layer to this amazing solution. The last but not least, it is the slickest iOS solution in the market, in our opinion. In the premium segments, iOS is key, and you're going to see that again later on in our demos.
Operating in a multilingual environment with fiscal requirements requires extensive investments and also requires operational excellence. That's where really we come in. We believe we are the only global cloud-based solution focused on the medium to high complex merchants in the hospitality space.
The majority of restaurants in that segment, yet again, use legacy on-premise solutions that are not equipped to serve, especially in the post-pandemic era or post-COVID era, the reality of customers that are out there. Customers that are expecting an incredible experience on site, table service, order ahead, delivery. These are complex flows that we bring it all together.
Let's talk about our go-to-market motion, and as we call internally, our land, onboard, and expand model. We optimize our go-to-market strategy to ensure that we fit the demand and the needs of our complex merchants from low to medium to high complexity. We've also optimized our go-to-market engine to ensure that we generate the most optimal LTV over CAC for each of our segments that you see here. We built a lead generation engine that leverages inbound, outbound, and partner channels.
We have both an insight and field sales team equipped to close sales both remotely as well as on the ground. We have an onboarding experience that promotes self-led or self-serve learning path for very simple low complexity merchants. Then as you move up, we can handle one-on-one meetings on the virtual front, all the way down to on-site training and on-site configuration for the more established and the more premium customers. Again, we're going to spend a lot of time on that front with Peter later today.
Lastly, once a customer is live and transactional, we have a dedicated account management team that handles every single customer at Lightspeed and really quarterbacks the needs of our customers, all the way up to a very high touch and white glove service for the more premium customers that are in the high complexity segment.
Now, of course, what's really great with Lightspeed is that we have a global playbook, a global blueprint, but we also allow for a local nuance in every single market where we sell and where we are present. You can see here the white dots are the offices of Lightspeed, where we have feet on the ground. We have a local presence in the US, in Canada, in the Benelux, in France, in the UK, in Germany, in Switzerland, and then in APAC, of course, Auckland, New Zealand, and both Sydney and Melbourne in Australia. What's really unique at Lightspeed is that, yes, we have a global blueprint. Yes, we have a global strategy.
When you meet with a Lightspeed employee or a go-to-market member, you will see that our Lightspeeders are not only experts in the industries that we serve, but they also speak the local language of our customers. They understand the local nuance of our customers. That is not a small feat to pull off, and we're extremely proud of the global footprint and our global teams. Lastly, this is for us a crucial slide.
This is what's happening underwater, if you think of the iceberg and what we're trying to build here. There is a lot of work behind the scenes that you don't see when you look at Lightspeed that is represented in this slide. We are literally taking 8 products to market, and we're converging to one flagship product per industry.
At the end of this fiscal year, we'll be in the position where we are selling one flagship product in both retail and hospitality. Why is this important? You can only imagine the efficiency that this is driving for our engineering team. Equally important, the efficiency that this will drive for our go-to-market teams. Converging to one customer journey across the board will have a massive impact in terms of how we market, how we sell, how we onboard, how we support, how we manage our customers, and ultimately, this will have a massive impact on our customers.
We're extremely excited. We've made a ton of progress behind the scenes on this, and we're seeing amazing proof points, and the results are astonishing.
There's no better way to highlight the results than to present some of our customers that are using these new flagship products. We'll have more during the fireside chat, but we wanted to pick a couple of examples of recent customers that have joined us in the past months that are using those flagship products. Starting with one of my favorites, Louis Vuitton meets Chef Marc Strausman.
Two minds come together to operate this amazing restaurant on Madison Avenue in New York City. They are using our new flagship restaurant product. They're not just using our software, they're also using payments, they're using our insights module, inventory management, Order Anywhere. Really an amazing proof point.
It goes to show the type of customers in the table service category on the fine dining and premium side that can come to Lightspeed and find success with our flagship products. We're very excited with this one. On the retail side, this is Neal's Yard Remedies. They specialize in organic body and skincare products. They are using, again, our new retail flagship product for 41, not just 40, but 41 locations across the UK. This is again a great example of the type of customer that finds success with Lightspeed.
You can only imagine the complexity of the flows when you're managing 41 locations. High GTV, they're not just using us on the software side. Again, they're using us on the payment side. Marketing automation is also a big piece for them.
They've added our marketing automation and loyalty module. Then lastly, they're also using our updated scanner app. Really great example for us in the UK. If we move to the next one, we're going to go back to hospitality. This is Parker Palm Springs. For those of you that have been to Palm Springs in California, this is a well-known establishment.
They are also using our new Lightspeed Restaurant flagship product. Obviously, our integrations to our property management solutions has been a key for them in the hotel segments. What's really interesting is they're using our solution across 9 terminals across the facility.
we'll hear from Peter again later today, but also for Parker Palm Springs, one key element in their decision was they wanted to use an iOS solution. We talked about how slick our iOS solution is. They looked at another vendor, they were really let down. They moved away from that vendor, and they moved to Lightspeed Restaurant, and they never looked back.
This has been a really, really raving success for us at Lightspeed, and really happy with this new customer on the hotel segment side. To bring it all home, we'll talk about Cleveland Metroparks. Cleveland Metroparks is a multi-course operator, as we call it in the golf segment. They manage eight golf courses in the Cuyahoga County, in Ohio.
You can only imagine for an operation like this one, using Lightspeed Golf with Lightspeed Retail across all of their facilities, across all 8 golf courses, it's extremely complex. It speaks to how deep we go in each of the verticals that we care about. We have built unique, specific flows and features that are relevant to golf. No one else can touch us in that segment.
No one else is as deep as we are in the 12 core verticals that we go into in retail. Here again, with Cleveland Metroparks, high GTV, high complexity, this is a great example of an ideal customer that is using Lightspeed and is finding amazing success with Lightspeed. That's it for me.
I believe I'm going to turn it back to Gus, who will talk about the next steps for today, and I'll come back a little later for a fireside chat with two of our amazing customers. Thank you, everyone.
Okay. Thanks, JD. I'm going to play a quick video, and then we're going to take a 15-minute break.
There is coffee and food at the end. During the 15-minute break, I encourage you to check out our demos.
We have the retail demo here to my left. Evan has got the hospitality demo here to just to the left of the stage. Both of them are wearing red T-shirts.
You can't miss them.
We will be doing a Q&A session, but we're going to wait till the end after everybody has spoken to do a Q&A session.
We'll see everybody back in about 15 minutes. Thanks.
Our biggest goal when buying the hotel was to take the restaurant and make it more than just this throw-in hotel restaurant. We want it to be a restaurant for the community and really the restaurant that people think about on special occasions. In the summer, it's just a real popular tourist destination, and you've basically got, for a few months, unlimited demand. It's really important for us to be able to turn tables quickly and maximize that peak four-month season. The thing that's really helped us the most with Lightspeed and been the best feature has been the increase in speed of service.
We're bringing iPads right to the table. The second that order is taken, it gets fired back to the kitchen, and the kitchen's working on it. It just keeps the flow going and keeps the restaurant moving.
We're taking payments from the table as well. The servers all carry credit card readers in their aprons. People can see their bill right on the processor, make their payment, make their tip. We're able to get that customer in and out faster.
They have a better experience, and we're able to get more people in those tables. For us, owning a hotel, integrations is super important, and Lightspeed was one of the top contenders that offered a hotel integration and many of the other integrations. We got hotel guests here, and they want to charge something to their room. They can do that. Managing refunds well, managing the payments, having everything all integrated all in one place, it's part of how you take care of your customers.
Lightspeed helps us make sure that every year the business from an infrastructure standpoint, from how it looks, from how it feels, the service is better than it was the year before. Both from the hotel side and then from the restaurant side, we're excited about pushing our limits and seeing how much we can do in our busy season.
The modern retail world is a competitive place, and I need to ensure that the leadership team can make the kind of decisions they need to make without any delays. My name is Paul Stephens. I'm the Head of Data and Technology at Neal's Yard Remedies. Neal's Yard creates health and beauty products that help people's inner beauty and health shine out.
We've been creating products which have naturally sourced ingredients, herbs, and essential oils for 40 years. We now have an eco-factory in Dorset, where we produce the majority of our goods. The company's vision is to make people feel good about themselves. We're a multi-channel business that's selling products all over the globe.
We need to be extremely agile with our choices for software. It's my role to head up the IT and data teams, and to choose the correct technologies that we're going to need for the future. We had a long list of requirements, and Lightspeed was the only one that ticked every box. One of my key pillars at Neal's Yard Remedies is about simplicity.
We have a very complex business where we make our own products, we manufacture, we distribute, and we sell across multiple channels in different markets across the globe. We need to introduce simplicity in our systems where we can. Where Lightspeed has really shone for me is that in both the front end and the back end and the API, it's very simple to use. We want to provide an omni-channel experience for our customers.
That means when they go to our website or one of our stores, it has the same look and feel.
They get to use the same loyalty schemes, gift voucher schemes. We weren't able to do that with our previous EPOS provider, and it was slowing us down. There was a bit of anxiety at first that the rollout of the new EPOS across all of our stores would take an incredibly long time. With Lightspeed, we were able to do it within two weeks, which is incredible. The team soon found that it's so simple to use and everything's so intuitive, they were able to pick it up very quickly and move forward.
It's so easy to get the data into the data warehouse. I can be sure that they're able to make those decisions without any hassle.
Lightspeed Payments was an obvious choice for us because of the security and simplicity it provides and the integration with the system.
The support team have been with us along the whole journey, not only with in-person training, but some in-depth videos that they've allowed us to share. That's not only helped us with our retail team, but it's really enabled the franchise managers to get behind the product. Because we have over 40 stores across the U.K., we really need to understand our performance day to day.
Lightspeed's going to allow us to do that and come with us on that journey.
Okay, we'll move on then.
We're going to have our fireside chat next. I just want to remind everybody that after the main sessions and Q&A, we will be hosting one-on-one sessions with our general managers for retail, hospitality, B2B and payments.
We'll be running three half-hour sessions with each one of them. You could pick three of the four sessions. Just a little bit fair warning, the rooms for payments and retail are a little small, so if that's a priority for you might want to try to get there a little early.
With that, I'll turn it over to JD for our fireside chat.
All right. Okay, great to be back.
An honor to be joined by two Lightspeed customers.
On the hospitality side, we have Peter Schimpl from L'Osteria, VP of IT and Digital. Then, of course, Pierre-Benoit Duhamel from Clusier, Owner of Clusier. A what? Over a decade-long customer of Lightspeed.
Maybe perhaps before we get started, could you introduce yourselves and also introduce your businesses?
Yes. Thanks for having me here. My name is Peter Schimpl.
I'm from Germany. Our vision for L'Osteria is the joy of Italy for everyone, everywhere. This is what we do in about 160 stores Europe-wide. We are in eight markets right now, but the major market is Germany. We are also in Austria, Switzerland, the UK, France, Netherlands, Luxembourg, and Czech. We are broad in the market and we have a full-service restaurant on the higher level, and we moved over to Lightspeed in the last couple of months.
Amazing. Thank you, Peter. Pierre-Benoit.
Good morning. Thank you for having me. My name is Pierre-Benoit Duhamel.
I'm the owner and founder of Clusier. We're a leading luxury menswear retailer here based in Montreal. We are a high service, made to measure and ready-to-wear and shoe retail storefront. We've been using Lightspeed for over 10 years, as JD sai d.
We've done from the on-site to the cloud merge, and we've been using it on a daily basis ever since we've been a customer.
Super. Thank you, Pierre-Benoit.
Obviously, common points with both of you. You're using, as you said, Lightspeed at your facilities.
Can you articulate a little more how you're using Lightspeed and sort of how it impacts your day-to-day operations?
We are using Lightspeed in the restaurant. In the average restaurant, we're using about 10 iPhones and 2 tablets, one on the bar, one on the management side. The 10 iPhones is used for mobile operations by the service people. For us, it was very important to have a mobile system, iOS-based system, since it reduced complexity in the store and is able to operate better service.
For us as well, the cloud-based was a really important perk. This is how we use it. Yeah. Usually the one restaurant, we have mobile devices for order taking, and of course we have the 2 stationary tablets for the bar, where all the drinks come in and for the management system.
When we initially looked for a POS solution, I was looking for something that had two key components to the solution. The first one being ease of use, and the second being onboarding. I wanted the power of the data that a major chain would have. I wanted to be able to analyze data in order to make better buying decisions, to optimize margin, and ultimately make our business strive.
When we researched, Lightspeed was the key element that you can take the solution, bring a new employee in, onboard him, show him or her how it worked, and two hours later they were operational. This was a key factor for us.
This, just so in a high service industry like we do, my salespeople spend about 30% of their time behind the screen tracking what customers bought previously in order to set an appointment and then to be able to sell them new things that they would like based on their current needs.
Even in a small store setting, we have the data that merchants would use to tailor offerings to their customers.
Thank you, Pierre-Benoit Duhamel. Peter, if I can come back to you.
Obviously, major tech rollouts, as you said, 160 locations, 130 today on Lightspeed. Prior to choosing Lightspeed, I believe you went through a fairly extensive due diligence process to see what's out there.
Can you walk us through that process? In the end.
Yeah.
what made you choose, Lightspeed over others?
What we have in common since or what we looked at firstly was to get rid of old systems, legacy systems, on-premise systems. Since this was complicated, we're not scalable with the systems. The system usually not reliable and not stable in the daily operations, which is a no-go in a high-volume restaurant. We looked at this part. We said we'd like to have to simplify the infrastructure in the restaurant. Why?
\Since we need to scale vertically within the market, since we like to open new markets, three new markets, next year, and horizontally, we like to open new restaurants in the existing markets. This is only possible if you have a stable, easy, and simple infrastructure on the base, and this is provided by a cloud solution.
The second one is, if you heard, we had eight different markets already out there, and this is fairly complicated in Europe. It seems like very small, but in Europe, every country is completely different on various points. We need to find a solution which is growing with us into the international markets, which is available in the international markets. Third, what we like to have an iOS solution. Why?
People are used to the iOS devices. The iOS devices are usually high in quality, which means with the wireless LAN chips and things like this.
The third one is, as you said, training is very important.
Mm-hmm.
When we did the rollout or when we started the rollout, it took us only 30 minutes to train the people. I come later on to this one. Having these three things in mind, there is not really much.
There is, as you said, a MICROS. There's a Vectron in Germany, but all like Toast, they're not available in these markets in Europe.
Right.
There was only a couple of systems which was available, and Lightspeed was the best one we had in there.
Well, we're happy you chose us. I think it's the right fit for sure.
For you, Pierre-Benoit Duhamel, little different. You've been with us, as you said, for over a decade. Started using Lightspeed Onsite, which is the original product that Dax coded. Can you touch a little bit more on that journey of having been a Lightspeed customer for over ten years?
What are you excited about as well as we talk about some of the topics that have been explored by both JP and I and the product?
Excuse me. Essentially, Lightspeed has provided us with a tool. It's so easy to use, and even as we merged into the cloud. I had a team of 7 people that were used to a solution that was very good but was on-site, was not scalable, where we cannot travel, for instance, to a customer's house and invoice them on the spot because it was on-site. When we merged into the cloud, it was very, very like a seamless operation. Tw
o days of work from my team, and we were operational on the new platform. I see things coming, and I've discussed things with the team here, where eventually some of our vendors that are on the NuORDER platform will have sort of a live view of their inventory.
We'll be able to connect with them to not miss a sale in store. Because essentially, these days, independent retailers that are multi-brand are competing with their vendors. We provide a service, an essential service for these vendors, and we'll be able to have things drop shipped for the next day to the customer's house that we're not even holding in inventory.
Our suppliers will be owning the inventory, and we will be able to make the transaction and make our margin instead of our customer going to the vendor's website and buying direct online. The power of these, essentially, you think it's a small system, but the power of these systems for us is very important not to miss a sale because all the profitability is in the incremental sales that can be done on a daily basis to our customers.
Can you share to the audience examples of brands or suppliers that you work with today that that are on the NuORDER platform? Maybe contextualize a little more the time invested in buying from your brands and suppliers today, and what's the process today versus where we want to take this.
I'll take a staple luxury Italian brand called Canali. In order for us to bring product to the market, it's always been a six-month cycle. With this new idea of suppliers being linked to us with the platform, we'll be able to do, yes, a committed buy, but that will be much smaller, and we'll be able to draw from their in-stock inventory key elements that are repeatable with a click of a finger.
Right now, basically, we have to call the supplier, send an email, but the power of the solution will eventually, I'll be able to click and drop ship to a customer's house from the warehouse of my supplier.
That's a big, big improvement that I'm looking forward to in the evolution of the platform for us to benefit.
Yeah, absolutely. We're really excited about the progress that we've been making on that front. I'm going to take us back a little bit, touching wood, that we don't have to ever live through that again. But obviously JP highlighted the impact that COVID has had on our customers, and equally as important, how our customers' customers now purchase, buy, behave.
Can you walk us through what this is this journey has been for you in the past few years, the impact of COVID, of course, with government restrictions and so on.
Today in this sort of post-COVID era, what are you seeing in the markets and what are the challenges?
Yeah.
Maybe starting with you, Peter.
Yeah. For t he restaurants, COVID was a real issue. It started 2019, and I remember in March 2020, the German government decided to close all the restaurants down. We, as L'Osteria, decided to close all the German restaurants completely. Not for pickup, not for delivery.
The reason was, at this time, we had the old efficient POS system, we was not able to react. We was not able to scale in the sales channels.
We had to close down all the restaurants for a month, prepare ourselves technically and process-wise, that we can open the restaurants for pickup and delivery. This was a huge impact for us, of course. No sales in 140 restaurants almost for over a month, and then the sales are climbing up.
After having this behind us, now we have the Ukraine crisis, which it has a high inflation. We have 10.4% in Germany. Every month we have a half percent of inflation up. The raw material prices goes up by 40%. The prices for building materials goes up by 30, 40, 50%. These are all the challenges we have. For this reason, it's important to have a system which we are able to scale on different channels.
Maybe there's something happened with the prices or the availability, then we have to drive down the in-store channel, but go up with the other sales channels to make this working for us.
Thank you, Peter. On your side, Pierre-Benoit?
Here in Quebec, most of there was one of the provinces where there was the most and longest closures. Our sales, because of COVID, dropped to almost zero, and we had to pivot from a buying perspective. With all the key vendors that were integrated into our system, we knew that some of them had product that was geared for a more casual lifestyle or work from home.
What we did is we pivoted very, very rapidly and changed our buying habits to buy things that were comfortable at home. You wear a T-shirt, jogging pants, things that we've never sold before. Used all the data from our customer list.
We circled in, we said, "Who are our 100 best customers in Lightspeed, and who are the people that have bought only formal?" That was our key aspect on targeting. Can we drive to their homes and drop off a wardrobe of casual clothes that they can try in their house? Put the clothes they don't want in the box, and then we can leave and invoice the customer on the spot.
The Lightspeed was the intermediary in sourcing the product, invoicing the customer, and just tracking all the inventory through that pipeline of a major shift in our customers' way of dressing.
Yeah. Thank you. Now, if we look forward, again, touching wood, that this is a thing of the past. Peter, you mentioned going into new markets. Can you maybe articulate to the audience, particularly in Europe, the challenges from one country to another, as far as taxation, fiscalization, multiple currencies.
Even in hospitality, the flows from one country to another can also be fairly different in terms of how customers are sort of eating, dining, behaving in each restaurant. I'd be keen to maybe just explore that a little bit more with the audience. Yeah.
In Europe, even as I said, the smaller markets like Switzerland, Luxembourg, Czech, they're really small, but they have their own taxes. Which make it worse, they have their own fiscalization. I give you an example. Germany has a software-based fiscalization where you have to send all the transactions to the government. Austria has the same, but completely different software and completely different rules to it. Poland, for example, they do fiscalization on printers.
They have a module in the printers. They only allow some printers to be used since the printer is storing the data transaction that they get it to the government. It's different for Croatia, it's different for Sweden, it's different for Italy, if we go there.
For us, this is a real burden to have all these different taxes, all these different processes, how to do tax and how you deliver data to the government. On the other hand, of course, supply chain is always an issue. We're very happy to have Lightspeed Payments in most of the markets, but there are some markets where you have a difference.
For example, you have different cards which is only used in the market. I give an example. Switzerland, they have a card, it's called PostFinance Card, and 50% of all the people in Switzerland are using this card to pay. But this is not a Maestro card, this is not a Visa.
Yeah
This is completely different system. For this reason, it's always important for us to adapt to the market with one or two restaurants, go in early, like we do next year in Poland. We go in early, a
dapt to restaurants, then we know how it works, and then we can grow out of these two, three, four restaurants in the next expansion wave to have more restaurants.
I'm glad you took us to payments, 'cause obviously, we believe at Lightspeed software and payments are meant to go together.
Can you walk us through your experience choosing Lightspeed Payments to power the payment side of the business, why you decided to go down integrated payments versus other options out there? What have been the lessons learned on that front?
Yeah. For us, a game changer or one of the most important things we choose in Lightspeed as well was the Lightspeed Payments. The reason is you can stay with your guest. You stay with the guest the whole transaction.
Before, when we had another integrated system, we had only four payment devices in the restaurant. The guest likes to pay, the seller likes to pay with card, they move back, look for a ready device, a free device, go back to the customer, try to type in the amount which is a little bit, how should I say, risky, getting the right amount as well. They went back, get the slip for the customer. With Lightspeed Payments, they have everything in their hand.
Means they go to customer likes to pay, we have a very small device where they can pay, and even the slip is then going automatically to the customer. This helps us to deliver better service. As you said, we have a labor challenge as well, especially in big cities like Berlin, Vienna, Munich. This helps as well to increase the productivity if you can stay with the customer and finish the transaction all in once with Lightspeed Payments.
Right. Delivering better service, delighting your customers, obviously, that's a common theme for both of you. We've also talked about labor shortages and the challenges of finding new staff. I know both are two different setups.
In your case, you went through a massive rollout, so I'd like to maybe get a better understanding of what was your plan going into this, as far as training the staff? What have you learned? Same goes for you.
Obviously the business has been thriving, but you've also, I'm sure, had volatility on the staff. What has been the experience with new staff coming on board as they're learning a new system?
Yeah. Our challenge was the rollout. Of course, everybody was tired and sick with the old system. Legacy doesn't work properly, and we had to plan the rollout, and we started at the beginning of this year with Lightspeed, set up lab and pilots, and find out how to set the system right.
Then we planned to roll out in April. I was really surprised. I'm still surprised that we managed to roll out 130+ restaurants within four months and 17 days. Means we installed or uninstalled the old one, installed the new one, updated the infrastructure, up to four restaurants per day.
The mind-blowing thing for me was since we had a lot of planning in the lab Phase, in the pilot Phase about training. We planned for the management 2-hour training to get with all the reports and to get to the back office.
We had planned to have 1.5-2-hour training for every crew member to be familiar with the system and to go into the first shift on launch since we're not closed.
Didn't stop doing operations.
For an hour.
Yeah.
No, not closed for an hour.
Kurt and Cole, yeah.
We need to be ready at 11:30 A.M. with the new POS system. Started 6:00 A.M. in the morning.
Right.
With the first restaurants, we saw that we had planned a 1.5-2-hour session for the service people, and they get bored after 15-30 minutes. They said, "Yeah, we know. Give it. Come on. We know how an iPhone works. We know an iPhone application works.
iPhone, yeah.
We know the basics. Give it to me. I like to go to the guest, to the customer to try it out, and if I have a question, I come back." This was for us really, in the mind, it was changing everything since usually the very complex system have an own hardware, own logic in their software.
Having now a system which in 30 minutes they grab your iPhone and said, "Yeah, no," and go to the guest. We was there with our people until the first shift in lunch to answer the questions. There was only three, four questions coming. Then the restaurant was with the new POS, fully operational within the first day, in the first shift.
How about you, Fabianna?
Well, funny you ask. When we onboard a new employee, even before showing them this, the whole store, the products, the brands we carry, the first thing we do is we put them in front of the computer and we say, "This is how our Lightspeed solution works. This is how you invoice a customer. This is how you can research merchandise in the system."
It takes about two hours for a normal employee to get on board and actually be able to work with the solution. It becomes the hub of their work throughout their whole career with us. I've had people with me since the beginning of Clusier, and they're still there today.
They love the constant evolutions in the platform, and they're always game to try new things, to try and connect inventory the best way they can.
That's awesome. Awesome to hear. I know we're coming up on time, but, as we discussed today, and I'm sure as you heard from all of us, the Lightspeed customers are serious business operators.
They're also very ambitious. I'd love to hear from both of you as we look forward, what's on what's on the plan? What's on the roadmap for L'Osteria and Clusier as you continue to find success?
Yeah. For us, it's we have an ambitious plan to double the number of restaurants within the next four years.
Wow.
To open new markets within Europe and to double the number of restaurants within four years. That's the plan for the long term. The plan for the short term, 2022, we have to be with the plan to be the year of the customer.
We like to enable the customer technology-wise. Usually, if you go in a QSR restaurant, you see the self-order kiosk, e.g., McDonald's and all the others which do not work for an Italian restaurant, full service restaurant. What we like to introduce, we start this year with the launch of Order Anywhere, and we like to introduce in the first pilots in the beginning of this year is
That they enable the customer to pay on table. If they take the time, they can scan the QR code and make their own payment, and maybe then reorder at the table. We don't believe in the order at the table. Since we're a full service restaurant, the first contact should be to the service people. But then reordering and doing the payment on the table for the customer is very important for us.
Second, we try to do e-commerce, or we did e-commerce, but we integrate e-commerce in the Lightspeed platform that orders coming from e-commerce are automatically booked into the Lightspeed platform. This avoids manual entry from the management. Last but not least, as you said, we're tackling inventory as a back office and a loyalty scheme.
We try to implement a loyalty scheme within the middle of next year, to get our customers to get the profitability and productivity high.
Wow. Really impressive. Technology will be a big, big enabler for all this. Really, really cool. How about you?
On our end, we have developed throughout COVID a line of our own store brand, Clusier branded products that are tailored in a sort of a hybrid way, work from home, but in a dressy kind of way, which we stay true to our essence, and it will be a key differentiating factor in our e-commerce presence.
We'll push these products online, which will be unique, only available for our niche customer, and that obviously will be pushed through the Lightspeed solution that they provide.
You heard, Benoit, you need your own Clusier shirt after this. Shameless plug. All right. I know we're at the end of the session. On behalf of everyone at Lightspeed, we wanted to thank you. I know you've spent a lot of energy and time and really busy schedules to come here and share what you've what you've experienced using Lightspeed at your facilities and really from the bottom of our heart, we really appreciate that. Hopefully this was useful for all of you in attendance and for everyone online. That's it for us. Thank you.
Thank you.
Our ramen originated in Fukuoka, in the Hakata style of ramen. I've eaten a lot of ramen, and I'm really proud of the one we've put together. At our core, it's a really great dish. This Kotsu Ramen really is our test facility where we test out all of our hopefully good ideas.
This is actually the first restaurant where we did put Lightspeed in, and we've learned so much through that process about how much our point of sale system can impact how we operate. Ramen can be a little complex or a little intimidating, so having a point of sale system that helps us guide our guests through that process is really helpful.
One of the things we do, for example, is design our POS setup on each individual item, ensuring we're asking the right questions of our guests to deliver that optimum guest experience.
Our Anywhere platform is set up exactly the same way. We have a QR code at the start of our restaurant. Guests scan that QR code, they can sit down, and they can place an order. Those flows match, and that's really, really important. The pandemic was an interesting time. It had big effects on restaurants, and we learned a lot of lessons as an industry.
One of those lessons I think most people learned was that technology is going to be part of our solutions, whether that's part of our customer experience, whether that's in terms of customer online ordering, delivery, or really great analytics. Having the payments integrated with the point of sale system is really important because that's what gives us a lot of that data that we really need.
I can see the sales by hour and really get a granular idea of when we're seeing good business and try to tie that back to time of day and weather and all these kinds of things. Lightspeed Restaurant gives us a great analytic tool that on one axis tells us how many sales we've had of a given item, and on the other axis says how much of that is driving repeat business. You can look at an item and say, "I love this item.
It sells really well, what? People come here and they try it and then they don't come back." Or, "This item I didn't think was a big deal, but the customers that come for this, they love it.
They come back over and over again." That kind of data drives really good decisions about what needs to be on our menu, what belongs there, and what makes sense. Based on this experience with Lightspeed Restaurant, I absolutely think we're going to extend this out to our other restaurants. The best kinds of technology solutions are ones in which we don't even realize we're using it.
As great as Lightspeed has been for us, we don't think about it day-to-day. It's just one of our tools. It's like picking up a knife in the kitchen. It does its job consistently, it does it well, and it helps us spend our time focused on what really matters for our business.
Okay. Hi, everyone. Brandon Nussey, for those that don't know me.
I've been at Lightspeed now for almost five years, I suppose. I joined as CFO back in the day and recently made the shift over to COO, helping focus on some of the broad-based execution across some of our key priorities. going to walk through some of those here today. going to start by just picking up on some of the themes you heard from JP earlier.
When we started back in March of 2019, as part of our IPO, we really talked about two primary opportunities we saw. The first was to create a category leader in a portion of this market that we felt was underserved.
You heard from our customers here, legacy systems just weren't getting it done, and we saw an opportunity to move this market share to cloud-based solutions like what Lightspeed offered. That was opportunity number one. Opportunity number two was to move from being a point-of-sale software provider to a more fulsome commerce platform.
We felt like if we could provide additional value to customers, that there'd be incremental revenue there for Lightspeed as a result, and we'll talk about that in a couple of minutes. We liked our position at the time. We were growing quickly. We were at about $13 billion of GTV. We saw a huge opportunity ahead, and we were operating in a largely fragmented market.
We had some of those companies around doing similar things to us, and we felt like there was an opportunity there to bring these companies together, some of the best companies in the space, that would bring necessary technology, it'd bring great people, and it would increase the market presence of all of us as we chased this, what we felt was a tremendous opportunity.
As well, as we thought about the M&A, there was a financial opportunity there we saw that was similar to the experience we were seeing, where each of these companies had been operating as a standalone point-of-sale provider, and we saw that opportunity to grow within the customers that they had as well. Fast-forward, here we are today. You've heard some of this.
we're a global commerce platform now generating our customers in aggregate over $80 billion of GTV over the past 12 months, and that represents a huge asset for us as we look forward. At the core of the opportunity then is taking that $80 billion of GTV and turning more of that into revenue for Lightspeed. If we do our job right, that's what we feel the opportunity is. It starts with providing incremental value to our customers.
It's our strong belief that customers want to do more with their core vendors, and if we do that job right, we think we can capture more and more of that GTV as revenue for Lightspeed. We've launched Lightspeed Payments since our IPO. We've launched things like Lightspeed Capital.
We've broadened our software footprint, and as you can see, we've moved from about 50 basis points of monetization back when we IPO'd to about 85 basis points here today. Again, as you saw from JP earlier, we're just getting started.
when we look at peers in our space, they're much further along in terms of how much of their GTV turns into revenue for them because they're simply more mature businesses. We're just getting going at this, but that represents the opportunity that we see ahead.
How do we close this gap? Well, there's three primary things that we're focused on in the immediate term to increase the amount of GTV that turns into revenue for Lightspeed. You hear a lot about Lightspeed Payments. That's the first priority.
We're going to go into some depth on that as to what we're doing and the progress we're seeing. Expand financial services. We think there's a tremendous opportunity there, and I'm going to walk through some of that as well. Then, of course, we're a software-first business.
if you think about everything you've heard to date in this session, payments is there, but the decisions our customers are making are about software. They want software and payments to be together, but they're not going to make a decision about what systems are run based on the payments. They're going to make a decision based on the software, and that represents a huge opportunity for us as well. Let's dig into the first priority, Lightspeed Payments.
At this meeting last year, we announced that we just brought Lightspeed Payments to some of our international markets, and with that, we had introduced it to some of our newly acquired customers from products like Vend. As we look a year later, we've grown our GPV over that timeframe by 90%. That's tremendous progress.
We're seeing good uptake of Lightspeed Payments. I'll talk a little bit more in a second on that. As you recall that chart I showed a couple of slides earlier about how much of our GTV turns into revenue currently, about 85 basis points, and how that compares to some of our peers in our space, payments is the primary driver of that gap.
Companies like Shopify and Toast, who have been at payments for longer than us, are further along in that journey, and as a result, more of their GTV is turning into revenue. That same opportunity is what's here for Lightspeed. JP talked about it earlier, but this is the primary contributor to that gap. Currently, about 17% of our GTV is processed with our payment solution, and we've just now, as we've talked about, we're just now getting going on some of our international markets and across a broader portion of our portfolio.
Core to this, and what we think is evidentiary here, and when we look at the space and our peers, and we've said this all along, customers want to buy software and payments from a single vendor.
It's an unnatural experience for a customer whose commerce platform that runs their business is not the same thing that puts money in their bank account. That's the problem we are closing the gap on, and that represents a tremendous opportunity ahead. 17% today, our target remains to grow this to 50% of our GTV in the midterm. How we're going to do that?
Let's take a look at our progress. When we first launched Lightspeed Payments, we launched it to our US retail customers only. We got used to the working the kinks out. We learned how to sell, we learned how to onboard, we learned how to position and price and do all those things.
We then opened it up to our Canadian retail customers, and then as a subsequent step, opened it up to our hospitality customers in the U.S. As we look today, that hospitality as a proportion of new payments deals we accept on a monthly basis, the proportion of hospitality to retail is now almost equal. Us entering with a new product on Lightspeed Payments, we're now seeing an equal amount of demand coming from both retail and hospitality, which is a great sign.
We're selling it well, we're onboarding it well across the portfolio. We talked about the international, that's where we went next. Now we've got North America launched, now we launch in international markets, and that's no small feat, okay? To build a payments platform that a card present, card not present, accepts all the local payment methods around the world.
We're one of the few companies we think that have built that capability. How are we doing? After a launch about a year ago, we now see on a monthly basis an almost equal representation of new deals that come into the company from North America as we do international. Again, evidence that we can sell this, the customers want to buy this, and that we know how to do this now.
That's a great sign for us also. Lastly, we always talked about payments, the lowest hanging fruit or the easiest time to get someone's payments business is when they're first coming to Lightspeed, so a net new customer to Lightspeed. That's the go-to-market motion we go through. JP talked.
JD, sorry, talked earlier about the land and expand, and we try to land customers with payments and point of sale. That's the easiest time to get them. Our sales motion starts with that, and then later we fold in the account management motion of upselling the base in that particular market. As we look at demand that comes in on a monthly basis now from account management versus net new stores, we're seeing consistent penetration from our existing base as we are net new, even as we've launched into new markets.
Again, I think that's a great long-term sign for us. All this gives us the confidence that 17% growing to 50% when we take a step back, when we listen to our customers, when we see what our peers have done, this is highly achievable.
To us, this is all evidentiary that we know how to do this, the customers want to buy it this way, and it's just time and execution that's going to close that gap for us. Next area of focus. Once we're in the payment flows, it opens up new financial service opportunities, and one of those that we're really excited about is Lightspeed Capital. Lightspeed Capital is a merchant cash advance program.
This is a program whereby we'll advance funds to eligible merchants, and in return, accept a fee for doing so that gets repaid over roughly a 6- to 9-month period from that customer out of their daily sales, okay? We'll pay back that advance over a 6- to 9-month period by withholding a percentage of their daily sales. We're in a great position for this because we've got all the data.
We see their sales trends, we see their seasonality, we know their volumes, and we know the direction, so that puts us in a great spot to make informed choices about who we open up Lightspeed Capital to. This is now open to our customers in the United States, Canada, Australia, and across most of the Lightspeed product portfolio.
Customers love this. It's fast, it's easy, it's friction-free compared to the experience they have with traditional financing means. This is a wonderful alternative that shows up right in the product for them. The restaurateur comes in and the freezer's broken, and they have an emergency capital thing they hadn't planned for, this is a wonderful source of capital for them. We're getting great feedback. As I mentioned, we're just getting going on this. Like Lightspeed Payments, we start carefully.
In fact, when we initially launched this, we simply white labeled a partner solution, because we wanted to get used to customer uptake, get used to the flows. We're now doing this directly ourselves, and we're seeing good, strong momentum. Number of advances in our most recent reported quarter were more than double a year earlier.
The amount of revenue we get from Lightspeed Capital was up more than 200% in our most recent quarter. Like so many other things, we feel like we're just getting started here. When we look at peers in the space, a lot more of their GTV is advanced by way of their own capital products, and we think that same opportunity exists for Lightspeed.
We're excited about this in part because it's a wonderful customer experience, and the feedback we get from customers is tremendous, and it really endears them to Lightspeed. In part, it's really lucrative for Lightspeed. What we're seeing is average advance sizes of about $20,000, and on that, we're getting an average fee so far of about 16% of that. So that's $3,200 of a fee for a typical advance that we're seeing right now.
Now, put that in context. Our ARPU across our customer base right now is $337 a month. That's about 10 months of ARPU with a single advance that we make that gets repaid over a 6-9-month period with high gross margins, 90%+ gross margins.
Because of the customer base we serve being more established, a little less risk, we're seeing tremendously low default rates. Less than 2% is our experience to date. It's a highly lucrative product for us, wonderful customer experience, and something we're really excited about that is getting a lot of focus now. Lastly, as I mentioned, we're a software company first.
You've heard a lot of that. As we've introduced our flagship offerings, as we've broadened our solution footprint, we're seeing continued growth in software ARPU. I think there's a long, long runway of things we can do from here. You're going to meet with our GMs in breakout sessions.
Anna and Peter and Heath and Joanne are all here to give you a sense as to some of the opportunities that we see, and we expect this to continue to grow as well. Ash is going to touch on this a little bit more in a few minutes. Those are the three primary ways that we're going to take more of that $80 billion and turn it into more revenue for Lightspeed. Again, we don't think this is a leap.
This is about consistent, good execution and time will close that gap versus what we see with our peers. That's just a tremendous opportunity that's sitting there if we never add another new customer. A lot of focus going into those three areas to drive revenue.
Of course, you heard from JP earlier, we're also very focused on our path to profitability. Increasing our operating leverage is a very important initiative for us. We've gone through a period of doing acquisitions. Those acquisitions have come typically with companies that have negative EBITDA when we acquire them. There's also integration costs that come when you buy or when you acquire a company as well.
That heavy lifting is mostly behind us. You're starting to see leverage show up in the business model, and that's what gives us confidence on our path to profitability. As we think across the income statement lines, the gross profit line, we see opportunity, and you're seeing results on us consolidating infrastructure of newly acquired businesses, consolidating support centers.
If you think about bringing on a company like Vend, they've got their own set of support centers versus Lightspeed and the inefficiencies that come from that. We've done a lot to bring those things together. Lightspeed Capital, we've talked about, will play a role in this gross profit line along with continued progress of Lightspeed Payments itself.
In the sales and marketing line, JD was up here talking about the simplicity of going from multiple products to one. That's going to drive a ton of leverage in the model, along with simply growing the average revenue per customer. The cheapest dollar of sales and marketing we have is the expansion revenue. The most expensive dollar of sales and marketing we have is net new customers.
As we think about leverage in the model and the opportunity to grow our ARPU, we expect to see a lot come through that line. r&d straightforward. Many products down to a couple allows us to reinvest those resources onto flagships, drive innovation, but from a financial model perspective, keep a lid on the costs, which unlocks leverage. Of course, G&A, that's an area where we've done a lot already and more to do in terms of seeing that leverage show up. We're in a unique position, and Asha will touch on this as well, where we don't have to extrapolate our cost lines at the same rate as our revenue.
There's a lot of inherent leverage on the OpEx along with this opportunity on the revenue side, that's really going to drive and why we feel confident on our path to profitability for fiscal 2024. We are also mindful of stock-based compensation, topical area as well. 19% of revenue most recent quarter for us. 15%-20% of our stock comp by way of context is comp that was given to key executives of some recently acquired businesses that's amortizing out over the next period of time here.
That's an important context for us. We do expect stock-based comp to come down as a percentage of revenue in the midterm and something we're managing closely as well.
That's focus on revenue upside, focus on operating leverage in the model, and I'm going to wrap up by just talking about what we think is a competitive differentiator for Lightspeed, which is our culture. I still remember the day walking off the elevator to interview with JP and Dax at that time and just feeling the energy and the excitement and the passion of this company.
We've grown, we've brought in new companies, but we still try to live by the same set of guiding principles. We do feel our culture is a competitive advantage and something we work hard to try and protect. Part of that culture is diversity.
It's been a core component since the founding days of Lightspeed as to what's made our culture unique, what's made our company special, and what's been a big driver of our success. We're proud of these statistics. They get a lot of focus internally, and we're going to make sure to continue to prioritize and privilege this as we go forward.
Okay, that's my quick overview. I'm going to pass it over to my partner now, Asha, who's going to spend a little bit of time going more deeply into the business model itself and talk more about the long-term outlook.
Thanks again for your time today.
Hey, everyone.
Thank you, Brandon.
I'm Asha Bakshania , Lightspeed CFO.
I've been here for about eight years. I just finished eight years recently. Had several different careers over my eight years at Lightspeed and most recently, the company CFO. You've heard from JP on our strategy. You've heard from JD on how we win customers and from Brandon on how we continue to find operating leverage in the business. I will talk to you a little bit about profitable growth and how we grow profitably as we look forward and how we look to model our business in the future.
Let's take a look at our most recent quarter in review that we released, about a little over a week ago. We saw very strong year-over-year revenue growth thanks to subscriptions, payments, and ARPU.
Revenue grew to $184 million in the quarter, which was 38% growth year-over-year and 41% on a constant currency basis. Our software and payments revenue organic growth was 35% year-over-year and 38% on a constant currency basis. Our gross payments volume grew to $3.7 billion in the quarter, representing growth of 86% year-over-year, and you saw some of these stats from Brandon.
Our ARPU has grown to $337 a month, representing growth of 25% year-over-year. If we take a step back and we look at ourselves in the 3.5 years since we've IPO'd, we see revenue has grown annually at 87% a year, ARPU 31% a year, and gross payments volume at 258% a year.
This is proof that our business model is working and that our strategy of growing organically in tandem with strategic M&A is paying off for us. We're seeing consistently strong revenue growth since IPO to today. These are all the quarters, and you see the growth has come through growth in subscription revenue, which is the red bars, as well as through upselling the base on payments, which is the growing white bars. You see that payments have been very impactful to our business.
What you also see is as payments becomes a bigger and bigger part of our revenue portfolio, you will see revenue impacted by that seasonality that comes with underlying transaction-based revenue, as you see in Q4. The bars at the bottom show very strong organic growth as well year over year, and we're very proud of the progress we've made here.
We've consistently met our revenue commitments to the street. As you see, the blue bars is the guidance that we've given each quarter. This represents the past 8 quarters, and you see the magnitude of our beat in the circles at the top. We've been growing GTV, and as you've heard from Brandon, we have LTM GTV of over $80 billion in the past quarter that we reported.
Despite soft net location count growth, which really comes as a result of signing higher ARPU customers and higher GTV customers and shedding lower, less profitable customers, that stunts overall location count growth. What really matters is GTV growth, because GTV, as you heard from JP, means more monetization for Lightspeed. We continue to sign higher value customers. The higher GTV customers come with higher software ARPU, as you saw from JD.
65% of the customers that we signed in our last Q2 results that we just released were high software ARPU customers, which is a 28% growth from a year ago. You heard from JD that Lightspeed Restaurant, the ideal Lightspeed restaurant, is award-winning restaurants, complex merchants that use the full breadth of technology that Lightspeed has to offer.
It makes sense for us to focus on that customer cohort. You've seen a little bit of this from JP, that in the cohorts that we're focused on, in the cohorts with the best unit economics, we are growing customer location count quite well. 17% year-over-year on the cohort that processes 200,000 and more in GTV a year. We're growing 25% year-over-year on the customer cohort that processes 500,000 a year of annualized GTV.
On the customer cohort that processes $1 million or more in annual GTV, we're growing that location count 30% year-over-year. Alternatively, in the less profitable cohorts, the cohorts that process under $200,000 of annual GTV, we see that cohort shrinking year-over-year. Now some of these customers, we do expect to grow with Lightspeed over time, and we have seen that.
However, as you've heard from us before, some of these customers came with us through a strategic M&A. Food trucks, convenience stores, ice cream shops, cohorts of customers that are not in the Lightspeed sweet spot. Churn in this cohort is expected and planned for. You saw this from JP as well. 95% of our GTV comes from the targeted customer that Lightspeed's focused on.
When you think about the full list or span of our customer locations, 54% of our customer locations, which are the locations processing 200,000 and more in GTV that I've just shown you is growing quite strongly year-over-year, represents 95% of our GTV. Forty-six percent of our customer locations that are the less profitable locations that I've just showed you are shrinking year-over-year, represents only 5% of our overall GTV.
This is why you keep hearing from us that all locations are not created equal, because at the end of the day, GTV represents the monetization opportunity for Lightspeed. In addition, this represents how much customers or how many locations we're losing a year.
84% of our overall locations lost in Q2, and it's representative for the year, is in the cohort of customers that constitute 5% of the company's overall GTV. When you think about the ideal customer that JD spoke of, the 500,000 and more in annual GTV, only 6% of the overall locations lost is coming from that customer base. Reaffirming our strategy that we're focused on the high GTV customers, and we're focused on reducing churn in that ideal customer cohort. This strategy has resulted in an increasingly favorable customer mix as you see here.
The bottom three bars are the cohorts of customers that we're focused on, and the topmost bar is in the 46% that you saw from us earlier that only represent 5% of our GTV. As we look ahead, our profitable growth strategies, you've seen us grow our subscription revenue, continue to grow our share in this underserved SMB market in the cohorts that are the Lightspeed focus, increase financial services revenue, as you saw from Brandon, drive more payments to the base and capital as well, which is, as very much in its nascency right now.
Continue to increase operating leverage. I'll speak about that in a little bit more detail. We have a disciplined approach to ensuring that we're bringing on new customer locations that supports long-term profitability. Because when we think about profitability, there's two key levers for us.
There is continuing to upsell our base on payments as we see the unit economics improves drastically, as you saw from JD. Second is going after the high GTV customers that I just showed you because they come with much better unit economics. We measure unit economics as lifetime value versus the cost to acquire that customer.
The lifetime value is how much gross profit do we expect to get from that customer over the life of that customer, and the cost of to acquire the customers, the full sales and marketing dollars that we spend to go get that customer. When we look at the Lightspeed portfolio, as you've seen, we're only 17% penetrated to date. At our current ARPU, our LTV to CAC ratio is about 3x.
When we look at the LTV to CAC ratio for a customer that takes Lightspeed Payments, that ratio more than doubles. If we now move on to operating leverage and how we're using the operating leverage that Brandon touched on to improve gross margins. We're expecting to consolidate infrastructure and hosting contracts. We've already started to do that. W
e acquired nine companies in the last few years. They came with their own Google Cloud and AWS contracts. As we consolidate those contracts, we get better and better rates from those processors, and that continues to improve as we look at our gross margin %. Consolidating service centers into lower-cost geographies, leveraging our GTV volumes to improve our take rates. As you saw from Brandon, we're scaling more and more on Lightspeed Payments.
As we do that, we get better rates from our payments processors. Expanding Lightspeed Capital. As you saw, that comes with over 90% gross margin, and we're only just getting started. We feel that with these levers at our disposal, and we've already started to see leverage, we expect to continue to see leverage here and that our gross margin will settle in the 40%-45% range. You saw in the last quarter that we released, our gross margin was about 46%. JP talked about as we continue to penetrate our base on payments, which, as comes with a lower gross margin, we expect to see over time that gross margin go down.
Given all of these levers at our disposal, we're confident that we can maintain our overall company gross margin over the mid to long term in the 40%-45% range. You also heard from JP our focus on flagship products, and that we expect by the end of this year, most of our new business will be sold our flagship products. Well, what that does is drive a ton of leverage inside the business. If you think about engineering, today, about 30% of our product and technology resources are still working on legacy products.
As you can imagine, focus on two flagships allows us to take 30% of those resources and reinvest it either into our flagship or into other parts of the business. Our customers, two flagships decreases onboarding time, training costs, and overall costs to acquire a customer.
Right-sizing and consolidating offices from all of the M&A that we've acquired brings tons of efficiencies in the business, and we've already started to see that. Aggregating ERP and user license contracts as we focus our flagships and selling efforts onto two CRMs, allows us to deprecate legacy CRMs and ERPs, and that brings a ton of operating leverage.
You've started to see that already in what Brandon just showed. Our scale and cost discipline, both together, are driving operating leverage. You've seen us tread this path to profitability for several years now. As a young, ambitious company, we've invested a ton in our growth, and we've seen lots of those investments bear fruit. As we become more mature and as we scale, profitability becomes more and more important to us as well as to our shareholders.
I mean, at the end of the day, profitability is what defines a successful business. We believe with the growth levers that we have at our disposal, that we're confident we can get to adjusted EBITDA breakeven or better in our next fiscal year.
Now let's take a second to look forward. How are we looking at our business as we look forward? How do we model our business when we forecast? We feel that we could confidently grow subscription revenue in the 10%-15% range, and that's through a mix of growing customer locations on the cohorts that we're focused on and upselling our base, upselling new modules to existing customers. Together, we feel we could confidently grow that line 10%-15% a year, grow gross payments volume by 40%-50% per year.
In the more recent year, at the higher end of that range, and as we scale and get bigger, coming down to the lower end of that range. Given the opportunity ahead of us, we're very confident that we can do this each year. Continue to decrease operating expenditures as a percentage of revenue. You've seen just now all the different levers of how we're going to do that.
Along with our strong balance sheet of over $860 million in cash and being Adjusted EBITDA breakeven or better next year sets us up quite nicely to be well capitalized for future growth. When we think about what success looks like at 50% GPV, you saw from Brandon that we're fairly confident that we can get to 50% of our GTV monetized through our payment solutions.
You heard from JP that the only reason that we're so far behind our competitors in terms of GTV penetration is because we're so international and our payment solutions were not ready when our commerce solutions were rolled out.
Today, our payment solutions are ready in the majority of the markets that we serve, and so we feel that it's only a matter of time before we get to 50% of our GTV going through our payment solutions. If we look at what Lightspeed would look like at 50% payment penetration, we would have over $2 billion in revenue, generating adjusted EBITDA margins of more than 20%. We have the right products, the right people, and the right market opportunity ahead of us.
We're confident that we'll not only be adjusted EBITDA breakeven or better next year, but that we're set up and well capitalized very nicely for future growth. Thank you.
I had always wanted to do something with styling. I love fashion. Last year, my sister helped me locate this space, and I started doing my personal styling business out of here.
My name is Alicia.
My name is Jeanette Horton.
I'm a wife, a mother, and.
One of the owners here at Blazers and Bottoms Boutique in Columbus, Ohio. Beginning of this year, we started talking about wanting to open up a boutique in the front of the store.
You have this big picture: I want to have a boutique that sells clothes. Well, there's a lot of stuff that goes into it in the background, and I'll be honest, one of those was the POS system.
We received the Lightspeed terminal in the mail, and the setup was pretty easy. You make sure you get on the Wi-Fi. They explained that all to us, and that happened very quickly.
After that first Zoom call, I was like, "Okay, this was so simple." It helped that we had a dedicated person that we could contact whenever.
Even when we had a question, and we emailed, they always called us back.
The fact that our Zoom calls were recorded, so we could go back and rewatch the answer to our question or watch the tutorial.
When we first had our soft opening, it got really busy.
We had customers almost out the door, and when that point came for checkout, get people in and out. We never had one glitch. That gave us the confidence to move forward.
You want them to be comfortable with everything, not just the shopping, but you want them to be comfortable with the whole checkout experience as well.
Not only is it customer-friendly, it's retailer-friendly. The reports that are available are at-a-glance reports. Like, the information is right there, and you can personalize it to what you want to see. How much we have, what did it cost us? What's the markup? What's the profit? It's all right there.
It's less behind-the-scenes work when you have those reporting systems available, and it all integrates with the online store.
Our goal is to keep growing, not just our inventory, but also physically. We're confident that Lightspeed can grow as we grow. That's encouraging. Like, I can see that right now we're barely scratching the surface of what Lightspeed Payments can do for us.
Okay.
Okay, I think we're going to start with our Q&A session. I'll get the speakers up on the stage. There's someone with a microphone, right? Okay. We'll start the session. If anybody has any questions, now is the time. Right up here. Well, you're up next, Clarke.
Sorry, don't mean to preempt anybody.
It's Andrew Jeffrey with Truist Securities. Appreciate all the data today, especially on customer cohorts and so forth. I wonder if you could speak to any challenges associated with selling more complex customers, be that sales cycle, payments attach, and then any investments you need to make in support, whether that's implementation or long-term customer support to stay competitive in the market as you go into these bigger, more complex retailers and restaurants.
JD?
Yeah. Thanks for the question. I mean, it's been a natural evolution for us. Obviously, you heard from all of us that on the product side, the product has evolved to meet the needs of the higher complexity customers. In parallel to that, we've been evolving our go-to-market strategy.
We've started to outbound customers in specific segments where we have a really good fit, and we're really seeing some encouraging results from that perspective. Our lead gen strategy has evolved towards more outbound and more partner-driven sales, and seeing really, really good results on that front. On the onboarding side, to your point, we've also evolved our approach.
For the higher complexity merchants, the higher GTV merchants, the merchants that have multiple locations, naturally, they need a little bit more care and love. We've also adjusted our approach to that. We are doing more one-on-ones, and in some cases have the flexibility to go on site provided that it makes sense for the customer. Lastly, on the account management side, as you saw on that slide when I was giving you the full picture, we've also again adjusted our approach.
All our customers are typically getting an account manager assigned to their accounts, but for the more premium or sort of higher complexity, higher GTV customers, we've adjusted the size of the books so that we can do a much more of a high touch white glove service for these customers. We have quarterly business reviews with those customers, and we talk about how we can expand their goals and so on. To your point, yes, we've absolutely adjusted our approach over time, and this has been mirrored with with the evolution of our product suite as well.
Hey, Richard.
Sorry. Do you mind if I just make a comment here on
Sure.
I'd have the mics on, yeah. I think what's very reassuring is the higher up you go in the SMB space, the more we distance ourselves from all competition. I think that's a lot of questions I had were, "Okay, what do we need to do to go after this market on the solution front?" There's nothing to do. I think that's what's great about this strategy is, okay, we need to readjust how we sell and how we support, but the fundamental solution is built for this. It there's a clear differentiator between us and anybody on the market as you go up. I think L'Osteria is a very good example, 130-140 locations.
There are very few cloud vendors that can offer that. Just arguably nobody.
Richard?
Yeah, thanks. Richard Tse with National Bank Financial. I just want to get an understanding of in terms of what was the aha moment in terms of the shift in strategy to these kind of say the larger merchants. Like, can you sort of walk us through how you got to that point? It seems like the strategy shifted maybe 6, 9 months ago, but just wanted to kind of get an understanding of that.
Sorry, they just want me to repeat the questions for people on the webcast. The question was, what was the aha moment that made us decide to maybe shift strategy towards higher end merchants?
I think the aha moment is path to profitability. Okay, we want to have sustainable growth. Let's look at our customers. Let's see which ones are generating the most revenues. I think it was a double thing. The first one is payments. Now payments is available everywhere, so the question is, how do I optimize and maximize my revenues? There, the aha moment is, wow, not all customers are equal. The more you look at it, the more you realize there's a clear disconnect between what we did in the past and what we're doing now. Very naturally, the other one was, okay, let's look at churn, which we shared. You...
If you package everything together and you look at churn, you look at ARPU, you look at sustainable growth, you look at payback, you look at LTV over CAC, everything drives you towards, okay, that is the right segment of customers to go after.
Over here. To Clarke there. No, up here. I think Clarke Jeffries, and then Josh, we'll get you.
Clarke Jeffries, Piper Sandler. Two questions. first to get to the 50% payment penetration target, does the percentage from account management need to increase meaningfully, and what are the strategies there, if that's true?
Again, sorry, I just have to repeat the questions for the webcast. If for 50% payment penetration, do strategies around account management have to change?
We're seeing hopefully, the slide illustrated that we're seeing a nice balance of existing base penetration with net new in. Do we need to see demonstrably more? I think we need to continue to penetrate in new markets that we've only recently launched in. We're getting smarter with every passing month and every passing quarter. It goes from starts as simple as what do you ask of the sales team.
What does JD ask of the account managers every quarter? How does their compensation work? Things of that nature. It goes to how quickly we get them from signed to onboarded. That's an important thing, and there's a bunch of work streams there as well. We're getting smarter with what's working from a customer perspective from an incentivization standpoint.
We've tried a number of different tactics there, and we've started to narrow down on the right package that encourages the existing base to move. I think if we just continue on the progress that we've seen, certainly that's the way we've modeled it, we're going to get to that 50% quite naturally.
The second question is, what are your expectations for that growth in the 200K-plus cohort going forward? Do you think you can maintain the sort of high teens or teens growth? How good of a proxy would the subscription growth range that you're targeting be to those target customer location counts?
Sure. so when we're looking at our model and how we model this going forward, we really look at the product of locations and ARPU. We're trying to move away from locations grow by X, ARPU grows by Y, 'cause as you've seen from us the bigger and bigger customers come with higher and higher software ARPU. The way we want everyone to look at our business is really the product of locations that we're going after, the locations that you've seen us focus on, the locations in our ideal cohort and software growing at 10%-15% per year.
I'll just ask a question from online before we go to Josh's question. Are you still targeting 35%-40% organic subscription and transaction-based revenue growth?
In the longer term or midterm guidance that we gave, where we say at 50% payment penetration will be over $2 billion in revenue, that does contemplate 35%-40% growth on the revenue line. We feel that with the growth levers at our disposal, that we could continue to grow that way over that midterm. For fiscal 2024, you'll hear more from us in our Q4 earnings call, where we give detailed guidance on revenue.
Josh.
Josh Baer from Morgan Stanley. I wanted to ask on software, so JP, not in your top three priorities directly as far as selling more modules and driving ARPU higher. I wanted to ask where that falls on your priority list. And a couple of follow-ups. When you do sell the flagship, is there an economic impact when you sell that to both new customers and existing customers?
Yeah. Just talking about the software. The whole strategy is built around modules and as you heard from our, actually our customers here is you start with one, and then over time, you buy the entire portfolio. For me, I didn't put in my immediate because that's ongoing. I mean, that's the nature of the game is. Even now in the context of a kind of a more difficult time, what we see from our customers is they're going to replace three or four vendors with one. Even though each module might be at a lower cost for them, for us, it just significantly increases our ARPU. We will continue to double down on the software.
I think, Josh, an important part of your question, too, is that second piece, which one of those priorities that JP highlighted is getting to one flagship product per industry. If you think about the makeup of those flagship products, it's the combination of a lot of key modules and elements that come from the acquisitions. By virtue of that, the flagship products are actually deeper as far as the number of modules that we can offer to our customers. We do see ARPU expansion on the software side naturally as we continue to sell our new flagship products.
Great. A follow-up there, as you are focused on payments attached, are you discounting on the software side as an incentive to customers? If so how should we quantify those discounts, and could that eventually be a tailwind as those roll off over time?
Yeah. If you check our website, you can see our list price changes, whether you go with Lightspeed Payments or not. Absolutely, we are providing incentives on the software side, if you pick the full bundle. I think if you look forward, what we really want to double down on is as you use Lightspeed Payments, we can provide more value on the software side.
Really, our motion shouldn't just be about the financial incentive that we're providing you, but really the value that you get by combining the two products together. I think a really elegant way to to crystallize this is the Insights module on the hospitality side. You absolutely need payments in order to see the benefits on the software side, on the reporting side.
that's that's really where we're going to capitalize in the future.
Just one important comment. The way we drive the business is net take rates internally. I hope you heard it, but software and payments are one, and the lifetime value of your payments is the lifetime value of your software. What's important to us is when we go for a customer, especially the high GMV customers like L'Osteria, the software is almost non-material compared to the net take rate of the overall contract.
We train our salespeople to look at the net take rate, which is on a net basis, how many dollars does this represent? Even on the account management front, on a net basis, how do we grow the customer? We look at net retention as an example on a net basis always.
Steve.
Steve Wilson, Lepidus Asset Management. A couple questions. The first one, I'm very curious, you talked about being able to double or more than double the long-term value or lifetime value versus the cost of acquisition with payments. Can you talk about how that changes your whole go-to-market strategy? I mean, there's obviously two extreme approaches.
One is just make a lot more money, and the other is double the spend on sales and marketing because you have such a higher return. Obviously, I don't think you'll be at either end of those goalposts, but it certainly argues that you could push harder, grow faster because you've got so much coming back when they take the full package.
Yeah. Maybe let's start with path to profitability, and let's assume that payback is always more than 12 months. When you have a certain amount of dollars that you put to grow, there's always this balance between how much do I put on upsell versus how much do I do on net new. Right now, in the context of what we're trying to do is get to profitability, we are putting more money on the upsell and less money on the go to market. Actually, we're being very targeted on the go to market to go after only the segment that matters.
You're right that there is the balance between short-term and long-term. If I look at the steps at Lightspeed, step one is we get to profitability.
Once we're profitable, we can decide what do we want to do with the extra money that we have. Do we want to pour more? I think that's naturally probably what's going to happen over time as we become really successful and know we control this business and know we can be profitable if we wanted to, then the real conversation becomes, okay, is this the right time to double down a little bit more on getting more customers given my lifetime value is better. There's a sequence, but the reality is, today, as we stand, payback is more than 12 months.
The more I'm going to put on getting more customers, even if my lifetime value is outstanding, the more I'm going to lose money the year I do this.
That's the balancing act, if you will, and that's the balancing act mainly between JD and Asha every quarter, which is, okay, how do we find the right balance to be sure that we are incrementally improving our cash position and going towards the path to profitability. I do think that's why it's always a question of half full or half empty. If you look at the glass half full, I do believe that once we get there, we should use every incremental dollar to double down on getting more customers, because they are very profitable customers.
This is a two-parter for Asha. Rough numbers, the target for 2024, you're $1 billion in revenue, we'll break even. I don't know how revenue-dependent the break-even is. When you make kind of this pledge, is it, "Well, we didn't get to a billion, so I'm sorry, we couldn't get to break-even," or if the revenues aren't there, we have to turn all the dials to make sure we're at break-even. Then the second part of the question is to talk about that hypothetical $2.4 billion. It comes across, again, it's back-of-the-envelope, that for an extra $1 billion of revenue, you'd make $400 million of incremental EBITDA.
You've got 40%-45% gross margins, which says your net operating costs on a dollar basis would have to be about flat, which sounds impossible. Could you just kind of frame that a little bit better?
Yeah.
Because the math doesn't work.
Sure. If we think about EBITDA break even, to answer your first question, it's dependent on both revenue and continuing to find leverage in the business. We're not a typical business as you saw from us. We've grown through M&A, and that's why we have so many different levers at our disposal on the operating leverage side.
Moving to flagships, deprecating old platforms, moving 30% of R&D. These are our growth levers or finding leverage in our business that's not available to other companies that have not grown through M&A. I would say it's a mix of the different growth levers on Lightspeed Payments, growing in the customer cohorts we care about and Lightspeed Capital, as well as finding the operating leverage in our business, right? That's the first part.
When you think about the $2 billion and the $400 million, it's the same thing. The only thing that you have to keep in mind, though, is when you think about the 40%-45% of gross margin you have in the near term, as Lightspeed Payments becomes a bigger and bigger part of our revenue portfolio, you will see the gross margins will start to come down.
As we scale and as we get better and better rates from our payment processors and as Lightspeed Capital, which as you saw from Brandon Nussey, is over 90% of gross margin, as that becomes more and more monetized on our customer base, you actually see the gross margin in the later years improve to the much higher end of that range.
when you do the math that way, and you think of our operating leverage and all the different levers we have at our disposal, as we deprecate legacy products, the math starts to make a lot more sense.
Okay. Raymond behind you.
Thank you. Hey, Ramsey El-Assal from Barclays. We haven't talked a lot about the installed base, because can you just talk a little bit about the plans around now you have a flagship solution. There's a lot more. It's a lot more integrated than all the stuff you got from the other customers. Where is the installed base on that one? Do you need to go back and kind of push them over? Is there plans for that? Are they automatically upgrading? Is there not a monetization opportunity, especially as we go into tougher times?
Thank you.
Yeah. Our number one focus this year, and as you saw in our presentation, is really get to the point where from a net new location perspective, we're selling the new flagship product. That's really where we invested all our time, all our energy.
Once we get there, to your point, the next step from a customer retention perspective, will be to highlight upgrade path with migration options for customers to go to the flagship products. That will be step two in our journey. For the time being, all our efforts, all our energy has really been focused on making sure we get to a point where in every single market where we sell net new, we're selling the new flagship products.
I think the main driver is customer satisfaction. What we're seeing is customer satisfaction is better on the new platforms than the old ones. We're seeing functionality gaps that have been really improved from one platform to the next.
We're really hoping that that's going to drive everybody to want to move. Then finally, there's going to be a lot of effort on technology just to enable people to convert and just hopefully, maybe not as exciting as that, but with a few clicks, try to get to the new environment without too much disruption.
We've gone through that process before, right? It's not our first rodeo. It's not the first time we do this. Lightspeed Onsite, effectively, we moved to that. We went through that process of moving our onsite customers to Lightspeed Retail. You heard from Chrissie earlier today, that was an experience that that had positive outcome for the business. Certainly, we're going to sort of roll through that process again, in the coming years.
Take our last question. Josh.
Josh Beck with KeyBank.
I wanted to ask a little bit about the go-to-market. When I think about actually, last time I was here in the HQ far before COVID, the go-to-market struck me as very performance-oriented. You've obviously shifted towards larger customers that dictate an outbound motion. I'm just kind of curious, how much of that transition do you think you've made as a company? Do you have the appropriate resources, the number of reps that you need to have in the field? I guess, what are some of the proof points that you've seen with this outbound motion that gives you the confidence to really
Focus on this higher end SMB.
Yeah. You heard from, and JP feel free to chime in too, but you heard from both JP and Ash on this. We measure a lot of these initiatives around payback and LTV over CAC. Let me answer by saying as a starter, both on the outbound side and even on the partnership side, which we didn't talk a lot about, but that is also an important piece of the equation here.
We are seeing some very encouraging metrics from a profitability perspective on both payback and LTV over CAC. You're absolutely right. I mean, we have been adjusting as we go pure sort of marketing lead gen inbound motions are still a significant part of what we do at Lightspeed.
Don't get me wrong, we haven't stopped doing that, and we continue to see some really healthy and strong results. It's natural for us to start to also evolve with an outbound motion and also to evolve towards sort of a partner-led and a channel-led motion as well.
Yeah. Maybe just it's the soup, ? One of the ingredients is marketing, the other one is outbound. I think for me, ultimately. Well, first of all, the majority of our deals come from exactly the same sequence we've always had..
We acquired a lot of companies, so there's a lot of noise that came with that. We are very confident in our teams and our ability to attract the right customers, close the right customers, onboard the right customers, and doesn't change much to what we've always had. It's just as we acquire, we brought in noise and then you gotta realign everybody to that's the metric, that's the. That's why I'm excited about the new product.
It's the ingredients the soup is going to be so much easier when I have one product globally and I'm using exactly the same sequence to attract a customer. There's not that much of a change.
The only big change for me is this acknowledgement that we shouldn't, and even less than before, try to be everything for everyone, and we should know exactly we want to be a king of the hill and just double down on that one, which is the more established merchants. I think attaching as much payments as possible on the new customers and going back to the early question, it's not about software or POS, it's about net take rates on these customers.
Sometimes net take rate might be no software, but the net take rate is going to be strong, and it'll be more valuable than if we had software plus payments.
Okay. I'm sorry. Go ahead, Josh.
Follow-up. I wanted to ask about capital, and you obviously mentioned that can get you towards the upper end of the gross margin targets. How much success do you need to have? Do you need to be where peers are? A little bit of a technical question, accounting-wise, but how should we think about the loss and the credit aspects of that flowing through the income statement?
I don't think we need to get all the way to peers. I do think our customer segment looks different than the peers we've put on the chart. They may have other sources of capital available to them versus, say, a micro. But I think we can get a lot further than where we are. JP used the example of even if we get halfway there, that's probably a good near-term target for us.
The last question, I mean, we've been very pleasantly surprised at the results to date. I mean, they've been very low. So we do expect that to grow. We put less than 2% on that slide. I think that's how we're envisioning it. And then losses themselves come right off the revenue line.
Yeah.
If I'm correct, right? Yes. That's how they'll show up in the P&L.
Right.
Okay. We're going to wrap it up there. We're going to say goodbye to everybody that's watching on our webcast. For those of you here in the room, we are having our breakout sessions, so half-hour sessions, starting right after this presentation is done. We'll have retail, hospitality, payments, and B2B. We'll say goodbye to everybody online, and if everybody in the room, please start making your way to the sessions.
Thank you.
Thank you. Thank you, everyone.