Lightspeed POS Inc. (LSPD) Q4 2021 Earnings Call Transcript

Lightspeed POS Inc. (LSPD 1.36%)
Q4 2021 Earnings Call
May 20, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Lightspeed fourth-quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session.

[Operator instructions] I would now like to hand the conference over to your speaker today, Gus Papageorgiou. Please go ahead.

Gus Papageorgiou -- Head of Investor Relations

Thank you, operator, and good morning, everyone. Welcome to Lightspeed's fiscal fourth-quarter and full-year 2021 conference call. Joining me today are Dax Dasilva, Lightspeed's founder and CEO; Brandon Nussey, chief financial officer; and JP Chauvet, president of Lightspeed. After the prepared remarks, we will open it up for your questions.

We will make forward-looking statements on our call today that are based on assumptions and therefore, subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements, except as required by law. You can read about these risks and uncertainties in our earnings press release issued earlier today, as well as in our filings with U.S. and Canadian securities regulators.

Also, our commentary today will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website, on sedar.com, and on the SEC's EDGAR system. In addition, our commentary today will include key performance indicators that help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

Such key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies. And finally, note that because we report in U.S. dollars, all amounts discussed today are in U.S. dollars unless otherwise indicated.

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

Dax Dasilva -- Founder and Chief Executive Officer

Thanks, Gus. Good morning, everyone, and thank you for joining us today. Before I get started, I just want to welcome everyone from Vend from the Lightspeed team. We are thrilled to have Ana and her colleagues join Lightspeed as we seek to transform the retail experience for our customers and consumers alike.

This past quarter closes off our 2021 fiscal year and I think it is safe to say that it has been the most transformative year in the company's history. Despite a global pandemic that was particularly hard on our customer base of small and medium-sized businesses, Lightspeed managed to deliver some of the strongest performance in the company's history, undertake three landmark acquisitions, which greatly improved our presence in the key U.S. markets, list on the New York Stock Exchange, released a series of new offerings including Lightspeed Capital, curbside pickup, e-commerce for restaurant, Order Ahead, Subscriptions, and launched two major strategic initiatives with supplier network and our recently announced global partnership with Google. Our transformation was definitely by design but also highly influenced by our environments.

I believe that every one of our customers will look back on the past year as the moment where they realized that an omnichannel strategy was no longer optional. It has become an absolute necessity. Never has our goal of arming our customers with the technologies they need to operate and scale their business felt so relevant and we are proud that they have chosen Lightspeed as their technology partner of choice. We were happy to end the year on a high note with Lightspeed delivering quarterly revenues that exceeded previously established guidance and Street expectations.

We grew revenue 127% year over year with organic software and transaction-based revenue growth of 48%. Lightspeed Payments had another record quarter and grew revenues both year on year and from the previous quarter. And we are now present in over 140,000 customer locations when we include the recent acquisition of Vend. Some notable customer wins in the quarter included AG Jeans.

This premium denim and knit warehouse show Lightspeed's modern cloud-based platform upgrade from their legacy system. AG Jeans' team will be using a series of Lightspeed offerings including Payments in their 18 locations across the U.S. Tommy John, this husband-and-wife-backed venture designs, manufactures, and sells quality undergarments for men and women in their six locations throughout the U.S. using Lightspeed Retail and Lightspeed Payments.

Zeus Street Greek focuses on high-quality and consciously sourced ingredients to Zeus Street Greek maintains 20 quick-serve restaurants throughout Australia and keeping Lightspeed to improve their operations through features like better inventory management. In usual, Lightspeed fashion, it was a very busy quarter. In addition to announcing and more recently closing the acquisition of Vend, we launch Payments in the United Kingdom, undertook a very successful offering of 620 million, and more recently announced our strategic partnership with Google to improve the discoverability of SMBs on that popular search engine. Brandon will take you through the numbers in greater detail.

I would like to focus on some key topics including the recent announcements of our partnership with Google, some of the initial success we're experiencing with the integration of our latest acquisitions, and some of the more recent trends we're seeing in our business. Earlier this month we announced a partnership with Google. The goal of this joint initiative is to improve product discovery for small merchants on Google's popular search engine. Through the legacy platform, our merchants will be able to display live inventory levels on Google search results.

Rather than ordering online, consumers will know they can walk down the street and find what they're looking for at a local merchant. Our rich Google integration also allows merchants to easily manage ad spend and improve the discovery of their locations, truly unlocking the omnichannel potential of businesses powered by Lightspeed. We believe this initiative will help small merchants compete with large online marketplaces. However, when combined with the capabilities of the supplier network, we think the two are even more powerful.

Supplier network allows merchants to pull high-quality images directly from their supplier's catalogs. By enabling our merchants to display both light inventory and compelling images, we believe the consumer experience will easily rival anything from big-box competitors. I think initiatives such as these illustrate that Lightspeed has evolved beyond being a simple point solution with Payments offering. Our scale and technology allow us to go beyond helping SMBs simply manage inventory and transact.

We are helping them solve a greater variety of challenges from online discovery to optimizing their supply chains. As we continue to evolve, I believe our value proposition can go beyond the merchant and the supplier and onto entire industries. By acting as the common thread among merchants, suppliers, and consumers, we believe Lightspeed can help make products more available, merchants more successful, and consumers more engaged with local retailers. I think this will be especially true in our focus verticals.

Part of the reason we're able to expand our ambitions, attract partners such as Google, and invest in new technologies is our scale. That scale has been a result of our considerable organic growth but also thanks for M&A efforts. M&A has always been a part of our strategy, and in the last six months, it has been front and center. Over time, we should continue to recognize the benefits of our M&A strategy across our entire business.

But I believe it is important to highlight that we are already seeing some of these benefits. As many of you know, when we acquired ShopKeep and Upserve, both of those companies maintain high levels of payment penetration within their customer base. However, the economics they were recognizing were inferior to our own. Since joining Lightspeed we have had success leveraging our combined scale to recognize more favorable terms from one of our Payments providers.

Improving the payment economics for these acquisitions was always a priority, but in this case, we achieved our goals much earlier than anticipated. This is one of the reasons we had such strong results in this quarter. In addition to improving the top line, our greater scale is also helping on the cost side as well, notably on our customer acquisition costs. Our increased scale and brand recognition in the U.S.

market is resulting in increased traffic to our own site. With U.S. site visits up 50% in this quarter versus the same quarter last year, which generally leads to more cost-effective lead generation for Lightspeed. In an industry where customer acquisition costs are increasing, we are happy to see our costs remain relatively flat.

I think these two examples illustrate that the benefits of our M&A strategy are not distant or qualitative but rather immediate and real. Over time, we will continue to recognize more and more benefits as we harmonize our go-to-market teams for the best of all technologies into one legacy platform and continue to use our scale and technological depth to deliver more solutions for our customers. Before I hand it over to Brandon, I just wanted to highlight some key trends in the quarter. Overall, as we entered Q4, we were seeing increased lockdowns, which negatively impacted our business.

But as we exited, we saw some regions begin to lift those restrictions, and March proved to be a very strong month. We saw new business really advance especially in EMEA and in hospitality. Payments again had a very strong quarter both in terms of revenue and new customer wins. We added more Payments customers than any other quarter so far by a wide margin.

I think we are experiencing strong trends for various reasons. Firstly, I think lightspeed is benefiting from economies reopening globally. We maintain strong footprints in the U.S., U.K., and Australia, all of which are in advanced stages of their current recovery. But even in regions where lockdowns are still present like Central Europe, we are seeing signs that our customers are beginning to prepare for an eventual reopening.

France, for example, has been showing very promising signs in recent weeks. Secondly, as Payments becomes more widely available, we are seeing that offering continue to boost our overall growth rate. Payments have only been made available in our hospitality business more recently. Aas hospitality GTV improves but economies reopen, we should see Payments continue to be a strong contributor to growth.

Finally, I think most importantly, we believe our customers are recognizing that an omnichannel approach is no longer optional. Before COVID, many of our potential customers understood the inherent benefits of a cloud-based omnichannel commerce platform but were perhaps too distracted by just running their business to undertake the effort to change. The challenges that the COVID-19 pandemic had made it quite evident that business as usual is no longer possible. Merchants need to be able to conduct business on their customers' terms be it in-store, online, or through curbside pickup.

And we believe Lightspeed is becoming the platform of choice for these SMBs to adopt omnichannel strategies. As I said at the beginning of my comments, this past year has been the most transformative our company has ever seen. There is no shortage of challenges ahead of us but as a company, we have never been stronger or more confident than we are today. I am very proud of what we have accomplished in the past year but I'm even more excited about what lies ahead.

And with that, I will pass it on to Brandon.

Brandon Nussey -- Chief Financial Officer

Thanks, Dax. Another good quarter across the board. As you heard from Dax, we continue to be encouraged by the trends we are seeing as economies around the world reopen along with the benefits we are seeing from our increased scale as customers seek upgraded technology to help them run their businesses. Looking at the building blocks of our business.

Everything starts with customer locations, which grew to approximately 119,000 on March 31st and is now over 140,000 on a pro forma basis, including our recent acquisition of Vend. This is up from 115,000 a quarter ago and from 76,500 last year. As we anticipated, lockdowns around the world in the first part of the quarter impacted new customer location additions in January and February, particularly in Europe. However, by March, we had our best customer location additions month ever with strong demand coming from all markets and a resurgence in hospitality and Europe as those markets began to prep for reopening.

All told, for the quarter, gross location additions were up 51% from the year-ago and 27% organically. A strong result, all things considered. With growth, customer location additions were terrific. As we mentioned last quarter, we did face ongoing heightened churn, particularly in hospitality reflecting the toll of the lockdown some of our customers have faced.

We've seen that moderate in April but so long as the pandemic remains, we will continue to be cautious in our outlook to reflect increased churn owing to business failure in our customer base. The great news is that we're seeing plenty of reasons for optimism in our customer base as customers find success using our omnichannel solutions to reach their consumers. This shows up in our GTV, which was almost 11 billion in the quarter, up 76% from a year ago. Excluding ShopKeep and Upserve's contribution, overall GTV was $7.6 billion, up 25% versus a year ago.

Omni-channel retail continues to perform exceptionally well for us with GTV up 65% from a year ago organically. Within retail, e-commerce volumes were up almost 100% from a year ago. Hospitality was down 15% year over year organically, but a solid resurgence in March, which continued into April. March grew approximately 10% sequentially from February, and April grew by approximately a further 15% from March.

We're quite bullish on how these trends continue as economies reopen around the world and look to our Australian market as a bellwether here, which saw GTV growth of over 75% year over year in the quarter. ARPU per location was up to $215, representing an increase of approximately 50% from a year ago. Subscription ARPU, which excludes our transaction-based revenue stream increased by over 10% as more and more customers adopt functionality beyond the basic POS. In ARPU, increase as a result of payments grew significantly, given the success we have had with driving payments revenue.

Lightspeed payments continues to be an exceptional performer for us. We had our best quarter ever for customers contracting for Lightspeed payments, alongside their core software subscription and overall payments revenue was up by well over 300% from a year ago. In the last month of the quarter, our overall penetration of GTV was approaching 10%, excluding Upserve and ShopKeep, showing the runway we still have ahead of us. All of this led to overall revenue of $82.4 million, up 127% from $36.3 million a year ago.

For the full year, revenue was $222 million, up 84% from $121 million a year ago. Excluding the impact of ShopKeep and Upserve, revenue was $51.2 million in the quarter. Within our total revenue, our software and payments revenue for the quarter was $75.3 million, up 137% from $31.8 million a year ago. When excluding ShopKeep and Upserve, organic software and payments revenue grew by 48%.

And for the full year, software and payments was $202 million, up from $107 million a year ago. You'll see in our filings that we have provided supplemental disclosure of our subscription revenue and transaction-based revenue. Subscription revenue for the year was $119 million or 54% of our total revenue. This represents a growth of 51% from the prior year.

Transaction-based revenue, representing our payments business plus our legacy payment referral-based revenues was $83 million or 37% of total revenue. It was up by 195% over last year. Included in transaction revenues was the impact of a newly negotiated contract with our payments partner at Upserve and ShopKeep. This new contract did two things, provide us with better economics than the businesses we're achieving on our own, and also brought us better control over the end-customer relationships.

As a result of this, we were able to realize an uplift in revenue of approximately $7 million in the quarter and greater gross margins as well. This is a great news story and reflective of how our scale has improved our negotiating power. But it's worthwhile noting that even without this, our revenue performance for the quarter handily beat our previous guidance of $68 million to $70 million. While we will continue to work on bringing all customers from our acquisitions to Lightspeed core offerings over time, this contract amendment does put us closer to the economic outcome we expect in the meantime, far earlier than we otherwise had planned.

Gross margin for the quarter was 53%, it was 57% for the year. Overall gross profit grew by 85% in the quarter and 57% for the year. The decline in gross margin year over year reflects the growing impact of our payments business and lower hardware margins achieved this year due to various incentives we extended to our customers to encourage adoption of our solutions as economies reopen. Adjusted EBITDA loss for the quarter was $9.6 million, ahead of our gains of $12 million to $14 million, and was $21.2 million for the year.

And adjusted EPS was $0.09 a share in the quarter and $0.23 a share for the year. As a percentage of revenue, adjusted EBITDA loss declined from 17% a year ago to 11.7% this quarter, reflecting the ongoing leverage we are seeing in our business model. You'll note a new item on the income statement, a restructuring charge we booked in the quarter. Following our most recent acquisitions of ShopKeep and Upserve, we reorganized the leadership layer of the business to ensure we maintained organizational agility to capture certain synergies.

As a result of these actions, we anticipate annual savings of approximately $8.4 million and recorded a $1.8 million severance cost charge in the quarter. All told, a really great quarter and a great year for the business. As Dax mentioned, this year was a transformative one for us and I'm really encouraged by the positioning of the business and our markets, which brings me to our outlook for fiscal '22. There's a reason for plenty of optimism as we look ahead.

The trends we are seeing and markets that are reopening, the ongoing benefits of our entry scale, and the tremendous opportunities that still lie ahead in payments and financial services are some of the contributors to this optimism. For the first quarter, we expect to achieve revenue in the range of $90 million to $94 million and adjusted EBITDA loss of approximately $10 million. For the full year of fiscal '22, we expect revenues to be in the range of $430 million to $450 million with adjusted EBITDA of approximately $30 million loss or 7% of revenue, which has improved from approximately 10% this year. With that, we'd like to open it up for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first call comes from the line of Andrew Jeffrey with Truist Securities. Your line is open.

Andrew Jeffrey -- Truist Securities -- Analyst

Hi. Good morning, everybody. I appreciate you taking the question. Nice job on renegotiating payment terms of -- on recent acquisitions.

And Brandon, you mentioned that you now have more control over the merchant relationship. Can you elaborate on what you think that means for potential penetration of the back book at those recently acquired companies?

Brandon Nussey -- Chief Financial Officer

Yes. Thanks -- thanks for the question. It's all good news. You know, we're quite pleased with our ability to get this done at the pace we got it done.

And what this amendment does is most importantly, it allowed us to achieve better economics. But not too far behind that, of course, is just getting better control over the end-customer relationship, which is important. To your question, I think it really opens the door for us to continue to migrate the back book, as you called it, at a good pace this year, alongside what we do with the rest of the Lightspeed's core business. So, this really kind of opens the door to let that happen.

Andrew Jeffrey -- Truist Securities -- Analyst

OK. Looking forward to seeing that. And I think encouraging comments too on customer acquisition costs. Can you provide an update on what LTV to CAC looks like today and or what the break-even time by cohort is? It sounds like that's improving pretty nicely.

Brandon Nussey -- Chief Financial Officer

Yeah, it is. I think it all starts with -- the some of the ARPU stats that we gave, you know, obviously, in that growth, 50% year over year, which, you know, was pretty core to the thesis. You know, we think there's a lot more economics to capture for the customer. That of course lead them to an ever-improving LTV-to-CAC ratio for us, which has been, you know, also pretty fundamental to the model.

You know, we're really encouraged by ORCN in terms of leveraged sales and marketing as a percentage of revenue. It's come down significantly year over year. And all that kind of comes together and allows us to continue to invest for growth, which is, you know, what we're very wanting right now, given the position we feel we're in a market that is only accelerating right now in our view. And our ability to capture more dollars per customer, of course, allows us to keep that investment at a level that makes sense from the overall business with a -- with an eye to long term as being a really profitable business.

Andrew Jeffrey -- Truist Securities -- Analyst

I appreciate it. Thank you.

Operator

Your next question is from Daniel Chan with TD Securities. Your line is open.

Daniel Chan -- TD Securities -- Analyst

Well, hi, Good morning. Congrats on a strong quarter. You talked about you're seeing the benefits of the reopening. Have you seen the mix of e-commerce versus brick-and-mortar GTV in regions that reopened? Have you seen the mix of that change?

Brandon Nussey -- Chief Financial Officer

JP, you're on mute. Sorry. I can see you're talking but --

JP Chauvet -- President

Oh, sorry. Can you hear me now?

Brandon Nussey -- Chief Financial Officer

Yeah. Yes, we hear you.

JP Chauvet -- President

Yeah. So, very quickly, sorry. I don't want to lose too much time. But, you know, we've seen -- when you look at our business, e-commerce continues to be very strong.

So, we've seen growth year over year, you know, at about 100%. Retail physical brick and mortar has rebounded, and we've seen, you know, growth up to 65% year over year. And hospitality, of course, with, you know, the curfews and COVID have continued to remain low where they're still under year over year. But what we've seen in the last quarter and we -- if we look at the month of March, we've seen a real rebound there.

So, I think for us, what's important is as we've always said, omnichannel is core. And I think the value of that is we can help our merchants service their customers on any channel. And herewith now, we're seeing the reopening, which we're seeing revenues go back into strong growth on physical. And so, it makes us very -- very positive about the future.

Daniel Chan -- TD Securities -- Analyst

OK. Thanks. Can you remind us that there is a difference in economics between online payments versus brick-and-mortar payments' transactions?

Brandon Nussey -- Chief Financial Officer

Slightly better online. I'm not, you know, overly materially different, but, you know, we do get slightly better online.

Daniel Chan -- TD Securities -- Analyst

OK. And the just one follow-on for me. How are the early days of payments doing in Europe? I know you just recently launched it, but is the adoption rate comparable to what you saw when you first launched it in the U.S.? Thanks.

Brandon Nussey -- Chief Financial Officer

Very early days, Daniel. So, more to say in the future on that. But yeah, we're optimistic that'll be a great market for us. It's just really early on at the moment.

Operator

Our next question is from Raimo Lenschow with Barclays. Your line is open.

Raimo Lenschow -- Barclays -- Analyst

Merci. Thanks for squeezing me in. Last quarter, you talked about Australia as an example for, you know, a region and country that is reopening. Can you just kind of maybe kind of continue there like how did that kind of evolve from, you know, the opening last quarter? And then the follow-up to that is if you look at March being the strongest quarter, was that kind of pent-up demand, or do you think that's the new normal? Thank you.

Dax Dasilva -- Founder and Chief Executive Officer

So, Australia continues to be very strong. And actually, what we've seen in Australia was starting in the U.K. with all the reopening. So, again our thesis here is as markets reopen, this is going to be a strong positive for Lightspeed.

GTV in Australia is growing 75% year over year and I think that's a great number, considering last year they were not in the same position we were with COVID. So, what we're seeing is as markets reopen, there's a lot of new concepts that are created, there's a lot of a -- a lot investment going in into our markets and this creates a higher GTV and a lot of demand for our products.

Raimo Lenschow -- Barclays -- Analyst

Thank you. And then the -- if you think about it, you had the strongest new customer quarter you mentioned on -- in months on March. Is that like do you think that's a pent-up demand or it's just like a idea of what's going to come? Thank you.

Dax Dasilva -- Founder and Chief Executive Officer

I think it's the result of Lightspeed having a good offering for the market and the results of a very dynamic market and the reopenings. So, we -- we've always felt good around the after-COVID world and everything we see now confirms what our thoughts have been, which is after COVID, Lightspeed is even more relevant given how strong our platforms are for the physical world. And yes, so I think March -- if March is a reflection of what the year is going to look like, we're very happy.

Raimo Lenschow -- Barclays -- Analyst

All right. Perfect. Congratulations.

Operator

Your next question is from Thanos Moschopoulos with BMO. Your line is open.

Thanos Moschopoulos -- BMO Capital Markets -- Analyst

Hi, good morning, guys. With respect to the new payment agreements for ShopKeep and Upserve, just to clarify, I think you moved those from a referral relationship to Lightspeed Payments. Are you now paying it back to those customers, if you could confirm that?

Brandon Nussey -- Chief Financial Officer

Yeah. We didn't -- so I think as we mentioned, there was going to be a period of technical integration with these newly acquired businesses that was going to take us some quarters. So we haven't completed that. You know, that work still remains ahead as my earlier comments, hopefully, reflect it.

And our intention is to, obviously, not just with payments, but with everything we do is to get all of these customers on the Lightspeed core offerings. But recognizing that that was going to take some time, what we did is approach payments partners and say, "You know, look, we've got this infrastructure. We're happy to take on more of the obligation historically it had been. And that -- and then also leveraged kind of the scale of the business to encourage folks to give us better economics on the overall transactions as well.

So it just allows us better customer control. It got us better economics, which is really important. And we were able to do it all on a much quicker pace than we otherwise would have. So that makes sense.

Thanos Moschopoulos -- BMO Capital Markets -- Analyst

Yeah. But to clarify, then, that means that maybe over the next year as you -- there could be further upside in economics as you actually grow some of those customers to full Lightspeed Payments? Is that the takeaway?

Dax Dasilva -- Founder and Chief Executive Officer

Yes. Yeah.

Thanos Moschopoulos -- BMO Capital Markets -- Analyst

OK. Great. Dax, if you could give us an update in terms of just the integration of various platforms and where that stands? I mean, obviously, [Inaudible], but just in terms of the prior acquisitions, what remains to be done to get a different kind of platform?

Dax Dasilva -- Founder and Chief Executive Officer

Yeah. So I think we're highly encouraged by what we're seeing on the hospitality convergence of platforms. You know, we've got our flagship product now, you know, being sold in EMEA. Termly, we call it K Series.

That will be making its way to the U.S., you know, by summer. But, you know, we also have amazing assets, analytics from Upserve, you know, other functionality around inventory management for restaurants from [Inaudible] that will all make the reference platform. So on the hospitality side, where, you know, things are really rolling and we expect to have extremely competitive products worldwide this year. On the retail side, retail e-com side, we're also, you know, barreling forward on that convergence plan.

And we're going to go from what I think is the best retail cloud platform to a truly unbeatable one with the combo of ShopKeep and all the Lightspeed technology assets.

Thanos Moschopoulos -- BMO Capital Markets -- Analyst

OK. I'll pass the line. Thanks.

Operator

Your next question is from Josh Beck with KBCM. Your line is open.

Josh Beck -- KeyBanc Capital Markets -- Analyst

Thank you, team, for the update. I wanted to go back to the Google integration that seems quite notable. So I'm just curious, once this is fully fleshed out and rolled out, will a consumer be shopping online and maybe whatever the category is, say, a bicycle and see, "OK, this is, for example, what I could buy from an online-only merchant and right next to it. Like here is an image from a supplier at the bike shop down the street." So I'm just -- you may not know at this point, but I'm just kind of curious how this is going to be presented from a consumer perspective?

Dax Dasilva -- Founder and Chief Executive Officer

Yeah. Local Inventory Ads, which is, you know, Google LIA. That's one part of our integration with Google, will show consumer where they can buy that item, you know, nearby. You know, as a business, now in Lightspeed, you can set a radius that shows where your locations are and what the -- what radius they serve.

And so serving up high, you know, high-quality images, potentially from our supplier network, allows them to be prioritized in the Google search engine. So it's discoverability for local merchants. Those merchants may also have an online presence. So it will serve to drive traffic to both channels.

And that's really the idea here is how do we help our businesses succeed as omnichannel merchants, how do we drive traffic to them? And I think Google is the perfect partner for this. And if they want to go further, they want to go further than these local inventory ads, which are free as part of our system. They can set up smart shopping campaigns, which is also a part of this integration, which allows them to more proactively market to customers in their area.

Josh Beck -- KeyBanc Capital Markets -- Analyst

Very helpful, Dax. Go ahead.

JP Chauvet -- President

No, I was just going to say, I mean, all of this is part of our strategy to actually help physical businesses have the same strategies as digital businesses. So giving the ability for someone who's spending an ad online with Google to actually measure the real return on investment in physical sales. And I think that's really exciting. And that's, again, the value of our platform in the cloud is we can now do this.

Josh Beck -- KeyBanc Capital Markets -- Analyst

That makes a little sense. I also wanted to ask on the new customer front, you had some pretty high-profile, well-recognized brands. When you look maybe just across the composition of the gross add that you're bringing in, do you feel like there's a notable shift upmarket taking place? Or maybe that's just more natural evolution that you've seen and the types of customers you're bringing on?

JP Chauvet -- President

[Inaudible] since the beginning. So, you know, we started -- we had a lot of relocations and then, you know, multilocation. And what we've seen last time is that we have, you know, bigger and bigger customers, but I think it's just a natural growth. What we did, remember last year, as we've said, we put in place a team in charge of mid-markets, and, you know, we structured the company to support mid-market in a better way.

And I think it's just the result of that strategy that are paying off then.

Josh Beck -- KeyBanc Capital Markets -- Analyst

Really good to hear. Thanks, team.

Operator

Your next question is from Tim Chiodo with Credit Suisse. Your line is open.

Tim Chiodo -- Credit Suisse -- Analyst

Great. Good morning. Thanks for taking the question. I want to dig in a little bit on the location ads.

So that was a real highlight of the quarter, a top-leading indicator of future results. So in terms of the mix, if we think about any group of new locations coming in, let's just say there were 10 or 100, just to make the math simple. Can you just talk about what portion of those would be newly formed businesses, just being created a new retailer or a new restaurant versus existing businesses that might have switched over to Lightspeed? And maybe just talk about how that might have evolved, what that percentage those mix percentages might have looked like a year or two ago, and what it might look like now? And how it might look ahead as more and more new businesses are formed coming out of COVID?

JP Chauvet -- President

Yeah. So I think -- so we haven't seen an evolution in the blend. So we've always had kind of a, you know, give or take, the same blend of, you know, new creation, people creating new concepts versus switchers. So we have this logic of starters and switchers, and, you know, the blend hasn't changed.

However, what we've seen is that, you know, during the pandemic, we have more and more digital demand, where we had a lot of demand for curbside pickup, and we had a lot of demand for e-commerce. What we're seeing in the markets that are reopening is that the demand goes back to the other side, where there's a lot of demand for physical platforms and actually for new concepts. So I think for me, what we're seeing is as markets reopen, the blend in terms of digital versus [Inaudible] go back to what they were pre-pandemic, but we haven't seen any kind of visible shift from, oh, these are only people opening new versus switchers. I think we've always had a good blend of each.

And what we see also is that on different geographies, we have very different demand. And the markets that are completely reopened like, you know, now the U.K. or Australia, we see a lot of demand that goes back to the physical world.

Tim Chiodo -- Credit Suisse -- Analyst

OK. Great. That's really good context. I really appreciate that.

A second question or a follow-up somewhat, I guess, unrelated actually. But back to the payments business, within some of the revenue share agreements that you have, either with your existing within Lightspeed's revenue share agreements, so not Lightspeed Payments, more of the sort of traditional ISP rev share business that's more legacy for you guys. And then maybe in some of the acquired properties as well. I understand there are some nonsolicit agreements in there, and there's sort of a time frame where you can't maybe approach all of those customers as quickly as you would like and maybe puts a little bit of a governor, but that should be opening up at some point.

And maybe you could just put a little bit of context around the mechanics of how that works and how that presents a nice opportunity ahead.

Brandon Nussey -- Chief Financial Officer

Yeah. You know, I think it's pretty standard practice in this industry where, you know, you're getting kind of a referral-based revenue stream from one of the payment processing partners that coincident without your signing a nonsolicit. These contracts also will have terms on them that will expire at various points. So -- and, of course, we're -- these are partners of ours and we will honor every contractual obligation we have.

Longer run, longer term, we just believe in the customer experience being a lot stronger, bringing together software and payments from a single provider. And of course, that's the reason we exist is to make our customers happy. So in the long run, you know, we do expect to continue to wean off of these referral-based relationships, but working well with our partners as we do so. So there's various opportunities, Tim.

And I know I'm not answering your question directly. But, you know, there's various windows where we can, you know, take on that activity a little more directly than we can currently do. And some of those windows will open kind of tail end of this fiscal year for us. But yeah, in the long run, you know, we expect all of -- just -- we really believe the value prop of bringing these things together as strong customers will be coming our way as much as we want them to anyway.

Tim Chiodo -- Credit Suisse -- Analyst

Great. No, Brandon, that was really helpful. I really appreciate it. Thanks for taking both of those.

Brandon Nussey -- Chief Financial Officer

No problem.

Operator

Your next question is from Richard Tse with National Bank Financial. Your line is open.

Richard Tse -- National Bank Financial -- Analyst

Yes. Thank you. On the ShopKeep and Upserve payment amendments. I just wanted to clarify.

Is it sort of largely the scale now of Lightspeed that allowed you to sort of kind of get that bargaining power? Or was it kind of, you know, your relative offering prowess to sort of recognize that opportunity post those acquisitions that led to those amendments?

Brandon Nussey -- Chief Financial Officer

I think all of those things, you know. If you think about how this naturally would play out, you know, we've got a partner of those businesses who, you know, now that gets the deal with a much larger entity where, you know, the greater opportunity is aggregating all these things together. So that creates, you know, opportunity for them, leverage for us. And then the conversation then [Inaudible] to, you know, what's important to Lightspeed, what's important to our customers, how can we do this in the way that, you know, puts our joint customer at the forefront.

And, you know, because we have the infrastructure, we become, you know, a trusted entity and the processing relationships. You know, those partners are willing to, you know, help us in that regard and help our customers in that regard. So I think it starts with scale or, you know, we have a much more compelling opportunity for these partners. And then from there, you know, just our capabilities and our infrastructure, allow that conversation or allowing that conversation to progress pretty quickly, which allowed us to, you know, make some of the improvements you saw in the quarter.

Richard Tse -- National Bank Financial -- Analyst

OK, great. And my other question has to do with I think you talked about the subscription revenue up 10% and it's tied in to serve the supplier network, which sounds like it's actually a bit more increasingly and more meaningful, especially with that sort of connection in Google. So is the supplier network going to be sort of a module that merchants have to pay an incremental fee for, or will it be part of Lightspeed's platform in general?

JP Chauvet -- President

So I'll take this one. The way we look at it is the supplier network is a module is going to become as we go forward a module of the commerce platform. As we said, we really want to go deep into verticals that matter for us. And within those verticals, we really want to triangulate supplier stores and consumers because there's a ton of value for everybody in the ecosystem.

So I think here, we've had an incredible reception from a lot of our suppliers. And actually, what we realized from this is they want to go faster than we can go today. So we need to invest a lot in those capabilities to go faster. But here, as we go forward, this integration and this visibility we get for suppliers to see what is the real sell-through at the store level and vice versa, the ability we get the stores to order directly from suppliers and see inventory levels of suppliers, we think it's key to the success in the verticals where we operate.

So there's a lot as we go forward there that we're going to be investing.

Richard Tse -- National Bank Financial -- Analyst

OK, great. And that supplier network is available across the board now to all merchants?

JP Chauvet -- President

It is.

Richard Tse -- National Bank Financial -- Analyst

OK.

JP Chauvet -- President

And we've been onboarding them very slowly, and there's a lot of -- again, we're very early in setting up the whole structure for every vertical. But within -- we've been progressing a lot within the key industry, but there's still a lot to do.

Richard Tse -- National Bank Financial -- Analyst

OK, great. Thank you.

Brandon Nussey -- Chief Financial Officer

And, Richard, just to clarify one thing and maybe I'm unnecessary to, but the average revenue per customer, ARPU, on the subscription side was up 10%. Revenue, obviously, ahead of that.

Richard Tse -- National Bank Financial -- Analyst

Yeah. OK. OK. Thanks.

Operator

Your next question is from Paul Treiber with RBC Capital. Your line is open now.

Paul Treiber -- RBC Capital Markets -- Analyst

Thanks very much and good morning. Just wanted to delve a little bit more into the Google partnership. Just without getting into specifics, could you speak to the general economic model with partners like Google? You mentioned it's free for the merchant. Is it coming up as a free organic search or -- and not part of Google Ads, or is -- are you paying, effectively, Google for it? Could you elaborate a bit there, please?

Dax Dasilva -- Founder and Chief Executive Officer

Yeah, I think the basic inventory ads, solely local inventory ads, that is a part of the Lightspeed retail offering. And that is -- that we'll publish and make discoverable the local inventory within a radius for that store. Beyond that, retailers can set up smart shopping campaigns. That's another part of the integration, and that is paid for.

You know, but it is eight times -- we've always calculated it, it's eight times more efficient to use a smart shopping campaign because, you know, Google and Lightspeed leverage data to make it -- to make that ad spend even more efficient, eight times more efficient than if that retailer was doing that on their own with their own buys. And the idea there is to make sure that we're democratizing this kind of capability so that it's accessible to all SMBs and not just, you know, big-box retailer, big-box e-com that can afford to plan such a campaign or optimize such a campaign. So yeah, one is free, and one is a part of a highly optimized paid campaign.

Paul Treiber -- RBC Capital Markets -- Analyst

Thanks.

JP Chauvet -- President

Ultimately, if the merchants are doing well, there's a lot of transaction volume, and that's how he gets the payback is we'd [Technical difficulty]. So our goal, again, is to just get all of our customers to be more successful than the average when they're on Lightspeed platform.

Paul Treiber -- RBC Capital Markets -- Analyst

That makes sense. Is there's not an opportunity to expand that out into additional ad networks? And then can you also surface the ability for your own merchants if they so chose, you know, pay for higher visibility, either pay per click or pay per conversion?

Dax Dasilva -- Founder and Chief Executive Officer

Yeah, you know, I think we've gone from helping a business manage and operate a store, you know, to interfacing with consumer. And now, I think we're driving traffic to the consumer. And so I think that this is a big I think partnership that shows what Lightspeed can do at scale, which is partner with the largest, you know, the largest companies out there in order to benefit our customers. And I think there's lots of opportunities to continue to drive traffic to our customers.

There's many channels, and, you know, we want our customers to be on as many channels as possible.

Paul Treiber -- RBC Capital Markets -- Analyst

OK, great. Thanks. That's really interesting.

Operator

The next question is from Josh Baer with Morgan Stanley. Your line is open.

Josh Baer -- Morgan Stanley -- Analyst

Great. Thanks for the question. A couple on M&A. It seems to me even outside of the contribution from the renegotiated payment terms and some of the commentary around efficient customer acquisition like ShopKeep and Upserve together have outperformed under your ownership.

I'm wondering if you degree in any context for what's driving that, like at this point, are those acquiring customers adopting more software, more Lightspeed modules from you?

Brandon Nussey -- Chief Financial Officer

Hey, Josh. Yeah. So I think one of the things we're encouraged across our business, and certainly what we see in Upserve and ShopKeep as well is just the benefits of the reopening. If you think about Upserve's business, in particular, you know, we've seen the GTV growth, which in turn turns into payments revenue for that business, coincident with the reopening in the U.S.

You know, I gave you some stats, 10% up March over February, and for the 14% up in April over March. And that's been really encouraging. I think the whole hospitality segment of our business, which Upserve is the beneficiary, is showing signs of a good life as we go through the reopening and in all of our markets, and that's led to some of the outstanding numbers we saw in March. So I think that the main contributor.

And I think, you know, there's other things we're doing inside these customer bases to make sure that they know they have migration paths and, you know, the things that they can do in the long run with Lightspeed. And I think that's helping overall as well. But I'd say the primary factors has been how the collective business, including those acquisitions, have benefited from the reopenings.

Josh Baer -- Morgan Stanley -- Analyst

That's helpful. And more broadly on M&A, I'm wondering if this strategy looking forward is the same in the past and really focusing on I think on the pace of M&A. Meaning you've done a lot of acquisitions recently. Is that pace sustainable, or should we expect a period of digestion at this point? That's it for me.

Thanks.

JP Chauvet -- President

So maybe I'll take this one. If you look at the M&A, first, two things. If you look at hospitality in the U.S. and you look at Upserve, they're now fully integrated with Lightspeed.

Actually, the CEO of Upserve is now the GM of Global Hospitality, and that'd be Sheryl. And then if you look at ShopKeep, ShopKeep is fully integrated also with Lightspeed, and Mike DeSimone now being the head of global retail at Lightspeed. So I think we feel good about the acquisitions. We are seeing the returns.

We've set up account management teams, you know, to upsell, and also to cross-sell when customers are outgrowing the platforms we've acquired. So -- and even, you know, the CFO of ShopKeep now is in charge of Lightspeed capital. So I think we're a good company in acquiring. I think we understand what we need to do.

And I think we feel very good about the returns. And as you mentioned, the companies within Lightspeed are doing better than outside of Lightspeed. So with that in mind, we want to -- I think we will continue to be active with M&A. I think maybe the slight change is until now, we've, you know, we've increased geographical penetration and concentration by acquiring companies that were in our sector.

I think as we go forward, we're more thinking now about how do we scale and how do we combine more technology to help accelerate the growth of these companies. And so when we think about that, we think about omnichannel, which is key. We think about suppliers. But I think you can expect active M&A, but not within the same categories that we've had in the last year.

Josh Baer -- Morgan Stanley -- Analyst

Thank you.

Operator

Your next question is from Todd Coupland with CIBC. Your line is open yet.

Todd Coupland -- CIBC Capital Markets -- Analyst

Yeah. Good morning, everyone. One quick follow-up on the location count. Has ShopKeep and Upserve started to benefit from location growth as the U.S.

has been opening?

Brandon Nussey -- Chief Financial Officer

Certainly, the Upserve business has. I think we've been, as you may recall, Todd, with ShopKeep, itself, we've -- we very quickly moved that product into more of a nurture mode. And with Lightspeed Retail being the core product, we're taking the market in North America. So that customer base is a little bit different.

But with Upserve, yes, for sure, the reopening has been a really nice contributor to that business.

Todd Coupland -- CIBC Capital Markets -- Analyst

And then a follow-up. We didn't talk too much about [Audio gap] but could you just give us an update on how that's going and some of the milestones for the coming fiscal year? Thanks a lot.

Brandon Nussey -- Chief Financial Officer

You broke up there, Todd, just when you -- just on the subject of that question.

Todd Coupland -- CIBC Capital Markets -- Analyst

Can you hear me now, Brandon?

Brandon Nussey -- Chief Financial Officer

Yup.

Todd Coupland -- CIBC Capital Markets -- Analyst

Yeah, yeah. The question was on Lightspeed capital, we didn't talk too much about it today. Could you give us an update and what we should expect in the coming fiscal year?

Brandon Nussey -- Chief Financial Officer

Yeah, I've seen more encouraging signs there. You know, that we've rekindled the -- what was the ShopKeep capital product. JP mentioned the former CFO of the ShopKeep businesses has been helping to drive that for us. So we're seeing lots of encouraging signs.

We're seeing lots of good momentum. And if anything, our optimism is brighter than ever on that product line as we head into this fiscal year. It's still early. You know, it's still not a huge contributor.

But from what we're seeing both with our rekindling of the ShopKeep program and taking on a little bit wider across our customer base. And then what we're seeing with our ongoing relationship with Stripe in that respect. We're seeing good momentum across both of those right now. So pretty encouraged, though it is still in early days.

Dax Dasilva -- Founder and Chief Executive Officer

Mary, I think we'll see -- we have time for one last question.

Operator

Your last question is from Tien-Tsin Huang with JPMorgan. Your line is open.

Tien-Tsin Huang -- JPMorgan Chase & Co. -- Analyst

Thanks so much. I'll keep it quick. I'm curious, did you give what the Vend revenue contribution would be for the fiscal '22?

Brandon Nussey -- Chief Financial Officer

Yeah, when we announced that acquisition, it's about 34 million in revenue.

Tien-Tsin Huang -- JPMorgan Chase & Co. -- Analyst

Right. I wasn't sure if there was any assumed growth beyond that, but I could just start with that. And just my quick follow-up. Is just that gross profit contribution from the payment contract changed? I think you said 7 million revenue, Brandon.

So what's the gross profit impact from that, just help us understand the P&L impact?

Brandon Nussey -- Chief Financial Officer

Yeah, we didn't give a specific number there, but it was -- if you follow through what our typical margin is on that line the business, it wasn't quite to that extent, but we got a nice little bump from that as well.

Tien-Tsin Huang -- JPMorgan Chase & Co. -- Analyst

Got it. Thank you, guys.

Operator

There are no further questions at this time. Now, I turn the call back over to you Gus.

Gus Papageorgiou -- Head of Investor Relations

OK. Well, thanks for joining us this morning on the call. If anyone has follow-up questions, please feel free to reach out to me. We are around all day today.

Thanks again, everyone, and have a great day.

Operator

[Operator signoff]

Duration: 57 minutes

Call participants:

Gus Papageorgiou -- Head of Investor Relations

Dax Dasilva -- Founder and Chief Executive Officer

Brandon Nussey -- Chief Financial Officer

Andrew Jeffrey -- Truist Securities -- Analyst

Daniel Chan -- TD Securities -- Analyst

JP Chauvet -- President

Raimo Lenschow -- Barclays -- Analyst

Thanos Moschopoulos -- BMO Capital Markets -- Analyst

Josh Beck -- KeyBanc Capital Markets -- Analyst

Tim Chiodo -- Credit Suisse -- Analyst

Richard Tse -- National Bank Financial -- Analyst

Paul Treiber -- RBC Capital Markets -- Analyst

Josh Baer -- Morgan Stanley -- Analyst

Todd Coupland -- CIBC Capital Markets -- Analyst

Tien-Tsin Huang -- JPMorgan Chase & Co. -- Analyst

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