Shares of Lightspeed Commerce (LSPD -3.13%) plummeted 43.1% in 2021, according to data provided by S&P Global Market Intelligence. And considering the S&P 500 was up 27% for the year, Lightspeed lost to the market by a wide margin. However, it was beating the market for most of 2021, rising from January through September. But then it suddenly started dropping and is now down 72% from its all-time high.
Lightspeed Commerce generates revenue by selling hardware point-of-sales devices to retail and restaurant customers, charging fees on transactions and providing subscription-software services. In the second quarter of its fiscal 2022 -- the most recently reported quarter which ended on Sept. 30 -- hardware, transaction-based revenue, and subscription services accounted for 7%, 49%, and 44% of total revenue. respectively.
In the first two quarters of 2021, Lightspeed's revenue more than tripled from the same two quarters of 2020, which is why the market was excited at first. There's two reasons for this substantial growth. First, retail businesses and restaurants struggled in the first half of 2020 because of the COVID-19 pandemic. Naturally, their revenues jumped in 2021 by comparison. Second, not all of Lightspeed's revenue growth has been organic; a fair bit has come via acquisitions.
Since November 2020, Lightspeed has acquired ShopKeep, Upserve, Vend, and NuORDER. And in the second quarter of 2021, 47% of Lightspeed's revenue of $133 million came from these acquisitions. Furthermore, the company spent another $163 million after Q2 ended to acquire Ecwid, providing its customers with better advertising functionality.
Investors are fearful that Lightspeed is masking poor organic growth with an aggressive acquisition strategy. And once this fear set in, the stock began plunging.
Whether or not one agrees with the growth-by-acquisition strategy, one has to admit that Lightspeed is gaining something impressive: scale. The company closed out fiscal 2021 with 119,000 customers, up from just 49,000 at the close of fiscal 2019. Equally impressive, in Q2, average revenue per user (ARPU) for the quarter was $270, up from just $170 in the prior-year period.
It's important for Lightspeed to keep growing its customer base. But the company could deliver outsized revenue growth just by continuing to grow its ARPU. And there's reason to believe it can. For example, Lightspeed measures transaction volume that its systems process -- $18.8 billion in Q2. However, only 11% of this $18.8 billion was processed by Lightspeed as the principal payment processor.
Lightspeed management calls this its payment-penetration rate, which has increased substantially from 5% in the second quarter of last year. But this one area alone represents a large tailwind if it can capitalize on the opportunity, to say nothing of other areas of optionality. Therefore, this is an area to watch in 2022.