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Lightspeed Commerce (LSPD) Stock | NYSE: LSPD | TSX: LSPD

Redefining SMB Commerce

Based in Montréal, Canada, Lightspeed Commerce Inc. (“Lightspeed”) is a point-of-sale (“POS”) and e-commerce software provider to retail and hospitality businesses and golf course operators worldwide. It is a fast grower in the space and is redefining the way these businesses in these industries run their operations.

Lightspeed’s aim is to be the one-stop shop for everything commerce that retail and hospitality businesses can use to improve their bottom line. The company hosts a variety of modules in its ecosystem that helps bring this goal to life, ranging from unifying digital and physical operations, global payments, financial solutions, and supplier networks.


Adrian Iwanicki

Equity Analyst






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Where Are We Now

Updated on: 11/11/2021

Conviction Score


Lightspeed has been recording solid growth as it continues to redefine the way point-of-sale and e-commerce systems look, feel, and operate. Despite the company’s impressive flourishing growth, we are concerned today with the executive leadership team’s preoccupation with the recent short report issued calling out potential reporting inconsistencies.

  • Lightspeed now serves 156,000 customer locations that pulled in over $130 million in revenue last quarter. Revenues increased almost 200% since last year through a combination of acquisitions (NuORDER, Vend, Upserve, and ShopKeep) and strong subscription and transaction-base organic growth of 58%.

  • Gross transaction volume is skyrocketing – Lightspeed recorded almost $19 billion of gross transaction volume, up over 120% versus the prior year.

Investment Thesis

  1. Lightspeed has carved out a niche in the retail and hospitality industries by disrupting traditional POS systems with its omni-channel and integrated approach.

  2. The company uses a highly effective go-to-market strategy that plays on its strengths in growing its ecosystem and constantly improving its products’ value propositions.

  3. The global POS software market is highly fragmented – Lightspeed has been acquiring companies at a rapid pace and integrating them effectively despite high valuations and some with inferior economics to those of Lightspeed.

  4. The global POS software market is growing quickly. Lightspeed is positioned in a manner that should allow it to penetrate a higher proportion of its total addressable market (“TAM”).

The Basics

Lightspeed is a POS and e-commerce software provider to retail and hospitality businesses and golf course operators worldwide. The company offers a full suite of POS software-as-a-service (“SaaS”) solutions, from back-office operations and omni-channel e-commerce capabilities to payments and financing.

The purpose of Lightspeed’s solutions is to empower businesses through one integrated, comprehensive POS ecosystem to:

  • Engage with customers

  • Manage operations

  • Accept payments

  • Gain insights that will help decision makers grow their businesses

Lightspeed's Merchant PlatformSource: Lightspeed Investor Relations

Lightspeed’s platforms are built in a way that grow with small- and mid-sized businesses (“SMB[s]”) in terms of scale. Smaller businesses use scaled-down versions of Lightspeed’s flexible solutions. As these businesses grow and open new locations, Lightspeed can easily accommodate and expand within the company’s expanding network of stores and online presence.

Unlike other companies in this space, Lightspeed focuses purely on POS SaaS. Even though it provides other e-commerce solutions, these revolve around and support the Lightspeed POS. As such, Lightspeed operates as a single operating and reportable segment.

Lightspeed makes money from two main types of sales:

  1. Subscription licenses

  2. Transactions

Lightspeed's Hardware and SoftwareSource: media.marketrealist.com

Subscription revenues are derived from cloud-based licenses and payments solutions for the retail and hospitality target markets. These revenues are typically recurring through subscription plans that are sold on a monthly, one-year, or multi-year contract.

Transaction-based revenues are generated every time a transaction is processed mainly through Lightspeed Payments, Upserve, and ShopKeep. Upserve is a top-to-bottom restaurant management platform that helps restaurants manage all their operations. ShopKeep is a provider of cloud-based iPad POS solutions, mainly serving the food and retail industries.

Revenues from the three main POS platforms mentioned are considered recurring for as long as these businesses operate. If a business grows and processes more transactions in-store or online, Lightspeed will make more money for providing payment processing and transactions through a percentage of gross transaction volume (“GTV”). Lightspeed grows with the businesses it serves.

Making up a much smaller proportion of revenues but certainly critical to the operation of Lightspeed’s software are Lightspeed’s hardware offerings and professional services. Lightspeed earns about one-tenth of its revenues from selling new hardware to new and existing customers. 

Hardware includes what one would expect to see at a store or restaurant – computer displays, receipt printers, cash drawers, payment terminals, servers, stands, and scanners. 

Professional services help businesses implement Lightspeed’s software and hardware to meet their specific needs if they need it. Lightspeed might also engage in partnerships that require integration work on the part of Lightspeed.

Financial Overview

Lightspeed is consistently posting numbers that are growing at astonishing rates. Of these revenues, approximately 92% are recurring from subscription- or transaction-based revenue sources.

Lightspeed Historical Revenues (US$M) (Q2 2022)

Despite not showing up on many investors’ radars, Lightspeed also has a massive global presence. Its hardware and software can be found in thousands of customer locations across more than 100 countries around the world.

Although a majority of its revenues are generated in North America, Europe and the rest of the world make up close to half of all revenues.

Revenue Share by Industry (Q2 2022)

Source: Lightspeed Investor Relations

Revenue Share by Geography (Q2 2022)

Source: Lightspeed Investor Relations

Many businesses make money by expanding volumes or its customer base, raising prices or upselling, or both. Lightspeed is doing both – it is acquiring new customers, expanding into more customer locations, selling more modules, and taking a percentage cut from ever-growing transaction volumes.

Lightspeed Historical Gross Transaction Volume (US$B) (Q2 2022)

Sources: Various Lightspeed Financial Filings

Lightspeed Historical Total Customer Locations Served (Q2 2022)

Sources: Various Lightspeed Financial Filings

Lightspeed appears to be doing everything right – it is growing its customer base, upselling existing customers, and expanding along with its customers by helping them manage their operations. The sign of a high-quality business is one that can continually increase its revenue per user.


Lightspeed was founded in 2005 by Dax DaSilva, who is still the President and CEO of Lightspeed today. DaSilva saw an opportunity to provide software solutions to physical retailers and he seized it.

The company first began as a payment solutions provider to Apple before Apple had established its first retail operations.

By 2011, Lightspeed was named the “Fastest Growing Company in Quebec” by Profit Magazine when they served about 10,000 retailers at the time.

The company raised billions of dollars through various funding rounds over the next few years to grow its operations, venture into e-commerce solutions, and penetrate new verticals. During this time, Lightspeed also expanded its customer base to include hospitality businesses, another set of brick-and-mortar businesses that were (and still are!) deeply in need of upgraded POS systems and other e-commerce solutions.

In March of 2019, Lightspeed closed its IPO (i.e., initial public offering) by listing on the Toronto Stock Exchange, shortly after launching Lightspeed Payments.

Over a year later, Lightspeed also released its IPO on the New York Stock Exchange in the US to raise an additional US$398 million.

Although initially a POS system provider, Lightspeed morphed into an e-commerce platform over the years. Despite this metamorphosis, however, Lightspeed is still an e-commerce platform that revolves around its POS software solutions today.

Competitive Advantages

Simplifying Business

Lightspeed’s solutions are fully integrated and reduce the need for SMBs to put together multiple disjointed or incompatible applications from various providers. Each of its platforms are designed and tailored to meet the needs of every SMB, making technology available to smaller businesses that were traditionally only used by large companies.

Lightspeed’s main competitive advantage is equipping SMBs with platforms that give them a competitive edge. In Lightspeed’s 2019 Year in Review report, the company revealed that Canadian and US retailers using Lightspeed saw 10.3% and 13.8% year-over-year (“YoY”) growth in GTV in 2019 versus 2018. Over this same one-year period, the industry average in Canada was 1.5% YoY.

Each SMB can use the combination of payments and operations, loyalty, and analytics solutions to run their business, analyze their performance, and find ways to increase customer loyalty. We consider the intertwining of these solutions at a reasonable price to be Lightspeed’s triple threat.

Not only are Lightspeed products sticky, customers also cannot get enough of them. We believe this is reflected in Lightspeed’s revenue per customer location. Customers see lots of value in Lightspeed’s platforms and are continually increasing the number of platforms they employ at each of their locations.

Carving Out a Niche

Lightspeed competes with two major behemoths — Square and Shopify. Despite their massive presence in the POS market, Square and Shopify focus on different markets than Lightspeed, who is carving out its own niche.

Lightspeed focuses on SMBs that have an existing brick-and-mortar foundation as opposed to an online-first presence. The typical SMB that uses Lightspeed products approaches their business using an omni-channel method. While physical stores drive most sales, these businesses recognize that an online presence is of growing importance for their survival in today’s digitizing world.

On the other hand, Square’s products can be used by any type of business, meaning its solutions are more broad and target a broader market as well. Shopify focuses on small “e-tailers” and recently entered the live retail space.

Lightspeed’s edge over Square and Shopify is derived from the specificity of its products and high level of systems integration for physical retail, restaurant, and golf course businesses. While the other two behemoths provide platforms broader in nature, Lightspeed’s target market finds value and ease in using Lightspeed platforms. 

As a first mover in this niche, Lightspeed’s current and prospective customers quickly find that Lightspeed is likely the best provider of omni-channel commerce solutions for a physical-first business.

Although it is too early in Lightspeed’s growth story to conclude whether it has strong pricing power, we believe we have early evidence that the company’s net dollar retention rates of above 100%, rising revenue per customer location, and a vastly growing customer base point to a sticky product portfolio that customers need more of as their businesses grow.

Land(ing) and Expand(ing)

Lightspeed’s go-to-market process is highly flexible and one that accommodates the needs of each individual SMB. While other companies seek bulky contracts right off the bat, Lightspeed allows for simplified pricing, payment terms in local currencies, and contract flexibility.

Lightspeed's Go-To-Market StrategySource: Lightspeed Prospectus

Every SMB that engages with Lightspeed can choose from flexible sets of modules for their specific business needs. Once Lightspeed “lands” a customer, even if it's at one location, it opens the opportunity for Lightspeed to find its way into other locations and upsell other modules.

Many customers that initially “land” with Lightspeed soon realize the benefits of reducing the number of services they use to run their business – they can reduce costs, reduce the number of contract renegotiations, and seamlessly integrate their systems for efficiency gains and optimal insight into their business.

Lightspeed’s products are highly functional and allow for incredible integration. As the Lightspeed ecosystem grows through management’s large investments in sales and marketing, research and development, and other capital purchases, Lightspeed customers should find themselves hungry for more, adding on even more services that serve their business well.

Like clockwork, every new product and solution brought to market will attract new customers, introduce new cross-selling and upselling opportunities for existing customers, and increase revenue per customer and each location with Lightspeed’s market strategy.

Lightspeed Select Historical Business Investments (US$M) (Q2 2022)

Taking a Piece of the Pie

The POS industry is one that is highly fragmented and ripe for disruption. Lightspeed is saying “no more” to clunky, old POS systems from the past by helping physical and omni-channel businesses upgrade their software to a suite of integrated, compatible, and streamlined modules. 

Today, businesses are increasingly opting for SaaS-based solutions to replace these POS and payments systems. Fortunately for Lightspeed, the POS software market is one poised to grow substantially over the next few years – from $12.2 billion in 2018 to over $40 billion in 2027, a CAGR of 15%.

POS Software Market Revenue Worldwide ($B)

Source: Statista

The largest end users of POS systems are overwhelmingly retail and restaurants, which make up well over 50% of total global POS software market demand.

The retail sector is one that is undergoing remarkable change brought forth by the COVID-19 pandemic. Omni-channel is no longer a want, but a need for retailers. Many retailers that rejected the need for online capabilities in the past now see the value. This wave of new adoption is contributing greatly to the overall market size and Lightspeed is set to benefit tremendously as a POS system provider tailored to retail (reminder – retail makes up over 60% of Lightspeed’s revenues).

The restaurant and hospitality industries will likely always remain physical, but the pandemic also created a need for change in these industries. Online food delivery systems are popular amongst younger crowds and gained in popularity across the general population as well because of COVID-19 lockdowns. Once again, Lightspeed is set to benefit as restaurants and hospitality are focus areas of the business, making up almost 40% of revenues.

We believe the perfect storm for Lightspeed has made landfall. Lightspeed’s total addressable market is growing quickly, and its penetration is still mind bogglingly low at under 1% of the ~50 million retail and restaurant SMBs operating around the world.

It is positioned in a way to cater to the end users with the highest demand for new POS software systems. Not only that, Lightspeed is continually making acquisitions in the POS systems space and innovating internally to bring new modules to the market. As first-time adopters rise, so will Lightspeed’s core sales and secondary cross-selling and upselling opportunities.

All Hands on Deck

Lightspeed has a strong track record of innovation and providing its customers with effective solutions that work. Since its beginnings in 2005, Lightspeed has been consistently bringing new products to market that customers love.

Lightspeed's Product Innovation HistorySource: Lightspeed Investor Relations

Lightspeed’s growth strategy comes down to one overarching idea – create (or buy) highly complementary modules to monetize a greater portion of GTV. 

One of the company’s main goals is to expand payments monetization as a percentage of GTV processed through Lightspeed’s software systems. Today, payments penetration is about 10% up from only 1% in 2019, but management has a 50% penetration goal in its crosshairs as businesses replace legacy systems with Lightspeed’s modern platforms. Lightspeed Payments presents one of the largest opportunities for Lightspeed.

Besides Payments, Lightspeed tries to upkeep a robust pipeline of new modules and solutions.

It recently launched Lightspeed Capital in a partnership with Stripe in August 2020, which grants retailers the opportunity to access up to $100,000 to build (or rebuild) their businesses while avoiding the barriers associated with traditional banks. 

As a business that grows with retail businesses, this venture comes full circle to ultimately benefit Lightspeed – retailers can grow, rebuild, and restructure their operations and build trust with Lightspeed while they do so. We believe this is a great way to support retail businesses and eventually end up cross-selling core modules to equip the business for today’s omni-channel retail approach.

Other opportunities exist within Lightspeed’s core ecosystem of back-office, omni-channel, and payments modules to bring more value to each business and upsell larger packages or justify price increases. Any price increases would theoretically be “eaten” by customers through indirect cost savings and gains in revenue.

Acquisitions and Partnerships

To accelerate market and GTC penetration, Lightspeed is aggressively acquiring and partnering with other established players in the field.

Within the last two years, Lightspeed made a few important acquisitions, namely including:

  • Upserve

  • ShopKeep

  • VendLimited


  • Ecwid

Upserve and ShopKeep were added to the Lightspeed ecosystem despite inferior economics to that of the existing Lightspeed Payments business before integration. Management quickly pivoted these businesses to align with the economics of Lightspeed Payments as a whole, showcasing the deep knowledge and expertise management possesses in the space. Now, these two businesses are highly complementary to the overall company, helping – and not hindering – Lightspeed’s progress.

In Q1 2022, Lightspeed also added NuORDER and Ecwid. The former was targeted as a complement to Lightspeed’s Supplier Network and the latter enhances Lightspeed’s omni-channel capabilities.

We expect more bolt-on acquisitions of these sorts that highly complement Lightspeed’s business to expand global reach and capture a wider customer base. The market is highly fragmented and ripe of disruption with many potential acquisition targets.

Poor economics? No problem – management has been able to turn targets around to be more profitable and grow faster under the Lightspeed ecosystem.

Lightspeed is growing quickly but is still a smaller player in the POS software market in the grand scheme of things. To combat this, Lightspeed partners with large technology companies to improve the value proposition of its offerings to customers. 

This year, Lightspeed partnered with Google Ads in a major strategic move to support SMBs. The partnership will allow Lightspeed to embed Google Ads tools into its commerce platform to enable its SMB customers to advertise to local shoppers.

Another fascinating partnership is the one between Lightspeed and OpenTable. Lightspeed’s restaurant customers can leverage the Lightspeed-OpenTable partnership to manage table reservations within the Lightspeed platform as opposed to dealing on an external terminal with OpenTable.

Lightspeed is obsessed with making operations management simple. These partnerships are just the tip of the iceberg – Lightspeed has many more partnerships in place that allow for bigger, better, and more integrated offerings to customers. Management has made it rather clear that it will continue pushing forward on this front to make things easier for customers and improve the value proposition inherent in the Lightspeed platforms.

Vertical Optionality

Lightspeed is growing quickly and has a global presence that it can leverage to expand its industry expertise, introduce new products that customers need, and tap into new verticals.

Lightspeed may have a target market of about 50 million SMBs today, but if it ventures into new industries with the knowledge it continues to acquire from its customers and their growing needs, that TAM can quickly accelerate towards the 230 million SMBs that exist worldwide across all industries.

Management has identified the expansion into vertical markets via acquisitions and organic development as one of its main priorities.

We believe that Lightspeed can make this happen. Lightspeed is helping retailers and hospitality businesses by transforming their operations and helping them make and save money. It has a brand image that is highly reputable in its niche, and this will bode well for Lightspeed as it gains prominence in the global POS software market. As its reach expands, Lightspeed will be able to branch out to new industries and continue building on its highly effective go-to-market cycle – land, expand, and venture into new modules or verticals. 


Acquisition & Integration

Although Lightspeed has a great track record of turning around acquired companies to at least match the economics of Lightspeed, future acquisitions may not be accretive (i.e., beneficial to Lightspeed’s growth profile and margins) at today’s high technology company valuations and face integration risks due to the unique nature and operations of each acquired company.


Despite the niche Lightspeed has carved out and the solid growth within it, Lightspeed competes against some major POS software companies. The main players are Square and Shopify, which can use their size and prowess to dismount Lightspeed in its growth trajectory if they consider Lightspeed a real threat. Square and Shopify are also more widely known by Lightspeed and offer a lot of cheaper services that could threaten Lightspeed.

High-Risk Customer Base

Lightspeed’s customer base is almost entirely retail and hospitality businesses in the small- to mid-sized range. During economic hardship, these low-margin and smaller-sized businesses generally get hit the hardest and may pose a large risk to Lightspeed versus competitors like Shopify and Square, which have broader operations and target markets.


Lightspeed’s enterprise value (i.e., market capitalization + debt – cash) to sales (“EV / Sales”) ratio based on full-year 2022 revenue estimates is above 30x. Lightspeed’s valuation is optically expensive, however, it may be justified given its growth. The main risk lies within Lightspeed’s future execution over the next 5 to 10 years, which are uncertain to any investor. We believe investors should be cautious with a valuation this high in any company.

Bottom Line

Lightspeed has carved out its own niche and is performing remarkably well within it. Retailers and hospitality businesses around the world are actively seeking to upgrade their POS packages, and Lightspeed is there to help them with the transition.

The world’s POS market is ripe for disruption, being highly fragmented and full of incompatible and bulky product offerings. Lightspeed’s suite of modules that revolve around its POS system provide the market with an integrated, easy, and compatible network of modules that grow with the customer. 

We suggest investors keep this company on their radar – it is growing fast and changing the retail and hospitality businesses as we know them.

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