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Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lightspeed Fourth Quarter and 2022 Fiscal Year-end Conference Call. [Operator Instructions] Thank you.
Gus Papageorgiou, Head of Investor Relations, you may begin your conference.
Thank you, operator, and good morning, everyone. Welcome to Lightspeed's Fiscal Q4 and Full Year 2022 Conference Call. Joining me today are JP Chauvet, Lightspeed's CEO; Brandon Nussey, Chief Financial and Operations Officer; and Asha Bakshani, our incoming CFO. After prepared remarks, we will open it up for your questions.
We will make forward-looking statements on our call today 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 earlier today, our fourth quarter and full year 2022 results presentation available on our website 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. This should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the 2 can be found in our earnings press release, which is available on our website, on sedar.com and on the SEC's EDGAR system. 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 JP.
Thank you, Gus, and welcome, everyone. Thank you for joining us this morning. Before I get started, I want to welcome some of our new members to our executive leadership team. Rani Hammond has recently joined Lightspeed as Chief People Officer; Asha Bakshani, who is being promoted to Chief Financial Officer; and Brandon Nussey, who has also been promoted to Chief Operating Officer. I'm honored to be working with such a brilliant executive team. Great companies are built by great people, and I am confident that together, our senior executive team and our thousands of dedicated employees will continue to make Lightspeed an extraordinary company.
And now on to the quarter. Lightspeed reported another strong quarter today and closed off another year of solid growth. In the quarter, Lightspeed delivered revenues of $147 million, ahead of our previously established outlook. We experienced an overall revenue growth of 78% and GTV growth of 71%. This was our 13th quarter as a public company, and I'm proud of the fact that Lightspeed has been able to meet or exceed our revenue outlook in every quarter. Brandon and Asha will discuss the financials in greater details, but I want to address top 3 matters on my mind.
Number one, the prospects of Lightspeed as we enter a post-pandemic world; number two, the continued launch and success of our flagship offering, Lightspeed Restaurant and Lightspeed Retail; and finally, our path to profitability. With the world returning to in-person shopping and dining, we are seeing increased demand for our omnichannel solutions. As a result, this March, we had the strongest month ever for new business and Customer Locations. In hospitality, I was excited to see the following customers adopt the Lightspeed Restaurant platform. Hawaiian Poke Bowl with 27 locations in Belgium; Table, a 2-star Michelin restaurant in Paris ranked by Forbes as one of the top 10 coolest restaurants in 2021; and 1858 Caesar Bar, a Toronto-based brand with 3 locations with payments.
In Lightspeed Retail, we were happy to sign the following customers all with payments. Simply 10 with 46 locations, a U.S.-based fashion and apparel retailer, 5 location chain of jewelry stores in Virginia with estimated annual sales volume of over $40 million; Goldy's Locker Room with 21 locations in Wisconsin and Minnesota. We continue to see strength with mid-market customers, which are generally larger, more established customers that tend to carry higher ARPU and GTV exhibit far less churn and deliver superior lifetime value.
Our e-commerce solution also saw strong traction, recently partnering with France's largest mobile carrier Orange that will act as a distributor of the solution to potentially thousands of SMB customers in France, and we continue to expand our supplier network, adding brands such as Reebok, Eddie Bauer and Intermix as partners and customers.
As I look to the year ahead, I see several trends that are really encouraging. I think the most important of these is the return to in-person shopping and dining. We performed well during the pandemic because we were able to help our customers thrive online, but our solutions are primarily targeted for brick-and-mortar. And with the world reopening, merchants are ready to open new locations, develop new concepts and invest in our technology. There is nothing more encouraging for me to see customers back in stores and restaurants.
Today, omnichannel strategies are no longer optional. Yes, consumers are again gathering in stores and restaurants, but they are not going to forget the habits they developed during the pandemic. We believe trends like buying online and picking up in store or ordering ahead for restaurants are here to stay. Consumers have become more demanding in the past 2 years and our merchants have to adapt, and we are in an excellent position to help them do so. The pandemic reinforced the notion that physical retailers need digital strategies, and this is an environment where Lightspeed can really shine.
And finally, there is a global rollout of payments. When we began our fiscal 2022, payments was available in North America and seeing strong adoption with our retail merchants. A year later, Lightspeed Payments is now available in all major markets in both our retail and hospitality offering in both card-present and digital channels. We are one of the very few companies that have rolled out a global physical and digital payment solution. I'm very encouraged by the early signs we are seeing in international markets for our payments offering. In Europe, the proportion of new customers that contract for payments alongside their core software subscription is now similar to the rates we see in North American retail.
Delivering on these trends takes a strong product offering, which I'm thrilled to dive into with more detail. But first, let me remind everyone of our strategy here. Lightspeed has no interest in maintaining multiple brands and product offerings. Our goal, which will be substantially recognized this year, is to be in all markets with these 2 core offerings, Lightspeed Restaurants and Lightspeed Retail. Earlier this month, we announced the release of our latest retail offering, Lightspeed Retail, bringing together the best aspects of Lightspeed, Vend and Ecwid, our new flagship retail offering.
The new Lightspeed Retail expands our availability to the Android platform, offers a truly headless commerce experience, completely reimagines the user interface and, of course, maintains industry-leading multi-store inventory management. Although our position in retail is very strong, we are far from being done. By integrating our supplier network into the offering, we will transform how SMBs work with their suppliers. I'm very excited about our progress here and look forward to making some announcements on this initiative in the not-too-distant future.
In hospitality, we are continuing to see strong momentum with the global rollout of our new flagship Lightspeed Restaurants, accounting for more than half of new customers in March. Our momentum continues to build, and I'm encouraged by how this product is also driving payments uptick.
Finally, I want to touch on our path to profitability. Brandon and Asha will discuss our outlook for the year and will provide more details. As you will see, we expect to achieve our target organic subscription and transaction-based revenue growth of 35% to 40% in fiscal '23 and reach adjusted EBITDA profitability for the following fiscal year.
Getting to profitability starts with strong unit economics. This has always been a priority for this company and the trends we are seeing in the business are very supportive. We see good momentum in the mid-market. Our flagship offering are showing strong evidence of boosting software ARPU and global payments adoption is growing. Expanding software ARPU and growing payments penetration is very supportive of improving unit economics. When we went public, we committed to making payments a substantial portion of our revenue stream.
In fiscal 2022, the transaction-based revenue is almost half of the total revenue. I believe that we have delivered on this commitment. We pursued an aggressive strategy with the goal of consolidating the best players in the industry and bringing game-changing technology to our customers. With our new flagship restaurant offering launched last year on time and the new retail omnichannel flagship recently making its debut slightly ahead of schedule, I believe we have also delivered on this commitment.
It is very important to me that we do what we say we are going to do and continue to drive value for our customers and shareholders. And the next 2 big goals for me are the commercial availability of supplier network and getting to profitability. We have the team, operating discipline, resources and ambitions to make it happen.
And now I'll pass it over to Brandon.
Thanks, JP. It was a tale of 2 quarters in Q4. January and February saw the effects of Omicron disrupt our selling efforts and our customer volumes. But as restrictions eased, we saw our best month ever in March in terms of new locations added and new business brought into the company. This gives us optimism as we look ahead to a post-pandemic world.
For the quarter, we saw the GTV processed by our customers grow organically by 39%, but we saw a shift in consumer spending behavior across a couple of vectors. First, a move back to the physical world and away from e-commerce and online ordering in our hospitality business; and second, a shift away from certain consumer durable categories such as bikes, sporting goods and home improvement and towards hospitality, fashion and apparel and others. These shifts are the latest in macroeconomic factors that we faced over the past 2-plus years.
We stated previously that one of the strengths of this business is our diversified global customer base. The strength has allowed the business to perform well even with these macro factors at play. When COVID began, our retail segment performed far better than our hospitality segment, aided by consumer spending in verticals where we have good market penetration. That helped to fuel our growth through the pandemic, and we've now seen those verticals cool off. But now hospitality is back and other retail segments such as fashion and apparel are faring better. And because of our diversity, we were able to deliver another strong quarter even with these changes.
Asha will talk you through our outlook for fiscal '23 shortly, but it goes without saying that the macro environment carries uncertainty around how consumer spending will trend this year. However, we're fortunate to have the diversity of customer base and available growth levers that will help us continue to grow our business. Our growth levers are unchanged and remain growing our revenue through the combination of location and ARPU growth, expanding our payments and financial solutions across the over $70 billion of GTV our customers collectively process. As you've seen by now, we don't need all levers to be hitting concurrently as the opportunity for each remains compelling.
Before discussing these growth levers in more detail, I will note that this quarter's results in which we reported 48% organic growth in Software and Payments now fully lapsed our easier comparative periods as well as 2 of our largest acquisitions by revenue, ShopKeep and Upserve, hopefully using any concerns about the business' ability to deliver strong organic growth while integrating our acquisitions. So digging deeper into our results reported today, overall revenue for Q4 was $147 million, ahead of our guidance of $138 million to $142 million. For the full year, we delivered $548 million of revenue, up 147% from fiscal '21. Software and Payments revenue for Q4 was $137 million, representing 93% of total revenue and grew by 48% organically. And for the full year, Software and Payments revenue was $512 million and grew 153% in aggregate and 62% organically.
As a reminder, our Q4 is seasonally slowest for our customers and the volumes they process. With transaction-based revenue now approximately 50% of our overall revenue, the seasonality plays an important role in the quarterly profile of our results. Additionally, as previously disclosed, we had a onetime pickup of approximately $5.5 million in Q3 of this year and our transaction-based revenue line that affects our sequential revenue growth profile.
Gross profit dollars grew by 58% in Q4 from the same period a year ago. And for the year, gross profit grew by 112%. As a percentage of revenue, gross margin for Q4 was 48% as compared to 53% last year, owing to a greater portion of our revenue now coming by way of payments, which carries a lower gross margin that provides us an important incremental gross profit dollar per customer location.
Adjusted EBITDA loss was $19.7 million and in line with our guidance. This loss was higher than a year ago, reflecting the impact of the adjusted EBITDA losses from our recent acquisitions of Ecwid and NuORDER. Adjusted EBITDA results in the quarter also reflect the impact of seasonality discussed earlier and our typical higher sales and marketing costs during the final quarter of our fiscal year. For the full year, adjusted EBITDA loss was $42 million or 8% of our revenue, which has improved from 10% last year. We believe our path to adjusted EBITDA profitability is clear, and you will hear more from Asha shortly on our commitment to getting there.
Turning to some of our additional business indicators. Customer Locations, excluding those stand-alone e-commerce customers, brought on through the Ecwid acquisition grew to 163,000 from 159,000 a quarter earlier. These Customer Locations provided an ARPU of $270 per location, which is up from just over $200 a year ago. Growing the Customer Locations and ARPU remains a core part of our plans and we continue to see opportunities to do both. Our focus is to optimize the mix of these, meaning we'll continue to target privilege customers that drive solid underlying unit economics, high GTV and generate an overall Software and Payments revenue that fit our strategic goals.
It's important to reiterate that we'll be focused on growing our business with the right customers, which may lead to variability quarter-to-quarter on this one metric. As mentioned, location adds in the quarter were slower in January and February, owing to Omicron's effects on our end markets. However, March was our best ever for Customer Location additions, allowing us to reach this growth in overall locations.
Customer Location churn rates when excluding Ecwid, overall, were largely unchanged in the quarter from our typical levels. It's worth noting that within this, we're seeing some ongoing churn from customers brought on from some of our acquisitions in noncore verticals, typically carrying a lower ARPU than our overall average and typically have a lower GTV profile as well. To be clear, this isn't new or unexpected, but it does reflect the mix change in our customer base and serves to slow down overall location growth stats. Again, our focus is on growing our customer base that has good long-term value for the business and our strategy.
As mentioned, overall ARPU in the quarter was approximately $270 per location and was up from just over $200 a year earlier. Software-only ARPU was $132, up from $113 a year earlier. Both of these exclude the Ecwid's stand-alone e-commerce customer base, which does carry a significantly lower ARPU.
Looking at our GTV, our customers processed $18.4 billion in the quarter, up 39% organically and 71% in total. And for the year, we processed over $70 billion of GTV, reflecting the scale of the business. Within overall GTV, we saw retail growth slow somewhat, reflecting overall industry trends. As mentioned, some of our best-performing verticals during the pandemic further slowed in the quarter. But despite this, overall retail GTV still grew 17% organically and 74% in total. Hospitality GTV more than offset this as consumers resume spending on travel and dining out in their communities. Hospitality GTV grew 67% in the quarter organically, and we saw this growth in all geographies and saw a really strong month of March in Europe in terms of customer volumes and new sales.
Looking at our payments. Gross payment volume was $2.2 billion in the quarter, up 132% from last year and flat with our Q3. Please recall that our Q4 is our seasonally slowest quarter for processing volumes where both our retail and hospitality segments show a slowdown from the busy holiday season in Q3. That our processing volumes were flat quarter-to-quarter sequentially is actually a very positive sign of progress overall, given the seasonal impact. All told, it was another quarter of progress and another quarter of meeting our commitments despite new challenges being thrown our way. I'm proud of our execution to date, and I'm optimistic for the future.
And as I now formally turn over the CFO role to Asha, I'll let her take you through our outlook for the year ahead. Asha?
Thank you, Brandon. As we look forward to fiscal 2023, we believe there are several reasons for optimism given the trends we are seeing in markets reopening, our increased scale, the success of our integration efforts, the launch of our 2 flagship products. And last but not least, the opportunity that still lies ahead in payments and financial services.
For Q1, we expect to achieve revenue in the range of $165 million to $170 million and adjusted EBITDA loss of approximately $16 million. The adjusted EBITDA loss in the first quarter includes costs associated with our annual sales, customer and partner summit, which we moved to a virtual format during COVID and which we are now bringing back to in-person this year.
Looking beyond Q1 fiscal '23, we remain confident that we will continue to drive organic growth in subscription and transaction-based revenues of 35% to 40% and we'll continue to realize lower adjusted EBITDA losses as a percentage of revenue on a year-on-year basis. As JP mentioned, driving a path to adjusted EBITDA profitability is a priority for us. For the full fiscal 2023 year, we expect revenue to be in the range of $740 million to $760 million and adjusted EBITDA loss of approximately $35 million to $40 million or 5% of revenue at the midrange of our guidance, which has improved from 8% this year.
As we look beyond fiscal '23, we are committed to achieving adjusted EBITDA profitability in the subsequent fiscal year. This will be a very natural progression for us moving from 8% adjusted EBITDA loss in the year just completed to a 5% loss based on our guidance for fiscal '23 to then set up a breakeven or better year in fiscal '24, while still achieving organic growth on the Software and Payments line of 35% to 40%. We believe this balanced approach to growth and profitability is the right one, given the opportunity we see ahead, the strength of our balance sheet and our desire to run a disciplined long-term business.
As a reminder, regarding this outlook, we expect seasonality to continue to have an impact on both our revenue as well as our adjusted EBITDA performance, as Brandon mentioned earlier. Whereby Q3 will be our seasonally strongest quarter and Q4, our seasonally weakest quarter. Furthermore, as we complete our integration work and roll out our flagship offering, we will realize ongoing synergies, which we plan to reinvest in core areas of the business, allowing us to invest in growth areas while remaining flat on operating expenses throughout the upcoming year. Except for Q1, where we have a higher adjusted EBITDA loss given our in-person sales partner and customer summit, I mentioned earlier. We expect transaction-based revenue to grow faster than subscription revenue year-over-year as merchants make greater use of our financial service offerings and as we attract a greater mix of higher GTV customers.
We expect our gross margin to reflect this revenue mix. Our focus will be to grow our overall revenue through an optimized mix of Software and Payments ARPU per customer. We ended the quarter with just under $1 billion in cash on hand and almost no debt. We are in a strong cash position, which bodes well for us in today's volatile markets.
With that, we will now take your questions.
[Operator Instructions] Your first question comes from the line of Dan Perlin from RBC Capital Markets.
A nice quarter here. I wanted to just jump in on this path to profitability. Really happy to see that announcement by you guys. I'm hoping maybe you can just tease us a little bit with some of the underlying assumptions beyond what you've just described. Talk a little bit about why you have confidence in achieving the 35% to 40% organic growth. And then if we think about the -- I guess, the cadence within that fiscal '24, would you expect to reach profitability early in the year or kind of as an exit rate?
Dan, it's Brandon here. Yes. Look, the path to profitability has always been important to this team. We think we've always talked about the need for balancing growth the market opportunity in this path. Hopefully, our operating results have shown that going from -- I think we were minus 18% a couple of years ago and minus 10% to minus 8% to minus 5% in this current year. So it's been an ongoing thing that we've always prioritized and felt it was important to run a disciplined long-term business.
As we look at the assumptions, we're coming into a year where you're seeing us launch our flagship offerings. You're seeing us integrate those acquisitions fully. And so we're starting to realize the synergies across those. As you heard from Asha, that doesn't mean we don't invest in the growth areas. It's basically allowing us to continue to put operating expense into the things that are going to grow while maintaining flat OpEx overall throughout the year.
So those are some of the underlying OpEx assumptions on the revenue line. It's -- hopefully, you got a clear message from us. We continue to see, despite the uncertainty in the market, good opportunity to grow that customer base with the right mix of ARPU and the type of customer we want to bring on, along with just this still largely untapped financial services opportunity to grow payments across the world now that we have that solution everywhere. So yes, we're heads down. We're continuing to operate, and we are committed and, hopefully, you heard that from us here today on getting to that profitability point.
Yes. loudly clear, which is great. The second quick follow-up is you highlighted in the kind of prepared release, you think you'll shine kind of in this environment as consumers start to kind of fit it back in-person shopping and dining. But can you be a little more specific about maybe some of the exposures in terms of overall mix that we should be mindful of that will help and support that as a tailwind. And then just conversely, again, how does Ecwid play in that narrative?
Yes. So I'll take this one. Look, simply put, I mean, the pandemic was not our environment. The majority of our GMV is in the physical world. And what we've really seen in the last few months is a strong return to physical everywhere. And that means -- I mean, restaurants are fully booked and GMVs are back to normal. We're seeing a lot of the shift from e-commerce back into physical. So all of that is really good news for us. And even in the context of the uncertainty, you compare that to a world of COVID where our customers were asked to shut down and to stop operating, all of this is really good news in this environment. So I think that's deep down how we're looking at this.
I think the other big reality is most of the businesses that have shut down during COVID, and those 3 spaces are now just creating a multitude of new concepts and new restaurants opening. And I don't know of any restaurants here who would use a legacy system. They'll go towards platforms like Lightspeed so -- as they open their operations. So feeling really good there. And then the last piece of all of this is we've always said it, a customer using Lightspeed Payments has doubled the ARPU, the net ARPU of a customer without and now payments is launched globally in every region where we operate. So that means with very strong attach rates, so now that means if you look at this, our CAC to LTV or LTV over CAC is very strong. And again, that helps with our path to profitability and strong growth in the coming years.
Your next question comes from the line of Timothy Chiodo from Credit Suisse.
I wanted to dig into the location. So this is not necessarily new messaging. You've been talking about a focus on larger, higher quality, higher LTV locations for some time now. And you recently expanded with feet on the street sales force. So this is all very much aligned. Also, the locations this quarter, as you mentioned, were a little bit better at 4,000. And you said that March was a really strong exit rate giving you some confidence for the year. But specifically in terms of modeling, should we start thinking about the return to, call it, 5,000 to 6,000 location adds per quarter? Should we be still thinking about that 15% location growth? And again, being cognizant of that all locations are not exactly the same to your financial model.
Tim, Yes. We tried to give a little more color in our prepared comments on this. We've got -- in this, as I tried to say, isn't new. It's not unplanned. It wasn't unanticipated by us. But some of the customers have come in by way of acquisition. They're in categories that are like convenience stores or their white label OEM relationships. We're seeing some of those naturally churn off as we continue to focus on attracting the type of customer that we think has the right attributes for the long-term strategy here. We're not stressed over that, but that is sort of playing into the overall location metric that you're all staring at. If we kind of put that to the side, we're achieving the growth that we always have kind of talked about on the locations at line. We're quite comfortable that we're attracting enough of the right customers to continue to meet our goals. And that's where our focus is going to continue.
Okay. Great. My brief follow-up is if you could give us some context on what the payments penetration rate is that is implied in the achieving EBITDA profitability in fiscal '24.
Yes, I don't think we have a specific number for you there, Tim. We're going to continue to roll out payments. We're quite happy with how this has gone. We've got more than double the customers year-over-year on this solution, driving more than 130% and processing volume. As JP mentioned, we're seeing good success in international markets. That's the metric we're going to stay focused on as our GPV and our revenue growth on this line. And you'll just continue to see that overall penetration rate continue to grow in line with that.
Your next question comes from the line of Andrew Jeffrey from Truist Securities.
I think if these results and this outlook don't finally quiet some of the noise around your stock, I'm not sure what going to. JP, I really like the focus on unit economics. I wonder if you can elaborate a little bit, I think you talked about a couple of the drivers software attach as well as payments in terms of improving your LTV to CAC. But can you expand perhaps a little bit with your new retail and restaurant solutions, perhaps the increment to unit economics that seem to have you pretty excited?
Yes, of course. So look, I think -- well, first of all, we're really proud of the 2 last releases we've done. Everybody was questioning, are you going to get 2 real go-to-market products that are going to be very competitive and reaching all regions? And this is job done for us. We have -- our restaurant product is out with all of the great features and our retail product X Series is now out, and it includes all of the headless commerce. It now goes into Android, which is a huge market for us. We were only operating on Apple until now. So that's a big, big lever for us. It has, of course, all of the workflows for omnichannel to pick up in store and then find the incredible web hooks on the API. So we're really proud of the work, and we really feel those products are extremely competitive.
Now this being said, the most exciting part about these products is the attach rates on payments are very strong. And what we're seeing is as our customers buy these products, ARPU grows. And again, that's ultimately going back to our strategy here, which is lifetime value is important. So I think just a way of summarizing the strategy is we need to push as hard as possible these new products, but we need to put it to ensure that we're not everything for everyone and that we go after the segment that is really valuable to Lightspeed. And I think on that front, those 2 products are incredible, and we're seeing higher ARPU, better attach rates on payments. So super excited about that.
Okay. That's terrific to hear. And maybe just a geeky question, but I think it's important just looking at the MD&A. And you mentioned that, Brandon, perhaps moving more to monthly contracts. Any comments on how that might affect churn? It sounds like some of these bigger customers will churn less. But anything we should think about in terms of the differences between monthly and annual contract terms?
It's been an ongoing journey for us. I think we first introduced or started to make some comments around this almost 2 years ago, where we with the release of payment and the launch of payments started to adjust some of our go-to-market strategies around this. We still attract a subset of customers that prefer to pay us in annual, but we are seeing that continue to move to monthly. But to answer your question, over the past few years, those were the questions we were asking ourselves as we made this shift, and we really haven't seen any [ reverse in the recent ] churn. We expect that not to as we look forward as well. It's just simply as what we think is the payment terms change for the customer.
Maybe just to add to this, I mean, if we do this right, monthly customers are paying a higher fee than annual customers. So we're keeping a close eye on churn, and churn is actually in the good direction, but we're getting higher ARPU. So again, this goes to our strategy and we're well -- I think we're balancing in the right way, monthly versus annual and churn rates in those. So very happy there.
Your next question comes from the line of Raimo Lenschow from Barclays.
Two quick questions. First, as we are living in a slightly newer world, uncertain world, can you just remind us how we need to think about some of the changes that are coming through in the economy in terms of inflation, et cetera? Is that just kind of driving higher GMV or something like that? Since we haven't had inflation for so many years, I don't know if there are more aspects we need to think about. But that's my first one. And then I had a follow-up.
So maybe I'll -- when you look at inflation and even you look at potentially the economy not going in the right direction, the way we look at this, well, first of all, is we're a high-growth company. And so what we're seeing here is payments and especially the payments -- the deployment of payments globally will offset, we think, any slowdown from the GMV.
The second big thing is when you think about inflation and you think about, again, a recession or -- this is all good for Lightspeed because what we do is we help merchants basically optimize how they operate, have way less manual processes and operate with fewer employees. So I think that also will drive well into Lightspeed's direction. And maybe the last thing that we're thinking about is as COVID lifts and people go back to the physical world, this really has a strong impact on Lightspeed. And it's -- I mean, any kind of recession is nothing compared to what our merchants have seen through the times of COVID. So we're feeling really good about this. And we actually think that as merchants need to automate and do more, we're going to be in a really good position here.
Okay. Perfect. That's very clear. And then the follow-up was on the supplier network. Could you just remind us a little bit in terms of where we are in that journey and how meaningful this could become like in terms of top line driver for the coming quarters?
Yes. So maybe just again, for me, this is probably the most exciting project at Lightspeed right now. As you know, we acquired a company that provided us a technology. We've been working hard at integrating this. And we'll be announcing in this quarter some really exciting new products coming out. But again, what is the value here of the supplier network? We're trying to create network effects within the verticals where we operate. And here what we're doing is by connecting suppliers and brands with stores and consumers and at the center of this is data and financial services.
And so we have the strong belief that if we want to help our merchants do better, we need to go upstream and see how our merchants work with suppliers. And here, really, we're trying to do what nobody else has done, which is trying to connect to have a completely integrated supply chain for the verticals where Lightspeed operates. And again, more to come on that front. And it's been a huge effort for us, and we're very excited about what's ahead and how this is really going to help our merchants, again, drive more profitability.
Your next question comes from the line of Daniel Chan from TD Securities.
Just the payments penetration rate continues to take higher by about 1 percentage point every quarter. Just wondering if that's consistent with your expectations. And how is the adoption in Europe tracking relative to your prior rollout in North America?
Dan, yes, look, payments continues -- we continue to be very pleased with how we're doing here. As I mentioned, customers more than doubling year-over-year. Our process volumes are 132%. Our revenue line growing close to 90%. It continues to go well. JP mentioned that attach rates in Europe are now rivaling sort of what we've been seeing in North America. So all told, very pleased.
The thing that's out of our control a little bit, and again, we focus on the things we can control, but we are seeing consumer spending shift categories right now. I called some of that out in our prepared comments, areas where we've been traditionally very strong, like bike shops and sporting goods. Consumer spending is shifting and it's moving towards hospitality and fashion and apparel and some categories like that where we're not as well penetrated just yet, not overly concerned. We continue to sell well. And that ultimately is all opportunity for us as we look ahead. So all told, we continue to be quite enthusiastic about how the payments rollout is going.
Okay. My second question has 2 parts. Just wondering how attracting or retaining talent, whether that's been impacted by just the share price and whether you have any plans to change your comp structure to address it.
Yes. I mean it's been well documented how tight the labor market has been. And of course, as you mentioned, what's happened in the broader stock market and the downstream effect of that, Lightspeed certainly not been immune to that. Having said that, we've been pretty pleased with our ability to attract and bring in new folks. We've brought in some really strong new leaders in marketing and sales. You heard JP talk about our new CPO, Rani. So we've been pretty happy with how we've been able to bring in new folks. But the ongoing pressures of the talent market and compensation, that's just something we're dealing with and have been dealing with and expect we'll continue to have to deal with.
Our next question comes from the line of Eugene Simuni from MoffettNathanson.
First question I wanted to ask is a bit on a competitive landscape. So obviously, we've always a very intense competitive landscape in this industry. I was hoping you could comment a little bit on what you're seeing out there and maybe compare and contrast the U.S. environment maybe with what you're seeing in European and Australian markets. And as a result, what are you seeing in the pricing environment, kind of promotional environment and how you were navigating that?
So maybe I'll take this. Look, ultimately, the way we look at the competitive landscape is we look at our close rates. And we ensure and we basically look at who we lose against and are we competitive there and then we listen to our customers. So for me, it's very clear in my mind that the new offerings we launched are extremely competitive, and they're arguably the best products we've ever had on the interface front, on the usability front, on the workflow fronts, on the complexity front. So I think, again, when we look at Lightspeed today, we're very happy with it. When we look at our close rates, they're doing extremely well.
So I think there's no reason for us to believe that we're not ahead of the game and continuing to lead this market. I think for me, the big thing when we think about competition is we want to lead in the segments that are interesting to us. And I always said, and I'm going to go back to this, there's 46 million restaurateurs and retailers on the planet. And on those 46 million, there's 6 million to 7 million that are in our bulls eye, which are the more sophisticated the more established, less prone to churn. And we have in the physical space, 163,000 out of 7 million. So this is a huge market, and the bulk of this market is on legacy systems. And so for us, that's really what we're focusing on. And in that segment, we're extremely happy and we've progressed a lot.
I think the last piece in my mind there is, you mentioned Europe versus the U.S. versus Australia and New Zealand. Yes, we are a global player. We have the same solution set for the globe. And I think that sets us apart also when you look at some of our customers who need to sell globally. But feeling really good about this and certainly feeling really excited about what we're doing with suppliers because that's going to ring-fence any other competitor in our segments, and it's going to accelerate our adoption within the verticals that matter for us.
Got it. Got it. Very helpful. And then, yes, maybe piggybacking -- speaking on what you were just talking about the supplier services and just broader subscription services, one way we look at it as kind of your subscription services revenue yield as percent of GTV. It looks like that continues to pick up year-over-year, which is good to see. Can you talk a little bit about kind of what's driving even relative to the merchant size guys, what's really driving the ARPU of your subscription services? And what are the opportunities they have, how kind of quickly can it continue to grow?
Yes. I think it's -- I mean, I've been in this company 10 years and it's almost every quarter, the ARPU continues to grow. And it's very simple. What we have is a platform with multiple modules. And so customers normally start with 1 or 2 modules. And over time, as they see the value, they buy more from us. So -- and I'll just give you a few examples. You might start with your core commerce platform and POS, and then you'll move on to your omnichannel and especially now with our headless commerce, arguably, this is a really good module and then you'll move on to analytics, you'll move on to loyalty, you'll move on to integration with accounting platforms, you'll move on to payment. So this is the core strategy of Lightspeed is basically providing a platform with multiple modules. And as you buy from Lightspeed, you become more successful.
So that's really what's driving all of this. And in both industries, hospitality and retail, we have a number of modules that our customers can buy from us. And it's really the story of we integrate with everyone. We want to be a fair player in the market, but the integrations with our products are always greater than what you have with the rest of the market. So over time, people buy more from us.
Your next question comes from the line of Thanos Moschopoulos from BMO Capital Markets.
If you look at attach rates in the North American retail, which is your most established markets for payments, are you starting to bump up against the ceiling on your payment attach rate for new customers? Or is there still more runway on that?
Within retail, I think we're pretty pleased with the attach rates overall. As we've talked about, there's always categories that we're not going to be able to onboard and so on. So yes, I think within retail, we've got that in North America, we've got that fairly well optimized. There's still opportunities for us across the board as we enter hospitality more deeply in international markets more fulsomely, but pretty pleased with how things are going in North America retail.
Yes. And Thanos, maybe if I could add on the product strategy, we are just trying to add more value to customers who attach payments. So we're making it more and more natural. We do analytics engines that are based on payments. We do everything we can base again. And actually, if you look at this world of omnichannel, with the customers going online and offline and now especially with the new headless commerce we've launched, there is real value, which is not just about what are your rates. There's real value in attaching likely payments. And I think it's becoming more and more natural for our customers to bundle in payments as they buy Lightspeed.
And sort of a related question, you called out a couple of larger payments wins. And I was kind of surprised that I didn't think you'd be competitive for payments for that kind of customer size. So is that new? Does that reflect maybe more of conservative efforts to go after larger payment customers? Or has that always been part of the strategy?
It's always been the strategy. We -- I think we have an extremely good flow. And we -- in our go-to-market, we are distinguishing the big customers from the small ones. And everybody is running in the right direction. And again, for me, it's the value we bring to customers, even the large customers having a fully integrated reporting where you can see exactly what hits your bank account versus what was sold is always going to be simpler than having a payment provider completely disintegrated from the core platform.
So I think, again, for me, this is a natural move. I think as we go forward, more and more customers are going to need this. And we're certainly focused on creating more value for customers who buy payments so that it becomes a natural step of the buying process.
Our next question comes from the line of Richard Tse from National Bank Financial.
You guys are obviously -- have become one of the most global players in the market here today. Obviously, it brings probably some strategic synergies, including diversification. Does it bring any operating synergies relative to your competitors that you can use?
I mean, yes, I'm trying to think of the right way to answer that for you, Richard. Certainly, on -- as we think about how we get leverage across, say, our development teams, we've got development centers in Germany and the Netherlands and, obviously, here in North America and Australia. And those are helpful in a tight labor market for us to be able to bring in talent and realize that benefit where we're not just chasing talent in one specific country. The benefits of scale, I think we've always talked about, the more GTV we're driving, the better economics we're going to get more value it's got as we look forward to our supplier network and things like that as well. So we're huge proponents of scale for sure. I think it really matters a lot in our market.
Yes. I think also I'd add a few, I mean, obvious ones. But when you think about our relationship for performance marketing, where we can centralize the performance and have much better rates because of the volumes that we're doing there. I think we are becoming a go-to brand globally, which also helps when you look at backlinks and you look at how the performance of organic growth. So again, it's much easier when you have more customers than fewer to find synergies and, obviously, operating in all regions brings us more customers and better intake of business so we can then leverage a ton of our suppliers.
Okay. That's helpful. And this question is sort of related to the hardware piece. I know it's not sort of the focus, but it is sort of part of the offering and with the sort of challenges in the supply chain and chip shortages. Like was there any impact in the quarter? And how do you think about that sort of going forward just to make sure that you've got enough inventory on that side that is not an issue here?
So we've been -- I mean, we've been managing through this for a few quarters now. We haven't had an impact on, say, business activity of selling and so on. It does have an impact on our hardware margins. You're seeing that show up where as we go to secure inventory to meet our growth rates, we're just having to pay more to secure that inventory in some cases. So that does show up in the margin line, and then you'll just see the inventory balance on the balance sheet has been growing as we look to make sure that we have sufficient inventory to meet our own growth. So it's certainly something that's there. As you mentioned, it's not a huge part of our business, but it's something we needed to manage through.
Okay. So it hasn't had any impact. Is it sort of the bottom line the way I hear it?
Right. Not to selling activity or anything like that.
Your next question comes from the line of Josh Baer from Morgan Stanley.
I wanted to ask on payments. Really what's it going to take to get to that 50% attach level? And specifically, just wondering like the hurdles to overcome the time line and also the trajectory. And we should expect steady increases or more of an S curve? Like with the broader availability of payments now, should we be expecting an inflection in that percentage of GTV process through Lightspeed Payments?
So yes, thanks, Josh. Yes, again, we're going to stay focused on our process volumes. That's what we can control the most. The penetration rate is subject to some variability as consumer spending shifts around and so on. I think that metric is a very good one from an opportunity perspective. From a progress perspective, we think the GPV or payments volumes are the right measure. I don't think you'll see it be linear. This is not perfect science necessarily, but I do think as seasonality will play a role in certain industries and then as we unlock markets and get meaningful traction, I think you'll see that line steepen at certain points rather than just be a linear extrapolation.
But a lot kind of goes in there. Should we get to the 50%? That's going to be a very great outcome, I think, for our business and the shareholders. We continue to see opportunity to get there and the path there will -- yes, and it won't necessarily be linear. I think you'll see periods of time where that line steepens.
And maybe if I could add 2 things. One is we have a high volume that's outside the U.S. This was recently launched, and the exciting news is we're seeing really good attach rates and similar attach rates in North America. So everything for us says, we're going to -- of course, that's going to drive a ton of GPV. So feeling really good about that.
And then I think when you look at the last pieces on the global environment, when you look at the attach rates on new customers and you look at how churn works in SMBs, we are going to get there no matter how we skin this. When you look at attach rates that are really strong on new customers, we are getting into that direction. So again, not concerned, not worried. We are where we wanted to be on a GPV front. And yes, feeling really good about payments.
Operator, I think we have time for one last question.
And your final question comes from the line of Josh Beck from KBCM.
Congrats, Brandon and Asha on the expanded roles. I wanted to ask about the go-to-market with the flagship platform. You've obviously had the restaurant product in the market for a while. You're just really out of the gates on the retail side. What have you learned maybe from the restaurant flagship launch? And how are you applying that to the retail launch?
Yes. So look, again, everything is very much in line or ahead of what we expected on that front. So we launched -- retail is launched sooner than we thought, so that's super exciting. But what did we learn? I mean simply put, it's a blueprint. It's a sequence. There is a very strong sequence for growing market after market. And as we deploy the new product, we are monitoring very carefully attach -- sorry, ARPU and close rates. And so just being very clear, if we were to launch and we didn't see an increase in ARPU, we didn't see good close rates or at least the same level of close rates, we would have paused. But we haven't seen any of that for now.
Maybe just sharing one data point. More than 50% of all of our hospitality deals globally now are on the new platform. So that tells us, okay, we're heading in the right direction. The next steps for us are fully launching the U.S. for the hospitality, which is going to happen before the end of summer. And the second step for us is launching hospitality in Australia and New Zealand, and that is well on track. We have our first alpha customers so are feeling really good there also. So I think for me, there's no real surprise. There's -- I would say, there's a strong operational focus here on launching these products, and we're satisfied with where we are.
Retail. I mean, retail, we took the other route. So we've launched now in Australia and New Zealand. We've launched it in Europe. And now the final launch for us is the U.S., and that's because it's the largest market for us. And on that front, we're going to be going -- every quarter, we're going to be deploying into new verticals and we're going to be checking those close rates and we're going to be ensuring that ARPU is higher, attach rates on payments are good and close rates are good. And we started in the first vertical now, and we're seeing really strong signs. So we're very excited about it.
Great to hear. And maybe just to close out with an ARPU question. I think it was up about $100 year-over-year to the $270 level. You obviously have a very comprehensive platform at this point that spans back office, omnichannel, financial services, front office, et cetera. So I'm just curious, like, maybe if you look at your highest ARPU customers or maybe what a customer would be paying if they adopted all the services, how should we think about a little bit the ceiling in terms of where that metric can go?
Yes. So I think I'll just start by -- when you look at adoption of modules, we are very, very far from the ceiling. And I remember us sharing a lot of data about this at the earnings date. But for me, there's at least room to multiply by 3, 4, 5, easily this number if customers are fully penetrated with all the modules and payments. So there's a lot of room for growth, there's a lot of greenfield. We don't see any ceiling anytime soon on that metric.
Okay. I think we'll end it there. Thanks, everyone, for joining us today. Again, if there's any follow-up questions, we are around, so please feel free to reach out. And we look forward to speaking to everyone again in the near future. Thanks, everyone.
This concludes today's conference call. Thank you for your participation. You may now disconnect.