MGCR 423 - Project Lightspeed

MOTIVATION SECTION I

6 Problem Identification and Research Question Formulation How can LSPD use strategy to thrive? The company now sits at one of the most important cross-road of its 15-years history: How can LSPD maintain their competitive advantage in the POS market to reinvigorate their customer locations growth rate? Above-Average Returns 20,000 27,600 34,900 41,300 49,000 76,500 ? 38% 26% 18% 19% 13% ? - 10% 20% 30% 40% - 20,000 40,000 60,000 80,000 100,000 2015 2016 2017 2018 2019 2020 2021E Organic Customer Acquisition Inorganic Customer Acquisition Organic Growth Rate Industry Growth Rate h 1 Number of LSPD Customer Locations 2 Problem Identification 3 Research Question ▪ For the years leading up to 2016, LSPD profited from its unique competitive positioning as the go-to POS player for SMBs with complex needs to sustain above-average (~20% vs. 8% for the industry) customer locations growth ▪ However, thorough the year as the competition became fiercer (Shopify, Square, etc.) LSPD experienced declining organic customer acquisition growth rate and slow pullback towards the industry mean ▪ This decline in competitiveness was exacerbated by the effect of the COVID-19 pandemic, which lockdowns and restrictions put pressure on LSPD’s main customer base (SMBs) ▪ However, COVID-19 was also a catalyst for e-commerce software providers since surviving SMBs realized that e-commerce and the digitalization of their operations would be key to their livelihood post-pandemic

9 Industry Analysis POS Software Industry is relatively attractive, with moderate profitability potential Threat of New Entrants Low ▪ While product differentiation and economies of scale are high, other barriers to entry are relatively low, such as low capital requirements and switching costs, and government policy which isn’t too strict ▪ Expected retaliation is low as well, leading to an overall high threat for new entrants Threat of Substitutes Low ▪ Industry operators compete externally with in-house-developed POS software products, particularly those in the hospitality market, and other substitute business software products (ex: those developed by Business Analytics, Enterprise Software Publishing) ▪ Not many similar products exist outside the industry Bargaining power of buyers Medium ▪ Many similar solutions available for the clients ▪ However, LSPD offers a unique and comprehensive omni-channel platform well positioned for complex SMBs (only 1 system that integrates all applications) Rivalry Intensity High ▪ Many competitors offering similar solutions increase rivalry ▪ Fragmented market with many small competitors growing rapidly ▪ Fast-cycle market ▪ Rivalry mainly based on innovation 1 2 3 4 Note: 4 forces are applicable to Lightspeed’s industry (power of suppliers is non -applicable)

STRATEGIC RECOMMENDATIONS SECTION llI

15 Recommendation 2 & 3 - Transport Logistics Acquisition & New App Recommendation #2 & #3 Before: SMBs would handle their shipping & fulfilling independently (time consuming and costly because lack of scale) After: SMBs will outsource their shipping & fulfilling to LSPD (save time and gain economies of scale) Recommendation 2 – Forward Integration into Shipment & Fulfillment Outpacing the competition: Will this allow LSPD to increase customer stickiness and retain its competitive advantage? It will as being a fully integrated platform will bring increased convenience to customers all the while increasing their switching costs. LSPD will effectively become a “on e- stop shop” that will generate value across customers’ value stick Recommendation 3 – LightMarket Pace app Changing the industry structure: By allowing SMBs to connect with consumers through the LightMarket Pace app, LSPD would effectively give free advertising to businesses which historically could not afford to have enhanced visibility. LSPD would create a platform with centralized consumer and commerce data, allowing it to be on the forefront of the SMB market; giving LSPD an unmatched ability to monitor and predict. Consumers Download the app, browse the marketplace, and get notifications about nearby opportunities according to their shopping habits SMBs Get increased visibility from consumers and higher access to quality audience Lightspeed Has a centralized platform for data collection, which allows it to scale through network effect and a variety of other enhanced core competencies Merchant

18 Appendix Map I. Internal Analysis a. Primary Research w/ Insiders b. Leadership Overview c. Annotated Stock Price Chart d. Financial Overview e. Lightspeed Verticals f. Cloud-Based Platform Approach g. Legacy Systems vs. Lightspeed h. Unit Economics per Business Segment i. Subscriptions Offering j. TAM Buildup k. Customer Acquisition Process l. Land and Expand Strategy m. M&A Strategy n. Stakeholders Analysis o. Vision & Mission p. Resources Analysis q. Mapping Resources and Capabilities r. Key Areas of Differentiation s. Value Chain Analysis t. SWOT Analysis II. External Analysis a. Competitive Landscape Overview b. Key Competitors c. Summary of Offerings from Peers d. Drivers of Competitive Behavior e. Competitive Rivalry f. GE: Demographic g. GE: Technological h. GE: Global i. GE: Economic j. GE: Sociocultural k. Porter’s 5 Forces: Threat of New Entrants III. Strategic Recommendations a. Developed Markets vs. Africa b. How to Penetrate the African Market c. Lightspeed Shipment Model Overview d. Shopify Case Study e. LightMarket Pace

21 Who are Lightspeed’s key executives? Leadership Overview Lightspeed executive team is formed of highly-experienced and committed professionals, and will be key to execute on the company ’s future plans Source: Company Filings, S&P Capital IQ Dax Dasilva Founder, CEO & Director ▪ CEO of the company since its foundation in 2005 ▪ Received many awards and recognitions through his entrepreneurial journey, including the E&Y Young Entrepreneur of the Year Award in 2012 and Startup Canada’s Entrepreneur of the Year Award in 2016 for both Quebec and Canada Jean Paul Chauvet President and Director ▪ Appointed as President in 2016 ▪ Previously Chief Revenue Officer (2012-2016) ▪ Prior to Lightspeed, Mr. Chauvet held various leadership position at Atex Group, Nstein Technologies, and IXISOFT Technologies Brandon Nussey CFO and COO ▪ Appointed as CFO in 2018 ▪ Previously CFO at D2L Inc. (2010-2018) ▪ Various leadership roles at The Descartes Systems Group, including CFO (2000-2007) Michael DeSimone CBO ▪ Appointed as Chief Business Officer after the acquisition of ShopKeep in 2020 ▪ Leads the commercial strategy for Lightspeed’s Global Retail, Hospitality, and Financial Services businesses Home

22 Commentary Lightspeed has been generating above-average stock market returns since its IPO in 2019, on the back of strong revenue growth (main drivers being increased GTV and merchant locations), accretive acquisitions, and expansion of their offering into omnichannel solutions. Equity investors have been clement with the company, supporting its multiple follow-on equity offerings to fund its growth (that the company has been prioritizing at the expense of its profitability). (100%) - 100% 200% 300% 400% 500% 600% 700% 800% 900% Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 S&P 500 Annotated Stock Price Chart Since LSPD TSX IPO in 2019 (dual-listed on the NYSE in 2020) Source: S&P Capital IQ Stock Price Chart 541% 69% 678% 235% / : Earnings Beat/Miss September 29, 2021 Publication of short report on LSPD by Spruce Point Mgmt. February 27, 2020 Completion of a ~US$250MM follow-on equity offering August 9, 2021 Filing of a ~US$715MM follow- on equity offering March 7, 2019 LSPD prices IPO at $16 / share, raising CAD$250MM on the TSX Home

23 North America 59% International 41% Financial Overview Over the years, LSPD has became a more international, recurring-revenue-based, and vertically diversified company Source: Company Filings, S&P Capital IQ Financial Results Summary (1) Revenue Mix (2) Merchant Mix (2) Market Capitalization (1) CAD$MM, except per share data; FY ended 3/31/2021 Share Price $121.05 52 Week High / Low $43.29 / $126.60 FDSO 148.0 Equity Value $17,911 (-) Cash & Equivalents (749.3) (+) Debt 74.3 Add: Preferred Shares - Add: Total Minority Interest - Enterprise Value $17,236 AV / LTM REVENUE 44.9x AV / NTM REVENUE 23.4x CAD$MM, unless otherwise noted FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 Total Revenue 38 53 71 96 150 275 YoY Growth (%) - 39% 34% 36% 56% 84% Gross Profit 23 34 49 67 101 157 Margin % 59% 65% 69% 70% 67% 57% EBITDA (28) (36) (24) (25) (51) (110) Margin % (74%) (67%) (34%) (26%) (34%) (40%) Net Income (63) (73) (119) (228) (66) (154) Margin % (166%) (137%) (169%) (237%) (44%) (56%) Diluted EPS (2.27) (2.50) (4.10) (6.86) (0.77) (1.47) Notes: 1. Market data as of November 2, 2021 2. Financial data as of March 31, 2021 (~120 000 customer locations) Subscription and Transaction-Based 91% Hardware and Other 9% By Vertical By Geography Retail 55% Hospitality 45% By Revenue Stream Home

24 Retail Restaurant Golf Apparel Bar Multi-Course Bike Café Municipal CBD Full Service Private Electronics Hotel Public Gift Store Quick Service Resorts Health Other Semi-Private Home Décor Other Jewelry Liquor Pet Sporting Goods Toy Vape Other Business Level Overview What are the verticals in which Lightspeed operate? Source: Company Website Sample Customers Commentary Lightspeed has been extremely strategic in its diversification into other verticals. Having niche offerings allows the company to leverage the perks of the differentiation business-level strategy. It is interesting to note that the majority of the diversification has been performed inorganically through acquisitions (Chronogolf for Golf, Upserve for Restaurant) Home

25 Lightspeed Payments POS E-Commerce Logistics Inventory Management Data & Analytics Cloud-Based Platform Approach to Retail / E-Commerce How Shopify and Lightspeed create value for merchants Cloud-Based Platform approach to Retail / E-Commerce Old way of Retail / E-Commerce Merchants Payments POS E-Commerce Logistics Inventory Management Data & Analytics Merchants Commentary Value can be defined by a product's performance characteristics and attributes for which customers are willing to pay. For Lightspeed, merchants pay for the convenience of using a platform instead of multiple individual software. This value proposition is particularly strong for SMBs, who don’t have the resources to afford / organize multiple software providers. Home

26 Legacy Systems vs. Lightspeed’s Platform Lightspeed's version of the cloud-based platform approach Legacy Systems Lightspeed Platform Cashier POS Software Accounting Software Inventory Management Software Payment Processor Commentary Legacy POS systems are disparate and lack integration with multiple applications (register, transaction terminal, points system, accounting, inventory management, etc.) whereas the Lightspeed platform offers a one-stop-shop for merchants to organize their payments, front-end, and back-end operations. Home

27 Business Segment Description Pricing Gross Margin Merchant Services ▪ Sale of POS hardware ▪ Professional services in installation support and implementation NA ~10% Software Revenue ▪ Basic subscription includes 1 register, integrated payments, accounting, and e-commerce ▪ Additional front-end and back- end modules sold to customers on a monthly basis C$89 - 229 / month For retailers ~75% Lightspeed Payments ▪ Revenue generated on all Gross Transaction Value (“GTV”) processed through LSPD Payments 2.6% + 10c Normal rate 2.6% + 30c Card-not-present rate ~25% Business Level Overview How does Lightspeed make money? For the three- month period ended June 30, 2021, 92% of LSPD’s revenue were Software or Payments -based Home

28 Lean Standard Advanced Price C$89 / mo. C$159 / mo. C$229 / mo. Products Retail POS ✔️ ✔️ ✔️ Registers (additional registers + CAD$39 / mo.) 1 Register 1 Register 1 Register Integrated payment ✔️ ✔️ ✔️ Accounting ✔️ ✔️ eCommerce ✔️ ✔️ Omnichannel Loyalty ✔️ Analytics Core ✔️ Services Card-present rate 2.6% + 10c 2.6% + 10c 2.6% + 10c 24/7 customer support ✔️ ✔️ ✔️ One on one onboarding ✔️ ✔️ ✔️ Additional free training ✔️ ✔️ ✔️ Dedicated account manager ✔️ ✔️ ✔️ Business Overview How does Lightspeed price its offering for retailers? Source: Company Website Commentary Lightspeed’s pricing strategy is based on product bundling and price discrimination. Merchants choose between the “Lean”, “Standard”, and “Advanced” subscription depending on their budget and needs. Furthermore, Lightspeed offers quotes to higher volume merchants and large businesses (“Enterprise”). Pricing for Restaurants and Golf is similar. Home

29 ▪ As of February 2021, ~39B in LTM GTV (pro forma for Upserve and ShopKeep) ▪ 75% of transactions via credit cards ▪ 80% fulfilled by Lightspeed Payments ▪ 2.6% + 10c pricing scheme ▪ ~4.9MM Customers Base ▪ Incremental $38B in TAM ▪ Scenario with better penetration of the ~4.9MM customer base ▪ 40% of customers adopt >1 module ▪ Fully penetrated merchant = ~$500 in monthly software ARPU/location ▪ Assuming 50% of the customer base is fully penetrated, and 50% is running at ~300/month/location ▪ Incremental $25B in TAM ▪ ~220MM SMBs globally ▪ ~47MM are Retail and Restaurants ▪ ~6MM have complex needs ▪ 80% are in industries covered by LSPD ▪ pre-Payments monthly ARPU of ~200/customer ▪ Core opportunity of $12B #2 – Expansion Opportunity #1 – Core Opportunity #3 – Addressable Opportunity Business Model Overview $12B $37B $75B $5B $15B $25B $35B $45B $55B $65B $75B Core Opportunity Expanded TAM Addressable TAM Total Addressable Market (Estimation) Home Is Lightspeed’s TAM large enough to sustain long -term growth?

30 Business Model Overview $75B Core Opportunity Expanded TAM Addressable TAM Total Addressable Market (Estimation) Lightspeed’s potential customer base has a value of $75B, which represents what LSPD could generate revenues of $75B if it captures 100% of the market Home Is Lightspeed’s TAM large enough to sustain long -term growth?

31 Step 3 Finalize Package and Pricing Step 5 Virtual Installation & Onboarding Step 4 Shipping Hardware Step 1 Lightspeed Website Google-Sponsored Research Website Advertisements Social Media Presence Review Websites Partnership Word of Mouth Step 2 Sales Hotline Robot Assistant Business Model Overview How does Lightspeed acquire new customers? Source: Company Filings, National Bank Financial Lightspeed’s Customer Acquisition Process Online Offline Commentary First, a merchant engages with LSPD online or offline. Second, the prospect is connected to LSPD’s direct sales team (which physically sits beside the marketing group). Third, the prospect is connected to the on-boarding group (which sits physically beside sales). The entire process, except shipping, happens online, enabling operating leverage. While LSPD does not provide its cost of acquisition, we estimate its Lifetime Value: Customer Acquisition Cost target to be ~3-5:1 Home

32 Commentary A significant growth opportunity exist in LSPD’s current customer base. As explained in page 21, management predicts that the current ARPU of ~$200/mo. could be expanded to ~$500/mo. if the merchant was “fully penetrated” (subscribed to multiple add- on modules). Thus, LSPD’s “land and expand” strategy is a key growth pathway for the company EXPAND Business Model Overview How can Lightspeed leverage its existing customer base (increase its average revenue per user, “ARPU”)? Source: Company Filings, National Bank Financial Lightspeed’s “Land and Expand” Strategy LAND MARKETING Targeted acquisition and growth strategy ONBOARDING & TRAINING First touchpoint and ensuring optimal product usage CGS Creating upsell demand ADD-ON SALE Front and back- office additional modules FIRST SALE Simplified pricing, local currencies, flexible contracts SDR Structured customer qualification process Home

33 M&A Strategy 2014 Acquisition of POSIOS – entry into restaurant market 2015 2017 2016 2018 2019 2020 2021 Acquisition of SEOShop – entry into eCommerce Acquisition of CrankLogic – Turned into LSPD Analystics Acquisition of ReUp – Turned into LSPD Loyalty Acquisition of Chronogolf Acquisition of iKentoo Acquisition of Kounta Acquisition of Gastrofix Acquisition of ShopKeep Acquisition of Upserve 1 2 3 4 Geographic expansion for existing solutions Targeted take-outs in existing markets Expansion of platform into adjacencies Consolidation in certain complex verticals (e.g. retail - bike shops) Inorganic growth: Lightspeed’s goals Acquisition timeline Home

34 Host Communities The financial industry is highly regulated and LSPD has to respect the reporting laws of the many country in which it operates. Furthermore, SMBs (LSPD target customers) tend to have stronger ties to local communities than multinational corporations. Business Level Overview Who are Lightspeed’s important stakeholders? Stakeholders Analysis Tool Positive Negative Low High Stakeholder Interests / Expectations Importance to Success Capital Markets Investor LSPD is entering its growth phase and is not yet profitable. Thus, it requires frequent and significant financing (particularly equity) to fund its operations Capital Markets Product-Market Organizational Merchants LSPD’s core mission and strategy revolve around making life easier for merchants and offering them an end-to-end omnichannel cloud platform R&D and S&M Leaders and Employees S&M is key for customer acquisition and retention and R&D is key for platform innovation. Both are extremely important as the POS market is a fragmented and fast-cycle market. Suppliers LSPD mainly leverages suppliers for its hardware devices, which represent a small % of its offering / revenue mix Short Sellers Firms like Spruce Point Capital Management profit when Lightspeed’s stock depreciates. However, the company refuted most of their claims and the stock moved minimally upon the release of their report. Competitors Competition is fierce in the SMBs payment and e- commerce space. Other firms like Shopify and Square are actively competing with LSPD to capture market share in the early-innings of what is believe to be a multi-billion dollar opportunity. Home

35 Business Level Overview What is Lightspeed’s vision and mission and how did it evolve over time? Source: Company Website Dax Dasilva founded Lightspeed in 2005 as a server-based retail management solution for Mac. From there, the company grew, and went on to create the first fully-featured POS for iPad, develop eCommerce integrations for brick-and-mortar retailers, and create a new, web-based POS platform with LightSpeed Cloud. 1 Lightspeed (2005) 2 Lightspeed POS (September 2020) 3 Lightspeed Commerce Inc. (August 2021) In 2014, Lightspeed launched “Lightspeed Restaurant”, their first foray into a vertical that would account for ~half of their merchant base a few years later. With that launch, the company decided to changed its name to “Lightspeed POS” to reflect its evolution from a retail-centric POS provider into a global, cloud-based commerce platform. On August 5 2021, at its annual shareholders meeting ,the company changed its name from “Lightspeed POS” to “Lightspeed Commerce”. This was done with the intention of more accurately represent Lightspeed’s current and future offerings, which is expanding towards servicing omnichannel commerce solutions. In the company’s word, “Lightspeed is revolutionizing commerce and is set to become much more than point -of- sale software.” Commentary From Collins and Porras (1996), companies that enjoy enduring success have core values and a core purpose that remain fixed, while their business strategies and practices endlessly adapt to the changing environment. This is exactly the case with Lightspeed. While staying committed to their core purpose of creating technology that powers all of Main Street, they’ve adapted their offering to answer the merchants’ demand for cloud -based and omni-channel software. Home

36 Business Level Overview What are Lightspeed’s tangible and intangible resources? Tangible Resources Intangible Resources Financial Resources ▪ ~CAD$275MM in revenue ▪ ~CAD$750MM in cash on balance sheet ready to deploy for acquisitions or internal capital expenditures ▪ Strong access to capital markets (raised >US~$1B over the past 2 years in secondary equity offering) ▪ Backed by high-conviction institutional investors, such as the Caisse de Dépôt et Placement du Québec Human Resources ▪ From our conversation with the company and its board of directors, Dax Dasilva (CEO) is a charismatic and visionary leader, with strong collaborative and team-building skills ▪ From our conversation with the company, management emphasizes collaboration between business segment of offer a streamlined experience to customers Physical Resources ▪ 13 offices around the world (Montreal, London, Ottawa, Olympia, Ghent, Amsterdam, Brisbane, Paris, Zurich, Lausanne, Geneva, Berlin, Hamburg) Innovation Resources ▪ Organic innovation through internal R&D and engineering team ▪ Inorganic innovation through acquisition of other POS players or players acting elsewhere in the software stack ▪ Lightspeed named CIX 2019 “Innovator of the Year” Organizational Resources ▪ Excellent Sales & Marketing team that identify potential merchants, respond to inbounds, and upsell current customers ▪ Industry-leading R&D team that create new modules for the Lightspeed platform and integrate acquired software ▪ Public Relations team lead Lightspeed's front-facing effort by leading initiatives such as the blog with free tools for merchants (ex: in 2021, LSPD collaborated with the McGill Bensadoun School of Retail Management to create a report on the Global State of the Hospitality Industry) Reputational Resources ▪ Strong brand name within the SMBs / POS industry ▪ Perceived by industry experts as one of the market leaders in the space and a go-to solution for SMBs with complex needs ▪ Won “Expert Choice Award” in the POS software category from FinancesOnline (2017) ▪ Won CVCA “VC Private Capital Regional Impact Award” for Eastern Ontario in 2020 Technological Resources ▪ Own intellectual property rights on their brand and their software solutions ▪ Often acquire other players in the space to obtain access to their technology, that is then bolted-on the main Lightspeed platform and offered as an additional module Home

37 Resources, Capabilities, Core Competencies, and Competitive Advantages Resources Capabilities Core Competencies Financial Physical Organizational Technological Human Innovation Reputational Tangible Intangible Full-Stack Offering International Expansion Mergers & Acquisitions Sales & Marketing and Land & Expand Strategy Merchant Acquisition & Retention Full-Stack Offering Mergers & Acquisitions Sales & Marketing and Land & Expand Strategy How does Lightspeed leverage its resources into capabilities, and capabilities into core competencies? Only full-stack platform for SMBs with complex needs Does more and integrates better acquisitions than peers Maintained above-average merchant locations growth for multiple years Home

38 Lightspeed’s Key Areas of Differentiation Source: Morgan Stanley Comprehensive omni-channel platform Complex SMB Supplier Initiatives SaaS Platform Customer Support Lightspeed Payments LSPD’s platform is differentiated by its cloud -based front office interface/integration and its back- office sophistication to serve complex SMBs LSPD has advanced inventory management abilities compared to peers, enabling them to serve merchants with a large amount of SKUs or a particularly fast or slow inventory turnover Products such as the LSPD Supplier Network ultimately enable referrals within a specific sub- vertical Lightspeed's modern cloud platform enables more reliability, remote access to data and applications, better security, and ability to run on basic iPad vs. proprietary hardware for legacy systems. Customers believe LSPD has superior support – from virtual training to solving customer challenges Allows for faster sales processing and refunds, and eliminates the need to enter transactions manually / twice Home

39 VRIN Analysis of Core Competencies Source: Statista, Company Filings, McKinsey & Company Valuable Rare Costly to Imitate Non-substitutable Back-office suite capabilities (R&D) ✓ Provides more value to customers needing such features leading to higher sales ✓ competitors are unable to integrate these capabilities ✓ Requires a lot of R&D ✓ No substitutes for the advanced features Hardware (R&D) ✘ Seamless integration with software provides value to customer, increasing sales ✘ Widely available and used for decades ✘ Widely available and used for decades ✘ Lots of alternatives such as mobile-based and cloud- based solutions Economies of Scale (Sales & Marketing) ✓ Saas cost is mainly fixed cost, hence economies of scale are key to profitability ✓ Achieving economies of scale can only be done by the first few largest players ✓ Achieving them requires the acquisition of a large customer base ✓ Need to be a large company POS Platform (R&D) ✓ Provides value to SMBs selling products to their clients ✘ Widely available and used for decades ✓ Developing it requires time and a lot of R&D ✘ Lots of alternatives such as mobile-based and cloud- based solutions Positive Network Effects (Customer Relationship Management, R&D) ✓ Makes client want their suppliers to use LSPD, which increases sales ✓ Only fully-integrated omnichannel software providers can achieve and lightspeed one of the only ✓ Requires time to attract customers and keep them over time ✓ No substitutes for such a business model Home

40 Lightspeed’s Value Chain Support Functions Finance Human Resources Management Information Systems Value Chain Activities Cloud-Computing Provider Cloud-Storage Provider User Onboarding R&D Lightspeed Software Platform Sources of Competitive Advantage Customer Acquisition Customer Service Home

41 Business Model Overview SWOT Analysis Appendix Strengths: Lightspeed offers broader software modules with their omni-channel approach. Competitors could offer similar payment systems, or POS systems, but they are unable to compete with lightspeed when it comes to offering customers (businesses) an integrated end-to-end software system. Lightspeed also has a remarkably high reach. They have more than 150k locations around the world, which allows them to have a larger TAM and serve more businesses. Weaknesses: One of Lightspeed’s weaknesses is its low global brand awareness relative to their large-scale competitors: Square and Shopify. Even though Lightspeed is showing incredible year-over-year sales growth, they are still extremely behind their competitors in terms of profitability. For instance, Square currently has 3 times more EBITDA and 30 times higher sales revenue. The financial suggest that although LSPD caters to a niche market (SMBs) its business model might not capture a large enough market Opportunities: LSPD should aim to scale its supplier network. This would allow LSPD to build its brand with scale. Lightspeed can also geographically expand through acquisitions as organic growth in foreign markets would be more tedious. Acquisitions would allow Lightspeed to expand geographically as well as technologically. Evolving from only retail to restaurant POS systems is also a very viable opportunity that Lightspeed is trying to tackle right now as it could allow it to handle a higher order velocity. Threats: They have strong competitors that have a swift and agile approach to running their business. This means that competitors such as Square and Shopify are constantly moving and improving. Thus, it becomes particularly important for lightspeed to be able to predict what they are doing and respond appropriately. Hypercompetition is present in the industry even though LSPD targets a specific market segment. Being able to respond to tactical actions is of the utmost importance for LSPD SWOT Analysis Home

APPENDIX – EXTERNAL ANALYSIS SECTION IV – lI

43 Competitive Landscape of Lightspeed There are many competitors in the POS market ranging from large multinationals to niche players Source: National Bank Financial Legacy/Incumbents Acquiring Banks (Payment) New Entrants Niche POS Providers Home

44 Key Competitors Source: Equity Research Restaurant-Focused Competitors Future Objectives Current Strategy Assumptions Strengths Toast Expand internationally Sells to customers in most market segments in the US. Offers management, and online ordering solutions Only run on Android to differentiate itself • Comprehensive product offering for restaurants • Easily replicable in other geographies TouchBistro Expand internationally Targets full-service, quick- service, bars & nightclubs, food trucks, and breweries Believes in the importance of hardware resilience in the case of internet outage • Resilient software in the case of internet issues Retail-Focused Competitors Future Objectives Current Strategy Assumptions Strengths Vend Developing a comprehensive omni- channel platform Targets merchants with complex needs and/or multiple locations Integrates with third-party platforms for eCommerce • Solid product offering adapted for its niche market Cross-Segment Competitors Future Objectives Current Strategy Assumptions Strengths Square Developing a comprehensive platform with its own eCommerce solution and POS app Primarily operates down- market for brick-and-mortar Believes in the importance of simplicity of their offering • Strong brand name • Simple product, easy to use for small businesses Shopify Becoming a broader platform of omni-channel solutions Focuses more on eCommerce than brick-and- mortar eCommerce is key to short term and long term growth • Strong brand name • Targeting both small and large businesses Home

45 Summary of Offerings from Various Vendors Price for Tier 1 Retail POS Retail Processing Fees Summary of Features-POS Offerings $99.00 $29.00 $99.00 $99.00 $75.00 $79.00 $69.00 $99.00 $60.00 $99.00 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 Average of $80.70 2.6% 3.0% 2.8% Not publicly disclosed 2.5% 2.6% Not publicly disclosed 2.6% Not publicly disclosed 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Average of 2.7% Type Vendor One-Stop Shop for Omni Channel Front End Capabilities Back End Capabilities Cloud Payment Developer- Friendly eCommerce Hardware Target Vertical Merchant Complexity New Entrant Lightspeed Yes Yes Yes Yes Yes Inhouse Yes Yes-Integrated eCommerce 3rd Party Retail & Restaurant Small-Medium Legacy/Incumbent Heartland Yes No Yes Yes Yes Inhouse No No Inhouse Retail & Restaurant Medium-Large Legacy/Incumbent NCR-Aloha Yes No Yes Yes Yes Inhouse No No Inhouse Restaurant Small-Large Legacy/Incumbent NCR-Retail Yes Yes Yes Yes Yes Inhouse No Yes - via NCR eCommerce Inhouse General Large Legacy/Incumbent Oracle-Micros Yes Yes Yes Yes Yes Inhouse No Yes - via Oracle eCommerce Cloud Inhouse Restaurant Medium-Large Legacy/Incumbent SAP Yes No Yes Yes No 3rd party No No 3rd Party Retail Large Legacy/Incumbent Aptos Yes Yes Yes Yes Yes Inhouse No No 3rd Party Retail Large Legacy/Incumbent Microsfot Yes Yes Yes Yes Yes 3rd party No No 3rd Party Retail Medium-Large Legacy/Incumbent QuickBooks POS Yes No Yes Yes No 3rd party No No 3rd Party Retail Small-Medium Niche POS Provider Touchbistro Yes No Yes Yes Yes 3rd party No No 3rd Party Restaurant Small-Medium Niche POS Provider Toast Yes No Yes Yes Yes Inhouse No Some-Online ordering 3rd Party Restaurant Small-Medium Niche POS Provider SilverwarePOS Yes No Yes Yes Yes 3rd party No No 3rd Party Hospitality Small-Medium Niche POS Provider Phorest Yes No Yes Some No 3rd party No No 3rd Party Salon Small-Medium Niche POS Provider Revel Yes No Yes Yes Yes Inhouse No Some-Online ordering 3rd Party Retail & Restaurant Small-Medium New Entrant Vend Yes Yes Yes Yes Yes 3rd party No Yes-Integrated eCommerce 3rd Party Retail Small-Medium New Entrant Shopify POS Yes Yes Some Some Yes Inhouse Yes Yes-Integrated eCommerce 3rd Party Retail Small-Medium New Entrant Square Yes Yes Some Some Yes Inhouse Yes Yes-Integrated eCommerce Inhouse General Small-Medium New Entrant Clover (First Data) Yes Yes Yes Yes Yes Inhouse Yes Yes - via Clover Online Inhouse Retail & Restaurant Small-Medium New Entrant Paypal POS Via 3rd party Partnership with other vendors Inhouse No No Inhouse General Small-Medium New Entrant ERPLY Yes No Yes Yes Yes 3rd party Yes No 3rd Party Retail Small-Medium Home

46 Drivers of Competitive Behavior Lightspeed is well positioned to compete and grow in a very competitive industry Awareness ▪ Many firms in the industry operate in the same markets as Lightspeed and often have similar resources ▪ Lightspeed recognizes the degree of their mutual interdependence with competitors as demonstrated by multiple acquisitions in recent years to offer a unique and differentiated platform Motivation ▪ Lightspeed operates in a fast-cycle market with many small competitors growing rapidly and trying to gain market share ▪ Lightspeed is motivated to compete in the industry since it perceives that its market position could suffer if it doesn’t respond Ability ▪ From our discussion with Marie-Josée Lamothe (Director), Lightspeed’s executives are outperformers who are always looking for ways to improve the company and its offering ▪ The company expects to keep growing organically at 30%+ per year and execute more acquisitions to further improve its offering Home

47 Competitive Rivalry Lightspeed operates in competitive markets where it competes with many other firms also having similar capabilities ▪ First-mover benefits: Lightspeed has been one of the early players in the industry (complex SMBs) and can now benefit from an advanced technology and brand loyalty. ▪ Organizational size: Small competitors are important to monitor in the near-term, as the market will eventually mature and consolidate into a few players. They also represent potential acquisition targets. ▪ Quality: Lightspeed’s platform is known to be very well adapted for complex SMB needs. They are also constantly improving it by adding new features to meet the needs of their customers. Therefore, the company is well positioned to attack competitors entering in its niche market. Likelihood of Attack ▪ Type of competitive actions: Additional competitors may add POS features to their existing solutions and/or expand to new markets (tactical actions). Lightspeed is likely to respond to these actions. ▪ Actor’s reputation: Given its aggressive M&A strategy and past acquisitions, LSPD is seen as a fierce competitor that does not back-off from the competitive dynamics within industries, it is therefore likely to respond to actions directed toward them. ▪ Market dependence: Lightspeed is becoming more and more diversified over the years as they enter in new geographies and offer their services to new markets. However, Lightspeed still focuses on complex SMBs so it is likely to respond to competitors entering this niche market and trying to capture valuable market share. Likelihood of Response Home

48 General Environment Trends Demographic Source: Barclays Equity Research, Harvard Business Review, IBIS World #1. E-Commerce is a Growing Share of Retail Commerce Retail spending has seen a gradual shift towards online channels or e-commerce due to mainstreaming of online giants such as Amazon, as well as physical brick and mortar stores providing online storefronts and mobile channels. E-commerce as a % of total retail sales is expected to grow at a 4-year CAGR of 5.4% 3% 4% 4% 5% 6% 7% 8% 10% 12% 14% 17% 18% 19% 21% 10A 11A 12A 13A 14A 15A 16A 17A 18A 19A 20A 21E 22E 23E #2. Consumers Prefer an Omni-channel Shopping Experience While e-commerce penetration continues to grow, physical stores are here to stay as consumers prefer shopping from several channels, including going in-store to try out merchandise. Thus, omni-channel commerce brings together the best of both worlds. Not only are consumer buying preferences shifting online, vendors also benefit from when consumers use multiple channels or touchpoints to transact. A survey indicates 4-10% more money is spent by omni-channel vs single-channel customers, 23% more repeat shopping trips within 6 months after an omni-channel shopping experience, and 13% greater in-store spending among omni- channel shoppers who browse the company’s / it’s rivals’ website beforehand. 7% 20% 73% Online Only Store Only Omni-channel 65% 45% 78% 32% 13% Physical Store Online Store Amazon eBay Facebook 73% of consumers prefer omni-channel and 65% of consumers shopped in physical stores during the first 6 months of 2019 Home

49 General Environment Trends Technological Source: Barclays Equity Research, BRP Consulting, Company Filings, Harvard Business Review #1. Legacy information systems becoming obsolete Legacy on-premise POS systems require large upfront investments, technical know-how for installation and ongoing maintenance which suit the needs of large businesses, not SMB’s. This is causing legacy POS to be replaced within the SMB customer base. Modernization is the top reason SMB’s are looking to replace their current POS systems 31% 21% 20% Modernize Faulty Current System Improve Inventory Tracking #2. Increased Demand for Cloud-Based POS Systems Modern POS systems leverage the benefits of cloud to address the needs of today’s digital SMB’s. They are cost efficient, all ow SMB’s to be up and running quickly, less frequent updates that do not require much technical expertise, and increased optiona lity. Adoption of Cloud-Based POS Systems Continues to Increase, But has a Long Way to Go Top 3 reasons SMB’s replace POS systems 40% 35% 27% 24% 22% 15% 13% BI / Reporting CRM Inventory Order Management POS Returns Pricing #3. Consumers are looking for tech enabled shopping Omni-Channel commerce is increasingly becoming the minimum requirement, and omni-channel integration and unified commerce platforms are key POS priorities for SMB customers. Cloud penetration for retail store systems Home

50 General Environment Trends Technological (cont’d) Overall, technological trends are acting as a tailwind to Lightspeed’s business and their goal to become a one -stop shop for its clients #4. Need for End-to-End Solutions SMB’s do not have technical resources to stitch together multiple digital platforms across front -office and back-office, so are seeking POS platforms providing end-to-end functionality. Cloud-based omni-channel commerce platforms are differentiated based on breadth and depth of back-office functionality along with core front-office POS and e-commerce offerings. Most cloud-based POS systems go for simplicity and do not address the value-added modules for back-office management. Less than Half of the SMB Customers Highlighted that their IT systems can Handle Basic Back-Office Functions 41% 41% 41% 39% 34% 34% 25% Inventory Loss Prevention Order Management Loyalty Program Pricing/Promotions Analytics/Reporting Returns Management Percentage of SMB’s that are satisfied with their IT systems’ ability to cope with back-office functions Source: Barclays Equity Research, BRP Consulting, Company Filings, Harvard Business Review Home

51 General Environment Trends Global Source: Barclays Equity Research, eMarketer, Harvard Business Review #1. COVID-19 Accelerated the E-Commerce Shopping Trend The COVID-19 pandemic accelerated the trend of e-commerce adoption. Traditional vendors are having to digitize to continue selling goods as customers increasingly move to online purchasing. E-Commerce as a % of Total Retail Sales and E-Commerce Sales Growth and Penetration Have Increased Due to COVID 10.8% 11.2% 11.3% 11.8% 16.1% 2Q19 3Q19 4Q19 1Q20 2Q20 18.0% 14.0% 14.5% 14.0% 2020 2019 Post-COVID vs Pre-COVID Retail E-Commerce Sales Growth E-Commerce as a % of Total Retail Sales Post-COVID vs Pre-COVID Retail E-Commerce Penetration 11.0% 14.5% 14.6% 15.1% 11.0% 12.0% 13.7% 13.6% 2019 2020 2021 2022 Home

52 General Environment Trends Economic Source: Barclays Equity Research, Harvard Business Review, McKinsey, OECD, Statistics Canada #1. Consumer Spending Habits 5 Consumer Themes Below Have Emerged in 2021: #2. Large Corporations Disproportionately Profited From the Pandemic In April, the OECD estimated that, across 32 countries, 70 to 80% of SMBs had experienced a drop in revenue of between 30 and 50%. Larger businesses have been slightly less hard-hit as a group, but the pandemic amplified a divergence between leading companies and the rest. This implies that now, more than ever, SMB’s are in need of a cost -efficient POS solution #3. Economic Recovery Following the onset of the pandemic, Canada experienced a drastic drop in its real gross domestic product (GDP), with the economy contracting 18.2% between March and April 2020.Note With the gradual easing of pandemic-related restrictions, the business climate began to improve. GDP grew for eleven consecutive months, although overall economic activity is about 1% below February 2020’s pre -pandemic level. Omni-channel is Ascendant: 60-70% of adults are omni-channel consumers; both brick-and-mortar business and e-commerce are growing. Spending is Strong but Bifurcated: Spending is growing by 6% vs pre-pandemic trajectory; higher incomes, younger consumers spend more. Recovery Differs Across Categories: Acceleration continues in many categories; travel and out-of-home consumption declined with the Delta variant. Homebody Economy Continues: Almost 50% of consumers buy out-of-home products; investment in homes continues Loyalty Shake-Up Continues: ~75% of consumers continue to switch brands; ~90% among millennials and high-income consumers Home

53 General Environment Trends Sociocultural Trends Overall, the general environment trends will act as a catalyst towards Lightspeed’s growth Source: Harvard Business Review, IBIS World, Small Business Trends Customers Prefer the Experience Small-Scale Businesses Offer Over Large Corporations ▪ Tailored offerings and great customer service allow SMBs to forge deeper personal relationships with customers. According to a Zendesk survey, 91% of respondents prefer small businesses when convenient, while 74% actively search for opportunities to support SMBs even when it is not convenient. ▪ The advantage small businesses have is their ability to provide niche and differentiating offerings to meet customer demand. In turn, these happy customers will give positive reviews to acquaintances and coworkers — boosting their reputation. Sociocultural Note: Legal / Political and Sustainable Physical Environment was deemed invalid for Lightspeed’s industry Home

54 Porter’s 5 Forces Threat of New Entrants Source: Company Filings, Equity Research, IBIS World Barriers to Entry #1. Economies of Scale : High - Companies in the POS software space are likely to realize economies of scale and operating leverage as fixed costs such as product development, marketing, and general and administrative expenses are spread across a larger revenue base #2. Product Differentiation: High - Each POS software provider claims to offer a unique set of functions / value proposition. For instance, Lightspeed’s cloud POS competitor in the restaurant market, Toast, has a comprehensive product offering. It allows restaurants to setup a direct online channel; most competitors lack this capability or require the use of a third-party app. Toast is also unique in their go-to- market approach due to their sizeable sales force. Finally, Toast’s solution only runs on Android hardware, which they believe is a competitive differentiator due to the lower cost and as this this enables it to offer a broader range of form factors (such as Toast Go, a handheld that can accept payments and “that can fit into a kitchen apron pocket”) and hardware that’s more physically resilient, due to being commercial -grade rather than consumer-grade (ex: better able to withstand kitchen grease or being dropped). Similar to Toast, another one of Lightspeed’s competitors, Square, claims to have a unique and differentiated product. They have a development platform, which allows developers, or restaurants (such as Shake Shack, which is using this platform), to develop their own POS apps that can leverage Square’s hardware and payment processing. #3. Capital Requirements: Low - Low capital requirements with companies spending $0.05 on capital for every $1.00 spent on labor. Most software companies need limited capital goods, like server computers and office space. In most ways, software can be considered an intangible product, and producing quality software chiefly requires talented employees and time. Companies in this industry rarely encode their software on discs themselves and generally prefer to outsource that activity. On average, this industry spends nearly 40.0% of revenue on employee wages, which is only expected to increase moving forward. The largest companies employ hundreds of workers to develop industry software and require vastly more office space than their smaller counterparts. $0.22 $0.14 $0.05 Economy Sector Industry The industry capital ratio is much lower than the overall economy; spending $0.05 on capital (vs $0.22) for every $1.00 spent on labor. Therefore, labor is the most valuable resource in this industry as opposed to capital. Home

55 Porter’s 5 Forces Threat of New Entrants (cont’d) The POS software industry has low barriers to entry and expected retaliation, meaning the threat of new entrants is high Source: Company Filings, Equity Research, IBIS World Barriers to Entry #4. Switching Costs: Medium - Customers of POS software have medium switching costs. Businesses develop a level of trust and familiarity with larger POS software developers, which makes them reluctant to switch to another provider. Furthermore, the switching process would involve transferring large amounts of data and integrating the overall system to a new software provider. However, at the same time, new entrants often introduce a new technology or cost- saving advantage targeting SMB’s, which may make them inclined to shift POS software providers. #5. Access to Distribution Channels: Low - Typically, access to distribution channels acts as a barrier to entry in consumer nondurable goods industries (such as in grocery stores where shelf space is limited). In the POS software space, distribution is not a major factor given the software can be purchased and integrated relatively easily #6. Cost Disadvantages Independent of Scale: Medium – Existing competitors have certain cost advantages such as proprietary product technology and new combinations of services offered as part of the POS software package (ex: Toast, as mentioned in the previous page). However, these can be easily replicated / companies can work around the patents and create similar products or offer other unique services. #7. Government Policy: Low - Government policy doesn’t have a significant impact on the POS software industry. While regulations around patents and intellectual property may increase barriers to entry, software companies typically find ways around these patents to create a different product which offers similar features. Lastly, anti-trust regulations tend to be an issue for large software companies such as Facebook and Amazon, but not for POS software companies looking to pursue acquisitions in the mid-market space with an average transaction value of ~$300M. Expected Retaliation Low: Expected retaliation of competitors is low. Companies are aware of the existence of several smaller players and that they are growing very rapidly. They respond by integrating more features to their platform to remain the best option for complex SMBs. However, part of their strategy is to acquire threatening small competitors, as M&A Represents a Lever to Further Accelerate Growth. Home

APPENDIX – STRATEGIC RECOMMENDATIONS SECTION IV – llI

57 Comparison of Developed Markets & Africa Lightspeed’s most attractive expansion opportunity The African market offers more opportunity for growth and lower legal hurdles for data collection and analytics, making an untapped opportunity. Sources: Statista, FinancesOnline, McKinsey North America & Europe Africa Political & Legal Env. ▪ Smoother regulatory environment given the new arrival of generalized use of internet ▪ Large set of laws to protect privacy of users Growth Potential ▪ Africa’s economy is less formal and the use of cash is dominant for transactions. Most stores don’t use modern POS systems. ▪ Africa is the continent who’s expected to see the highest growth in eCommerce due to the increasing access to internet, its young demography, and the wide use of mobile phones. ▪ 92% of corporations already use or are in the process of using cloud- based POS ▪ eCommerce sales in these markets are expected to keep growing. However, eCommerce is already an established and widely used option. Hence, the total eCommerce market has a medium growth potential . 0 200,000 400,000 600,000 800,000 1,000,000 Actual Projected North America - eCommerce Growth (millions) 0 10,000 20,000 30,000 40,000 50,000 Actual Projected Africa - eCommerce Growth (millions) Home

58 Comparison of Developed Markets & Africa Lightspeed’s most attractive expansion opportunity North America & Europe Africa Growth Potential ▪ There are very few players (4 companies control 92% of the market) in the POS systems and payment processing industries in Africa. The established players only offer software limited to payment processing or registering, but nothing on the scale of the one-stop all- inclusive model of Lightspeed. ▪ Largely fragmented and competitive market . Clients tend to stick to the same POS provider due to the high switching cost caused by the complex implementation of a new POS and the loss of the integration smoothness with other platforms. Source: Statista, IBISWorld 42% 24% 24% 4% 4% 1% 1% Jumia Takealot Souq Konga Bidorbuy Zando Other Africa – Market Fragmentation (Low) North America – Market Fragmentation (High) 34.70% 4.80% 5.60% 3.30% 11% 9.80% 30.59% Square NCR Heartland Verifone LSPD Shopify Other (100+ Companies) Home

59 Comparison of Developed Markets & Africa Lightspeed’s most attractive expansion opportunity Sources: Statista, FinancesOnline, Conclusion ▪ Regulations : Lightspeed can benefit from the smoother African regulations with regards to privacy by creating analytics to predict consumer behavior for suppliers and stores more accurately. ▪ Maturity : Lightspeed can benefit from the large pool of stores and eCommerce platform who don’t use cloud- based POS systems and their full-integrated platform because it is a completely new technology in Africa. On the other hand, most North American companies are already using similar systems. It would be hard for Lightspeed to grow by capturing clients from the competition, because consumers face a high switching cost. Hence, the North American growth will mainly come from the 8% of corporations who still need modern POS systems, which is limited compared to Africa’s potential. ▪ eCommerce : The growth of eCommerce in Africa is more than 3.5x faster than America’s . It is an opportunity for lightspeed to implement Lightspeed Pay in a fast-growing environment. It would also allow Lightspeed to be the first-mover in the market. Hence, consumers will get used to the Lightspeed system and will stick with them since switching to another platform would be costly and decrease the integration of all services combined. Also, the positive network effects will make consumers stick to Lightspeed more, as stores will ask for suppliers to use Lightspeed too to integrate their supply management systems in real-time. ▪ Market Fragmentation : Lightspeed on its own has a 5x greater market capitalization than all the industry’s African players combined. Hence, Lightspeed can compete on a larger scale with more resources and dominate the market with ease and capture all its growth. Lightspeed could even opt for an acquisition in the African market to penetrate it faster and ensure a first-mover advantage. Home

60 How to Penetrate the African Market Adapting the offering to key differences in the African market African Consumers have a very limited access to credit cards and use cash a main payment method. To benefit from the growth of eCommerce in Africa and be convenient for the 60% of consumers who use cash, we recommend a new service: Lightspeed Cash, an extension of Lightspeed Pay How it Works Consumers – Choose their preferred products with an eCommerce partnered with Lightspeed Lightspeed processes the order and compiles the data for future consumer behavior analysis Warehouse – Receives the order and prepares its shipping Lightspeed provides real-time data to shipping company and suppliers about the Warehouse inventory First Mile – The transportation company takes the product to a local last mile shipping company partnered with Lightspeed Pay Last Mile – The delivery man takes the package to the customer’s house and takes a cash payment at the place of delivery. Lightspeed processes the order and compiles the data for future consumer behavior analysis Lightspeed Communicates invoice information to delivery man Lightspeed stores data about delivery time for further analysis Cash is collected and taken back to the shipping company partnered with Lightspeed Pay to be cashed in by Lightspeed Pay and electronically transferred to the seller Home

61 Lightspeed Shipment Model Overview Goal Design Value added Resources needed Benefits As Marie-Josee Lamothe, Director of Lightspeed’s board mentioned during the call team #101 had with her, the next step for LSPD is to become a fully integrated one-stop shop for its partners. Doing so would allow LSPD to achieve higher customer stickiness and therefore be more resilient in an industry where competition is ever-increasing. The shipment model sees LSPD take care of the B2B or B2C shipments through warehouses LSPD could have across its main geographies of business. LSPD’s partners would send their inventory to be shipped out to the nearest Lightspeed shipment warehouse after which LSPD would take care of getting the product to the end consumer and handling other components of the logistics (freight errors, product returns etc.). Given LSPD’s strenuous position within the tactical action heavy industry, the value of this initiative would be mostly captured by the SMBs themselves (the customers): small and medium businesses often times try to outsource the delivery and logistics portion of their business to focus on core operations as they mostly are targeting sales growth. LSPD’s shipment model would allow them to eliminate the burden of handling logistics all the while having LSPD maneuvering all non-core parts of their business. The value-added therefore stems from the added convenience businesses would have. To tackle such a project, LSPD would need. To purchase warehouses at strategic locations where there is the most partner traffic. LSPD would then hire staff and partner with shipping companies to get the products to the end consumer. LSPD would effectively use core competencies to achieve a competitive advantage as its new model would create superior value for customers through the integrated offering. Although that competitive advantage may be short lived given the fast-cycle market, the significant amount of capital required to duplicate the model would make it harder to imitate. Recommendation #2 Home

62 Lightspeed Shipment Model Overview: Mapping Consumers – Choose their preferred products with an eCommerce partnered with Lightspeed Lightspeed Lightspeed – Receives the order, stores the data, gets the goods from the commerce 1 2 3 SMBs – Sends the goods to the closest LSPD warehouse in a timely fashion 4 Warehouse – Receives the goods, stores them and prepares the shipment 5 Dispatcher – Takes the shipments to a shipping company. Ships in bulk or in low volumes depending on consumer preferences 6 Shipping company – receives the package and ships it across the world directly to the consumer 7 Worldwide consumers receive goods from SMBs that would, without the help of LSPD, only ship locally. Commerce get access to a larger audience and market and consumers get to consume products that would not have been available to them. LSPD therefore is a significant actor in the globalization of e-commerce Recommendation #2 Home

63 Lightspeed Shipment Model Overview: Shopify Case Study Shopify Inc. is a Canadian multinational e-commerce company headquartered in Ottawa, Ontario. It is also the name of its proprietary e-commerce platform for online stores and retail point-of-sale systems. The Shopify platform offers online retailers a suite of services including payments, marketing, shipping and customer engagement tools. In an effort to build an end-to-end solution for its partners, Shopify created the “Shopify Fulfillment Network” . Under the model, Shopify permanently holds some of its customers inventory for future shipments and stores them in automated warehouses that send the products to customers once ordered Value-added Accuracy Robotic support ensured 99.5% order accuracy Flexibility Service for businesses that ship 3 orders a day Optimization better routing and carbon emission Management Centralized inventory management by tech How they made it possible Scalable Responsible Control Pricing Shopify achieved a successful model by balancing making the service it provides fulsome and automated with charging a price that makes sense for each of their partners. See below for a more detailed pricing/quote computation. Storage Fulfillment rates Special projects $$$ – Calculated daily based on the space the inventory occupies in the warehouse $$ – Cost of fulfilling each order, using the most affordable shipping rates $ – Cost of projects that go beyond normal tasks Quote ($) + + Home

64 Lightspeed Shipment Model Overview: Shopify Case Study Storage $$$ – Calculated daily based on the space the inventory occupies in the warehouse + + Changing the storage format of Shopify’s Fulfillment Network is the only way to reach a feasible price point for the SMBs that have less inventory and less capital available compared to Shopify’s target companies x Home

65 LightMarket Pace Recommendation #3 Potential results The LightMarket Pace is a marketplace that connects consumers with the small & medium businesses LSPD partners with. Through a proprietary algorithm, LSPD monitors and predicts consumers’ shopping patterns to propose a product catalogue and locations to shop via phone pop-ups according to their geolocation. Powered by John has been shopping for running shoes over the past week Shoe shop LSPD Partner Once he gets closer to the shop, John gets a pop-up telling him he’s approaching a shoe shop and showing him some of the deals they have John found the pair of shoes he was looking for and the shoe shop got a new customer! Source of the problem SMBs cannot afford to advertise their products heavily until they reach a certain top line and profitability. However, advertising helps them reach financial prosperity; they are therefore stuck in a vicious circle where they cannot afford to advertise without using advertising The app Brings unmatched value to businesses as it allows them to gain exposure and get advertised at no additional cost, which would precipitate revenue growth and profitability (given the no downside risk nature of the app) What’s in it for LSPD? Lightspeed would effectively create a platform with centralized consumer data which would allow it to be on the forefront of data analysis and general environment predictions and forecasts, positioning it to be poised for growth going forward. The data could be used to provide advice to partners with regards to their inventory management, product offering, and strategic positioning, which would again be a value generator. 1 Home

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