MONTREAL — In mid-2019, Lightspeed acquired Chronogolf, marking its entrance into a new business: providing point-of-sale and management software specifically for golf courses. The purchase gave Lightspeed ownership of Chronogolf’s course-management software, positioning the Montreal-based company to sell those courses on even more software to run their retail stores or restaurants.

For Lightspeed, the acquisition couldn’t have come at a better time. The pandemic has led to a surge in popularity for golf: U.S. Golf Datatech reported that last year saw the largest increase in rounds played since the research firm started tracking the data in 1998. In the United States, golfers played over 60 million additional rounds in 2020 compared with 2019, according to the National Golf Foundation, as people flocked to activities that were outdoors and socially distanced. 

Those trends have been a boon to the golf industry worldwide—and for Lightspeed, company executives said on a quarterly earnings call in February. Software and payments revenues from golf nearly doubled year over year in its fiscal third quarter of 2021, Lightspeed reported. “It’s been a huge story for us,” CEO Dax Dasilva told The Logic in a recent interview. “Golf’s been a top performer for the company.”

Golf still represents a tiny portion of Lightspeed’s overall business, with only about 1,000 golf courses as customers worldwide. (Lightspeed didn’t discuss golf on its most recent call on May 20, and a spokesperson for the company didn’t provide an up-to-date figure of the business’s performance.) Other more significant revenue streams come from sales of its point-of-sale units and fees on transactions made through its software platforms.

Despite being a small part of the business, however, Lightspeed’s golf venture symbolizes the firm’s approach to gaining market share by focusing on POS systems for niche markets such as bike stores, home-decor retailers and pet shops. “Lightspeed is highly verticalized,” Dasilva said. “We say retail, but we are actually talking about a dozen specialty verticals.”

In some cases, Lightspeed has captured a large portion of the overall market in those businesses. For example, one in two bike stores in North America use Lightspeed’s platform, the company says. Lightspeed’s product for bike stores allows vendors to browse supplier catalogues from their POS unit and allows for specialized integrations with industry-specific software.

Dasilva said the golf industry in particular was an attractive opportunity because golf courses often combine multiple aspects of Lightspeed’s platform, making it possible to sell a single customer on several different offerings over time. “Golf happens to be a hybrid of both [retail and hospitality], because on a golf resort, you have pro shops, you have retail, and you also have the restaurants and the cafés,” Dasilva said. 

Lightspeed has been trying to bring that approach to other industries. On its website, the company offers resources for customers on how to integrate different aspects of its platform for different industries, such as loyalty programs for clothing stores or e-commerce for restaurants.

“There’s a lot of tools in the Lightspeed platform that people bring together in really unique ways,” Dasilva said. “There are bike shops that also have a café, that also leverage loyalty in an interesting way that makes them completely differentiated. Another store could use the same Lightspeed tools in a totally different way, a totally different configuration, and have a unique customer experience.”

Suthan Sukumar, principal at Toronto-based investment firm Eight Capital, said that while Lightspeed’s more niche businesses like golf are still too small to move the needle for the overall enterprise, the decision to expand into new markets has paid off for the company. “Lightspeed has been very thoughtful around building out their end-market reach and some of these moves have proven to be strategic, like golf and bike shops, which happened to be pandemic beneficiaries,” Sukumar said. “While there’s substantial runway for growth in Lightspeed’s core markets, there will likely remain a strategic focus on gaining inroads into new niche markets that may be under-penetrated [or] under-serviced.”

The number of verticals in which Lightspeed operates—the company has more than a dozen specialized offerings for different types of retail businesses—stands in contrast to competitors like Square, which offers a product for retail businesses, but doesn’t segment its offerings within that category. Still, entering specific verticals can come with established competitors, like foreUp and Teesnap for golf, which could lower the returns of focusing resources on those areas.

Other payments companies have tried to expand their reach by broadening their footprint into different types of payments, rather than entering specific markets. Montreal-based Nuvei, for example, said in May that it was acquiring cryptocurrency startup Simplex for $250 million, allowing it to add support for digital currencies to its list of offerings.

Lightspeed recently raised its outlook for the next fiscal year in light of promising signs of economies around the world reopening, sending its shares nearly 15 per cent higher after a mixed performance so far in 2021. Lightspeed’s revenue jumped 127 per cent in the fourth quarter, a surge largely driven by the acquisitions of Upserve and ShopKeep. The company also announced a partnership that would allow merchants to integrate their products with Google’s services, bolstering its multi-channel sales strategy.