Lightspeed offices in Montreal on Jan. 18.Christinne Muschi/The Canadian Press
Lightspeed Commerce Inc. LSPD-T is pledging to sharply increase its subdued pace of customer and subscription growth in the second half of its fiscal year after delivering better-than-expected first-quarter results driven by pushing clients to use its financial service products.
The Montreal-based point-of-sale software company’s stock dipped 1.2 per cent on a bad day for stocks overall. That reflects Lightspeed’s ongoing challenge of attempting to steadily improve its bottom-line performance while recapturing the more buoyant top-line revenue growth of its past. That has been a challenging juggling act for many software companies since tech markets crashed in 2021.
“There are a number of things the market wants to see, and I think we’ve executed really well on some of the early priorities,” chief executive officer Dax Dasilva said in an interview. “The last thing is software and location growth. That’s the pipeline we’re building and where we will deliver in the second half.”
Revenue in the quarter ended June 30 was US$266.1-million, up 27 per cent year-over-year on stronger-than-expected contributions from its payments business. That was ahead of the company’s prediction in May that it would book US$255-million to US$260-million of revenue.
Adjusted earnings before interest, taxes, depreciation and amortization were US$10.2-million, ahead of the US$7-million Lightspeed had forecast. It had an adjusted EBITDA loss of US$7-million in the same period last year. (Adjusted EBITDA considers such factors as share-based compensation and is not a recognized accounting standard, but is a metric analysts follow closely). It was the company’s fourth straight quarter of positive adjusted EBITDA. Lightspeed posted a net loss of US$35-million, after losing US$48.7-million a year earlier.
Looking ahead, Lightspeed forecast Thursday revenue of US$270-million to US$275-million and US$12-million in adjusted EBITDA in the second quarter. The company maintained its 20-per-cent-plus revenue growth forecast for the year and upped its adjusted EBITDA forecast for the period to US$45-million-plus, up from US$40-million-plus
Much of Lightspeed’s improved performance was due to its push to convert customers – retailers, restaurants, hospitality providers and golf course operators – to use its payments processing product, while charging fees to those who don’t. The share of clients on payments reached 36 per cent, up from 19 per cent five quarters ago. Lightspeed forecasts that will surpass 40 per cent this year.
The increased payments adoption, plus a 388-per-cent year-over-year revenue gain in its nascent customer cash-advance business, resulted in average revenue of US$502 per customer in the first quarter, up from US$383 a year earlier. But gross transaction volumes processed by clients only increased by 1 per cent to US$23.6-billion, as sales per existing client declined.
Lightspeed reported continued weakness in areas investors are monitoring before embracing the stock. Its performance challenges resulted in the departure of CEO Jean Paul Chauvet in February and the return of Mr. Dasilva, the founder, who put an increased focus on operational efficiency, starting with a 10-per-cent staff cut in April.
Subscription revenue expanded by just 6 per cent to US$83.3-million. The number of larger customer locations generating more than US$500,000 and US$1-million in gross transaction volumes each increased by 4 per cent. Those segments are important for Lightspeed as it has shifted its strategy to serving relatively larger clients while shedding customers with less than US$200,000 in volumes. It was the seventh straight quarter of smaller growth in the two segments.
Lightspeed executives outlined a series of initiatives on a conference call with analysts that they said would lift software sales growth to between 10 per cent and 15 per cent by year’s end. That includes increasing prices, investing more in outbound sales efforts and by moving sales efforts away from payments adoption to driving software revenue.
“We think better software growth will be needed in order for the stock to work – but believe Lightspeed can achieve its goal of accelerating this” in the second half, BMO Capital Markets analyst Thanos Moschopoulos said in a note.
One of Lightspeed’s challenges is that it has been hard for investors to follow since going public in 2019, thanks to a string of acquisitions, an overhaul of its flagship digital platforms and its shift to focusing on larger customers. The departure of smaller customers has been a drag on subscription revenue and the company was slower to cut costs than other tech companies during the downturn.
The recent focus on payments at the expense of selling subscriptions has also made it challenging to assess longer-term prospects. Mr. Chauvet also raised the spectre in February of Lightspeed starting to acquire companies again, talk that Mr. Dasilva quickly shot down after becoming CEO after it was poorly received by the market. “I understand that struggle for investors” in getting a handle on the company, Mr. Dasilva said.
Mr. Dasilva has also mused about taking Lightspeed private, a path other devalued Canadian public tech companies have followed. He said Thursday the board “is always reviewing our strategic options” but said his preference is to continue to “tell the story as a public company.”