Dax Dasilva, founder and CEO of Lightspeed poses in their offices, in Montreal, Quebec, July 20, 2021.Christinne Muschi/The Globe and Mail
After a slew of recent Canadian software company privatizations, Lightspeed Commerce Inc. LSPD-T founder Dax Dasilva is musing whether his enterprise should do the same.
Lightspeed stock gained 3.4 per cent on Monday after Mr. Dasilva told La Presse in an interview published in the morning that he has wondered about taking the company private. Lightspeed, one of Canada’s most valuable software vendors, sells point-of-sale transaction software to retailers, restaurants, golf courses and hospitality providers.
Mr. Dasilva told The Globe and Mail that he had talked to investment bankers and dozens of investors since returning as interim chief executive officer last month, replacing former right-hand man Jean Paul Chauvet. That mid-February shakeup followed the negative reaction of investors to the company’s latest financial update.
“People have remarked to me since I’ve come back that going private would be a good option for Lightspeed,” he said. “As other companies weigh that decision, that’s one of the strategic options open to the company. We’re evaluating all options, our board has a fiduciary duty to evaluate all options.”
Mr. Dasilva said Lightspeed’s board had not formally launched a strategic review nor had it hired investment bankers: “We’re passively receiving their recommendations. I’m taking a lot of calls. I’m open to discussions.”
He said he continues to believe “the public markets are a good place for Lightspeed. If we can continue to be a high growth company and at the same time increase our margins, which is what investors want to see, I think we will be rewarded on the public market. The focus is operational efficiency and capital allocation.”
Shares of fellow Montreal software company Nuvei Corp. also shot up last week after the digital payments processor confirmed reports it was engaged in potential takeover talks. If Nuvei privatizes, it would be the eighth technology company out of the 20 that went public on the Toronto Stock Exchange during a flurry of COVID-19-era offerings in 2020 and 2021 to leave the public markets.
Other Canadian-listed software companies including Absolute Software Corp., mdf commerce and TrueContext Corp. have also recently agreed to buyouts. This wave of privatizations of Canadian tech companies in the past year followed a crash in valuations in late 2021. (Lightspeed stock is down more than 85 per cent from its high that year.)
BMO Capital Markets analyst Thanos Moschopoulos said Monday that, despite Lightspeed’s openness to strategic alternatives, “we think its near-term focus will likely will be on accomplishing this through operational improvement in the underlying business.”
Lightspeed has been on a push to shift clients to its in-house payment processing product and to focus on larger customers – those that generate US$500,000-plus a year in revenues – all while achieving positive adjusted-operating earnings. It delivered positive results by the latter measure in its fiscal second and third quarters, beating its revenue forecasts.
But Mr. Chauvet sparked concerns about Lightspeed’s financial outlook when the company reported third-quarter earnings last month, telling analysts that Lightspeed would shift sales efforts during its next fiscal year starting April 1 to increase its client count and software sales, He said the increased spending would only pay off months later, meaning operating profits would sag.
Analysts also wondered whether Lightspeed, which is on track to deliver US$900-million revenue this year, could increase its tepid rate of subscription software revenues growth. They slashed their share price forecasts, underscoring the challenge for a company trying to balance the twin goals of being profitable and growing revenues quickly.
“Investors have been telling me they are waiting to see operational efficiency and integrations of our acquisitions to reach a conclusion in order to make that business model a lot cleaner and more investible,” Mr. Dasilva said, referring to the nine deals the company has made since going public in 2019.
For example, Lightspeed pays more for general and administrative as well as sales and marketing expenses as a share of revenues than rival Toast Inc., which is adding customers at a faster clip.
Mr. Dasilva has hinted Lightspeed could slash costs and said he had no interest in making more acquisitions. The company will provide guidance for its next fiscal year when it reports fourth-quarter results in May.