Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lightspeed Commerce Inc (LSPD, Financial) reported strong revenue growth of 27% year over year, reaching $266.1 million, surpassing their outlook.
- Adjusted EBITDA came in at $10.2 million, significantly better than the adjusted EBITDA loss of $7 million in the same quarter last year.
- Payments penetration increased to 36%, up from 22% in the same quarter last year, demonstrating successful adoption of Lightspeed Payments.
- The company added several high-profile customers, including Google Bike, Horkans, Karavel Shoes, Foodmaker, Northgate Resorts, and Dineen Coffee.
- Lightspeed Commerce Inc (LSPD) launched several innovative features, such as the omni-loyalty program, advanced inventory management features, and a partnership with Uber for restaurant delivery services.
Negative Points
- Same-store sales were down year over year, particularly in certain verticals like bike and home and garden, and traffic in US restaurants was also down.
- Gross margins slightly declined to 41% from 42% year over year, impacted by the transition from integrated partners to Lightspeed Payments.
- There was a slight uptick in churn among non-flagship customers due to the Unified Payments launch in Europe.
- The company is still in the early stages of monetizing its supplier network, with significant contributions expected only in fiscal 2026.
- Despite strong growth in Lightspeed Capital, the business remains nascent with single-digit million-dollar revenue, limiting its immediate impact on overall gross margins.
Q & A Highlights
Q: Can you delve deeper into the decision to keep account managers focused on payments through Q2? Was there anything incrementally driving that decision?
A: Jean-David Saint-Martin, President: We've been following our game plan for this fiscal year. The Unified Payments program started in Q1 for retail and progressed throughout the regions. This year is a story of two halves. Our account managers will return to cross-selling and upselling software as well as payments, mitigating churn. We expect software revenue growth to come back above 10% in the second half.
Q: Can you provide more details on the updated pricing strategy for the second half? Is it for existing products or new clients?
A: Jean-David Saint-Martin, President: It's both. We've benchmarked our value against peers and see opportunities for price increases with minimal disruption. We've started executing this, and we expect to see the impact from Q3 onwards.
Q: Can you explain the gross margin dynamics in the quarter, especially with capital contributing $8 million?
A: Asha Bakshani, CFO: Gross margin came in at 41%, slightly down from 42% a year ago. The decline is due to the reduction in residuals from integrated partners as we transition them to Lightspeed Payments, which has a lower gross margin. Capital, with over 95% gross margins, is still nascent but growing.
Q: Are we getting closer to seeing supplier network contributions in the model? Where would these revenues come in?
A: Jean-David Saint-Martin, President: We continue to sign notable brands and have unlocked the pet vertical. We're stepping forward to monetizing the supplier network and expect meaningful impact from next fiscal year. We have about $10 billion of GTV from the supplier network, and we have started monetizing it in a negligible way.
Q: Can you update us on the progress of migrating the existing base to flagship platforms?
A: Dax Dasilva, CEO: Our non-flagship platforms are profitable with low R&D and support costs. We are creating pathways for customers to migrate to flagships, which offer more exciting innovations. We will detail more at our Capital Markets Day.
Q: How should we think about the sequential pace of payments penetration as you refocus the sales force?
A: Asha Bakshani, CFO: Payments penetration is impacted by GTV fluctuations. We expect it to continue its upward trajectory as all new eligible customers must take payments. The account managers' return to selling software won't significantly impact this.
Q: Can you quantify the impact of the pricing strategy on subscription revenue?
A: Jean-David Saint-Martin, President: It's tricky to share exact numbers due to the sensitive nature. However, it is a significant number of customers where we see opportunities for meaningful price adjustments.
Q: Can you talk about the competitive environment in retail and restaurant sectors and your win rates?
A: Dax Dasilva, CEO: We focus on specific needs of our ICPs in retail and hospitality, which helps us displace legacy players. Jean-David Saint-Martin, President: Our close rates are typically 32-33%, and in certain sub-verticals, it climbs to 45-50%.
Q: What are your capital allocation priorities moving forward?
A: Asha Bakshani, CFO: Our Board authorized a share repurchase program for up to 10% of our public float. We repurchased about 2.7 million shares for $40 million. We plan to be opportunistic with our NCIB.
Q: Can you discuss the early strength in software ARPU and traction from module upsells?
A: Jean-David Saint-Martin, President: Our flagship products have higher software ARPU due to significant software modules. In hospitality, our insights module is strong, and in retail, inventory management and analytics modules are performing well.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
