Lightspeed’s loss widens to $100.8-million: What you need to know

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Montreal-based Lightspeed Commerce Inc. reported a wider net operating loss of $100.8 million for its fiscal 2023 first quarter, despite an increase in revenue as the economy continued to recover from the pandemic.

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“Consumers are once again shopping in-store and dining out,” Lightspeed chief executive Jean-Paul Chauvet said in a press release announcing the results. The point-of-sale services company attributed the rise in revenue to “organic growth” and acquisitions of NuORDER, a B2B e-commerce company, and Ecwid, which enables small business owners to set up online stores.

But those gains were not evenly distributed, as improvements in the hospitality sector were not enough to outweigh headwinds on the retail side.

Here’s what you need to know about their earnings for the three-month period ending June 30:

Backstory

The e-commerce sector is experiencing a shake-up as the pandemic-era growth fizzles out. Ottawa-based Shopify Inc. laid off 10 per cent of its staff in late July, and it’s not the only company struggling. Shares of a number of e-commerce companies have declined in recent months. This is partly due to the fact that consumers have returned to brick-and-mortar retail stores, pulling business from online merchants.

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“What happened during COVID is that a lot of pure digital players had a lot of tailwind,” Chauvet said, “and now they’re having a hard time.”

Lightpseed, Chauvet said, is not in that situation. During a conference call with shareholders, he elaborated when an analyst alluded to the tech layoffs and share price declines.

“For me, it’s very simple,” Chauvet said. “We are not a pure e-commerce or pure digital company. The strength of Lightspeed (is that) 90 per cent of our Gross Merchandise Volume (GMV) is physical retailers and restaurateurs. And so, this return to the physical world is creating a lot of demand for us.” Lightspeed’s emphasis on retail and hospitality makes the company “well-balanced,” he added.

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Asha Bakshani, Lightspeed’s chief financial officer, said that interest rates and inflation were indeed having an impact, but were affecting the retail side of the business more than the hospitality side. Consumers are prioritizing spending in “areas such as travel and entertainment,” she said, rather than goods. Hospitality, conversely, is doing well. “Hospitality gross transaction value (GTV) grew 40 per cent in the quarter organically,” she said. “And although we saw a particularly strong uptick in Europe, Hospitality GTV remained at healthy levels in all regions.”

Lightspeed remains focused on building its business even though its share price has fallen 73 per cent this year. The company recently completed a renovation of its Montreal headquarters to make it more “homey” to encourage employees to return to the office of their own free will. “If you want people to want to come back — and we don’t want to force anyone to come back — you need to make it exceptional,” said Chauvet.

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The company is also working to attract top talent by implementing a People Experience (PX) policy, which offers workers unlimited paid leave.

Financials

Revenue reached $173.9 million in the quarter, up 50 per cent from $115.9 million in the year-ago period.

The company posted a net loss of $100.8 million, or $0.68 per share, compared with a loss of $49.3 million or $0.38 per share in the same quarter last year.

The company had an EBITDA loss of $15.6 million in the first quarter, worse than the EBITDA loss of $6 million in the same quarter last year. According to a fact sheet, Lighspeed believes EBITDA more accurately measures its performance than operating loss/gain, “by excluding certain items such as costs related to completing an acquisition, or items that are non-cash in nature.” Chauvet said that by this measure, the company is well on its way to breaking even by the upcoming fiscal year. 

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Shares were trading down more than 12 per cent at $27.47 in afternoon trading in Toronto.

Outlook

Lightspeed executives are not worried. “There is no question that the economic outlook has grown more pessimistic in the last few months,” Chauvet said. “I do not want to downplay the situation, but we believe that Lightspeed will continue to perform despite these challenges.”

He highlighted that “the return to in-person shopping and dining is by far the biggest macro influence on the company’s success. And here, I’m very encouraged with what we are seeing.”

Despite economic pressures stemming from the pandemic, the company has been busy over the last two years, making five acquisitions and introducing two new flagship products. “We’re being very rigorous and disciplined in our spend, but at the same time, we have so much opportunity as we integrate all the different companies that we’ve bought over the last two years,” Bakshani said.

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