Is Lightspeed Commerce A Good Investment?

This company posted fantastic quarterly results but upon closer inspection, not all is as it seems, so is Lightspeed a good investment?
Feb. 4, 2022
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Lightspeed Commerce (NYSE: LSPD) is a point-of-service (POS) and e-commerce software provider for vendors, hospitality companies, and restaurants. Recently, the company has been growing through acquisitions, spending over a billion dollars to purchase Ecwid, NuOrder, and Vend last year alone. The company isn't yet profitable but that's usually par for the course for young companies. Seemingly on the right track, Lightspeed was accused of inflating revenue and customer numbers pre-IPO. Considering all this, is Lightspeed Commerce a good investment?

The bull case for Lightspeed Commerce

As per the company's latest quarterly earnings report (Q3 2022), Lightspeed's revenue grew 165% and gross transaction value (GTV) is up 124%, year-over-year (YoY). Drilling down, subscription revenue surged 123% and transaction-based revenue rose by 249% in the same time period.

The monthly average revenue per user (ARPU), an important growth metric, is up over 60% to $290, YoY. Additionally, as of the beginning of the year, the company has roughly $1 billion in cash and equivalents. 

Fiscal 2022 revenue is projected to be between $540 and $544 million, increasing the previous outlook by $20 million. Also for the year, the adjusted EBITDA is in line with the previous quarter's outlook of a loss of $45 million. 

As pandemic restrictions ease worldwide, Lightspeed's profits are sure to grow. In fact, the company anticipates long-term ARPU growth of 10% or more and growth in customer locations of 15%, annually.

The bear case for Lightspeed Commerce

The acquisitions that Lightspeed made actually skewed its earnings numbers. Its revenue and GTV hadn't grown as much organically but rather through consolidation. Its ARPU, in combination with the newly acquired companies, actually goes down 47%. 

Nothing really shady there but here's what is. Before making its stock market debut, the company inflated its customer count by 85% and its GTV by 10%. Once this news broke, the company's stock price dropped 12% on the first day of trading. Since then, the price has continued to sink nearly 70% merely on rumors of an impending lawsuit.

So, is Lightspeed Commerce a good investment?

Lightspeed has a nice amount of cash and has bolstered its position in the market with its aggressive acquisitions. However, the company shamelessly reported growth during the pandemic while the rest of the industry, including its competitors, suffered. Any organization that cooks its books should be avoided.

Quickfire round:

1. Who is Lightspeed's CEO and where is its headquarters?

Founder Dax da Silva; Montreal, Quebec, Canada

2. When did Lightspeed go public?

September 11, 2020

3. What are some competitors to Lightspeed?

Block, Toast, and ShopKeep.


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