Canadian cloud-based point-of-sale company Lightspeed POS (Lightspeed POS Stock Quote, Chart, News TSX:LSPD) is beginning to see real upside from acquisitions, according to National Bank Financial analyst Richard Tse, who reviewed the company’s latest quarter in a note to clients on Thursday.
Shares of Montreal-based Lightspeed POS closed Thursday down 1.3 per cent as the market reacts to the company’s fiscal second quarter results.
The company posted total revenue of $28.0 million, representing a 51 per cent increase year-over-year and ahead of management’s guidance of $26.5 to $27.0 million. (All figures in US dollars unless where noted otherwise.)
In the press release, management touted Lightspeed’s growing customer base for its POS system which has now hit 57,000 customer locations worldwide, while pointing to new acquisitions iKentoo and Kounta.
“Our recent acquisitions not only fortify our leadership in geographic coverage, but we are thrilled that high-performing companies and their talented teams are eager to join forces with us as we tackle our massive market opportunity of building a truly global platform,” said CEO Dax Dasilva.
Tse reports that Lightspeed’s $28.0-million top line was ahead of his $26.8 million estimate as well as the consensus $26.9 million, while its adjusted EBITDA loss of $5.1 million was also better than his negative $5.6 million estimate and the Street’s negative $5.5 million.
The analyst called the results solid and noted that management put forward an increase in guidance for its fiscal Q3 and fiscal 2020, now calling for Q3 revenue of $31.5 to $32 million and full fiscal year revenue of $117 to $119 million.
Drilling down, Tse said LSPD’s recurring software and payments revenue was up 52 per cent to $25.4 million and better than his $23.9-million estimate, while its merchant count of 57,000 was up 26 per cent. The analyst noted that management commented in the conference call that Lightspeed is gaining traction with larger and more complex retailers and hospitality clients, such as Gabriela Hurst and Four Season-operated Costa Palmas resort.
“In our opinion, our review of the results, filings, conference call and subsequent discussion with Management this morning has us reiterating our view on LSPD where our investment thesis has the Company holding its valuation off a growing incremental revenue base from Payments,” writes Tse.
Increasing prominence of Lightspeed acquisitions has been a surprise…
Tse says that the increasing prominence of LSPD’s acquisitions in his investment thesis has been a surprise.
“While it was clearly laid out in our initiation of coverage report as one of the growth drivers, with three acquisitions since that initiation report, it’s clearly a notable driver of growth,” Tse says.
“What we did not appreciate as much though are the potential synergies. For example, with respect to Chronogolf, a vertical market acquisition made in May, has already seen growth accelerating under Lightspeed’s ownership since acquisition via the added scale and channel,” he says.
Tse concludes, “Bottom line, while there wasn’t anything materially incremental in the quarter, the Q2 results, outlook and comments suggests the name is tracking right in line with our investment thesis. We’d be buyers.”
The analyst is maintaining his “Outperform” stock rating and C$52.00 target price, which represents a projected 12-month return of 65 per cent at press time.