Eight Capital remains bullish on Lightspeed

New quarterly numbers from Lightspeed POS (Lightspeed POS Stock Quote, Chart, News, Analysts, Financials TSX:LSPD) look good but so does the view up ahead, according to Eight Capital analyst Suthan Sukumar, who reviewed Lightspeed’s fiscal fourth in an update to clients on Thursday.

Montreal-headquartered e-commerce company Lightspeed POS delivered fiscal Q4 2021 results on Thursday, showing total revenue of $82.4 million, up 127 per cent year-over-year. Recurring subscription and transaction-based revenue hit $75.3 million, up 137 per cent from Q4 2020, as the company saw Gross Transaction Volume (GTV), the total dollar value of transactions processed through LSPD’s platform, grew to $10.8 billion, up a full 76 per cent year-over-year. Adjusted EBITDA was a loss of $9.6 million compared to $6.2 million a year earlier.

The company said fiscal 2021 was one of its most transformative years to date, listing among the highlights its landmark acquisitions, new offerings like Lightspeed Capital, eCommerce for Restaurants and Order Ahead, listing on the NYSE and the recent integration of Google tools onto its platform.

“While helping our customers meet the challenges of the past year, Lightspeed grew its scale, established itself as a leader in the key US market, launched a series of new product offerings and continued to deliver strong results,” said Dax Dasilva, Lightspeed founder and CEO, in a press release.

“Lightspeed had another record quarter with strong software growth and outstanding results from our payments offering” said CFO Brandon Nussey, in the press release. “Although we entered the quarter under challenging conditions as lockdown measures increased globally, we saw strength in March and are encouraged by the reopenings we are seeing around the world.”

Looking at the Q4 results, Sukumar said total revenue of $82.4 million was better than his and the consensus estimate of $69.5 million and was also above LSPD’s own previous guidance at $68-$70 million. The adjusted EBITDA loss of $9.6 million was also better than expected, beating Sukumar’s negative $14.0-million estimate and the Street’s negative $12.6 million. Adjusted EPS of negative $0.09 per share was again better than Sukumar’s and the consensus calls at negative $0.15 per share and negative $0.11 per share, respectively.

On the quarter ahead, Lightspeed has guided for revenue of $90-$94 million compared to the Street’s prior call for $79.4 million and an EBITDA loss of $10.0 million versus the prior consensus forecasted loss of $10.1 million.

For the full year, management has guided for fiscal 2022 revenue of $430-$450 million and adjusted EBITDA at negative $30 million, whereas Sukumar had previously called for revenue and EBITDA of $351 million and negative $23.4 million, respectively, and the analyst consensus had been for revenue and EBITDA of $363 million and negative $31.4 million, respectively.

“LSPD delivered on a stronger set of results relative to our/Street expectations, highlighting robust organic growth (+41 per cent year-over-year with +48 per cent year-over-year in subscription and transaction revenues) on the back of continued strong GTV and customer growth, another record quarter for payments, and better than expected contribution from recent M&A,” Sukumar said.

“Citing an improving outlook with markets reopening and ongoing business momentum, the company raised their outlook for Q2 and provided strong guidance for F22, with revenue expectations well ahead of our/Street estimates and adj. EBITDA outlook in-line, suggesting continued focus on growth investments,” he wrote.

Breaking down the fiscal Q4 revenue, Sukumar said LSPD’s Software and Payments revenue of $75.3 million (up 137 per cent year-over-year) compared to his estimate at $64.4 million, while the company’s Merchant Services revenue of $7.1 million (up 59 per cent year-over-year) was also above his $5.1-million estimate.

Lightspeed had said it ended the quarter with $807 million in cash and equivalents, while Sukumar said after the recent acquisition of Vend (closed on April 16), Lightspeed’s cash position has a pro forma balance of about $600 million.

“We continue to see a strong growth outlook for LSPD given their dominant market positioning in light of the early days industry transition to cloud-based POS, with growing tailwinds from greater merchant adoption of omnichannel and payments. We continue to see reopening of key operating markets in quarters ahead as a potential catalyst for accelerated growth. We will revisit our estimates and valuation following [Thursday] morning’s conference call with management,” Sukumar wrote.

With the update, Sukumar reiterated both his “Buy” rating and $120.00 target price, which at the time of publication represented a projected one-year return of 72.4 per cent.

Lightspeed closed in February on a US$676.2-million public offering of 9.66 million shares including over-allotment, saying the proceeds would go towards strengthening the company’s financial position and allowing it to pursue its growth strategies.

On the M&A front, Lightspeed closed this past November on the acquisition of ShopKeep, a New York City-based cloud commerce platform, for $145.2 million, the acquisition in December of Rhode Island-based restaurant management cloud software company Upserve for $430 million and then in April of this year, Lightspeed closed on the acquisition of cloud-based retail management software company from Auckland, New Zealand, for $204.7 million.