There have been a lot of expectations placed on Lightspeed Commerce (TSX:LSPD) over the years. Perhaps even more on Chief Executive Officer (CEO) Jean-Paul Chauvet. Chauvet took the top spot at arguably the worst time in February 2020. Yet since then, he has taken the company on the path to greatness.
Not that the share price shows it, though Chauvet doesn’t appear concerned in the least.
“We’re not that concerned by the day-to-day stock,” Chauvet said in an interview with Motley Fool. “Everyone is concerned with the economy. But even with that, we’re very confident we’ll hit our goals.”
From top to bottom
There have been many moving parts with Lightspeed stock over the last few years. The company gained prominence after its initial public offering (IPO) in 2019, marking one of the top 10 tech IPOs in the history of the TSX. Investors were excited about the idea of consolidating an industry handling sophisticated companies that need a simple payment solution.
“There’s a big difference between the companies like Lightspeed that do the heavy lifting … and the ones that are a glorified cash register,” Chauvet said. “We were the golden child when we went out. Then there was a succession of things that made the story unclear.”
Lightspeed stock was hit hard by a short-seller report, sending shares down 30% in a day. But even more issues came its way when the market fell as well.
“Nobody loved consumers because of the uncertainty, and nobody loved physical, and nobody loved fintech, and we were all in the middle of that,” Chauvet said.
Spending wisely
Despite the drop in the markets and investor reactions, however, Chauvet believes the company executed its strategy well. Lightspeed used its stock price and cash from the IPO to its advantage, acquiring companies for great value. And this year, it looks as if they’ve come out the other side.
During its most recent earnings report, Lightspeed stock reported total revenue up 25% year over year to $230.3 million. Gross payment volume increased 59% to $5.9 billion, with gross transaction volume (GTV) hitting $23.5 billion. Yet the big headline was that the company hit positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first time.
“Today, we’re still growing at 25% year over year and just crossed the billion-dollar run rate,” Chauvet said of the report. “This is now 100% organic… No one can argue the acquisitions were what brought organic growth.”
But if you think Lightspeed stock will be slowing down, Chauvet said there are large plans to bring in even more profitability.
“The only delta now between us and their competitors is payment penetration,” Chauvet said. “The only difference is our percentage of monetization is much lower; that’s because we haven’t forced our customers to be on our platforms until this year … We’re going to make Lightspeed payments mandatory.”
What investors can expect
So, what can investors expect in 2024 and indeed beyond? More implementation of Lightspeed payments. Only 25% of Lightspeed stock’s total GMV uses payments, which provides a lot of room for growth. Chauvet stated that the company wants to hit 50% in the next year and a half.
So, for now, Chauvet isn’t all that concerned about the day-to-day stock price. The company continues to put out very conservative forecasts, as it has in the past, knowing full well that more profitable growth is on the way through payments. From there? Chauvet expects the company’s combined revenue growth and profit margin could get it closer to meeting 40%, known as the “Rule of 40,” in the coming year.
Yet even beyond 2024 there are big plans, Chauvet said. Lightspeed stock plans to enable its brands to access its symbolic model verification between its businesses, which he believes will be quite lucrative.
“Nobody does this for very well-established brands,” he said. “That will have a huge impact financially … it’s the next big wave for Lightspeed.”
So, with payments as the first step, one that’s already achieved profitability, investors can expect even more growth from both payments and new client intakes as well — especially as many of these sophisticated companies continue to use legacy systems.
“We did the right moves,” Chauvet said. “Now, we are greatly undervalued.”
