Lightspeed turned in a great quarter especially when considering how much the economy tanked in calendar q4 2020. I wasn’t sure if they would meet the high end of their guidance and instead they beat it.
Business highlights
- completed acquisitions of shopkeep and upserve
- Payment penetration grew to 15% and 12 % of US and Canadian retail
- Launch of the supplier market (think coupa) . My thoughts below why this is such a big deal
- initially said they were going to raise ~490 million but their offering was oversubscribed to the tune of 676.2 million.
Financial highlights
- Rev of 57.6Million 69% growth, Guide was 47 million. Excluding acquisitions they hit 49 million.
- GTV from 8.5 Billion to 9.1 Billion sequentially
- Organic growth accelerated from 42% to 47% and would have been significantly higher if not for hospitality which shrank 19%!!
Guide for 70 Million for calendar Q1 2021 which would be 92% growth
Key Points
Payments will be rolled out to all regions by the end of calendar 2021
Payments penetration is still single digits for total GTV
Company is well capitalized. ~ 900 million of cash. Expect to see more acquisitions
Early data from Supplier market is that it is a strong referral source from suppliers and strong benefit to LSPD customers as well as a large differentiator for LSPD’s offering.
My take
Lightspeed continues to go from strength to strength. The supplier market is a really really interesting feature and strong differentiator for lightspeed. Their vision for it is pretty epic. The supplier market allows lightspeed customers to directly order from their suppliers through lightspeed’s software. Customers can see suppliers inventory, pull in imaging and data, order, invoice and pay. This was first rolled out in the bike vertical. Lightspeed said they saw their suppliers start referring customers to lightspeed because it made the supplier’s life so much easier. At the moment lightspeed isn’t monetizing this feature. In the future they plan on using lightspeed payments for the suppliers which is a pretty genius move as they can double capture each customer. When the lightspeed customer buys product and then when they sell it.
On top of that lightspeed continues to execute on payments. Their roll out continues to go well and should be a large driver of future growth. I liked pretty much everything about the quarter except for GTV which I anticipated being bad but not only 9 billion bad. The lockdowns really affected that. I’m very heartened by the fact that their organic growth is accelerating despite lockdowns across the world. When the economy opens up lightspeed is going to go from lightspeed, to ridiculous speed and then ludicrous speed but as it is I’m happy with them. https://www.youtube.com/watch?v=ygE01sOhzz0
I’ll leave you with this quote from their CC. “And I think that the market fit is stronger than it’s ever been, and we do not feel any pressure right now on pricing form any of our competitors.
CC notes
Q3 2021
Re: products in most demand?
Omnichannel and capital “we’ve launched capital and capital now is ramping up, and we’re seeing a lot of demand for that also.”
Re: supplier market
we’re very bullish about suppliers. We think this is a very big differentiator for us in the market. As you understand, what suppliers enables us to do is to really completely integrate the ordering process and the supply, preparation of the catalogs inside of Lightspeed, and it really creates this incredible flywheel of value between suppliers, stores and consumers.
As you know, we – the first test case we had was on bikes, and that proved to be very good for us. And when we look at metrics and data on bikes, what’s interesting is everybody within the ecosystem is recommending Lightspeed. So it has a really good impact on cost of acquisition and lifetime value of customers. We’re going to – we’ve now launched this as a real product and service.
And we already have 100 suppliers now on the platform, and we are going to be focusing on the core verticals where Lightspeed has a lot of customers and penetration. And as we go into the year, we’ll be expanding to others, but there’s a few verticals right now that we are focusing on, and those are the verticals where we have the highest concentration.
Re: more supplier market
your opening discoverability for suppliers right within the POS system. So it’s not a separate system, another set of B2B portals. We’re combining all of that functionality directly into Lightspeed
already managing inventory and they’re already managing their e-commerce assets in site. So that I think is a huge advantage here. And I think that the big benefit to us is that eventually, that we are going to be the system of choice. Suppliers are already recommending Lightspeed to their independent – to the independent merchants that sell their goods because they’re going – over time, they’ll have aggregate real-time selling data.
So there’s benefits for the suppliers, in that regard, there’s benefits for the stores. And of course, the benefit for us is we become the system of choice. And eventually, there will be other opportunities for us to facilitate B2B invoice
Re: australia as an example of a post covid market (confusing as the operator accidentally had a second person ask a question before they finished answering another guys so I have edited this for clairty)
What we’re seeing is in Australia, I think we mentioned best quarter ever to get back to Raimo’s question…., and that led to just a wonderful quarter in terms of new customer additions and revenue growth for our business there.
I think the reopening process not only drives better volumes across the board, which will help in our ongoing rollout of payments, it just spurs new business creation as well,
Re: if people are hesitant to switch during a pandemic? post covid?
we’re very excited about the post-pandemic world. I think we’re seeing quite the opposite. So think about someone who has the legacy system, and now the majority of their business, if I’m a restaurant that’s going to be online, it’s going to be through delivery platform, it’s going to be through Order Ahead.
And if you don’t have a platform like Lightspeed, you’re basically stuck with silos and trying to manage a ton of different applications. So the view here is that it’s become way more complex for the traditional platforms to operate. And actually, we are seeing more demand from actually more established vendors who maybe would have never moved and now are looking at this, and they understand that they have to do something about it. So I think that’s why we’re very excited about the next few years because the harsh reality is the majority of the platforms on the market are still legacy systems.
They’re completely underserving their merchants. And then, there are platforms like Lightspeed that integrate everything and make it much easier for our customers, and we’re seeing a ton of demand there.
Re: upserve and shopkeep acquisitions regarding payments
It was up near the top of the to-do list, for sure. And teams from both of those businesses are actively working on that rollout now. So we’re optimistic.
Those teams have settled in nicely and already driving significant value into Lightspeed
By the end of April, we will have the go-to-market teams fully integrated and focusing on selling one product. And the goal is also by the end of summer, we will have Upserve’s advanced analytics platform fully integrated with our restaurants and with one product going to market in the U.S.
re:question on the supplier network.
With the Anheuser-Busch relationship, you did announce that they would be devoting some resources to selling your product. Are these new suppliers that you’re onboarding now also committing any resources to this engagement?
all the contracts that we are putting in place in the context of the suppliers are – have exactly the same logic. So as you know, there’s benefits for the suppliers and then there are benefits for the stores.
And so the value proposition here is for suppliers to see sell-through. So as soon as you’ve connected your catalogs and your inventory to Lightspeed, what we will do is for the stores that are ordering directly in Lightspeed, we will give you the sell-through, which is very unique in small business. And vice versa, we enable all of the stores to actually see – have visibility on inventory levels at the supplier. And that whole relationship is really around basically suppliers and stores promoting Lightspeed within their network
Me: this was one of the better questions. I’m going to paste the question and answer with minimal editing as i think it is really important.
really unique that you have a B2C software and payments business, and now you’re certainly getting more into the B2B realm. So I’m just kind of curious like what’s the time frame that we should be thinking about? When I think about to when you went public and you started to embark on Lightspeed payments, you, obviously, have given us a lot of color and updates since then, but it was certainly a journey.
I mean, is this a multiyear initiative? And what milestones should we be really focused on? Certainly, the size of the supplier network, you gave us an update, which I think is a really important indicator. But just what other metrics should we be focused on in the coming quarters and years tied to this initiative?
So it is a journey. It’s a bit – it’s like payments. But I think maybe I’ll try and share our mindset with the steps and where we see this heading.
So I think Step No. 1 for us, and this was listening to our customers actually, we need to make it easier for a customer to order directly through the supplier network. The harsh reality in small businesses is everything is pen and paper, there’s a lot of back and forth, it’s manual, it’s inefficient, and it’s also inefficient for the supplier. So step one for us was to make automation possible within the network, within the software and go vertical by vertical to try and go inside of the verticals where we have a lot of penetrations.
And here, there’s really two advantages. We see one is operational efficiencies for our stores. And the other advantage is really for the suppliers having visibility on sell-through and helping them adjust manufacturing so that we can get to a model that’s fully integrated. So here, what you can expect in the coming quarters is expect to see more and more verticals where we have concentration, where we’ll just be onboarding more and more suppliers within the platform and with the goal of efficiency.
I think one – so that’s one track. The second track in our mind is payments. Lightspeed payments right now – we’re using Lightspeed payments from store to consumer, we should be using Lightspeed payments from store to supplier. And this means that when – once they select the items they want to order, once they’ve had visibility on the stock and the inventory levels at the supplier and once they’ve passed the order, we expect them to use Lightspeed payments to actually pay for that order.
And then, for us, the value here is we monetize both ways, and we monetize on the sell side, but also on the buy side. And then, I think as we go into all of this, I think the last piece for us is, think about all the acquisitions we’ve done, and we acquire normally companies that have basically sourced within the same verticals as Lightspeed, we want to make all of this available to all of the stores within the network. And here, you can imagine that as, I don’t know, we put all these – you put ShopKeep and Lightspeed together in the U.S., there’s a ton of commonalities in the verticals where we both operate. And I think there, we can gain concentration.
And then, I think the last piece for us is really to look at commerce at large and figure out how we’re going to use data to actually help suppliers identify new stores that should be selling their supplies that are not selling their supplies. And here, you can think about this with us looking at the data, analyzing the data and really fingerprinting suppliers to stores by looking at commonalities of inventory and outliers that should be sold by those stores. So I think for us, it’s a journey. It’s a very exciting journey, and it’s just the first step.
But I think when you think about this, once you’re in the core of all of this and you’re providing value to the entire flywheel from suppliers to stores to consumers, you really become a very sticky platform. And I think the last piece is think about cost of acquisition and lifetime value. As soon as you have the network and you have the entire ecosystem promoting Lightspeed, the cost of acquisition goes down and lifetime value goes up. So it’s a journey, but we are very excited about the journey.
Re: lightspeed capital
Dax mentioned in the call, ShopKeep had a much more advanced capital product than we did as well, and we’ve started to leverage now their expertise. They pressed pause a little bit at the onset of COVID here and ramping that back up now.
A number of cloud players seem to have gained some stable footing during the second half of 2020. And I’m just wondering if you see any risk of pressure on pricing, whether subscription rates or payments rates? Or is it still features and functionality of omnichannel supplier network and that kind of thing that’s driving decisions? Could you just talk about the landscape in the last six months?
I think we’ve never had a better model. So we don’t feel pressure from competitors.
We – if you look at our organic, if you look at our close rates, if you look at the ARPU, we’re not feeling that pressure. We’re actually seeing more and more customers wanting to buy a full package from one vendor versus buying from multiple vendors. We see our customers wanting solutions like ours because they need to integrate all of the delivery networks on the restaurant front, and they need to have true omnichannel when you think about physical retailers with multi-location support. So I think the offering is very strong.
And I think that the market fit is stronger than it’s ever been, and we do not feel any pressure right now on pricing form any of our competitors.