LSPD (8.8% allocation; Q1FY22 5Aug earnings date)
The thesis for holding LSPD remains strong with growth ahead from the reopening of commerce (particularly in sectors affected by the pandemic), rollout of Lightspeed Payments, and consolidation of a fragmented market. During the last quarter, we saw strong evidence that LSPD is executing well on all three fronts.
Lightspeed Payments penetration exceeded 10%, and the Payments attach rate for new customers was in the 60-70% range. LSPD announced the launch of Payments in five European countries (Germany, France, Switzerland, Belgium, and the Netherlands) with further plans to launch in some Asia-Pacific countries. The Company maintains that they will be able to achieve 50% Payments penetration. Assuming annual GTV is about $80B (and growing), a 50% Payments penetration translates to about $1B in revenue! And that’s only from Payments; LSPD will, of course, also get increasing revenue from software subscriptions. Progress toward that 50% penetration goal is continuing.
Customers in the retail, restaurant, and hospitality businesses showed incredible strength in Q2. These LSPD customers are coming back in a big way. Specifically, hospitality GTV was up 380% and omnichannel retail GTV was up 139%. Whether this strength continues into the 30Sep quarter we don’t yet know. The coronavirus is resurging which could once again affect businesses that are dependent on human-to-human interactions. If LSPD’s customers do need to take precautions, then we know that they’re better equipped with tools (provided by LSPD) that facilitate contactless purchasing. Furthermore, any shutdowns, if they do occur, will be temporary and business would rebound strongly eventually. Personally, I tend to think that the worst impacts (on retail, hospitality, and restaurants) of the pandemic are behind us.
LSPD also continued to make progress on its consolidation strategy. Having now acquired customers in most geographies, LSPD has continued to acquire companies for their technology: NuORDER and Ecwid most recently. As LSPD integrates these companies into the fold, the Company expands its product offering to all relevant customers in its target markets. Thus, we have growth from cross-selling of the acquired technologies. NuORDER is particularly interesting because it will likely create a nice differentiator through the rollout of B2B supply chain tools and a network.
In summary, there’s continuing evidence that LSPD is executing where it needs to in order for the investment thesis to play out.