LightSpeed was in my radar mid 2020 when it was trading at $25 USD. I bought and sold a small position in a short duration. At the time, it didn’t interest me because the growth rate from the past few years was not impressive. It’s 35% YoY 2019 from 2018. It’s really not that great.
I primarily look at revenue growth rate history as a base to start looking into a company. With this criteria, I’ll miss some companies that starts slow but accelerates later.
Fast forward 1 year, the growth rate is accelerating! There are two reasons. The 1st one is obviously aggressive acquisitions. This is good. But what else?
I dug into the numbers and I found patterns very similar to Shopify and BILL .com !
It added Payment service in 2019 and its revenue from transaction fee has been increasing at a rapid rate, much faster than the SaaS growth!
Here’s some notes I took:
Lightspeed Payments:
-Launched in 4Q’2019 to US Retail customers
-Better user experience for customers; More attractive economics for Lightspeed
-Majority of early adopters successfully processing live transactions by March 31
- > 40% attach rate for new eligible customers Pricing model: ~2.6% gross non-cash transaction volume; ~65bps net of direct processing costs
-Once 50% payments penetration is attained, Adjusted EBITDA as a percentage of revenue of ~20% is achievable.
-Portion of GTV monetized via payments: 10%, Q1-2022
Revenue is accelerating:
Year Total Revenue(m) YoY
2020 $120.60 56%
2019 $77.50 36%
2018 $57.10 34%
Lightspeed only started disclosing transaction fee revenue so I only have a couple quarter of data. Transaction fee revenue is growing at a much faster speed than SaaS! As a result, the transaction fee becomes a bigger and bigger portion of total revenue just like Shopify and BILL . COM !
Transaction fee becomes more important:
Quarter Transaction fee/Total revenue
Q1-2022 48.75%
2021 37%
2020 23.00%
Transaction fee is growing faster than SaaS:
Quarter Subscription fee (m) YoY Transaction fee (m) YoY
Q1-2022 $49.90 115% $56.50 453%
2021 $119.00 51% $83.00 195%
A motley fool writer named Victoria Matsepudra wrote an article titled: Why Lightspeed (TSX:LSPD) Is Not a “Mini” Shopify (TSX:SHOP) and said Light Speed is more comparatable to Square. I disagree. Square did the opposite of Shopify,Bill .com and Light Speed. Square’s transaction fee revenue as a percentage of total revenue is declining and downed from 55% last year to 19%. It’s YoY growth rate is merely 27%. Where in both shopify and LightSpeed, they started with SaaS and then expand into fast growing transactional market with huge TAM.
I think it’s a mini Shopify with a retail/restaurant/golf focus.
I am very comfortable holding a large position in Light Speed despite the recent runup in stock price.
I just noticed I have 25% exposure to payment processors. If I count the transaction fee revenue from BILL and Shopify, I have 35% allocdation to payment processing. It has a large TAM and money changes hand every day. It’s almost SaaS. It’s sticky as mentioned in BILL’s earning call. BILL transaction fee did not go down at all during COVID and went up 106% YoY in the COVID quarter Mar, 2020! I guess B2B payment is sticky as the core engine of the econonomy is essential.
Currently Long Light Speed 14.6%