Home>> Business>>‘The reopening is now’: Lightspeed used the pandemic to bulk up — now it’s time for the next phase of its strategy  
Business

‘The reopening is now’: Lightspeed used the pandemic to bulk up — now it’s time for the next phase of its strategy  

Looking to different segments, geographical markets in attempt to scale up to compete more directly with online retail giants such as Amazon

Article content

Lightspeed POS Inc. is moving to broaden its acquisition strategy beyond its point-of-sale origins as it aims to push deeper into e-commerce in the post-pandemic world.

The Montreal-based software provider, which makes cloud-based products for small and independent retail, restaurant and golf businesses, has grown rapidly since going public two years ago, fuelled in large part by acquisitions. Since November, Lightspeed has integrated three global rivals but is now looking to different segments and geographical markets in an attempt to scale up to compete more directly with online retail giants such as Amazon.

“We’re moving from being a point-of-sale and payments provider to a one-stop commerce platform provider,” founder and chief executive Dax Dasilva told the Financial Post in a recent phone interview.

Dasilva is betting that, as pandemic-ravaged economies recover amid shifting consumer preferences, businesses will be eager to reach customers through both brick-and-mortar stores and digital platforms, and he wants Lightspeed’s offerings to cover both channels.

Advertisement

This advertisement has not loaded yet, but your article continues below.

Article content

“The time is now,” Dasilva said. “The reason that these acquisitions are important now is because the reopening is now. We anticipated that and last year was a year of pivoting customers, but this next year will be one of people moving to new systems or opening new businesses.”

Late last year, Lightspeed completed the two largest deals in its 16-year history. It purchased New York-based cloud-based point-of-sale system ShopKeep Inc. in November for US$440 million, adding more than 20,000 retail and restaurant customer locations. Less than a month later, it acquired Rhode Island-based restaurant management software provider Upserve Inc. for US$430 million, bringing on 7,000 locations.

Then in April, it added New Zealand-based Vend Ltd., a cloud-based retail management platform, for US$350 million, nearly doubling its customer base in the Asia-Pacific region. After integrating Vend, Lightspeed said it will have 140,000 customer locations, up from 80,000 in the second quarter ending Sept. 30.

Dax Dasilva, founder and chief executive officer of Lightspeed POS Inc.
Dax Dasilva, founder and chief executive officer of Lightspeed POS Inc. Photo by Christinne Muschi/Bloomberg files

The deal was the company’s seventh acquisition since it launched its IPO on the Toronto Stock Exchange in 2019 and the twelfth in its history.

Along the way, Lightspeed has added features as well, including payments processing early last year and a supplier network feature in January to help small to medium retailers and independent suppliers better compete with e-commerce giants. Earlier this month, it also struck a partnership with Alphabet Inc.’s Google to allow small businesses to advertise to local shoppers looking for alternatives to large online retailers.

Advertisement

This advertisement has not loaded yet, but your article continues below.

Article content

The string of recent deals came against the backdrop of the global pandemic, which initially saw small retailers and restaurants struggle under lockdown restrictions.

But as in-store closures forced businesses to shift to online, Lightspeed has seen its revenue growth accelerate again.

In its fiscal fourth quarter, revenue jumped to US$82.4 million, up 127 per cent from the same period the previous year.

While its net loss more than doubled as well, climbing to US$42 million from US$18.6 million in the same period a year earlier, Dasilva points to the company’s organic growth, which rose 48 per cent, and the strong performance of its most recent acquisitions, with ShopKeep and Upserve contributing $31.2 million in revenue as positive signs.

This next year will be one of people moving to new systems or opening new businesses

Dax Dasilva

Even though a large portion of Lightspeed’s scale has come from its aggressive M&A strategy, some analysts note the company has demonstrated it has the capacity to manage further M&A deals.

“While acquisitions have played a prominent role in driving growth, Lightspeed has executed equally on organic drivers,” said National Bank Financial analyst Richard Tse in a note following earnings. “Bottom line, while the pace of measures has been rapid, Lightspeed’s ability to execute (as evidenced by the results) within that continues to be what’s most impressive to us.”

While the buying spree will continue, Dasilva said he’s not interested in building a portfolio of companies; instead, he plans to fold acquisitions under the Lightspeed brand. He said Lightspeed is able to conduct M&A at a rapid pace because the companies it acquires offer similar products in new markets, and the teams are integrated in a way that incentivizes engagement.

Advertisement

This advertisement has not loaded yet, but your article continues below.

Article content

Upserve and ShopKeep’s former chief executive officers, Sheryl Hoskins and Michael DeSimone, joined the senior leadership ranks at Lightspeed, and the company made its largest acquisitions with a mix of cash and stock to encourage buy-in from the teams it brings onboard. In its US$440 million deal with Shopkeep, for example, Lightspeed offered US$145.2 million in cash, with 9.5 million shares making up more than half of the balance.

  1. Dax Dasilva, founder and chief executive officer of Lightspeed POS Inc., at the company's head office in Montreal.

    Lightspeed partners with Google in global deal to boost small businesses online

  2. Dax Dasilva, CEO of Lightspeed POS Inc.

    Lightspeed rolls out online payment processing service in virus-hit UK and Europe in boost for continent’s battered restaurants

  3. None

    Canada risks relegation to the second tier of the global tech economy if it doesn’t act now

  4. Lightspeed POS, Inc. CEO Dax Dasilva at the New York Stock Exchange on September 11th, 2020, in celebration of the company's IPO.

    Why Lightspeed POS’s strong quarter is a positive omen for the broader economy

Lightspeed is now looking beyond just merchants it serves in an attempt to add new platforms for suppliers and consumers, with services including online ordering and curb-side pickup. Dasilva said he’s also looking to expand the company’s footprint in the U.S., as well as Europe and Asia.

“You’re going to see a trend in our M&A towards companies that accelerate our capability when it comes to those platforms,” Dasilva said. “The reason why you’ve seen this happen in this sequence is because you’re not going have suppliers join the platform if there weren’t already a base of 140,000 merchants, and that’s what we’ve been building in the last two years in bringing together these similar companies.”

Financial Post

• Email: | Twitter:

Advertisement

This advertisement has not loaded yet, but your article continues below.

In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

donate

Please disable Adblock!

Leave a Reply

Your email address will not be published. Required fields are marked *

%d bloggers like this: