Perhaps it wasn’t the best signal as Lightspeed Commerce’s third fiscal quarter earnings report season kicked off with the announcement of a net loss of $814.8 million (the company reports all figures in USD). Lightspeed attributed the bulk of the loss to a non-cash goodwill impairment charge of $748.7 million.
Lightspeed said it conducts an annual goodwill impairment test every December 31. “Given the decline in the valuations of technology companies broadly and Lightspeed’s share price, the Company’s net assets exceeded its market capitalization as at December 31, 2022 which was an impairment trigger for the Company,” Lightspeed announced.
CEO said that recent layoffs impacted management, and that the “reorganization” was mainly around restructuring toward one product.
Lightspeed also posted revenues of $188.7 million, an increase of 24 percent compared to the same time last year, and an adjusted EBITDA loss of $5.4 million, which was less than its previous forecast of approximately $9 million.
While the third fiscal quarter didn’t represent a significant increase in revenues compared to the second fiscal quarter of 2023, it did show a slight upward trajectory between the quarters. The company’s second-quarter revenues amounted to $183.7 million.
But again, as between first and second quarter revenues, second and third quarter revenues for 2023 showed a decline in percentages year-over-year from 38 percent to 24 percent.
Lightspeed’s TSX-listed stock dipped on the announcement dropping to $23.73 CAD at press time. Its 52-week low remains $17.27 while its 52-week high is $42.89.
With the earnings announcement coming on Groundhog Day, it contained the feeling of the heavy prediction and inevitably of at least another six weeks of tech winter as companies and startups alike continue to cut costs and lay off staff.
Lightspeed itself announced a reduction of 300 employees in late January as it aimed for “profitable growth.” The news came just a few weeks after company CEO J.P. Chauvet showed up fourth on a list of Canada’s highest-paid executives. Chauvet earns $27.7 million CAD annually, according to a recent story on the country’s biggest C-suite earners.
Chauvet previously said that most of the cuts impacted management, and that the “reorganization” was mainly around restructuring toward one product versus needing to reduce costs within the company.
That said, the cuts to the company over the quarter resulted in an estimated restructuring cash charge of $12-to-$14-million, consisting largely of severance payments, employee benefits, and related costs. Lightspeed expects to incur those charges in the company’s fourth quarter, adding that the estimated salary and related benefits from the eliminated roles will amount to $25 million annually.
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The company has spent the last year making a case that the retail segment, among others, requires its technology to succeed, and that it is targeting its point-of-sale tech and other solutions to that market.
In its recent survey of 1,100 hospitality owners, managers, and operators—along with 7,000 consumers across a number of countries—Lightspeed argues that restaurateurs grappled with high inflation rates, staff shortages, and economic uncertainty, looking for technology solutions to help them succeed.
“The ability for hospitality operators to do more with less is essential, with survey results noting a majority of industry respondents credit the adoption of a POS or restaurant management software to streamlining shifts, including new or expanded online ordering systems or the use of new technology to automate tasks,” Lightspeed reported.
But while the company maintained that its results from the quarter are proving that thesis, the firm’s slight increase in quarterly revenue indicates it hasn’t been easy going. A recent Bloomberg News report asked, “with the recession worries growing, some shoppers could cut back on their spending. If that happens, how many retailers and restaurant owners will be ready to make the shift to Lightspeed’s software?”
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The most recent Bank of Canada Survey of Consumer Expectations reports that in response to high inflation and rising interest rates, consumers have reduced their purchases of a broad range of goods and services.
As access to credit has become worse and real wages have continued to decline, a growing share of Canadians plan to further cut or postpone purchases in the coming months, the survey reported, adding that most Canadians expect a mild to moderate recession in Canada within the next 121 months.
In light of all this, Lightspeed said in its forecast that it expects consumer spending to remain under pressure in the near term. Given that transaction-based revenues now represent over half the company’s total revenues, the firm will “continue to prudently manage the business while macro uncertainty continues and will prioritize profitable growth,” Lightspeed said.
Lightspeed is now forecasting an adjusted EBITDA loss of $437 million down from its previously estimated outlook of $40 million, while it is calling for revenues to come in at the low end of the previous forecast of $730 to $740 million. The company reiterated that it remains committed to its goal of an adjusted EBITDA breakeven by or before fiscal 2024.
Feature image courtesy Lightspeed Commerce.