Lightspeed Commerce Inc.
(LSPD-N, LSPD-T) US$13.00 | C$17.49
Q4/F23 Results: Strong Setup for H2/F24 and F2025
Event
Q4/F23 results. See our previous notes for a review of the results and call.
Impact: SLIGHTLY POSITIVE
We are maintaining our BUY rating, given our view that the accelerated payments strategy would drive material growth in F2025. We believe the share pullback presents an attractive risk/reward profile as we expect growth to accelerate in H2/ F24 and into F2025, combined with margin expansion from a higher mix of payments and Lightspeed Capital revenue.
Guidance looks conservative. Management is guiding to $875mm-$900mm of revenue. If we assume GTV grows by 4% in F2024 to $90.5bln (likely conservative, given it grew 18% in F2023, but we are cautious on the macro) and Lightspeed's payments take rate is 2.6%, this implies the total F2024 revenue guidance could be reached with payments revenue alone if the 2024 payments penetration rate (PPR) reaches 38%. Lightspeed exited Q4/F23 at a 19% PPR and is targeting to have the majority of customers on payments by year-end. This implies an average of ~35% PPR for the full fiscal year if PPR grows linearly throughout the year. There are arguments for PPR to come in above this if PPR acceleration is front- end-loaded from the strategic push in H1. This may be offset by the 4-8-week lag to start recognizing payments revenue. We are modelling 24% PPR in F2024, which we believe is conservative, given the considerable resources being put toward accelerating payments adoption in H1.
Forecasting accelerating growth and expanding margin in H2/F24 and F2025
as the unified payments strategy starts benefiting payments adoption and revenue mix. We believe payments revenue is accretive to consolidated EBITDA margin.
We believe there could be revenue and margin upside from increased Lightspeed Capital revenue, given a higher payments customer base. Management is planning to continue funding Capital using its balance sheet in the near term, which should keep margins high. We also note that more favourable terms may be achieved with payment partners as GPV scales, resulting in higher payments gross margin as payments adoption increases.
TD Investment Conclusion
We are maintaining our $25.00 target price. With the stock trading at only 1.4x revenue, we are maintaining our BUY rating.