Our view: With the overall backdrop remaining healthy for aggregate consumer spending, coupled with the likely continued uptake of LSPD Payments, we believe FQ1/23 offers upside to our estimates. The broader question will be around guidance and the state of non-US market exposure.
Key points:
Reporting, est. vs. consensus, stock performance. LSPD is scheduled to report on August 4th before the market opens and will hold a conference
call at 8am. We are modeling $166M (Street $168M) in revenue (+43.5% y/ y) and $78M (Street $80M) in gross profit (+46.8% y/y). Since reporting last quarter, the shares are down ~17% vs. the S&P 500 down ~2%. The stock is currently trading at ~2x FY23E EV/Rev or 4x EV/Gross profit, with a YTD avg. of ~3x & 7x, respectively, thus upward multiple revisions in the near-term are possible as long as new customer adds, payments growth/penetration and transparency for key KPIs increase.
Specific areas of focus. We believe there are three key focus areas this quarter including 1) “core” ex-Ecwid customer location growth, with an eye on the mix of adding larger customers (management’s call-out that the absolute number is not indicative of growth), 2) software monthly ARPU expansion (especially with both flagship platforms rolled out), and 3) payments GPV growth (RBCe = ~70% y/y to $2.78B).
Intra-quarter data. Mastercard’s SpendingPulse data show that volumes for ecom retail sales decelerated in CQ2/22, averaging just 0.5% y/y vs. CQ1/22, 3.8% and CQ4/21, 13%, while In-store purchases remain elevated, up ~12% y/y in CQ2/22, vs. up 5% in January 2022, and lodging up 33.7% y/y in June. Total retail sales (ex. autos) from SpendingPulse improved from an average of 8.1% in CQ1/22 to 9.1% in CQ2/22. We believe LSPD, with its omnichannel balance, is well positioned amid the ongoing shift in consumer spending from ecommerce to in-store, while ~37% of revenues are tied to restaurant/hospitality, which should benefit in the current quarter.
Current thoughts on the stock. With the stock down ~53% YTD and trading at ~4x FY23 EV/Gross profit, it’s hard not to want to be more aggressive on the name; however, the risk-on appetite of the market for non-profitable growth tech appears to still be waiting to re-enter. Fundamentally, the company looks to be in good shape, with the consolidated flagship products in market, payments and more broadly financial services taking hold, and in the early days of monetizing its supplier network, which we believe is incremental to numbers. In our opinion, the likely near-term scenario is an earnings beat with guidance maintained given it’s only the fiscal first quarter and management’s tendency to be conservative.