Lightspeed cuts 10% of jobs, announces stock buyback in bid to revive flagging shares

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Lightspeed Commerce Inc. is cutting 280 jobs, or 10 per cent of its staff, and buying back up to 10 per cent of its stock in an attempt by the Montreal commerce software company to revive its moribund shares.

The company announced the moves early Wednesday in a press release along with other unspecified cost-cutting initiatives in its facilities and operations. The initiatives come seven weeks after the board ousted chief executive officer Jean Paul Chauvet and replaced him with his predecessor, founder Dax Dasilva. The shakeup came after negative investor response to the company’s third-quarter financial update in early February, and Mr. Dasilva promised at the time Lightspeed would be “a long-term profitable growth story with operational efficiencies throughout” and a frugal approach to spending.

“Lightspeed is now entering a new phase, one focused on profitable growth to capture the opportunity in front of us,” Mr. Dasilva said in a statement Wednesday. “This means making some hard decisions, like reducing spending in specific areas such as head count, to allow for investments in others.”

The stock traded up 5 per cent in early Wednesday trading on the New York and Toronto Stock Exchanges.

Most of the costs related to Wednesday’s announcement will hit the company’s financial results in its fiscal first quarter that began April 1 and the company said the restructuring will be “substantially complete” by July 1. Lightspeed reaffirmed previous guidance that it generated revenue of between US$895-million and US$905-million in its just-completed fiscal year while generating at least break-even adjusted operating earnings. (That measure, called adjusted EBITDA, is not a recognized accounting standard, but is the metric Lightspeed most commonly uses when reporting results and which analysts closely follow.) The company provided no guidance for its new fiscal year, saying it would provide its outlook and strategic plan when it reports year-end results next month.

“The market has rewarded balanced profitable growth over growth-at-all cost over the past year,” said National Bank Financial analyst Richard Tse, who estimated the cuts would amount to US$30-million to US$40-million in annual cost savings. “Given the announced actions, it’s a positive move” by Lightspeed.

Lightspeed sells point-of-sale transaction software to retailers, restaurants, golf courses and hospitality providers. Mr. Chauvet had been leading it through what he called a period of “execution” during its last fiscal year. On his watch, Lightspeed had been on a push to shift clients to its in-house payment processing product and to focus on larger customers – those that generate more than US$500,000 a year in revenues – all while achieving positive adjusted-operating earnings. It started delivering positive results by that measure in the second quarter and beat its forecasts for the third quarter, generating US$239.7-million, up 27 per cent year-over-year.

But Mr. Chauvet sparked concerns about its financial outlook, telling analysts that Lightspeed would shift sales efforts to increase its client count and software sales after focusing on moving customers to payments. That had paid off against a promise to have payments account for 30 per cent of transaction volumes by fiscal year-end. Lightspeed got that to 29 per cent in the quarter.

The increased sales spending, however, would only pay off months later, he said, sparking concerns that the positive operating margins would evaporate. Analysts also expressed concerns about whether Lightspeed could increase subscription software revenues – which rose just 9 per cent in the quarter – enough to drive higher growth. Mr. Chauvet also signalled the company was gearing up to make acquisitions again, two years after the last of a spate of deals following its early 2019 initial public offering.

The outlook and weak software sales prompted analysts to slash their share price forecasts, underscoring the challenge for a company that had previously driven investor interest as a high-growth story but was now also aiming for profitability. While shares of other tech companies hit by the downturn have partly recovered, Lightspeed’s haven’t: Its stock is down more than 85 per cent from its 2021 peak.

Mr. Dasilva acknowledged upon his return the negative investor response and said the company needed to rebuild investor trust. His first move was to signal he had no interest in making acquisitions, reversing Mr. Chauvet’s stance.

Wednesday’s announced cuts come well after other tech companies’, which tightened their belts more forcefully in 2022 and 2023, leaving Lightspeed with higher costs than peers. For example, Lightspeed pays more as a share of revenues for general and administrative and sales and marketing expenses than rival Toast Inc., which is adding customers at a faster clip.

He also mused publicly last month about possibly taking Lightspeed private, a path many other public Canadian tech companies, including Nuvei Corp., have done in response to their chronically underperforming stock market performance. But Mr. Dasilva added he believes “the public markets are a good place for Lightspeed” and that investors will reward the company if it can increase revenue growth and improve margins.