Lightspeed Commerce Inc. LSPD-T founder Dax Dasilva has returned to the chief executive post in a management shakeup prompted by negative investor reaction to the e-commerce company’s latest financial update.
Mr. Dasilva, 47, is replacing Jean Paul Chauvet, who served as president for 11 years and succeeded Mr. Dasilva at the helm of the Montreal company two years ago. Lead independent director Patrick Pichette will replace Mr. Dasilva as chairman. Also leaving, for personal reasons, is chief product and technology officer Ryan Tabone, who will be replaced by John Shapiro, Lightspeed’s senior vice-president of retail technology.
The 19-year-old company said Mr. Dasilva would become the “interim” CEO, but that period is undefined, and it could be a more permanent move, he indicated in an interview. “I think it’s an amazing idea for me to come back,” Mr. Dasilva said. He had left to pursue other interests such as funding conservation projects and documentaries – one of which won him an Emmy – and completing his university degree. Returning as CEO “wasn’t my plan, but this feels so right. Lightspeed is my biggest priority. I’m fully energized. I love this company, this is my company, and I think the founder is an important person when entering a new chapter like this. I’m here for as long as needed. It’s at the discretion of the board. Let’s see how I do.”
He also hinted Lightspeed could slash costs in the near term to increase profitability and said he had no interest in making acquisitions, a reversal of comments by Mr. Chauvet last week. “Lightspeed has to be a long-term profitable growth story with operational efficiencies throughout the company, with frugality throughout,” Mr. Dasilva said. “The market does not want to see large M&A from Lightspeed. The market does not want to see growth strategies that are not paid for with efficiencies.”
The market greeted the change positively. Lightspeed closed at $19.70 Thursday, up 7.3 per cent, after shedding 30 per cent since it reported third-quarter earnings last week. “If Lightspeed was executing well, I doubt we’d see such a meaningful change. I think it tells us something is not working with their strategy,” National Bank of Canada Financial Markets analyst Richard Tse said.
Mr. Dasilva acknowledged that the negative investor response over the past week prompted the board to act. “The market needs to believe that this is a business model they can invest in,” he said. “I don’t believe there is enough investor trust or confidence in what we’re doing. You can see it through the stock price.” He noted Lightspeed has grown more than 11-fold in revenue since going public in 2019 “and the stock price is the same, so there is not trust with the story. That needs to be rebuilt.”
Lightspeed sells point-of-sale transaction software to retailers, restaurants, golf courses and hospitality providers. It expects to generate about US$900-million in revenue this fiscal year. Mr. Chauvet had been leading it through what he called a period of “execution” during the fiscal year that started April 1. 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 next fiscal year 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 would only pay off six to 12 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 9 per cent in the quarter – enough to drive higher growth. 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 partially recovered, Lightspeed’s haven’t: Its stock is down more than 85 per cent from its 2021 peak.
“Investors in this space pay for growth,” ATB Financial analyst Martin Toner said, noting Lightspeed’s valuation on a price-to-gross profit basis is half that of its larger rival Toast Inc., which is increasing customer counts at a faster clip.
The shakeup, Mr. Toner said, “will have people wondering if there will be any changes in strategic direction. I think the most positive change would be to tighten up on costs.” He said Lightspeed had a larger cost structure than other tech companies, which have slashed payrolls more deeply.
For example, Lightspeed spent 12.5 per cent of revenue on general and administrative expenses and 25.4 per cent on sales and marketing in its most recent quarter. By contrast, Shopify Inc. spent 4.7 per cent and 14.8 per cent, respectively, on the same items in its most recent quarter, while Toast spent less than 10 per cent on each. Lightspeed has also maintained its headquarters in a castle-like former railway station in Montreal, while other tech companies have gone fully remote.
Mr. Dasilva, one of Lightspeed’s biggest shareholders, with 9.1 per cent of the stock, said the headquarters building is “very important to Lightspeed and its culture,” but added: “I intend to review all of the operations and facilities as well as our work policy regarding remote work. We have to create efficiencies in the business to be profitable.”
Sean Silcoff