Lightspeed POS Inc.’s shopping spree continued Monday as the merchant point-of-sale software provider announced two acquisitions valued at a combined US$925-million, including an emerging competitor to fellow Canadian commerce software giant Shopify Inc .
The acquisitive Montreal-based Lightspeed said it would pay US$500-million for Ecwid Inc., a San Diego-based e-commerce platform with more than 130,000 paying customers. Lightspeed is also paying US$425-million for Los Angeles-based NuORDER Inc., which provides an online platform for 100,000 retailers to automate wholesale product ordering from more than 3,000 brands. It processed more than US$11-billion in orders over the past year.
Both companies generated more than US$20-million in revenue each in the year ended March 31. Lightspeed is paying a mix of cash and stock for the two companies.
The acquisitions enhance Lightspeed’s reach as a provider of point-of-sale software providers to retailers, restaurants, golf and hospitality businesses. But “unlike their previous acquisitions which have been to expand their market reach, it looks like today’s acquisitions are to expand on their technical capabilities, making their platform more attractive to prospective merchants while growing their addressable market size with new services,” National Bank Financial analyst Richard Tse said. “Quite frankly, it looks like they are heading directly for Shopify.”
Ecwid, like Shopify, is more of a pure e-commerce platform that enables companies to sell through a range of online channels, including social-media websites and marketplaces. Lightspeed executives highlighted that as a key benefit on a conference call with analysts to discuss the transactions.
“Today we are really good at e-commerce, but we need to do much more than that,” president Jean Paul Chauvet said. While Lightspeed has in the past highlighted its capabilities to provide “omnichannel” service to customers for both in person and online transactions. “You could say that we have an offering now that is getting closer to Shopify,” he acknowledged.
Ecwid is a fraction of Shopify’s size, and grew at a rate of more than 50 per cent a year to March, 2021, compared with Shopify’s 86-per-cent year-over-year revenue growth in 2020.
With NuORDER, Lightspeed will advance its fledgling strategy to supply goods to its merchant customers by three to five years, Mr. Chauvet said. “Clearly this seems like a new growth vector for the company,” BMO Capital Markets analyst Thanos Moschopoulos said in an interview. “They could have a strong, defensible competitive position longer term” thanks to the purchase.
Lightspeed is paying 15 times projected current-year revenue for the two companies, which an analyst said on the call seemed relatively high. Chief financial officer Brandon Nussey called the deals “cornerstone acquisitions” that would bring significant potential for revenue and profit gains, particularly as the economy opens up postpandemic. Both acquired companies have relied on outside payments processing providers, while Lightspeed has driven much of its recent gains by providing its own payment service to its 140,000 clients. That provides an opportunity to accelerate the company’s revenue growth, Mr. Chauvet said.
The two acquisitions “are very different than Lightspeed’s previous deals,” ATB Financial analyst Martin Toner said in an interview. “The retail world is smashing together, and going omnichannel. You have successful direct-to-consumer e-commerce retailers opening offline stores and offline going online as quickly and efficiently as they can. I think Lightspeed sees the value of being in both places. A key question is Lightspeed’s ability to innovate at the rate of some larger competitors” such as Shopify.
With the two latest deals, Lightspeed has now committed U$2-billion to five acquisitions in the past seven months. The company agreed to pay a combined US$870-million for two U.S. companies last fall that provide restaurant management software: Upserve Inc. and ShopKeep Inc. In March, Lightspeed agreed to buy Vend Ltd., a cloud-based retail management software company, for US$350-million.
Lightspeed stock was up Monday 1 per cent in midday trading after the news. The stock has risen sharply since it reported stronger-than-expected fourth-quarter results last month, including revenue of US$82.4-million, up 127 per cent year over year. Roughly two-thirds of the revenue gain in the quarter came from ShopKeep and UpServe. The company reported a net loss of US$42-million in the quarter, compared with a loss of US$18.6-million in the same period a year earlier.
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