Lightspeed POS Inc

Lightspeed POS Inc (TSX: LSPD) is a leading cloud-based omni-channel commerce platform services for small and medium-sized enterprises. The business offers an all-in-one solution which supports services like managing day-to-day operations, customer engagement, acceptance of payments etc. to restaurants and the retailers.

Recent Highlights:

• To cater the efficient online shopping and personalized experiences for limited and distanced in-store visits, the group introduced new Lightspeed eCommerce features. The above feature is likely to address the evolving needs of retailers and restaurants by creating multi-channel shopping touchpoints.
• The Company collaborated with Ivanhoé Cambridge (IC), a real estate company and would offer fully integrated cloud services to small and medium-sized tenants and restaurateurs across several locations in Ivanhoé Cambridge Canadian shopping centers. 

FY20 Financial Highlights: LSPD impresses with its yearly results, and reported revenues of USD 120.63 million, significantly higher than USD 77.45 million in FY19. The increase was driven by strong momentum from both of its operating segment, namely, Software & payments and Hardware & other. The period was marked by growth in the subscription customer base, including a positive impact from the recent acquisitions. Gross profit soared to USD 77.44 million, as compared to USD 53.88 million in the previous year. However, total operating expenses increased to USD 135.85 million, against USD 77.09 million in FY19 due to a surge in general and administrative expense, research and development costs and sales and marketing expenses. Operating loss widened to USD 58.41 million from USD 23.22 million in FY19. The Company reported a net loss of USD 53.53 million, as compared to USD 183.52 million in FY19, due to an extended loss from Fair value loss on Redeemable Preferred Shares in the previous financial period.

FY20 Income Statement Highlights (Source: Company Reports)

Risk: An adverse business scenario, on account of lower business activities and protracted slowdown, might lead corporates to adapt several cost-cutting measures, which might lead to the closure of subscriptions of the platform. Further, several clients might negotiate with the existing subscription fees, which might challenge the operating margin of the company. The services can be replicated by other firms, which can lead to a loss of clientele.

Stock Recommendation: The Stock of LSPD remained resilient in the recent past, amidst a stiff correction across the broader market and declined only ~7% so far this year. The Company offers easy-to-use, omni-channel commerce-enabling SaaS platforms, and the products are extensively used across more than 100 countries by several small and medium enterprises, which is a key positive. Further, the group’s revenue is highly fragmented as no single client account for more than 1% of the group’s revenue. The Company believes due to the impact of COVID-19, more enterprises would lean towards LSPD’s products in order to move away from legacy systems and adopt cloud-based solutions and omni-channel strategies to adjust to the changing regulations and consumer behaviors. The Company is well-positioned to utilize the opportunity. The stock has soared ~153% in the last three months, outperforming the index by ~98%, which is more than impressive. Considering the current collaborations, innovative offerings, we continue to remain positive on the stock and recommend a ‘Hold’ rating on the stock at the closing market price of CAD 34.72 on June 22, 2020.

LSPD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Absolute Software Corp

Absolute Software Corporation (TSX: ABT) is a software & computer services company, which is engaged in the business of developing, supporting and marketing of data risk management and endpoint security solutions to customers from government, education, healthcare and commercial sectors. The solutions offered by the Company are based on SaaS (software as a service) business model.

Recent News

On 18^th June 2020, Absolute Software announced the launch of a new platform, which will help its customers to strengthen endpoint device protections and sensitive data in hybrid or remote work environments.

Financial Highlights – Q3 and Nine months FY2020 (31^st March 2020, USD)

(Source: Quarterly Report, Company Website) 

For the nine months period for FY2020, the revenue increased to USD 77,511,964 as against USD 73,633,064 for nine months period in FY2019. The revenue in Q3 FY2020 increased to USD 26,061,861 from USD 24,883,198 in Q3 of the financial year 2019. The gross profit increased to USD 67,872,985 for nine months period FY2020 and USD 22,678,514 in Q3 of the financial year 2020. Driven by lower operating expenses for nine months period, the Group reported an operating income of USD 11,734,371 for nine months FY2020 versus an operating income of USD 7,878,158 for nine months FY2019. The PBT (Profit before tax) for nine months period in FY2020 stood at USD 11,819,941 versus USD 8,042,062 for nine months FY2019. The net income for nine months FY2020 stood at USD 8,419.941 versus USD 5,538,062 for nine months FY2019. The net income in Q3 FY2020 declined to USD 2,258,393 from USD 2,511,433 in Q3 FY2019. The basic earnings per share for nine months FY2020 stood at $0.20 versus $0.14 for nine months FY2019.

Share Price Performance

Daily Chart as of 22 June 2020, after the market closed (Source: Refinitiv, Thomson Reuters)

Absolute Software Corp shares closed at CAD 13.40 at the time of writing after the market close on 22 June 2020. Stock's 52 weeks High is CAD 14.31 and Low is CAD 6.70.

Conclusion

The Company continues to implement the strategy and business model to deliver returns. The Group, through its wide-ranging scope, had accelerated growth organically and through acquisitions and strategic partnerships. The Group has shown an increase in the financial performance for the nine months period ending 31^st March 2020. Both the top-line and the bottom-line performance for the nine-months period have improved, with an increase in the profitability for the period. The revenue from core operations and cash balance has increased in the third quarter and for Nine months period for the FY2020. The operating expenses in the Q3 of the financial performance have increased, which needs to be controlled unless it will reduce the financial performance in the long run and will also impact operational performance as well. For the FY2020, the Group maintained its outlook for revenue and expected its adjusted EBITDA to increase. The group operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and return with capital discipline and reducing its costs.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of CAD 13.40 (as on 22 June 2020).

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.